The Preliminary Specification Part LI (C&G Part VI)

How could we have a discussion of the Compliance & Governance module and not discuss the much loved Sarbanes-Oxley requirements. As everyone is aware these are standard requirements for American based financial capital markets. The impact of the legislation has seen many changes in corporate America, and to me it provides a good start in the area of overall corporate governance. With the global scope of the changes that are being contemplated in the People, Ideas & Objects Preliminary Specification, I think now is the time to to rethink governance from stem to stern. To implement governance into these changes in a manner that doesn’t just add them to the system, but embeds them deeply within the systems DNA.

From what we know about the development of corporate governance in the last twenty years we should certainly give this different approach a try. The probable reduction in direct supervision and management, which is what the pundits say the future holds, would also require a commensurate increase in governance of the firm. That governance coming from an increase in the automation of the processes through the People, Ideas & Objects software development team and user community.

This is the last post for the Compliance & Governance module, and the last post of the first layer of the peeling of this onion we call the Preliminary Specification. We will now start over and begin peeling the second layer of the onion and go a bit deeper in the Preliminary Specification. Tomorrow we will start again with the Resource Marketplace module.

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.

The Preliminary Specification Part L (C&G Part V)

Today we want to discuss the governance of the capabilities process documented in the Research & Capabilities and Knowledge & Learning modules. Recall that this process takes the ideas that are generated throughout the oil and gas industry, and the service industry, funds them, develops commercial products and services, develops the producers capabilities, transfers those capabilities to the Joint Operating Committee and learns through their application. As we can see this is a long term process that would have many open ended elements that could be lost in the shuffle, or has aspects of the process that are too tempting.

Its probably best to take a step back and discuss why we are implementing this process in the Preliminary Specification. Simply we have two choices for providing the producer firm with the products and services of the service industry. We can let the market provide for all of the products and services, or we can have the producers conduct all of the work from manufacturing drill bits to producing the oil. We currently have a situation where the producers are dissatisfied with the service industry and are micro-managing that industry through control of the market. When producers are not satisfied with the size of the drilling rig fleet, they, the producers will commission more rigs. Sending the wrong messages to the service industry entrepreneurs. Producers have to work with the service industry, not against them, and certainly not accuse them of being greedy and lazy. When you take away the incentives to build a drilling rig, don’t accuse them of being greedy or lazy.

It is here within this “capabilities” process that the firms governance must enforce the boundaries of the firm. The division between the market and the firm, and where that division lay has to be enforced within this process. Simply the producer firm is only concerned with their asset base and their earth science and engineering capabilities. Everything else must be provided by the marketplace. The producer however has a role in providing a vision and leadership to the marketplace and seeding that market with funding. In a paper written by Professors Richard Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

The economic change the producer is facing is the commodity prices are rewarding the innovative producer. To focus on purchasing more drilling rigs is not where a producer can increase value. The governance of the producer must maintain the focus on where the producer can gain the greatest value, on finding and developing oil and gas reserves, otherwise.

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21

I am going to suggest that reliance on the Work Order and Military Command & Control Metaphor of the Preliminary Specification be the means of how the producer maintain focus and governance on this process. Distraction away from the objective of the firm is a very real possibility in dealing with the noise of the marketplace. The Work Order will ensure that no work is done on unauthorized off-the-reservation projects and that a chain of command is imputed in the administration of each project. This will help to ensure that each project is ultimately focused on providing the producer with earning greater returns on oil and gas reserves enhancement and production.

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. 

The Preliminary Specification Part XLIX (C&G Part IV)

The manner in which much of the work is done in the proposed People, Ideas & Objects Preliminary Specification resonates with the ideas of how work will be done in the future. Direct supervision is replaced by self organizing groups who are motivated by and directed by the performance of their property. This becomes the altruistic nirvana that people aspire to work for; and the governance issues that this creates for the firm. This post deals with the governance issues and how the governance areas of the Compliance & Governance module reels in the vision of self organizing groups to something that is more workable and sensible in the commercial environment.

First of all the Military Command & Control Metaphor is not just for the Joint Operating Committee. Although we have discussed it in terms of just the JOC, there is nothing stopping the firm from using the organizational overlay within the firm. This would also apply to the Work Order system. These two tools would provide the firm with the ability to ensure that tasks were assigned and completed as budgeted and execution was consistent with the firms expectations. Recall by the use of these systems, it is understood that no other work is undertaken without the ability to charge time or costs to a work order. Effectively ensuring that no off-the-reservation type of projects are undertaken. The Work Order system could also provide the internal control necessary to ensure that the appropriate people necessary to achieve the governance are assigned to approved projects and are capable of meeting the requirements of the tasks. When “things” go wrong it’s usually at the beginning and having that “governance” information available is the objective of this warning.

When we talk about the firms and Joint Operating Committees internal controls, they seem to me to be a lost art in the tool kit of today’s management. The ability to set up a control to trigger a warning that something is happening that is inconsistent with normal policies, has been used more in the past then they seem to be used today. The power of technology seems to go hand in hand with internal controls. I think they provide a strong method of  governance that should be built in to the People, Ideas & Objects governance area of the Compliance & Governance module. That is to say that a section be devoted to building database “triggers” and “stored procedures” that are used by the firm to monitor areas of the firms activities. These of course being available only to those individuals with the appropriate authority to access the data and information necessary to run the queries, and to fully appreciate the art and science of internal controls.

There is a potentially large issue that we need to discuss in the topic of governance which I will approach in the next post. The issue is the process of how the capabilities of the firm are generated. Recall in the Research & Capabilities and Knowledge & Learning modules the reliance on the marketplace to generate ideas that “might” be funded by the producer firm is certainly an area where enhanced governance is required.

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. 

The Preliminary Specification Part XLVIII (C&G Part III)

In a capital intensive business such as oil and gas, access to capital is a critical capability the producer needs to develop their operation. In order to have access to the capital you must meet the regulatory requirements and compliance needs of the markets. Therefore the Compliance & Governance module of the Preliminary Specification is a critical capability to all those that are dedicated to building an innovative oil and gas producer. That applies equally to ExxonMobil and the start up oil and gas operation.

And it should be a concern of ExxonMobil that the start up oil and gas operation has its compliance and capital in good shape. Why? What’s that saying you can’t pick your neighbor's and you can’t necessarily pick all of your partners. Sometimes you have to deal with partners that you have no history with. You want to make sure that they are capable of operating in a fashion that is at least consistent with standard industry practices. It is those standard industry practices that include high levels of compliance and governance in today’s oil and gas industry operations.

As we have discussed in the past few days the level of expectation by regulators with respect to the compliance requirements are high. It would appear that there is no sense that any relief will be forth coming, on the contrary, we should expect the level of requirements to grow. This is the only reasonable expectation, however, I would ask, have we implemented these compliance frameworks correctly? Have the regulations which are submitted in technical frameworks, been “integrated” to the ERP system, or just attached?

We can see the answer to that question when we find that no current ERP system calculates the Gas Cost Allowance for royalty calculations. To conduct these types of calculations you would need to integrate the royalty frameworks deeply within the ERP systems, and that clearly has not been done. So when it comes to the automation of the compliance frameworks, which is the objective of the regulators in publishing these technical frameworks, nothing has been done from the industry side.

I have always argued that there is two ways in which to approach the problems that we face in oil and gas. One is to automate the processes to high levels with systems. This requires the high capital costs of software development like what People, Ideas & Objects have proposed. Or, you can employ the human resources to maintain the compliance requirements on a manual basis. This is the method that industry has chosen to pursue up to this point. I would ask in times where;

• The cost of capital is historically low.
• The demand for human resources is somewhat constrained.
• The regulators have published technical frameworks.

Why wouldn’t the oil and gas producers chose to develop the People, Ideas & Objects applications.

Automation of the compliance frameworks within the People, Ideas & Objects applications would provide many benefits to the innovative oil and gas producer. The costs of doing this engineering work is being amortized over the entire industry. Making these highly engineered software products, incidental in terms of actual cost to each producer. Access to these systems would be to the benefit to all of the producers in the industry. Enabling the capability of each individual producer to meet or exceed the minimum standard of industry expectations. In a world of increasing demands your partners capability could become a critical issue to your operation. There is a compelling argument here in the compliance part of the Compliance & Governance module. And I think its time for the industry to act.

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. 

The Preliminary Specification Part XLVII (C&G Part II)

Yesterday we discussed the opportunity that we have of centralizing the software development costs and efforts for Compliance & Governance frameworks under one roof. That is to say that instead of each producer building the in-house capacity to have their software and compliance capabilities maintained, it is possible instead to have it centrally managed through People, Ideas & Objects. Today I want to take that concept a bit further and break down another element of the cost of compliance and discuss how that element of compliance could also be done in a centralized manner. That element is of course the accounting and administrative costs incurred in meeting the regulations requirements. The costs of which are incurred in the human resources and associated overhead. Therefore these costs are an area where specialization and the division of labor could be applied and build real value for the producer firms.

It comes down to the question of where is the compliance work done at the Joint Operating Committee or the firm. It has to be done at the firm as all the variables are unique to each producer. However, that does not preclude the firms from having their accounting done by groups that work for many firms. Traditionally public accounting firms do work for many firms. People, Ideas & Objects will rely on our proposed network of Community of Independent Service Providers (CISP) who would be looked at to provide these types of services. These accounting services have been traditionally handled internally by the producer firm, however, I think from an efficiency point of view there may be an alternative means of having these types of work done. I think that it may be time that producer firms should consider that they undertake to have CISP member firms conduct the entire scope of accounting and compliance work for multiple producer firms. Why not.

If we were to approach the accounting and compliance reporting requirements on a specialization and division of labor basis we could add significant value to the industry. Taking the organization of the accounting across the industry and building the accounting and compliance needs for all of the producers would provide that value at lower costs and better service because of the efficiencies from the division of labor and specialization. Particularly in the area of compliance reporting, especially royalty, where the knowledge of the people who were employed in the compliance service could be so specialized that they are able to ensure that their clients royalty obligations are the lowest possible. With royalties being the largest cost component of a producer this would certainly be of value but there are greater efficiencies then these available. There would also be the ability to manage the process with the most efficient team available.

These are the two elements of the costs of compliance. First, as we noted yesterday the cost of maintaining the software in compliance to the regulations. And two, the accounting that is done in keeping the firm up to date. If the software can be maintained on a global basis on behalf of the industry by People, Ideas & Objects then the one time costs of the software can be amortized over the industry as a whole. And if the accounting costs can be managed by also centralizing the accounting function, and as a result, specialization and the division of labor coming into play. Then the industry is benefiting by reducing their costs by reducing the two largest components of the costs of compliance in the most cost effective way. Yet, they have also done so in the manner where their compliance is more accurate.

Another element of quality also comes into play as a result of the proposal from People, Ideas & Objects. That element is time. If the timeliness of the information that is provided is within the guidelines, or is earlier, then the quality of that information is much higher. I think that what is proposed here with the high levels of software automation, specialization and the division of labor provide an assurance that the timeliness of the information that the systems we are building will be better then the deadlines imposed by the regulators. This timeliness doesn’t appear to come at the expense of any accuracy either.

Lastly when we discuss moving the compliance and governance frameworks of the hierarchy to the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. We state that this provides an increased speed, innovativeness and accountability. For when you move compliance closer to operational decision making, accountability is the result.

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. 

The Preliminary Specification Part XLVI (C&G Part I)

Ah Compliance & Governance, the module everyone loves to hate. It is my hypothesis that it is here, at compliance and governance, that everything went wrong. What I mean by that is in the 1960’s when the first computers were being introduced into oil and gas companies. The question was asked what will we do with them. And of course the answer was accounting. Then as they became ever more powerful and more capable they began to add more tasks to their duties and added the natural follow on concerns of tax, royalty and SEC compliance. Soon the culture became focused on those “compliance” requirements of the “firm” and the Joint Operating Committee became something that was used over there. Soon after this engineers and geologists began speaking a different language to the “business” types, as they began development of management science and other such nonsense. Divisions grew and the business of the business was focused on the corporation and its need to file the appropriate paper work to the appropriate agency in the appropriate time frame on the appropriate colored form.

Anyway the real business of the business, the Joint Operating Committee somehow survived and if we align its legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks to the compliance and governance frameworks of the hierarchy everyone can start speaking the same language as the engineers and geologists and start to get some real business done. And as People, Ideas & Objects research has shown this would provide the oil and gas producer with greater speed, innovation and accountability.

Compliance & Governance is the eleventh module in the eleven module Preliminary Specification. Please note, the number of modules is not set as the user community may certainly add more modules if they feel the need to. It’s also no accident that I added Compliance & Governance last, as the question that should be asked is. How are we going to ensure compliance to all the regulations for all the module specifications that we have discussed so far? And I would assert that is why these are user based developments. But seriously, one thing governments seem to be fond of today is regulations on oil and gas companies. With Information Technology enabling various governments to issue technical business rules, technical specifications, XBRL syntax’s and other technological frameworks for these regulations. The ability to write these “frameworks” only seems to have encouraged them to write even more regulations. The larger point is that these frameworks do provide software developers with distinct advantages in enabling the regulations within the software.

As we had indicated in an earlier post about the user communities determination of the scope of the People, Ideas & Objects application. Part of that determination of scope will include which regulations it will need to be in compliance to. With so many jurisdictions requiring compliance, each transaction may need to be assured to be in compliance with multiple jurisdictions. Add to that the transaction may be generated through a Joint Operating Committee owned by a variety of producers. And those producers maybe composed from an international background and the Compliance & Governance module takes on enhanced importance.

From the point of view of a producer maintaining the database and applications for all of the compliance frameworks that you have to be concerned with is a difficult task. The number of people you need to have to keep your applications up to date is significant. However, People, Ideas & Objects as one software developer acting on behalf of the industry as a whole, the job becomes much more specialized and therefore manageable. Then again if we were building these applications with the purpose of serving an industry we could use the division of labor and specialization to manage these tasks in a way that would significantly lower the costs of compliance, and increase the quality of the producers compliance.

I foresee just the royalty compliance requirements of these applications potentially including many dozens of different jurisdictions. To approach that as a sole producer is not cost effective in the least. To consider these costs are replicated across each producer firm, then we begin to see the costs of compliance escalating to the levels that they are today. There is another way, and that is what is being proposed here in People, Ideas & Objects, along with the many other innovative ways we are proposing to deal with the issues 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.

The Preliminary Specification Part XLV (A&S Part III)

This post will deal with the motivations of people to use the Analytics & Statistics and Performance Evaluation modules of the People, Ideas & Objects applications. Its one thing to have a very nice statistical analysis tools available for those who are inclined to use them. Its another to have these tools being used by people who are actively looking for the next measure of performance or metric that will reflect how their performance can be improved. This latter use is the reason for these tools in the eleven module Preliminary Specification.

We pick up on our discussion from the Research & Capabilities module in which we discussed the McKinsey article “The 21st Century Organization”. We now discuss the fourth element of that paper “Measuring Performance.”

The final set of ideas rounding out this new organizational model involves relinquishing some level of supervisory control and letting people direct themselves, guided by performances metrics, protocols, standards, values, and consequence management systems. 

In the Research & Capabilities and Knowledge & Learning modules we presented a complex process of how ideas were generated, products and services were funded and built, capabilities were developed and transferred to where the decision rights reside and enabled the complex scientific and engineering learning to occur within the Joint Operating Committee. This process flowed through the entire entrepreneurial marketplace, the service industry, the oil and gas industry, the producer firm and the Joint Operating Committees that it is associated with. It is a comprehensive process that is unique in that it exists as a result of the interactions of entire industries.

The Joint Operating Committee is the net benefactor of all of these interactions. And as noted in the “The 21st Century Organization” people are not measured and told explicitly what to do in their jobs. There is too much activity going on for someone to be doling out task lists to mindless automatons. What the responsible and productive person needs to do in this world of massive information and activity is to focus on what is important. To deal with the critical value generating areas of their jobs that can add, and avoid destroying, value. That is where the Analytics & Statistics and Performance Evaluation modules of the Preliminary Specification come into play. Providing the user with the ability to focus on building value for their clients and employers, the oil and gas producers.

Whether they are earth scientists or engineers, business related or in any field that the oil and gas industry employs, access to the data and information through these modules will be critical to build value. Using the “dashboard” metaphor where algorithms are constantly monitoring various processes. The user could be running thousands of statistical and analytical programs that will look at data in new and innovative ways. It could be conceivable that some people may dedicate large percentages of their time of the day to thinking of new ways to analyse the data and information that is available to them.

As we indicated yesterday, the data that will be captured in People, Ideas & Objects will be voluminous. Add to that the industry related information already available and the new trend in unstructured data and we begin to see a trend that just doesn’t seem to quit.

I agree with the assertion that these tools are to powerful to be left in the hands of everyone. However, I think we have little choice. As we move more into the future, the education level of the average oil and gas worker will continue to grow higher and higher. Simply the basic maths of each person, particularly in the business areas, are going to have to be upgraded to fully understand and appreciate these tools. As that will be the key to gaining focus and building value.

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. 

The Preliminary Specification Part XLIV (A&S Part II)

Our first entry in the Preliminary Specification for Analytics & Statistics was very brief. Now that we have some of the modules discussed we have some substance in which to better discuss this module. The Analytics & Statistics module is similar to the Performance Evaluation module in terms of functionality. It is a firm focused module where as Performance Evaluation is focused on the Joint Operating Committee.

A major assumption in these modules is the bulk of the transactional work is handled by the systems modules that we are building. Application modules such as the Partnership Accounting and Accounting Voucher remove the demand for People so they can be much less involved in low level transaction related activities. Enabling them to move to the higher level work of designing transactions and assessing performance, analytics and statistics. These modules provide the higher level analysis where the creative and perceptive user will be able to determine the issue, the probable and possible courses of action, and take the appropriate action necessary to create value for the oil and gas producers.

One should recall that the Security & Access Control to the data and information contained within the modules provides the firm with continued limited access. Access to the Analytics & Statistics module could be open to the majority of the people within the firm, however that does not open the data and information of the firm to everyone. Only those that have authorized access to the information that they should have will be able to access that data and information through this module. This isn’t a back door to be used for unauthorized access.

And data there will be. As we have seen in the discussion of the modules up to this point there is a significant amount of data and information that is being managed by the application. From the ideas in the Research & Capabilities to the information contained in the marketplace modules. But there is even more then that. Particularly from a raw data point of view. To get a handle on the scope of that data we need to revisit the People, Ideas & Objects Technical Vision.

The Technical Vision consists of four cornerstone technologies that will fundamentally change the way in which the oil and gas producer approaches the business. These four technologies will provide growth in the volumes of data based on some simple facts.

1. The energy industry is based on the physics of heat and pressure. 
2. The ability to remotely monitor and control physical assets.
3. The ability to work anywhere, anytime.

The ability to analyse and compare these variables would provide value to the firm. Included in the Draft Specification for this module is the statistical application R. R is an open source embeddable application used for statistics everywhere. Its reliability and usability are familiar to those that are used to dealing with large data and statistical analysis. Also since the Analytics & Statistics module also relies heavily on the Security & Access Control module for access control we will also rely on it for the full communications capability. That consists of person to person, person to process, process to person and process to process communications.

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. 

The Preliminary Specification Part XLIII (K&L Part III)

Throughout our discussion of the Research & Capabilities and Knowledge & Learning modules. We have been discussing the earth science and engineering research, developments, innovations and thinking of the oil and gas producer and the Joint Operating Committee. Many of you may be wondering what exactly does an ERP system have to do with these activities? Simply these activities are where the business of the oil and gas business are being conducted. It is imperative that the systems that manage the commercial aspects of the firm support the people and activities that occur in these areas. This post will hopefully convince you of this.

Up to this point in our discussion we have only discussed the activities of the modules from the point of view of engineers and geologists. As we peel this onion known as the Preliminary Specification we will begin to see the commercial end of the Research & Capabilities and Knowledge & Learning modules. We began to see a bit of it yesterday with the re-introduction of Dynamic Transaction Costs. With these costs being incurred, a means to enable them and control them should be provided as a mechanism in the Knowledge & Learning module. Therefore the ability to issue Work Orders, budget and effective cost control would be part of the modules functionality. Also project management tools that are able to source from the Resource Marketplace module and use the Military Command & Control Metaphor are necessary to project manage the new idea or run the experiment.

The final look and feel of these two modules will ultimately be the result of the user input and their involvement. The point that I am trying to make in this post is that these modules are where the business of the oil and gas business are happening. It should be within these modules that the engineer or geologist should never have to leave. If they find an interesting idea within the research area of the Research & Capabilities module they should have the opportunity to right click their mouse to have a list of options to prepare a Work Order, Prepare a Budget, or Resource a Project. The ultimate list of options would include the supporting activities of a user defined commercially focused ERP system.

Today there are significant financial resources available for innovation. The commodity price increases are a reallocation of capital to fuel innovation. The reorganization of a producer to facilitate innovation is the purpose behind the research that People, Ideas & Objects conducted. That research was the basis of the Draft Specification of which the Research & Capabilities and Knowledge & Learning modules are part of. These modules are the two key points where innovation occurs. Within these modules there is a flow of ideas from the service and oil & gas industries through to the producer firm, and then that knowledge is then sent to the Joint Operating Committee where it is applied and specific learning occurs.

The People, Ideas & Objects application modules are a critical part of how these ideas are aggregated, filtered and parsed. From having a free flowing, post your ideas on an industry wide publication, to generating funding for those ideas, to developing commercial products and services, to enhancing and developing internal capabilities, to focusing the right people on the right knowledge, and enabling them to learn from what is not known. This process is managed through these two modules.

There will be a lot of ideas and there will be a lot of money spent in the coming decades. Successful innovation is not cheap. Unsuccessful innovation is terribly expensive. If anyone can tell me the difference as to why Apple’s iPad is commercially successful and HP’s Touchpad lasted only seven weeks; probably has an idea as to the secret to successful innovation. The only way to participate is to get in the game. And understand that the areas that we will innovate in are not limited to any corner of the industry. We have focused on the key business of the oil and gas business. But just like People, Ideas & Objects is focused on the organizational innovations and systems developments, there are other areas where innovations will be needed to be funded and deployed in oil and gas.

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.

The Preliminary Specification Part XLII (K&L Part II)

The title of the Preliminary Research Report was “Plurality Should Not Be Assumed Without Necessity”. This being of course Occam’s Razor which in its simplest form means - the simplest explanation is most likely the correct one. Very appropriate when we are talking about using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. However, I also noted in the Preliminary Research Report that Occam’s Razor was referenced as “Its not what you know that you do not know that hurts you. Its what you do not know, that you do not know that will. It must be considered that there is nothing more difficult to carryout, nor more doubtful of success, nor more dangerous to handle, than to bring about a new order of things.” Knoop & Valor (1997).

Imagine we are now in the Joint Operating Committee with full operational decision rights with respect to the course of action to take. Thanks to the work that is done at the producer firms we know what we know from their work in the Research & Capabilities modules. That information and data is populated in the Knowledge area of the Knowledge & Learning module. Now the rubber hits the road sort of speak and the theory comes to practice.

Through the process of elimination, it is at this point that only the substantial ideas are left standing. Those that are still functioning on paper and have not been refuted or proven false through the normal vetting process. If these ideas were the beginning of new products, services or innovations these would probably have begun their early stages of commercialization. The point being that the Learning aspects of the Knowledge & Learning module are where the innovative aspects of the oil and gas producer are learned. By that we are not turning the property into a science experiment, only considering what is known and what is unknown.

Once again we turn to Professor Richard Langlois for guidance. In his definition of “Dynamic Transaction Costs” he notes.

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firm's capabilities to the market or vice-verse. These "dynamic" governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably technological and organizational innovation. In effect, they are the costs of not having the capabilities you need when you need them. p. 99

As everyone with any experience knows learning is costly. These costs are well captured and identified in Langlois definition of Dynamic Transaction Costs. It is reasonable to assume that these and failure are the two primary costs of innovation. The alternative is that nothing is done and that is always an option. However, as has been suggested in People, Ideas & Objects research before, the commodity price change is a “technological paradigm” that is financing innovation.

What I intend that to mean, and what the research imputes that to mean is very simple. That to stand still is to lose. We see in many producers today the costs of production has increased as quickly, and in many cases quicker then the prices of the commodities. Profits in some companies are quite healthy however, as an industry we don’t see windfall profits being earned from price increases that are in the area of 500% over the past 8 years. I think the ability to innovate will not only permit the oil and gas producer to find more oil and gas, increase the production of oil and gas from a field, but will also provide innovative ways in which to deploy its capital and reduce its costs. These are the domain of the Joint Operating Committee and these are the areas in which it can learn to do things in a more innovative manner.

As we explore the Preliminary Specification of the Knowledge & Learning module we will see how innovation is supported at the Joint Operating Committee. 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.