The Preliminary Specification Part CCVI (FM Part XXIII)

As we continue to document the capabilities of the various financial communities. And how these capabilities will be sourced from the marketplace by the producer firm and Joint Operating Committees. We see that technology is a large part of the organization. Particularly in People, Ideas & Objects Financial Marketplace module where the “Marketplace Interface” brings everything together. We continue today with our review of Professor Richard Langlois’ “Institution, Inertia and Changing Industrial Leadership.” And discuss whom it is that will find the “Marketplace Interface” the most valuable in their pursuit of oil and gas innovation.

If we look at the scope of the changes that are made as a result of Preliminary Specification they are substantial. The movement to the Joint Operating Committee has a remarkably significant impact on every aspect of an oil and gas concern. Added to that is the use of advanced technology and the innovative oil and gas producers operations are more in alignment with what an innovative oil and gas producers operations should be then ever before. Yet there is no support from the oil and gas companies. They remain trapped in concrete with their SAP installations. Living a bureaucratic life that is so far removed from the oil and gas business it is mind numbing. Adopting any change to People, Ideas & Objects is counter to the inertia that is built within the organization and something that will only happen through the forces of creative destruction.

And institutional change, we argue, can often take place through the more or less slow dying out of obsolete institutions in a population and their replacement by better-adapted institutions - rather than by the conscious adaptation of existing institutions in the face of change. p. 6

Therefore the people that will be attendant in the “Marketplace Interface” of the Financial Marketplace will be those that are able to accept the dynamics of industrial change and begin the process of renewal. Those looking for ways that are efficient and innovative in which to operate their oil and gas land and asset base, and deploy their earth science and engineering capabilities.

Another aspect of capabilities that has recently received a great deal of attention is organizational culture. In practice, not all organizations may be equally able to cope with change, as existing patterns of behavior involving both executives and subordinates may be resistant to change. Organizations develop collective habits or ways of thinking that can be altered only gradually. To the extent that a given culture is either flexible or consistent with a proposed change in product or process technology, the transition to the new regime will be relatively easy. If, however, the culture is incompatible with the needs posed by the change and is inflexible, the viability of the change will be threatened (Robertson, 1990; Langlois 1991; Camerer and Vepsalainen, 1988). p. 9

Can anyone portray a vision of how the existing bureaucracy will survive and prosper in the coming decade? Have these bureaucracies taken any steps to deal with these issues? What is the future of the oil and gas industry? Many questions that can be answered by selecting and supporting the People, Ideas & Objects software development capability and Preliminary Specification.

Teece... fails to note that the inflexibility, or inertia, induced by routines and the capabilities that they generate can raise to prohibitive levels the cost of adopting a new technology or entering new fields. Such inertia can develop to the extent that existing rules are both hard to discard and inconsistent with types of change that might otherwise be profitable. p. 10

I may yet be surprised that one or two of these behemoths might be able to break these chains of their own mindset. However, I’m not holding my breath.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCV (FM Part XXII)

In today’s post we continue with our discussion of the “Gap-Filling Interface” in the Financial Marketplace module of the Preliminary Specification. And how a software development capability like that which is proposed by People, Ideas & Objects is necessary to support the changes that are instituted by the gap-filling process. But before we get to that I found these quotes from Professor Richard Langlois in his paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.” They detail exactly what the gap-filling process is.

As Harvey Leibenstein long ago pointed out, economic growth is always a process of “gap-filling,” that is, of supplying the missing links in the evolving chain of complementary inputs to production. Especially in a developed and well functioning economy, one with what I like to call market-supporting institutions (Langlois 2003), such gap-filling can often proceed in important part through the “spontaneous” action of more-or-less anonymous markets. In other times and places, notably in less-developed economies or in sectors of developed economies undergoing systemic change, gap-filling requires other forms of organization — more internalized and centrally coordinated forms. p. 6

and

Let’s take a closer look at the nature of the “gaps” involved. Adam Smith tells us in the first sentence of The Wealth of Nations that what accounts for “the greatest improvement in the productive power of labour” is the continual subdivision of that labor (Smith 1976, I.i.1). Growth in the extent of the market makes it economical to specialize labor to tasks and tools, which increases productivity – and productivity is the real wealth of nations. As the benefits of the resulting increases in per capita output find their way into the pockets of consumers, the extent of the market expands further, leading to additional division of labor – and so on in a self-reinforcing process of organizational change and learning (Richardson 1975; Young 1928). p. 7

As gaps are discovered they are published in the “Gap-Filling Interface” of the People, Ideas & Objects Preliminary Specification. There they can be seen by the banks and investment houses that are providing the products and services to the producer firms and Joint Operating Committees. And in turn, develop a product or service to fill that gap in a manner that meets the need that was identified. The reverse is also the case, that the banks and investment houses may initiate the discovery of a gap and have the producer or JOC fill the gap. In either of these scenarios the division of labor and specialization doesn’t consider the fact that the 21st century organization requires software to identify and support the roles and responsibilities within it. If we are to have “gaps” filled, its not just a matter of having someone fill in the new position. It also requires that a dedicated software development team be available to prepare the software for the role to be productive and functioning within the greater system. This is the role that People, Ideas & Objects is proposing in the Preliminary Specification. It is not a destination in terms of what the specification will be, but more a journey where the end result is a continuously improving system driven by its users needs.

The other aspect of this software development capability is that this is prospectively an innovative oil and gas industry. Currently, management operate on the basis of what is considered the acceptable norm in terms of operations. They will need to break this mindset and become the innovative producers we all know deep down they want the industry to be. Either that or the forces of creative destruction will be set upon them. Either way the need for a dedicated software development capability will be necessary. Professor Langlois notes the following.

The second hypothesis, which has resonances at least as far back as Gerschenkron’s famous “backwardness” thesis (Gerschenkron 1962), is that the way an economy responds to the problems of coordinating economic development depends not only on its own institutions and capabilities but also on institutions and capabilities elsewhere. It depends not only on an economy’s own history but on the history of other economies as well. The force of this observation is that an economy at the frontier of economic development (however we care to define that) is likely to respond to the coordination problem differently than an economy lagging behind that frontier. Specifically, an economy at the frontier is arguably more likely to rely on decentralized modes of coordination. This is so because uncertainty is greater at the frontier — uncertainty about technology, organizational form, market direction. p. 18

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCIV (FM Part XXI)

Based on yesterday’s post we have begun to account for and capture the costs of change, or “Dynamic Transaction Costs” in the Financial Marketplace module of the Preliminary Specification. Today and tomorrow we are going to discuss the manner in which the changes from the firm to the marketplace will occur and the importance of having a software development capability like that provided by People, Ideas & Objects. We will also be discussing some of the interfaces that were previously introduced in the Resource Marketplace module that will be needed here in the Financial Marketplace module. The quotations for this blog post are from Professor Richard Langlois’ “The Vanishing Hand: the Changing Dynamics of Industrial Capitalism.” We begin by noting that although the marketplace for banking and investment dealers is well established, the coordination capabilities within the producer firms and the “Marketplace Interface” of the People, Ideas & Objects Financial Marketplace module are not available.

The basic argument - the vanishing hand hypothesis - is as follows. Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets, much as Allyn Young (1928) claimed long ago. But the components of that process - technology, organization, and institutions - change at different rates. p. 3

Part of the process of developing the Preliminary Specification will be to identify the various standards that affect the markets and firms within the industry. These standards are part of the market-supporting institutions. It may be through this process that it is determined that the market supporting institutions are inadequate for the producers and Joint Operating Committees needs. And it will be the responsibility of the user communities that are part of the People, Ideas & Objects software development to identify those standards that are needed to ensure these markets are established and operating appropriately. It will also be necessary to ensure that this is a continuous process in which the evaluation of the market-supporting institutions are undertaken frequently to ensure that the producers and JOC’s needs are continually met.

As in Chandler, secular changes in relative prices attendant on "globalization" (driven by technology or politics) affect economic organization not only directly but also, and perhaps more importantly, indirectly through changes in technology. Production costs matter as much as transaction costs (Langlois and Foss 1999) Moreover, the kind of transaction costs that matter in history are often not those of the Williamson kind but those I have labeled dynamic transaction costs (Langlois 1992b). Costs of coordinating through markets may be high simply because existing markets - or more correctly, existing market-supporting institutions - are inadequate to the needs of new technology and of new profit opportunities. But when markets are given time and a larger extent, they tend to "catch up," and it starts to pay to delegate more and more activities rather than to direct them administratively within a corporate structure. p. 5

To provide for these market-supporting institutions and to bring in new services if they are needed, I want to reintroduce the “Gap-Filling Interface” that has been introduced elsewhere within the Preliminary Specification. The further specialization and division of labor is achieved through the process of filling gaps. Jobs that were not done before are filled by new tasks and people who then expand the division of labor. This is the simple process of how it is done. The “Gap-Filling Interface” allows the producer firm or Joint Operating Committee who sees a Gap within the service industry offering, publishes their finding within the “Gap-Filling Interface” for those product or service providers to configure their organization to provide. The key is that with the time and distance that exists within the oil and gas industry, the demand for a service and its supply might never know of the others existence. With the “Gap-Filling Interface” there is a reduction in the time and space by using the Information Technologies that are available today. The “Gap-Filling Interface” can also be used from the other perspective of the service provider configuring a product or service that fills a gap, then publishing that to the producers and JOC’s.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCIII (FM Part XX)

In today’s post we want to discuss “Dynamic Transaction Costs” in the Financial Marketplace module of the Preliminary Specification. These are the costs that are incurred when we establish a “Marketplace Interface” like that which we discussed in the past few posts. Dynamic Transaction Costs are incurred when capabilities are moved from either the firm to the market or vice-verse. But first in a paper entitled “Transaction Cost Economics in Real Time” Professor Richard Langlois provides us with this definition of capabilities.

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge” and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." For the most part, Richardson argues, firms will tend to specialize in activities requiring similar capabilities, that is, "in activities for which their capabilities offer some comparative advantage" (Richardson 1972, p. 888). p. 27

We have also added ideas to the definition of capabilities. The financial marketplace, that is the banking and investment communities, capabilities are currently accessed by the oil and gas industry through the marketplace. Therefore the changes and the Dynamic Transaction Costs will be as a result of adapting to the “Marketplace Interface” of the Financial Marketplace module, and will be minimal. This is particularly in comparison to the Dynamic Transaction Costs that will be incurred in the Petroleum Lease Marketplace module. Where the marketplace currently doesn't exist and the capabilities are held within the producer firms. What Professor Langlois describes as Dynamic Transaction Costs is as follows.

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

What we therefore need is to record these costs for the producer firm and Joint Operating Committees. To have an account that clearly defines the Dynamic Transaction Costs, whatever they may be, within the chart of account of the firm or JOC. This would help to identify and control the costs. This would also be the case for the Resource and Petroleum Lease Marketplace modules. Although some of the producers costs for “change, notably technological and organizational innovation.” would be associated with the fees that are paid to People, Ideas & Objects. There are other out of pocket expenses that the firms are incurring to make the changes to the “Marketplace Interfaces” and it is these costs that need to be captured in the accounts.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCII (FM Part XIX)

In today’s post we want to discuss the elements of modularity and apply them to the Financial Marketplace module of the Preliminary Specification. We also want to expand further on the videos that were introduced yesterday and describe how the “Marketplace Interface” would be built within the Open Wonderland interface.

What we have described so far in the Financial Marketplace is a comprehensive area where the banking and investment communities conduct all of their business with the producer firms and Joint Operating Committees. This would involve not only the day to day payment of bills but also the closing of a major financing. We have also discussed this would enable the alignment of the seven frameworks of the Joint Operating Committee, which includes the financial framework, with the compliance and governance of the firm. The “Marketplace Interface” being a place where people would go to have their financial “things” taken care of. From Professor Richard Langlois’ “Modularity in Technology, Organization and Society”.

What is new is the application of the idea of modularity not only to technological design but also to organizational design. Sanchez and Mahoney (1996) go so far as to assert that modularity in the design of products leads to - or at least ought to lead to modularity in the design of the organizations that produce such products. p. 1

and

Why are some (modular) social units governed by the architecture of the organization and some governed by the larger architecture of the market? p. 2

What we have learned from Professor Langlois is that modularity depends on interdependency and standards. If we include compliance and governance within the standards definition, then the Financial Marketplace, with banking and investment capital standards, are ripe with standards. Interdependency reduces the focus of the user to just banking. If the user wants to find a P&NG Lease then they go to the Petroleum Lease Marketplace, the Financial Marketplace has nothing for them. Interdependency reduces the interactions between the elements within the modules to simplify the systems within each module. If everything was contained within one module the interdependency would be so high that the system would not function as effectively.

"In organizational and social systems - and perhaps even in mechanical ones as well - it is possible to think of interdependency and interaction among the parts as a matter of information transmission or communication." p. 5

Lastly Professor Langlois provides us with a clear understanding of what is required within a modular system design. These are some of the guiding principles that I am using to write the Preliminary Specification.

• An architecture specifies what modules will be part of the system and what their function will be.
• Interfaces describe in detail how the modules will interact, including how they fit together and communicate.
• And standards test a modules conformity to design rules and measure the modules performance relative to other modules.

I now want to take the opportunity to discuss the videos that were presented in yesterday’s post. Specifically the one which is re-posted below. It has the commentator highlighting the different buildings that he has built, and the terrain that he has set out in his virtual world. Here is how the “Marketplace Interface” will start out. Banks or investment houses will set up a building and their people will be able to set up demonstrations and marketing presentations to those who may be just walking around to the various buildings within the “Marketplace Interface”. When they see something of interest they will be able to engage one of the bank or investment house representatives and begin a discussion of how they could help their producer firm or Joint Operating Committee. Once the relationship has begun the producer / JOC could return and have their needs met virtually by the firm represented in the “Marketplace Interface”.

The advantage of this is obvious to me, however, it may not be obvious to everyone. This is not technology for technology sake. This is a marketplace for business purposes. A completely different situation to the current social media experiments which appear to have no business purposes behind the interactions. Within the “Marketplace Interface”, which is full of interactions the People, Ideas & Objects ERP systems are available for use by the parties within the virtual world. If they conduct a transaction then it can be handled virtually. If they close a deal that can be handled virtually within the “Marketplace Interface”. The transaction management is what makes this video transform from a useless technological experiment to a potential for so much more.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCI (FM Part XVIII)

I think we have firmly established that by placing a virtual interface, the “Marketplace Interface” over the financial marketplace we would be able to provide the capabilities of that market to the innovative oil and gas producer and Joint Operating Committees. Having this marketplace would provide access to the skills, knowledge, experience and ideas of the banking and investment communities in an environment that is administratively more efficient, effective and timely. This is a critical aspect of the innovative oil and gas producer and therefore a critical aspect of the Financial Marketplace module of the Preliminary Specification.

The oil and gas industry is a capital intensive industry. The access to capital is a necessary and primary ingredient to any producers success. Without the needed access to capital, unfortunately, its just ideas. Unfortunately as well there are skills that are needed to access the capital markets that are not evenly distributed. These “access” privileges are hold outs of the last century. In the future the strength of the ideas and the potential of the deals will be what drive the frothing at the mouth of investment dealers. Therefore creating marketplaces where access is open to all parties is how things will get done.

By accessing the banking and investment community through the “Marketplace Interface” the innovative oil and gas producer and Joint Operating Committees acquire the financing and banking capabilities that they need. Allowing them to focus on their key competitive advantages of their land and asset base, and earth science and engineering capabilities. To do otherwise is foolish. The scope of what is called for to succeed within their domain of competitive advantages is broad enough. To expand it unnecessarily into other areas is incomprehensible in today’s business environment.

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of co-operating individuals. p. 17

And that would include areas that are part of the Resource Marketplace module. No producer would own their own drilling rigs as part of their competitive advantage, yet some Canadian producers like Encana Corp. think that is the key to their competitiveness.

Industrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organization structures - what Langlois and Robertson (1995) call "business institutions. But few have thought about the choice of business institution as a competitive weapon. p. 1

The “Marketplace Interface” in the Financial Marketplace module of the Preliminary Specification provides a window for the producer and Joint Operating Committee on the banking investment communities. A virtual world where the interactions and transactions are unlimited and undefined. Watching this video from Open Wonderland will provide you with an understanding of how the interface would operate. Note how random most of the interactions seem to be. If those random interactions are with like minded investment dealers, wouldn’t that be a good thing?

and

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CC (FM Part XVII)

When we talk about the capabilities that the producer firm or Joint Operating Committee acquire through the “Marketplace Interface” of the Financial Marketplace module of the Preliminary Specification. It is the full scope of the financial capabilities and money management that the banking and investment dealers provide. These are acquired through the simple process of paying a fee when necessary. These markets are “thick” and there are many standards that support them, the costs in terms of executing the transactions are negligible, or in other words, ideal for the “Marketplace Interface”.

When we think in terms of the boundaries of the firm and the markets, there is not much ambiguity as to which lays in which domain. Banking is banking and oil & gas is oil & gas. Would any producer attempt to provide the services of a bank as a value added process for its shareholders today? Why would it assume that it would be able to provide a better lease administration process then one that can be done on an industry wide basis as in the “Marketplace Interface” of the Petroleum Lease Marketplace?

Just as in the Petroleum Lease Marketplace in which the marketplace infrastructure, or standards and other market supporting institutions are already in existence. The marketplace in the Petroleum Lease Marketplace needs to be created, whereas here in the Financial Marketplace it already exists and in essence only needs the virtual interface, the “Marketplace Interface”, built to emulate the marketplace. In the Petroleum Lease Marketplace the entrepreneur’s need to establish the service offerings and provide the services to the producers and Joint Operating Committees, whereas in the Financial Marketplace that infrastructure, the banks and investment houses, already exists.

Acquiring the capabilities of a bank or a lease administrator through the marketplace is a choice that the 21st century oil and gas producers need to make. The People, Ideas & Objects Preliminary Specification have assumed that these processes are best left to the markets to provide for the producers and Joint Operating Committees. The producer and Joint Operating Committee are best left to focus on their land and asset base, and earth science and engineering capabilities as key competitive advantages and the majority of the processes that support those tasks can be provided by robust marketplaces.

This manner of operations is consistent with the means of how innovative organizations are able to operate in other industries. It is also wholly inconsistent with the current management thinking of the oil and gas industry today. Theirs is an attitude that will maintain command and control of all aspects of the oil and gas producer firm to ensure that “management” maintains its “power” for a while longer. If not for the Internet these ideas from People, Ideas & Objects would not be communicated to like minded individuals, and management would remain unchallenged in their position. There are distinct advantages to relying on the marketplace for the administration of these administrative processes. We will be discussing those advantages here, and how the Preliminary Specification provides those advantages, in the next few days.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCIX (FM Part XVI)

We continue our discussion of the “Marketplace Interface” of the Financial Marketplace module of the Preliminary Specification. In yesterday’s post we noted how the banking and investment dealers were providing their services to the oil and gas producers and Joint Operating Committees through what Professor Richard Langlois would call Transaction Cost Economics. The services were provided at a fixed service cost that was passed to the producer / JOC as a transaction on the completion of the service. The division of labor and specialization of the service was the responsibility of the bank or investment dealer and they were free to organize themselves in any fashion based on a competitive pricing of their services. Today we want to explore the “Marketplace Interface” a little further and how the transaction costs will impact the way in which the marketplace will operate for the producers and JOC’s.

The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. ...The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more that is reflected in the price movement. (Hayek 1945, pp. 526 - 527)

With producers maintaining relationships with possibly each and every bank. This as a result of banks financing all of the Joint Operating Committees partners in a property. And possibly the same situation occurring with multiple investment dealers. The need for the marketplace to deal with the logistical aspects of the finances with each bank and investment house will be necessary. There is however not much of an issue with respect to this manner of handling the finances. The majority if not all of the payments and receipts of the banking can and should be managed in the People, Ideas & Objects Preliminary Specification electronically. The need to print checks or to make physical deposits is something that occurred last century. Another thing that happened last century was the need to manage the cash in this various accounts. The Financial Marketplace module will provide an “Advanced Cash Management Interface” to enable the appropriate cash management is applied to the producers cash resources.

One of the other aspects of this marketplace is the topic of discussion and type of transaction that can be undertaken in the marketplace. With so much activity in the oil and gas producers domain. This as a result of the volume of work needed for each barrel of oil equivalent produced and the demands on every one's time. The amount of travel may be limited in the future and the reliance on the “Marketplace Interfaces” of the Preliminary Specification as a replacement for some of the face to face time that is done now is a possibility. If a transaction can be done as efficiently virtually, and might I suggest a closing, then the “Marketplace Interface” would be worthwhile building just for that purpose. Let alone for the day-to-day transactions of paying bills and depositing money.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCVIII (FM Part XV)

In yesterday’s post we invoked the much maligned user vision in the Financial Marketplace’s “Marketplace Interface” of the Preliminary Specification. We want to continue on with the discussion of the scenarios that were being played out in the discussion and specifically what the division of labor and specialization were having in the makeup of the financial marketplace. It would seem that the majority of the costs of transacting within the banking and investment community are fixed. That is there is little a producer can do to offset the costs associated with these services. And they are usually priced as a percentage of the transaction for loans and investments, or service fees based on banking practices that are global in terms of their competitive offering. Therefore the need to leverage these services should be the key to optimizing the value of these services.

Before we go any further we should note that the People, Ideas & Objects Preliminary Specification aligns the seven frameworks of the Joint Operating Committee with the compliance and governance frameworks of the producer firm. This alignment includes the financial framework as we have discussed in this the Financial Marketplaces Preliminary Specification. Having the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks aligned permits the speed, accountability and innovativeness that we are seeking in the oil and gas industry. Therefore the probability that a Joint Operating Committee will be using the Financial Marketplaces “Marketplace Interface” is a certainty.

Offsetting as much of the logistical and transaction related costs associated with the banking and investment management to the banks and investment managers will enable this marketplace to operate more efficiently. Imputing that the division of labor and specialization will fall within the domain of the bankers and investment managers, and the fee for their services will be one charge for that service. From a paper by Harvard Professor Carliss Baldwin.

The user and Producer need to deploy knowledgeable in their own domains, but each needs only a little knowledge about the other's. If labor is divided between two domains and most task-relevant information hidden with each one, then only a few, relatively simple transfers of material, energy and information need to pass between the domains. p. 17

and

Placing a transaction - a shared definition, a means of counting, and a means of payment - at the completed transfer point allows the decentralized magic of the price system to go to work. p.22

By leveraging the marketplace in this manner helps to mitigate the increased logistical load on a producer as a result of the many Joint Operating Committees undertaking their own banking and investment management needs. This leveraging, and the aid of Information Technology, make this a minor irritant when compared to the benefits achieved when the financial framework is aligned with the other six frameworks of the Joint Operating Committee and the governance and compliance frameworks are also aligned. (Speed, Accountability and Innovativeness vs. a minor logistical irritant.)

The most significant fact about this system, is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on... Frederick Hayek (1945)

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCVII (FM Part XIV)

Within the Financial Marketplace module of the Preliminary Specification we are providing the innovative oil and gas producer with the capability to finance their operation at the speed of their innovativeness. Therefore it is necessary to accelerate the pace and speed of the financial community in terms of their capabilities in understanding the producers business.

The first thing we want to do in this the fourth or capabilities pass of the Financial Marketplace is to start the “Marketplace Interface” for this module. Just as in the Petroleum Lease Marketplace module, the Financial Marketplace will use the user vision to create a virtual instance of the financial marketplace that exists. This will be of the banking and investment communities that we have discussed earlier in this module. Creating an environment where the marketplaces capabilities in terms of banking and investment dealing are made available to the producers through a “Marketplace Interface”.

Within the “Marketplace Interface” producers will be able to engage banks to conduct the banking that they do today. The interface will provide the medium of communication and transaction support that is currently available in two separate medium. With the user vision focused on your bank and their representatives, all of your banking documents that you have with the bank are available to you in the tiles that populate your screen. The items that are outstanding or at issue with the bank are also populated in other tiles and are a simple click away from your full attention. You are able to resolve the outstanding issues and transactions with the bank and move your focus on to the next group.

While still at your desk, the next area of your focus is the investment group that you have been working with on a financing in your firm. They have been undertaking a review of your firm and have some detailed questions of you and your representatives to answer. Those representatives are available and are brought into the virtual meeting and are recorded for the archives. It would seem that the investment group want to take your firms offering on speculation and would appreciate it if you would increase it by 30%. Such is the way for innovative producers.

The point of the “Marketplace Interface” is to provide a virtual environment that accelerates the pace of the producers financial capabilities. If the producer and Joint Operating Committee are to pursue the oil and gas marketplace in the future then the pace of their operations will most certainly have to accelerate. The demands for more energy will be insatiable. The prices realized by the producers will reflect this demand and those prices are rewarding enhanced innovation. It is therefore necessary to ensure that the producer has the capabilities within the financial communities to finance this level of activity. We will be discussing these capabilities further in this the fourth pass through the Financial Marketplace of the Preliminary Specification.

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

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCVI (PLM Part XXXI)

This will be the last post of our fourth or capabilities pass through the Petroleum Lease Marketplace module of the Preliminary Specification. Tomorrow we will begin with our fourth pass through the Financial Marketplace module. I think that what we have learned about capabilities is valuable and applies to the “Marketplace Interface” that we detailed during this fourth pass. That “knowledge, skills and experience” are the basic ingredients of capabilities and these fit in well with the Petroleum Lease Marketplace module. If we at People, Ideas & Objects could be so bold as to assert that we include “ideas” with knowledge, skills and experience then we are starting to really build on these concepts.

The other aspect of what we have discussed is the role the oil and gas industry has in making the market supporting infrastructure. This includes standards and as we have discussed, software like People, Ideas & Objects to support the markets and the marketplace. The choice between the marketplace and the management as to who will control the industry in the future has already been made. The Internet demands the decentralized methods of the market will rule the day. Just don’t tell the current management as they fight to hang on to their last few moments of control.

When a modular product is imbedded in a decentralized production network, benefits also appear on the supply side (Langlois and Robertson 1992). For one thing, a modular system opens the technology up to a much wider set of capabilities. Rather than being limited to the internal capabilities of even the most capable Chandlerian corporation, a modular system can benefit from the external capabilities of the entire economy. External capabilities are an important aspect of the “extent of the market,” which encompasses not only the number of possible traders but also the cumulative skill, experience, and technology available to participants in the market. Moreover, because it can generate economies of substitution (Garud and Kumaraswamy 1995) or external economies of scope (Langlois and Robertson 1995), a modular system is not limited by the weakest link in the chain of corporate capabilities but can avail itself of the best modules the wider market has to offer. Moreover, an open modular system can spur innovation, since, in allowing many more entry points for new ideas, it can create what Nelson and Winter (1977) call rapid trial-and-error learning. From the perspective of the present argument, however, the crucial supply side benefit of a modular production network is that it provides an additional mechanism of buffering. p. 70

To summarize the interfaces in the Petroleum Lease Marketplace to this point:

Capabilities & Commitments Interface

A summary of the capabilities that are “acquired through” and “committed to” the various Joint Operating Committees your firm is party to.

Long Term Capital Program Interface

Summarizes in geographical and account form the projected capital expenditures of the firm. Data is sourced from reserve reports, stripped of any proprietary information, is aggregated with other producers information and published to suppliers and vendors.

Revenue Per Employee Interface

Calculates Revenue Per Employee for each producer in the industry. Variances and trajectories for volume, price and number of employees, public data. Calculations for Revenue Per Employee for each Joint Operating Committee that your firm participates in. Variances and trajectories for volume, price and number of employees, private data.

Strategy Interface

Collaborative interface to discuss with partners what the strategy for each Joint Operating Committee will be. Overall interface which summarizes what each unique Joint Operating Committee’s strategy is.

Marginal Production Threshold Interface

An interface that enables the producer to collaborate with other members of the Joint Operating Committee and establish thresholds where prices or other criteria would trigger action to reduce production. Once criteria are established, then the interface could be used in as automated a fashion as desired to reduce production.

Marketplace Interface

A virtual environment that represents the Petroleum Lease Marketplace. An environment where the producer or Joint Operating Committee can buy, sell, bid, post, acquire, participate, trade, in lands, leases and oil and gas properties. An environment that is supported by the administrative and transaction capable lease administration necessary to support the marketplace.

What has been done already has the sharp-edged reality of all things which we have seen and experienced; the new is only the figment of our imagination. Carrying out a new plan and acting according to a customary one are things as different as making a road and walking along it. p. 27

and

There has to be a mechanism by which new knowledge enters the system. And that mechanism cannot be rational calculation, for as David Hume (1978, p. 164) long ago observed, “no kind of reasoning can give rise to a new idea.” p. 27

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 CXCV (PLM Part XXX)

The key deliverable that would be the outcome of the development of the Petroleum Lease Marketplace of the Preliminary Specification. Would be the removal of management control by the current bureaucracy and replace it with the “vanishing hand” of the marketplace. The representation of the marketplace would of course be through the “Marketplace Interface” that we have been discussing here. In this quotation, taken from Professor Richard Langlois’ book “The Dynamics of Industrial Capitalism” he reflects on this point.

In highly developed economies, moreover, a wide variety of capabilities is already available for purchase on ordinary markets, in the form of either contract inputs or finished products. When markets are thick and market-supporting institutions plentiful, even systemic change may proceed in large measure through market coordination. At the same time, it may also come to pass that the existing network of capabilities that must be creatively destroyed (at least in part) by entrepreneurial change is not in the hands of decentralized input suppliers but is in fact concentrated in existing large firms. The unavoidable flip-side of seeing firms as possessed of capabilities, and therefore as accretions of habits and routines, is that such firms are quite as susceptible to institutional inertia as is a system of decentralized economic capabilities. Economic change has in many circumstances come from small innovative firms relying on their own capabilities and those available in the market rather than from existing firms with ill-adapted internal capabilities. Chapter 5 will reconstruct the New Economy of the late 20th and early 21st centuries along exactly these lines, once again adding nuance and historical texture. If the antebellum period reflected the Invisible Hand of market coordination, and if the late 19th and early 20th centuries saw the rise of the Visible Hand of managerial coordination, then the New Economy is the era of the Vanishing Hand. p . 14

One could certainly accuse me of being anti-management. They and I have had an interesting battle since the discovery of using the Joint Operating Committee was the key to administrative efficiency in the innovative oil and gas producer. Our other key discovery, that software defines and supports the organization, and therefore to change the organization requires that we change the software first. Management have distorted this knowledge by realizing, if they never changed the software, their domain would never be challenged. Using this knowledge to seal their future. But we know many things from our review of Langlois, Coase and Chandler; specifically.

• Management have no stake in the firm. 
• If a crisis were to strike a firm, the management would resume elsewhere. 
• It is the investor and debt holders who will shoulder the costs.
• Management currently hold the reigns, and are mindful that their options may lay elsewhere. 
• Ownership, in the same fashion as the Merchants needs to start over. 
• Starting over begins with supporting People, Ideas & Objects and the Community of Independent Service Providers.
• Chandler noted that management have failed before. 
• During the great depression. 
• A time when government had to increase its involvement in the economy.
• Management may not see the more global picture, and therefore, may fail again.

The knowledge that management have in not changing the software is an extension of their monopoly on the tacit knowledge of how to get things done. They know that the tacit knowledge can be held by bureaucracies or markets and have ensured that no tacit knowledge capable markets gain a foothold to challenge their franchise. Making the entire People, Ideas & Objects idea an exercise in futility, or a call to action for the ownership class of the oil and gas industry.

Much knowledge - including, importantly, much knowledge about production - is tacit and can be acquired only through a time-consuming process of learning by doing. Moreover, knowledge about production is often essentially distributed knowledge: that is to say, knowledge that is only mobilized in the context of carrying our a multi-person productive task, that is not possessed by any single agent, and that normally requires some sort of qualitative coordination - for example, through direction and command - for its efficient use. p. 359

The assertion that vendors and suppliers are greedy and lazy is as much self serving and designed to ensure that the market doesn’t develop and compete with management. What is needed is the market supporting efforts of an innovative oil and gas industry that depends on a dynamic and effective “Marketplace Interface” in the Petroleum Lease Marketplace.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCIV (PLM Part XXIX)

The past number of posts have focused on the deliberate nature of developing the “Marketplace Interface” of the Petroleum Lease Marketplace of the Preliminary Specification. During the 1960's systems capabilities were limited and their applications were quite crude. Organizational developments were therefore constrained by the limitations in Information Technologies. The focus of systems development was the firm itself, and that focus was driven primarily by the compliance and governance requirements of firms (Accounting, Tax, Royalty, SEC etc). During this time, in oil and gas, the Joint Operating Committee was secondary to the demands of the compliance and governance frameworks of the firm. This systems thinking grew over a period of time in which it included several generations of people. Through this process the administration of oil and gas became more oriented to the compliance and governance frameworks and conversely more withdrawn from the seven frameworks of the JOC.

It is my opinion that the Preliminary Specification is not revolutionary in it's move to the Joint Operating Committee, but evolutionary. Particularly from the point of view that we are moving towards the common-sense form of organization of the industry. Leaving this 1960’s “systems thinking” that is prevalent in today systems behind. This is what is necessary for the innovative producer to attain the speed of operations to compete in the 21st century oil and gas industry.

We also must contend with the concepts that originated in the minds of the software developers of SAP and Oracle which certainly were different then what have been stated in the Preliminary Specification. I believe that whatever their vision may have been, for oil and gas it is misguided as it does not recognize the unique nature of the business, the Joint Operating Committee. The unique nature of the industry had developed solutions to the problems and manner of operation. Those solutions consist of the JOC and the dependence on the market to provide for its needs. I can't think of an industry that comes close to the culture of the energy business.

Today the technologies involved in the Internet provide the industry with the opportunity to realize the fashion that it operates is unique, and deal with those anomalies in the best Interests of the industry. A dedicated software developer to build the systems that mirror the manner of the industries operations, will enable greater innovation by relying on the marketplace and allowing the innovation to flow from where-ever and whomever. This will not happen by chance. It is a deliberate act. And today that demands a software development capability and vision like that offered by People, Ideas & Objects and the Preliminary Specification.

Here again, I think the problem is one of conceptual imprecision. It is perfectly common, and often unobjectionable, to contrast a market and an organization, that is, to contrast the institution called a market and the institution called an organization (such as, notably, a firm). But the opposite of “organization” in the abstract sense is not “market” but disorganization. More helpfully, the opposite of conscious organization is unplanned or spontaneous coordination. In this sense the market-organization spectrum (and similar spectra one could imagine) are arguably orthogonal to the planned-spontaneous spectrum. One could well wonder, as I have (Langlois 1995), whether large organizations do not in fact grow far more as the unplanned consequence of many individual decisions than as the result of the conscious planning of any individual or small group of individuals. And it is certainly the case that, as Alfred Marshall understood, both firms and markets “are structures for promoting the growth of knowledge, and both require conscious organization” (Loasby 1990, p. 120).

Therefore development of the “Marketplace Interface”, complete with the user vision, is not a nice to have but a necessary for the innovative 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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCIII (PLM Part XXVIII)

In yesterday’s post we detailed some of the interfaces that would be used by the suppliers and vendors in providing specific products and services to the oil and gas producers and Joint Operating Committees through the “Marketplace Interface” of the Petroleum Lease Marketplace. Today we note the Community of Independent Service Providers as they are called at People, Ideas & Objects, or Industrial Districts as Professor Langlois refers to the concept, is structurally different then in the Resource Marketplace. The focus of the work that is done in the “Marketplace Interface” is primarily administrative. Although the disruption in moving the majority of the work from the firm to the marketplace will involve innovative and creative processes, once the marketplace settles into a rhythm, the administrative level of change will slow. Much of the actual work that is conducted in the “Marketplace Interface” will be to support the transactions that are conducted by the producers in the marketplace environment.

That it is not a source of innovation for the oil and gas producer is what is expected of the “Marketplace Interface” in the Petroleum Lease Marketplace. It is an area where the producer can focus on their core competitive advantage of their land and asset base. The administrative efficiencies and effectiveness are certainly part of the competitive advantage. I only raise this point to identify that there will be the dynamic nature of the marketplace for buying, selling, purchasing, bidding, acquiring, dealing, surrendering, etc leases and properties and that will contrast the rather static administrative service and support environment that enables the marketplace to operate.

If we invoke the much loved user vision, we have a producer who is interested in determining what the market value for their interest in a small gas plant will generate. The average production is 100 barrels of oil equivalent per day from 50 wells, compression and dehydration. Through the “Marketplace Interface” the producer puts their 17.5% working interest in the property on the market for sale and is open to offers. The property is then highlighted in the Google Earth section of the “Marketplace Interface” where users can see that property was just posted for sale. It is also listed by zone and product category in the international markets databases. Soon offers are made and the property attracts a reasonable price. The seller deems the property is to be sold, none of the partners are able to match the best offer, and the property is sold. Immediately the administrative aspects of having the leases, agreements and partners recognize the sale agreement, and with the closing executed, these administrative tasks are done.

Or something along those lines. The point in this scenario is to briefly show how many of the attributes that we have been talking about will work together in the “Marketplace Interface”. The efficiencies of the marketplace in terms of having a ready market to buy and sell properties, leases and interests. And to have those transactions backed up by the transaction processing that is as complex as is necessary to close the most complex of purchase or sale agreements. This is how the innovative oil and gas producer will need to operate in the 21st century.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCII (PLM Part XXVII)

Lets assume for a moment that you are a vendor that is involved in the Petroleum Lease Marketplace and you want to involve yourself in the People, Ideas & Objects Preliminary Specification to expand your business. To include your firm in the “Marketplace Interface” would require you to use some of the interfaces that we developed in the Resource Marketplace module. This blog post is how the vendor would interact within the “Marketplace Interface” and engage with the producers and Joint Operating Committees that were looking for your products and services.

First we should mention who it will be that makes the changes that we expect to see in the “Marketplace Interface” of the Petroleum Lease Marketplace. Resistance to People, Ideas & Objects by the current bureaucracies has been strong. They have a comfortable system that keeps them firmly in control and do not foresee any need for change. So how do these changes in the marketplace come about. And how does a marketplace like that which has been described here in the past few days come about. The answer is simple and is reflected in this next quote from Professor Richard Langlois paper “The Vanishing Hand: the Changing Dynamics of Industrial Capitalism”.

Ruttan Hayami (1984) have proposed a theory of institutional change that is relevant to my story of organizational and institutional change. As they see it, changes in relative scarcities, typically driven by changes in technology, create a demand for institutional change by dangling new sources of economic rent before the eyes of potential institutional innovators. Whether change occurs will depend on whether those in a position to generate it - or to block it - can be suitably persuaded. Since persuasion typically involves the direct or indirect sharing of the available rents, the probability of change increases as the rents increase. And the more an institutional or organization system becomes misaligned with economic realities, the more the rents of realignment increase. pp. 36 - 37

Simply is the profit opportunity from being an innovative oil and gas producer greater then what is offered by today’s marketplace? And will those that operate in the “Marketplace Interface” find greater profits by providing services that innovative producers will want and need. If either of those situations are the case then the profits will motivate the changes within the marketplaces described within this blog.

In terms of the interfaces that will help the vendors who provide lease and land services to the innovative oil and gas producers the first would be the “Vendor / Supplier Contact Database”. This provides the basic information that is needed for the oil and gas producer or Joint Operating Committee to have on the vendor. Think of it as a rich contact data base that is maintained by the vendor. There is a second aspect of this data base that provides a secondary or tertiary level of data to the producer when the firm is engaged by the producer. This includes access to the vendors staffing profiles, calendars and scheduling information and enables the producer and vendor to work to establish further elements of their working relationship. (Query the “Vendor / Supplier Bidding / Commitment Manager” for further information on the extent of these interactions.)

The second interface that would help the vendor in operating within the “Marketplace Interface” of the Petroleum Lease Marketplace would be the “Gap Filing Interface”. Recall this is the interface that is used by producers and vendors to communicate the need to have a “Gap Filled”. The gap being a situation where the division of labor could be expanded by providing a further service that is not currently offered. The expansion of the division of labor is done through the process of filling gaps. And if producers and vendors identify and communicate needs and services that are in need of filling, or demanding of new services, then the opportunity for the service to meet the demand will occur quickly. The reason for this is that we live in a time and a place where the service and the need may be located thousands of miles away from each other, or even just next door, and may never know that either exist. The “Gap Filling Interface” helps to eliminate the time and distance of these needs.

The third interface that provides value to the vendors in the “Marketplace Interface” of the Petroleum Lease Marketplace is the “Actionable Information Interface”. Although somewhat similar to the “Gap Filling Interface” it fills a different role. If a vendor was undertaking a strategic and competitive investment over the next five years that would fundamentally change their service offering. They would publish this information in the “Actionable Information Interface”. This would inform the producers and Joint Operating Committees of the prospective changes in the marketplace and allow them to engage the vendors on what they need. This being a collaborative interface the vendor would be able to engage the market to help define their market offering in the mid term. Most of this information is available to the prudent Google researcher today. However, it being located in one database in the “Actionable Information Interface” the value of the information in its aggregate would provide a unique window on the marketplace offerings and the direction of the industry. One might question why you would publish such sensitive information. I would remind readers that the act of publication is how you earn the copyright.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXCI (PLM Part XXVI)

To review what we have with the “Marketplace Interface” of the Petroleum Lease Marketplace in the Preliminary Specification. Is that we have an environment that is accessed by the user, a member of a producer firm or Joint Operating Committee, through the People, Ideas & Objects user vision. There they find a rich market environment where they are able to resource the skills, knowledge and experience they need to secure and manage their Petroleum and Natural Gas lease and land base. Given that marketplaces time to develop and grow, with its own market supporting institutions, it will take on its own characteristics and efficiencies. Enabling the innovative oil and gas producer to leverage the marketplaces capabilities and focus on their core competitive advantages.

Making this transition to where the producers and Joint Operating Committees capabilities are sourced from the marketplace will take time, incur unique costs and involve many iterations. These “Dynamic Transaction Costs” as Professor Richard Langlois calls them are necessary as the transfer of capabilities from the firm to the market occur. One should recall the reasoning for this transition. And the reasoning is not as strong in the Petroleum Lease Marketplace as it is in other modules such as the Resource Marketplace module. Is that we are moving the industry from the “High Production Model” to the “Decentralized Production Model”. This provides the producer with the capability to shut-in production, and then have the associated costs of production not incurred.

One might think that, as governance costs diminish in the long run, the boundaries of the firm would be determined solely by capabilities. But capabilities also change over time as firms - and markets - learn. The classical presumption was that the firms capabilities would diffuse completely to the market in the long run, leading to complete vertical disintegration. This reinforces the point that capabilities are more than a matter of production costs in the neoclassical sense and, more importantly, suggest that the notion of a firms capabilities implies a kind of information or knowledge cost - the cost of transferring the firm's capability to the market (other firms) or vice versa. these costs are a neglected kind of governance cost, which I call 'dynamic' governance costs. These are the costs of transferring capabilities: the costs of persuading, negotiating and coordinating with, and teaching others. These costs arise in the face of change, notably technological and organizational innovation. They are in effect the costs of not having the capabilities you need when you need them. pp. 123 - 124

As one can imagine, this marketplace would be dynamic. The need for a dedicated software developer to identify and support not only the innovative oil and gas producer and Joint Operating Committee, but also those changes that are occurring in the marketplaces vendors and suppliers, would be critical. That is the role of People, Ideas & Objects.

"The basic argument - the vanishing hand hypothesis - is as follows. Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets, much as Allyn Young (1928) claimed long ago. But the components of that process - technology, organization, and institutions - change at different rates." p. 3

This provides a high level summary of the “Marketplace Interface” of the Petroleum Lease Marketplace module. One that relies heavily on the user vision and the software development capability of People, Ideas & Objects.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CXC (PLM Part XXC)

Now that there is a marketplace established for the knowledge, skills and experience of the resources used in the Petroleum Lease Marketplace. We can begin to approach that marketplace from the point of view of its standardization and division of labor. So much of the work that is undertaken within a producer firm for Land administration etc. is done for the purposes of timeliness and accuracy. Due to the scope and scale of the individual producers volume of lease and land activity. Efficiencies from the analysis of the division of labor and specialization may not be available. With the development of the “Marketplace Interface” of the Petroleum Lease Marketplace the opportunity to conduct that analysis during the Preliminary Specification is provided.

It was autonomous innovation that Adam Smith had in mind when he argued that the division of labor enhanced innovation: each operative, by seeking ways to make his or her lot easier, would discover improved methods of performing the particular operation (Smith, 1976, I.i8, p. 20). The improvement he had in mind were such that they improved the efficiency of a particular stage without any implication for the operation of other stages. Autonomous innovation of this sort may even further the division of labor to the extent that it involves the cutting up of a task into two or more separate operation. Instead of being differentiating in this way, however, an innovation may be integrating, in the sense that the new way of doing things - a new machine, say - performs in one step what had previously needed two or more steps (Robertson and Alston, 1992). More generally, a systemic innovation may require small modifications of the way work is performed at each of a number of stages, and would thus require coordination among those stages. pp. 116 - 117

In today’s market we have powerful tools that help alleviate us from the repetitive nature of lower level work. Two of those tools are computers and globalization. Our analysis of the marketplace should use these tools to the fullest extent to enable us to focus our attention on innovation. If we look at the Petroleum Lease Marketplace “Marketplace Interface” from this perspective there is much work to be done, and a significant opportunity to provide real value for all producers. Having a Petroleum Lease Marketplace that provides the producer and Joint Operating Committee with the ability to focus their capability on building their land and asset base would be a worthwhile objective for this module. It is fully one half of an innovative oil and gas producers competitive advantage.

Designing and implementing a marketplace that organized these capabilities in an efficient and effective way would not be the difficult part. Ensuring that the user community was supported through their learning and development of new and innovative capabilities would be.

A market form of organization is capable of learning and creating new capabilities, often in a self reinforcing and synergistic way. Marshall describes just such a system when he talks about the benefits of localized industry. p. 120

To start this process we have the Preliminary Specification. It would provide us with a beginning of how this marketplace would be formed. When you consider the scope of the work that would need to be done to detail the “Marketplace Interface” the budget for the Preliminary Specification (all 11 modules equals $100 million) doesn’t seem that high after all.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.