Showing posts with label Pluraltiy. Show all posts
Showing posts with label Pluraltiy. Show all posts

Monday, September 26, 2011

The Preliminary Specification Part XXXVII (R&C Part V)


Yesterday we talked about the role the producer would have in determining the long term horizon of the firm. How the Research & Capabilities module would provide a window on the various Joint Operating Committees to provide the ability to apply systemic earth science and engineering innovations at each JOC with out the risks of unnecessary duplications or repeated following of blind bunny trails. Today I want to discuss the risks and rewards of the leakage of earth science and engineering information from the firm through the Research & Capabilities module. As it would be apparent that the level of discussion and collaboration through the partnerships in the Joint Operating Committees, through the industry itself and the service industry in particular would lead to significant leakage of the producers proprietary earth science and engineering knowledge, understanding and capabilities.

In the Preliminary Research Report we learned an interesting point about the producers proprietary earth science and engineering knowledge, understanding and capabilities.

In Brown & Duguid (1998) they make the following observations: “The leakiness of knowledge out of and into organizations, however, presents an interesting contrast to internal stickiness. Knowledge often travels more easily between organizations than it does within them. For while the division of labor erects boundaries within firms, it also produces extended communities that lie across the external boundaries of the firms. Moving knowledge among groups with similar practices and overlapping membership can thus sometimes be relatively easy compared to the difficulty in moving it among heterogeneous groups within the firm. Similar practice in a common field can allow ideas to flow. Indeed, it’s often harder to stop ideas spreading then to spread them.” (p. 102) p. 32

We all know this leakage of information to be inherently true. When someone discovers something that is “news” within the industry, it is generally well known within industry associations for the geologists or engineers as soon as it is known in the firm. It is either imputed through what is known, or the leakiness is as porous as it is. What is a producer firm to do to ensure that the information they have does not leak. I think that the point lies in the meaning of “capabilities”; which is “an aptitude that can be developed”. Simply it is not possible to stop the leakage. The question therefore becomes, is it best to develop your aptitude by curling up with a text book or to participate in a marketplace.

According to McKinsey the solution requires...

... a company must develop organizational overlays in the form of markets and networks that help its professionals work horizontally across its whole extent. These overlays make it easier for them to exchange knowledge, to find and collaborate with other professionals, and to develop communities that create intangible assets.

These tacit interactions are what are captured in the “Research” area of the Research & Capabilities module. Interaction with the larger communities to develop the knowledge and understanding around the science of oil and gas not only expands the capabilities of the producer firm but will also expand the overall science. We learned two other important points regarding innovation in the Preliminary Research Report.

  1. That new science fuels new innovations, and new innovations fuel new science.
  2. Technical trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms.

People, Ideas & Objects research assumes that one technical trade-off in oil and gas is accurately reflected in the oil and gas commodity pricing. That these prices are providing the resources to fuel innovative oil and gas producers. Therefore the faster we iterate on the science and innovation, the more appropriate a producers strategy should be focused on a capabilities approach.

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.

Sunday, February 21, 2010

Budget Conversation Part II

The question as to what happens after March 31, 2010 and we don't have our budget for 2010 funded. Do we pack up and go home? There is nothing worse for a project like People, Ideas & Objects to have been turned down for its funding request. It puts the entire project at greater risk of ever being funded. So what is the plan, what do we transition to if the funding for 2010 is not secured?

The cut and run mentality is something that I have great difficulty with. I don't start something to have it left unfinished. The fact that the budget possibilities are more limited do not deter me from proceeding with this project. The May 2004 Preliminary Research Report was named "Plurality should not be assumed without necessity" or Occam's Razor for a reason. I knew that this level of change would be difficult. The quotation that I used for describing this difficulty was from the 1997 Report to the World Bank.

This statement was written by Ernst & Young in a 1997 report to the World Bank, and was described 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.” Knoop & Valor (1997)
What I do know is we have not attained success. On the other side of the coin, I know what dangerous means. We will continue on in some fashion irrespective of the outcome of this budget drive. In the event that we do not receive any support, what frustrates me the most is that we are effectively losing another year. One change that might be considered is that we immediately commence a budget drive for the entire design and planning stage. These have been costed at $150 - 200 million.

In terms of the context of energy, failure has consequences. If I have to live the consequences of this project for a while longer that is fine. I'm not dragging anyone or anything down in the manner that this project is being proposed. I want to establish an environment where the motivation is to succeed. And if that success is not attainable with the current configuration, we'll work with the communities [investor, shareholder, user and Community of Independent Service Providers] to get it right.

Join me here and lets work together in finding the right answers. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Saturday, August 02, 2008

Exxon, Shell, Apache...

The issue of declining production has struck the majority of producers in the oil and gas industry. The New York Times suggests total production declines may reach over 600,000 boe / day. Exxon, Shell and Apache, just as many others have reported, are showing a trend that supports the hypothesis of this blog's preliminary research report. That being;

  • The corporate hierarchical organizational structure is an impediment to progress and most particularly innovation.
  • Determine if the industry standard Joint Operating Committee, modified with today's information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.
Producers have also been spending record amounts on capital projects. Much of this increased funding is diluted by the costs associated with too-much-money chasing too-few-skills. Nonetheless producers are involved in a record number of projects. How often in life has doing more of the same; worked to mitigate fundamental changes in an industry?

Within the interpretation section of the preliminary report I suggested;
It is suggested in this research that the speed that a bureaucracy can adapt and change is inadequate for the operational demands of a future oil and gas operation. Innovation within the oil and gas industry will be required in order to keep up with the natural and increasing rate of decline in production. Where the sciences of geology and applied sciences of engineering, which cover a broad range, will need to progress substantially in the next 10 years in order to achieve the demand requirements of the North American energy consumers. p. 71
This claim of mine seems to have a tenuous hold on the legitimacy of me asserting my hypothesis is correct. What evidence is there that the dynamics of the underlying earth science and engineering disciplines have expanded to a higher level of understanding? A level of understanding that a bureaucracy, however large, is unable to comprehend or implement.

Possibly one of the most appropriate statements that has developed in 2008 is "the easy oil is gone". Captures the entire situation very well in my opinion. I'll be the first to agree that the contents of the preliminary research report were only extensions of my "sensing" that the demands of the business were accelerating beyond the bureaucracies capabilities. After 30 years in the business it was generally known that things were getting tougher, much tougher.

And not to discount the research that was done in the preliminary report. That of Professor Giovanni Dosi clearly defining what innovation is and what is necessary to be innovative. Or Professor Anthony Giddens Structuration Theory. A theory that suggests People, Society and Organizations move in lockstep, or failure will occur. I think we clearly see the current demands of society and people being ignored by organizations. Although no failure has occurred, one does not have to look too far. And Professor Wanda Orlikowski's Model of Structuration which suggests technology is a defining and reinforcing component of society. A model in which I coined the phrase "SAP is the bureaucracy".

The subsequent discovery of Professor Richard Langlois research on Transaction Cost Economics, The Boundaries of the Firm, and Market definitions. Dare I forget McKinsey Consulting's grounding of these theories in the current business environment. That the hypothesis and conclusions are based on this academic foundation prove that the Joint Operating Committee is the key organizational construct of the innovative oil and gas producer. At least that is what is proven on paper. As we know the ability to subject a field of study to a paper document provides proof of the concepts contained within the written word. People are still trying to test the theories of Albert Einstien's, theories that he published in the very early 1900's.

Professor Thomas Davenport has also contributed to this research. His blog (his feed ) is frequently highlighted for some of the current thinking he has in business today. In the preliminary report I quoted him from "Strategy and Structure of Firms in the Attention Economy" stating;
Strategy and structure are mental constructs, important not in themselves, but for their impact on people in the organization. Strategy and Structure are also the vehicles for focusing attention. p. 51
But what tangible proof is there that these hypothesis, conclusions, research and concepts are valid? I sarcastically suggest two alternatives;
  1. We continue the debate of these "theories" with industry for another five years.
  2. We begin building the systems based on these concepts.
I naturally conclude that point two is the choice I would recommend. Producers are being allocated the financial resources to fuel the innovation that commodity markets are demanding. Since these financial resource's are being distributed to managements pockets, I ask what's the risk?

Still not satisfied? I suggest that you select the "Call-to-Action" label of the blog to review the 45 posts that provide even more grounding for these theories validity. Or, review the Draft Specification for this software development and see how fundamentally different and capable the JOC is to enabling innovation in the oil and gas industry. I have also posted the Preliminary Research Report on Innovation Within Oil and Gas in three knol pages here, here and here.(Editing not complete.)

Lastly, please join me here.

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Monday, June 18, 2007

Plurality should not be assumed, without necessity.

This quotation is "Occam's razor" which I used as the title of my thesis that this blog is based upon. Click on the title of this entry for the Wikipedia entry.

I've found a few comments that bring about a different perception of where we are in this technologically induced, changing world.

"If we get this wrong, it doesn't matter what else we get right."
I read that for the first time on the Singularity Institute weblog. I found it highly reflective of the times that we live in, and the critical nature of some of today's technologies influence over our future.

Another interesting point was put across by Stanford Professor Paul Romer. Instead of economies being driven by "Land, Labor and Capital," it was now "People, Ideas and Things" that mattered.

And in a critical review of Thomas Friedman's best seller "The World is Flat", Professor Edward E. Leamer states the following.
"The speed at which ideas are exchanged determines the pace of progress."
and
"If you think of humans on Earth as a single thinking organism, then until the 1980's we have been using only about 1/3 of our global brain because 2/3rds of humanity were shut in closets where they couldn't communicate with the rest of us."
And maybe, I am thinking, the future has arrived.

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Monday, April 23, 2007

Changes at Shell.

First off, I am a "Shell Brat", my father worked for Shell Canada for over 33 years and retired in 1982. I was also fortunate to work at Shell for two summers during my high school days in the 70's. During my first year I was helping out in the mail-room, and the second summer was spent washing dirt in their geological warehouse. Shell holds a special place in my mind and strongly influences my perception of the oil and gas industry. That is why it is with extreme disappointment regarding The Royal Dutch Shell group, who just purchased the outstanding shares of Shell Canada, have announced that the CEO of Shell Canada will be retiring and the new CEO will be the CEO in their Houston operation. The time when the decisions and understandings that Calgary may have had on Shell Canada will now cease to be a factor.

In my thesis that was the precursor to this blog. I suggested that if the producers were not willing to move toward a more innovative footing, the loss of their independence would be the result. That Shell is the first is disappointing, and I can not determine which producer would be next, nor can I provide any of the cause and effect analysis that proves my thinking. It would only seem reasonable with Houston's focus moving away from the Middle East, Russia and China, that Canada would lose its independence and stature, as Houston asserted its influence.

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Wednesday, February 07, 2007

Where we're at.

This past month we seem to have travelled quite far in terms of the optimal organizational structure for producers. A summary table of the concepts and roles of each component would help to provide clarity of all the issues we have discovered and discussed. This table recalls the basic premise of this work being the Joint Operating Committee, and adds to it the work of Langlois, Foss, Winter and Dosi. As this research is ongoing and the table would be considered subject to adjustment in the near future. However, I think it currently provides the oil and gas worker with an understanding of where the roles of the firm and market begin and end.

I have separated the various areas of responsibility and frameworks into either the Market or Firm. Within each construct I placed the "P" as the item being a Primary role or "s" as being a secondary role within in the market or firm. Each category / construct can then be seen to provide the separation of responsibilities, the boundaries of the firm and the division of duties.

ConstructMarketFirm
Joint Operating CommitteePs
Military Styled Command and ControlsP
Transaction CostssP
Production CostsPs
InnovationPs
Routine, compliance and accountabilitysP
ResearchsP
DevelopmentPs
Financial FrameworkPs
Legal FrameworkPs
Cultural FrameworkPs
Operational Decision Making FrameworkPs


P = Primary
s = secondary

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Tuesday, February 06, 2007

Towards a Neo-Shumpterian Theory of the Firm.

Professor Sydney G. Winter is the Deloitte and Touche Professor of Management at The Wharton School of the University of Pennsylvania. The Wharton School consistently ranks as one of the best business schools on the globe. I have read Professor Winter's works before, particularly in combination of the work that he has co-authored with Professor Giovanni Dosi. The title of this article stood out in terms of a good follow through on Professor Langlois' theories.

In the abstract, Professor Winter provides a little more focus in to the theme of this research;
"Schumpeterian analysis requires an intuitively appealing and realistic conceptualization of the distinction between routine and innovative behavior, and in particular, a conceptualization relevant to complex organizations and complex tasks."
Which leads me to ask, is Professor Winter stating that innovation can be handled by the Joint Operating Committee, and "routine" tasks handled by the Military Styled Command and Control Structure? This role definition helps to understand the division of labor and the barriers of the firm in assigning tasks. However, I would state that these classifications are both right and wrong. The role of the Military Styled Command and Control Structure (MSCC) is not limited to compliance and routine. The most important aspect of the firm is well represented in the case study of Chrysler by Thomas H. Davenport and John C. Beck in "The Strategy and Structure of Firms in The Attention Economy." (This document is behind a paid wall but you may be able to find elsewhere. It is in the March / April 2002 Ivey Business Journal.)
"One example, of both a problem and a solution, is the Chrysler division of DaimlerChrysler. In the early 1990's, it shifted to cross-functional "platform teams" that managed the entire process of developing a new vehicle. Over all, these teams worked well, producing both successful new car designs and shorter development cycles. But the functional organization that had focused attention on producing and maintaining technical skills was no longer in place. Soon, technical experts found themselves working not with others of their ilk, but with manufacturers, marketers and financial experts on cross-functional issues. The result? A recurrence of quality problems that Chrysler had previously solved. The company is now attempting to turn some of its attention to increasing functional and technical knowledge by organizing "Tech Clubs," so that engineers in specific domains of car development can meet with each other and exchange ideas. In general, matrix structures such as these create attention problems; our innate focus on hierarchy and threat / reward does not match well with situations where it is not clear which dimension is the primary one. But Chrysler's Tech Club approach, a kind of "stealth" matrix, avoids this problem by giving only informal legitimacy to a second dimension of structure. It's important to understand that the balancing act here is not about power, but rather about attention; Chrysler needs employees to stay focused on the process of developing new vehicles, but not forget about enhancing their technical skills. The Tech Club structure seems to get that balance just about right." pp. 52
Just as Chrysler needed to redeploy "Tech Club's" to recapture the engineering capability that was no longer being developed in the "platform teams". And it would probably be safe to say the engineering capability atrophied under Chrysler's revised organizational structure. For oil and gas I see the potentially similar atrophy of earth sciences and engineering capabilities by leaving the Joint Operating Committee (JOC) as the only organizational construct and relegating the Military Styled Structure to "routine" tasks. The scientific capability and the strategic land base of the producer are two of the primary areas of responsibility that those members of a producers MSCC are providing. The nature of the MSCC is about the "firm", and the JOC is about the "market" to relate them back to the discussion around Professor Langlois' theories. Professor Winter takes these concepts to the next step with this quote.
"But the edge of production set is the edge of an abyss so far as technical knowledge is concerned: We there encounter the Great Unknown. When an attempt is made to introduce the phenomenon of technological change into this conceptual scheme, the theorist is almost forced to try to play the new game by the old rules. This means that certain production possibilities are suddenly extracted from the Unknown and added to the Known. There is ordinarily no analysis as to why particular possibilities rather than others should be thus discovered, and considerations of mathematical convenience determine, by default, the path of technological development is such a theoretical world." pp. 3
The oil and gas industry is not static. We are entering a time where the demands of the engineers and geologists is accelerating at a ferocious rate. Innovation will straddle both the JOC and MSCC organizational constructs. How much of these capabilities, innovation capabilities and scientific capabilities, are captured, managed, enhanced, tested, and redeployed within the JOC and MSCC? What I want to do here is ensure that the "routine" tasks of "transaction costs" and accountability are not the only responsibility of the MSCC. I would suggest the MSCC is the "research" and the JOC is the "development" in the traditional Research and Development classifications. This is an overall objective of this re-organization of the industry, to enhance the speed, innovativeness and capability of the producer and the industry. Professor Winter adds some more problems and opportunities to these concepts;
"But "knowing how to bake a cake" is clearly not the same thing as "knowing how to bring together in one place all of the ingredients for a cake". pp. 4
and
"Just to have a label, let us call this level of discussion of a technique the conceptual level as distinguished from the operational level discussed earlier. Two points should be made about it." pp. 6
Here we have a clear definition of the roles within the various organizations. Are you able to bake a cake, or know how to build a kitchen for the Chef to bake many cakes? Do you know how to drill a well, or do you know how to advance the science of geology and engineering? Professor Winter continues with some additional issues regarding the capability and ability of staff within these classifications.
"When a corporation president whose experience is in finance succeeds one who started as a production engineer, the technique that the corporation is using changes even before the new president makes his first phone call: The same procedures are now embedded in a new frame of experience and analogy." pp. 6
and
"Knowing your job' in such an organization is partly a matter of having the necessary repertoire of actions, and partly knowing which actions go with which incoming signals. Each individual has some ability to perform a considerably larger set of actions than are called for in his job, but to the extent that "practice makes perfect" he will acquire superior skill in the ones actually called for. [The man who graduated as a chemical engineer becomes gradually specialized first in petroleum refining and then in those particular aspects of particular refining methods that are central to his job.] As emphasized previously, a large part of any individuals conceptual understanding of his job consists of images of other peoples' jobs." pp. 7
Within the producer there will be those that are practiced at drilling wells effectively and those that conduct research effectively due to the nature of their jobs and previous experiences. The cultivation of two separate and disparate "types" of employees is not necessarily new, it is necessary that these be clearly differentiated within the producers JOC and MSCC. The interactions and communications between employees and particularly between the two organizational constructs is answered here:
"Any single individuals conceptual understanding of the firm in its entirety is mainly at an extremely abstract and aggregative level." pp. 7

"By far the most important coordinating and organizing force is the invisible interlocking structure of mutually consistent expectations held by the various members of the organization: Each correctly expects that he will receive familiar signals from the others, and will respond in the familiar ways" pp. 7
These last quotes emphasizing the tacit interactions that are so prevalent in today's organizations. Dr. Winter then quotes directly from Schumpeter;
"It is easy to see that the characteristic of being in a higher rank, the function of superintendence in itself, constitutes no essential economic distinction. The mere circumstance that ranks one worker above another in the industrial organization, in a directing and superintending position, does not make his labor into something distinct. (p.20)"pp. 8

"But we see at once that the necessity of making decisions occurs in any work. No cobbler's apprentice can repair a shoe without making some resolutions and without deciding independently some question, however, small." (p. 20) pp.8

"... insofar as individuals in their economic conduct simply draw conclusions from known circumstances -- and that indeed is what we are here dealing with and what economics has always dealt with -- it is of no significance whether they are directing or directed. (p. 21)" pp.8

"The data which have governed the economic system in the past are familiar, and if they remain unchanged the system will continue in the same way. (p.22)" pp.8
Winter then comments on the difficulties of how these definitions are understood by the "worker" as classified as the "manager" and "entrepreneur".
"In short, the manager of a firm, when the economic system is in an equilibrium circular flow, is just another guy who knows his job in a firm full of people who know their jobs. The firm in equilibrium knows the technique it is using because it is using it, and has been for some time past." pp. 8
and
"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.85)" pp. 9
Walking along this road will be difficult. The changes that are being realized and instilled within this software that we are developing will initially provide comfort to few. Change is a difficult and necessary action that is being driven, I suggest, by societies demands for energy, and peoples need to be "less" burdened by the demands of their work. I wrote extensively in the "Plurality" document about Dr. Anthony Giddens and Dr. Wanda Orlikowski and their structuration theory and model of structuration here. Review and familiarity with these theories will help to understand the role of change.
"The general emphasis in Schumpeter's work is, of course, on the entrepreneurial phenomenon in its most pure and dramatic form, where single individuals provide the leadership needed to bring about drastically new ways of doing things. But he does occasionally point out the essential continuity between these instances of dramatic innovation and the smallest sort of adaptation, to changing conditions." pp. 9

"Moral: Sometimes an innovation involving substantial technological novelty is much less costly and difficult than a change which, by standards external to the firm, is simple and commonplace. Viewed from inside the firm, technological novelty is only one among several reasons why an attempt to change techniques may involve large and unpredictable costs." pp. 10
Professor Winter moral provides some evidence that we are traveling the shortest route through these changes. I believe so. How much change the development and use of these systems brings about is unknown, however, the directness of our objectives helps in making the journey shorter, and potentially less painful. Professor Winter goes on in the document to note some principles of Neo-Schumpeterian Theory.
1) Contrary to the received theory of the firm, no sharp distinction can made between techniques known to the firm and those that are unknown. There is, instead, a quite continuous gradation from highly routine behaviour, to highly innovative behaviour. pp. 11
2) Relativity to existing routines: the only techniques which may appropriately be considered "perfectly known" to the firm are those it is actually performing, and has been performing repetitively. Furthermore, if we revert to the metaphor of Figures 3 and 4, the steepest part of the percent known curve is reached very quickly as the firm departs from its existing routines. Costs and uncertainties pile up rapidly for all but the most minor departures from well worn paths - even when the new direction is one already taken by other firms. pp. 11
3) A new method of production is a minor departure from an old one the the extent that (a) the repertories represented by the individuals currently in the firm contain the relevant skills, in roughly the right amounts, and (b) only minor "rewiring" is needed in order to create the interlocking system of signals and expectations that will evoke the appropriate actions at the appropriate time, (c) the relationship between the new technique and the old is correctly conceptualized by most individuals - so that planning for the change can go forward under largely correct premises as to who is capable of what. Similarity of list of ingredients may be a useful proxy variable for some of the considerations, but it is not a fundamental aspect of the closeness of one technique to another." pp. 11
4) Just as the fragmentation of knowledge in the firm makes innovation difficult and the consequences of attempted innovation unpredictable, nor does it tend to frustrate the economist who wants to predict the lines that innovation will take. The firm gradually "learns" a new method of production, vast numbers of details of the routines established will be determined by considerations that play no part in ordinary economic calculus, and may in addition be unknown to most of the firms managers, let alone to the observing economist. Not infrequently, decisions with quite major consequences for the firms future economic transaction will turn on such considerations. "Mere mangers" may behave predictably, entrepreneurs (and the organizations led by them) do not especially if the prognosticator directs his attention only to the economic influence on behavior. " pp. 12
Finally, as with Professor Langlois, I have abused the fair use of Professor Winter's copyright. As with Langlois, I am in contact with Professor Winter to determine what is required to make him whole under this phenomenal document. He leaves with a conclusion that resonates with my thinking of where we are headed too, and to a large extent why;
Thus a neo-Schumpeterian theory of the firm would be a historical theory in the sense that significant differences among firms would be regarded as historically determined; it would be a dynamic theory because only in the context of such a theory can the traditional problems of price theory be confronted anew, and, ideally, it would be probabilistic -- the existence of a multiplicity of unobservable factors that shape firm behavior would be explicitly recognized. Clearly, the program is an ambitious one, involving conceptual, theoretical and empirical questions of great difficulty. Success in building a new theoretical road can not be guaranteed, and the easier choice is to walk the old one. The question is how long are we prepared to content ourselves with a theory that is simple at the price of being simplistic. pp. 11
Photo Courtesy Kaley Davis

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Monday, January 15, 2007

A clarification of my contradiction.

In my previous post on the weekend, I stated that the industry should not fund the suppliers needs with the capital to build more rigs or capacity. And that would apply to all members of the service industry. The point that I was making is that the entrepreneurial and market forces are stunted by industry attempting to influence the market to get what it needs. The oil and gas producers need entrepreneurial activity to anticipate and provide the market with what it needs, when it needs it. The contradiction comes as a result of my asking industry to fund the development of these systems they need. How can I contradict myself in such a manner.

An important clarification would involve the difference between building drilling rigs and developing software. Software is a unique and important component in society, not to suggest that a rig is not. The business models are different in that all of the costs are in the up front initial phase, and the revenues are in the later phases. Software is intangible with nothing of value to leverage other then it's revenue stream. The purpose built software systems for industry needs should not be funded by capital infusions from the industry or venture capital. The funds necessary to develop these systems will be the revenue stream of the software developer.

The technical risks of the success of this software is highly dependent on the involvement of industry. If they have no skin in the game, then they are free to proceed in other directions leaving the development team and its potential investors in the lurch. By tying the industry to the funding in this manner also has them putting some skin in the game. Ensuring that the system gets built properly with the producers full attention.

Capital investment in software ceased during the dot com meltdown. The possibility of having someone stand up and finance this projects $110 million budget is laughable on the surface. The software is being built for the oil and gas industry and that is where the long term source of the software developers revenue will come from. Therefore, in my logic, revenue should also be used to develop the system. This method also reduces the producers costs by eliminating the venture capitalists costs and expectations.

Since the software business model is more long term, intangible and capital intensive then the drilling rig business model. This proposed model of revenue supported developments is the only manner that I should consider in taking on these developments, it is the only manner in which I have the full attention and support of the energy industry.

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Photo courtesy troels

Monday, December 04, 2006

Writing as an art form.

I enjoyed writing what I have called the final research report, it tops out at a little over 23,000 words and is the culmination of many of the ideas and issues regarding the oil and gas industry. One thing that I have learned, and enjoy about the skill of writing, is that generally the author does not know what he / she is writing about until such time as the work is completed in their mind, and they sit down and read it from cover to cover, literally for the first time.

I have experienced this phenomenon before in my writing. I thoroughly enjoy the final reading as there is some almost secret point that has been hidden deep in the subconscious that is being said in the words. I know I will be the first to see what that is, and it will be I who will be the most excited to discover it. This proposal did not disappoint.

The idea that came to the forefront is the copyright itself, and specifically, its application in what would be considered a unique way. The copyright has become a major sticking point with the industry and is deemed by myself to be of extremely high value. The point about ideas is that good ideas take an immense amount of intellectual effort to complete. The copyright is a monopoly granted to the writer for the lifetime of the writer + 70 years after death.

The point that I understood from my writing about the copyright is this. The copyright is far more valuable to industry then it is to me. My desire to keep it in tact and close care of it is also in the best interests of the industry. Why, for 2 reasons for sure, and their may be more, however, what I've learned in the development and writing of this proposal are these:

  1. The level of technical risk that is inherent in these developments is high.
  2. To focus the attention of the industry on the project owned by the copyright holder.
To expand on these concepts a little further, this copyright helps to focus the energy industries efforts on these software developments. For them to spend any money and resources on a pirated software venture would be wasteful and still born from the word go. Companies are not in the business of taking risks and the risks associated with sponsoring a pirated software venture are 100% in this instance.

Therefore industry is left with their resources being pooled to address, and mitigate the technical risks associated with these software developments. A handy benefit for the industry. From my point of view, I have done the industry a big favour by consolidating this intellectual property in one location. I doubt they will share in this opinion, however, it is time to start working together to solve these problems and building these solutions. I hope that they see this too.

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Sunday, November 26, 2006

Another McKinsey survey.

This survey is reported by Dr. Nicholas Carr on his Rough Type web log. (Click on the title of this entry to go there.) Noting that large percentages (61%) of companies in North America are on the verge of adopting SaaS (Software as a Service). Their motivation being, and it is a subtle point, that companies are moving closer to Dr. John Hagel lll's idea that industry will need to restructure as either;

  • Infrastructure Management (Firms like Genesys providing SaaS solutions.)
  • Innovation Management (The key role of the producer (Based on capabilities and oil and gas leases.))
  • Customer Management (The down stream business of refining and marketing.)
As I move to secure some of the residual budget allocation for 2006, I will be highlighting these points to the industry, I only hope they are listing to the volume of people that are speaking to these issues.

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Saturday, October 21, 2006

What is a Petroleum Lease Marketplace?

The final component of the proposal has been edited and the document is now complete.

Up until now we have not discussed what "may" be possible as a result of the organizational changes which are caused by a focus on the joint operating committee. Moving to the Joint Operating Committee (JOC) as an organizational model has an air of being too philosophical or intangible and thus there is a need to have some substance added to this concept. The following is how I see the manner in which this type of system will be developed to meet the needs of the oil and gas industry.

The Mineral Lease and associated agreements define and establish the rights and responsibilities regarding the lands and minerals described within the lease document. Looking at the Marketplace concept, these leases are bought, sold, traded, surrendered and pledged as capital in the oil and gas industry. Each lease provides to the holder the rights to those reserves and any associated production facilities. In short, the entire oil and gas industry "market" can be boiled down to these documents. These documents are the point where the industry and / or producer activity begins. The lease "market" in Calgary does not substantially differ from any other oil and gas marketplace in the world. What this proposed development is attempting to display and encourage is the virtual existence of an oil and gas market. Although initially limited in its geographic scope to the province of Alberta, many of the outgrowths of the system will be global in scale, with only immaterial differences in the reference values of the geographical data elements.

Given that the market for oil and gas leases is very large, the critical nature of this system will need to assume a number of variables that do not exist in their current form. If a producer has a lease that is in jeopardy of being surrendered, then the producer could expose the lease within the virtual Marketplace to determine if there is an interested party that may want to partner or purchase the lease and maintain it. Currently the scope of the offers to do business with the producer is limited to the extent of his or her personal network of interested parties. What if the lease was perusable and searchable by the entire market for a willing buyer? This system is designed to provide this environment to the oil and gas producer.

Taking the analogy of an exchange a little further, consider the possibilities of the Petroleum Lease Marketplace in terms of what this can do for a business. Search and discovery mechanisms could be built in as tools that would enable the producer to optimize the opportunities and hence the value of the lease. Data involving the prospective operation would be codified in the marketplace and the transaction processing would be an enabling capability and an inherent justification of the marketplace. This marketplace would then provide the means to collaborate on the methods of operation around the newly formed partnership. Where a Farmout / in, Joint Venture, Pooling or Construction Ownership & Operatorship agreement is facilitated in codifying the partnership based on the Petroleum Lease Marketplace Module. Adding secondary agreements (Novation, Area of Mutual Interests), Accounting & Operating Procedures as they are formed, agreed to, and counter part executed by the users of the Petroleum Lease Marketplace. This Marketplace will be the beginning of the industries commercial activity, establishing a base of software operations that would provide the producer with A.F.E., budget and operational programs. This system, ultimately, would be designed to facilitate the processing of capital and operating expenditures, revenues and royalties, based on the partnerships of producers needs and wants. This is the system that is being captured and codified in the Petroleum Lease Marketplace.

I have documented elsewhere the unique nature of partnership accounting for oil and gas. The business dynamics of each producer are so fundamentally different in terms of financial metrics and motivations. I have also described how the Partnership Accounting system mirrors the organizations needs. If two groups are partners and one owns the midstream assets that it in turn rents to provide access to these facilities to the other partners, the criteria for measuring and comparing results are different from producer to producer but the data is the same, only perceived differently. This is one of the fundamental aspects of Relational theory and is a tacit underlying theme in Java. Critical to the understanding of this system is that the metrics of each producer in a property are different and are directly related to each producer’s strategy and organizational capability. The difficulty in the partnership knowing the specifics of each producer’s motivations are unknown and not relevant to each of the other producers. The common interest that drives each producer is in harmony, as they are all driven financially to succeed. There is no conflict of interest because the motivation is consistent throughout the marketplace irrespective of the competing strategies employed by the different partners. And these unique features are relevant and evident to each producer in this system.

The Alberta Petroleum Lease Market.

The PLM is a database of the Petroleum & Natural Gas Leases for the land governed by the state, province or lessor. The lease, or concession, entitles the holder to the mineral rights and is the start of the process of exploring and drilling for oil and gas. This is therefore the natural place to start these software developments.

The lease documents are populated into the database to represent the mineral rights for the region. The population contained within the database would be those that are under lease, being posted, auctions and prospective lands. The level of detail of information queried and available by an authorized user is recorded and controlled by the system. The ability to then buy, sell trade or surrender these leases would be possible through a variety of transactions managed by the system. Or, in other words, a Marketplace is formed with its own community.

From here the derivative works of the Farm-in, Farm-out, Novation, Joint Operating Agreement and / or Construction Ownership and Operator-ship could be developed through the collaborative environment of the PLM. Additional documentation such as the operating and accounting procedures would be available to be negotiated, documented and counter part executed electronically in this collaborative environment.

The PLM would be a virtual portal that gives the producer, investor or employee access to the Lease, agreements and its associated history. It would literally be the area where people would log in via the Human Resource Marketplace in order to go to work. Having both a Private and Public interfaces to the data elements and functionality, a producer who has an interest in a certain area would be able to engage the owners of any lease of interest, on future business opportunities and from there, pursue subsequent operations extending the operations management, accounting and administration function. The marketplace is a place where the people will go to do business.

Employees and contractors could actively contact producers and investors to offer and provide their services to work as consultants in the day to day activity of the lease, or contract for drilling rigs etc. Adding additional software developments to manage the approval of AFE's, Mail-Ballots, Contracts, Statements of Operations, and Statements of Expenditures and ultimately providing a high level of on-line commerce.

All of these operations are derived through the Joint Operating Committee (JOC). As was mentioned in the preliminary research document the JOC is, the financial, legal, cultural and operational decision making framework of the oil and gas industry. Why not move the accountability for those decisions over to the JOC? This conceptual alignment has received immense tacit support by most of the people who are employed in the oil and gas industry.

The accountability is currently managed by the hierarchy because that is the only logical manner in which an organization could control their assets during the past 100 years. Now with the Information Technologies available for "Collaborative Commerce" (Harvard's term) the hierarchy is not necessary for the purposes of 21st century operation, particularly in oil and gas.

Another key point is the methods by which the energy industry would pay for these transactions. The producers would need to subscribe to the system and pay a nominal fee for each transaction. Or, alternatively an assessment can be made on each producer based on the number of barrels of oil per day it produced. Assessing $1 per barrel of annual production would cost a firm such as Encana to access the system approximately $700,000 per year. I can assure you that no employee or individual would ever have to pay for access to the system. The oil and gas industry revenue is in excess of $2 trillion. The employee's use is almost guaranteed due to the fact that the alternative is to work the prospective 80 hours or more that their jobs would take through the traditional hierarchical methods available today. This is the definition of Web Services and accurately reflects the threat of how things may be developed in the near future. Users are key and their productivity is the focus of their, and the software development, efforts. A capable software developer is critical to achieving these results. This proposal exposes the opportunity for the industry to build this software.

For the sake of clarity, the information within this module appears complex and an attempt to accurately reflect "what" and "how" this operates is my purpose. So, in summary, the PLM is a market to buy, sell, market, trade, assign. novate, post, bid, surrender, a working / royalty interest. Facilitating the electronic capture, management, secure and authorized access to the documentation regarding joint ventures, assignments, novations, sales, AMI's, of working / royalty interests. And establishment of joint operating committees - CAPL, PASC operating and accounting procedures, caveat registration, assignment of committee members, their roles, their responsibilities, delegations of authority, programs budgets, A.F.E.'s, Mail Ballots, Amendments etc.

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Monday, October 16, 2006

A different approach.

It could be argued that the focus of this research is a software product that falls within the classification of vaporware. And it does. However I would put some spin on the classic definition of vaporware and call this a clean slate approach to oil and gas systems. The category that this "product" is in is difficult to define and therefore difficult to build without the express support of the oil and gas industry. This final research report is an attempt at communicating these concepts far and wide within the oil and gas industry in an attempt to find an audience. The strength of the concept of using the Joint Operating Committee requires that every data element, every relationship, and every process be revisited and rewritten. New modules and marketplaces will be built to eliminate the old software classifications.

I am attempting to articulate a vision of what a new approach could do in the systems area. It certainly is vaporware as no group or company has ever approached the joint operating committee as the central organizational focus. How can I, as one individual, do all this work in order to make a viable system exclusively for the producers? The clean slate approach has to be communicated in a way that the system could and should be built in order to accurately describe its features.

I have identified several points that present future difficulties in oil and gas systems. Partnership Accounting, Human Resource Marketplace module, Petroleum Lease Marketplace module and the Genesys Technical Vision are the foundation of this final research report and are unaddressed by the competition. All these aspects of future software systems have to be addressed and neither SAP, Oracle or IBM have a solution or vision that is as compelling as shown in this research report.

To be more specific, the perspective of using the joint operating committee brings new and better ways of managing an oil and gas enterprise. From a systems point of view oil and gas has ignored and avoided the joint operating committee as it conflicts with the underlying purpose of the bureaucracy. Significant contradictions and conflict have crept into the oil and gas producers’ operations that results in the Joint Operating Committee being precluded from the systems used.

This project was originally proposed to the industry in 2004 as an $85 million software development project. The producer must ask itself,: isn't it more appropriate to keep your options open ? What if SAP and Oracle continue with their current offerings; will those be adequate in the future? A future with IPv6 capability? A further question that needs to be asked, and based on the work of John Hagle III and John Seely Brown, is : Are the proposed industry stratifications changing to be reflected as either innovation management, infrastructure management or customer management?
Is there an expectation or belief that the bureaucracy and its use of last century’s technologies can hold a candle to this vision? These technologies and the forces of change in all areas of the economy have to be addressed. Oil prices are up almost 300% will result in the reallocation of financial resources to support innovation. Organizations are constrained in their speed and innovativeness due to the bureaucracy and its refusal to accept the joint operating committee as the explicit form of organization. Constraints in human resources, field capacities and speed to market are real issues that jeopardize the industry.

We have consistently seen successful companies that were able to integrate technology into their strategy and form strong competitive advantages. A company such as HSBC. Homogenization on SAP is not a competitive strategy. I have now counted 12 calls to action from Harvard, Oxford Analytica, MIT, McKinsey, John Hagel III and John Seely Brown, Secretary Bodman, SEC Chairman Christopher Cox and a variety of others. Add to these calls the demands of the consumers. The time to act and put these software developments into play is now.

Ray Lane is a partner at Kleiner, Perkins, Caufield & Byers and a former president of Oracle Corporation. He knows what he is talking about. This entry will take you to a Business Week article that documents many important points. Two of these points I want to discuss in this entry, they are:

"The traditional method of selling big corporate software applications as multi million-dollar packages that take years to implement is broken."

"The 70% of startups out there that are trying to do what the big companies do, only better, faster and cheaper - it's a fools errand. The customers would like to buy that from a large company, so they’re going to lose out." Ray Lane

Surprisingly, perhaps, I think he is right on both counts. The large multi year, multi million dollar packages are the dinosaurs of the software world. Even Petro Canada tried to implement SAP and after $14 million gave up. It’s fallacious to try to retrofit the company to the software.

On the second point of Ray Lane's, stating that the startups will fail, is something that I struggled with at the beginning of this process and something that I think I can also prove is not valid in the oil and gas sector. The two points that I would assert in my defense is that I am the copyright owner of the methods and processes discussed in this research, and in the preliminary report. I published my thesis in May 2004. I have tangible evidence that the state of the art thinking was not as advanced as what I proposed in September 2003, and earned in the publication of the Plurality document.

Back in 2003 I concluded that the software vendors could consume themselves competing with new offerings and no one would have been able to secure a competitive hold in the market. The only manner in which to establish a competitive offering, I felt, was to own the intellectual property as the key competitive advantage. The copyright, and other forms of intellectual property are the only sources of value in this new age.

Secondly, if anyone thinks that a large vendor is going to be able to write the code for the Partnership Accounting, Human Resource Marketplace, Security, Petroleum Lease Marketplace module that I have spoken about in this report I think they would be mistaken in their expectations. What is needed is a clean slate approach and the heavy involvement of potential and future users. The day and age when the software innovations were brought to the industry’s door through the cottage software industry has ceased. The involvement of the industry in its software development needs is mandatory, and become an inherent capability

So on that basis I would agree and disagree with Mr. Lane. Intellectual property is the only method of securing any kind or competitive advantage in this new day and age. Those that attempt to build systems without their differentiation being codified and protected are in my opinion wasting their time. What is required to compete with this software is some fundamentally different basis of organizational structure for the software to define and support just as I have outlined here.

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Friday, October 13, 2006

Application Architecture: Appendix

The two hardware vendors that will provide the development environment are Sun Microsystems and Apple Computer. The following are some of the tools and products that will be incorporated into this solution.

The primary operating system will be Solaris.
The primary database for both development and deployment will be Ingress.
The tools used will be the Sun Microsystems family of open source Integrated Development Environments (IDE's). Consisting of Netbeans, Sun Studio Creator and Sun Studio Enterprise.
The build tool will be Maven 2.0 or better.
The repository will be Subversion.
Java v5.0 or greater will be the programming environment.
Java Swing and Java Web Start will be the default and only interface.

This application will operate as a "Software as a Service" (SaaS) that will be hosted on a number of geographical grids provided by Sun Microsystems. No hosting of this application will be done locally, but only through the grid offerings of the major tier one original equipment manufacturers, primarily Sun.

Java is the base programming environment. The reasons for the Java selection are its inherently strong security model, broad industry support and modern underlying technologies. It has been assessed as the most effective language to develop a comprehensive transaction oriented system such as this. Within Java, the Enterprise server that we have chosen is Sun Microsystems GlassFish open source offering. This is the first server to be certified based on Java V 5.0 and has the full backing of Sun Microsystems and the open source communities. Java also contains the Mobility Environment, which deals with the programming environment on cell phones pagers, and other devices that this proposal sees as becoming both prolific and ubiquitous. In the oil and gas industry the ability to monitor and control any and all of these devices will become mandatory and this is where Java has had substantial success with well over 1 Billion installed Mobility Environments.

As the technology vision denotes, IPv6 is a cornerstone of the Genesys application. This therefore will be secured through the grid provider.

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Thursday, October 12, 2006

Free like a puppy.

In this section I will describe the benefits in terms of free or open source software. Genesys as an application will be made available to be downloaded, reviewed, inspected and tested but not compiled into an application. The only fully compiled application will be the one all the users will access via the Sun Microsystems operated network and grid. It is critical to the producers that they have this free access to the code upon which they are operating their firm. The ability to freely verify the software code is unlimited. Industry needs a software capability that is as transparent as possible. As the licensee of the application, Genesys, will have the rights to publish the code in this manner. What is suggested is not that dissimilar to what Sun Microsystems does with their software offerings. It is an objective of this proposal that the code of the operating systems, database and specific application available to be inspected by anyone. This will not encumber the copyright of the software as no one will be licensed to run the actual application.

The best way I can think to describe how I expect the code to develop is it is free, not as in price, but like a puppy that is following its own thoughts and direction, a direction that is under the control of its users. A direction that everyone involved in oil and gas has stake in, but no specific individual or group has control of.

Harvard Professor Jeffery Sachs made an interesting point in the PBS Series "The Commanding Heights" by Dr. Daniel Yergin . Throughout the six hours of video, Professor Sachs was consistently called upon to identify and resolve the economic issues of individual countries. Bolivia, Russia and Poland were three of the governments that Sachs consulted with. In each case it became quite obvious that the solution was unique and therefore had a specifically crafted solution. Not a solution that would be assumed to be appropriate for each and every country, but a "custom" designed method of dealing with the countries issues. I draw an analogy to this "custom" oil and gas solution to note that the unique attributes of the energy industry need to be captured and resolved.

These unique oil and gas attributes (the joint operating committee) are not recognized or considered in SAP, Oracle or IBM. These oil and gas applications therefore preclude their respective vendors from the opportunity to ever provide a solution that might be considered adequate. Their basic designs were to provide the original equipment manufacturers and supply chains with a solution.

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Wednesday, October 11, 2006

Human Resource Marketplace

More editing.

The Human Resource Marketplace is derived from the software's prospective user base of eligible oil and gas workers. Its purpose is to provide global access to the human resources the oil and gas industry needs to conduct its operations. Organizing the volumes of people and making them readily accessible by other users from interested producers and joint operating committee's. The Human Resource Marketplace will be a free resource for its users and is part of the overall system that will be financially supported by the oil and gas industry.

The population of these software users will include the full scope of the professions, trades and skill set found in the industry, and its suppliers, regulators and governments around the world. These users are the critical resource to the success of this system and the oil and gas industry. They are the driving force in defining and demanding the types and quality of software applications they need to operate effectively in the oil and gas industry.

As has been stated elsewhere, the ability to access the necessary human resources is a challenge for the energy industry. This challenge is expected to increase as the brain trust of the industry begins their retirement. Industry already is taxing the maximum amounts of employee time and is actively competing on the basis of lifestyle benefits to acquire and maintain talent. This proposal assumes that industry agrees with this author's opinion that people want to be more effective at their jobs. Enhanced employee effectiveness is best achieved through higher productivity and this proposal shares these concerns of industry and its employees. I am boldly suggesting here that the condition of employee effectiveness begins with the effective reorganization with these objectives in mind. The process of creating more creative, productive and innovative oil and gas workers needs to be planned and implemented through this software development proposal.

What this proposal offers industry is a software development capability. An ERP software development capability that sources its application development's leadership, direction and functionality from its user's involvement and demands. It is these users who will demand and expect the necessary software applications be crafted and built from the developers employed by Genesys. Creating a virtual environment where developers and users collaborate. Building a new generation of software systems based on the reorganization of the industry around the Joint Operating Committee.

The Human Resource Marketplace user's interface will be their gateway to completing their task's, fulfilling their roles and responsibilities to the Joint Operating Committee's that actively hire and engage their skills. Each user will have free and unlimited access to the Human Resource Module to manage the:

  • Marketing of their skills.
  • Day to day interactions with other users.
  • Managing and completing their work.
  • Accounting, billing and banking services.
  • Work orders and contracting with producers.
All access will be controlled by a high quality security system that ensures access to the system is by authorized users only. It will ensures all access is accredited and verified as to their accessibility. Included in this verification will be:
  • Educational transcripts.
  • Verified and supported employment references and documentation of their Curriculum Vitae.
  • General ranking and task capability. (See section on Military Command.)
Once accredited it will be up to the user to maintain their on-line presence and work environment. Representatives of the producers will have access to source their employee needs through the Petroleum Lease Marketplace module and or Partnership Accounting described elsewhere. It should be evident that this module is conceived as the major point of contact for the user working in the oil and gas industry. All the primary transaction and document access, creation and processing is done, from the user's point of view, through this portal.

Specific technical attributes of the Human Resource Marketplace module.

This application will manage the Genesys domain name for users based on "first.lastname@genesys-energy.com". This will be the manner in which people access their work and tasks, eliminating the need "to drive to the office". This portability of the user creates issues regarding the level of automation adopted by industry. Manual processes will be limited in the virtual world, primarily due to the need to present data to many different users simultaneously. Efforts through this application need to be focused on this point. If a firm requires paper pushing employees in the future, they will have no competitively sustainable business, and potentially no business partners. Nonetheless to help with this transformation of the working environment, Google's Tessaract OCR (Optical Character Recognition) engine will be embedded within this application.

Each user, producer and joint operating committee will have access through their specific portal (Human Resource Marketplace, Petroleum Lease Marketplace and / or Partnership Accounting modules). Therefore security at the portal has to be of the highest grade and quality possible, has to capture these needs and most importantly the security module needs to be built first. To layer in a management security requirement after the system has been built will prove fruitless. The security module specifications and possibilities that exist today are such that the type of security level that can be achieved will be more then adequate for the needs described here. As this system will also be operated on Sun Microsystems grid, a higher level of security is achieved and provided. Security is the first priority for this system.

The Human Resource Marketplace will provide:
  • Modules for marketing their products and services. These will consist of blogs and Wiki access for each user to actively promote and market their skills and services to the full range of producers as represented in the joint operating committees, service providers and employers.
  • Access to community based Wiki. (Specific areas for Accounting, Geology, Engineering, and Land etc.) Including glossaries, dictionaries and other reference material pertinent to the oil and gas industry.
  • In the military command section of this proposal there is discussion surrounding how the command and control of the hierarchy is replaced. The command and control issue is resolved by adopting a military command type of structure. The rank and role that an individual will have with respect to its client producers and assigned joint operating committees that make up the users "place of employment".
  • Search module access (Google appliance) within the user's authorized domain.
  • Project management module consisting of a variety of project management, calendar and task management.
  • An RSS pool / reader.
In short, a social network for the oil and gas industry worker to access and manage the work they are doing. It may appear that the service will take on a "MySpace" type of atmosphere and that would be incorrect. The purpose of this environment is that the presentation to the other users is based on your professional life, not just a social aggregator.

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Tuesday, October 10, 2006

Security Model / Module.

And more back from the editor.

Security Module

This module concerns all user access to any and all markets / modules contained within all of Genesys. The important element of this discussion is the methods, procedures and types of security provided here will be the first order of business in the development of this software. Clearly identifying and implementing the highest level of security is the objective and this can not be implemented after the fact or after any of the software is developed.

Therefore, in summary, security includes:

- Elliptical encryption technology via Solaris on all communications. ( http://research.sun.com/spotlight/2006/2006-02-13_ECC.html )

- Sun Solaris has now released their "ZFS" file system providing historical and 128 bit file storage. ( http://www.sun.com/bigadmin/features/articles/zfs_part1.scalable.html ). The benefits of using Solaris is that it provides new and critically needed tools for the general user community. "With ZFS, Sun addresses the important issues of integrity and security, stability, and difficulty of administration". With 128 bit addressing there is no limit on the amount of files the system can address. With the global scope of this application, and mission critical nature, it is necessary to have this level of capability.

- Single Sign On (SSO).
- Global access on all public and private networks.
- UserID, Password, Authentication and smart card.

- Encryption and signing keys for documents and transactions are separate from those that are provided for access and security.

- Contacts - LDAP access to all registered users located throughout the world.

IPv6's inherent security model that provides IPsec, the protocol for IP network-layer encryption and authentication.

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Is the Joint Operating Committee Revolutionary?

And more from the editor.

Is the joint operating committee organization focus revolutionary?

Unequivocally Yes.

Using the definition provided by NASA scientist Dr. Robert Casanova, (Click on the title.)

"Revolutionary paradigm shifts are simple, elegant, majestic, beautiful and are characterized by order and symmetry.”
The comments that I have received personally regarding the value of the concept consist of the "well of course" type. People realize immediately the value of the concept. Over time their thinking moves them to make comments like "this solves the majority of the administrative issues in oil and gas." Or "It's an entirely new discipline." On the strength of the concept the rewriting of the entire energy industries software to a more efficient paradigm is possible. Every data element, relationship or process is affected by this change.

I think this concept is revolutionary, and here is why. I can see each element of Dr. Casanova's description of revolution in the overall concept of using the joint operating committee as the organizational construct. It also dovetails well with the current technology offerings, is consistent with many people's technological visions and a variety of academic theories. It is simple; it could solve many difficulties in oil and gas, and provides a natural element of both order and symmetry. My vision of the ease of how the solution gets built in terms of functionality, logic and process reflects this simplicity.

In oil and gas there are many legal documents that support and define the Joint Operating Committee and these have been in place since the beginning of the industry. Industry associations, codified processes, documents, and the many legal agreements form the legal foundation of the industry. The strength of these documents and procedures form the culture of the industry and establish normal and acceptable practices of operation, decision making, financial accounting and reporting. This is global in scope and systemic throughout the energy industry.

The area where the joint operating committee fails is in the accountability framework. This has long been the domain of the hierarchy. And now the hierarchy is failing in providing the shareholders with adequate and effective controls. This has become such a problem that the U.S. congress has implemented Sarbanes Oxley to provide the assurances the shareholders need. Clearly Sarbanes Oxley is not working well and provides little comfort to the shareholders at large. Form my point of view the legislation has done little outside of reinforcing the entrenched bureaucracy.

What would happen then if the tax, SEC, FASB and Sarbanes Oxley accountability's moved to the joint operating committee? Would there be a greater alignment between the decisions being made? Yes, most definitely. When accountability is separated from operational decision making, difficulties occur and are presented. There is no one responsible for the bad decisions and no one can trace the good decisions to their source. After a period of time people begin to realize the time and effort necessary to make a difference is not worth it and very quickly stop trying. Not the proper attitude of an innovative producer.

It is my belief that the development of this system will enable the industry move further and faster. Innovation is the driving force behind this final research report and proposal and the industry is the primary beneficiary.

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Monday, October 09, 2006

Tacit organizations and creation nets.

More from the editor.

McKinsey Consulting, John Hagel III and John Seely Brown have published a series of articles which touch on "Creation Nets" and "Tacit Organizations". This is a summary of the articles as they apply to this research proposal. Much of what is said is a direct call to action and I have selected this article to stand on its own with respect to how the industry could and should be re-organized.

"Tacit interactions are becoming central to economic activity. Making those who undertake them more effective isn't like tweaking a production line."
This article states that tacit interactions, consisting of collaborative and complex problem solving, are the primary means of future economic value. The majority of these interactions are found in western-based economies and are conducted by those that earn higher salaries. The article goes on to say;
"During the next decade, companies that make these activities - and the employees most involved in them - more productive will not only raise the top and bottom lines but also build talent based competitive advantages that rivals will find hard to match."
and
"But building these advantages won't be easy: companies must alter the way they craft strategies, design organizations, manage talent and leverage technology."
Today the technology exists to collaborate at a basic level. In the next ten years the development of collaborative applications will enable those firms that choose to increase these tacit interactions, with "competitive advantages that rivals will find hard to match."

McKinsey goes on to better define what is meant by tacit interactions noting "the searching, coordinating and monitoring activities required to exchange goods, services and information". The developed economies are finding the volume of tacit interactions are growing faster than in any other category or job description. Increasing to the point where they are taking up almost half of the resources in certain industries. The developing world is not far behind and has opportunities that could match the developed worlds pace in a very short period of time.

Automation of the business process, or transactional activities, does not augment the performance of tacit interactions. How a firm may increase those tacit interactions and increase performance is not well known or defined at this point.
"But that must now change. Executives will have to learn to innovate, and manage in era when tacit interactions dominate and drive performance."
Facilitating the opportunity for people within your organization to increase tacit interactions requires the management to provide the tools for people to do their jobs. In oil and gas, I would suggest that direct participation of all members of the joint operating committee, collaborating in a virtual environment is a part of the Genesys application being developed. Each engineer, geologist, administrator and developer are there to represent their companies' interest in the area. Collectively the groups are able to collaborate and have the software support their thinking and decisions with tools that handle the business end of these interactions. For example, if it is determined that a sand frac is to be used on the well the following processes would be invoked:
  • the contracting firm is chosen
  • a purchase order is created
  • a contract is made
  • the invoicing and payment for those services are completed
These are all as a result of the decisions made by the joint operating committee (JOC). This frees employees to conduct a greater volume of tacit interactions and innovations that are necessary to meet the market demands for energy.
"Workers engage in a larger number of higher quality tacit interactions when organizational boundaries (such as hierarchies and silos) don't get in the way, when people trust each other and have the confidence to organize themselves, and when they have the tools to make better decisions and communicate quickly and easily."
McKinsey has conducted a survey of 8,000 companies and determined that certain sectors had higher levels of tacit interactions. Within each industry the number of tacit interactions was widely variable and appears to have a direct correlation to the overall performance of the firm! McKinsey goes on to say;
"The need to move forward is both substantial and urgent."
High levels of tacit interactions were consistently shown to have built substantial competitive advantages. These advantages were difficult to be replicated by competitors as their "power lies in the collective company specific knowledge that emerges over time."

McKinsey goes on further to state that these require a;
"New Management Science"
and
"Require changes in every facet of business, from hatching strategies, to organization, to managing talent, and leveraging IT."
The Genesys systems will be developed with the joint operating committee as the organizational construct and focus. This will enable high levels of tacit interactions and collaboration throughout the enterprise, the partnership in which the JOC is represented, the industry as a whole and the individual professional groups.

Consistent with the need to revisit all aspects of the firm, McKinsey believes the role and purpose of strategy and its development take on a higher importance than they once did. This becomes the critical task of senior management to provide the overall scope of interactions and their derivative innovations. This implies that innovations occur at the front lines of the business, not in the management ranks. The means that companies use to enhance the volume and value of tacit interactions is captured in the following;
"Tacit interactions reduce the importance of structure and elevate the importance of people and collaboration. Some of these changes are already underway. In many companies people now come together in project teams, address an issue, and disassemble to start the process again by joining other informal teams. In fact this approach is common in certain professional services and engineering firms, so their organizational charts rarely reflect what is really happening in them. Hierarchy busting has been a theme in the business press for years, but the pace of change has been slow and its effectiveness questionable."
The technology that companies will need to employ is fundamentally different from those used today. In addition to the enhanced communications, these technologies needs to be brought into context for the next ten years that McKinsey suggests these changes will occur. This proposal provides a technical vision that is necessary for these interactions to grow in unpredictable ways. Key will be the asynchronous process management and its ability to mirror the unpredictability of events as they occur.

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