People, Ideas & Objects Part II

Research & Capabilities, and, Knowledge & Learning Modules.

Another aspect of the Research & Capabilities™ and Knowledge & Learning™ is that they are very unique to what the other modules in this specification are, and those within today's IT marketplace. These are not Knowledge Management modules as they were conceived in the mid 1990's. These will take more effort to "get right" by the user base, due to the many complex concepts that are being introduced. Much of the modules are applying the state of the art business management thinking, that although mostly unproven, is the definitive direction in which the energy industry needs to move.

The management science falls into the category of "interactions" which includes transactional, tacit knowledge, and transformational activities of the producer, its partners and the vendors or marketplace. Many of the modules specifications that have been published deal with the automation of transactions to free up the resources of the firm and market. The generation and application of ideas is the area that the innovative energy producer needs to have their resources spending most of their time. The producers and the marketplace will use these modules to obtain a window on these activities.

These modules are involved in the new "types" of jobs that humans can do far better then computers. Making judgments, based on good data and information, and deciding on the best course of action. Some of the best information in this area or discipline is provided by McKinsey Consulting. As such I have set aside some budget dollars for their consultants during development. One particular McKinsey document that has had significant influence in the development of the concepts in these modules is located here. It is also the main thrust of a McKinsey book available here.

Quoting the information in the article provides the best understanding of how these concepts are related. McKinsey sets the tone of where we are and where we need to be.

Productive professionals make big enterprises competitive, yet these employees now increasingly find their work obstructed. Creating and exchanging knowledge and intangibles through interaction with their professional peers is the very heart of what they do. Yet most of them squander endless hours searching for the knowledge they need, even if it resides in their own companies and coordinating their work with others.

Is the reason that oil and gas prices have reached such heights really the result of the poor performance of the hierarchy? In oil and gas we need to consider the legal, financial, operational decision making and cultural means of the producers who are represented in a JOC. Making McKinsey's point take on a particularly prescient characteristic. I think that McKinsey shows that all industries need to address their poor performance, not just oil and gas.

Today's big companies do very little to enhance the productivity of their professionals. In fact, their vertically oriented organizational structures, retrofitted with ad-hoc and matrix overlays, nearly always make professional work more complex and inefficient. These vertical structures "relics of the industrial age" are singularly ill suited to the professional work process. Professionals cooperate horizontally with one another throughout a company, yet vertical structures force such men and women to search across poorly connected organizational silos to find knowledge and collaborators and to gain their cooperation once the have been found.

To raise the productivity of professionals, big corporations must change their organizational structures dramatically, retaining the best of the traditional hierarchy while acknowledging the heightened value of the people who hatch ideas, innovate, and collaborate with peers to generate revenues and create value through intangible assets such as brands and networks.

Reflecting that there are many attributes of the hierarchy that need to be retained. The need is clear that the chain of command of the hierarchy needs to be emulated in some form of new organizational model. People, Ideas & Objects™ application has developed the Military Command & Control Metaphor™ to preserve the necessary chain of command and extend it over the producer companies representing the JOC.

Companies cannot only build this new kind of organization but also reduce the complexity of their interactions and improve the quality of internal collaboration by implementing four interrelated organizational design principles.

1. Streamlining and simplifying vertical and line management structures by discarding failed matrix and ad hoc approaches and narrowing the scope of the line manager's role to the creation of current earnings.
2. Deploying off-line teams to discover new wealth-creating opportunities while using a dynamic management process to resolve short and long term trade offs.
3. Developing knowledge marketplaces, talent marketplaces, and formal networks to stimulate the creation and exchange of intangibles.
4. Relying on measurements of performance rather than supervision to get the most from self directed professionals.

And McKinsey provides the reasoning "why" we need the Research & Capabilities™ and Knowledge & Learning™ modules.

The ideas underlying each of these policies may not be entirely new, but we don't know of any company that applies all of them holistically and this failure limits the ability to perform up to potential. A company that tries to simplify its vertical organizational structure without helping large numbers of self directed professionals to collaborate more easily might increase its efficiency, for example. But that would be more than offset by a decrease in its effectiveness.

    1. "Simplify the line structure."

The first design principle is to clarify the reporting relationships, accountability, and responsibilities of the line managers, who make good on a company's earnings targets, for all other considerations will get short shrift until short term expectations are met.

And offers a better alternative. 

Dynamic management and improved collaboration, as we show later, are better ways of accomplishing the purposes of these ad hoc structures. A company that aims to streamline its line management structures should create an effective enterprise wide governance mechanism for decisions that cross them, such as the choices involved in managing shared IT costs.

Research & Capabilities™ and Knowledge & Learning™ modules provide the energy industry with the implementation of what McKinsey is suggesting. The dynamic management, networks and marketplaces are critical components of these two modules. Initially these will be separate from the firms in order to "think" how best to build this software. With the stated objective of providing a clear and distinct break from the day to day of the bureaucracy.

    2. "Manage dynamically,"

What we have done in these module specification is to separate the "firm" and the "JOC" and give them mutually exclusive roles and responsibilities. Here McKinsey notes one of the key roles of the firm. 

    3. "Develop organizational overlays"

Using the Joint Operating Committee provides us with the alignment of the financial, legal, cultural, communication and operational decision making frameworks to the compliance and governance frameworks that have traditionally been held in the companies. The conflict that has occurred between the company and the JOC limited the speed and innovativeness that either could attain on their own. According to McKinsey the solution requires...

The JOC is represented by like minded producers that share a consistent motivation, financial rewards.

What is the difference between a social network and a marketplace? People exchanging things of value.

What's the best way of encouraging strangers to exchange valuable things? The well tested solution, of course, is markets, which the economy uses for just this purpose. The trick is to take the market inside the company.

Exchanging knowledge on a company wide basis in an effective way is much less a technological problem than an organizational one.

Key to enabling the marketplace is the producer. The producer however needs to understand where their competitive advantages lie. The land and production base is what they have to apply their earth science and engineering principles to. If every producer also had to develop the drill bits and rigs in order to drill their own wells, nothing would be accomplished. The adversarial position the producers have taken towards the field research and development has provided little of the potential that is available. By working within the marketplace to produce the tools and talents the producer needs to expand its competitive advantages. The producers will attain the value of the entire marketplace.

How can companies create effective internal markets when the product is inherently intangible? Among other things, working markets needs objects of value for trading, to say nothing of prices, exchange mechanisms, and competition among suppliers. In addition, standards, protocols, regulations, and market facilitators often help markets to work better.

In defense of the producers these areas and concepts are forming throughout industry today.

These conditions don't exist naturally, a knowledge marketplace is an artificial, managed one so companies must put them in place.

As is made clear in the Resource Marketplace™ module the talent that the producers need will be made available as it is required. This includes the intellectual property (owned by the marketplace) that will need to be developed by the resources of the marketplace, with the producers dollars.

Talent marketplaces. A company can create similar efficiencies by developing a talent marketplace that helps employees in a talent pool, either within a single organizational unit or across the enterprise, to explore alternative assignments varying from short term project to longer term operating roles.

and 

Companies must define the talent marketplace by specifying standardized roles, validating the qualifications of candidates, determining how managers receive the job seekers' performance evaluations, and so forth. The other requirements include pricing (the compensation for a particular role or assignment), and exchange mechanism to facilitate staffing transaction, and protocols and standards (how long assignments run, the mechanics of reassignment, the process of conveying decisions to reassign employees). Talent marketplaces to exist particularly in professional organizations but like knowledge marketplaces they are at an early stage of development.

and

The solution, for a company, is to boost the value of the network by investing in it and formalizing its role within the organization. A formal network relies on self-directed people who work together out of self-interest.

    4. "Measure performance"

This last area involves the next and last two module specifications. The Analytics & Statistics (Producer based) and Performance Evaluation (Joint Operating Committee based) modules will be the final two specification that are to be published in draft. I will expand on the McKinsey points in how to measure performance in that specification, and only highlight the key point here.

Professor Richard N. Langlois has provided the majority of material for this research project to date. His area of expertise is in the economics of organizations. Specifically he has pushed the science of the boundaries between markets and firms, transaction costs, dynamic transaction costs. To summarize his findings I quote from his May 2007 paper "The Austrian Theory of the Firm: Retrospect and Prospect. (Note this quotation is particularly salient for the need for the Knowledge & Learning™ Module).

The oil and gas industry determined long ago that the operational decision making framework was managed by the Joint Operating Committee. The conflict in the industry between the firm and the JOC needs to be resolved.  Research shows that by recognizing the JOC as the organizational construct that it is, and supporting the JOC through the development of People, Ideas & Objects application, will reduce this organizational conflict and associated issues. What Professor Langlois quotes above shows that by moving the knowledge to where the decision rights are held is the necessary change. Hence making this an objective of these modules.

An effective corporate governance process that allows experimentation in a controlled, business oriented environment may be the best way to summarize the purposes of these two modules. It is critical to fully understand and appreciate the significance of these types of modules. It is necessary to do a deep dive in the research done on the innovation blog, and the documents that are available in the library of the development wiki. There you will find most of the documents regarding the research done by Professor Richard N.Lanlgois, Professor Carliss Baldwin, Professor Oliver Willliamson and Professor Sydney G. Winter and others.

Preamble

A quick review of how the operation of an unconventional gas field is discussed in this summary. I will be expanding on the concepts and facts that are introduced in the story to better explain how these modules will operate. Before we get to far I want to make a few assumptions not made clear in the article. I assume that BP is not the only producer. It is reasonable to assume that a facility with such a large aerial extent has many joint interest owners. Lets also assume that the entire facility has been unitized.

The article states there are 750 - 900 employee / contractors working on the facility. 150 of which are BP staff. For the purposes of these two modules draft specification lets assume that there are 150 engineers and earth scientist from 4 other producers that have a financial interest in this facility. The scope of the Research & Capabilities™ module will therefore include a population of (900 - 1050) as a minimum. Recall the Security & Access Control™ Module provides access to the data, information, processing based on their rank, role and responsibility as defined by the producer companies of the JOC. The role and responsibility are augmented by designating a rank for a chain of command to exist in the facility.

What we are attempting to do is to focus the understanding of the entire industry into a variety of interfaces that provide the producers with the understanding of what their firms and the markets they operate have in terms of capabilities at its disposal. The Research & Capabilities™ and Knowledge & Learning™ modules then provide the means in which to engage these resources to the needs of the producers and the facilities they own. Also recall in the Petroleum Lease Marketplace™ Module the Capital Budgeting of the entire industry can be accessed in one database. The generic data, representing the producers intended capital expenditures by geographic location, provides the marketplace with a view of where the industry is heading and its long term needs. In turn, the producers, BP et al in the Wamsutter example, would be able to understand what the vendors capabilities and development projects are, which in this example the Wamsutter Operation is a subset of. To take this sharing of information between producers and the marketplace to its ultimate level of efficiency, the producers would then be able to sponsor the development of the innovative marketplace offerings.

Conversely, the JOC's understanding and access by the 600 - 750 contractors is managed in the Knowledge & Learning™ Module which contains information specific to the Wamsutter field and the population of firms and resources available for that facility. This is the deployment mechanism of the ideas and thinking of the producers for the field staff and contractors to act upon. (Think really sophisticated work ordering systems.) The domains of information in these two modules intersect between the BP et al staff, or all the producers in the unit, accessing a unique intersection of data and understanding. Enabling producers to apply what they know from other areas of knowledge on a field by field basis to control the "messy" aspect of innovation.

The last assumption that I want to introduce here is the energy industry is interested in the efficient and effective production of the facility. This therefore includes the accountants, management and other staff located at the contractor, vendor or supplier companies. These people, representing the total population of individuals that earn a living off the Wamsutter operation, either directly or indirectly, should have access to the necessary information and transaction processing of this system. Their costs are ultimately borne by the producer and it is therefore necessary that they are as efficient and effective as possible.

Innovation is a recursive constant in the scientific discovery process. The energy industry is a scientific industry, and is actively moving away from what I refer to as its banking mentality of the 1980's and 1990's, or the cheap energy era. As science is discovered, it is implemented in new and innovative ways, which can and will lead to further advances in the sciences. Innovation is also really messy. Firstly the risk tolerances have to be adjusted to accept some level of failure. Failure is the first step toward scientific discovery. Expect to see much more risk taking and failure in the future. This is the primary reason that the energy prices are transferring so many financial resources to the industry. To try things that are risky and may not work. People, Ideas & Objects™ Research & Capabilities™ and Knowledge & Learning™ are the means in which the experiments and understanding of oil and gas exploration and production are managed dynamically and applied in the most cost effective and innovative manner.

In the Wamsutter example property we have the 900 - 1050 employees / contractors working at the site or in the head office of the producer companies. This is a small subset of the total population of employees / contractors that may work in the Wamsutter Operation over the next five years. It is fair to assume that the total population of employees and contractors might total 2,000. These numbers and throughput bring a complexity to the entire operation that is how reality conspires to make life difficult.

This enhanced work order systems will need to ensure that the communication between the subset of workers is such that the Wamsutter, or any facility, is not reduced to the lowest understanding of a resource. Interfaces such as a Google Map of the facility. Overlaid with a schematic diagram of the physical assets and landmarks (roads, plants, compressors etc), and with GPS in cell-phones becoming ubiquitous, show the location of the resource, their phone #, email, role, responsibility and rank and the work orders they are executing. With 1,925 square miles to cover at the Wamsutter facility this simple Google based interface would help identify many obvious issues and opportunities. Taking the visual concept further, we could then represent many elements of data contained within the other module specifications. This could be implemented through a user selectable layering of the data they have access to. The perspectives being in the Research & Capabilities™ module as the firm, and the JOC view of the firm being represented in the Knowledge & Learning™ module.

Lastly as I have documented in the Resource Marketplace Module. The competitive advantage that a producer will have is their land and production base. The application of the earth sciences and engineering knowledge, understanding, and capability applied to their land and production base are the means in which to build value. TheIP (intellectual property) is how the market provides the commercial means of building the producers value. And IP is the markets way of building value.

The holding of IP within a producer company is redundant, of no value and an impediment to innovation. The market uses the tools of IP to prepare the state of art research and knowledge for its own monetary gain and competitive offerings. In the hands of a producer IP is useless. What would holding a number of patents on drill bits provide a producer? Or in my case the IP of using the JOC as the key organizational construct? Again in the hands of a single producer it makes the ideas unavailable and unusable. In the hands of an entrepreneur it can build value for the entire industry. Neither of these forms of IP provide the producer with any strategic competitive advantage. Nor does the producer have the economics of scale to make the innovation or discovery worthwhile. Until the producers realize this and accept it, the market will not respond to the needs of the producers if their efforts are in vein and the producer just hands over one vendors IP to another competitor. This practice will need to change before the producers can begin to approach the market demand for energy.

For the past number of years the management of IP by the industry has been catastrophic. Other then the large suppliers such as Schlumberger, BJ and Halliburton's ability to file for patents, most of the IP's owner has been ignored by the producers so that they do not have to grant the monopoly rights to the technology developer. Since the energy industry is a primary business and 100% of the resource value is received by them does not mean they can strip, cherry pick, abuse or otherwise attempt to steal the IP of the market. What is needed is the industry to provide the research direction and development resources for the marketplace to configure the solutions the producers ultimately need. This involves the producer actively investing in the marketplace. It's one thing to believe in the power of marketplaces and another to actively participate in them.

The Draft Specification - Research & Capabilities

How the industry accesses the new tools and methods of exploring and developing oil and gas belongs in what I am calling the Marketplace in these specifications. The motivation to create new ideas has to represent the entire energy industry as the market for that research or innovation. Holding the idea or development within one company provides no value for the industry. As I indicated earlier the market of one producer makes the idea of its development questionable. And, the resources necessary to develop it will lead to the failure of the oil and gas producer.

The competitive advantages of the energy producer resides in its land and facilities. Working in the Resource Marketplace module is how the market represents their ideas, research and development for the producer to view. There, one or many producers can find a tool or method that interests them and may choose to provide the financial resources necessary to fully develop the tool or method. The Intellectual Property would reside in the hands of the vendor and enable them to make a financial success, if possible, by marketing to the remainder of the industry. The days in which the energy producers would have 5 or 6 vendors providing them the same market offerings will decline. The costs of development, and theIP being closely held will limit the number of offerings, which is a benefit. This enables that vendor to acquire the concentration of producer resources to fully develop the device. This is the cost of making the changes contemplated in these modules. There is an inherent risk in the development of ideas. The only way in order to be of value in any marketplace is to give those with the ideas the motivation to try them.

Specific functionality of the Research & Capabilities module are;

• Complete E-commerce capability and support. (Both producer and vendor).
  • Contracting
  • Bidding
  • Invoicing
  • Payment processing.
  • etc.
• Interfaces to enable producers and vendors to research, develop and implement technologies.
• Interface for producer to view the capabilities of the marketplace.
• Comprehensive work order and project management tools.
• User based Search, based on the users rights, role and rank within the system. (Please note I realize this is expecting a state of the art enterprise search capability built within the entire People, Ideas & Objects™ application.)
• Rich media interface consisting of text, audio, video and any data element of which the user has access to in this application.

Innovation is a critical component of the capabilities and a key objective in this reorganization of the energy industry to use and support the JOC. It is also necessary for the industry to move closer to the suppliers and vendors. It is at the Joint Operating Committee level that these innovations are expected to rise (from a demand point of view). However research has discovered that the risks to the firms (the energy producer) in terms of its capabilities will fall into jeopardy. That to capitulate all of the science and innovation to the JOC would be a mistake similar to the problems diagnosed of Chrysler in the introduction of its "cab-forward design". Where Chrysler lost much of its overall technical and engineering capability in the transition. This is a risk that remains in the People, Ideas & Objects™ application that the Research & Capabilities™ module is designed to mitigate. It should be noted that the development of a tool or method within a producer company almost guarantees that the producer company will fail after spending so much time and energy outside of their core competitive advantage.

The overall vision and implementation of the scientific advances and innovations has to be managed by the producer firm, otherwise it will fail in its ability to provide the overall direction of where it and the industry should be heading. The producer company is where the "rubber hits the road" in the relationship between producers and vendor marketplace. Research in the firm will take on a new role in this type of application. I foresee most of the engineers and earth scientists being employed by the firms and accessing the most advanced tools and research capabilities and applying them throu their participation in the JOC's they have an interest. This is what will be required to build the exploration capabilities back to what they were prior to the cheap oil era. The field level research and development have to be built in concert with the changes in the producers.

The interface of these modules consist of access to several databases. Parts of these databases are in the "wiki" format and have enhanced functionality and capability. The access to the data and information consists of the publicly available information with the access privilege's as set in the Access Security & Control™ modules. Therefore the information contained within the databases will be limited to the access privilege's defined in the Military Command & Control Metaphor™ employed throughout the People, Ideas & Objects™ application.

The first database was initially introduced in the Resource Marketplace™ module specification and is the window on the marketplace offerings. As the understanding of the marketplace changes, each resource changes the information of their offerings and provide the information in human and RSS based consumption methods. As mentioned in the Resource Marketplace™ module specification the e-commerce capabilities are provided to support the transactions in the marketplace.

Additionally reflect on the databases that have components of this video on YouTube. This video reflects on the semantic web and what a "visual wiki" would provide. This an excellent demonstration of how the technology can assist users in perusing data and information and their connections. Powerset, Freebase and Thinkbase are tools that I have used that include data and information that is semantic and related. This is how the implementation of the knowledge and understanding of the industry and firm is captured and used in the facility etc. Note the tools are Java based and therefore are more of a function of that technology then of the individual companies. These database examples are only provided as a reference and example to the possible implementation.

Contract, bid, invoice and payment processing to manage both the producer and vendor marketplace. These e-commerce capabilities are developed in other modules and need to be available to both sides of the transaction in the Research aspect of the module.

Please note the addition of the file "McKinsey Capital Projects" located at the bottom of this page and in the Library folder "McKinsey". Some excellent thinking on some of these topics is contained there.

The Draft Specification - Knowledge & Learning

This will be the repository for the market or JOC's knowledge and learning. The objective is to move the knowledge to where the management and control are exercised, the JOC. Mckinsey notes in "Mobilizing Minds".

As employees exchange knowledge debate issues, and solve problems with one another, new knowledge is continuously produced. Reputations emerge as people continually produce valuable work products. 

This module is focused on the Joint Operating Committee (JOC) and provides a means to aggregate the knowledge held within the producer firms that represent the JOC. Effectively dispatching the redundant building of individual silo's of capabilities within each company. This will alleviate many of the problems in terms of the resource shortfall and retirement issues faced by the industry. Effectively pooling the talent, resources and capital of the JOC towards finding and producing oil and gas.

Using the various types of data and information to display what the JOC level of knowledge is, and, what deficiencies exist.

Specific functionality of the Knowledge & Learning™ module is much as the Research & Capabilities™ module;

• Complete E-commerce capability and support. (Both producer and vendor).
  • Contracting
  • Bidding
  • Invoicing
  • Payment processing.
  • etc.
• Interfaces to enable producers and vendors to research, develop and implement technologies.
• Interface for producer to view the capabilities of the marketplace.
• Comprehensive work order and project management tools.
• User based Search, based on the users rights, role and rank within the system. (Please note I realize this is expecting a state of the art enterprise search capability built within the entire People, Ideas & Objects™ application.
• Rich media interface consisting of text, audio, video and any data element of which the user has access to in this application.

The other aspect of this module is the Learning component. What does the property contained within the JOC need and have in terms of current knowledge. What are the current deficiencies and how will the future requirements influence the direction of their learning in mid to long term.

Clearly the power of ideas will resolve our energy difficulties. Aligning the resources with the knowledge and decision rights will enable the most effective means of field operations. Clearly the power of ideas will resolve our energy difficulties. Aligning the resources with the knowledge and Clearly the power of ideas will resolve our energy difficulties. Aligning the resources with the knowledge and decision rights will enable the most effective means of field operations. decision rights will enable the most effective means of field operations.

Areas of collective and personal learning. Interface to training vendors that are available, either on-line or local. These services are some of the possibilities of what the market can offer.

Performance Evaluation, and, Analytics & Statistics Modules