McKinsey, Edmund S. Phelps

It’s Saturday which means its time for some clearing of our McKinsey backlog. This is an enjoyable read from Edmund S. Phelps who won the Nobel Prize in Economics a few years ago. He is speaking on the topic of innovation, and although not specifically topical to what we are do here, it is worthwhile reading. The title of the paper is “Supporting Innovation: Why and How”.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part VII (PLM Part II)

Yesterday we discussed the Petroleum Lease Marketplaces virtual representation of the physical oil and gas marketplace. And the “User Vision”, or graphical user interface that could be used in the Preliminary Specification. In today’s post I want to discuss the general classifications of the people that will work in the Petroleum Lease Marketplace (PLM) and some of the activities they’ll be involved in.

When we look at the types of work that is carried out in the PLM we see a large group of administrators working within different areas within a producer firm. Whether it be the Land or Legal department, Production or Exploration Operations staff or Accounting people; all of these groups have an interest in the information, people, assets, documents, processes and functionality contained within the PLM.

The primary concern of the people in these groups is the information and data contained within the module. It’s accuracy, access, and use by those within their firm, but also within the Joint Operating Committee’s that their firm has an interest in. Some of this data will be similar to the data that is held by their firms partners, and much of the data has been generated in a cooperative and collaborative manner by those partnerships.

For example AFE’s, Mail Ballots, agreements, are generated through interactions by each of the participants in the Joint Operating Committee. How much of this data and information could therefore be held by the Joint Operating Committee with an interface to the firm, is a question that should be answered with significant research during the Preliminary Specification. To answer that question would also answer; for whom do those people we mentioned, work for. The implications would be significant.

One of the greatest opportunities that we have in developing this system is to address the division of labor and specialization. To take these people’s work and to reorganize it across the industry, so that it was focused on the Joint Operating Committee but very specialized in terms of the tasks that they conduct. And apply those skills across the entire industry, or a geographical region, or some other classification. Is something that could provide significant increases in oil and gas industry productivity and overall cost savings. That is to say that an individual would work for a process that is billed to 1,000 Joint Operating Committees that might represent 200 Companies.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part VI (PLM Part I)

We now move to the next “marketplace” module in the Preliminary Specification, the Petroleum Lease Marketplace (PLM) module. The PLM is the most interesting marketplace module as its objective is to replicate virtually what the physical oil and gas marketplace is. That begins of course with Petroleum Leases. The discussion of the Petroleum Lease Marketplace module will take a few posts as its scope is rather broad and the concepts far reaching.

When we are replicating the physical oil and gas marketplace, the Petroleum Lease is the source document that is the common denominator of all activity and ownership within the industry. Any physical oil and gas assets will be attached to some lease, agreement, rights or concession granting the holders the rights and privileges of ownership, lease or rental. These are the things that are contained within a marketplace. They are what are purchased and sold, bargained and traded for. They are the things that people are recruited to provide services for. Generally a marketplace is a dynamic and evolving commercially oriented hub of activity. That is what we are replicating in the PLM.

The second point that I want to put across today is the manner in which some of the interactions may take place in the PLM, the Resource Marketplace and Financial Marketplace modules of the People, Ideas & Objects application. I have been hesitant to promote this “user vision” too aggressively due to the controversial nature of the vision. Its something that the community will need to determine if it wants or needs to include the vision in the Preliminary Specification. Please read the user vision here.

Simply it shows a three dimensional version of a virtual representation of a marketplace. One which avatars looking to conduct business on behalf of their human representatives. I think it may have validity in the future of business. I could be wrong. If the “user vision” is necessary will be a determination of the community in the Preliminary Specification. I expect this decision to be based on substantial research and user input, not an initial show of hands as to who thinks its a good idea today. This may have some value for the innovative oil and gas producer. If so we will need to determine that in the Preliminary Specification, design those features and engineer them into the application.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part V

The sky is the limit when we talk about the output of the Performance Evaluation and Analytics & Statistics Modules, literally. These two modules should be somewhat best be left in the hands of those that have an aptitude to deal with data and its presentation, I don’t think that I can add any value over what is stated in 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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part IV

We want to continue discussing the output requirements of the Resource Marketplace Module from yesterday. We run the risk of getting too complex when we speak about the division or boundaries of the firm and markets but its an important definition that we get right in the People, Ideas & Objects applications. Simply we are attempting to provide as much actionable information between the producers and those in the service industries so that innovation in the field and at the producer levels can begin and develop. We need to ensure that the ideas that will drive the industry are developed as quickly as they can be.

The Resource Marketplace module offers more as well. In addition to the service industries that are sourced by the producer, human resources are handled by this module. Now this is more of the traditional Human Resources recruitment function of the firm where the recruiting and management of the firms personnel is done. Of course one other aspect would be that we would bring full payroll capabilities into the system.

What may be difficult to determine is the appropriate placing of the interfaces for deployment of the resources within the firm and various Joint Operating Committees. Ideally the Resource Marketplace module makes the most sense, however the community may think that these interfaces belong elsewhere. What I am referring to is the pooling of human resources that the partners within a Joint Operating Committee may do in order to adequately resource the property. (We will also discuss this in the Accounting Voucher module.)

For example, with the demands for more engineering and earth science effort for each barrel of oil produced. The ability for each producer to have in-house the global capability to deal with all aspects of their operation; will be a luxury that the market for human resources will not provide. Therefore, the capabilities to meet the needs of the properties operational demands will need to be met through the pooling of the Joint Operating Committee's partners human resources.

Recall in the Partnership Accounting Module that this pooling can take on any characteristic that the partner is able to contribute. If the partner is able to contribute only financially, then they are charged for everything, whereas, a partner that is able to contribute human or technical resources, these are costed to the Joint Account in consideration of their contribution.

The interfaces that we discussed will not only include the ability to source the resource through the Resource Marketplace Module. The ability to charge the costs of the resources through the Partnership Accounting Module. The ability to grant secure access through the Security & Access Control Module. Which will also of course include an appropriate designation in terms of the qualifications of the individual and determination of who they will be reporting to in the Military Command & Control Metaphor. But will also need to have the appropriate governance requirements interfaced in to the Compliance & Governance Module.

Here we begin to see the complexity that this system needs to address to deal with the needs of pooling the resources in the Joint Operating Committee. This is not a nice to have that might be used by some of the firms some of the time. This will be a necessity of the industry in order to deal with the complexity of the operations that the industry deals with today and in the future. It is fair to assume that with the current production profile and decline curves that the industry activity levels will need to accelerate. Although the systems complexity can seem daunting, a properly designed and engineered system, such as the opportunity as is presented here with People, Ideas & Objects, would make the industry operate in a fashion that would enable it to optimize its operations.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part III

Last week we began our series discussing the output that the community would produce during the Preliminary Specification. We noted the geographical scope and its representation, how technology was not an influence in the specification and that producers, service industries, society and individuals were part of the output. Today we are going to discuss the redefinition of the boundaries between the markets and firms. Where markets are comprised of the service industries and firms are the producers themselves. Where the current bureaucrats and managers are no longer able to micro-manage the industry as they once claim they were able to.

The Draft Specification redefines the boundaries of the market and the firm in the oil and gas industry. As controversial as that sounds, it is required in order for innovation to occur. Critical to this redefinition is the understanding that the key competitive advantages of the producer firms are their land and physical assets and their earth science and engineering capabilities. Acceptance of this fact is critical to the competitiveness of the producer firm. Management of all aspects of the industry are beyond the scope of what is now possible. The market must be relied upon to meet the needs of the field activities. That demands more and better information be communicated between market participants.

No producer would hold out that their drill bit technology as superior to another producer, or their rig as more capable, yet, field level innovations are held back until the marketplace for them is proven for the technology. This chicken and egg strategy has been exploited by the producers time and again because they hold the financial resources of the industry and will only release those dollars for “proven” engineering. Unfortunately the investment capital groups understand this and have decided not to play this game any longer and as a result their is little to no innovation in the field occurring. With no investment capital to fund the start-up ideas nothing is happening. The producers are now having to pay what they feel are exorbitant prices for field services as their are no field level innovations or new entrants. Well whats that saying “you reap what you sow”.

A good example of this holding off is reflected in People, Ideas & Objects. At no time has there been any assistance from industry. Yet on three occasions, in three significant ways they have attempted to circumvent this Intellectual Property. Each attempt has ended in failure. And each failure has only secured my claim by establishing that there is no other competitive offering. Bureaucrats don’t work with the service industry, they only take what they want without paying for it. Those days must end and with the modules in the People, Ideas & Objects application, that end is designed to happen.

When we talk about an industry that needs to do more with the same amount of resources this type of stand-off will not solve the problems the industry face. The problems that this industry faces will not be solved easily. Those with the ideas on how to solve them will not be willing to do it for an industry that will just hijack them. How this is resolved is through the Research & Capabilities Module that allows those with the ideas to publish, in a manner similar to a blog, their ideas and earn the rights to them. There they can have producers see them and have the producers sponsor them and build them for the benefit of those with the ideas, the producer and industry.

Once the ideas are generated and operational within the industry, then the Resource Marketplace module will enable all service providers with the ability to interact with producers to conduct the work needed. From preparation of budgets, AFE’s, work orders, billing, invoices etc the service provider will have accounting interfaces that enable them to manage their interactions with the producers.

In other words those with the ideas working with the producers, developing their ideas, getting funding from the producers to prove their ideas, developing their ideas into commercial products and then interacting with the industry participants to conduct their business. These are the actions that these two modules of the People, Ideas & Objects application are designed to support. These processes are what are needed to enable the market and firms to interact in a manner necessary for the industry to achieve the markets demand for energy. Field level innovations are a critical and necessary element of meeting that demand. The current bureaucrats and managers are unable to understand the information they have in front of them. It is therefore time to take the task away from them.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

McKinsey, Measuring the Nets Growth Dividend

It’s the weekend which means its time to review some of our McKinsey backlog. Today we have the executive summary of “Internet Matters: The Net’s Sweeping Impact On Growth, Jobs and Prosperity” from the McKinsey Global Institute.

I want to highlight three quotes from the executive summary as they pertain specifically to the work that we are doing here at People, Ideas & Objects. The first quote states what should be obvious to most people by now;

Our research shows that more than 75% of the value added created by the Internet is in traditional industries. The businesses that have seen the greatest value creation have benefits from innovation leading to higher productivity triggered by the Internet. 

Applying technology to the oil and gas industry is to benefit those that work within the industry and the industry itself. To a large extent, what the Draft Specification provides is necessary functionality and process management for the industry to innovate and meet the markets demands for energy. Its not a nice to have but a necessity.

A few days ago we discussed Professor Paul Romer’s New Growth Theory and the three themes of People, Ideas & Things. In this next quotation McKinsey Global Institute discusses endogenous economic growth’s impact on per capita GDP.

The maturity of the Internet correlates with rising living standards.

Leveraging endogenous economic growth theory, we have been able to show that Internet maturity correlates with growth in per capita GDP. Using the results of the correlation, a simulation shows that an increase in Internet maturity similar to the one experienced in mature  countries over the past 15 years creates an increase in real GDP per capita of $500 on average during this period. It took the Industrial Revolution of the 19th century 50 years to achieve the same results. This shows both the magnitude of the positive impact of the Web at all levels of society and the speed at which it delivers benefits.  

If we are currently seeing these dramatic effects on per capita GDP, then the Information Revolution is well entrenched and the benefits to society are beginning to develop. As time passes these benefits will multiply and the values realized will grow. Now is the time to become active in these areas and start at what can only be described as the beginning of the commercialization of the Information Revolution.

This last quotation from McKinsey’s report advises where business leaders should put the Internet in terms of their strategic agenda. The Information and Communication Technologies are too powerful to leave outside of the tool kit of any CEO or business leader. Not only are they are powerful ways in which to lever competitive advantages, they leave areas of weakness exposed to competitors who exploit these technologies.

All business leaders, not just e-CEO’s, should put the Internet at the top of their strategic agenda.

Business leaders must optimize the benefits gleaned from the Internet through innovation and change. It is no longer a choice, given that many businesses face competitors who capitalize on the power of the Internet to Innovate business models. Business leaders should play a significant role in the spread of the Internet and systemically review how the Internet allows them to innovate more aggressively and even reinvent their business models to boost growth, performance, and productivity. 

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

McKinsey, Preparing Your Organization For Growth

With the increasing demands in the oil and gas industry of more engineering and earth science effort in each barrel of oil produced. And the marketplaces demands for “more” makes the challenges faced by the industry far more complex then what has been faced in the past. Just standing still requires the producer to attain more capabilities. How does a producer prepare for growth?

In this McKinsey article the authors discuss three “pain points” experienced by three organizations. Although none of the three organizations mentioned are in the oil and gas industry, it is important to think ahead as to what we will face in terms of how the industry will need to change and grow.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part II

Yesterday in the first part of our discussion on the output of the Preliminary Specification. We talked about how technology was not an influence in the Preliminary Specification. And how producers, the service industries, society and individuals were all included in having their needs met by the software developments at People, Ideas & Objects. Today in Part II of our Preliminary Specification Output summary, we want to talk about the geographical scope of the application, and how that will be represented in the output of the application.

As part of the output of the Preliminary Specification the community will determine what the geographical scope of the People, Ideas & Objects application modules will include. This will involve determining which participating producers geographic needs are be to met in terms of areas of operations; U.S., Canada, Britain, etc. Regulations that govern those areas; royalty requirements, tax regulations, currency, security exchanges etc. Service industry providers etc. Etc;

In each instance a determination of the subscribing producers requirements of where their operations reside will need to be assessed. Next a determination of what the geographical scope requirements are for operations in that region will need to be populated within the Preliminary Specification. A determination of the cost benefit of developing software for that region (see the recent blog post “Budgets and Canadians” for more information) needs to be made. Finally decisions as to what the final geographic scope of the initial Preliminary Specification will be and how the budgets for any anomalies will be resolved.

In many ways this sounds like what current systems requirements do in terms of defining what needs to be done. As we progress through the Preliminary Specifications Output series we’ll see that the output will involve many things for People, Ideas & Objects that are different. These geographic requirements are capturing many of the compliance and statutory requirements of the system, but as we progress through this output summary we’ll see how this systems development differs.

In many cases the regulatory and compliance agencies that require producers to report to them have established advanced technical guidelines for their reporting. In many cases this has included technical frameworks, application programming interfaces (API’s), business rules and in the case of the Securities and Exchange Commission (SEC) Extensible Business Reporting Language (XBRL) an entire XML syntax.

What will need to be done by the community is to take these requirements and tie them into the various modules that exist in the Draft Specification. The SEC requirements would fall under the Financial Marketplace and Compliance & Governance Modules, and other areas such as Security & Access Control. The royalty frameworks would fall under the Partnership Accounting and Petroleum Lease Marketplace Modules. We will get into more specific detail of how the details of this output is specified in later posts in the Preliminary Specifications output summary. For the purposes of geographic scope I think we have the picture in that there may be ten’s or hundreds of lessor regimes to comply with in the People, Ideas & Objects systems geographical scope. As there may also be several securities regulators governing operations for producers located in geographical regions within the scope of the People, Ideas & Objects Preliminary Specification.

On Monday we’ll pick up with this discussion with the related topic of how the service industries are not only a part of the geographical scope, but also a critical part of the innovation that occurs in the oil and gas industry.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

The Preliminary Specification Part I

For the next few months I want to talk about the output that the community will produce for the Preliminary Specification. Although I have hesitated in the past in making any comment about what the output would consist of, it may be appropriate at this time to offer some suggestions just to get the ball rolling. I don’t wish to limit in any way what the scope of the output would look like, only to offer a few suggestions as to how I might see the output of the Preliminary Specification. These posts will be able to be aggregated under the PS-Output label of this blog.

In general the first requirement of the Preliminary Specification is that it will have no consideration of any technology. It is all about the oil and gas industry and the people that will be using the application. Consideration of the technology is not valid in this project, technology will accommodate the needs of the users when the time comes. This means that the General Ledger, the Relational Database Management System, Java etc are not pertinent to the considerations of what is required in the Preliminary Specification. (Please note however that we have selected this Oracle Stack as the base of Detailed Specification.)

Secondly we are looking at the global scope of the energy industry. Or as been stated elsewhere, the producers, services industries, society and individuals. That’s maybe a bit broad and could use a bit more detail. What is intended to be included in these classification is as follows.

Producers

• Start-ups
• Junior
• Independents
• Integrated Oil Companies
• National Oil Companies

Services Industries

• Field Services 
• Research
• Development
• Operations
• Engineering
• Project Management

Societal

• Royalty
• SEC
• Tax
• Compliance
• Environmental

Individual

• Employment
• Entrepreneurial

As we can see the functionality and process management of the application modules will include organizations and individuals outside of the producer firm. Transactions, interactions and collaborations occur outside of the producer and these are being captured by the People, Ideas & Objects application and therefore will be used within the various firms, agencies and industries noted above.

The output of the Preliminary Specification will therefore include the needs of these other organizations and people in addition to the producer firms. Their inclusion in this process is not limited to just managing transactions. A thorough review of the Research & Capabilities and Knowledge & Learning modules reflects the needs of the producer and service firms transaction management are not the only aspect that needs to be considered.

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.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.