The Preliminary Specification Part CIII (FM Part IX)

In yesterday’s post we asked the important question of what role will the capital markets play in the future of the oil and gas industry? More specifically, I want to ask what role will they play in funding innovation? Will they value the capabilities of the innovative producer and fund them as was suggested yesterday? Will the demand for capital be diminished as a result of the high commodity prices reallocating the financial resources towards an innovative producer? What role will banks fill in this costly science and engineering based environment? These are all difficult questions that have to be asked in funding the oil and gas producer. Since the 2008 financial meltdown there is definitely change in the air.

With the Financial Marketplace module of the Preliminary Specification the attempt to keep the producer within the financial market is the objective. As the answers to these questions are worked out in the market the producer will be able to participate and resolve the issues in their favor. The risks associated with taking too much time to resolve these issues will fall unfavorably on the producer.

Recently we discussed in the Petroleum Lease Marketplace module the factor that was developed in People, Ideas & Objects Preliminary Research report of Revenue Per Employee. I think it might be worthwhile to publish the producers Revenue Per Employee factor for the current and past periods, and include some of the future projections of where the producers factor is heading. This would provide the investors and bankers with an understanding of the innovative standing that the firm was expecting to maintain over the next few periods.

One of the attributes of Revenue Per Employee is that your history becomes a significant part of the calculation. If you have a poor factor then the performance of those fields will continue to affect your performance in the calculation from that point forward. Laggards remain laggards. To change requires significant and radical changes to the way the firm operates. Those firms that have a high factor are those that are able to truly state that they are innovative. And they have the benefit of that history in which they will be able to live off those high factors for the short and medium term. This factor can be a significant selling point, or alternatively, highlight the real stinkers.

The variance in the marketplace of the factor of Revenue Per Employee is truly remarkable. I haven’t run the calculations lately but to have a variance of five fold is not uncommon. When a producer has five times as much revenue per employee as its competitor then it reflects that something is fundamentally different in terms of what they are doing. As we stated in the Petroleum Lease Marketplace module, although not necessarily an overall reflection of innovativeness, the trajectory of the factor over a period of time is definitely a reflection of innovativeness, or not.

The Financial Marketplace should be a place where the factor of Revenue Per Employee should be highlighted and the trajectories promoted. I will leave it to the user community to determine where in the interface of the Financial Marketplace module to put it. I think the demand for capital in the global economy will continue to be substantial for the long term. In a capital intensive business those with the access to capital will have an advantage. And that advantage will go to those that can prove they are outperforming their competition on the basis of a more innovative footing.

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 CII (FM Part VIII)

We now begin our third pass through the Financial Marketplace module of the Preliminary Specification. As has been mentioned this third pass is focused on innovation and reviews Professor Giovanni Dosi’s 1988 paper “Sources, Procedures and Microeconomic Effects of Innovation”. It has been argued throughout the writings in this blog that commodity prices are reallocating the financial resources to fuel the innovative oil and gas producer. If that is so, then what role will the capital markets play in the future of the oil and gas industry?

Taking this thinking to its extreme then the most innovative firm would also be the most profitable. As the costs of capital would be lower then its competitions, and with their innovations being on a steeper trajectory, and therefore more effective, and would be at less cost then the competitions. 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 notes:

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.

What you are capable of achieving as an innovative oil and gas producer is possibly the most valuable asset that you have in the very near future. This capability is what you are investing in and how you expect to earn a return on your investment. Although much of your capability may be funded by the day to day of your operation, it represents a critical part of your firms investments. In answer to the question posed earlier, this investment in your capabilities is a future role for the capital markets to make investments in.

We noted that the producer firms engineering and earth science team was being highlighted in an interface on the Financial Marketplace module in the October 20, 2011 blog post. Is it time that the producer was able to financially leverage these capabilities in the capital markets? If innovation is the result of the team that is put together, then the ability to fund that team and earn a return on the basis of their performance might be something that should or could be considered in this new energy era.

To facilitate that possibility the interface in the Financial Marketplace module could have performance metrics that reflect the results of their efforts. These could be quantified over a certain period and verified by reserve reports prepared by independent engineers. The point of the exercise would be to increase the value of the producer firm based on the intangible value of its capabilities. In a world where ideas matter, the ability to quantify them and qualify them within a marketplace brings real value to the oil and gas producer and investor.

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 CI (PLM Part XVI)

In yesterday’s post we documented the “Strategy Interface” of the Petroleum Lease Marketplace module of the Preliminary Specification. This being a simple collaborative interface that documents the unique strategy of each and every Joint Operating Committee the producer has an interest in. This blog post will deal with the positive attributes of the Strategy Interface, and the difficulties that it will impose on the bureaucracies that are unwilling to consider the option of individual property strategies.

In oil and gas the business cycle is more dependent on the reserve life of new reserves. With rapid three-year declines, especially in gas, the question becomes: is this a product of the cumulative innovative-ness in exploiting the technologies that have developed? Or, is the use and application of oil and gas technology yet to be tested against a more exploration style mindset consistent with the risk - reward of the current market pricing of the commodities. Asked another way, would there be longer lasting, more prolific reserves in the frontier regions of oil and gas? Natural gas is experiencing a unique situation with the prolific nature of the shale gas discoveries. And oil continues to experience high global demand with nominal supply growth.

Either way it appears that the exploration and exploitation of oil and gas reserves has and always will be a function of the technology based on the underlying sciences. This is undeniable, and may also be the cause of the shorter-term life cycle and diminished size of new reserves, which is agreed by most to be a trend that will continue. This reserve size and deliver-ability is paralleled in Professor Giovanni Dosi’s discussion of how innovations in industrial companies have been diluted by demand prediction and lower production volumes. Generic corporate strategies are therefore an impediment to the value realization of these short reserve life indexes. Even an innovative posture is going to bring about different strategies in terms of timing of the investments. Professor Dosi notes;

Finally, empirical studies often show the coexistence, within the same industry and for identical environmental incentives, of widely different strategies related to innovation, pricing, R & D, investment and so on. Specifically with regard to innovation one notices a range of strategies concerning whether or not to undertake R & D; being an inventor or an early imitator, or “wait and see”; the amount of investment in R & D; the choice between “incremental; and risky projects, and so on (see Charles Carter and Bruce Williams 1957; Freeman 1982 and the bibliography cited therein). Call these differences behavioral diversity. p. 1157

Changing the innovative behavior of one producer carries a scope of change that is as broad and as diverse as is contemplated in the business world. Change at this scale in many instances can not be managed within the organization but needs to be managed through the forces of creative destruction in the greater economy. A time of dynamic change driven by the organizational changes focused around the innovative Joint Operating Committee. How can a firm that has been developed in an era of cost control transform themselves into an innovative, dynamic, earth science and engineering capability focused producer. In many cases the will to do so might exist, however, with the speed and unforgiving nature of the business cycle, not much time will be provided to those that attempt the transformation. We see in this world the capital markets reflecting many interesting phenomenon since 2008. To suggest any trend or definitive result from these would be premature. Its just a different world in terms of being an oil and gas CEO then it was before 2008.

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 C (PLM Part XV)

What People, Ideas & Objects is undertaking in developing the Preliminary Specification is the simple process of moving the compliance and governance frameworks of the innovative oil and gas producer into alignment with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. This blog post will deal with the strategic framework and how the Petroleum Lease Marketplaces “Strategy Interface” works to communicate the unique strategic direction of each of the Joint Operating Committees the producer has an interest in.

With the demands of the earth sciences and engineering necessary in each property. The ability for producers to apply generic corporate strategies to all of their properties is quickly expiring. The need to address each properties unique characteristics and accommodate those needs with the properties own unique strategy is a necessity. Each properties unique strategy will be a result of the collaborations among the participants in the Joint Operating Committee and will be subject to change from time to time.

Placing the Strategy Interface in the Petroleum Lease Marketplace is the logical location for this information. Along with the agreements, leases, AFE’s, and other partner related data that shares several things in common with the “Strategy Interface”. Those common threads are the collaborative nature of the development of the documents, and the access privileges that will be used to access the information. Each producer having read / write access to each property that they have an interest in. Where they can collaborate within the partnership as to the overall strategy and tactical direction of the property. Where individuals who are authorized to work within the property through the Security & Access Control module are able to read access the document to determine their actions are in line with the strategic intent of the property.

From the producers perspective they have a database of strategic documents that are unique to each property. They are able to determine quickly what the strategy is for any property and engage the specific people responsible for further information. Although each property is following its own unique strategy, the producer firm is not without its input and is able to quickly determine the details of the properties key strategic direction.

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 XCIX (PLM Part XIV)

Within the Petroleum Lease Marketplace of the Preliminary Specification we have established two new interfaces. The first is what we have called the "Revenue Per Employee" listing that details the various calculations of revenue per employee by producer within the industry. These calculations are broken down to provide variances based on the commodity prices, volumes and number of employees. Further calculations are conducted on each of the Joint Operating Committees that the producer firm participates in. These calculations are broken down by the variances noted above and are confidential to the producers who are participants in the Joint Operating Committee. Recall we are looking for the trajectory change in the variable over a period of time.

The second interface that has been developed in the Petroleum Lease Marketplace is what we should start calling the "Capabilities and Commitments Report". This was first discussed in the November 25, 2011 blog post. It details the capabilities that are provided by agreement in the various joint venture agreements the producer participates in. This report also details the commitments that the producer has undertaken to provide in terms of its capabilities under those same agreements. This report enables the producer to fully leverage their partners capabilities and focus on developing their capabilities while contractually meeting their requirements.

These reports add value to the producer and the Joint Operating Committees that use the information that are contained within them. They are unique and provide information that can be used in innovative ways. Of note I think that someone could be assigned the task of occasionally verifying the producer data on an industry wide basis. That way only one individual would need to verify the industry wide producer related information. However, there is more to the use of these reports when they are used in combination. And what we could provide is a hybrid report that sorts the information based on the Joint Operating Committee, having both the Revenue Per Employee calculation and the determination of the Capabilities & Commitments together.

In our review of Professor Dosi’s paper, he begins by summarizing that businesses commit to innovation stemming from “exogenous scientific factors and endogenously accumulated capabilities developed by their respective firms.” His general point is that “observed sectoral patterns of technical change are the result of the interplay between various sorts of market-inducements, on the one hand, and opportunity and appropriability combinations, on the other”. p. 1141

Recall that “appropriability” for the purposes of the producer include lead times and learning curves as more effective ways of protecting process innovations. Therefore appropriability and opportunity are clearly reflected in the Revenue Per Employee report. What the Capabilities and Commitments Report is reflecting are the “market-inducements”. The result of the “interplay” between these reports would be “patterns of technical change”. That might be a bit of leap for some to make on an industry wide level, and that I would agree, however, the devil would be in the details. On a Joint Operating Committee basis, which we have the data for, both the capabilities from the partners, the producer and the revenue per employee, the information would be valuable.

Any “pattern of technical change” would be triggered by the trajectory changes in Revenue Per Employee. Most probably by any trajectory change in the volume variance. Therefore what was the reason for the change and was it as a result of any change in the capabilities of a producer due to any “patterns of technical change” or “market-inducements”. Maybe I am being too analytical and reaching to extend the value of innovation within the enterprise.

Highlighting what is effective within your organization, from an innovation standpoint, will be a difficult and important task. These reports will be able to highlight any success or failure within the current month. I think that provides ample time for the producer to determine the viability of the operation of either their or their partners innovative capabilities. Making these reports critical to the innovative oil and gas producer.

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 XCVIII (PLM Part XIII)

Our third pass through the Preliminary Specification has an innovation focus. It would be difficult to review the Petroleum Lease Marketplace without discussing the enhanced emphasis that specialization and the division of labor need to take in this module. These next few posts will therefore deal specifically with those topics.

In a blog post dated October 16, 2011 we documented how the division of labor might affect the lease rental process. It was in there that we discussed the specialization of 20 individuals who were processing the lease rentals for all of the producers who might use People, Ideas & Objects (PI&O). These people were actively improving the process by identifying “gaps” where they could improve or enhance the process, and were supported by a PI&O software development team to amend the software to accommodate the changes they made to their processes.

The Petroleum Lease Marketplace is an area that is rich with processes like lease rentals. All of these processes would be subject to similar changes as those that are documented in the October 16, 2011 post. This module deals with the administrative details of the producer firm and the Joint Operating Committee. Both of which are undergoing significant changes as a result of innovation in other areas of the business. What has been a rather constant area in terms of its activity level may take on a more dynamic feel for the business. When the producer and Joint Operating Committee are actively innovating, Professor Giovanni Dosi notes that two separate phenomenon are observed.

• First, new technological paradigms have continuously brought forward new opportunities for product development and productivity increases. p. 1138
• Secondly “A rather uniform, characteristic of the observed technological trajectories is their wide scope for mechanization, specialization and division of labor within and among plants and industries.” p. 1138

This only makes sense. The dynamism of the Research & Capabilities process, documented elsewhere, must rely on the Petroleum Lease Marketplace for information and resources. The need for it to be responsive to the Research & Capabilities changing needs is a necessary requirement of the Research & Capabilities innovative-ness.

Looking to model the management of this process across all producers within all geographical regions would seem to be a difficult task. To capture this process within the People, Ideas & Objects software, an even more difficult task. However, Professor Dosi notes that there are other serious concerns that need to be taken into consideration.

The appearance of new paradigms is unevenly distributed across sectors and so are (a) the degrees of technical difficulties in advancing production efficiency and product performance, and (b) the technological competence to innovate, embodied in people and firms. pp. 1138 - 1139

Simply not everyone will be working off the same page when it comes to the types of innovation, the scale of their application and degree of complexity. In this next quotation it becomes clear that the process under management by the software is the means in which to be able to deal with these underlying paradigms and trajectories. Therefore, in order for the producers to begin the path of innovative-ness requires that we resolve these process design issues, and build the software before they are implementable.

These distributions of opportunities and competence, in turn are not random, but depend on (a) the nature of the sectoral production activities, (b) their technological distance from the “revolutionary core” where new paradigms are originated, and (c) the knowledge base that underpins innovation in any one sector. p. 1139

As the Preliminary Research Reports research question asked, can innovation be reduced to a quantifiable and replicable process, the answer was an unqualified yes. This last quotation is one of the reasons why. Having the process defined at the “revolutionary core” and at the “knowledge base that underpins innovation” are the requirements that we capture in the software. That does not mean that each and every producer will fully appreciate or understand the full scope or scale of what the system provides. Only those that are at the revolutionary core will be able to fully exploit its resources. That however, does not preclude the systems use by everyone within the industry.

People, Ideas & Objects believes that if we engineer a software application to deal with these issues, we can accelerate the performance of the producer and the industry. From a systems engineering point of view this has been beyond the scope of one software development team working with one producer. For any producer to undertake the required analysis, let alone development of the systems, is beyond the scope of what was possible or desirable. It is well beyond the scope of any software developer to undertake on their own, in a speculative manner, and therefore has been beyond the imaginations and possibilities of the industry. I would also argue that, in the past, automation of this business process would have generated limited value. Today we can define a more specific division of labor and specialization and therefore, provide a more profitable means of oil and gas operation.

To state this point differently, we can focus the resources of the industry on the comprehensive engineering of these processes. Allocating these costs over the entire energy producing base presents opportunities to undertake the detailed development of software that has not been attempted before. This is the approach that is necessary to deal with the issues associated with the producers meeting the market demands for energy. Management of these processes is the key to enabling the organizational performance, technological paradigms and trajectories that Professor Dosi notes in this 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.

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 XCVII (PLM Part XII)

In an October 21, 2011 post we made a point about the accounting for the joint account in the Partnership Accounting and Accounting Voucher modules that used data from the Petroleum Lease Marketplace module of the Preliminary Specification. In that blog post is the assumption that the data was centralized amongst the partners in the Petroleum Lease Marketplace. This centralized data is as a result of the proposed research that the user community will undertake for that module. This blog post will discuss the centralization of the information in the Petroleum Lease Marketplace and why that assumption was made.

When we discuss the centralization of the information, what I mean is that each of the producers that are party to a Joint Operating Committee are accessing the same central data elements. There are not separate individual data elements stored within each of the firms databases. If you review the data that is stored within the Petroleum Lease Marketplace it is of the type that is “owned” jointly by the participants in the JOC. Whether that be agreements, leases, AFE’s or other data, each participant is provided with their own access to these one off types of documents.

What benefits are achieved by centralizing the data? Simply everyone is working from the same page. There should be no more confusion as to what the document states if the documents have the appropriate change management controls placed upon them. These document control procedures exist, its only a matter of implementing them appropriately within the systems on an industry wide basis. Something that is proposed here in People, Ideas & Objects and should be part of the scope of the proposed research project.

The logistics of the systems management would become complex. The access privileges and the storage access would be unique. For example a producer would have unique access to a multiple number of data elements based on the number of Joint Operating Committees that they participate in. However, there is a maturation of the systems infrastructure that provides us with new opportunities to look at these issues from a business point of view first and ignore the technical issues. I would caution you that we are ignoring the technical issues, which is the point of the Preliminary Specification, we are only concerned with the business issues.

So in reference to the October 21, 2011 post the check and the balance between the systems was a simple mathematical calculation to verify the validity of the working interest calculations as they were known. Any variance would be material in that their understanding of the working interest distribution was somehow different then what was calculated. This might occur if there was a significant systems or user error during the month that was not captured in the regular checks, balance and routines throughout the producer or other working interest partners.

And that is the point of the October 21, 2011 post that is not well reflected in the text. With a highly integrated and collaborative ERP systems such as People, Ideas & Objects the simplest of mistakes can occur. What may seem to be a rather redundant check and balance can become a valuable tool in determining if the system is maintaining the appropriate balance. We will need to develop more of these checks and balances throughout the Preliminary Specification in order to ensure that the producers are accounting for their properties in the correct manner. What we are providing is a means for the innovative producers to develop their businesses, and as a result, that will require that we sharpen our pencils in terms of our accountings accuracy and timeliness.

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 XCVI (PLM Part XI)

Continuing on with our discussion from yesterday regarding the selection of potential partners for Joint Operating Committee’s. Today I want to discuss some of the key factors that enable innovation and how they need to be sought after and developed. And how the Petroleum Lease Marketplace of the Preliminary Specification can develop an interface that will help producers to understand their capabilities, with respect to what their partners in the Joint Operating Committee may be contributing.

Our discussion so far on the capabilities that the producer holds has documented a number of processes through the Research & Capabilities, Knowledge & Learning and Resource Marketplace modules. These are comprehensive processes that enable the producer to develop and maintain their unique and valuable competitive advantages in terms of their earth science and engineering capabilities. These capabilities should be actively marketed to other producers as a potential partner in terms of the value add that could be contributed to a potential Joint Operating Committee.

We are in a period where the “easy energy era” has passed and it is generally agreed that the complex energy era has begun. The demand for earth scientists and engineers is substantial and challenges the ability for each producer to build the capabilities they need to operate all of their properties. Therefore the need to pool their capabilities with their partners in the Joint Operating Committee is not a nice to have but a necessity. This pooling can take on an ad-hoc disorganized mashing of two or more producers or can be a deliberate construct as a result of the meeting of minds at the beginning of a joint venture. People, Ideas & Objects Petroleum Lease Marketplace assumes the latter is the preferred choice and is providing the tools to develop these joint capabilities.

In Professor Giovanni Dosi’s paper he notes the following factors involved in the development of innovation.

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.

We are assuming for the purposes of these writing that the key stimuli is the commodity prices which are reallocating the financial resources to fuel innovation. Throughout the Preliminary Specification we have focused on the capabilities of the producer. What the producer must now learn to do is to leverage the capabilities of their partners in their Joint Operating Committees.

Within the Petroleum Lease Marketplace there needs to be an interface that lists the areas where the capabilities of other producers are being leveraged. These listings need to be based on the agreed to and documented exchanges of capabilities that are part of the CO&O or other agreements that make up the Joint Operating Committee. This same report could detail the commitments that the producer firm has made in terms of its capabilities to the partners in future years. This "Capabilities & Commitments" interface would of course be organized based on 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.

The Preliminary Specification Part XCV (PLM Part X)

In yesterday’s post we talked briefly about revenue per employee and how the Petroleum Lease Marketplace module of the Preliminary Specification should have an interface for various calculations of that factor. In today’s post I want to talk about the Revenue Per Employee interface of the Petroleum Lease Marketplace and what should be included in that interface.

First we should ask ourselves does the calculation of revenue per employee provide a reasonable comparison of the innovativeness that exists in a producer? Or would this calculation reflect the quality of assets, the size of the firm or its actual innovativeness? That is the question that is hopefully being answered in this post.

Clearly the factor of revenue per employee would reflect many factors other then the innovativeness of the firm. However, would the comparison of revenue per employee over multiple periods be a determining factor of innovative-ness? I think it would. That the increase / decrease in the factor would be as a result of an increase or decrease in price and volume, with the volume being particularly affected by the changes and innovations that occurred over the period in the firm. The one other critical determining factor is the number of employees the firm employs. Unreported changes in the number of employees would skew the results significantly.

If the Revenue Per Employee interface in the Petroleum Lease Marketplace module calculated revenue per employee for the participants in Joint Operating Committees of the producer. And calculated the factor for prospective producers there could be value in determining whom would be a good prospective match as a partner in which to deal with in the future. The report could also calculate the trajectories on the basis of the volume, price and employee variances during the periods under comparisons by the user.

So what have we got. We have run some elaborate calculations that “might” prove that one producer is innovative. What does that prove. That depends on what is imputed by being innovative. Professor Dosi states “In very general terms, technological innovation involves or is the solution to problems.” Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and un-codified capabilities, or tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.”

Running this factor against the general population of producers within the industry provides value to the user. The ability to highlight who is solving the problems in the industry on an innovative basis and then partnering with them is positive for all concerned. However the real value in the Revenue Per Employee calculation would be the ability to run the report on the basis of the individual Joint Operating Committees that you are a participant in.

This is a more difficult task due to the calculation to determine the number of employees that worked on each property. That is it was a problem until the People, Ideas & Objects Military Command & Control Metaphor and Work Order system were implemented. These have been recording the hours of the people from all of the various producers who are authorized to work on the JOC’s. Therefore the calculations that were run on the basis of the producers, can then also be run against any and all of the Joint Operating Committees that you have an interest in. This would also include the calculation of the volume, price and employee variances of the trajectories over the periods being compared. Providing an understanding of where the innovation within your firm may be coming from.

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 XCIV (PLM Part IX)

We now move on to our third pass through the Petroleum Lease Marketplace module of the Preliminary Specification. The theme of this third pass is innovation, and how the Preliminary Specification enables the innovative producer and Joint Operating Committee. In today’s post I want to discuss the role the Petroleum Lease Marketplace module could have in forming the Joint Operating Committee, its agreements, the partnership itself and the factors that make for the innovative-ness of the partnership. Recall two of our four Preliminary Research Reports research questions were 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. Therefore the formation of the Joint Operating Committee within the Petroleum Lease Marketplace is a critical point in which to begin the process of innovation.

What would be ideal would be if there was a factor that could be used to evaluate if a partner was appropriate in terms of a match to your capabilities. In the Preliminary Research Report we developed just such a factor that details the overall capability of the firm. That factor is revenue per employee. If you calculate revenue per employee you will find rather dramatic differences in terms of the different factors for producers. Special consideration has to be given for the integrated firms to ensure that you preclude the downstream operations and the smaller producers as the factor unfairly reflects their capabilities. Given the disparity in the independents this factor I think is a valuable tool in determining the appropriate partner to select in a property.

After the selection of the partners the development of the agreements to include the innovative elements needed to operate the property. This would include the general assignment for the banking in the Financial Marketplace module, and the adoption of the Military Command & Control Metaphor for the management of the facility. Pooling of the capabilities for the targeted zones in the Knowledge & Learning module. These additions, and others, to the standard agreements would be necessary to adopt the innovative standing that is possible through the People, Ideas & Objects Preliminary Specification.

Professor Giovanni Dosi’s paper “The Sources, Procedures and Microeconomic Effects of Innovation” 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. Ensuring that your partners in the Joint Operating Committee are of the same mindset and capability is a critical component to your future innovation strategies. 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.

A meeting of the minds with regards to innovation needs to be established in the Petroleum Lease Marketplace module and captured in the agreements and associated modules. We will be discussing the revenue per employee factor in the Analytics & Statistics and Performance Evaluation modules in this third pass through the Preliminary Specification. Maybe what we need to do in the Petroleum Lease Marketplace module is find a place where we can compare the various producers revenue per employee factors to determine their appropriateness / suitability in terms of an innovative partner. A simple listing of the revenue per employee of your partners and potential partners on its own interface within the Petroleum Lease 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.