The Preliminary Specification Part CCLXXXI (S&AC Part XI)

Some people may be wondering with the co-mingling of Oracle products within the Preliminary Specification what the implications are with respect to Intellectual Property (IP). The answer is simple, what is Oracle’s is clearly Oracle’s and what is the IP of the Preliminary Specification is clearly the Preliminary Specifications. In my dealings with Oracle in the past they have not been difficult in this area. As a matter of fact I would state that they have been very generous. Giving us very valuable technology that was provided matter of fact at no cost and with no expectations of any future revenues. All of our agreements with them renounced the IP to our firm. There are however cost implications in having the Oracle products as part of the Preliminary Specification.

Therefore I expect that a user in the People, Ideas & Objects application modules will seamlessly be alternating between some Oracle products, some Oracle products that have been heavily modified by People, Ideas & Objects and areas where only People, Ideas & Objects developers have worked. This will be less “violent” to the user then it initially sounds. All of these products will have the same look and feel and will be subject to the same user interface guidelines.

Today we want to discuss the Oracle Internet Directory and Oracle Virtual Directory product offerings in the Security & Access Control module. A little off topic but Oracle Internet Directory is a relational database derived directory server. That Oracle is providing the marketplace a directory server based on relational database technology speaks to the power of their relational database. They claim they have the performance for two billion users. I see advantages of using this product over their traditional directory server and have therefore selected it for the Preliminary Specification. It will provide us with some flexibility when we ask some of the comprehensive and demanding questions of the technologies.

Oracle Internet Directory could be deployed as an industry wide, and by that I mean oil and gas and service industry wide directory server. There it can integrate with the information that is held in other Oracle products, such as Oracle Identity Manager which would be deployed at the producer firm, Joint Operating Committee and service industry representative level. I think we could provide large volumes of information consisting of everything that exists in the industry. The producers, service industry, Joint Operating Committees, the people who work within the industry, etc. Because this is a database we have some interesting opportunities here.

And Oracle Virtual Directory may be the beginning of optimizing the relational database opportunities. So what we will have is a global database of names within the Oracle Internet Directory and these will relate to the information contained with Oracle Identity Manager and other applications. What Oracle Virtual Directory will provide us with is a seamless way in which to browse, and for applications to see, these datastores as one.

Within the Preliminary Specification we want to access the contact information of the people or firm that provide services or products to the producers or Joint Operating Committees. As we indicated we want the individuals and service industry providers to maintain their own contact and basic data. These will be maintained in the Oracle Internet Directory for each and every producer or Joint Operating Committee to access the most recent and up to date information. That is assuming the individual or company providing the service keeps their address and telephone numbers up to date in the directory. This will save an immense amount of time on behalf of the producers and Joint Operating Committees, as well as the individuals and service industry providers. When looking for someone the search capabilities will be significant as we have added the “Vendor / Supplier Contact Database” and the “Actionable Information Interface” to this base data in the Resource Marketplace module.

Having the Oracle Internet Directory reference the Oracle Identity Manager through a Primary Key constraint on the individual's name attribute would be an ideal situation. Then the two databases would be in harmony; and I’m dreaming in technicolor and therefore will stop here.

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 CCLXXX (S&AC Part X)

It is important to remember here in the Security & Access Control module of the Preliminary Specification. That the role and identity based Military Command & Control Metaphor (MCCM) as has been conceived here has not been implemented, developed or conceived of anywhere else before. We are taking the concept and technology of role and identity based management to the next level with the MCCM.

Why are we bothering with the MCCM and the pooling of the resources in the Joint Operating Committee anyways? The issue that we are resolving is the finite number of earth science and engineering resources that are available to the industry. With the anticipated retirement levels in the next 20 years. With the time requirements to bring on new levels of resources. And most importantly with the demands for more energy, and the demands for more earth science and engineering in each barrel of oil equivalent produced. We face a long term shortage of these critical resources. The need to organize the industry to exploit the specialization and division of labor are therefore necessary to expand the output from the same number of resources. That begins with the Joint Operating Committee. And that imputes that we have contributions of earth scientists and engineers from multiple producers working together to meet the objectives of the Joint Operating Committee. Therefore we need a means in which they can organize themselves and that is the Military Command & Control Metaphor.

How the MCCM will be implemented will be determined by the user community. However, I can speculate that the Joint Operating Committee will have standard roles and identities that are used throughout the industry. This standardization will probably be necessary for the purposes of making the technology work. The need to have the various areas “covered off” in terms of compliance and other requirements will require a standard template be used by everyone. Then everyone will know that that position is responsible for that role and responsibility. When Joint Operating Committees are small and have only a few people assigned, then multiple roles can be assigned to one individual.

Today we want to discuss Oracle Identity Manager which will be used as the base product for role and identity management. It will also be the base of the Military Command & Control Metaphor for the People, Ideas & Objects Preliminary Specification. It is part of the Oracle Fusion Middleware product offering and as such is part of their Java Enterprise Server. Therefore we are able to build off the functionality that exists and enhance it with the user community's needs. Building off of the functionality will be somewhat limited as many of the concepts that are inherent in the MCCM are already captured in the Oracle Identity Manager.

Oracle Identity Manager is a highly flexible and scalable enterprise identity administration system that provides operational and business efficiency by providing centralized administration & complete automation of identity and user provisioning events across enterprise as well as extranet applications. It manages the entire identity and role lifecycle to meet changing business and regulatory requirements and provides essential reporting and compliance functionalities. By applying the business rules, roles, and audit policies, it ensures consistent enforcement of identity based controls and reduces ongoing operational and compliance costs

Needless to say the Oracle Identity Manager will need to be a necessary part of the Preliminary Specification. There is an element of governance within this application, however, we will be talking about that in a few days, tomorrow we will be talking about Directory Services.

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 CCLXXIX (S&AC Part IX)

Today we look into the Oracle product classification of Access Management. This is part of our review of Oracle products for the Security & Access Control module of the Preliminary Specification. Included in the Access Management classification are the following products; Oracle Access Manager, Oracle Adaptive Access Manager, Oracle Entitlements Server, Oracle Identity Federation and Oracle Enterprise Single Sign-On Suite. Each of these products will be included in the Preliminary Specification as they have components that are required for the day to day use by the users, producers and Joint Operating Committees.

One area that I was surprised to learn that Oracle had been working on was in the area of working with partners, vendors and suppliers. Within the Oracle Access Manager it is noted that they are able to provide “Building federated user communities that span company boundaries”. These are the beginning of both the pooling and Military Command & Control Metaphor (MCCM) that are critical to resolving so many of the big issues that the oil and gas industry faces.

On the heels of Oracle Access Manager is their Oracle Adaptive Access Manager which takes the concept of intra partner interactions further with “Oracle Adaptive Access Manager makes exposing sensitive data, transactions and business processes to consumers, remote employees or partners via your intranet and extranet safer.” This is the nature of business in the future. Working with your partners, as is done in the Joint Operating Committee, is an effective means of reducing costs and increasing innovation in any industry. It’s only reasonable that the technologies are beginning to emulate these needs. In addition Oracle Adaptive Access Manager takes the level of security and authentication to a higher level. As a result our demands regarding the pooling concept and the MCCM, I feel, will be less of a technical risk for the People, Ideas & Objects Preliminary Specification.

The next application is the Oracle Entitlement Server which provides a dynamic access control element to the applications that use the server. Instead of hard wiring access control privileges into each application and user you can dynamically generate them using the Oracle Entitlement Server. “The solution can manage complex entitlement policies with a standalone server or with a distributed approach that embeds information at the application level.” So when it needs to be determined if user x has access to Joint Operating Committee y, a decision from the entitlement server, based on criteria within the application, can be made. If this information changes then the user would be denied access. This provides greater security based on policies and reduces the amount of detailed specific software development that is difficult, time consuming, and costly to maintain.

Federated Identities are also a major part of how the pooling concept and MCCM are implemented in the Preliminary Specification. Oracle Identity Federation provides high levels (attribute federation) to the applications that use it. We have specified in many of the modules, such as the Resource Marketplace module, the use of Federated Identities. Situations like where the contact and other information is maintained by the vendor. That information is comprehensive in nature and includes key organizational contacts, calendars and scheduling information. Working with the partners in the Joint Operating Committee and the representatives of the service industry in this way will effectively mitigate many of the technical software development issues we have.

One area that we will continue to have difficulty however is in the Work Order. The ability to dynamically put together a working group to study some earth science or engineering research subject is critical to the innovative oil and gas producer. These are ad-hoc and made with partners that you may have no history with. Federated Identities will provide you with some of the information you need to form the partnership and grant application access, however, there is still the pooling of and sourcing of costs, and budgets which is the bureaucratic nightmare that mitigates and destroys the motivation for these working groups to form. We need to make sure these roadblocks do not get in the way.

The last thing we want our users to be involved in is some form of security access hell. Oracle Enterprise Single Sign-On Suite Plus promises to keep this from happening. Logging onto and off of systems as the user proceeds through the various modules and components of the applications is a must have. This product also promises the ability to provide this level of service on a remote basis. Much needed.

As we can see the technical risk associated with the Preliminary Specification dropped a few points today. I’m sure it will continue to do so. Tomorrow we will move onto the Oracle Identity Administration product.

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 CCLXXVIII (S&AC Part VIII)

And now we begin our fifth pass through the Preliminary Specification. Starting with the Security & Access Control module we find that Oracle Corporation have a comprehensive suite of applications that provide for the security and access control that we are looking for. Falling under the Oracle Identity Management brand name. These products include tools for Access Management, Identity Administration, Directory Services and Governance. These product classifications come in a variety of different products and are configured in some specialty industry and management suites.

What will need to be done in the Preliminary Specification is to breakdown in detail the requirements of the user community. Starting with the determination of the scope of the application, that is what is the geographic, scope and scale of the People, Ideas & Objects application modules needs here in the Preliminary Specification. From there we will know what the user will need in terms of the actual security and access control requirements. Matching those specific needs with those detailed in the Oracle product categories we will be able to sit down with the Oracle people and draw up a development plan on how to meet the users requirements for the Security & Access Control module. Remember the producers, Joint Operating Committees, service industry representatives are all critical members of the user community.

Two areas that we are going to have difficulties are going to be the Military Command & Control Metaphor (MCCM) and the inter-relatedness of the Joint Operating Committee and service industry representatives. Early on in the specification we noted a number of research areas that were needed to be conducted. These are two areas that will take some research dollars to resolve. To have the MCCM recognize members of different organizations will not be the difficulty. To engage them and have them interact in the manner that we expect them to when we expect them to, will. With respect to the access control of who has access to a Joint Operating Committee. Each user may have to have an encrypted “access control list” of Joint Operating Committees they have authorized access to. And they are only authorized to access JOC’s on that list. These user access control lists being part of the authorization by the chairman of the Joint Operating Committee.

Oracle Identity Management resides within the Oracle Fusion Middleware product. As we indicated earlier in the Preliminary Specification this is Oracle’s Java Enterprise Server. Therefore these applications are open to be tailored to the user’s needs. So when we do sit down with Oracle and define the Security & Access Control module based on the user needs. These needs can be accommodated by the technologies that we have selected.

And it is through the efforts of the user community that we will resolve these issues. It is also one of the reasons that the budgets of People, Ideas & Objects software developments are where they are. We have issues to resolve in delivering these innovative systems to the industry. I would also remind producers that our value proposition sees the one time costs of these developments amortized over our subscribing base of producers. Yet each one of those producers receives the full scope of that development effort in terms of the software application.

Tomorrow we’ll look a little closer at the Oracle Access Management tool.

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 CCLXXVII (S&AC Part VII)

It has been a while since we wrote anything specific about the Security & Access Control module of the Preliminary Specification. It is maybe a generic module that has a fixed level of functionality and process management in comparison to the other modules. Our review to date has been about innovation and organizational change. And these topics have not necessarily been consistent with what Security & Access Control are all about.

In reviewing the posts to this point I want to highlight a few of the things that have to be the important features of the module. We are providing the Security & Access Control to the right people, who have the right access to the right information with the right authority at the right time and at the right place. What we know about relational databases, that they are based on predicate calculus and set theory, makes them ideal for enabling this access in the context of the Joint Operating Committee.

It is in the Security & Access Control module that the Military Command & Control Metaphor is established. That is the chain of command between the individuals from within the producer firm, the Joint Operating Committee and the service industry representatives. Each individual is provided with a rank level of “command” and is provided with established authority and responsibilities as a result. Lower ranks are also within the chain of command of higher ranks. This ranking and command structure provides the ability to have the pooling of the earth science and engineering, as well as other, resources pooled between members of the Joint Operating Committees.

We noted that the types of data that the producer firm and the Joint Operating Committee were dealing with were different in terms of their security requirements. Joint Operating Committees were dealing in data that was shared amongst the partnership and was not necessarily proprietary in nature. On the other hand the producer firm is where most of the proprietary information is held. The reserve reports, accounting information and strategy, and internal communications. This provides a separation of data from the domains of operation.

Authentication, and having the ubiquitous availability of anywhere and anytime access are issues that are needed to be addressed by advanced ERP systems. Secure access through iPad’s and phones brings about new challenges for producers and Joint Operating Committees. Encryption of all network traffic, and storage of data are necessary in this day and age. For compliance purposes a proposed ownership structure of the “cloud computing” infrastructure that meets the needs of the producers SEC requirements has been provided.

The Security & Access Control module will provide an interface that provides the appropriate governance requirements are met by the organization. If you have a requirement that a process is reviewed by certain individuals within your organization then they can be mapped within the organization. Any gaps could be filled and the process could then proceed. There is also the ability to have the delegation of authority and responsibilities assigned during absences.

This is a quick summary of the content of the Security & Access Control module of the Preliminary Specification. Now that we are reviewing the Oracle technologies, strategies and architectures we will be able to blend these requirements into their products and services and give users a better understanding of how these technologies will be implemented. The one area that will be unique is going to be the Military Command & Control Metaphor. However, as we will see that may not be technically too difficult to do.

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 CCLXXVI (General Part V)

Before we begin our fifth pass through the modules of the Preliminary Specification I wanted to discuss the overall technological architecture that People, Ideas & Objects will be using the Oracle products for. There are also some other points of discussion that I wanted to raise in this post.

The first point of discussion is the fact that People, Ideas & Objects does not currently have a relationship with Oracle. I have had comprehensive development agreements with Oracle before and will not be going down that road again. Oracle does not have the patience necessary for this marketplace. Theirs is to book quarterly revenues, not to convince industries for the need for change. When we do establish a relationship with Oracle it will be when People, Ideas & Objects have achieved revenues and Oracle will look upon us as a customer.

With the recent acquisition of Sun Microsystems Oracle is now the owner of the Java Programming Language. This in combination with their industry leading Database, they provide us with the base tools to implement the Preliminary Specification. No other technologies can provide the scale and scope of performance and reliability that the oil and gas producer and Joint Operating Committee need to operate their business. Add to these base technologies is Oracle’s hardware engineering and integration for database and Java technologies, and we will have the least concerns possible in terms of what the technological marketplace can offer.

Recently Oracle conducted a comprehensive investment to update and integrate their ERP offerings under one solution. These come under the Oracle “Fusion” brand of offerings. The first and possibly the most important, especially from the point of view of the Preliminary Specification is the Oracle Fusion Middleware. This is their Java Enterprise Server technology. All of their Fusion ERP application are derivative of the Oracle Fusion Middleware technologies. That is an important consideration for us as will be noted later. What the Oracle Fusion Middleware provides People, Ideas & Objects is access to the base layer of Java to build the Preliminary Specification function, process and applications. Modules of the Preliminary Specification could be complete stand alone components without any of the Oracle code from the Fusion ERP applications. That being stated, they can also be fully integrated into the Oracle code of the Fusion ERP applications. So when we need to include an accounting general ledger we can include the Oracle Fusion Accounting Hub as the key component of the Partnership Accounting module and build the unique oil and gas elements within that base Oracle technology. This level of integration marries the best of the technology with the best of the understanding of the oil and gas industry.

The Oracle Fusion Applications are the result of a significant investment by Oracle. They came to market in 2010 and are based on the same base technologies we are using, Java and the Oracle Database. As time passes this new breed of technologies will begin to outperform those technologies that have been in the marketplace for several generations. They are also the technologies that will be best positioned for the so called “cloud” computing model. Something that is a fundamental aspect of the People, Ideas & Objects offering.

One thing that I think will show as a result of this fifth pass through the Preliminary Specification. Is that specialization and the division of labor has created large gaps between the oil and gas industry and Oracle. Gaps that need to be filled by People, Ideas & Objects. Tomorrow we will begin with a look at the Security & Access Control module.

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

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

The Preliminary Specification Part CCLXXV (General Part IV)

Four full passes through the Preliminary Specification have provided some substantial codification of the way this software will operate. From the eleven modules there is an overall vision of how the innovative oil and gas producer, and the Joint Operating Committee would function in the insatiable energy demand era. I had two comments made to me when I wrote the Preliminary Research Report. The comments were that “this solves every administrative issue in oil and gas for the past fifty years” and “it's an entire new discipline”. Both were related to the significance of using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. What I think that we can say as a result of completing the four passes through the Preliminary Specification is that both of these comments underestimate the significance of using the Joint Operating Committee.

What we have discovered is that it certainly resolves the administrative issues when the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks are aligned with the compliance and governance frameworks. However, when it comes to the operational concerns of the oil and gas industry, it also provides the frameworks and means to solve those problems as well. Whether it is the ability to agree amongst the partnership and reduce the production during price declines, or moving the industry to a decentralized production model, where the costs more accurately match the revenues. Or where the innovation is generated through the two major processes in the Preliminary Specification, which do not directly conflict with tight operational control. Or how the division of labor and specialization are enabled, defined and supported through the software to provide for the industry to expand its output of the limited resource base of earth scientists and engineers. These are just some of the features of the Preliminary Specification that impact the operations and enable the producers to enhance their organizations. And although they have been used to highlight today's issues they will also provide for tomorrow's problems.

Bold statements and evidence to prove that I am one of two possible things, as people would say. But the fact that the Joint Operating Committee supported in the fashion that is identified in the Preliminary Specification also provides us with this opportunity to build these systems. This vision needs to be acted upon and the forces that are aligned against it are as determined not to see it exist. They have a vested interest in the status-quo and will continue to fight to ensure theirs is the only alternative.

We turn now to the fifth pass through the Preliminary Specification. And this will continue on with the module by module review, however this time it will be from the basis of Oracle Corporation’s technology. If you read or review any of their material it has a decidedly technological focus. If you mention the Joint Operating Committee within their organization you can hear it echo for a week and a half. They really have no fundamental understanding of oil and gas, and only a basic understanding of business. They have become very specialized in what they do and the products they sell. Such is the nature of the division of labor and specialization. What People, Ideas & Objects are therefore doing is filling a “gap” in providing the business understanding of the oil and gas industry to the technology. This “gap” between the oil and gas industry and Oracle is something that is needed because the two are unable to speak coherently to each other, they need an interpreter, and that’s People, Ideas & Objects and the Preliminary Specification.

So tomorrow we’ll begin with the Oracle technologies in general and build out from there.

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 CCLXXIV (C&G Part XXIII)

We have been concerned with the governance over operations in the last number of posts. And today we look into the governance over the two major processes of innovation in the Preliminary Specification. The first process of innovation is the development of the innovation within the producer firm and is a result of the earth science and engineering capabilities being developed. The second process is as a result of the field level innovations that are developed by the service industry and are either product or service related in terms of their offering to the producer or Joint Operating Committee during some operation. Either way it is important that the producer firm have a measure of governance over the developments of innovation for a variety of reasons. These governance elements will again be captured in the “Operational Review & Governance Interface” of the Compliance & Governance module. Quotes are from Professor Richard Langlois paper “Innovation Process and Industrial Districts”.

What is it that the innovative oil and gas producer and Joint Operating Committee will be doing when they are “innovating”. That seems to be a fairly reasonable question and one that would be the founding principle in which the governance over the innovating processes should be based on. It's here that Professor Langlois provides us with a very good summary for our purposes.

Innovation is based on the generation, diffusion, and use of new knowledge. p. 1

The source of this new knowledge, and all of the knowledge is the “Dynamic Capabilities Interface” in the Research & Capabilities and Knowledge & Learning modules. Recall that “knowledge begets capabilities, and capabilities begets action”. The capabilities that are contained within the “Dynamic Capabilities Interface” are comprehensive and are designed to serve the needs of all of the people that are required for that particular operation.

While it is possible to conceive of a firm that is so hermetic in its use of knowledge that all stages of innovation, including the combination of old and new knowledge, rely exclusively on internal sources, in practice most innovations involving products or processes of even modest complexity entail combining knowledge that derives, directly or indirectly, from several sources. Knowledge generation, therefore, must be accompanied by effective mechanisms for knowledge diffusion and for "indigenizing" knowledge originally developed in other contexts and for other purposes so that it meets a new need. p. 1

and

Relationships within industrial districts therefore lead to diffusion but also to the creation of new knowledge through shared preoccupations. Because many people or firms can work on a problem simultaneously, a number of different solutions may be found (Bellandi, 2003b). The results is a larger and stronger "gene pool" within the sector (Loasby, 1990, 117), with the further advantage that solutions that are originally regarded as competing may turn out to be complementary and well-suited to different niches within the district.  p. 7

I could go on for ever reciting the elements of the Preliminary Specification as the reasons for the governance requirements in the “Operational Review & Governance Interface”. The point that needs to be made is that the two major processes of innovation need to be reviewed from a high level within the firm. There are so many interactions between the firm and the Joint Operating Committee and the larger service industry that the possibility that all of the valuable knowledge is not all codified is high. That is just one of the risks. Another is that the “Lessons Learned Interface” doesn’t capture the failures accurately for further learning. These are all necessary to have someone review to ensure that the knowledge and capabilities, as well as the innovations are built upon for the future.

And with this final post on Professor Richard Langlois we move on to our fifth pass through the Preliminary Specification. I'll have a few general things to say tomorrow to wrap where we are and where we are heading.

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 CCLXXIII (C&G Part XXII)

Within the Preliminary Specification there is a conflict or contradiction that needs to be managed through the Compliance & Governance module. That is the posture that needs to be presented by the people who are members of the Joint Operating Committee towards the service industry representatives. At two different times and two different places during the ongoing operation of the properties the approach towards the service industry will be fundamentally different. At one time the approach will be to have the service industry operate as a free wheeling marketplace where the innovation and ideas are flowing at the fastest possible rate. And then there will be the times when the operations are being conducted and the need for military precision is expected and required to ensure the operations are completed successfully. This Dr. Jekyll and Mr. Hyde routine would give most people in both the Joint Operating Committee and the service industry a second look.

We have discussed this contrast in the Preliminary Specification before. On the one hand we have a marketplace and on the other we have operational control. And for many reasons the two may be comprised of the same people operating in different capacities at different times. The governance issue is; how do we ensure that the operating mode, marketplace or operational control, is the appropriate mode that everyone is operating under. This is of particular concern to the service industry representatives, as so much of the operational control and success of the operation is dependent on their full attention.

The answer to this question comes from the “Operational Review & Governance Interface”. If there is an operation that is currently being conducted by the Joint Operating Committee. And there has been no corners cut or short cuts taken then there will be the explicit knowledge contained in the “Dynamic Capabilities Interface”, the “Planning & Deployment Interface”, assignments under the Military Command & Control Metaphor which will include representatives of the service industry, the AFE, and Job Order. Whereas none of these are required in the marketplace. Therefore the onus is on the Joint Operating Committee to ensure that these tools are used to ensure that the contrast from a freewheeling marketplace is imposed. And it will be in the “Operational Review & Governance Interface” that the governance over the members of the Joint Operating Committee is imposed to ensure they are using these tools appropriately during their operations.

Operational control and innovation are on two opposite ends of the same spectrum. That however does not mean that they can’t be attained by the same organization. The innovative oil and gas producer must have both. One without the other is not worth pursuing. The conflict and contradiction will show up in the organization at some point and the need to deal with it becomes a governance issue. The user of the “Operational Review & Governance Interface” will have the tools necessary to ensure that the Joint Operating Committee is able to discern the difference between innovative markets and tight operational control.

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 CCLXXII (C&G Part XXI)

We have asserted and I am certain that it is generally agreed that the oil & gas industry is moving towards its scientific basis as its primary form of competitive advantage. The days in which financiers or lawyers could build viable producers based on their skills are numbered if not nonexistent. There is also a perception that is developed through the Preliminary Specification that the producer is a firm that maintains financial interests in a variety of Joint Operating Committees. That the producer will deploy their capabilities to these assets when and where they are needed and as the capabilities are developed. These processes are under constant levels of change and innovation in the innovative producer which causes “Dynamic Transaction Costs” to be incurred, and for people to question the direction of the changes. What is needed is a method of governance in the Compliance & Governance module over the overall process of change to ensure that the ship maintains its course and the costs remain in line. Quotations are from Professor Richard Langlois “Transaction Costs in Real Time” paper.

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

The other day we introduced the “Operational Review & Governance Interface” and today’s post will continue with its discussion. In our previous post we had the ability to mentor the Project Manager and oversee or supervise the operation if required. What we need to discuss today is broader and more global in scope. An interface that encapsulates the entire firm's operations so that the user can see that the direction the firm has taken in terms of capabilities development is being optimized in its Joint Operating Committees, etc. It would be of little value if the firm was expending valuable resources on developing its capabilities on fracing when none of the Joint Operating Committees were deploying, or able to deploy the technologies.

With the “Operational Review & Governance Interface” the user would be able to review the entire operation as it happened. From the “Dynamic Capabilities Interface” to the “Planning & Deployment Interface”, AFE, Job Order and “Lessons Learned Interface”. Review all of the actions taken and the documentation that was generated during the operation to determine what was the critical cause of the success or failure of the operation. This could be done in fine detail or in summary form to oversee the many operations that may have been conducted.

Another variable that is being captured by the Preliminary Specification is the “Dynamic Transaction Costs” themselves. These are the costs associated with change. When people run into these costs then they will know to code them to the Dynamic Transaction Costs account in the chart of accounts. This will be a red flag in the “Operation Review & Governance Interface” for the user to trigger on. When they see high levels of “Dynamic Transaction Costs” then they know the operation ran in to high levels of change and / or innovation. Therefore they will be able to see the implications of these costs in the knowledge and information in the interface. And know that either some significant change or innovation was the result.

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

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

The Preliminary Specification Part CCLXXI (C&G Part XX)

We are discussing the operational governance of the firm and Joint Operating Committee. An important element of this discussion is the capabilities that these organizations have access to. Capabilities are documented in the Research & Capabilities and Knowledge & Learning modules of the Preliminary Specification. And are one of the key competitive advantages of the innovative oil and gas producer. Therefore from a governance point of view these capabilities need to be safeguarded and ensure that they are kept for your firms eyes only. Nothing could be further from the truth. The use of these capabilities will cause their leakage to outside firms. And it is imperative that the firm consider the use of their capabilities as having the right information deployed by the right people at the right time. The Compliance & Governance module will therefore be more concerned with the appropriate use of the capabilities, rather than the hoarding of information. From Professor Richard Langlois “Organizing the Electronic Century”.

"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

What is it that we are trying to achieve in employing these capabilities. It is of course to generate value. But more importantly to generate value on behalf of the owners represented in the Joint Operating Committee. In economic terms this value is called “externalities”. After the operation, after the deployment of the right capabilities at the right time by the right people the value should have been gained by the members of the Joint Operating Committee.

So why don't we observe everywhere a perfectly atomistic modularization according to comparative advantage in capabilities - with no organizations of any significance, just workers wielding tools and trading in anonymous markets? We have already seen the outlines of several answers. The older property rights literature, we saw, would insist that the reason is externalities, notably the externalities of team work arising from the nature of the technology of production itself. The mainstream economics of organization is fixated on another possibility: because of highly specific assets, parties can threaten one another with pecuniary externalities ex post in a way that has real ex ante effects on efficiency (Klein, Crawford, and Alchian 1978; Williamson 1985). Richardson offers a somewhat different, and perhaps more fertile, alternative. Firms seek to specialize in activities for which their capabilities are similar: but production requires the coordination of complementary activities. Especially in a world of change, such coordination requires the transmission of information beyond what can be sent through the interface of the price system. As a consequence, qualitative coordination is necessary, and that need brings with it not only the organizational structure called the firm but also a variety of inter-firm relationships and interconnections as well." pp. 27 - 28

If the Joint Operating Committee coordinates these capabilities in the appropriate manner then the externalities will flow to the producers represented there. That is what the governance of the operation is most concerned about. That there was leakage of some documentation of these capabilities during the operation is immaterial to the externalities and the competitive position of the firm. Recall during our review of Professor Giovanni Dosi for the Preliminary Specification. His research showed that it took an equal and sometimes greater effort to copy another firm's capabilities then it did to generate the capabilities themselves. It is therefore more effective for a firm to focus on their key competitive advantages of their land and asset base, and their earth science and engineering capabilities. And the effective and efficient deployment of these competitive advantages on a “just in time” 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 CCLXX (C&G Part XIX)

What I am seeing develop with our review of Professor Richard Langlois writings. Is that there will be an element of the Preliminary Specifications Compliance & Governance module that will be devoted to what we would call “operational governance”. Today’s post will discuss the incentives vs. coordination issue of any operation that a Joint Operating Committee undertakes. This deals with the current conflict between the producers and service industry and the high costs associated with any field operation. Producers feel that the costs are out of control in the field and are imposing cost controls in an effort to manage them. People, Ideas & Objects feel that coordination of the field operations will provide the appropriate means to control costs and will also provide for better outcomes. The coordination coming about through the modules in the Preliminary Specification, specifically the Research & Capabilities and Knowledge & Learning. In his paper “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization” Professor Richard Langlois states.

More generally, we are worried that conceptualizing all problems of economic organization as problems of aligning incentives not only misrepresents important phenomena but also hinders understanding other phenomena, such as the role of production costs in determining the boundaries of the firm. As we will argue, in fact, it may well pay off intellectually to pursue a research strategy that is essentially the flip-side of the coin, namely to assume that all incentive problems can be eliminated by assumption and concentrate on coordination (including communication) and production cost issues only. p.17

Let's assume for a moment that the People, Ideas & Objects Preliminary Specification is operational in your firm. You have the Military Command & Control Metaphor, the Planning & Deployment Interface, the AFE and Job Order systems operational as expected however your results continue to disappoint and the cost overruns are tragic. How do we ensure that the performance expectations are met and these poor performing situations are identified quickly and dealt with.

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

We should have an interface in the Compliance & Governance module that provides a user with the ability to oversee the operations being conducted in the Research & Capabilities and Knowledge & Learning modules. This interface should be called the “Operational Review & Governance Interface” and give its user access to the operational information that is being undertaken. There they can interact, if desired, and supervise or mentor the project manager to ensure that the objectives are met and the costs are maintained. All with the understanding of how these objectives can be achieved. And that is through enhanced coordination, not through incentives.

In saying this, it's more about governance then about supervision. You want to be able to effect change when things go wrong, and you want to identify when things go wrong quickly, however, you also don’t want to interrupt the day to day operations.

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

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

The Preliminary Specification Part CCLXIX (C&G Part XVIII)

One of the key changes that is made in the Preliminary Specification is the move away from the “high throughput production” model to the “decentralized production” model. We have discussed this throughout the various modules and now we want to discuss the governance aspect of producing oil or gas when it is known to be unprofitable. Through the changes that we have made in the Preliminary Specification. Shutting in of production causes the production and overhead costs to drop in line with the revenues from the well so that a lack of production does not create a loss. Producing at low price scenarios does however a create a loss. Therefore the firm should have in the Compliance & Governance module a strong governance model that enforces a discipline to ensure that production is curtailed when pricing drops below the margin. Professor Richard Langlois defines the two models in his book “The Dynamic of Industrial Capitalism: Schumpeter, Chandler and the New Economy.”

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

The amount of value that is destroyed during times when the natural gas or oil prices decline is significant. The response of the North American producers to this “phenomenon” is both amusing and startling. They have within their power to fix the situation, yet do absolutely nothing to mitigate the source of the problem or the severity of it. They are natural gas producers, don’t bother them with prices or pipelines or customers, or for that matter the business of the business. This is management’s way of listening to the market and acting accordingly.

What is needed is a new method to deal with the volatility in the oil and gas marketplace. This is only the beginning of price variances. The producers need the ability to curtail production when the prices drop below the margin as is proposed in the Preliminary Specification. This may run against the best interests of those that are charged with operating the firm. And therefore the decision may need to be made by those that are responsible for the governance of the firm. If you can limit the losses. Save the reserves for the day in which the prices will return a profit. The periods in which losses will occur will be less frequent and of less intensity.

But let's look at the larger picture. If everyone in the industry adopted this new discipline then there would be no downward spikes in pricing. If all of the marginal production was removed from the market, the prices would respond to the upside almost immediately. Placing a floor on prices at the higher costs of production. Producers like to think they have employed a high level of capital discipline in terms of their spending. What if they employed a high level of production discipline as well. Then they could assert that they were not reckless in incinerating capital through operating losses in the fashion the capital markets have come accustomed to.

In the Petroleum Lease Marketplace module we have the “Marginal Production Threshold Interface” which indicates which production is at the threshold of becoming marginal or is not earning a profit. In addition this is a collaborative interface that allows the producer to interact with the other participants in the Joint Operating Committee who collectively hold the decision rights to suspend production. It is there that the decision will be made. We will also establish an interface in the Compliance & Governance module and also call it the “Marginal Production Threshold Interface”. It will include a section where the CEO or COO has the authority, in cooperation with the partners in the Joint Operating Committee, to shut-in some production. Taking the decision out of those in operations and placing it in the executive is probably how most of the decisions will have to be made. It certainly isn’t being done in any form or fashion today is it.

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 CCLXVIII (A&S Part XV)

When users are in the Performance Evaluation and Analytics & Statistics modules they will be able to look at a new type of cost that we have recorded in the accounts of the firm and Joint Operating Committee. That is the costs associated with “Dynamic Transaction Costs” which are the unique costs that are incurred during times of change. Professor Richard Langlois described these costs in his article “Transaction Cost Economics in Real Time”.

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

The types of these costs will be varied and not necessarily be the same in all instances. To break these down into their types may be overkill from an accounting point of view when just putting them into an account called “Dynamic Transaction Costs” will do. And we have done that in all of the other modules of the Preliminary Specification. However, having the ability to further analyse these costs when the time comes, from the Performance Evaluation and Analytics & Statistics modules could lead to further insight and learning into the organizational changes that might, or should, be occurring.

Indeed, in cases in which systemic coordination is not the issue, the market may turn out to be the superior institution of coordination. In general, the capabilities view of the firm suggests that we look at firm and market as alternative and sometimes overlapping institutions of learning. p. 99

and

Economic progress, then, is for Marshall a matter of improvements in knowledge and organization as much as a matter of scale economies in the neoclassical sense. We can see this clearly in his 'law of increasing return,' which is distinctly not a law of increasing returns to scale: 'An increase of labour and capital leads generally to improved organization, which increases the efficiency of the work of labour and capital' (Marshall, 1961, IV. xiii,2 p. 318) p. 101

And maybe we need to have a page or screen in each of these two modules dedicated to breaking down these costs. Then a producer or Joint Operating Committee will have some point of reference to determine the state of change and its impact in terms of the costs, and types of costs, to the organization.

F.A. Hayek (1945, p. 523) once wrote that 'economic problems arise always and only in consequence of change.' My argument is the flip-side: as change diminishes, economic problems recede. Specifically, as learning takes place within a stable environment, transaction costs diminish. As Carl Dahlman (1979) points out, all transaction costs are at base information costs. And, with time and learning, contracting parties gain information about one another's behavior. More importantly, the transacting parties will with time develop or hit upon institutional arrangements that mitigate the sources of transaction costs. p. 104

Tomorrow we will begin our fourth or capabilities pass through the Compliance & Governance module.

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

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

The Preliminary Specification Part CCLXVII (A&S Part XIV)

We should also mention, with yesterday’s discussion of the accounting and administrative costs being charged to the Joint Operating Committees. That these accounting and administrative service providers would need to have extensive software built as part of the People, Ideas & Objects Preliminary Specification. They too are a critical part of the efficiencies and effectiveness of the producers and Joint Operating Committees and therefore need to be included in the definition of this software. Today we are going to discuss the overall nature of the Preliminary Specification and how the Performance Evaluation and Analytics & Statistics users will need to look upon the data that is stored within the applications. The method that users will access this data is through ad-hoc queries and general inquiries that they will formulate over time. There will of course be opportunities for users to save and deploy those queries in a more structured approach within the module.

We are focusing the producer firm and Joint Operating Committee on its key competitive advantages. Those are its land and asset base and the earth science and engineering capabilities it holds. These are the things that differentiate them from other producers and how they produce value for their shareholders. Everything else is secondary. We have adopted what Professor Richard Langlois calls the “capabilities approach” in his paper “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization”.

However, a new approach to economic organization, here called "the capabilities approach," that places production centre stage in the explanation of economic organization, is now emerging. We discuss the sources of this approach and its relation to the mainstream economics of organization. p. 1

And we feel this can bring about a new level of competitiveness, one based on innovation, within the industry. As Professor Langlois notes in “Competition through institutional form: the Case of the Cluster Tools Standards”.

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

And it must be in the hands of the user. Whether that is the CEO of the producer, the Chief Engineer of the Joint Operating Committee or the accountant preparing the financial statements for the property. A decentralized and empowered workforce is the only manner in which to approach the future demands of the energy consumer. From Professor Langlois “Organizing the Electronic Century”.

… “if we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place," he wrote, "it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its order. We must solve it by some form of decentralization" (Hayek 1945, p. 524). p. 15

Lastly we have used modularity to deconstruct and simplify both the Information Technology and the organization. This provides us with an efficiency of data between the modules and encapsulation of the roles and responsibilities within one module. For example all of the “land” is within the Petroleum Lease Marketplace module.

What makes decentralization economically effective is the possibility of a standard interface that allows the modules to coordinate with one another without communicating large volumes of information. This interface is the price system. 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 and passed on only to those concerned (Hayek 1945, pp. 526 - 527) pp. 15 - 16

We have come a long way for a relatively precise point. In the Preliminary Research Report which was entitled “Plurality Should Not Be Assumed Without Necessity” or Occam’s Razor. I also went on to describe it as Knoop & Valor [1997] did as “It’s not what you know that you do not know that hurts you. It’s what you do not know, that you do not know that will. It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to bring about a new order of things.” I should have heeded my own warning. But the point is that the unknown unknowns are what need to be discovered and the tools for doing that are the Performance Evaluation and Analytics & Statistics modules 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 CCLXVI (A&S Part XIII)

We have combined the Performance Evaluation and Analytics & Statistics modules into one discussion stream for purposes of the Preliminary Specification. The difference between the two modules is that the Performance Evaluation is a Joint Operating Committee facing module and the Analytics & Statistics module is a producer firm facing module. Both are inherently the same in terms of functionality and process management, however, the data and collaboration elements are fundamentally different. It will also be in these two modules that the move away from the “high throughput production” model to the “decentralized production” model that the Preliminary Specification is conducting will have an effect. In Professor Langlois book “The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy” he defines the differences between the two models.

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

In previous modules we have discussed how the overhead costs of production and royalty accountants, and for that matter any accounting to do with operations, land administration, production administration and exploration administration would become variable costs that would only be incurred if there was production. How the further specialization and division of labor of these traditional departments provided a means for the oil & gas industry to have their accounting and administration prepared by service providers. This was an example of how the industry could have all of their production and overhead costs allocated to the revenues from production. When the wells were shut-in then these administrative and accounting costs would not be incurred and the decentralized production model would therefore be in place.

Both in the Analytics & Statistics and Performance Evaluation modules each Joint Operating Committee becomes a stand alone reporting entity. Each property should have financial accounting reports that are prepared monthly. These could be generated here in these modules. Having a balance sheet, income statement, and statement of changes prepared for the Joint Operating Committee and for the producers interest would provide real value for those trained in reading financial statements.

With the fine granularity of the data. That is to say the charges for the accounting and administrative services will be very precise, as will all the variable charges that will be charged under the “decentralized production” model. The assurance that all the accounting and administrative service providers have billed, and billed correctly for a month, will need to be automated to a certain level and that too can be done in these modules.

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 CCLXV (K&L Part XXXIII)

This will be the last post of our fourth or capabilities pass through the Knowledge & Learning module. It has been in the Research & Capabilities and the Knowledge & Learning modules that Professor Richard Langlois work has been of most value. We will continue on with the review of Professor Langlois in the Performance Evaluation, Analytics & Statistics and Compliance & Governance modules and then in the fifth pass we will be taking a different perspective on the Preliminary Specification. The fifth pass will combine two elements during its review. The first will be the application of Oracle’s Fusion technologies which are the base technologies of the Preliminary Specification. The second element is some of the more common components of an ERP system. We have covered off what an innovative ERP system looks like, we need to include how that innovation interacts with the day-to-day of an ERP system. So those will be the focus of the fifth pass through the specification. I am tentatively scheduling the sixth pass to be a deeper dive into the same elements as we may not be able to make sense of everything in the first pass and will need two runs through to be coherent.

If we go back to the previous modules we recall the discussion around moving from the “high throughput production” model to the “decentralized production” model that was being conducted in the Preliminary Specification. Essentially the “decentralized production” model has all of the costs, production and overhead, match the revenues. So when there was no production, there would be no costs associated with any shut-in production. The “high throughput production” model is something that the bureaucracy can do. It is their means of managing and is how they are able to provide value in the organization. That “high throughput production” is incapable of providing value today is a matter of the time and place that we find ourselves in. Using the “high throughput production” model requires the bureaucracy to summarily ignore the Joint Operating Committee as the key organizational construct of the oil and gas industry. It can not do both, “high throughput production” requires the designation of operatorship be granted to one partner for control over the property.

Industrial structure is really about two interrelated but conceptually distinct systems: the technology of production and the organizational structure that directs production. These systems jointly must solve the problem of value: how to deliver the most utility to ultimate consumers at the lowest cost. Industrial structure is an evolutionary design problem. It is also a continually changing problem, one continually posed in new ways by factors like population, real income, and the changing technology of production and transaction. It was one of the founding insights of transaction-cost economics that the technological system does not fully determine the organizational system (Williamson 1975). Organizations — governance structures — bring with them their own costs, which need to be taken into account. But technology clearly affects organization. This is essentially Chandler’s claim. The large-scale, high-throughput technology of the nineteenth century “required” vertical integration and conscious managerial attention. In order to explicate this claim, we need to explore the nature of the evolutionary design problem that industrial structure must solve. p. 50

With the Preliminary Specifications adoption of the “decentralized production” model and the recognition of, and technical support of the Joint Operating Committee. The elements of change are in place. It is the culture of the industry to use the Joint Operating Committee, it is an industry that is based on partnerships and the closer we move to that culture the greater alignment (speed, innovation, and accountability) we will achieve. This next quote should be read twice with either the hierarchy or the Joint Operating Committee in mind.

And there are certainly examples of this. But it is also possible that a structure of organization can persist because of “path dependence.” A structure can be self-reinforcing in ways that make it difficult to switch to other structures. For example, the nature of learning within a vertically integrated structure may reinforce integration, since learning about how to make that structure work may be favored over learning about alternative structures. A structure may also persist simply because the environment in which it operates is not rigorous enough to demand change. And organizations can sometimes influence their environments — by soliciting government regulation, for instance — in ways that reduce competitive rigors. p. 58

This discussion elevates the importance of the Research & Capabilities and Knowledge & Learning modules in defining how the industry operates. These modules remove the task of how the industry is operated from the hands of the bureaucracy and moves the operations to the Joint Operating Committee. It is therefore a critical module.

Over time, two things happen: (a) markets get thicker and (b) the urgency of buffering levels off and then begins to decline. In part, urgency of buffering declines because technological change begins to lower the minimum efficient scale of production. But it also declines because improvements in coordination technology — whether applied within a firm or across firms — lower the cost (and therefore the urgency) of buffering. p. 78

As a point of interest when I read that last quote I became concerned for the Natural Gas business in North America. The size of the Natural Gas storage business has become so large as to dwarf any real purpose for its existence. The other aspect is, the storage business is no longer in the hands of the producers. How in a market economy will the producers ever get market prices for their product again?

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.