Lets assume for a moment that we have built the capabilities necessary to provide an alternative means of organization to the oil and gas industry. And the investment community, furious with our friends the bureaucrats, decide to proceed with our alternative. What would be their first step in dealing with us.
It would be to implement a service level agreement between the industry and People, Ideas & Objects for the providing of the systems, software and services. And it is at that point that I laugh and point out to them, I or People, Ideas & Objects only work for the user community. You’ll have to speak with them in terms of what you’ll need. It would be hypocritical and condescending for me to entertain a service level agreement with industry when we have taken the efforts to build the user community.
It is the user community that is defining what and how the software needs to be and that is what People, Ideas & Objects is working towards. I will never have an agreement with the industry. I will issue invoices for the use of the Intellectual Property contained within the software, the services of the user community, and the cloud computing infrastructure. It may be that the industry will have service level agreements with service providers but I only have end user license agreements with those people for their use of the software, and no other business with them. That will be their choice as to how they run their operations.
If the industry wants to have elements of their organization included in the People, Ideas & Objects software then they will have to involve themselves in the user community. This is what makes the People, Ideas & Objects user community so effective, it has power. They are not a committee that have been established to make it look good for some purpose other than for good software. The user community first of all has revenues. A total of $333 to 667 million in the initial development phase. They will be able to budget what they do with that. People will be able to specialize in terms of being user community participants.
Secondly users will have the power to make the changes in the software. People, Ideas & Objects Revenue Model is based on change. Without change we would generate no software development revenues. We are oriented to change. Ours is a fundamentally different basis in which to base our software product on. Therefore the user community will have the software development capabilities of People, Ideas & Objects to affect changes that they need and want, when they want. They will be the ones who determine the configuration of the software. Not the technical architecture or some business cycle.
Thirdly the user community will have the power that they are the ones that are in control of the business model. Changes to the underlying Intellectual Property can be made by anyone and everyone in a model that allows free access to those that are licensed in the user community. Use of the Joint Operating Committee is a powerful model that solves the administrative, accounting and operational issues and opportunities of the industry. And it is in the hands of the user community.
And as we have justed pointed out the user community is the point where industry deals with their issues and opportunities. The user community is the exclusive point of contact for industry to deal with their administrative, accounting and operational issues and opportunities. There will be no other place for industry to go. People, Ideas & Objects is mute and dumb other than to the user community.
What we have configured here is a fundamentally different, far more powerful user community to deal with the way the oil and gas industry is operated. The oil and gas producers can certainly participate, that is their choice. A choice they should make quickly.
When I mean the industry I mean the individual oil and gas producers. Participation is imperative for them if they want to proceed with the developments around the Preliminary Specification which includes the decentralized production model, the Joint Operating Committee, the three marketplaces and the eleven modules. And in turn achieve the most profitable means of oil and gas operations. Non participation in the user community will preclude the producers from the benefits of the software, the user community and the service providers.
But there is more. Non participation will also make it that the producers particular requirements, your unique way of administration, accounting and operations are not accommodated or considered. That none of the software is built for the situations that your company has experienced. And that premier asset of yours doesn’t have the software to handle the particular nuances of how it makes money. The bureaucrats will say they have it covered with their current administration, and they do, to the extent that it makes money today.
There is also the fact that your people are not participating in the user community itself. I expect the user community to be dynamic and fast paced with significant iterations being made over the business model that uses the Joint Operating Committee. Your people won’t know what these changes are and they won’t know what the implications are to the assets that you hold. As an analogy you're the four year old that has closed his eyes and covered their ears and shouted they’re not listening. Yours will be a very effective strategy.
Your shareholders will be wise to your actions and wonder why you are not participating. Is their profitability not an issue with you? Or are you unaware of the technical progress that has occurred in the past 20 years. They will have questions and will need answers.
One answer might be that it is best to sit out and see how things develop. I think in this case sitting on the side lines will be the tragic choice. You should choose to be in or out and have your reasons, but to sit on the fence will be the worst choice of all. When the user community iterates on the model in the first phase of development the software will be quite advanced. More advanced than your organization can handle or understand. The user community and the developers will not stop iterating on the model. What you will find is that the ability to catch up doesn’t exist. The software will be bringing in new concepts and features on top of the previous features that you didn’t participate in, and therefore can’t understand or implement. Leaving you unable to make the transition.
This sounds very similar to President George Bush’s claim that you’re either with us, or against us. You have to chose. There is no middle road. And I am sure that the bureaucracy could all decide that they are against participation in the user community. Their reasoning would be financial they don’t want to pay the fees to get to the point to where they can participate. But there will be a day when the decision is taken away from them and the investors can assert their needs for profits. And demand that the Preliminary Specification and associated business models be implemented in the industry. Until then we will keep building the user community that will eventually build the alternative means of organization to what the bureaucrats feel is acceptable. Then we won’t need either. The producers in their unprofitable form, or the bureaucrats. Just the investors and the user community is all that will be required to establish a profitable oil and gas industry.
I was in a record store the other day. No scratch that. There are no records and there certainly are no stores. Technology has disintermediated that business. Apple did it with iTunes their iPods and iPhones. Steve Jobs disintermediated a few industries. What People, Ideas & Objects, the user community and the service providers is doing is disintermediating the oil and gas business. Ending the life of the archaic business model that no longer supports any of its users needs and ceases to build value for its stakeholders. Disintermediation is necessary, no industry will be immune, and timely. We are scheduled to commence software developments in 2019 which gives us five years of user community development. Enough time to be able to provide an alternative means of organization to the oil and gas industry. And we will finish developments for our first commercial release in 2021 and be operational on the software in 2022. That is our plan and we have much to do.
Just today deep down in the Oracle organization a developer, using D-Trace solved a bug that had been present in the code of the Solaris operating system for over 20 years. This was done with no fanfare, no recognition other than a few high fives with team mates. The technological infrastructure that we are using as the base for People, Ideas & Objects has matured, I would say about five years ago. Matured to the point where something like what we expect of the technology can be done. To do it five years ago would have required superhuman strength. Today it could be done much easier, however it would still require a hope and a few prayers. In five years time kids will be assembling this kind of technology out of gifts that they get from Santa Claus.
A bit of an exaggeration but you get my point. There are no large technical issues that need to be solved. Everything that we need to do can be done with today’s technological infrastructure. There is no technical risk in our business. If you look at the last two keynote addresses by Larry Ellison at his Oracle conferences they reflect his absolute brilliance. Although there are no large issues to resolve it hasn’t stopped him from moving the technology forwards in significant ways that will make our job faster, better, smarter and higher in quality. Five more years of this and we will be able to do anything that we as a community can think of.
I mention this as this technological infrastructure is what is enabling the disintermediation of the industry. It will be a new oil and gas industry. One that is limited by the user communities imagination. One based on the Preliminary Specification and built from there. This is the opportunity that we have in front of us in the next five years. The user community has the power as was documented in this vision. No one is going to grant you approval to proceed. We will act in our own best interests and provide the oil and gas producer with the most profitable means of oil and gas operations. Those are our limits.
As a group, the user community has some specific tasks that need to be completed in the first iteration of our development. These apply only to our initial development and will change once the software is operational in the marketplace. If we look at these tasks from a global perspective we are taking the Oracle Fusion Applications, applying the vision of the Preliminary Specification, developing and integrating that across the industry. In terms of technical risk, I assess the project as moderate, we are using proven technologies on a very large scope and scale. The vision within the Preliminary Specification is comprehensive and has the benefit of unifying the user community in the appropriate direction for successful implementation.
The first step in this initial development phase is therefore to implement the model that is the Preliminary Specification. This vision provides the broad outline of what and how the applications need in order to operate. The details of how each individual's work needs to be handled is the work of the user community to fill in, define and ensure that our developers provide you with the systems that you want and need. For example, if you are working in an area where the Material Balance Report is part of the domain of your work. You will collaborate with others to determine what is required, ensure that it is correct and iteratively develop the functions and processes that will be managed by the software and the service providers. In many ways we are capturing the manner in which the industry operates today from an operational, administrative and accounting manner and redefining it around the Joint Operating Committee and the vision of the Preliminary Specification.
What we don’t need in this first iteration is to have any innovation completed by the user community on the business models contained within the Preliminary Specification. What exists today in the vision works in terms of its global perspective. It may appear that in some small area it might be better to change an element of the model to accommodate some other condition. What we will not know is if this change will upset the global perspective and put the overall vision out of sync in terms of its operational capabilities. The first iteration is not a time in which to innovate on the business models of the Preliminary Specification.
What we can do, and what brings about the greatest value from the model is exploring and implementing the interactions and implications of our model. When we move to the Joint Operating Committee as the key organizational construct of the producer. We are changing every aspect of the oil and gas producer, the industry and service industry. Not much is unchanged in terms of the effects of implementing the Preliminary Specification. The interactions and implications are where the dramatic value is generated for the various stakeholders in our targeted market. It is here that I expect to see the value of the model to be in the forefront of the user communities search for delivering on that value in the first iteration of the development.
Once we have the software fully operational in the marketplace then we will be able to innovate on the model, and determine further interactions and implications within the various domains of our operation. We are focused on providing the oil and gas industry with a dynamic, innovative, accountable and profitable oil and gas producer. This requires that constant change be part of the user community and service providers. People, Ideas & Objects Revenue Model is structured to generate revenues based on changes within the industry. That is the dynamic that keeps this community moving forward. Software has the effect of becoming concrete to an organization. Turning it into an unchangeable beast. If an organization needs to change, it is the software that needs to change first. And in order for the software to change, the user community has to be the ones that make the changes through the mechanisms they have to affect that change. And in People, Ideas & Objects that is our user community vision.
The power in which the industry is operated. That is who is running the show is currently held within the bureaucracy. That low pitched hum which is occasionally interrupted by the grinding of gears is the quiet droning on of our favorite people. If you want to make a change to the business model in which the industry operates? You’ll have to talk to, well there is no one. And there is no way in which you can make any changes. It is what it is. You muddle along and hope for the best. The industry has always survived and will be around tomorrow, so just carry on. The problem is it isn’t working anymore. Now that may just be my biased opinion, but the industry has a problem with its profitability. And the bureaucracy has no answers.
What I have proposed is that we replace the bureaucracy and put in place the user community and People, Ideas & Objects. It will be this user community that will have the power to effect the changes to the business model that the industry operates on. What we have proposed is the Preliminary Specification and the decentralized production model as a start. The control of this business model will be in the hands of the user community. It is they who will have the power in the industry when the bureaucracy is removed from the landscape.
It is also the user community that the industry will turn to in order to have their changes made. They will be the ones to go to, unlike the bureaucracy who have no one. The user community will be able to take the industries input and effect the changes in the business model to accommodate the industries needs. That assumes of course that the industry and the specific producers participate in the user community. The user community is open to all within the industry, however, there are requirements of the participants.
The user community also has a budget. And not just any budget, a budget that is similar in its makeup to People, Ideas & Objects budget. Please review our Revenue Model for a better understanding as to the differences in our budgets makeup. In essence we are not blind sleepwalking agents of anyone who will feed us. The Revenue Model is based on the Intellectual Property of the Preliminary Specification which determines what is required in terms of software development, as dictated by the user community, and the user communities costs. It is those determining factors that set out the budget for both organizations and then determine what the fees will be for the producers to use the software. The software and user community that provides the producers with the most profitable means of oil and gas operations.
These three components make up the fundamental power that the user community has. Control of the business model, the key point of contact for changes, and their own budget based on its needs makes this user community not your grandfathers user community. With this power comes the associated responsibility of operating the industry. And providing the industry with the most profitable means of oil and gas operations. One day the bureaucracy will be gone. They will either fail or just give up. Either way the industry will be looking for an alternative means in which to operate. I am proposing that we organize ourselves on this basis.
We have at this time selected the Oracle Fusion Applications and the complete Oracle stack of technologies as the technological base for our solution. We have a product vision contained within the Preliminary Specification. And now we have this user community vision in which to build the user community to operate the industry upon. I think we are a formidable alternative to the bureaucracy. We need to organize ourselves to make this opportunity real. The industry, I think, is in desperate need of a solution and the bureaucracy has no plans, hopes or prayers.
Now for the relational database geek in all of us I provide you with the videos of the last two keynote presentations of Larry Ellison. These are very technical. And if you don’t understand what it is that he is talking about I suggest you take some time to learn what it is that he is discussing. Understanding relational databases will provide any participant in the user community with a better knowledge of how the system is put together. It should almost be mandatory understanding. And the best place to get that understanding is from C. J. Date, An Introduction to Database Systems
Here are Larry Ellison’s last three keynote addresses, all are must see viewing for members of the user community.
The 2013 keynote is only available on Oracle's website here.
2014's keynote is available here.
Its true that not everyone will qualify to work within the user community. This applies to both the leadership team as well as the general community. We will be looking for certain individuals that are unique in their skills and understanding of the oil and gas industry. That is a given. And the diversity of those skills will make up the entire scope of the oil and gas industries administrative and accounting needs. It is these skills and understanding that are the primary concern that need to be addressed in the work that is done by the user community. The ability to analytically breakdown the processes and design new effective ones that are consistent with the Preliminary Specification is not something that will be easily done. That is why we have costed this work in our budget at the $195.00 / hour rate for the user communities participants. We are looking for people of that calibre.
As I noted the primary concern is that the user community participant be trained and experienced in the disciplines that fall within the administrative and accounting areas of oil and gas. However, we expect that there will be a strong element of Information Technology aptitude that will be inherent in their skill set. Particularly in the two areas we have mentioned before of relational databases and Java. Having a good working knowledge of these technologies, on top of your current skills, will make the design and development of the software, which will be your job after all in the user community, that much easier and better. The importance of this IT aptitude will make a significant difference in the quality of the People, Ideas & Objects Preliminary Specification in many different ways.
First it will permit you to better understand the issues and opportunities that the technology provides. What is possible to you as a result of the Oracle database, its deployment in a cloud computing environment and Java from a conceptual level offer interesting new perspectives and dimensions in ERP software. To add these to your tool kit and be able to employ them, either to use them as a service provider, or to ensure that the producers who use them are provided with the most dynamic, innovative and profitable means of oil and gas operations, should be of concern to all within the community.
Secondly your ability to communicate with the People, Ideas & Objects developers in their primary skill set will be necessary to enhance the communications between yourself and them. It is easier for you to understand the elements of these concepts in relational theory and Java then it is for them to comprehend the full understanding of the oil and gas industry which is represented in the entire user community. Therefore to enhance the communications between the developers and the user community it is by far the easiest for the user community to speak the language of the developers. As there is no way in which the developers are ever going to understand fully the scope and scale of the oil and gas industry which is contained in the entire user community.
This understanding of the technology may take three or four university level courses in order to acquire the type of understanding that I think is necessary. Thankfully we are not looking to start this type of development work until we are funded by industry in January 2017. Which provides ample time for you to acquire that knowledge if you should choose to do so. Think of it as an investment in order to earn those handsome hourly rates. The thing about providing the oil and gas producers with the most dynamic, innovative and profitable means of oil and gas operations. Is that you are able to prove substantial value propositions such as what we have. And therefore, as a result everyone benefits monetarily.
Our discussion has focused on the development of the user community and why that is needed to replace the bureaucracy in the oil and gas industry. What I wanted to talk about today is the first real ingredient of the user community in terms of its needs. And that is leadership. For all intents and purposes the user community is a separate organization that is driven by its own vision, purpose, community and stakeholders. Therefore the leadership is an aspect that needs to be developed from those who commit to the overall vision of the Preliminary Specification and desire to provide the oil and gas producer with the most profitable means of oil and gas operations.
And there will be two types of leadership that make up the user community leadership group. There is the organizational focused leadership group that will be focused on what the needs of the user community are. Secondly there will be the leadership group that provides the continuous leadership in terms of the business model for the oil and gas industry. This will include the twenty or so Product Owners who are responsible for either a specific module of the Preliminary Specification or an element of its development.
This is the hard work of developing an organization that meets the needs of the software, the industry, the service providers and most importantly the people in the industry. To build an application on Oracle Fusion Middleware and Oracle Fusion Applications can be done by anyone with the money to do so. To add a vision as compelling as the Preliminary Specification to the mix adds a lot of value to the process. However, building a user community to define and support the Oracle and People, Ideas & Objects software will ensure that this environment becomes successful for all concerned. And that is the only manner in which I will continue with this software development project. It would be nice to have the financial resources to spend our way to building the user community. And maybe one day that will happen. But with the bureaucracies attitude towards us that is a non starter. We therefore should look forward to a process of building this user community brick by brick and stick by stick. Based on our capability of providing the oil and gas producer with the most profitable means of oil and gas operations. One day the resources will be there and we can begin these software developments. However we are not in control of that timing at this point so we must do what we can do, and that is organize ourselves for the eventuality of developing the software.
McKinsey Consulting have a good article on the topic of leadership entitled “Change Leader, Change Thyself.” And within it they have an exhibit that I can’t reproduce. You can download the article and view the Exhibit for yourself. Its the one that details the roles and responsibilities of the CEO, CFO, COO and Human Resource Officer. Their focus of attention, their source of power and their sweet spot. It is those roles that need to be filled in the user community as an organization before we begin development.
Other roles that will need to be filled are the 20 or so product owner roles we mentioned earlier. These are fascinating roles that take a premier seat in the software development team. They are the ultimate representative of the user community for the scope of the teams development authority. So if the team was developing the Partnership Accounting module the Partnership Accounting Product Owner would ensure that the user communities needs were understood and implemented in the software by the People, Ideas & Objects software development team. Having expert knowledge in the area, in this case partnership accounting, the Product Owner is able to interpret the user communities needs and desires and increase the effective communication between the user community and the development team. Ensuring that no misunderstandings or confusion between the groups cause delays or faulty software.
These are just some of the obvious leadership roles that are necessary in the user community. As we proceed we will begin to put more elements of what is required and how we expect things to develop. However if you have any comments or concerns don’t hesitate to contact me or use the comment feature on this blog.
We have consistently asserted that we provide greater value to the dynamic, innovative and profitable oil and gas producer over what the bureaucracy is providing today. Our focus on developing the user community, its leadership and the associated service providers is our primary task in the next five years. We do this as we are striving to provide an alternative means of organization to the oil and gas industry. So that the oil and gas investor, and the people who work in oil and gas can choose the bureaucracy or People, Ideas & Objects Preliminary Specification, the user community and service providers as the method to manage their industry. Organizations don’t change. Therefore without alternatives we are stuck with the bureaucracy. If we don’t work towards building an alternative, nothing will change. And just as organizations don’t change, people do. And this is the place where people can begin the process of changing the oil and gas industry from a tired, poorly performing, muddling along behemoth to a dynamic, innovative and profitable industry.
We have documented within the Preliminary Specification how it provides over $705 billion in opportunity costs over the current bureaucracy. There are additional benefits that are not quantifiable that can be gained from the tools of specialization and the division of labor. It is a new way of operating the oil and gas industry. And as we have stated here before. Even if the bureaucracy could park their own selfish self interest and wanted to proceed with the developments we would not begin until the user community was fully formed. The Preliminary Specification is a fine vision of what the industry can operate as. However without the user communities involvement in the software developments it will be a great vision without the appropriate implementation. There must be strong user community involvement in the software development of the Preliminary Specification. It is mandatory, and as I have pointed out the user communities development is our current number one priority. We have set this long time frame as we are without the support of the industry. The bureaucracy are challenged by the Preliminary Specification. They are eliminated from the landscape by it and therefore don’t want to be part of it. Therefore they will not support us. And therefore we have to build the user community brick by brick and stick by stick. And that takes time.
We have set out the 28 leadership positions of the user community that we are actively seeking to recruit today. These people will form the leadership team and help to develop the user community over these next few years. In preparing an offering for people to make a decision to go with our solution. And what that is qualitatively and quantitatively is unknown and unknowable at this time. We need to figure that out. We have however proven that we provide substantial value over the status quo. And the logic is compelling. People can see where and how they fit in within the industry quickly and begin to effectively and efficiently do their job. Using the Joint Operating Committee is a very natural way of organizing the oil and gas industry.
What compels someone to even think that we need to develop an alternative to the current way things are done. I don’t know, and as I have indicated this has been a long term prospect for me. What I do know is that it doesn’t sound so crazy anymore. Industry after industry is being disintermediated by Information Technology. And that is what we are doing here with the Preliminary Specification. And it is timely from a business point of view. The prolific nature of shale reserves is demanding a new business model be generated for the oil and gas industry. A business model that deals with the resource abundance and price destroying nature of producers producing unprofitable production. A business model that deals with allocating production fairly, based on profits and doesn’t harm a producer with shut in production with excessive G&A costs. A business model like the Preliminary Specification supported by the user community and the service providers.
There are significant opportunities that lay ahead for the people who participate on the leadership team of the user community. They will have a hand in developing the organization that defines the manner in which the oil and gas’ business model is defined and supported. As we have noted before, the motivation for participation is the power and the money that the user community and service providers will hold in the new oil and gas industry. That’s the upside, and for the individual members of the leadership team, this upside will be significant. There are however some risks, and most of all the costs associated with participation in the user community in any one of the leadership positions.
The first cost that you’ll incur, particularly in the short term. Is that your connections that provide you with your source of income, whatever that is, a job, revenue in your firm etc. will be at risk to dry up faster than you can say “what happened?” The bureaucracy doesn’t mind acting out against individuals and when they see an individual who is taking a position that is counter to their long term benefit they act swiftly and ruthlessly. If you need your job or are happy with your company you should think twice about a leadership position. Leaders are expected to suffer for their cause. And this will be the primary way in which you will suffer. I can almost assure you that you will not survive in your job or your business if it is discovered that you have taken a leadership position in the user community.
The upside is that you’ll have significant amounts of time to commit to the user community. The next five years will certainly draw in your time and tax your savings while you pedal backwards in your life while everyone else moves forward in theirs. This can be a difficult thing for some people to sustain. To maintain the necessary focus on the job at hand while their ship is being torn apart by the storm. Do you continue on where the sailing “might” be better or turn back to port. This takes a certain type of fortitude and is not the domain of the majority of the population. It takes a certain type of person. An “A” class entrepreneur I would suggest.
The prize is that there will be revenues that are established in the user community. In the current budget the user community has a budget of $333 to $667 million for the software development costs of the Preliminary Specification. These are for the initial commercial release. As we have indicated before People, Ideas & Objects and the user community are based on the changes that are required in the industry. It is those changes that are the source of our revenues. People, Ideas & Objects and the user community are very much going concerns for the long term.
In addition the members of the user community are the ones that are establishing the service providers who provide the administrative and accounting services to the oil and gas producers under the decentralized production model. It is estimated that the revenues for these service providers for the North American oil and gas industry will range in the area of $40 - $60 billion per annum. These revenues are a replacement of the current G&A costs of the producers. It will be the leadership team that would have the primary opportunities in configuring solutions within the user community and the service providers. Therefore the known risks that were indicated in the earlier part of this post are not without their significant potential rewards.
People, Ideas & Objects have a reasonably high profile with the bureaucracy. If your name should show up as being involved in this project, not something that we would do first of all, they would attack you and anyone who shared that name with you. We can do this quietly. And protect people as much as possible. The Internet will provide us with some anonymity for some time. It also reduces our costs to the time involved in this project. So if you can hold your position and work on this project outside your job, all the better. We just need to realize that we operate in an extremely hostile environment that is very dangerous to those who participate here. And we need to take steps to ensure that no one is subjected to the bureaucracies antics unnecessarily..
We have discussed the career risks to those that may take the plunge and join the user community in one of the many leadership positions that are open. Today I want to discuss what it is these people will be doing if they do join. And what impact they will have on the oil and gas industry in the mid to long term. It would be my opinion that the work that is being done in People, Ideas & Objects and the user community will be some of the most interesting work that has ever been undertaken in the oil and gas industry. Few opportunities of this scale would come around within the lifetime of an individuals career, if at all. I have stated before this may be a once in a century type of opportunity.
The bureaucracy has been the prevalent form of organization in business since they took over from the merchants in the late 1800’s and early 1900’s. What we are doing with People, Ideas & Objects and the user community is retiring the bureaucracy and replacing it with a new form of organization primarily focused around the Internet. This is the trend that is happening in all industries as the Internet is capable of providing greater efficiency in terms of the management of our organizations. This is the scale of the changes that are being made through the implementation of the Preliminary Specification and the development of the user community.
To participate in this level of revolutionary change. That is on such a scale, is a once in a century type of opportunity. The opportunity to take today’s prototypical producer firm and convert it to the one that operates under the Preliminary Specification and the user community doesn’t exist. The scope of change necessary is beyond what is humanly possible. The forces of inertia from the bureaucracy would need to be fought at every step and our energy would be wasted in such battles. So we chose not to concern ourselves with such battles and instead rely on the forces of creative destruction to make the choice between the performance that the bureaucracy provides, and the solution that we present here with the Preliminary Specification and the user community.
The transition from the bureaucracy to the Preliminary Specification may be as a result of successful producers buying out laggard firms that refuse to change. That is the normal course of change as a result of creative destruction. We don’t know and we certainly don’t care. What we are concerned with is that we provide the most profitable means of oil and gas operations. And with the Preliminary Specification we already have a material difference in our value proposition. This will be the focus of the development of the user community and particularly the leadership. One area of our value proposition that we are unable to quantify is the value that we will be able to provide the dynamic, innovative and profitable producer due to the toolset that we implement within the Preliminary Specification. And that toolset currently consists of automation of the business process, specialization and the division of labor. With the configuration of the industry into service providers there is ripe material here for the ability to significantly add more value to the industry.
So it is these topics and areas of focus that will be the domain of the leadership within the user community. Very high level, once in a century type of work that will be something an individual can highlight their career with. The changes we are making are dramatic and will have a material effect on the performance, makeup and manner of how the oil and gas operates for the next 50 to 60 years. Foundational work that is material to how the producer performs, and since our organizations are a critical part of our society, healthy organizations lead to healthy societies which lead to healthy individuals.
Looking at the overall scope of what can be accomplished by the leadership team and the users in the user community. It is important to remember that the user community has the wherewithal to make this happen. This is documented in our user community vision and includes the money and power that the community has at its disposal. So it is one thing to define broad strokes of a vision of what is possible, as I did in last weeks posts. And another to provide that community with the means to undertake that vision. And I think those mechanisms are within the domain of the user community and its leadership team.
The Preliminary Specification provides a solid vision and workable framework of what an alternative means of organization could be for the oil and gas industry. It works in that there is no deficiency or major failing where there is a breaking down in logic or implementation. It is a result of my vision of what could be, and a decade of very painful research. It is also incapable of providing the industry with the ability to be operated upon, as it stands today. It needs the input of thousands of others who work and understand what and how the industry operates. It is now time for these people, the users, to have their input into the process and build on the framework and vision that is the Preliminary Specification. I have nothing more to add.
This is the job of the leadership team as well. To guide the further development of the Preliminary Specification from its current framework to a comprehensive understanding of what and how the industry operates. With a detailed understanding of what jobs are required, what those jobs consist of and how those jobs are done. And how the software will be developed to serve those users. This needs to be done from stem to stern in terms of the number of people that work within the oil and gas industry. Earth science and engineers, land, legal and support people that are employed within the oil and gas producers. Administrative and accounting people in the service providers. And those people that are in the field and their head office resources of the service industry. This documentation needs to be comprehensive and complete.
And this work will be done with an eye to the understanding that the overall business models of the industry are under the user communities control. That to earn a profit and to be efficient is inherent in the software that the producer uses. That our societies today are structured and defined by the software that its people and organizations use. And that the user community is how the people within oil and gas and the producers use the software that the user community are responsible for. With this immense power comes immense responsibility for the leadership team. Oil and gas producers may own the oil and gas assets. However without access to the software that makes the oil and gas asset profitable, they have an albatross around their neck.
When the Internet came about in the mid 1990’s people saw the potential that this technology could have on society. As a result we had the technological boom in the late 1990’s that saw business models being rewritten by anyone with the ability to host a website. What subsequently happened is well known as the .com crash and the Information Technology field has not been the same since. There has been little in terms of employment opportunities. Businesses have not spent money in this area as it is perceived as a lost cost. And people don’t go into the field due to the generally negative feeling they get that technology is not necessarily the place you want to spend a career. What we do know about change is that change is always overestimated in the short term, and underestimated in the long term. We are definitely at the underestimating stage of the changes brought about by the Internet. What we are doing with People, Ideas & Object and the user community is what is necessary but also what is possible as a result of the maturing of the technologies in the past decades. The power has shifted, when will you.
We have been fortunate at People, Ideas & Objects to be able to quantify the differences between our method of organization and the current bureaucracies. Documenting the $705 billion in opportunity costs goes a long way to making our case for change. One area that is just as material in terms of the scope of change, however we are unable to quantify the differences, are the differences that are attributable to the toolset that we employ within the Preliminary Specification of automation, specialization and the division of labor. These will be material in their value to the dynamic, innovative and profitable oil and gas producer. Probably more material than those benefits that we are able to quantify today.
It will be up to the leadership team of the user community to ensure that we employ the toolset in the development of the user community and the Preliminary Specification. This will be a difficult aspect of their work in terms of how it is undertaken. With the reorganization of the industry and reduction in size of the prototypical producer. The service provider becomes a specialized provider who uses their division of labor to approach the entire oil and gas industry as their client base. This of course is an entire new way of organization and perspective of how things are done. The scope of the change is tremendous. The size of the G&A resources that are being shifted in this reorganization are quantified in the region of $40 to 60 billion per annum.
Our leadership will need to spend a significant amount of energy on this topic in order to make this transition effective. I suspect that, in time, the Preliminary Specification will be seen as a desirable method of organization by many in the oil and gas industry. The demand to proceed with the Preliminary Specification will be strong and we will need to have this issue worked out effectively in order to satisfy that demand. This may be one of the critical points that we need to provide to the investors to be able to satisfy them in their decision to choose the Preliminary Specification over the bureaucracy.
The monetary value from the specialization and division of labor changes would be significant. From today’s resource base the North American producers may be able to approach the concept of energy self sufficiency. A material increase in the continents throughput without any footprint increase in the size of the human resource base. How does someone quantify that value. But this is the value of specialization and the division of labor. The ability to increase production from the same resource base. And what we do know is that the producers have been unable to exercise any advantages from specialization and the division of labor due to the constraints of developing all of their capabilities within their organizations. By moving to an industry wide capabilities development we are able to fully exercise the value of specialization and the division of labor in the administration and accounting fields, and earth science and engineering disciplines. Applying this toolset to essentially very fertile fields.
Taking a process and defining it and managing it on the basis of an industry wide capability will need to be the focus of the user community and particularly the leadership of that user community. I think if we have a good answer for how we will conduct this operation and implement it within the People, Ideas & Objects Preliminary Specification. How it will be organized with the service providers organizations and the structure of their work. We will be on our way to convincing the investor and the people within the industry that our solutions is the better solution for the industry in terms of profitability for the oil and gas producers and the people who work in the industry.
What the oil and gas industry needs in the future is the means to deal with change. Change within the business model that it operates upon. Where the strategies, opportunities and risks can be addressed in a timely and effective way. What we do know about software is that it is the equivalent of pouring concrete on an organization. Software both enables and constrains organizations. The capacity to change afterward doesn’t exist unless capabilities to make the changes to the software are also built within the systems. People, Ideas & Objects are building the software development capabilities. However developers are blind and dumb when it comes to the actual activities of what and how people do their jobs in the industry. We need a user community to direct us. One that has the power and the money to be independent and proactive in the industry to solve the issues and pursue the opportunities that occur in the marketplace.
So that is what we are building here at People, Ideas & Objects, our user community based on our user community vision. A dynamic, innovative and profitable oil and gas industry has to be based on a dynamic, innovative and profitable method of organization, software, and user community. We have the Preliminary Specification which has the business models that provide the producer with those attributes. We will build the software that has those attributes once we have built the user community. What we need to do in the next five years is to build that user community that will lead the oil and gas industry and provide for it its dynamic, innovative and profitable nature.
To give an example of how this will work. The user community will realize that the shale reservoirs are creating a new dynamic in the oil and gas industry. One in which the marketplace is being flooded with the commodities. A new and unique situation to the oil and gas industry. What is necessary is for the oil and gas producers to move away from the price taker position and become price makers. This can be done through the Preliminary Specifications decentralized production model. Therefore it is decided in the user community to implement the decentralized production model into the software at the earliest possible point in time. This is how the industry needs to be managed. Effectively and efficiently through the user community that is being established here and now.
You may ask what it is that a producer is to concern themselves with? What they need to concern themselves with is to how to produce their oil and gas at the highest possible profit that they can. Focusing on their competitive advantages of their earth science and engineering capabilities, and land and asset base they have a scope of operations that is within the realm of what is controllable. Being a price maker is not within a producers controllable domain and therefore better left to the user community to deal with. Other issues that the industry face will be able to be parsed in a similar fashion. What the bureaucracy has traditionally left untouched in their muddle along strategy will now be handled through the user community.
It will be through the user community that the producer will be able to have their needs for both the controllable and uncontrollable domains satisfied. Operating software for an organization in the 21st century needs to be built to accommodate change. At People, Ideas & Objects that is what we have done. By building a software development capability that works for the user community we are able to meet the needs of the oil and gas industry in both their controllable and uncontrollable domains.