The Preliminary Specification Part CCXII (PA Part XXII)

As we noted in yesterday’s post the transition to a “decentralized production” model in the Partnership Accounting module of the Preliminary Specification would enable the innovative oil and gas producer to match the operational and overhead costs to any decline in revenues due to a shut-in of production. By using accounting service providers, predominately through People, Ideas & Objects Community of Independent Service Providers (CISP), the various Joint Operating Committees would be able to control their costs in the event that commodity prices were unfavorable. Today we want to discuss the configuration of those accounting service providers and how they will fulfill the needs of the innovative oil and gas producers.

When we talk about the Community of Independent Service Providers we are highlighting their independence from any one specific producer. With the elimination of the designation of “operator” from any one specific producer in the Joint Operating Committee no accounting, production administration or exploration administration is provided to the Joint Operating Committee in a dedicated manner as it is today. This creates a fundamental change in the manner of how the work is approached in the industry. It is liberating when we consider the use of technology that is available today and the standardization of the processes that has occurred in the oil and gas industry. A Joint Operating Committee is therefore free to engage a service provider to fulfill these administrative duties, independent of any one specific producer.

From the accounting perspective we have already talked about the Production Accounting role and how that could be specialized to the point where a service provider is working in one geographical area for a large number of Joint Operating Committees. That is the most logical manner in which to organize that type of work. We have also discussed the royalty accounting requirements. And how a service provider would be able to specialize on that specific legislation enabling the Joint Operating Committees that use that service provider to pay the lowest possible royalty obligations. And we have talked about an accounting service provider that specialized in the compliance requirements to the SEC. The point being that we are seeing a further break down in the types of accounting service providers that are specializing on a variety of different criteria for the oil and gas producers. This is the required next step in the evolution of the economic output of the oil and gas industry. The further division of labor and specialization are the only means in which an economy can expand its output.

The recording of operating and capital costs for the joint account will not take too much of a specialization for a service provider to acquire. Most smart phones can now code an invoice to a fairly high level of detail. The interaction between vendor and producers is something that can capture the high levels of detail that are needed in an ERP system. Particularly one in which we are setting out to design. The real value for a service provider might be in the area of transaction design which falls under the Accounting Voucher module. Another area might be in Audit’s and reviews.

With the specialization of individual service providers based on unique accounting specialities. [I’m not familiar with production or exploration administrative needs and therefore can’t comment on those.] A Joint Operating Committee would engage these service providers to provide for the services that are required for their property. There they could choose a Production Accountant who is located in the region. A revenue and royalty accountant who is known for their ability to keep royalties down. And if the price of natural gas drops to the threshold price determined by the Joint Operating Committee, to where the facility will be shut-in, these accounting service providers are not engaged during that time and incur no billings for the property.

The alternative is for each producer to hire the necessary accounting staff as they do now. This is bureaucratic and wasteful in that it builds capacities in each firm to handle x contingencies. The problem is that each firm only needs those capabilities for a few hundred hours a year. Its time to look at alternatives, and the time to look is when we are designing systems for 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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification. 

The Preliminary Specification Part CCXI (PA Part XXI)

Traditional oil and gas accounting systems have sought to identify the costs of operations and allocate those costs to the rightful owners. And those will be some of the objectives in the Partnership Accounting module of the Preliminary Specification. We are also seeking to transform the producers from a “high throughput production” model to a “decentralized production” model where the costs of operations decline in line with revenues. Then if production is shut-in, the costs incurred will track revenues. This is necessary in the highly volatile pricing situations the commodity markets get themselves into. As Professor Langlois describes the model.

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. p.58

Recall in the Petroleum Lease Marketplace we have the “Marginal Production Threshold Interface” that enables the partners within a Joint Operating Committee to agree on a pricing point where production would be curtailed. We have also discussed in the Resource Marketplace module the use of the Production Accounting role in terms of how the costs of those resources would be reduced to zero in the case of shut-in production. What we haven’t discussed in detail is the need to charge the Joint Operating Committee directly for the charges of the Production Accounting service provider. This will be a change as a result of using the Joint Operating Committee and the elimination of the “operator” designation on any one specific producer.

Many of the costs that might have been incurred by the “operator” as administrative overhead and were to be covered by the various provisions of calculating overhead allowances for the operator will be eliminated in the future as a result of using the Joint Operating Committee. These costs may be incurred by any one of the producers in the Joint Operating Committee. Either directly by their staff or through a service provider. Either way they should be directly chargeable to the joint account. Costs such as production and revenue accounting, or partnership accounting in general is a cost of doing the business of the JOC. There would also be costs associated due to the administrative areas of the production and exploration activities done on the property.

What we have learned from our review of Professor Richard Langlois is that transaction costs and the markets are the ideal situation in which to source the capabilities the producers need. That would be the case for these administrative roles as well. By hiring individuals in a dedicated fashion would incur the costs during the time that production might be shut-in. By hiring service providers the costs associated with these administrative duties would be reduced to zero when the production was shut-in. Attaining the “decentralized production” model in terms of the operating and administrative costs of the property.

Tomorrow we will discuss how the configuration of these accounting service providers organize themselves to provide their services on the “decentralized production” basis.

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 CCX (PA Part XX)

We begin now with our fourth or capabilities pass through the Partnership Accounting module of the Preliminary Specification. In doing so I have reviewed the text of the previous posts of the module. There was one area that I thought that we needed to go back and clarify. It was in the area of budgets for the work that might be done in various projects through the Work Order system or in AFE’s. I thought that we should add another data element to the budgeted information, an “Unallocated Budget $” which reflects the amount of the budget that has not been spoken for.

We discussed in previous posts how a number of producers would collaborate on a project to conduct some research. The Work Order system of the People, Ideas & Objects Partnership Accounting module enabled the producers, who may not have been affiliated in any form or fashion until this working group was formed, to be able to form and contribute to the project. The capturing of the meeting of the minds was the objective of the Work Order system, in that it would capture the manner of each producers contribution and method of payments at the time the project was being formed. This enabled them to be free of the bureaucratic difficulties that come along with participating in these types of working groups. The accountants have a capacity to make participation in these more difficult then they are worth, and therefore, the working groups are avoided. The reason that we have to cut through the bureaucracy and encourage the use of working groups is that participation in these types of activities are critical to an innovative oil and gas industry.

The way that the interface for the Work Order will work is there will be two elements to the accounting interface. One will be the accounting for the costs. This will list the costs of the working group and your working interest share based on your participation rate. Fairly simple so far. The second element is where the problems come about. The participation can be funded from a variety of different sources and contributions. Some will have a key piece of research that is the foundation of the project. Some will contribute time and some will be able to contribute cash. The combinations and permutations are really unlimited. The one constant in these contributions is that they all have budgets. The second element will identify the source of funds or contribution that is to make up your participation in this working group. It will need to be determined if that means cash will be transferred from your firm to others by simply clicking on a box in the interface. Once all of the producers have completed thier interfaces the balancing of the Work Order will be attempted with any variances worked out to determine who will make up any short falls. Once all the short falls are resolved the work can begin.

The issue of the budget is the point of this post and remains somewhat outstanding. How does the user know that the account that they want to draw from still has budget dollars available? We need to have some numbers available to the user that tells them the amount that is in the account, the budget for the account, and the amount that has been committed to other working groups but has not been expended yet. Enabling the user to not overextend that account and find that they can not use it when the time comes to pay the bills. And once they have made a claim on those resources, by selecting that account for use in a Work Order, that their Work Order will have a priority claim on those budgeted resources. Therefore when the user in a Work Order or AFE in a manner such as described here, sources a budgeted amount for use in a working group, that budgeted amount, upon approval of the Work Order, is allocated to that working group.

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 CCIX (RM Part XXXVI)

We take a step back for a moment to pick up a point or two in the Resource Marketplace module of the Preliminary Specification. It has to do with the “Marketplace Interface” within that module. At the time I was resisting the discussion of the user vision and therefore was not able to discuss any part of the “Marketplace Interface” within the Resource Marketplace module. That’s the first point, the second point is to highlight the fact that within the Resource, Petroleum Lease and Financial Marketplace modules there is only one “Marketplace Interface”. That is to say that while in the virtual world you would be able to engage with companies for Resource, Petroleum Lease and Financial Marketplace purposes. There would be no reason to have three separate environments.

By way of a scenario, you hear from a partner that a vendor is conducting a presentation of a new technology in the “Marketplace Interface”. You log in to see what the technology looks like and find their presentation overwhelmed with interest. Nonetheless you are able to view and hear everything clearly and see the value of the technology. While there you run into a number of partners that are interested in testing the technology at one of their facilities that you also have an interest in. They present you with an AFE for the costs associated with running the tool and ask that you approve it as quick as you can.

You have a minor interest in the property and the partners are at the threshold of having the 75% approval necessary to proceed with the project without your approval. Nonetheless you would like to be a constructive contributor to the project and are proceeding with the expectation that you will gain approval. The costs associated with the work over are small, yet the down time affects the production and revenue projections. Those are the bigger issues, as reliability and predictability have been an issue at this property. Something that this tool is designed to mitigate.

Funds are sourced from the firms Research & Development area as the firm feels the tool will show some promise in other properties. The AFE’s are signed and you are seconded to the Joint Operating Committee to work as an engineer on this project. What is not realized through this scenario is that you completed all of this work through the “Marketplace Interface” through your iPad during breakfast at home. The ERP system was able to establish the AFE through the partners, the communications internally to approve the AFE, source the budget, assign the roles and responsibilities to the project and to participate in the vendors presentation were all done at the breakfast table. In this scenario the paper work was almost faster then the ideas!

Tomorrow we will start our fourth or capabilities pass through the Partnership Accounting module 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 CCVIII (FM Part XXV)

In this our fourth pass through the Preliminary Specification we are discussing capabilities. Here in the Financial Marketplace module the capabilities of the financial marketplace are provided to the producer and Joint Operating Committee through interfaces such as the “Marketplace Interface” and the “Gap-Filling Interface”. It is through dynamic markets that the innovative oil and gas producer will find that their financial needs are met. And that is the point of this fourth pass, it is that the innovative oil and gas producers capabilities will be sourced from dynamic markets.

This will be the last post of our fourth pass through the Financial Marketplace module. Tomorrow we will be taking a step backwards to pick up some items that were missed in the Resource Marketplace module, and then we will resume our normal progression to the Partnership Accounting module.

I have been critical of the management of the oil and gas producers. They have resisted the changes proposed in the Draft and Preliminary Specifications and have governed as if all is well. It needs to be asked if the oil and gas industry is the same industry when it receives $100.00 for its products when only a few years ago it received $25.00? I’m not of the opinion that it is the same. There has been a fundamental change from a low cost easy energy era, to an innovation focused dynamic producer. The type of producer that operates in these two domains is fundamentally different. The Preliminary Specification is designed for the innovative producer. To make the transition from the easy energy era to the innovation focused dynamic producer will require that we build the Preliminary Specification first. The Financial Marketplace module is a critical aspect of the Preliminary Specification. By aligning the financial framework of the industry with the legal, operational decision making, cultural, communication, innovation and strategic frameworks we will achieve the speed, accountability and innovativeness we desire. In his book “The Dynamics of Industrial Capitalism”, Professor Langlois notes.

As soon as we go into details and inquire into the individual items in which progress was most conspicuous, the trail leads not to the doors of those firms that work under conditions of comparatively free competition but precisely to the doors of the large concerns – which, as in the case of agricultural machinery, also account for much of the progress in the competitive sector – and a shocking suspicion dawns upon us that big business may have had more to do with creating [the modern] standard of life than with keeping it down. (Schumpeter 1950 [1976, p. 82].) p. 2

My two criticisms of the management are that the velocity at which the management operates at is too slow, and the innovativeness is non-existent. In the financial marketplace the pace of activity will need to accelerate in order to address both of these issues. I think we have addressed these with the changes we have documented here in the Preliminary Specification.

Schumpeter’s account of progressive rationalization takes the form of a contrast between two modes of economic organization, modes roughly cognate to the difference between the small owner-managed firm and the large multi-unit enterprise. Characteristically, however, the issue in Schumpeter is a dynamic one: he is concerned with the respective merits of these two modes of organization not in the static allocation of existing resources but in generation of economic change and growth. The paradox of Schumpeter is that he famously defended, and has come to be associated with, both of these modes as drivers of economic growth. Schumpeter has returned to prominence today as champion of the role of bold entrepreneurs in creating new combinations and redirecting the means of production into new channels, to such an extent that he is revered as an inspiration to the present-day field of entrepreneurship studies (Shane and Venkataraman, 2000). In this (Schumpeterian) literature, the force behind economic growth comes from individuals or small groups of individuals who work mostly outside the established structure of organization rather than from within it. pp. 17 - 18

Big, small, lean or bloated with management I don’t care what configuration the producer firm is in. The future requires that we are able to provide for the markets demands for energy. If the financial crisis is waning then the economies of the world will begin to grow again. The increase in demand for energy is not something that we can currently contemplate. We need to get our head around this problem and start to deal with a solution. Muddling through just seems to be too much of a risk.

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 CCVII (FM Part XXIV)

By way of a scenario I want to impart an understanding of how I see the Financial Marketplace modules “Marketplace Interface” providing the innovative oil and gas producer, and Joint Operating Committee with banking and investment dealing products and services.

You are the Chairman of the Joint Operating Committee for an area where you have a mutual interest with five other companies to conduct exploration in some shale gas. After many years of acquiring land and drilling to identify the scope of the reserves your companies have announced a major discovery of significant reserves. A vote was passed by 80% of the participating companies to undertake bank financing by a general assignment of those reserves to fund the gathering, compression and tie-in to a company owned gas plant. It was approved that these funds can be sourced from any bank that is willing to competitively bid for the business.

A specification and a detailed cost proposal has been developed to support the application for funds. Two individuals from the other companies who have participated in the Joint Operating Committee will be joining you in making the proposal to the banks. You have arranged to make the proposal to 16 banks located in New York, London and Hong Kong next Tuesday through the “Marketplace Interface” of the Financial Marketplace module. Three of the banks have relationships with two of the producers that are represented in the proposal.

It quickly becomes evident that there are technical questions regarding the nature of shale gas and the financial situation of company B. You are able to call upon the geologist for the project and the CFO of company B within the “Marketplace Interface” to answer these questions. This however causes you to overrun your time limit and you send the other two participants to the next meeting without you for now. Eventually bank A is satisfied and you return to the second meeting to find that the same questions have arisen. You quickly contact the CFO and geologist and ask them to edit video excerpts from the previous meetings answers, and include them with the proposal to satisfy bank B, and move on in time to bank C and so on.

Two days later you have received offers from 4 of the banks that you visited virtually. However, one of the banks offer stands out to the other three banks, and is accepted by those 80% of the participants in the Joint Operating Committee. The CFO’s, Lawyers, accountants and bankers of all of the participating companies of the Joint Operating Committee are informed of a closing two weeks from today. The closing will be held within the “Marketplace Interface” of the Financial Marketplace module. You have also scheduled the virtual signing of the AFE’s for the project to commence once the closing is complete.

What this scenario shows is the alignment of the financial framework is consistent with the legal and operational decision making frameworks. The decision to leverage the property with debt is the appropriate one from a business point of view. What the scenario also shows is the time required to make this bank debt happen. Even though there are more people involved in the decision making process, because of the number of companies in the Joint Operating Committee, the time needed to deal with everything is compressed and the exposure to the best deal was obtained with minimal administrative time incurred.

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 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.