Conservative environmental policy.

An announcement by the Canadian Federal Government on environmental policy was leaked, with few specifics, on how the country would achieve certain CO2 targets.

There will be more information coming on Thursday at which time I will post an update. I "hope" that the government does not assess industry as it is suspected of doing. The tax, if any, should be assessed on the consumer, not industry. Secondly the majority of the taxes should be focused on bringing the costs of Coal in line with Natural Gas.

The other interesting point was, the reduction in greenhouse gases was proposed at 150 million tonnes. In my previous posting, the one facility had injected 7 million tonnes over four years on a pilot project. Maybe the injection of CO2 as a miscible agent will provide the environmentalists with the means to solve this alleged problem. Therefore I would recommend the Federal government join the Alberta Government and provide incentives for the energy industry to act in this manner.

Technorati Tags: Genesys, Environment, Proposal, Government

Changes at Shell.

First off, I am a "Shell Brat", my father worked for Shell Canada for over 33 years and retired in 1982. I was also fortunate to work at Shell for two summers during my high school days in the 70's. During my first year I was helping out in the mail-room, and the second summer was spent washing dirt in their geological warehouse. Shell holds a special place in my mind and strongly influences my perception of the oil and gas industry. That is why it is with extreme disappointment regarding The Royal Dutch Shell group, who just purchased the outstanding shares of Shell Canada, have announced that the CEO of Shell Canada will be retiring and the new CEO will be the CEO in their Houston operation. The time when the decisions and understandings that Calgary may have had on Shell Canada will now cease to be a factor.

In my thesis that was the precursor to this blog. I suggested that if the producers were not willing to move toward a more innovative footing, the loss of their independence would be the result. That Shell is the first is disappointing, and I can not determine which producer would be next, nor can I provide any of the cause and effect analysis that proves my thinking. It would only seem reasonable with Houston's focus moving away from the Middle East, Russia and China, that Canada would lose its independence and stature, as Houston asserted its influence.

Technorati Tags: Genesys, Plurality, Governance

CO2 as a solution, not a problem.

In this article,the April 2007 Oil & Gas Network (Print Edition), "What's New in EOR Research" talks about the use of CO2 in Enhanced Oil Recovery schemes in Alberta. Each of the highlighted projects are taking advantage of an Alberta Government's CO2 Projects Royalty Credit Program. The participants include Apache, Devon, Penn West and Anadarko. The schemes use the EOR technology that has been learned by the energy industry over the past 20 years. Using pattern drilling to sweep the reserves to the production wells with a Water Alternating Gas (WAG) injection, sometimes horizontally as well. I found it interesting in the article that the producers could now justify this type of flooding with the higher oil prices. I did not realize CO2 injectants would be more costly then C2+. However the article states that the source of these injectants is primarily from the neighboring gas plants. And that the sources of CO2 would constrain the further development of these pilot projects. Another interesting element is the use of reserves that have been very prolific, yet difficult to find, areas like the Rainbow Lake pinnacle reefs and Nisku formation in Pembina. Another area where it is being tried is the Pembina Cardium Miscible Flood.

The injection of liquefied CO2 is a miscible agent that will also maintain pressure on the oil being driven to the producing wells. In the Weyburn area over 7 million tonnes of CO2 has been injected over the past 4 years. And unlike any other miscible flood where the miscible agents are expected to be recovered, the CO2 will be left in the ground permanently. If the energy industry is able to discern any value from CO2 injection, a given as far as I am concerned, and the Alberta Government continues to provide incentives to the industry to do so, we may have shortfalls in those green house gas supplies. If we used the 7 million tonnes of injectants as a guide how much human production of CO2 is offset?

Using the "Carbon Dioxide Calculator" we can determine that the atypical home heating and other associated demands produce of CO2. Using rather liberal values, and particularly 5 eight hour flights per year, I came up with 935 tonnes per household. Now in the past 4 years, 7 million tonnes of injected CO2 at the Weyburn facility essentially eliminated the annual production of 7,486 homes. If we extend the number of facilities that could use CO2 as a miscible agent, maybe these Kyoto targets are not necessary after all.

Technorati Tags: Genesys, Environment, Engineering, Development

Eric Schmidt, Google CEO

There is an interesting and worthwhile video on YouTube of Google's CEO at the Web 2.0 conference. Within this video Dr. Schmidt says something very interesting that applies to the work being done around this blog.

"Collaboration is the 'killer app' for how communities work."

In economics one learns fairly early on that transportation, communications and financial resources are key ingredients of economic growth. Collaboration is a key technology of communication. If the energy industry is going to be able to grow, enhanced communications will be necessary.

Technorati Tags: Genesys, Collaboration, Trends, Ideas

The Role of Networks in Organizational Change

McKinsey have published a very interesting article, (Premium Membership Required) regarding organizational change. Noting that "organizational charts mask the invisible networks that employees use to get things done." I think this may be right on target with respect to the Joint Operating Committee, what do you think?

Technorati Tags: Genesys, McKinsey, Organization, Call-to-Action, Change

Organizing the Electronic Century

A very current working paper form Professor Richard N. Langlois.

March, 2007

This post is the first of two to reviews Professor Richard N. Langlois papers on modularity. In March 2007 he published a new working paper that adds value to the work that we previously reviewed. That work was used primarily to build the table that summarises the application of his theories to the oil and gas industry.

We have been reviewing and defining the boundaries of the firm between the market and the firm for the oil and gas producer. Discussing how the market could easily be deemed the Joint Operating Committee (JOC), and the division of tasks and obligations that are handled by either the JOC or the firm. The table provides a coherent and precise division of these roles and responsibilities. People with experience in the energy industry can see the manner in which this software could identify and support both the market and the firm. It is almost a natural division of the industry, a division that makes sense as to where this or that would best belong in the firm or in the market.

What these two new documents discuss is modularity, its benefits and difficulties. Modularity really isn't an option, its a necessity in today's marketplace. The ability to manage the scope and scale of activities involved with the human resources and speed of change, managing can't predict and prepare for all the tasks that need to be carried out. The market needs to anticipate the changes and provide the solutions to the firms as they are required. How the market does this is through the loose coupling of modularity.

Introduction

The introduction to this first document throws the topics of discussion out extremely well. The following paragraphs are direct quotations of the introduction. I have to admit that I am a bit of dupe when it comes to papers that start discussions around the revolutionary periods of business. Langlois notes however, that talk of whether industrial revolutions exist is only a "convenient container" for his narrative. I fundamentally believe the time today is best reflected in Professor Carlotta Perez' call that the installation period is over and the deployment period is upon us. We live in probably the most exciting business times imaginable. Nonetheless, how this deployment period is undertaken is directly in line with the theories of Langlois and he starts this introduction talking about the different perspectives of where we are in terms of the first second or third industrial revolution.

"Talk of a Third Industrial Revolution presupposes that there has been a Second. Alfred Chandler (2006, pp. 12) tells us that the Second Industrial Revolution began in the 1880's, when the railroad, steamships, electricity, and the telegraph and telephone called for the economies of scale and set in motion genuinely multinational enterprises (Chandler 1977, 1990). The revolutionary barricades were manned by a large number of integrated multi-divisional firms wielding a multiplicity of technologies. By 1930, that revolution was over, leaving behind the infrastructure of the Industrial Century - the twentieth century. As Chandler (2006, p. 48) reminds us, with what one suspects is a great deal of satisfaction, 98 of the 100 largest industrial enterprises in the U.S. in 1993 had been founded by the early 1930's." p. 1

Our review of Coase has been through the works of Langlois. In a series of slides, Langlois highlights the work of Coase and summarizes it with a graph on slide 11. This graph shows the optimal point of which the firm size is a result of a hybrid of efficiencies in the "Costs of administrative coordination" and "Costs of the price system." Coase has also noted that the size of the firm would or should be reduced if the efficiencies or "costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organizing in another firm." Coase 1937, p.395. It is clear to me that the size of the firm has sought the "integrated multi-divisional" firm at the expense of what would more reasonably been organized, if it were possible.

"The Third Industrial Revolution, which Chandler tends to call the Electronic or Information Revolution, began just as its predecessor was ending. It would eventually generate the infrastructure for the Electronic Century now upon us. Unlike the Second Industrial Revolution, the Information Revolution bubbled up from a narrow set of technologies - the vacuum tube, the transistor, the integrated circuit, and the microprocessor - and thus involved a smaller set of players (Chandler 2001, p. 12) But the organizational outcome was identical, because it would be the same kind of large multi-divisional firms that would commercialize the scientific and technological ideas of the new century. As first movers, and occasionally fast followers, these firms developed an integrated knowledge base from which they could launch innovative products." p. 1

This brings up memories of what we have seen in the North American business landscape. Since the 1980's when these giant industrialized groups roamed the landscape. Made up of a variety of business that offered the investor diversification. The only case that probably exists today is GE and its associated and diverse business lines. The type of firm is now for all intents and purposes extinct. If we assume that these monoliths were the high point of the bureaucracy, the next 20 years may see the current form of "integrated multi-divisional" organizations follow the same path of extinction. What can a large firm provide that can't be done by an efficiently operating marketplace? Here Langlois takes steps to understand how these "integrated multi-divisional" firms can continue, and notes his opinion on the survival of these firms is different then mine.

Although a "supporting nexus" of smaller, more-specialized firms was crucial to the success of the overall industrial enterprise, it was the multi-divisional firms, not the web of specialists, who did the heavy lifting. So long as the pioneering firms employed virtuous strategy of related diversification and remained on the straight-and-narrow paths of learning the first movers had mapped out, those firms were able to enjoy economies of scale and scope and to become the perpetrators rather than the victims of creative destruction. But when the pioneers strayed from the path, and especially when they succumbed to the temptation of unrelated diversification, they stumbled and fell (Chandler 2001, 2006)" p. 2

and

"My approach will be to steer between - or rather to recombine elements from - these competing accounts of the Electronic Revolution. In accord with the "new economy" view, I will be sensitive to the ways in which changing technology and other factors have affected the nature, role, and scope of both the multi-divisional firm and the "supporting nexus." Indeed, I will concur in the view that the forces of the modern age have led to a widespread "de-verticalization" of production in this and other industries, although, as in previous work (Langlois 2003, 2004, 2007), I will locate the source of that phenomenon less in the specific demands of digital technology and the Internet than in the larger Smithian forces of specialization attendant on a growing economy, increasing globalization, and an expanding base of technological knowledge. At the same time, however, I will not consign the multi-divisional firm to the dustbin of history. I will attempt to tell a tale of the electronic industry that is fundamentally Chandlerian in character, as it will focus on the development of technological and economic capabilities and on the paths of learning in the industry." pp. 3 - 4

Capabilities and Architecture

I have written extensively in the past six months about capabilities. Mostly in regards to Langlois writings, but also of Professor Sydney Winters work published through the LEM Working Paper series. Capabilities and governance are two issues that go hand in hand. Here Lanlgois uses the contrast between an integral and modular architectures to help in relating the benefits of modularity within markets.

"Baldwin and Clark (2000, 2006) make the argument more formally when they suggest that a given set of innovative activities - of economic experiments - are more valuable in a market than in a (large multi-divisional) firm: the value of a portfolio of options in always greater than the value of an option on a portfolio." p. 5

"A complex systems product is underlain by an architecture: a set of parts and a way of fitting those parts together. An integral architecture is one in which the parts depend on one another in complex and often unpredictable ways: the system is a tangle of spaghetti. By contrast, a modular architecture is one that regularizes the dependencies among the parts, forcing them to interact only in relatively formalized and predictable ways (Lanlgois 2002b)" p. 6

"What can we learn form all this? The present-day theory of capabilities has much to say about paths of learning; but it does not prescribe that those path be trodden by large multi-divisional firms alone - or, for that matter, by small highly specialized ones. Rather, it provides a toolkit I will use in nailing together an account of how the infrastructure of the electronic century came to be organized." pp. 7 - 8

The energy industry is driven, in my opinion, by the needs of the regulatory environments that it operates. The SEC and Tax authorities, the environmental and local conservation groups that dictate certain behavior from the producers. This has left the focus of the business, from a business perspective, away from the operations. In addition, the ability of a CFO to stand in front of his shareholders and promise a 10% increase in production volumes next year, has very little influence on how or where those additional volumes will be generated. To discuss the operational increase in capabilities and capacities from an oil and gas point of view is the domain of the Joint Operating Committee. These decisions are made with all of the partners that are involved in the asset. And that asset may consist of just one well, or a field and plant that represent 10% of the countries productive capacity. The CFO will have influence on the desire to increase production, as long as it is the consensus of the JOC. From a strategic and tactical point of view the CFO's input is traditionally determined through the capital budgeting process. A powerful tool, but nonetheless one that does not provide the level of understanding and innovativeness that is possible to achieve. In other words the decision makers are so far removed from one another that the understanding of where the critical decisions are made is predominately not known in a large firm. Where an innovation has been created would fall into the same category.

What it is that I am proposing here is that the architecture of modularity which Lanlgois speaks of is facilitated through the "Electronic Century". Modularity is entirely consistent to the producers interest in the JOC. The number of JOC's that the firm may participate in is limited to the capital the shareholders have invested in the management of the firm. If modularity is to be sought and achieved in the marketplace, the JOC is the organizational construct and market focus. This is more then just me highlighting a self fulfilling prophecy, as Langlois writes more regarding this and his concepts of modularity. Taking into consideration the controversial comment that I had just made. Langlois notes the following in his analysis of the consumer electronics industry.

"Thus in radio it was not the case that an integrated path of learning within a large firm gave rise to innovation; it was rather that innovation, channeled within a particular structure of property rights, contained the path of learning within a single large firm." p. 16

My understanding of the energy industry leads me to believe this statement is correct. Innovation can occur if it is channeled within a structure of property rights, a.k.a. the JOC. How is it that the focus of the industry has removed itself so far from the operational area? Langlois addresses this in the following, and I would assert consolidation and limiting of General and Administrative costs within the producer over the past 20 years has led to the same outcome as Langlois example.

"Why? Chandler (2001) lays great stress on the strategic mistakes. RCA (and other integrated American firms) strayed from the virtuous strategy technological development and related diversification that would have maintained paths of learning on which they had originally embarked. Instead, they succumbed to the temptation of conglomerate diversification, thus ultimately destroying the integrated knowledge base on which success depended." p. 26

And in today's marketplace perspective;

"The strategy of massive unrelated diversification in this reading is merely the proximate cause rather that the ultimate cause. As Michael Jensen (1986) has taught us, unrelated diversification is one possible symptom of "free cash flow," corporate windfalls that allow managers to pursue their own interests and visions without the short run discipline of product markets and financial markets. Although it is not often remarked on, the hey day of the large American multi-divisional firm coincided with a period of relative economic isolation. The Depression, tariffs, and wars of the first half of the twentieth century constitute what economic historian now see as a massive collapse of nineteenth-century globalization (James 2001; Bordo, Talyor, and Williamson 2003). And, with the destruction of the German, Japanese, and other economies in World War II, that isolation continued for the better part of two decades. In a general sense, then, the post-war golden age of the large multi-divisional American firm was one in which competition was relatively relaxed by later globalized standard - and in which managers found themselves with sources of free cash flow. The resulting (relatively) slack environment not only encouraged diversification (as Chandler insists) but also reinforced the multi-divisional form itself, a form of which unrelated diversification is the logical if extreme extension, and arguably isolated that form from economic realities to which it was increasingly ill adapted (Langlois 2003, p. 37 - 371)." pp. 26 - 27

Convergence and conclusion.
Langlois focus has been on firms within the electronics and digital industries, companies such as RCA and IBM. His research has been over been several decades of time and provides sound advice for the environment that any industry finds itself in today. For the energy industry, these points that have been made resonate with the work that has been done and is proposed to be done in this blog and software development project. Langlois finishes off with a salient conclusion that is strong and valid for the oil and gas industry.

"What does all this imply? Paths of learning are not thoroughfares excavated by large multi-divisional firms with entourage in train. they have always been, and are perhaps increasingly, trails beaten out by a variety of specialists working in cooperation and competition. The Chandlerian model works well for producing system innovations in their early stages (television was a prime example) and occasionally for generating fundamental new ideas (like the transistor). But many if not most important development - from the vacuum tube to the planar process, from the radio to the personal computer - were the product of specialists within the network. (The digital computer was the product of a special kind of specialist, the university.) Moreover, by taking advantage of a range of capabilities far wider than the boundaries of what even the largest firm can encompass, a network of specialist suppliers and competitors is better able to exploit the value of a complex and potentially modular product architecture."

Technorati Tags: Genesys, Langlois, Market, Organization, Modularity

Copyright issues on MIT Video

MIT Video is hosting a discussion on the topic of copyright. As I have mentioned here before, intelectual property is the most valuable assets on a go forward basis. Copyright, Trademark and to a lesser extent Patents provide their owners with powerful tools to ensure their thoughts and ideas are respected and commercial. It is interesting to see the constraints that are realized by the Professor of these universities are required to consider whether they can even use their own ideas. If the professors previously published their ideas, it seems that most of the publishers had taken the rights to the copyright in consideration of the costs of publication. Now with the desire to let those ideas be heard by a larger, and electronic audience, they are unable to secure those rights from the publishers. In addition to this point regarding overall access their is many other worthwhile points. I would recommend the viewing of the video on this important topic. People need to generally understand these points of law better then they do now.

Technorati Tags: Ideas, IP, Knowledge, Genesys

Professor Langlois' Slides

I've been reviewing some of the material that I gathered when I was looking into Professor Richard N. Langlois' writings. Going slowing through the slides that he produced for his "Economics 486, The economics of organization" course reveals a number of very interesting nuggets. I can't technically recreate the slide, and I do recommend that everyone download and study this rather comprehensive and valuable information that Professor Langlois has included in the file. Slide number 21 deals with measurement costs. Recall that we are discussing the role of the firm and of markets. And the "production" costs are being handled by the market and the "transaction" costs help to define the firm. To give you a good understanding of the oil and gas application of Langlois' theories I would refer again to the table that I prepared.

Now as for slide number 21, is this just me cluing into something that is generally known or understood, or is this something more then than that? The text of the slide is as follows;

"Measurement Costs."

Here Langlois is noting that if the costs to measure and negotiate the terms of the transaction are too high, then the role of prices will be established by firms and not markets. Not a great description but I am trying to get to an obscure point here.

"Consumers seek attributes of goods, not goods themselves."

This is where the obscure point starts. If I said that I was to go grocery shopping, I would say that I was not just buying food, but I was buying high quality goods at reasonable prices that meet my discerning tastes. The key words being "high quality", "reasonable prices" and "meeting my tastes". I could go into a Safeway and buy what I want and I would be able to more then satisfy my needs using just those three specific attributes.

"Costly to measure attributes."

I can see how a grocer would need to determine his pricing. How much product does he get, Oranges are rare due to the crop freezing, the amount of wastage and spoilage incurred by the shipper and the customer, and finally what the store will cost in terms of overhead. This can't be calculated for each Orange and therefore depends on the market for the price determination. The point being that the ability to standardize the attributes would help to establish the market pricing. Note information is what the market provides the consumer, grocer, distributor and farmer, and that is the role of markets.

"Level of buyer sorting depends on variability of goods."

The buyer will have to deal with what is provided. If the quality or price is not to his liking then they will not buy it, and leave it for the next consumer. The market information being generated here by the buyer and seller is significant.

"Sellers may reduce variability to lower buyers' search costs."

If the Safeway were located in affluent neighborhoods it would be inappropriate to attempt to sell products that are of low quality or bargain pricing. The buyer may be minimally challenged by price and therefore will look to other attributes to choose. Again markets provide information, and if their costs to transact are too high, then the firm is the optimal choice. For oil and gas the important component to consider is the level of standards that support the market. These standards mitigate the costs of completing transactions.

"Net price goes down when excessive measurements reduced."

The grocer and the consumer will share their information indirectly through the pricing and purchasing of each individual Orange. This information is being communicated through the price, set by the market.

OK so we have travelled along way to state some pretty basic facts. And I will attempt to tie these points into what I am seeing.

Attributes of goods are what consumers seek, not the goods themselves. In a market where standard means and measures, glossaries of terms, default contract templates, like those in oil and gas are able to communicate, facilitate and support the markets ability to establish price and other information to the oil and gas producer purchasing / selling them. That is to say that the majority of the work that can and should be done within oil and gas ideally should be by the market. The oil and gas industry has established many of these market supporting components of standard etc. in the variety of non-profit and non-governmental organizations that make up the industry.

I am now taking a hard left turn, so try to stay with me. In databases the table is called entities, and the columns are named attributes. And that is consistent with the information that is stored in database. The "Oranges" table is made up of volume, price, grade etc (attributes). In XML (which is a key technology in discussing databases) "Elements, which are the building blocks of XML documents, are bounded by start tags and end tags that may hold content, or may consist of one empty-element tag," and, "Attributes are name-value pairs that may appear in a start-or empty-element tag." Confused, don't be. Simply XML here is being used to portray the information contained within the database, which uses standards, and for the purposes of communication of those elements to the data user.

Thanks for keeping with me to this point, I hope its been worth your while. Here is what I am thinking that may be my new epiphany, and I hope it is for most people, and not just me.

If we, as I have suggested in my table that I noted earlier, wanted to move to a market orientation, according to these facts as I have laid them out, we could establish a functional market for those areas that are under the domain and administration of the joint operating committee. There is only the need to build this according to this "theory" we have all the parts and pieces that will make the JOC function as we expected it to do.

Going back to the proposed development, and particularly the Petroleum Lease Marketplace, the critical data attributes that are available and can be queried and searched. These data elements are well developed, what is needed now is to create the virtual Petroleum Lease Marketplace I have proposed here. Imagine for a second that you were trying to secure the petroleum lease rights in an area that you believed through geological mapping and seismic to be of particular value in a zone of your specialty. By reviewing the PLM you would be able to find out what was available, with whom, for how long. Or you would then be able to post the land and prepare for a bidding based on new reserves valuations and pricing. A PLM being a virtual marketplace of Leases, partnerships, joint ventures and farm-in/out, companies that want to do business, and companies that may want to sell their interest. All within a virtual environment that is search-able and leads to the necessary transaction processing that will eventually become the producing field. And here is my epiphany, because the marketplace can be supported in this manner.

Technorati Tags: Genesys, Langlois, PLM, Market, Ideas, Development

Collaborative Advantage

"The days of U.S. technological domination are over. The nation must learn to thrive through working with others."

Leonard Lynn
Hal Salzman

Blog Summary

I found this kicking around on my hard drive. I had apparently downloaded it from the Kauffman Foundation a while ago, a copy of this document can be secured by selecting the title of this entry. Collaboration is clearly a key attribute of how work will be done in the future. Collaboration facilitated by technologies that are available today provide competitive advantages, and different methods and means of completing work. This article suggests the American dominance in technology leadership is waning. How the U.S. can regain the leadership position they once enjoyed is suggested in this article is through collaboration. This document takes a critical look at the realities of globalization for the U.S. Based here in Canada, much of the same feelings of the need to compete is shared by most. We have lost some of our leading position, however, the U.S., and to a lesser degree Canada, were in need of a competitive challenge. Competition is good, and we are faced with some formidable competitors in a globalized world. This document focuses on collaboration in the sciences and technology, and specifically noting the role of engineers in providing the means for North America to compete.

It at times seems that the differences that made North Americans unique are fading quickly. Whether or not a reconciliation of the standard of living of all people is in force, most people would concur with this documents premise and hypothesis. The authors note;

"It is not that the new globalization has gone unnoticed. Many observers are concerned that the United States is beginning to fall into a vicious cycle of disinvestment in and weakening of its innovation systems. As U.S. firms move their engineering and R & D activities offshore, they may be dis-investing not just in their own facilities but also in colleges and regions of the country that now form critical innovation clusters. These forces may combine to dissolve the bonds that form the basis of U.S. innovation leadership." pp. 75

Were these challenges demand driven? Or, has the scientific and engineering capability to conduct most of the high end complex tasks what made North America so dominant? Or was it the freedom and liberty were being released in the former communist nations, that is now rising up to challenge the west? I think it is the latter, that with China in 1978 and the Former Soviet Union (FSR) since 1989, can now focus on quality of life issues and be less concerned with controlling their populations. The authors seem to think that some of the ways in which business had been conducted has been exploited by other countries. In an open society that is what will happen, and did happen to the benefit of all people. Although losing these competitive attributes is possible, the competitive focus they unleash is both the purpose of an open society and the key to its future.

"Strategies that may have served U.S. firms in the second generation globalization will not work in the third generation world. The new emerging economies are an order of magnitude larger than those that emerged a generation ago, and they are today's growth markets. Nor does the United States, despite its undeniable strengths, enjoy global dominance across the range of cutting-edge technologies. More-over, U.S. multinationals are weakening their national identities, becoming citizens of the countries in which they do business and providing no favors to their country of origin. This means that the goal advocated by some U.S. policy makers of having the United States regain its position of leadership in all key technologies is simply not feasible, nor is it clear how the United States would retain that advantage when its firms are only loosely tied to the country." pp. 77

These comments may appear to resonate more with a protectionist mindset then with a more globalized point of view. It also seems to state a wanting for a greater share of a smaller pie then sharing a large pie to a certain extent. If the third generation globalization ties into Professor Carlotta Perez's theories, the third generation is the point where the benefits are soon to arrive. Dr. Perez made that call just recently. So the installment period as she described has been made, and thankfully we had a large and growing China and India to help sustain the world through this transition. It is also necessary to point out that what fuels this activity is the oil, gas and coal industries. These resources are constrained due to the global demand, and are potentially a hindrance to the progress of the world economy. The only manner that the energy industry can meet this demand is to re-organize for this challenge. This reorganization has to be made explicit through the software that defines and supports the structure. We should be less concerned about the losses of competitiveness and focus more on how they can be solved collectively.

The authors offer some of the ways in which the past competitiveness of the U.S. market is slipping away. In these four categories I can clearly see that the authors are not offering a means to stop the hemorrhaging of the U.S. economy. But offering constructive ways in which the U.S. can participate in the global economy and compete.

The Bandwagon Syndrome.

"As U.S. multinationals join the bandwagon of offshore technology development, they often seem to go beyond what makes economic sense." pp. 77

The Snowball Effect.

"The more that U.S. multinationals move activities offshore, the more sense it makes to offshore more activities." pp. 77

The loss of Positive Externalities.

"Some multinationals are finding that if their technology is developed offshore, then it makes more sense to invest in offshore universities than in domestic universities." pp.78

The Rapid Rise of Competing Innovation Systems.

"Regional competence centers or innovation clusters in the United States grew haphazardly in response to local market stimuli. China, India and other countries are much more explicitly strategic in creating competence and innovations centers." pp. 78

"Rather, the United States needs to develop new strengths for the new generation of globalization. With U.S. and other multinational firms globalizing their innovation work, emerging economies developing their education systems and culling the most talented young people from their huge populations, and communication technologies enabling the free and fast flow of information, it is hard to imagine the United States being able to regain its former position as global technology hegemony." pp. 79

"No amount of science and engineering expansion will restore U.S. technology autarchy. Instead, a new approach - collaborative technology advantage - is needed to develop a vibrant S&T economy in the United States." pp. 80

Policies for strength,

"We believe that the government, universities, and other major players in the U.S. innovation system need to work toward three fundamental major goals:" pp. 80

• "The United States should develop national strategies that are less focused on competitive, or even comparative, advantage in the traditional meaning of these terms, and are more focused on collaborative advantage." pp. 80
  
• "To start, the nation needs to counter the bandwagon and snowball effects that are driving the out-sourcing of the technology in potentially harmful ways." pp. 80
• "Designers of Tax Policies at all levels also can redirect policies in these directions." pp. 81
  
• "To a large degree, the U.S. patent office serves as the patent office for the world." pp. 81
• "As a second goal, the United States need to help create a world based on the free flow of S & T brainpower rather that a futile attempt to monopolize the global S&T workforce." pp. 81
• "Immigration policies that support global circulation would allow easy short term entry of three to eight months for collaboration with U.S. based scientists and engineers." pp. 81
• "Finally, in working toward the first two foals, the United States needs to develop an S&T education system that teaches collaborative competencies rather than just technical knowledge and skills." pp. 81
• "Our finding suggest that it is not the technical education but the cross - boundary skills that are most needed (working across disciplinary, organization, cultural, and time / distance boundaries)." pp. 81

Finally as part of the conclusion of this paper, "the enhanced communications within and between organizations". In oil and gas the consistency of motivation between the members of a Joint Operating Committee (JOC) resonates with the recommendations of this paper. The science, technology and engineering is the focal point of those JOC members. It is their backgrounds and scientific interests. The JOC has the operational decision making capabilities, however, it must retard these processes for the various bureaucracies to sign off on the plan. Its time to stop placing the bureaucrats at the centre of the organization and adopt this papers recommendations. And it is my opinion that the start of this change would be to develop the software as part of the solution to our long term economic well being.

"Our research suggests that the new engineering requirements, like the old, should build on a strong foundation of science and mathematics. But now they go much further. Communication across disciplinary, organizational, and cultural boundaries is the hallmark of the new global engineer. Integrative technologies require collaboration among scientific disciplines, between science and engineering, and across the natural and social sciences. They also require collaboration across organizations as innovation emanates from small to large firms and from vendors to original equipment manufacturers. And obviously the require collaboration across cultures as global collaboration becomes the norm. These requirements mandate a new approach not only to education but to selecting future engineers:colleges need to recognize that the talent required for the new global engineer falls outside their traditional student profiles. Managers increasingly report that although they want technically competent engineers, the qualities most valued are these other attributes."

Technorati Tags: Genesys, Call-to-Action, Engineering, Science, Trends

Format change.

Taking a little time off this past week to reflect on the past three months research. I had completed a good chunk of what I have to do, and spent some time reviewing what has been discovered. The difficulty and the pace of the research were a bit too much for my liking and I think that is also reflected in my writings. I am particularly pleased with the writings of Professor Richard Langlois in determining the division of the market and firm. (The summary table is located here.)

The difficulty in reviewing so much information is that the ease of reading has been lost. Although I will continue to use this blog to secure the intellectual property that I feel is necessary to support the basic hypothesis. The manner in which the writings will be completed will change for the future. I will now in addition to the posting, summarize the key points of the entry in an opening commentary. The abstract or summary will provide the reader with enough of the necessary information to see if they desire to read on. I hope this helps in making this research more usable by the growing population of people visiting this site. I am pleased with the numbers of visitors and the growth. I think with a little more effort on my behalf it should make their experience better.

I would also point to the del.ic.ous and Google Reader columns at the side of these posts. For anyone interested in oil and gas, and information technologies, there are some very high quality information and writings there. The search for quality continues and I hope that this blog becomes the focal point for most people that are interested in innovation within oil and gas. I will also be posting many smaller items that I think require special notice. These will consist of a quick summary and introduction to other articles, videos and podcasts. One last point regarding tags and labels. It may seem redundant to being posting to both Technorati tags and Google for labels, however, using the labels limits the tags to this site exclusively, where as Technorati tags will aggregate any and all blog tags. Any other comments or suggestions would be greatly appreciated. So with that we resume regularly scheduled writing on Monday. And most of all thank you, I know I've enjoyed myself.

Technorati Tags: Genesys, Writing, Langlois, Summary

Globalization at the turning point: A Perspective from the great surges model.

Professor Carlotta Perez has been one of the many Professors that I keep a close eye on. Her work is in the area of long wave economic theorists. Defining two distinctive periods of time marked by change. The installation period, and the deployment period. I found this abstract to a seminar that she is holding at Sussex University. Within this abstract, she calls the current time period as the "Turning Point between the two periods." A very important point in time.

Abstract:

Though Schumpeter himself emphasised the double agency of the entrepreneur and the financier in the innovation process, neo-Schumpeterians have generally neglected the role of finance in technological diffusion. The great surges model proposed by the author addresses these complementary roles and suggests that the propagation of technological revolutions has historically involved two distinct periods of two or three decades each: The Installation period, led by financial capital and characterized by radical innovations or creative destruction and the Deployment period, led by production capital and marked by processes of expansive growth that could be termed “creative construction”. After indicating the differences with Schumpeter’s long wave model, it will be argued that, at present, the diffusion of the ICT revolution is at the Turning Point between the two periods. The world economy would be in a phase of instability, imbalances and income polarisation, calling for institutional changes as profound as those of Bretton Woods and the Welfare State, which enabled the full flourishing of the previous technological revolution, that of mass production and its “Fordist” paradigm. On this occasion, due to the nature of the “Knowledge Society” and the flexible ICT paradigm, much institutional innovation would need to be at the global level. Thus, seen from the great surges model, globalisation would be at the crossroads choosing a path between two extremes in the current “space of the possible”: between creating the institutional conditions for a global “golden age” that would be a positive-sum game for all countries, developed and developing, or letting the short-term criteria of the financial world continue to guide investment towards what is likely to result in merely “a gilded age” of polarised incomes, very uneven growth and an incomplete realisation of the wealth generating potential of the ICT paradigm.

Carlota Perez is Professor of Technology and Socio-economic Development at the Technological University of Tallinn, Estonia, currently Visiting Senior Research Fellow at CERF (Cambridge Endowment for Research in Finance), Judge Business School, Cambridge University, and Honorary Research Fellow at SPRU. Originally from Venezuela, where she served as Director of Technology Policy at the Ministry of Industry, she is also an international lecturer and consultant, specialised in the social and economic impact of technical change and in the historically changing conditions for growth, development, innovation and competitiveness. As such, she has worked for various public and private organisations, for major corporations and governments in Latin America, North America and Europe, as well as for the EU, the OECD, the UN and other international agencies.

For many years she has collaborated with Chris Freeman in the study of long waves and techno-economic paradigms

Carlota Perez’ articles from the early 1980s and her book Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages (Elgar 2002) have contributed to the present understanding of the relationship between technical and institutional change, between finance and technological diffusion and between technology and economic development. ISBN 1843763311

Technorati Tags: Genesys, Perez, Call-to-Action, Trends

Change artists; Stories from the Real World: CEOs, CIOs and Change

HP in cooperation with CNN and CIO Magazine have produced a series of videos focusing on change, and particularly technological change in organizations. Click on the title of this entry, registration is necessary to review the videos, and I highly recommend it.

A particularly interesting video is the Chevron CTO Don Paul talking about his business. If only we had such progressive forward thinking leaders here in Calgary.

Technorati Tags: Genesys, Video, Development, Innovation

Enterprise search and security.

In the User Vision I noted the ability to search the domain of the user. A far easier thing to say then it is to do. Consider for a moment the number of companies within the industry. Consider the number of Joint Operating Committee's (JOC's) they participate in, and then consider the number of users that will be involved in preparing and using corporate data. Access to the user's domain when they may fulfill different roles in different JOC's for different client companies, one begins to see the issue regarding their ability to search for their information.

The idea that search and security would be linked would have seemed oxymoronic a few years ago. How could search maintain and build upon the security of a Service Oriented Architecture (SOA) such as the one being written about in this blog. Firstly the top priority of any development and operation of any application of this type is the quality, integrity and security of the data that is being used by producers and users. At the same time search will become an indispensable competitive tool for any oil and gas producer. Access through extensive, state of the art search technologies is a critical requirement for the oil and gas producer and user. Another critical issue is the users expectation of near single shot relevancy being provided by search giant Google. A little review of the features of the technological architecture as it is proposed here is as follows.

Authorized access will be granted to users through the world wide web. Recall that the use of a private network using IPv6 provides enhanced security that is inherent in the protocol. The producers will also access their applications from the Grid that is owned and operated as a service by Sun Microsystem. Hosting of the Genesys application by Sun provides a level of third party reliability and security that is necessary for the application. Genesys will focus on research and development of systems, not compete with Sun on infrastructure.

Each producer will have a virtualized Solaris environment on the Grid, Ingress Open Source Database Instance, and Genesys Application Server all operating side by side with other producers, possibly on the same processor. This will provide, and it stands to reason that firewall and other security requirements are already in place, each producer will access their, and only their application and data. In addition each virtualized environment will have a Google Enterprise Search Appliance maintaining the access, control list, search security, and search index's. Information about Google's Enterprise Search Appliance can be found here, and their Enterprise blog here. Information on Sun's virtualization of Solaris is here.

Deciding between money, time, and / or quality, as with any system development you are entitled to two of these objectives at the expense of the third. In the case of search security, and security in general time and quality will be at the expense of money. Although the Solaris user and Ingress user accounts are free as they are open source, they do command large fees for services of operation, the Google Search Appliance is also relatively expensive.

I found a website and consulting firm that has dedicated themselves to enterprise search and security. Idea Engineering have a newsletter that provides the necessary discussion of many of the issues companies will need to address in the future. I am highlighting a series of articles they wrote in a series of newsletters that provide value for the readers here. The series of articles are here, here and here.

A couple of the assumptions that I am operating under should be stated explicitly. We have design freedom in terms of how the application is built. Secondly, we have the cost of 1 Million Instruction Per Second (MIPS) of processing power is now $0.01 (processor costs only), enabling intense, yet affordable processing capability. Think encryption, virtualization of each producer each employee, heavy and multiple indexing algorithms and access control lists, processing demand will be very high. Add the unique perspectives that are part of this blog like Military Command Structures, Single Sign On (SSO) which is a necessary feature.

Lastly the manner that I see this application being built is through the ultimate users. What I would like to see happen is that a discussion around these points fill in some of the detail and ferret out the finer points and issues. It is the users application and their involvement is being called on for this critical issue.

Technorati Tags: Genesys, User, Vision, Data, Search, Security

Professor Whitesides, on MIT Video

This video has an interesting point of view, one that states the United States will at least be challenged for leadership in science and technology. Professor Whitesides suggests that areas such as K - 12 education need to be amended to accommodate the ways that academia and corporate research are undertaken.

Two of the important points that he suggests is that the Chinese have a very low cost structure. This cost structure extends in all areas of their economy and includes research. Noting the Chinese also have very large foreign currency reserves that could be used to help sustain the long lead times necessary in research. This provides them the opportunity to challenge and possibly lead the world in research and science.

Professor Whitesides notes that energies problems will require science and technologies to advance to solve these issues. I would suggest that this is correct, the problems are many, they are diverse in nature, and are key to a countries competitive position. I have suggested here that the oil and gas industry needs to aggressively employ the sciences in order to meet these challenges. I have also suggested that the tie in to the academic community is necessary. As Professor Dosi has suggested technology influences science, and science influences technology. Industry and academia need to be working together. And to do this effectively I believe industry needs to reorganize themselves for these purposes around the Joint Operating Committee. A bureaucracy will most certainly fail in these critical energy challenges.

The question and answer session in the last half of this video is a must watch as well. The participants for this presentation are the who's who in terms of who is interested in providing solutions to these issues.

Technorati Tags: Genesys, Knowledge, Research, Engineering, Science

What I would do.

In the instance of having some companies with qualified opinions on their financial statements. If this project was proceeding as it should, I would have struck a committee of the large accounting firms to discuss what would be necessary to ensure that the companies had unqualified opinions next year. And then set out to do just that.

The source of this problem is the sale of Qbyte last year by IBM. The new vendors gave notice that it would not support Qbyte after 2009, and therefore has put the energy companies in a situation where on a go forward basis they have to qualify their opinions in the financial statements.

Why did IBM sell? Their frustration with the industry to do anything with their systems on a go forward basis was discussed many times in the past. What were they to do? I can't blame them in the least.

The industry reaps what it sows.

Technorati Tags: Genesys, Team-Failures, Call-to-Action, Alternative

Annual Report Season

Canadian Natural Resources Ltd have filed their 2006 annual report. Within its financial statements there is a small qualification of managements opinion on internal controls. But first lets go back to 2005 to see what they wrote.

The accompanying consolidated financial statements and all information in the annual report are the responsibility of management. The consolidated financial statements have been prepared by management in accordance with the accounting policies in the notes to the consolidated financial statements. Where necessary, management has made informed judgements and estimates in accounting for transactions that were not complete at the balance sheet date. In the opinion of management, the financial statements have been prepared in accordance with Canadian generally accepted accounting principles appropriate in the circumstances. The financial information elsewhere in the annual report has been reviewed to ensure consistency with that in the consolidated financial statements. Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance that transactions are appropriately authorized, assets are safeguarded from loss or unauthorized use and financial records are properly maintained to provide reliable information for preparation of financial statements.

PricewaterhouseCoopers LLP, an independent firm of Chartered Accountants, has been engaged, as approved by a vote of the shareholders at the Company’s most recent Annual General Meeting, to examine the consolidated financial statements in accordance with generally accepted auditing standards in Canada and provide an independent professional opinion. Their report is presented with the consolidated financial statements. The Board of Directors (the “Board”) is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The Board exercises this responsibility through the Audit Committee of the Board. This committee, which is comprised of nonmanagement directors, meets with management and the external auditors to satisfy itself that management responsibilities are properly discharged and to review the consolidated financial statements before they are presented to the Board for approval. The consolidated financial statements have been approved by the Board on the recommendation of the Audit Committee.

And for 2006

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 15(d)-15(f) under the United States Securities Exchange Act of 1934, as amended. Management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, performed an assessment of the Company’s internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, has concluded that the Company’s internal control over financial reporting is effective as at December 31, 2006. Management recognizes that all internal control systems have inherent limitations. Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006, has been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report presented with the audited consolidated financial statements.

Well who would have thought, sounds like a systems related argument that has been discussed here many times. I'll let you know of whom's head I see rolling down 5th Avenue first.

Technorati Tags: Genesys, Governance, Call-to-Action, Failure

Technology, Entrepreneurship, and Inequality

Alfonso Gambardella, Sant'Anna School of Advanced Studies, Pisa, Italy

David Ulph UK government, London, UK

February 2003

This paper has some interesting insights as to the makeup of the skilled vs. unskilled workers within oil and gas. The number of unskilled workers in the energy industry is very small. Weather it is in the offices of downtown Calgary or in the field, the level of skill is generally very high. Since we are primarily concerned with the head office staff we can focus just on that "high skilled" group. The research done by these authors provides a good understanding of how the energy industry as it stands today, may evolve.

"This paper develops a model that compares some implications of the rise of these new industries with the traditional organization of firms and sectors based upon the large integrated companies of Chandlerian memory (Chandler, 1990). Our model yields three main insights.

The contrast of the authors in terms of firms is very high. To compare the Chandlerian firm with its structured hierarchy and emphasis on process and regimen, vs., the purely entrepreneurial company that can best be summarized as a Silicon Valley firm. And the two types of workers that are employed at each type of firm. The Silicon Valley skilled vs. the unskilled in the Chanlerian firm are fundamentally different.

"First, our two archetypes - Silicon Valley and the Chandlerian firm - entail two different degrees of inequality between the earnings of the skilled and unskilled workers." pp. 1

"Second, apart from skill-intensity, a notable feature of the new industries is that they entail knowledge externalities." pp. 1

"Third, our model shows that the marginal effect of an increase in the relative supply of skilled people on the total income (and therefore on the total output) of the economy is always higher in the equilibrium where the new industries dominate vis-a-vis the other. The intuition is intriguing as it is a natural upshot of inequality. If the skill premium is higher, then as the marginal unskilled worker becomes skilled, the raise in her income will be higher than if the economy was in the less unequal equilibrium" pp. 2

Which is the logical conclusion to the use of their model. Creating an equillibrium that is unique to the situation, and that is reflected clearly in the next quotation.

"Put simply, German skilled workers, with potential employment in companies like BMW, Bayer or Mercedes, have higher opportunity costs of setting up their own firms vis-a-vis Indian or Israeli engineers." pp. 4

With so much to lose by taking a risk as an independent machinist, it would be foolhardy to attempt entrepreneurship in a country like Germany. And in India it may be the only manner in which a highly skilled machinist could exercise the value of their skills. I would suggest that the equilibrium of highly skilled workers in the energy sector provides little incentive or disincentive for the worker to take a risk in an entrepreneurial fashion. Therefore a mix of both contracting and employment approaches exist for a person to being hired in oil and gas. With some companies such as Encana employing a 50% employee 50% contractor human resource strategy.

"Our model shows that a large relative supply of skilled people is likely to imply a higher total income in the Silicon Valley equilibrium vis-a-vis the one dominated by Chandlerian firms. This suggests that, as the relative supply of skills rises, skilled people may "direct" technical and organizational change towards the formation of new firms and industries that are skill-intensive, rely on knowledge externalities, etc., whereby their inventive capabilities can be best exploited." pp. 5

Well that is music to my ears. The high skilled labor would "direct technical and organizational change towards the formation of new firms and industries." I would normally be on the verge of describing this research as a call to action.

Conclusions

"In sum, the large Chandlerian firm has been a notable shield against inequality across skills for many years. At the same time, the knowledge spillovers produced by the new industries imply that the rise of such industries require co-ordination, which gives rise to multiple equilibria. This explains why even when comparing similar countries or regions, either the traditional sectors or the new business models dominate." pp. 31

Technorati Tags: Genesys, Call-to-Action, Lem, Research, Trends

We've been Haacked!

And I do like it. Phil Haack runs a blog that

"attempts to infuse technology and software development with humor and a pragmatic eye... Attempts."

Phil read one of my recent posts and commented on it in his blog.

I certainly would welcome Phil and his community to have a look at this early stage project. The scope is large and therefore, "one day", will have ample amounts of paid developers working on it. No time like the present for a little introduction, and self-promotion, I think.

Technorati Tags: Genesys, Development, Open-Source, Software

Silence Fails, Part B

Continuing on with Silence Fails and the impact that the documents 5 crucial problems have raised.

Starting with the Conclusion on page 18.

"Although Silence Fails focuses on important findings that can predict and explain failure, the most important implication of the study is that potential leaders have to influence success." pp. 18

More then anything the energy industry needs this project to be a success. The time, money and effort that needs to be channeled through this project is not something that can fail. I believe fundamentally the ability for the industry to increase its throughput capacity requires fundamental revolutionary change in the manner that people organize themselves and conduct their work. The time for this to start is not after this software is built, but now, starting today the user needs to be the influence and drive to make this real and successful. Now that this paper Silence Fails has enabled me to dispatch the wrong approach, its time to start planning how the process gets under way. I think Google is going to be announcing the integration of JotSpot into Google Docs & Spreadsheets. This will enable me to put up all the blogs content on that Wiki and have any and all people that this project appeals to to begin posting their content. From there the users will determine what's in and what's out and what should be there. The project scope, the budget etc.

First lets continue on with the review.

Getting People to Speak Up Well.

This is something that I can see is important and I think I have been able to maintain the scope of the project as a result. Many times I have been approached with alternative methods of dealing with this project. A compromise here and a compromise there and the project is on a go forward basis. This hasn't happened because the time and effort necessary for success is not there. You also can not compromise on such a large and important project as the basis of the first step. If it is necessary to say no, I apparently have said so. The paper deals with this specifically;

"Across the problem areas, about half of leaders make some attempt to speak up. But most are ineffective. Some speak up but they water down their concerns, so the issues are never fully aired. Some speak up but do so in a way that provokes defensiveness from others. And a handful - are able to share their full concerns by the end of the conversation, feel their views are understood and respected."

and

"The study also shows that while the skill of the initiator is a key ingredient in ensuring these crucial conversations are held well, the receptiveness of the other party is similarly important."

"Unless and until leaders take extraordinary measure to ensure their environment is conducive to holding crucial conversations, a number of issues will remain unaddressed, invisible, and fatal."

The authors then note a number of key steps to make the changes that are necessary for this project.

Develop a Business Case for Change:

• Begin by making the problem visible. Track and publish data about project successes and failures.
• Distribute Silence Fails to generate discussion about the root cause of current under performance.
• Engage senior leaders in a "listening campaign" where they lead structured focus groups to validate whether these crucial problems affect current results.

Well I have been doing this with the blog but that is not enough. As soon as I get a Wiki up and operational it will enable more voices to express what they want in terms of systems etc. I am also hopeful that I can find the kind of software that prepares and manages the Java Community Process. Have a look it's ideal for the purposes of this project.

Measure Behaviors

What gets measured gets done. The authors have prepared a Silence Fails Assessment to help measure and monitor the conversations that need to be carried out. The scoring of this assessment will help the project leaders assess where the conversation is missing and initiate steps to get it back on track.

Invest in Skills

The two sponsoring firms in addition to preparing the report and assessment, have prepared training materials in this area for project managers. This is of course how they make their money. The training looks to be very thorough and is designed to teach the project managers how to carry out these difficult conversations. I believe these programs have value and will explore them when we get our funding. Until that time I will have to muddle through with the material that has been published by the two sponsors The Concours Groups and VitalSmarts. In addition, the program states;

Hold Senior Management Accountable

Ultimately this project will survive and endure the difficult road ahead through the determination of a few strong CEO's in the marketplace. Their commitment to making this project successful can not wane or fade.

"Make leaders the teachers. People will change their behavior more rapidly if leaders deliver the training than if staff trainers or outside consultants do so. When leaders teach, the speed of change can be two or three time greater than when those who aren't as credible and connected in the organization lead instruction."

Make Heroes of Early Adopters

In order for the candid comments and conversations to be carried out The early adopters of these principles, the ones who stand up and take a risk and raise the conversation should be identified publicly with the recognition and support of the project leadership.

"Be sure to send a clear and public message that these conversations aren't just important, they're crucial and those who raise them are highly valued."

Technorati Tags: Genesys, Silence-Fails, AWOL-Sponsors, Call-to-Action, Team-Failures, Project-Chicken, Skirting, Fact-Free-Planning

Silence Fails, Part A

The title of this entry will take you to a website that will enable you to download a .pdf entitled Silence Fails.

In the process of determining what the proposal for the targeted 135 producers (T135) will be. It is necessary to review the project completely. The scope has changed slightly. The target market is different and I think they need a fundamentally different approach. Particularly from the point of view of the knowledge, ideas and undertakings discussed here in this blog. These ideas and the basic premise that the Joint Operating Committee (JOC) is the key organizational construct for oil and gas. Unless they stumbled onto the blog they would have heard very little about this project. Specifically the May 2004 research report was not targeted at them. Times have changed and the need to start over again is the approach that has to be made to them. Therefore I have revised the first years budget requirements at $375,000.00 and will be looking for a number of T135 producers fund this first year. The purpose of these funds has changed radically as well. As opposed to doing any construction of the project deliverables I want to create a number of "conversations" with the industry. This will be done by continuing on with reviewing the pertinent academic research as I have been on the innovation in oil and gas blog. This is the most effective area of where I can spend the next year. The addition of a Wiki to deal with the project scope, budget, deliverables and associated material gets developed. These need to be determined through the population of users that this project is targeted at. They need to be involved in these determinations. This change in tactical approach is as a result of the prompting of the "Silence Fails" research report that I am in receipt of.

Silence Fails is the name of a research report that has been published by it two research sponsors VitalSmarts and The Concours Group. These companies are described as follows.

VitalSmarts
"An innovator in corporate training and organizational performance, VitalSmarts helps teams and organizations achieve the results they care about most. With award-winning training products based on more than 25 years of ongoing research, VitalSmarts has helped more than 300 of the Fortune 500 realize significant results using a proven method for driving rapid, sustainable, and measurable change in behaviors. VitalSmarts has been ranked twice by Inc. magazine as one of the fastest growing companies in America and has trained more than 500,000 people worldwide"

The Concours Group
"The Concours Group is a new breed of professional services firm, supporting senior executives through the blend of leading-edge intellectual capital and pragmatic business applications. The firm works with more than 300 of the Global 1,000 firms, helping leaders turn human and technological potential into business value. The Concours Institute is the research and education arm of The Concours Group. Concours research discovers and develops future best practices in business, technology, and human capital; its education articulates them and motivates their adoption; and its innovative senior-person Advisory Services enables clients to implement them quickly and achieve business results."

The sponsors research involved approaching a variety of companies with more then 2,200 projects ranging from $10,000 to billion dollar organizational restructuring efforts. It sounds like these research projects are almost directly in-line within the scope of what this project entails, organizational change with information technology.

Silence Fails; The Five Crucial Conversations for Flawless Execution.

The project focused on five conversations that should occur within the project, however rarely do. These five conversations, or rather their lack of them, were determined to be the reason for "91% of all large scale corporate initiatives fail". These five conversations make it clear to me that I was on the wrong path. Expecting that a top heavy project would be able to lead the Users to the ultimate destination of better systems is clearly the result of the lack of the conversations that need to be done. Going through these five conversations also show me how it could be done with less risk, greater accountability and potential success.

The five conversations are simply conversations that should be carried out, but aren't for a variety of human resource and psychological reasons. They are:

• "Fact Free Planning"
• "A project is set up to fail when deadlines or resource limits are set with no consideration for reality."
• "Away With Out Leave (AWOL) Sponsors"
• "A sponsor doesn't provide leadership, political clout, time, or energy to see a project through to completion."
• "Skirting"
• "People work around the priority-setting process."
• "Project Chicken"
• "Team leaders and members don't admit when there are problems with a project but instead wait for someone else to speak up."
• "Team Failures"
• "Team members are unwilling or unable to support the project."

This listing does not provide a lot of comfort that this would be an appropriate direction to follow. But reading the entire report gives a perspective that transcends just the listing of the necessary conversations. Reviewing the report provides an understanding of why projects fail implicitly. Anyone who has worked on projects will understand why these conversations will have an effect on the outcome of projects. So lets look at each conversation and attempt to capture what the research report is providing.

The Silent Crisis

To mitigate failure, management has turned to hedge against failure by implementing
"Formal systems. Over the past twenty years, project professionals and management experts have focused on improving the formal systems related to program governance, project management, and project related technologies." pp. 3
"This study... demonstrates that project leaders can substantially improve their organizations ability to execute on high-stakes projects and initiatives by breaking a code of silence on five astoundingly common yet largely un-discussed and ignored problems that contribute significantly to almost all project failures." pp. 3

Key Findings

"When one or more of these problems is not controlled - or not confronted well - it festers, sets off workarounds, and produces politics." pp. 5

One of the key findings is that when four out of five of the projects fail when one or more of these conversations is missing. The good news is that one in five projects succeeds because the conversation was used by the project leaders or the project was turned around based on introducing the conversations. The authors of this report go on to note;

• "Does it affect project success when project leaders speak up effectively?"
• "Can others be taught to speak up more skillfully with similar results?"

"The resounding answer to each of these questions is yes". pp. 5
"Senior leaders can predict and prevent the failure of high-stakes business initiatives by creating a culture where the five conversations are held quickly and effectively. Silence Fails Also provides insights and recommendation on how senior leaders can develop a business case for change, measure behaviors, invest in skills, hold senior management accountable, and make heroes of early adopters." pp. 6

Crucial Problem # 1:
Fact Free Planning
"A project is set up to fail when deadlines or resource limits are set with no consideration for reality." pp. 8

To this I plead guilty. Using a top down approach as I did, didn't feel right. Yet this un-asked question was never raised outside of the comment that the total amount that was deemed necessary was "sticker shock" the real and necessary conversation about the resources and the sources of project funding did not occur. Therefore it is necessary to start this conversation and have the input from all stakeholders and users detail a plan and budget that can instill the accountability and ownership to the agreed to deliverables. Immediately I can see one source of this problem being the users. In retrospect I was expecting the users to provide their involvement and participation out of the greater good of their employer or in the case of independent workers their time. This is wrong and the developers and users should be paid equally to provide the long term motivation and sustenance of the project. This will form the basis of the conversation as we go forward. It should also be understood that the resources to carry out this conversation are not available. Participation in this next / first year should provide some direction with respect to who the leaders and resources are in the user community so that when the project does have its sponsors their participation can be recognized. The report goes on to say.

"Fact free planning reflects bad planning behaviors at every level. When project leaders realize these practices are taking place, they must be willing and able to call the bluff. If they avoid this crucial conversation and either commit to something they know can't happen or fake their way to success, they set themselves and their projects up to fail."

"Similarly, executives who avoid discussing their doubts about an estimates validity or the team's competence instead use their power in a way that generates political rather than valid agreements. Then when failures follow, their doubts about the team are confirmed, and they feel justified in using more fact-free planning to re-establish their sense of control."

The only way out of this vicious cycle is for project leaders and executives to candidly and effectively express their suspicions, doubts, and data. While these crucial conversations aren't easy, they are the only path to rational commitments."

How common are these problems? Eighty-Five percent of project leaders are faced with "fact-free planning"."

Crucial Problem # 2
AWOL Sponsors
"A sponsor doesn't provide leadership, political clout, time, or energy to see a project through to completion."

Not something that I want to experience. This is a long life project and to have sponsors disappear is not what I want for this project. I don't even know of whom the project sponsor would be. Since this is an industry wide initiative the need to have several committed to the success would be necessary, and therefore possibly the CEO's. This conversation therefore needs to be undertaken in the next year with the funding being sourced.

"Project Sponsors are responsible to provide leadership and political support. And they frequently don't. When the sponsor is AWOL, the project team is stranded and exposed. They're sent off to accomplish a task and don't have the firepower needed to implement the project. For example, key leaders whose help or resources are needed to enable the project may not come through, and the sponsor who has the organizational muscle to hold them accountable fails to do so." pp. 11

Crucial Problem # 3
Skirting
"People work around the priority-setting process."

"Powerful stakeholders and senior leaders often skirt the formal decision making, planning, and prioritization processes. They need what they need, and they don't want to be burdened with practical considerations. So they work around the process. The results are often outrageous overcommitment, disappointment, and burnout. Projects get approved for which there are no resources, scope creep bloats approved projects far beyond the resources originally budgeted, and team members deliver a succession of disappointing results from battered morale."

Yikes this one hurts just thinking about the possibility. The authors break this category down even further into the various culprits that cause skirting.

• New projects added without revisiting priorities. 59%
• Too many projects on my plate. 53%
• Politics determine highest priorities. 52%
• Too many high priority on my plate. 52%
• Low priority projects become emergencies. 49%
• Some projects should be cancelled but are not. 33%

Crucial Problems # 4
Project Chicken
Team Leaders and members don't admit when there are problems with a project but instead wait for someone else to speak up first.

"When project leaders play project chicken, the status and review process becomes a joke. The team loses opportunities to gracefully respond to problems by revising goal, shifting resources, reorganizing plans, and more. Instead, the project hurtles forward on a collision course with failure while everyone watches - nervous but silent."

As with all of these crucial problems, the issue resonates with the experience and understanding of why some things did not work.

Crucial Problem # 5
Team Failures
Team Members are unwilling or unable to support the project.

Firstly the change I mentioned in Crucial Problem # 1 where users will be compensated for their efforts as well as the developers will help mitigate this problems exposure. Specific problems include Team members;

• Don't have the right skill set for the projects. 55%
• Don't put enough time or energy into the project. 51%
• Not raising issues when they are met. 48%
• Not making a real contribution. 46%
• Don't attend meetings or respond to requests. 43%
• Are difficult to work with. 42%
• Are remote or otherwise not participating fully. 23%

In terms of expecting the user to contribute to this project on a volunteer basis is foolhardy.

This glaring problem of the users not getting compensated was not seen earlier by me, but thankfully has been rectified. How many more of these types of problems are lurking in this project, to be honest most if not all these are resident within the project. Effectively with this posting I am setting this project back to day one for a re-start. The need to have the resources be represented in the necessary discussion's is obvious for this projects success. As I indicated I will continue to conduct the research that I was doing, the review of the LEM working paper series, and the authors that are on topic with the efforts in this new community. Secondly, with the budget for next year, I will set up and maintain a Wiki and run the Collabnet software so that the community process is completed in the time frame that is requires. I would suggest that this may involve more then one year to establish and conduct these conversations. The key point is, the time - line needs to be established in these conversations. What I can do to help this process is contained within the second entry of this paper I will publish on Wednesday.

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