Professor Giovanni Dosi, Part II

In this the second part of our review of the Preliminary Research reports summary of innovation. We note Professor Dosi’s key factors of innovation, and its application to oil and gas. One of the breakthroughs that was determined in the Preliminary Research report was the use of revenue per employee as a means of determining what the producer firm and / or Joint Operating Committee could use as a determination of its level of innovativeness.

In determining the key factors of innovation Professor Dosi notes:

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between:

• Capabilities and stimuli generated with each firm and within the industry of which they complete.

and

• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc.

Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.)

Based on the capabilities and stimuli of innovation present in the oil and gas sector, particularly the microeconomic effect of the commodity prices, it is reasonable to conclude that oil and gas would be an area where significant innovation can and needs to occur. The primary reasons for the future enhanced innovation is due to the following analysis of the industry.

The capacity to enhance reserves is significantly more challenging than as little as five years ago. Exploitation is generally expected to continue, however, an enhanced role for various degrees and types of exploration is expected to commence. The energy frontier brings many new risks and complexity in the area of technical, political and the environment. These account for much of the changes in stimuli and capability that Professor Dosi states is required to facilitate further innovation.

Secondly, microeconomic trends associated with changes in the relative prices of outputs. Oil and gas prices are beginning to reflect the scarcity, importance and value of the commodities to society.

To attain concurrence on these factors of innovation would be easy. What is needed in oil and gas is a measure of innovativeness that could be applied to the oil and gas producer or to a specific JOC. As was mentioned in the opening paragraph of this post, the Preliminary Research determined that an appropriate measure of innovativeness is the revenue per employee of a producer firm or JOC. Differences in performance are imputed to be the overall net result of the investments, both organizational and science based capabilities, and innovativeness of the firms. To make an effective change in the revenue per employee requires a substantial effort to increase the output of the firm or JOC. We will contiue to use and elaborate on this factor throughout our remaining review.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Professor Giovanni Dosi, Part I

We now begin a review of Professor Giovanni Dosi’s 1988 paper “Source, Procedures, and Microeconomic Effects of Innovation.” This was the key paper that was reviewed in the Preliminary Research report. As a result of the publication of this paper, Professor Dosi has gone on to become one of the premier authorities on business innovation.

Professor Dosi’s article discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The key aspects of Professor Dosi’s theories that make them directly applicable to oil and gas are the innovation theories application to earth science and engineering disciplines. These disciplines are key to the capability and success of oil and gas firms search, and production of, hydrocarbons. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. Professor Dosi note:

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

We have asserted in People, Ideas & Objects that higher commodity prices are a re-allocation of the financial resources towards the innovative producer. This is reflective of the changes from the easy energy era, to one that will be dominated by the earth science and engineering capabilities of the innovative producer. What is necessary is for producers to build People, Ideas & Objects Draft Specification which will enable them to align their resources towards innovation. That alignment being the movement of the compliance and governance frameworks of the hierarchy to the legal, financial, operational decision making, cultural and communication framework of the Joint Operating Committee (JOC).

One of the difficulties in reviewing this paper is the comprehensive nature of its content. I recall how difficult it was to review during the Preliminary Research report, and it appears to have only maintained its degree of difficulty. The content of the paper is accurately reflected in this following quotation.

The discussion will aim to identify (a) the main characteristics of the innovative process, (b) the factors that are conducive to or hinder the development of new processes of production and new products, and (c) the processes that determine the selection of particular innovations and their effects on industrial structures. 

Recall two of our four research questions are to determine if the processes of innovation are able to be reduced to a quantifiable and replicable process, and, does the JOC facilitate the means to innovate. It would appear to me that the selection of this paper to review these research questions. Was the reason we are / were able to answer these difficult questions. Professor Dosi notes:

There are two major sets of issues here: first, the characterization, in general, of the innovative process, and, second, the interpretation of the factors that account for observed differences in the modes of innovative search and in the rates of innovation between different sectors and firms and over time. 

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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What is Structuration?

The Preliminary Research Report reviewed a variety of papers that fall under the topic of Structuration. What is this and why is it important to People, Ideas & Objects and the innovative oil and gas producer. Here are excerpts from the review and how they affect this project.

Professor Anthony Giddens initially published “The Constitution of Society: Outline of the Theory of Structure”, Berkeley, University of California Press and his theory is well articulated through the following excerpt from “Using the Structurational Model of Technology to Analyze an ERP Implementation” by Olga Volkoff, of the Richard Ivey School of Business.

From the perspective of structuration theory, adaptation is the joint effect of the actions of individuals and the institutional structures within which those actions take place. Structures such as business strategies, organizational culture, reward and control systems, patterns of communication, and professional norms both enable and constrain the daily activities of people, but do not wholly determine them. At the same time, while individuals can choose to act in ways that will either reinforce or alter those structures, their choices are not independent of the structures within which they take action. This “duality of structure” - the recursive (re)production of institutional structures through the ongoing daily social practices of individuals - allows change to emerge in ways that are not wholly predictable. 

I think within this quotation we see the reasoning why the oil and gas producers have such difficulty in meeting the demands of innovation. The Joint Operating Committee holds the “actions of individuals, and the institutional structures” that are not recognized by the ERP systems that are available in the marketplace. Therefore you have two disparate organizations, the JOC and the bureaucracy, operating in two different structures, creating conflict and contradicting one another.

Giddens’ theory of structuration is further define by Professor Wanda Orlikowski’s 1992 comments: “the duality of structure refers to the structure of social systems: human actions create a social systems institutional properties and these properties then serve to shape future human actions.” The notion of structuration has three aspects.

• It refers to a social process that involves the reciprocal interaction of humans with the structural features of an organization. 
• Human actions are enabled and constrained by structures, yet these same structures are the result of previous actions.
• Structural properties mediate human action and, at the same time, are reaffirmed through human use. In other words, institutional properties are both the medium and the outcome of interaction.

The Preliminary Research report looked at structuration from the perspective of how the current oil and gas organizational structure is defined through the social, legal and environmental influences that provide that structure, and of how the organization in turn provides structure to the social and human elements. People, Ideas & Objects are focused on building ERP systems that identify and support these organizations.

The JOC has explicit legal, ownership, financial and procedural authority and control of the field operations as the standard of operations and conduct in oil and gas, on an international basis. Financial investment in an oil and gas property qualifies for participation on the committee where the operational control is agreed to and implemented. This research asserted that this operational control has significant implications on the internal operations of the participating organization. The facility design, capital budget, legal agreements and the decision making processes are constrained, Giddens’ theory would suggest, by a variety of forms and structures that comprise the basis of operations for the entire industry.

As Thomas Davenport noted in his paper “The Strategy and Structure of Firms in the Attention Economy” 2002,

Strategy and structure are mental constructs, important not in themselves, but for their impact on the people in the organization. Strategy and structure are also the vehicles for focusing attention. 

Clearly stating that by moving the compliance and governance frameworks of the bureaucracy to be in alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This realignment will eliminate the conflict and contradictions that occur between the two organizational constructs. This realignment will also increase the attention and focus of the individuals involved within the producer firm and the JOC, and by moving compliance to be in alignment with the operational decision making authority, accountability is enhanced. Lastly, as we will document as this review progresses, innovation is enabled.

Another key component of Giddens theory is that there is an inherent risk of failure if the progress of one element is out of step with the other two. Society, organizations and people need to move in lock step to avoid failure. This has been explicitly interpreted for the purpose of this research that the progress of society and people is either inhibited or facilitated through the actions that form the organizations. Currently individuals and society are dictating larger volumes of energy be sourced and provided by the market. If the bureaucracies that exist today, are unable to meet these demands then we will most certainly see failure.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Oracle - Adopting a Successful IT Strategy

A quick break from our review of the Preliminary Research Report, the Draft Specification and subsequent research to pick up an interesting point of view on technology. Oracle Vice-President and Fellow Frank Buytendijk talks about the application of technology to the organization.

In my own professional development, I’ve gone full circle. Twenty years ago, I started out being an MIS developer, but in the last number of years I have spent a lot of time on the soft side, looking into subjects such as impact of behaviors, values and culture. 

I have come to the conclusion that in order to successfully adopt such a strategy paradigm, you need to have a solid enterprise architecture. So I have gone from IT to business and back to IT. In the end that is only logical. Since the dawn of mankind, the key to progress has been in technology. A spear is technology, and it changed the way we hunted, the types of animals we could hunt, and the productivity of our hunting. We need to adapt to technology instead of the other way around in order to be successful. When the circular saw was invented, it became better to bring the wood to the saw instead of the other way around.

An interesting development in the thinking involved in ERP systems. One that I think summarizes the position of People, Ideas & Objects in building the Preliminary Specification. Taking the advanced Information Technologies and applying them in new ways to the Joint Operating Committee.

The moment we think technology should adapt to the organization, things start to go wrong. We will try to apply the circular saw to the wood. Unhandy, not to mention dangerous. Translated to modern IT, it leads to costly, inflexible solutions that don’t do what you want — and we’ve all seen our share of those.

Basically, we have forgotten that the way organizations look today is based on the constraints of yesterday. They are as technology-dependent as we’d like to prevent today. The moment we apply modern IT and adapt it to the organization, we are doing two things wrong. We are not improving the organization, and we are using unfit technology (the old technology had a much better fit).

Essentially stating that new technology needs to address new organizational constructs. So when People, Ideas & Objects use Cloud Computing to solve the networked effect of participants in the Joint Operating Committee, we are applying new technology to new organizations. Or when we use Oracle’s new Fusion Applications, which will be announced later this month, to identify and support the Joint Operating Committee, we are applying new technology to new organizations. We have chosen to let IT take a leading role in supporting the successful and innovative oil and gas producer.

The role of IT in your strategy is a choice. If you choose IT to have a leading role, you should let yourself be led by IT.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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McKinsey, When Failure is not an Option

McKinsey Consulting are publishing a three part series on what they describe as the Joint Venture (JV). Entitled “When Failure is not an Option: Making Joint Ventures work for capital projects.” The article notes the role of JV’s in oil and gas and other industries, JV’s are of course one in the same as the Joint Operating Committee (JOC), the key organizational construct of People, Ideas & Objects Draft Specification.

This paper provides further support for the development of the Preliminary Specification and the research that has been conducted by People, Ideas & Objects. It is satisfying that the worlds number one consulting firm are publishing these types of articles. Prospective users and  members of the Community of Independent Service Providers need to see this type of support to ensure their efforts are put towards providing success for the innovative oil and gas producer.

Joint Operating Committees are initiated for a variety of reasons, to reduce capital risk, to include other producers throughout the aerial extent of the property, or to include needed resources and capabilities. Industry has established a culture around using the Joint Operating Committee that is reflected in many of the processes that are used. This culture has developed as a result of the Joint Ventures that are systemic throughout the industry. Whether it’s through agreement, the Operating or Accounting Procedure, partnerships are what the Joint Operating Committee was designed to reflect. McKinsey states;

Historically, project developers have relied on the operating versus non-operating partner construct. However, companies are also increasingly leveraging JV constructs as a way to bring broader expertise into the project, build local talent and industries and retain sovereign ownership. In the oil and gas industry for example, a major project is likely to include a “supermajor” international oil company (for whom this project is part of a very large portfolio), an independent (who may be betting the company on this project), a passive investor (with a purely financial focus), and a national oil company (owned by the government where the project takes place). 

The Draft Specification has specific attributes that resonate with this perspective. First there is the enhanced participation enabled by the Partnership Accounting module. This module deals with the various ways in which partners may contribute to the Joint Operating Committee. Noting in the quotations example the passive investor, national oil company and international oil company each have differing costs and contributions. Permitting each of the firms to contribute fully, in their own unique way, to the successful development of the project. Secondly, the participants that are noted in the McKinsey quote, independents, start ups, international and national oil companies, are the targeted market for the People, Ideas & Objects software applications. Having each of the partners within a JOC with the same software development capability is a necessity, and the key deliverable of People, Ideas & Objects.

Noting the need for change, McKinsey details what is required for these organizations to deal with the enhanced participation enabled by the Partnership Accounting and other modules of the Draft Specification.

On top of the massive scale and obvious technical complexity, these new, multi-operator constructs

• increasingly embody multi-cultural perspectives (both corporate and sovereign),
• frequently represent divergent strategic priorities for the individual owners,
• generally struggle with the governance and performance management challenges associated with any multi-parent structure and
• often lack a single point of accountability for key decisions.

Addressing each of these points has been the topic of discussion in our Review. Having differing types of participants and cultural influences within the Joint Operating Committee is becoming commonplace. We had determined that each participant could pursue their own unique strategy within the property. We developed the Military Command & Control Metaphor to deal with the governance and performance management challenges. And lastly addressed the accountability for the decisions that are made within the JOC and the producer firm. Most importantly, the Draft and Preliminary Specifications are developed to address and resolve these very issues.

Next, consider that the “new generation” of project JV has multiple layers, as both the owners and contractor teams rely on individual partnerships to deliver the project. As this phenomenon evolves, it should be no surprise that we see an explosion of risk and management complexity, given the sheer number of stakeholders involved and the more sophisticated tools and processes needed to deal with project intricacies.

In the Resource Marketplace module of the Draft Specification we have included the service industry as critical elements of the success of the innovative producer. McKinsey are right to suggest the level of risk and complexity will increase further as a result of having the need to develop the support industries. Innovation at the producer level needs the service industries to be intimately involved in developing the products and services the producer demands.

Studies show that about 50 percent of all JVs do not succeed. Moreover, studies of large capital projects indicate that cost overruns from 50 to over 100 percent are common. So, when we consider this double-barreled risk of often-unsuccessful JVs managing often- unsuccessful mega-projects, we recognize that the difficulty project JVs have in aligning and operating effectively is a major reason why large capital projects often fail. Given the strategic importance these projects represent to participating partners, it is clear that JV organizations must be effective if a project is to meet expectations for predictability and performance.

There we have it, the world’s number one consulting firm clearly stating that joint ventures fail due to the difficulty in aligning and operating effectively. People, Ideas & Objects, its prospective users, the Community of Independent Service Providers through the Draft Specification are moving the compliance and governance frameworks of the hierarchy into alignment with the cultural, legal, financial, operational decision making and communication frameworks of the Joint Operating Committee. Laying the groundwork for the producers involved in the JOC to be successful. McKinsey quote a Harvard Business Review article that reflects these elements are necessary at the commencement of the JOC.

In their seminal article in the Harvard Business Review, Banford, Ernst and Fubini suggest four areas on which to concentrate the early planning and launch of any JV:

1. Strategic alignment. This ensures that each partner’s disparate goals, priorities and business models are recognized and reconciled.
2. A “loose-tight” governance model. This ensures that each partner’s needs for accountability and control are met, while at the same time, the project’s need for independence and authority is also respected.
3. The economic interdependencies between the project JV and each partner. They will impact the extent and means by which human, technical, and other resources are invested in the project.
4. Building the project organization. The parent organization should contribute their best people to the considerable challenges a major project presents, overcoming the frequent perception that such assignments are not always the best path to promotion.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Eliminating the Conflict

In the Preliminary Research Report, in addition to the advantages of using the Joint Operating Committee (JOC) we listed the disadvantages of the conflict between the JOC and the traditional hierarchy. What becomes clear in listing these disadvantages, is the overriding focus on compliance and governance by the hierarchy. Tax, SEC and Royalty requirements at times appear as the sole focus of the organizations. The operations within the JOC are a distant second in terms of dealing with the business of the producer.

I am speaking of course from the business perspective dictated by the use of the ERP system of the producer, not the technical perspective of the earth science and engineering production operation. The separation between the administration and the earth science and engineering focus within the producer is something that is being eliminated in the Draft Specification. Lets call this well known phenomenon of “no one reading from the same page”.

Oil and gas operations are unique based on their geographic and geological makeup. Applying blanket corporate strategies to these operations was possible in the easy energy era. In today’s marketplace the need to have unique operational strategies for each oil and gas property is a necessity and is accommodated in the Draft Specification. What is not needed is the conflict and confusion within the producer that is as a result of no one reading from the same page.

One of the breakthroughs from the research People, Ideas & Objects has conducted is that the differing operational strategies that are employed by each of the producers in a JOC are possible and appropriate. Each producer has a unique make up of assets and strategies and those can be enabled through the use of People, Ideas & Objects Draft Specification. Without the systems needed to support these differing strategies, the confusion and conflict will only grow, potentially in exponential ways.

The conflict between the separation of the compliance and governance of the hierarchy and the five frameworks of the JOC are reflected in each of the following points.

Introduces political and bureaucratic conflict.

This is the first and most damaging aspect of no one reading from the same page. When strategy, operations and administration are all moving in different directions within the organization, conflict is the result. The solution in the Draft Specification is provided by moving the compliance and governance from the hierarchy and aligning them with the legal, financial, operational decision making, cultural and communication frameworks of the JOC.

Compromises and muddles internal decisions.

What may be ideal strategy to optimize the property may be unknown to many of the decision makers within the producer firm. The operational decision making resides with the JOC. The decisions made by these organizations are not communicated effectively through the producer firm. Time necessary to make decisions and the bureaucracy have the effect of slowing the capacity of the producer.

Lacks the direct support from the hierarchy.

When no one is reading from the same page, it seems that the administration is moving in different directions from the technical groups. For cost reasons, having everyone reading from the same page isn’t a luxury but a necessity.

Successes and / or failures are not identified, shared or learned explicitly by any of the participating organizations. Knowledge is held tacitly, limited amounts of knowledge is codified or make explicit.

As decisions and strategies are confused, the ability to learn from the decisions is lost. Innovation is an iterative process based on the success and failure and the history of the property. In a science and applied engineering business that requires more scientific effort for each barrel of oil produced, the decision history and understanding of the underlying knowledge of the property become necessities.

Eliminates initiative and innovation. No tolerance for risk taking or experimentation that is required for innovation.

Building on the previous point regarding success or failures, when no one is held accountable for the decisions that were made, initiative and innovation fall to the sidelines.

No regulatory or internal financial reporting requirements.

The standard reporting of an interest in a JOC is fairly standard. People, Ideas & Objects have published a Technical Vision of how Information Technology will change in the near future. This Technical Vision foresees a substantial increase in the volume of data that is available to a producer. With the Performance & Evaluation and Analytics & Statistics modules, the producer can expand their use of this data in innovative ways.

The hierarchically based organization is an impediment to future progress.

This has been discussed by many. Although People, Ideas & Objects subscribe to this thinking, we are offering a viable solution by recognizing the Joint Operating Committee and developing an alternative governance structure in the Military Command & Control Metaphor in the Draft Specification.

Capacity to replace reserves has become logistically, operationally and organizationally constrained.

The long term perspective of a producer firm is reflected in their reserves. To expand their reserves a producer has a scientific capability, that in addition to their reserves, are its critical competitive advantages. These capabilities are the differences between success and failure.

Capacity to meet the market demand is diminishing.

The overall effect of these points is that the ability of the industry to expand its productive capability has stalled. As the world has more people entering the middle class, the lack of market supplies of energy will bring significant societal issues to all concerned.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Military Command & Control Metaphor - Innovative?

Last week in research question # 1 we asked if the hierarchy’s value had expired. Suggesting that elimination of the hierarchy would require an alternative governance framework to replace the tried and true hierarchy. Recall that the alternative framework we developed in the Draft Specification is what we call the Military Command & Control Metaphor (MCCM). It might seem a contradiction to suggest that the military chain of command enables innovation at the producer level. The military is known for its strict adherence to command and control, how is this going to assist the innovative producer? And isn’t the use of the MCCM going to cause the Joint Operating Committee to be less responsive as a result?

First is the fact that the strict level of adherence is a reflection of the command and control that is implemented. We are attempting to impose an organizational structure on to the various members of the producer firms that have been seconded to the specific Joint Operating Committee. These resources are being sourced from a multitude of organizations, they also continue to have responsibilities to the individual producer that they represent. Therefore imposing this structure allows them to interact, respecting the equivalent military chain of command used, in a manner that is expected of them in both the JOC and at the producer firm that employs them.

Second is the innovative footing that we are striving to provide to both the producer and the JOC. This innovative footing seems counter to the military command and control expectations. Victor Davis Hanson is a well known military historian. In this video at around the 33:00 minute mark, he makes the interesting comment noted just below the video.

I still can’t believe as a military historian that we came up with the idea that a flying fortress was going to go over daylight at about 200 miles an hour and supposedly at 30,000 feet knock out the strategic capability of Germany. And depend on a few 50 calibre machine guns to save this lumbering plane that had as few as nine crew members and they were going to be fighting against the finest fighter pilots in the world in ME-109’s and they think they can pull it off when the British had tried it and had already assumed that it was impossible. And we did that of course and we lost 25,000 Americans, six times more then in the Iraq war, on that flawed concept. But that's the nature of war, live and learn. And out of that we learned what. You could stack formations to increase fire power. You could create drop tanks and have Thunderbolts and Mustangs escort them. You could use radio signals, you could use chafe. And by that trial and error counter response, response, counter response by 1945 the B-17’s were taking a lethal toll on German society and industry. And that is what usually happens in war.

And at 1:01 minutes, based on his experiences Professor Hanson states;

There is more free speech in the military then there is in a university campus.

In this example I see two characteristics at play. The first is the ability of the higher command to maintain the focus on a difficult and costly job for the long term. Secondly, the ability to innovate in the use of the resources to achieve the long term goal, success in its mission. Compare this, or any other military operation, against the capabilities of the hierarchy and I think we can see the use of the Military Command & Control Metaphor will enhance the JOC’s and producers that use, prospectively, People, Ideas & Objects software applications.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Quick Post - Dan Pink on EconTalk

This weeks EconTalk podcast has Dan Pink talking about his new book "Drive, the surprising truth about what motivates us".

This being a quick post I just want to point out his discussion regarding his research about what motivates people. Pink notes.

Suggest we upgrade to a different approach to motivation, one far less reliant on if/then rewards, not on all rewards but a certain kind of reward, and prizes other sorts of motivators such as autonomy, mastery, and a sense of purpose.

People, Ideas & Objects provides the software to the oil and gas producer. There are substantial services that are associated with delivering this software. The Community of Independent Service Providers is the community that we look too to provide those services to the innovative oil and gas producer.

I see autonomy, mastery and a sense of purpose as being the key motivators of the Community of Independent Service Providers.

Some Advantages of the JOC

Last week we began a comprehensive review of People, Ideas & Objects research and systems development. This review is focused around using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer. It also appears, based on this blog’s analytics, that many of our readers may have been on vacation. I think this review provides substantial value to all our readers, and particularly for those that may have joined us in the past few years. To aggregate the posts that make up this review, please select the Review label on this blog. Last week we were able to summarize the four research questions that were answered in the Preliminary Research Report. Today’s post deals with the advantages of using the JOC.

The JOC is very much involved in the day to day activities of an oil and gas producer. What is surprising is that the ERP systems that are in use in oil and gas do not recognize the JOC. Not until such time as we develop the Draft Specification will we have the systems that align to the legal, financial, operational decision making, cultural and communication frameworks. All of the current ERP systems have been developed during the pre-Internet era. None of these vendors have approached the oil and gas industry from the point of view of the partnerships represented in the JOC, they only recognize the hierarchy of the individual producer. This prompted our assertion that SAP is the bureaucracy. The Preliminary Research Report noted the advantages of using the JOC are as follows.

• All participants are motivated equally. Financial opportunity drives consensus.

Attaining a consensus when everyone is motivated on the basis of financial incentives is the optimal situation. It is for this reason alone that the JOC provides such strong support for building the systems defined in the Draft Specification. Developing the systems to recognize the decision rights within the JOC will enable the decisions to be made more efficiently and effectively.

Subsequent to the publication of the Draft Specification, and around the time that the iPad was introduced. People, Ideas & Objects asserted that we could use the iPad or other device to have the JOC representatives video conference the meetings. Each representative being in attendance irrespective of when and where they may be. With the software development capability which is a fundamental element of the People, Ideas & Objects offering, these meetings would be supported with automated software that implements the processes and procedures that are decided on by the committee. When the decision was made to re-enter a well to complete another zone, the AFE’s would then be automatically issued and become effective within the system. Fast, high quality decision-making with full implementation of the necessary processes will be the result of producers funding People, Ideas & Objects software developments and Community of Independent Service Providers.

• The JOC is the legal, financial, operational decision making, cultural and communication foundation of the oil and gas industry. All the internal processes tacitly support this fact.

Moving the compliance and governance frameworks from the hierarchy to be in line with the JOC puts all the frameworks of both the producer and the committee into alignment. As decisions are made by the JOC they are implemented in accordance with the strategy, compliance and governance needs of each individual producer. Each producer employs their own strategy based on the unique makeup of their assets. Just because the producer voted for the recompletion of the other zone, does not impute any element of their corporate strategy or financial metrics to any of the other participating producers.

• The participants in the JOC hold significant technical and managerial capabilities.

The people that represent the producer firm in the JOC are usually of broad business experience and educational background. Usually sourced from the earth science and engineering disciplines, their focus is developing the oil and gas assets held within the JOC. In many of the smaller producers it is frequently the president that represents the producer. Building the software that identifies and supports these key individuals is the beginning of making the producer more innovative.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Research Question # 4

In our fourth and final installment of the Preliminary Research Report’s research questions. We asked “Does the industry need to change from a “banking” to a “science and engineering” based mindset?”

Much of current infrastructure of the oil and gas industry has been developed during a time when the costs associated with exploration and production were reasonable. A time when the efforts of the producer firm could be quantified by determining a reasonable return on investment in oil and gas. This generated what could be considered to be a “banking” mindset that sought to exploit a resource based on a specific return on investment.

That of course is the reasonable approach that any industry will take to the business at hand. To do anything other then approach the business from the return on investment would be foolhardy. What the question being asked is, will the approach of a guaranteed return on investment be capable of dealing with the complexity of a science based business in a resource constrained environment.

With the earth science and engineering disciplines expanding at a significant pace, where each barrel of oil produced requires progressively more science and engineering. With the supply of scientists available to producers being somewhat fixed. To expect this environment to produce a reasonable return on investment with no change in approach from the “easy” energy era will lead to disappointment.

I think the answer to the question is clear. The industry needs to change in order to meet the markets demand for energy. Since the time the Preliminary Research report was published and today, the world energy production has remained static. At a time when a large percentage of the worlds population is moving towards the middle class, the static or potentially declining world oil production is a serious problem for society. It is therefore reasonable to assume that high commodity prices will be with us for the long term. Prices are the reallocation of financial resources to facilitate innovation. Therefore it is also reasonable that the producers with the most innovative capability will have the highest return on their investments.

But lets be clear, changing the stripes on a Tiger is not easy. As we progress into this review we will see that this level of change may not be able to be managed by the current oil and gas producers. Some times the changes occur from an attrition of the existing firms and replaced by new and innovative producers. Either way, People, Ideas & Objects and our Draft Specification are designed to identify and support the successful innovative oil and gas producers.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Research Question # 3

The Preliminary Research reports third research question builds on the probable positive outcome of the second question. That being, if innovation can be reduced to a quantifiable and replicable process “Will the Joint Operating Committee facilitate the means to innovate?” In addition to having the scope and understanding of the processes of innovation quantified and replicated. The breakthrough from this research question is that the Joint Operating Committee is the ideal organizational construct to facilitate innovation. I will highlight two key points in this post, and follow up with much more detail throughout our ongoing review.

The two key points are simply ideas and decisions. Two elements that can not be handled by computers. Ideas and decisions are the higher level work that humans need to be involved in, with computers taking over the repetitive and transaction oriented activities.

When we consider the changes in the oil and gas industry, particularly from the point of view of an expanding understanding in the earth science and engineering disciplines. The Joint Operating Committee is designed to generate ideas and make the decisions for the producers represented, making it the ideal organizational construct to support the successfully innovative oil and gas producers. Building ERP systems like People, Ideas & Objects Draft Specification that identify and support the JOC are what’s required to facilitate that innovation.

In terms of idea generation, collaboration is the ideal means in terms of identifying and solving problems. Contrasting the difference between collaboration and consensus is an important point. Consensus is when the majority can agree on a certain decision or direction. Collaboration is when the best solution is being sought by those with a mutual interest. I see the JOC using collaboration as a means to find the innovative solution and making the decisions based on a consensus of understanding.

The operational decision making framework of the industry is with the Joint Operating Committee. What becomes very clear in reviewing Professor Dosi’s paper is that decisions play a critical role in innovation. Professor Dosi states that not all efforts are successful, many fail, and from the failure sometimes the most important lessons are learned, and everyone inherently understands this. The ability of an industry to learn through their collective efforts will mitigate the subsequent similar failures and their costs, and enhance the success over a larger population of companies.

Some of the advantages of using the Joint Operating Committee that were listed in Preliminary Research report were;

• All participants are motivated equally. Financial opportunity drives consensus.
• The JOC is the legal, financial, operational decision making, cultural and communication frameworks of the oil and gas industry. All the internal processes tacitly support this fact.
• The participants in the JOC hold significant technical and managerial capabilities.

The scope of the operational authority of the JOC is constrained by the participants financial interest in the property. The JOC’s formation is traditionally formed around a geographical area, is traditionally limited in its geological and areal extent. This naturally limits the focus of the committee to that facility. The JOC is therefore financially motivated, has the appropriate level of focus, has the operational decision making authority and brings together the collaborative idea generation and consensus building needed of an innovative organization.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Research Question # 2

The second research question within the Preliminary Research Report was, Can the scope and understanding of the process of innovation; be reduced to a quantifiable and replicable process?

The short answer to this question is yes, most definitely. Which is significant news to most people. People, Ideas & Objects has consistently stated that high commodity prices are the reallocation of the financial resources to enable innovation. We stand at a point in time where the oil and gas industry will change to an innovation based and focused industry. Fascinating times.

It would be difficult to summarize the entire answer to this research question in one post. During the next few months of our review we will be better able to answer this question. Readers in the mean time can also review the Preliminary Research report.

The paper that was used to answer this research question was Professor Giovanni Dosi’s “Sources, Procedures and Macroeconomic Effects of Innovation” September 1988, Journal of Economic Literature, Volume XXVI pp. 1120 - 1171. If you have access to JSTOR or other databases I would highly recommend that you download and review the paper.

Professor Giovanni Dosi makes the statements that,

“The search, development and adoption of new processes and products in market economies are the outcome of the interaction between”:

• “Capabilities and stimuli generated with each firm and within the industry of which they compete.”

The capacity to enhance reserves of oil and gas is significantly more challenging than as little as five years ago. Exploitation is generally expected to continue, however, an enhanced role for various degrees and types of exploration is expected to commence. The energy frontier brings many new risks and complexity in the area of technical, political and the environment. These account for much of the changes in stimuli and capability that Professor Dosi states are required to facilitate further innovation.

Secondly, the microeconomic trends associated with changes in the relative prices of outputs. Oil and gas prices are beginning to reflect the scarcity, importance and value of these commodities to society.

Dosi notes the second influence to enhanced innovation is;

• "Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc.”

Innovation and science are iterative upon each other. As the pace of development in earth science and engineering innovations increase, these will have an accelerating effect on the development within the sciences which of course, will lead to further innovations.

These points are only the tip of the iceberg. Professor Dosi’s 1988 paper is renowned for its impact on business innovation. Over the next few months as our review of the Preliminary Research Report and Draft Specification progresses. We will be spending a significant amount of time in Professor Dosi’s paper.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Research Question # 1

In addition to the Preliminary Research Reports hypothesis and conclusion, noting the Joint Operating Committee is the “natural” form of organization, there were a handful of research questions that were answered in that report. The four questions and their updated answers will be posted here over the remaining part of this week.

The first question was simply, “Has the hierarchy’s value expired?”

This may seem to be an unfair question, but one that most people will have firm opinions on. Alan Murray, Deputy Managing Editor of the Wall Street Journal wrote an interesting piece on the topic in Saturday’s Wall Street Journal. Within the article he documents many of the issues that organizations face. However, it’s the quantity and quality of the comments to the article that show the scope of the debate on the hierarchy’s future. One can clearly see the two camps forming and the ability to influence each other is at somewhat of a stale mate. Opinions are well formed with differing perspectives of the same facts, note the discussion regarding the development of Boeing’s 787 aircraft. This argument has only begun.

Those who believe that we will continue with the hierarchy number in the minority at this point in time. Those that support the hierarchy would assert, correctly, that their needs to be some form of replacement governance model. You just can’t eliminate the well defined model that governs the oil and gas producers organizations. Although we had not developed an alternative in the Preliminary Research report, we eventually did publish the Military Command & Control Metaphor (MCCM) that provides the replacement governance model for both the Joint Operating Committee and producer firms.

By adopting the well understood military chain of command. Applying it over the producer firms involved in a JOC. Allows teams comprised of members from different firms to operate as required within the specific JOC. This pooling of the available technical resources replicates in many ways the manner in which the NATO countries military resources are able to operate.

The ability to pool technical and scientific resources from several of the producers participating within one JOC is critical. Each firm currently have dedicated technical resources and capabilities built within each producer firm. The luxury of having each firm with mutually exclusive technical resources may be over. With each barrel of oil requiring progressively more earth science and engineering, the demand for these resources may begin to outstrip supply. Additionally the time required to train new earth scientists and engineers does not provide for the potential retirement of the brain trust. These resource constraints can be resolved through the use of the MCCM and pooling of the technical resources of the producer firms.

Therefore, the answer to the question for the oil and gas producer is the hierarchy’s value has expired. It is a model that deals with the firms needs, but ignores the JOC. What the successfully innovative producer needs is a governance model that deals with both the producer firm and the JOC’s that they have an interest in. (Particularly when the operational decision making framework resides with the JOC.) For further reading on this topic please review the MCCM of the Draft Specification.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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The Joint Operating Committee is Critical

Starting with today’s post we will begin a process of reviewing the data, information and ideas that makes up People, Ideas & Objects and the Draft Specification. This will provide readers with a thorough understanding of the elements that make up this project. These posts can be aggregated by selecting the Review label.

People, Ideas & Objects began with the Preliminary Research Report’s hypothesis asking “if the Joint Operating Committee (JOC), modified with today’s information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.” The critical breakthrough in the research’s conclusion is the “industry standard JOC is the “natural” form of organization for oil and gas where the participants of the committee are supported and augmented through the diversity and availability of the remaining organizations team members. A greater alignment to this conceptual model would facilitate the desired innovation.”

So if this is how the industry operates why does it need People, Ideas & Objects Draft Specification, its software development capability and associated user communities? The difficulty is that today’s ERP systems do not recognize the existence of the Joint Operating Committee. This stands in contrast to the fact that the JOC is the legal, financial, cultural, communication and operational decision making framework of the industry. Every internal and external process of a producer tacitly recognizes these frameworks. However, the organizational focus has become centered on the compliance and governance frameworks of the royalty, tax and SEC requirements of the producer firm. What the Preliminary Research Report determined, and the Draft Specification implements, is the movement of the compliance and governance frameworks into alignment with the five frameworks of the JOC.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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IBM's Global CEO Survey

IBM has published their bi-annual Global CEO Study. Registration is required to download the .pdf, I recommend reviewing the document to gain an understanding of the state of affairs in the global CEO’s mindset.

Oil and gas producers are faced with a difficult situation. As the earth science and engineering disciplines expand. And the volume of technical effort needed for each barrel of oil increases. The scientific human resources available to the producers remains relatively constant. What’s needed is a new division of labor and specialization to increase the volume of throughput of these fixed human resources. This changing environment is, according to the IBM study, being joined with a new variable, complexity.

Using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer becomes a necessity in this complex environment. The JOC being the legal, financial, cultural, communication and operational decision making framework of the industry can deal with this enhanced complexity. When we are required to work with the needs of multiple producers within each and every JOC. Continuing to use generic ERP systems that don’t identify and support the JOC. Introduces unneeded complexity to an already difficult environment. If industry is to meet the market demands for energy, the Joint Operating Committee will need to be supported and identified by the ERP systems that are defined in the Draft Specification. The IBM Study notes.

In our past three global CEO studies, CEOs consistently said that coping with change was their most pressing challenge. In 2010, our conversations identified a new primary challenge: complexity. CEOs told us they operate in a world that is substantially more volatile, uncertain and complex. Many shared the view that incremental changes are no longer sufficient in a world that is operating in fundamentally different ways. Four primary findings arose from our conversations:

The first of these four findings is complexity and the capacity to deal with that it. IBM’s survey seems remarkably candid about the CEO’s capacity to deal with this new complexity.

Today’s complexity is only expected to rise, and more than half of CEOs doubt their ability to manage it.

Innovation will become the means for value creation in the oil and gas industry. Innovating on the basis of the expanding earth science and engineering disciplines. The industries leadership will be derived from those that are able to operate creatively in this scientific and technical environment.

Creativity is the most important leadership quality, according to CEOs. Standouts practice and encourage experimentation and innovation throughout their organizations. Creative leaders expect to make deeper business model changes to realize their strategies. To succeed, they take more calculated risks, find new ideas, and keep innovating in how they lead and communicate.

Third in the IBM study focuses on the customer, the Draft Specification will enable, closer interactions between the producers, vendors, suppliers and communities involved in the industry. IBM’s survey notes the focus of CEO’s is more towards the customer. Oil and gas producers never see their customers however, an expanded capability to deal with those involved in the business of oil and gas is needed.

The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority.

In the fourth finding, IBM focuses on the interactions between partners and suppliers.

Better performers manage complexity on behalf of their organizations, customers and partners. operations and products, and increasing dexterity to change the way they work, access resources and enter markets around the world.

These four conclusions are consistent with the needs of the innovative oil and gas producers. IBM has developed a strong capability in their bi-annual study of CEO’s. I can only assume that personally interviewing 1,500 CEO’s is done at substantial expense. I would question the value that IBM is able to generate from this survey. This paper was published in May 2010 and the volume of discussion that it has generated must be disappointing. I wonder if there will be another report in two years time.

Producers are encouraged to contact me in order to begin their participation in these communities and support our Revenue Model. Those individuals that are interested in joining People, Ideas & Objects can join me here.

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People, Ideas & Objects - Wish List

Today we provide a list of the independent producers, National Oil Companies (NOC's) and International Oil Companies (IOC's) that People, Ideas & Objects are targeting. It would be ideal to have these twenty five firms use the applications that we are building. If you know, or have access to the decision makers in these firms, please contact me here. The company name and location are provided as are their web addresses.

• Abu Dhabi National Oil Company                          United Arab Emirates
• Anadarko Petroleum Corporation                            The Woodlands, Texas
• Apache Corporation                                                 Houston, Texas
• BP                                                                            London, England
• Chesapeake Energy Corporation                             Oklahoma City, Oklahoma
• Chevron Corporation                                               San Ramon, California 
• CNOOC Limited                                                     Hong Kong, China
• ConocoPhillips Company                                        Houston, Texas
• Devon Energy Corporation                                     Oklahoma City, Oklahoma        
• ExxonMobil Corporation                                        Irving, Texas
• Forest Oil Corporation                                            Denver, Colorado
• Hess Corporation                                                    New York, New York
• Iraq National Oil Company                                    Baghdad, Iraq
• Kuwait Petroleum Corporation                               Safat, Kuwait
• Marathon Oil Corporation                                      Houston, Texas
• Occidental Petroleum Corporation                         Los Angeles, California
• Petroleos Mexicanos                                              Mexico
• Petroleo Brasileiro SA - Petrobras                         Rio de Janeiro
• PetroChina Company Limited                               Beijing, China
• Petronas                                                                 Malaysia 
• Pioneer Natural Resources Company                    Irving, Texas
• Qatar General Petroleum                                       Doha, Quatar
• Saudi Arabian Oil Company                                 Dhahran, Saudi Arabia
• Royal Dutch Shell                                                 The Hague, The Netherlands
• Total S. A.                                                             Courbevoie, France

In addition to these firms, People, Ideas & Objects would be pleased to include representative firms from the startup oil and gas producer community. Producers are encouraged to contact me here in order to begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here.

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Our Revenue Model - Defined

I am pleased to have defined the Revenue Model for People, Ideas & Objects. I have aggregated the material in one knol located here. We now have the justification for producers to support these developments. Definition of the Revenue Model initiates Phase Two of this projects development, the Preliminary Specification. Readers can aggregate all of the posts for Phase Two here.

Producers are encouraged to contact me here in order to begin their participation in these communities.

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Oracle vs. Google

Oracle has taken steps to litigate Google’s use of Java on the Android operating system; claiming Google’s use of Java requires payment for the technology. Oracle’s lawsuit seeks to establish that Google’s use violates its patent and copyright. One thing that can be stated about Oracle’s acquisition of Sun Microsystems, is that the adults are now running the show.

Working with Sun Microsystems was frustrating on many different levels. One of the frustrations is there never seemed to be any follow through from the business point of view. They may have built the most advanced technologies, but left the major issues of the business and marketing to chance. Letting the altruistic “community” or “open source” world develop the business.

This statement may appear in contrast to the dedication and commitment of People, Ideas & Objects to its communities. To that I would make the following points. When it comes to open systems, “free” does not mean for nothing. Free or open source systems leave the overall leadership or guidance of the product in the hands of the community. That the community is free to discover the correct direction for the product. People, Ideas & Objects has put the product direction in the hands of the user, producer and Community of Independent Service Providers. The business of how our communities will survive in the long term follows a similar strategy to what Oracle is employing.

In Sun’s “altruistic” management of their communities they left the business aspects of their technologies to find their own way. The community needs to be supported financially. Without the financial resources, there is no sustainable viable long-term community that will survive. Leaving the communities financial resources to the whims of whether Google would pay or not is foolhardy. Now that Oracle is monetizing these Intellectual Property assets, the Java community will prosper.

With that stated, it is important to note that People, Ideas & Objects have budgeted for all of Oracle licenses, including Java. These are being paid on behalf of our users, producers and Community of Independent Service Providers. At no time will users or producers be expected to pay Oracle directly, or be subject to any Oracle litigation with respect to their use of the underlying Java or Oracle technologies used in People, Ideas & Objects software applications.

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Getting it Right

The Draft Specification provides a clear vision of how the innovative oil and gas producer would be supported by Information Technology systems. By building IT systems that use the industry standard Joint Operating Committee, innovation is facilitated and enabled. The Draft Specification is however, only the beginning and is by no means the final say. It is the beginning of a process that will discover the right solution with the input of users, producers, the Community of Independent Service Providers and others. Only then can we begin to develop the “right” systems for the industry.

Getting it right will be the difficult part of developing these systems. Community based developments are the only possible way of discovering what is “right”. Producers need to realize these are critical and necessary elements of their future systems success. To assume a vision, or technology driven solution from another vendor would require the same user-driven process. Unlike other ERP vendors, we are not selling a solution to users, we are building the user the “right” tools they need to efficiently do their jobs.

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McKinsey Ten Technology Trends Part I

McKinsey are once again focusing on the impact that technology will have on organizations. This new article entitled “Clouds, Big Data and Smart Assets: Ten Tech-Enabled Business Trends to Watch” and sub-titled “Advancing technologies and their swift adoption are upending traditional business models. Senior executives need to think strategically about how to prepare their organizations for the challenging new environment.” For the past while I have been closing these blog posts with the comment that management are conflicted and will not make the necessary changes to financially support these developments. Here McKinsey is putting the decision to move to adopt these technologies at the foot of senior executives.

As the worlds premier consulting firm, McKinsey have added substantially to the discussion of applying technology to organizational change.

The ways information technologies are deployed are changing too, as new developments such as virtualization and cloud computing reallocate technology costs and usage patterns while creating new ways for individuals to consume goods and services and for entrepreneurs and enterprises to dream up viable business models.

Again, prospective users of People, Ideas & Objects, and members of the Community of Independent Service Providers will be at the forefront of these major trends.

For senior executives, therefore, merely understanding the ten trends outlined here isn’t enough. They also need to think strategically about how to adapt management and organizational structures to meet these new demands.

1. Distributed co-creation moves into the mainstream.

Recall that we are working to detail “Phase Two” of this project. The purpose of Phase Two is to develop the Preliminary Specification which is proposed to generate a system design consisting of 100 man-years of effort. These developments will be generated from one thousand or more contributors and the entire prospective user community reviewing and influencing the output. A design such as the Preliminary Specification, which of course has not been done before, has also never been possible before.

In the past few years, the ability to organize communities of Web participants to develop, market, and support products and services has moved from the margins of business practice to the mainstream.

Producers need to be a part of this process. Determining the geographical, functional and process scope of the application are part of the Preliminary Specifications deliverable. Ensuring that the specification addresses the producers needs is the responsibility of each producer.

The time for producers to begin their involvement in these communities and developments is now. With the Revenue Model providing significant financial incentives for early participation and the ability to influence the output of these developing communities, delays in a producers participation could be costly.

2. Making the network the organization. 

Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer is only possible as a result of the advanced networks and Information Technologies. Networks enable and facilitate the interactions between JOC partners and service providers.

We believe that the more porous, networked organizations of the future will need to organize work around critical tasks rather than molding it to constraints imposed by corporate structures.

Management orthodoxies still prevent most companies from leveraging talent beyond full-time employees who are tied to existing organizational structures. But adhering to these orthodoxies limits a company’s ability to tackle increasingly complex challenges. 

As the research that has been conducted here at People, Ideas & Objects shows, the use of the Joint Operating Committee provides a solution to many of the key issues that the industry faces.

3. Collaboration at scale.

To suggest that the oil and gas industry is already engaged in a high level of collaboration would be an understatement. The Joint Operating Committee by its definition is a collaboration. These interactions have been conducted throughout the industry for many years. What is needed is for the Information Technology systems the industry uses to capture these collaborations and embed them within the ERP systems used in the industry. That is what People, Ideas & Objects is working to provide. By adopting the advanced IT infrastructure and enabling the collaborations to be handled through the technology, the industry will be able to scale their activity and innovations to the level necessary to meet the market demands for energy.

Despite such successes, many companies err in the belief that technology by itself will foster increased collaboration. For technology to be effective, organizations first need a better understanding of how knowledge work actually takes place. A good starting point is to map the informal pathways through which information travels, how employees interact, and where wasteful bottlenecks lie.

A process that is part of the work being proposed to be completed in the Preliminary Specification. Recall as well, that tacit knowledge, the understanding of how things get done, can not be captured. It exists only in the minds of the users, Community of Independent Service Providers and employees of the firms involved in oil and gas. What we can do is design and build the tools that enable the people in the industry to use their tacit knowledge.

4. The growing “Internet of Things”.    

McKinsey highlighted their concept of the Internet of Things a few months ago. These concepts were covered in a blog post that ties McKinsey concept to the People, Ideas & Objects Technical Vision.

5. Experimentation and big data.

Experimentation is the way in which innovation in oil and gas will expand the sciences. One of the keys to exploiting the experimentation and “big data” in the industry is the Joint Operating Committees operational decision making framework. When we align these organizational decision making processes to the systems used by the innovative firms, then we will be able to use these new and valuable tools.

Using experimentation and big data as essential components of management decision making requires new capabilities, as well as organizational and cultural change. Most companies are far from accessing all the available data. Some haven’t even mastered the technologies needed to capture and analyze the valuable information they can access.

We will address the remaining McKinsey technology trends in a future blog post. McKinsey close their paper with the following comment.

The pace of technology and business change will only accelerate, and the impact of the trends above will broaden and deepen. For some organizations, they will unlock significant competitive advantages; for others, dealing with the disruption they bring will be a major challenge. Our broad message is that organizations should incorporate an understanding of the trends into their strategic thinking to help identify new market opportunities, invent new ways of doing business, and compete with an ever-growing number of innovative rivals.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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