Preliminary Research Report

This text is the full upload of the preliminary research report. Copies of the reports .pdf can be secured by emailing Paul Cox at paul.cox@people-ideas-objects.com. Please note the following changes;

More information is located on the innovation web log and the publication of the Preliminary Specification.

Abstract

“Plurality should not be assumed without necessity.” This title does not appear to mean much until it is explained 

further. 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) 

This statement clearly reflects the times we live in today. The difficulties in business appear to be expanding exponentially and inversely to the capacity to deal with them. Change within organizations is difficult when the constraints of a hierarchy are imposed on the employees within that organization. Additional issues that effect the organization are accurately reflected in the following statement:. 

“What information consumes is rather obvious. It consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.” 

- Herbert Simon, Economist and Nobel Prize recipient. 

Research purpose

To test the hypothesis of: 

Research questions (In summary)

Genesys® perspective.

Several of the fundamental factors underlying the oil and gas business have changed. 

The scope of operations of an oil and gas concern is geographically, politically and scientifically diverse. The hierarchy limits the detail and focus to deal with the political and technical difficulties of each facility. Expecting an organization with these constraints to innovate is foolhardy. 

The hierarchy has created “Information overload”, which in turn has created a paralysis in decision-making, directly affecting the capacity to change and or innovate. The hierarchy’s bureaucratic, complex and conflicting lines of authority have muddled accountability. The ability to identify success / failure, to share those experiences, and to learn from them has diminished and is not progressing. Calgary, as a collective group of independent producers, is discovering constraints to its ability to drill wells in the prairies. How can an industry with these constraints consider the complexities of the geopolitical, technical and operational concerns in the frontier areas of oil and gas. 

Genesys® research results.

What’s the problem, the SJOC is operating as usual? However, the: 

Advantages of the SJOC. 

 

The scope of operational authority of the committee is constrained by the participants financial interest in the property. The committee’s formation is traditionally formed around a geographical area, is traditionally limited in its geological and areal extent. This naturally limits the focus of the committee to that facility. The SJOC is therefore motivated, and has the appropriate level of focus for the needs of an innovative organization. 

The disadvantages of the conflict between the SJOC and the traditional hierarchy.

 

Research conclusion.

The classic hierarchy’s useful life expired and its existence conflicts with the efforts and capabilities of the SJOC. 

The Industry SJOC is the “natural” form of organization for oil and gas where the participants of the committee are supported and augmented through the diversity and availability of the remaining organizations team members. A greater alignment to this conceptual model would facilitate the desired innovation. 

Qbyte, SAP and their competitors tacitly support the hierarchy and bureaucracy that obstruct alignment to the SJOC. And without explicit support for the SJOC, these ERP systems are inappropriate for an oil and gas organization. Genesys® research and software developments are the only opportunity for producers to acquire ERP styled systems based on the SJOC. 

Technologies dark side.

One significant and serious threat exists for the independent producer. 

The overall implication of the technology is the integrity of internal data will come into question. This research asserts the further implications of data integrity are significant with two possible outcomes: 

Or, 

It has been noted in this report, that after World War 1, the French were active in preparing for their future defense with enhanced thinking and infrastructure based on trench warfare. The Maginot line is famous for its failure, and reflects that companies need to consider different strategies for today’s issues. And just as Albert Einstein once said, that today’s problems will not be solved by today’s thinking, producers need to consider this report in a manner that considers the changing structure and methods of success in their industry. 

Executive Summary

Organizations require a new means of competitiveness for operating in the global economy. The standard 

operational strategies (focused on growth) are now limiting, and possibly exposing major societies to economic decline. It is this author’s opinion that growth should not be an objective, but is something that occurs as a result of doing the right things correctly. 

Enron and WorldCom achieved significant and spectacular growth and is testament to the misguided nature of pursuing growth as a corporate objective. Is innovation a key economic driver and operational strategy for the future of North American companies? Will a shift away from the focus on price strategies be replaced by quality and innovation as operational strategies? Will focusing on innovation lead North America to continue with its present influence and global position? 

Dr. Giovanni Dosi’s work defines the basis of innovation for a company to straddle the business cycles that they see themselves in. With the increasing pace of change and compression of business and product cycles, transition from one cycle to the next has become increasingly perilous. If innovation does provide the means to straddle these business cycles, then the innovation model developed through this research will be of significant value to Genesys® and its oil and gas clients.

 

Dr. Dosi assumes that the motivations for companies to pursue innovation are the traditional economic cycle and monetary in nature, asserting that there is an implicit return on investment in science and technology. He defines the areas where innovation occurs is in product, process and organizationally. Since this research project is based on organizational innovation on independent oil and gas producers, the need to discuss the Structuration Theory of Dr. Giddens and Dr. Orlikowski’s Technology Model are critical in the role of defining constraints and enhancements to innovation. Additionally, this research will be based on Dr. Noel Tichy’s writings on managing strategic change. How Dr. Tichy’s theories and models involve the cultural, political and technical motivationsbehind change. 

Dr. Dosi asserts that a technological paradigm involves a technical change of a specific technology. This research project is therefore to determine if the underlying development of information technologies has created technological paradigms that require changes in the organizational structure of oil and gas companies. This research proposes that the industry Standard Joint Operating Committee (SJOC) be configured as the center of the management function, where accountability, corporate performance and other management attributes fall within the domain of the operating committee’s roles and function. This research asks if organizational change can be facilitated through enhanced collaboration tools to support this revised structure. Has the abundance of knowledge, information, collaborative tools and information technology, with their inherent low costs, facilitated the technical paradigms that Dr. Dosi establishes as required for innovation, and provide the means to change the performance trajectory of the organizations? 

This research project reflects an opportunity for the internationally oriented, independent oil and gas producer to take a different approach. A means to mitigate the costs from learning and risk be shared jointly amongst producers. Collaboration between producers through the SJOC can innovate, experiment, affect change and take risks far greater then one organization can. Each participant to the collaboration will learn different lessons from innovations process of trial and error, but the costs are shared. Today too many companies are incurring the same errors and this is a major impediment to their competition on a global basis. Sharing of risk and innovation through collaboration allows each producer to learn the lessons of “how to do things and how to improve them” at less cost by the industry as a whole, and enables each producer to accelerate the technology trajectories of their firm in a manner that is unique to their capability. 

Enhancement of the capability of a producer to innovate is the desired objective of this research. The organizational structure is believed to be an impediment to the further progress of staff and society, and this is implicit in this research hypothesis. The liberation of the organizational structure through collaboration at the joint operating committee or SJOC is key to facilitating further innovation, shared risks, shared learning and shared costs across the producers involved within the specific facilities operating committee. It can therefore be stated that this research is to determine the viability of changes in the organizational structure of oil and gas, which would facilitate the innovation needed to remain competitive in a global environment. 

Considering the societal and economic changes of the past 5 years. Changes that include low interest rates, staff shortages, high-energy costs, abundant and low cost information and knowledge. These scientific and technical changes should create substantial technical paradigms, shifting trajectories and therefore substantial innovation that supports this research projects assertion that the ability of the North American economy to compete is based on innovation. 

The purpose of this research is to determine the validity of the hypothesis of how current oil and gas companies organizational structures are inappropriate for the future, and inhibit rather then support an innovative capability necessary of an internationally based organization. Employing Dr. Giddens and Dr. Orlikowski theory and model, the inappropriateness of current organizational structure is an impediment to the societal and human developments. That technology, which forms the duality of societal structures, employed in the fashion of this research, will provide a tangible opportunity for producers to innovate and progress. 

This research project establishes Genesys Software Corporation in the position of building on their February 2003 proposal by quantifying and qualifying the means for interested producers with a method to analyze their innovativeness, and better understand the effect and opportunity of innovation. The development and implementation of The Genesys ® Model of Strategic Innovation will be one of the direct outputs of this research. The Genesys® Model of Strategic Innovation, in addition to Genesys ®, February 2003 software development proposal, provide a significant opportunity for a producer to build on the impact and broaden the scope of understanding around innovation. 

It is therefore asked in this research: is the SJOC the basis of an Open Source style of organizational formation? Where like-minded groups comprised of individuals representing different organizations, meeting formally, informally, asynchronously, and in person. Manage all aspects of strategy, management and financial performance of a certain property? Should this be the basis of how the ownership, operation and construction of the oil and gas industry be organized? Is the addition of financial performance, accountability, full authority and responsibility at the operating committee a means to enhance a producer’s innovativeness? Will collaboration at the operating committee level facilitate the opportunity to innovate based on the criteria of Dr. Dosi’s as defined in this research project, and, instill the accountability, performance orientation, innovation, shared risk and organizational structure for the future of the global oil and gas producer? 

The complexity and risks involved in oil and gas will escalate substantially in the short to mid-term. The risks are systemic and based on the facts regarding the reserves and deliverability of the Western sedimentary basin, the arctic, offshore operations and the oil sands. 

A producer that participates in this research will receive a detailed report based on The Genesys ® Model of Strategic Innovation. Additional opportunities to participate in the Genesys® 

ERP software developments are part of the specific recommendations of this report. 

B a c k g r o u n d

In Dr. Daniel Yergin & Joseph Stanislaw’s (1998) book The Commanding Heights, the economic malaise that 

consumed most of the European countries in the period prior to WW2 was attributable to the capitalist’s comfort with the status quo. 

This status quo, and a well-defined class system, particularly in Britain, enabled capitalists to reap the benefits of their companies’ economic activity without the need for further investment or, more importantly, innovation. Yergin et al (1998) attributed the decline of this economic malaise to the majority of the European countries moving toward economic reforms in the form of government nationalization, planning and control of the commanding heights of each countries core market requirements. This level of planning initially spurred the European economies and was widely believed to be the appropriate role and responsibility of governments. These theories were supported by John Maynard Keynes “Keynesian” economic theories and thinking, and the fact the centrally planned industrial complex of the Soviet Union appeared to be more prosperous than western-based systems. 

This economic thinking coupled with market reforms in Europe led many countries to pursue various forms of communist, nationalist style governments and even in the United States, high levels of regulation. This Keynesian economic period began in the immediate post war period and continued into the late 1970’s and led to the fundamental reforms of the Reagan - Thatcher era. Based on Friedrich von Hayek’s economic theories, Reaganomics led to comprehensive market reforms adopted by Russia and China that now have the opportunity and economic structure to compete effectively in the global economy. 

During the 1990’s we began to see capital flow into the more risk-oriented areas of the global economy. This risk orientation was at the expense of what was considered the “old economy” and resulted in a feverish over expenditure in speculative and corrupt business models. This precipitated large-scale global economic fallout. This fallout being symptomatic of the occurrences of what this paper will describe as a global manufacturing capacity overhang, which is cited by this author for the purposes of this paper, as the cause of the current global deflationary pressures. However, was this capital orientation to risk incorrect? Or, did this level of capital investment form the basis of a third “revolution” in business and economics comparable to Keynesianism and Reaganomics? The thinking from the Reagan-Thatcher era now presents new issues, and begs the question: does the new economic revolution, or globalism, present a new basis for companies competing on a global basis? 

Over the past ten years we have seen a comparable revolution in thinking of all forms of international governments, western based or communist. This presents new competitive threats and opportunities for firms operating in this new global environment. Today companies need to make difficult choices. Do today's companies atrophy under the guise of harvesting during the regular business cycle? And is history repeating itself by North America being challenged by a potential new global leader, just as the United States challenged Europe after WW2? Or, does management actively invest in their organizations on the basis of new competitive advantages and take the appropriate risks to enable their organizations to evolve and adapt in this rapid, change-oriented environment. History reflects that in the period after WW2, companies involved in investing in market share and growth were rewarded with larger and more profitable organizations. This model of “growth” has become so systemic in most of western management’s thinking that it is easy to confuse an organization’s growth orientation with their purpose of maximizing shareholder return. (Enron and WorldCom.) With unending supplies of human resources in the Asian and Eastern European countries, this growth strategy only exacerbates deflation. 

Capital deflation presents two unique and difficult issues, which include: 

Consumers, companies and countries find their holdings in a never-ending spiral of decline in value, which is only contrasted by the never ending upward spiral of debt, and commitments valued at prior periods higher valuations. Capital deflation must be avoided at all costs. The never-ending economic decline can become permanently entrenched in the minds of consumers and make the situation only worse as time passes. Witness the approach of the Japanese to their economy. The government, acting on the response of their citizens, after 12 years of deflation and recession, has not implemented the necessary market reforms to deal with this deflationary economic phenomenon. The Japanese people are generally well off and continue to accept that they need not invoke any measures to deal with problems that are not evident to them. 

A new means of international competitiveness needs to be adopted by all companies operating in the global economy. The standard operational strategy (growth) is now limiting, and possibly exposing major societies to economic decline. It is this researcher’s opinion that innovation is a key economic driver and operational strategy that can augment a firm’s other strategies for the future. Innovation is an operational strategy that augments the other operational strategies of marketing, operations, financial, and human resource. Focusing on innovation will lead North America to continue with its present influence and global position. 

Some choices in this environment are simple to make, but for companies such as Air Canada, built on the thinking that consolidation of market share was the key to prosperity, change is difficult to consider, let alone implement. What basis of competitiveness can provide western economies with sustainable competitive advantages? How does a firm expand its capacity to innovate? What are the necessary tools and methodologies that enable a firm to augment their capability to ensure that their competitiveness continues to accelerate throughout their product life cycles? Is innovation capable of supporting the western economies in such a competitive environment? With Vietnam and China taking the most advanced telecommunications and other products of the West and employing them, their economic infrastructure are immediately competitive. 

The risks of not changing to a new economic model in North America are significant. Will organizations be able to stay in business? Is innovation the competitive advantage for the future of our western economies? What can a firm do to augment their innovativeness, and is there a method of implementing the appropriate procedures and policies to become innovative?

Or are we destined to rely on the competitive nature of the entrepreneurial methods of creative destruction? 

What are the ethical dilemmas for a firm that chooses not to pursue an innovative path? With the inherent loss in value, standard of living and employment, the ethical dilemma is clear and should be articulated to the managers to ensure that these tools and methodologies are clearly understood and implemented. 

Theoretical Basis of this Research.

Listed in descending order of importance to this paper, are the following theories: 

The first is Dr. Giovanni Dosi’s theory and his 1988 article “Sources Procedures and Microeconomic effects of innovation”. Dr. Dosi’s article provides a critical level of thinking and introduces many tools necessary to implement innovation. 

Secondly is Dr. Wanda Orlikowski’s Model of Structuration for Technology and Dr. Anthony Gidden’s theory of structuration, which states that society, organizations and people need to move in lock-step in order for successful advancement to occur. Dr. Orlikowski’s model asserts that a fundamental component of society is technology, that technology provides a duality and therefore is a constraint or inhibitor to successful advancement of society, people and organizations. It is this paper’s hypothesis that the hierarchical organizational structure is an impediment to advancement of the oil and gas company and society in general. 

Thirdly Dr. Michael E. Porter’s work in “On Competition” and “Competitive Strategy” and his strict application of competitive strategy. A further movement away from the focus on growth needs to be further emphasized and acted upon in oil and gas. Dr. Porter’s work has emphasized that growth is not a successful strategy since the late 1970’s, and the methods and tools that Dr. Porter has developed, which include the definition of clusters, provide a sound basis for reviewing critical components of an organization’s underlying strategy. 

Fourth, Dr. John Seely Brown and John Hagel III recent and comprehensive work on implementation and management of Web Services technologies. Dr. Brown is the former Director of Xerox PARC and has written extensively with John Hagel on the risks, opportunities and threats of the Web Services paradigm. 

Fifth is Dr. Noel Tichy’s management of strategic change and the definition of change agents. How leadership is a 

necessary component of change management. Where leaders engage and align the people within their organizations through technical, political and cultural dynamics. 

Globalization requires companies to stop investing for market share and growth through increasing capacity; rather, innovation is the way to increase value for organizations, people and society. Emphasis on growth has lead to over capacity in all the western economies and now runs the risk of a protracted deflationary depression as witnessed in Japan over the past decade. Businesses must maintain their competitive offerings by innovating. 

Implicit in this research project’s hypothesis is the capacity for the “old” system to provide growth is failing to increase shareholder value. This has presented a very precarious situation for large organizations in which errors in judgment, ethical behavior or market structures have the detrimental effect of being fatal to the health and independence of the organization. We have consistently seen large companies that have erred, and fail as a result. In a ruthless and unforgiving North American market, where do the companies move to mitigate or avoid these effects? 

Of note: participants in the Japanese economy have not taken any risks, live in an environment where protection of companies mistakes is mitigated by government policies, and no innovation, failure or economic growth occurs. Conversely, why have Apple and 3M, companies built on innovation, fared better then their competitors? Apple has demonstrated resilience and has come back from near death experiences, and 3M has consistently outperformed others in value generation, on the basis of innovation, for decades. 

One of the reasons cited for the former Soviet Union’s economic demise was the inability for the economic system (that propelled them to alleged greatness in the 40’s, 50’s, and 60’s) to accommodate change or innovation. Things were done because that was the way they were done. The lack of questioning and process inefficiencies continued until the system began to collapse upon itself. Are large organizations incapable of reforming and embracing innovation as a means of competitive survival? Enron lead the way with what was heralded as organizational innovation, only to be found criminal and eventually bankrupt. Since then the all time top three corporate bankruptcies have occurred in the United States and many CEO’s have been arrested and organizations shut down due to fraud and other inappropriate actions, a key example being the former accounting firm of Arthur Anderson. What is the cumulative effect of these occurrences, and are these parallel to the experience of the former Soviet Union? 

During the past 15 years we have also seen a fundamental change and understanding in the individual’s role within organizations. The trust and commitment of people in their organizations has diminished through systemic and chronic downturns, layoffs, early retirements, pension revocations and brutal downsizing. The emergence of the superstar CEO and escalating pay scales for senior management has had the dual effect of recognizing the value of intellectual talent, and, further eroding the trust and commitment of the staff within those organizations. Today we see Disney, which was one of the greatest companies built on the basis of intellectual property, challenged by key employees and contractual relationships with suppliers and partners. Pixar Entertainment, Jeffrey Katzenberg and the Current CEO are collectively more profitable then the entire capital and intellectual property base of Disney. This dissection of value continues unabated, and essentially unidentified as a detrimental trend to the health of large organizations. Is this the beginning of the identification of this capital dissection, and the beginning of the legal remedies necessary to mitigate insidious devaluation of shareholder trust and value? 

Microsoft faces it’s greatest challenge in the form of open source developed software. Independent, self-organizing teams working together, electronically, collaboratively, to build what they consider to be better software than that which is offered commercially. 

Dr. Orlikowski’s model requires that the organization, society, technology, and people move in lock step with one another. Our society appears to have embraced market reforms on a global basis with outstanding success. Technology is being developed that could only be imagined a decade ago, and is readily available throughout the world. People are reaping the economic benefits of their increasing capabilities and monetary value. These benefits have placed enormous stress on the traditional organization with the ability for the organization to adjust appears limited. 

Dr. Giddens states that failure occurs if the components get out of lock step with one another. It certainly appears likely to this author that it could be asserted today’s organizations are beginning to parallel the difficulties that the former Soviet Union experienced in its last decades. Does that mean companies must atrophy until the end is clearly presented to them, as is the case with Air Canada? The inability to innovate has stalled these organization’s growth, which was their overall purpose for existing. 

Research Objectives

This researcher’s objective is to build an innovation model for Genesys Software Corporation (Genesys®) to use as a means to consult to organizations that desire to move away from the structural difficulties articulated above and become an innovative leader in their industry. Development of the innovation model will be based on the determination of key success factors and application of the success factors within the oil and gas industry. It is expected that this will be developed through a consulting role that is supported by producers. 

What makes a company innovative? What tools, methods and procedures, implications for management, and leadership are available within an organization to define and implement innovation? Innovation is certainly a topical point in business conversations, everyone can clearly identify a new innovative idea or product, but how are these innovations initialized, developed, financed and created? Who can benefit from a consulting role that is specifically designed around a model for innovation? Where within an organization can innovation come from? How long can it take before the innovations begin to provide the expected returns, and what are the expected returns? 

Key to the development of this innovation model will be an underlying reliance on project management’s role in the future of organizations. This author believes fundamentally in the ability to invoke change as fundamental as what is facing organizations today is a role best assumed by the project management methodology. 

Research Questions.

Can the scope and understanding of the process of innovation, be reduced to a quantifiable and replicable process? 

How are innovation leaders able to instill in their people the drive to attain the innovative needs of the organization? 

What role does leadership play in an innovative firm? What corporate, operational and marketing strategies and methods do leaders use to assert their leadership? 

Can the definition of innovation be expanded to include finance strategies, human resource strategies as well as products and processes and therefore be a critical component that compliments each operational strategy an organization employs? 

What role does information technology and information strategy play in the innovative firm? Collaboration is a key component for the future but is it an enabling technology for innovation within organizations? How can collaboration be implemented to facilitate the work required in implementing innovative procedures, thinking and capability? 

Hypotheses.

Implicit in this research project’s hypothesis is the capacity for the “old” organizational system to provide growth is failing. The current oil and gas hierarchical structure is inappropriate for the future of internationally based, innovative organizations. 

This research can facilitate and affect a trajectory change in organizational performance through the development of the SJOC and by introducing collaborative tools and systems to facilitate innovation in production, process and organizational capabilities. 

Research approach

Summary of this descriptive research design and methodology.

This research provides a base of understanding to assert that the method of competition for a large sector of the senior independent producers has changed. Where these independent producers are collectively contemplating the internationalization of their asset bases. Producers who need to consider a broader definition of what their competition consists of and consideration that they are now several of the largest of 100 oil and gas companies in the world. To compete in this new environment requires a different mindset of what their competition is and how to adopt a manner of cooperation and competition with other producers. 

The selected methodology of research for this project’s approach is descriptive. Using a descriptive research approach provides a basis of research that is more speculative and tentative in nature, where the research questions and hypothesis are not necessarily based on causation and effect. 

The purpose of this research is to determine the validity of the hypothesis that current oil and gas companies’ organizational structures are inappropriate for the future and lack the innovative capability of internationally based organizations. Employing Dr. Giddens and Dr. Orlikowski’s theory and model in this situation shows that the inappropriateness of current organizational structure is an impediment to societal and human developments. Technology, which forms the duality of societal structures, employed in the fashion of this research, will provide a tangible opportunity for producers to innovate and progress. 

In February 2003 Genesys Software Corporation published a proposal for the oil and gas industry to consider a revised methodology of securing the Enterprise Resource Planning (ERP) style of software. This February proposal contained several innovative new methods for companies in “niche” markets to secure the ERP styles of software necessary for their future. Genesys®, February 2003 software development proposal is provided as an Appendix to this preliminary research report. This February 2003 proposal provides a unique value proposition for producers to consider. 

Collaboration defined.

Consistent with a revised understanding of competitive forces, there is a need to better understand the attributes of collaboration. Dr. Dosi lays the fundamental groundwork for how industries need to deal with the types and methods of competing in an innovative manner. In this definition Dr. Dosi clearly raises the point that collaboration is key in raising a firm’s capability to straddle several business cycles and increase their long-term viability and competitiveness in a global environment. 

Collaboration provides firms with the ability to achieve a collective learning. In the competitive environment of today where each company could be considered a competitive silo within an industry, errors and issues arise that are learned within each silo over and over again. The learning from these mistakes are not shared and therefore, based on a firm’s capability, incurred again and again by each silo. 

Collaboration seeks to share the learning experience over a broader base. Whether internal or externally, this “sharing” attitude is inconsistent with the industries’ past and current culture. Hence, it may be a major impediment to their ability to move forward in the global competitive environment. 

Research methodology.

How this organizational structural change can be orchestrated is through a relatively new development in a well-established technology. Lotus Notes has provided a collaborative environment for many companies that have effectively used the features of Notes beyond its email functionality. The change in Notes functionality was the upgrade to Lotus Notes 6 and release of Lotus Workplace in which users can be administered (a timely and costly task) remotely. The primary issue that Lotus Notes R6 and Lotus Workplace mitigate is the elimination of the need for the Lotus Notes style “big bang” approach to implementation. A company no longer needs to make the dedicated roll out of Lotus Notes on an enterprise wide level. Workplace moves the technical difficulties from the user and centralizes it to where it belongs. This facilitates the ease of having several individuals from each company “tied” together in a “sharing” style of technology, easily and affordably.

Some of the initial uses of Workplace for this research project are as follows. The following are considered basic components of Workplace and are available immediately. Please note that all communication and access is controlled through IBM’s extensive use of encryption keys and certificates. 

1) Libraries of documents. 

The Construction, Ownership and Operation Agreement, with associated mail ballots, Joint Venture agreements with associated AFE’s, lease documents and other agreements that have been counterpart executed by members of the joint operating committee. Of note Workplace can invoke what is referred to as a CVS (Concurrent Version System). These were developed originally for programmers to enable the use of one code base as the “library” of all versions of their software code. Control and updates of these documents can be made subject to user-defined criteria. For example, if an amendment to the CO&O was considered, this could be proposed, edited, approved and managed through Workplace. This would provide a means to review the current existing CO&O and the evolution of the agreement over time. 

2) Discussion databases. 

For anyone who is familiar with Lotus Notes and the use of databases in that application Workplace is precisely the same thing, however available through a browser, and hence from anywhere with https (secure internet connection). 

These discussions are unique in that they provide an asynchronous discussion of the issues. Many discussions may take significant time and are added to by the participants as the collective thinking advances. These discussions being asynchronous provides time for the user to think and consider other points of view and issues. 

The other advantage is that these discussions are provided to all team members’ whether they contribute or not. This facilitates team learning and discussion, which is key to innovation, risk taking and sharing of costs. A noted by-product of these discussions is the direct documentation of the tacit knowledge of the staff and contributors, leading to the ability to capture and manage the knowledge of the organization. 

The motivation to contribute to these discussions comes from the fact that the staffs thoughts, ideas and contributions are made explicit, noted by their peers and stamped with the time they were made. Recognizing the contributions of the specific staff member is a significant method of motivation. 

3) Synchronous messaging with team members. 

Lotus’ implementation of instant messaging has many advantages over their competition. Firstly, these discussions are logged and posted within the databases for all the other team members to review thereby cutting the time for team learning down. Secondly, communications are encrypted and secure and are not a port for viruses or security breaches. 

What this facility could be used for is innumerable. The oil and gas industry has been built on several basic principles that require “joint ventures”. 

These are: 

As a result of these principles rarely does an oil and gas company participate in 100% ownership of both physical facilities and producing assets.

 

This is systemic and culturally ingrained in the industry. Consistent with the cooperative management of these facilities is the Standard Joint Operating Committee, which is comprised of members from each producer with a monetary interest in a facility or property. The committee, consisting primarily of engineers, is responsible for many of the decisions regarding the management of the facility and producing assets. Budgets are established; programs are developed, agreed to and approved collectively. 

Most companies are active and use the operating committee as a means of managing their interests but other companies may, due to a relatively small financial interest, or non-core area participate only in annual meetings. The range of participation runs the gamut of possibilities. 

Consistent with the authority of the committee, there are a number of forms, legal and other documents that represent the committee’s legal, environmental and cultural requirements. Each form requires counter-part execution by the committee members duly authorized officers. A current issue with respect to the management of oil and gas organizations is that the committee is not charged with the financial performance of the property. This task is left to the remaining organization to attempt to finance, produce and operate these assets in a profitable manner. This financial responsibility, generally, does not fall within the scope of the operating committee. What would happen if the joint operating committee or SJOC participants were charged with the responsibilities of attaining increased volumes, better financial returns or any of the other measurement criteria that are traditionally the domain of the hierarchy? Where the hierarchy has no direct influence in the manner of operational control. This anomaly between the hierarchy and joint operating committee forms a dichotomy or contradiction that this research project will attempt to further identify and resolve. 

It is therefore asked in this research, is the Operating Committee the basis of an Open Source style of organizational formation? Is it where like- minded groups meeting formally, informally, online, and in person to manage, in all aspects, the strategy, management and financial performance of a certain property? Should this be the basis of how the ownership, operation and construction of the oil and gas industry be organized? Is the addition of financial performance, accountability, full authority and responsibility at the operating committee a means to enhance a producer’s innovativeness? An accountability that would include the financial reporting, tax planning and other requirements of management traditionally managed by the hierarchy? Is this revised method of accountability consistent with the requirements in the Sarbanes Oxely (SOA) legislation or Canadian Institute of Chartered Accountants (CICA)? Will collaboration at the operating committee level facilitate the opportunity to innovate based on the criteria of Dr. Dosi’s as defined in this research project? Will collaboration at the operating committee align and instill the accountability, performance orientation, innovation, shared risk and provide the organizational structure for the future of the global oil and gas producer? 

Key success factors of this research

Based on the technical and organizational changes that are being introduced, assessments will be made on how collaboration has affected team performance, innovation, leadership and accountability. These and other measures of performance will be the criteria used to define and determine the key success factors. Key to this research will be the outcomes of the analysis 

built on the primary theories introduced. Specifically, Dosi’s methods in determining how innovation is developed, Orlikowski’s structuration model and the interactions between human, organizational and societies with particular emphasis on technology’s role in structuring institutional properties and human agents. And finally, leadership based on Tichy’s methods and models of managing strategic change. Significant technical and organizational changes are being introduced to an informal team environment with specific responsibilities. The potential for increased team performance exists, however, how these changes are implemented, supported and instituted will be of particular importance towards measuring and assessing the current and future benefits. 

In Orlikowski’s structuration model in addition to the duality of technology, where technology is a product of human interaction that in turn assumes structural properties, there is the concept of interpretative flexibility of technology, which asserts that institutional properties influence humans in their interaction with technology. 

Dr. Tichy asserts that key to leadership is the role of teaching. Citing examples of how Navy Seals teach new recruits what it is that they know, for survival, as an example of the role a leader needs to assume. This point may be one of the critical underlying motivations behind the open software movement and its success. Where the collective good outweighs the harboring and control of information and knowledge. The leadership role in this research and in the operating committee will be critical to the success in that, just as in the examples of the Navy Seal and Open Source contributor, will the operating committee member be motivated on the basis of what the facility should and could be, and can that attitude be extrapolated across the producer population represented in the operating committee? Dr. Tichy’s book “Managing Strategic Change: Technical, Political and Cultural Dynamics”, will form much of the underlying base of understanding how to introduce the changes this research project presents. 

This research reports delivery and implications.

This proposal’s method of research in innovation will be concentrated on the SJOC of those Genesys® clients that subscribe to this research project. The Workplace software facilities will be provided and prepared by Genesys Software Corporation. This research is being facilitated and monitored through Genesys Software Corporation and will form the basis of innovation. Innovative tools and techniques are for the collective good of Genesys Software Corporation and supporting producers. Copies of all data will be held confidentially and made available, upon request, and review, to ensure the confidentiality. Producers subscribing and sponsoring this research will receive copies of the final report based on the following outline: 

This research should be considered in conjunction with Genesys®, February 2003 ERP proposal and the issues identified therein. It is explicitly stated this research project should lead to the development of an ERP system based on the proposed organizational structure of this research and Genesys®, February 2003 proposal.

Technologies Darker Side

In order to best describe how technology may impact an organization, a summary description of the IBM 

WebSphere and Workplace technology and toolset is provided. Additionally this paper will describe some relatively 

everyday technologies have become a greater threat than most people and organizations perceive them to be. Specific examples will be provided illustrating how the impact of a technology, with an associated revised business model, can be disruptive to established businesses and how technological induced change occurs today. Finally this review concludes with a description of a speculative scenario for oil and gas firms that might be triggered by the introduction of the IBM WebSphere or middleware technologies. 

Summary of the technologies discussed.

The specific technology that is being contemplated in this research is considered “middleware” and “Web Services” by IBM, the owner and marketer of the products. A better description might be infrastructure. The technology consists of the core products of database and network infrastructure that are standard fare for the corporate enterprise. Additional technologies include Lotus Domino, WebSphere and Lotus Workplace which I will draw particular attention to. Summary descriptions of the particular components that comprise the overall architecture are now discussed. 

Lotus Domino

This product is not necessarily new and has been a staple of the IBM product suite for almost 10 years. It is of particular value in managing the Lotus Workplace product and is the “backbone” of that functionality and capability. It is primarily a development environment that enables an organization to cater and accommodate the Workplace tool to meet the unique needs of the users. It is not the most comprehensive technology that is deployed in this overall infrastructure; it is however very unique with no other vendor currently able to offer a similar capability to facilitate the collaboration and integration of the user. 

WebSphere

WebSphere is IBM’s product offering that falls within the Enterprise Java (J2EE) domain. Consisting of Enterprise Java Beans (EJB’s) that IBM has developed through an army of developers over the past years, WebSphere is sold as core infrastructure to corporations, and / or as Web Services to users requiring specific functionality on demand. WebSphere is IBM’s interpretation and implementation of the concept of software reuse that is one of the founding concepts behind Java

. 

Developers can access the core functionality and process management of key specific requirements of an application, such as a general ledger, or specific requirements such as web enabled credit card processing. Both of these capabilities are on demand and can be further enhanced with other EJB’s from WebSphere, or developed internally or elsewhere. WebSphere is of the scope and scale of a highly sophisticated ERP system, which is its intended target and purpose. 

Key to WebSphere is the Lotus Workplace product that provides for the interactions of the users. This interaction enables the product to tie disparate partners, customers and vendors together and enable them to share data and information under the same process management. Think of WebSphere as Enterprise Resource Planning (ERP) software over several different organizations. WebSphere and Workplace are the two key ingredients of the infrastructure that enable the joint operating committee to be tied together as suggested and introduced in this research.

 

Lotus Workplace

Workplace is the product suite and toolset that raises concerns for the organization from our research. Workplace was the new name that IBM started calling their Quickplace product suite and is simply a “web enabled” version of Lotus Notes. Its primary difference compared to Notes is that it mitigates the two key issues of a Lotus Notes deployment, the first being the need to have everyone and anyone that you may want to collaborate with, must also have Lotus Notes installed as part of their desktop infrastructure. Many corporations found that the need to deploy Notes in a big bang style of integration caused the costs and complexity of the desktop configuration of Notes to be too much for the value provided. 

The second issue regarding Notes was the user generally did not fully understand or appreciate the concepts and capability of the product suite and essentially reduced the system to an email client. One key difference of Workplace is the full ability of its tools to communicate person-to-person, person to process, process to person and process to process. Enabling Workplace to provide an asynchronous process and productivity tool for anyone with the access, understanding and capabilities to use it. Asynchronous communication is critical to effective team efforts. Not every individual needs to be present at the same time. Time to respond and follow a “thread” of thinking over several days which facilitates team participation and effective problem identification and resolution. This asynchronous communication provides each team member with the ability to follow each participant’s contributions to the discussion. Asynchronous communication is a key competitive differentiator of the Athabasca University’s MBA program and is one of the most powerful tools available to organizations. Companies not discussing asynchronously are at a significant disadvantage and will be unable to participate in asynchronous communications, and, asynchronous process management. Astute readers will fully comprehend the previous sentence. Others may not have captured the importance of “asynchronous process management”, and I urge them to attempt to visualize the importance and capability of the concept. 

Workplace eliminates the two Lotus Notes related issues of deployment and configuration through its access, and management via the web browser. This web browser access is also where the concern that Lotus Workplace introduces to the organization. Specifically the product has a very insidious nature to it. It can be introduced to a user who needs only a browser. This introduction might be through the management of the company, but it is suspected that the majority of the introductions will take place from outside the management’s involvement and be mostly through other users, corporate partners and customers. 

Workplace introduces the virtual ability to conduct activity anywhere, anytime and on any machine with a web browser. This reduces the need for employees to be at their desks in order to complete the work they are responsible for. This facilitates the ability for the team to meet and manage the process, as the process requires, and enabling groups to form and break asynchronously as required and to get the job done in the most efficient manner. If the need exists for physical meetings, they can be coordinated and facilitated through the tool. The value of this technology is best represented in the following analogy to the standard use of a telephone. No longer will your staff need to be at their desks in order to make a business telephone call, and then travel to their home to make a personal phone call. 

An additional side and necessary benefit of these tools is intimated in the literature review of Dr. Giovanni Dosi. The further parsing of roles and responsibilities of individuals in order to have the project completed increases in an innovative environment. Workplace facilitates the larger population of users and specialists to actively participate and cross-pollinate their work and efforts more dynamically, and therefore increasing collaborations value. 

As stated Workplace is a great tool and all should welcome this quality and functionality of the product. However, understanding users’ propensity to find the path of least resistance the Workplace tool could easily circumvent the entire infrastructure of the corporate IT department. Parsing small bits of processes and functionality out of an Enterprise Resource Planning system can render the data and systems of an organization useless, with the management of the company unaware of its introduction and use. Accelerating this trend over 5% of the company could have an effect that is nightmarish in its scenario in that it would render the entire corporate IT investment redundant by questioning the integrity of the data. 

The particular capabilities of the Workplace tools are to facilitate user collaboration asynchronously. If Workplace were limited to that it would be of substantially less concern. Workplace’s critical feature and a key part of IBM product strategy is that it is a front end, or veneer, to all of IBM’s middleware products. DB2, WebSphere and Lotus Domino, which can be invoked and supported through Lotus Workplace. As users become more familiar with the Workplace product they will be introduced to additional capabilities, in the form of management of processes and functionality that could be initially limited to something such as distribution of a common legal or source document such as an invoice. Then, someone who understands the capabilities of Workplace asks a developer to write an Enterprise Java Bean (EJB) to strip the variables from the documents into Extensible Markup Language (XML) and soon you have data being captured by the Workplace tool. It’s not far from here that the concern for the traditional organization begins to become very serious and quite disconcerting. 

Is this data required elsewhere, is this the same data consistent with what was reported last time, has this data been reported to the existing systems? Or, is this data critical for the financial reporting requirements, should this data have updated the current ERP system, is this data not being collected elsewhere today but is critical in the future, such as purchaser needing the specific gravity? What are the data requirements of a networked group of companies? What data is being released to our partners, what data is being collected that may be of strategic importance to our competitors? Are we undertaking an unnecessary cost or burden in collecting this data for our partners benefit only? Are our partners cost justifying why they are collecting critical data for our needs, but redundant to theirs? Where has our partner sourced the data that has been provided, is it correct and is it based on industry standards? Has a producer been able to establish their own “standards” and are now charging for the services? Have our partners ERP system been compromised? How is that data calculated in Libya? Is this data from our partner or that new virus, and did that virus infect that other data? 

Workplace’s mission critical nature enables these products to achieve an Enterprise Resource Planning system level of capability. This is also from IBM, and not some irrelevant dot-com that may not see the better part of next year. How many competitors are actively considering these tools as their revised ERP environment? How many competitors are planning on introducing Workplace as a strategic and tactical Trojan horse into your organization? Their purpose would be to deter their competition (your organization) from realizing the value associated from its advanced IT infrastructure. Or has that already happened? 

It is this potential replacement to the ERP system functionality and process capability that is of concern. IBM finds that the product grows in population like rabbits. It has been this writer’s experience that most of the time it is introduced to the user from outside of the company. 

Another key point is, the developments and enhancements are incremental. The big bang implementation has proven to be unsuccessful and Workplace et al fully understand that and have built in incremental changes as part of its product attributes and strategy. 

The question for management should be when and where would this product be introduced into the organization? Or, has it already arrived? 

T h e s u b t l e i m p l i c a t i o n s o f t e c h n o l o g y

Today we need to better understand the subtlety of the implications of technology. Organizations are entering a time period where technology is providing a level of infrastructure that permits its proliferation and adoption that is firstly insidious, ubiquitous and with possible or probable implications that are not fully understood? Three generic examples are cited to show the cause and effect of technologies on an unsuspecting audience of users and businesses. They are, the downloading of MP3's and Apple's iTunes, PowerPoint as a presentation tool and SourceForge.net. 

The first two, MP3's and PowerPoint contain warnings of not fully understanding the impact the technologies will have, with the third example expressing the threat that self organizing teams present as an organizational alternative to the comparatively inefficient hierarchical based organization. 

All these examples share the same symptomatic cause and effect that the user is attempting to achieve, that is, to acquire what they want through the path of least resistance. The other major new thinking that may develop is that intellectual property and knowledge management are by far the most important aspect of a firms assets, and that they are very temporary as an advantage, aging in quarters, not years. Included within these intellectual property attributes are the organizational innovative capability, or appropriability and IT resources. I am citing this point to reflect that the competitive nature in business today is rapidly changing on all fronts. 

MP3's and Apple's iTunes.

The following is a good example of how technology can become disruptive to a well-entrenched business model. Downloading of MP3’s and the effect it has had on the music industry should be well known at this point. The phenomenon of least resistance showed itself through otherwise very honest and hardworking individuals, knowingly breaking the law. These thefts were justified in the users minds by a variety of excuses, and with all that has happened to mitigate the effects, little if anything has been done to stem the waning tide in the revenue of the musicians and music companies. This is also not a recent phenomenon, copying records onto cassette tape was a concern in the 1970’s with the development of the cassette recorder. The downloading issue has been raised as a result of the selection of music made available through the networked user seeking the path of least resistance. 

Initial attempts to shut down the vehicles (Napster) proved fruitless as the website's were only replicated quickly, and in far greater numbers, effectively providing users with more outlets in which to acquire their music. 

Apple iTunes has provided a strong business model that appeals to the user and provides them with the ability to use their music in the fashion that they have always wanted. This is currently working effectively, with the full support of the law and under contract with the music distribution companies. In hindsight the record companies, in seeking Apple's help, might soon realize they invited a Trojan horse into their camp. 

iTunes appears to be the application that users and musicians need as a portal for their communications and distribution of their products. This enabling an alternate solution for communication and distribution of music, which might eliminate the “music business” as represented by Time Warner, Universal and Sony. 

All of the machination's conducted by the music industry to control the intellectual property of their distribution copyright, has only provided the music user and musicians with the ammunition and motivation to further eliminate any goodwill towards the music industry. Which musician will be the first to distribute their new music to their fans via iTunes, and how much less will they be asking? ITunes is the only system that maintains the musicians rights of intellectual property, which is another aspect that the competition does not appear to understand. Disintermediation of the music industry will most certainly be the result of these activities. 

NASA's comments regarding the dangers of PowerPoint.

We have witnessed the recent NASA comments regarding PowerPoint presentations that place that product in the category of the real “killer app”. I interpret NASA's comments not so much as blaming PowerPoint for the failure of the space shuttle, but more for the phenomenon that users would seek the path of least resistance in getting their message across. We all inherently understand the point that NASA is attempting to make. 

The ubiquity of PowerPoint presentations is as a result of their inherent ease of use and effectiveness at selling a message. Any attempt to eliminate the product from within an organization would be devastating to its internal communicative capability. The product works effectively for the reasons that it is used for. 

The future implications are that any attempts to eliminate PowerPoint would be more negative than positive, the PowerPoint presenter and viewers need to be cognizant of the limitations of the application, which unfortunately they now are. 

SourceForge.net

SourceForge is not a name that many people would have heard of before. And many will not hear of in the future. This is good example of how minor changes in a business model or technology could have significant implications on how the organization of commercial enterprises becomes redundant and therefore effectively disrupted. 

Sourceforge.net is the open source vehicle used to download and manage the open source code that a user wants. It is also the forum where like- minded developers organize and work to build the better, and “free” code that is provided to anyone who wants it. This is strictly on a volunteer basis with the altruistic objective of building better software and is not guided in any form or fashion as a result of anyone’s policies. The Linux, MySQL, Darwin, and other software are being developed through this medium. Self-organizing groups of developers, motivated by similar causes, located throughout the world are tied together through CVS (Concurrent Version Systems) to produce the code they seek. Most never meet the other developers, ever. 

This environment has developed over the last few years from a small community to a reasonably moderate size of 800,000 developers working on 80,000 different projects. Mostly organized in an ad-hoc and informal manner, these developers have produced software of the quality that Linux is now the alternative operating system used by IBM, Sun and other vendors, and is beginning to be the preferred system for many corporate servers and considered for the desktop. 

SourceForge.net is so significant that it may render the corporate IT infrastructure unworkable in the short to mid-term. This is a pretty bold statement regarding a completely irrelevant and mostly unknown organization. The announcement and an explanation of how this might occur is as follows.

 

On December 16, 2003 SourceForge.net distributed the following announcement to their membership through their site wide mailing list. The announcement had three components of the same theme. These were: 

This one change in the business model of SourceForge.net will provide the economic means for the developer to live in what he may have always considered to be his career objective of full independence, freedom and a means of financial independence. This will provide developers with the confidence and capability, and who may have been moonlighting through SourceForge.net as a means to hone his / her craft, with the motivation to commence drafting that resignation from their day job and securing their long term intellectual property value. 

This, of course, won't be all of the corporate IT staff, just the ones that have achieved the level of sophistication and capability that can and usually is measured in the quantum's of 10, 20 and 30 fold to the standard. The technical workers that preferred to work on building their craft outside the organization they work for. 

Although the losses may be limited to a handful, they are the critical ones who are known for their capability and will be able to make significantly more money through SourceForge.net than through any other means they could have imagined. They will be further motivated by the fact that their previous employer may become their greatest supporter. Which opens the other side of this threat, namely the opportunity for the companies to acquire several of these high quality developers through SourceForge.net. 

Recently SourceForge.net started a company that provides software tools for corporations to hire and manage the source code through SourceForge.net. The following two url’s are to that company, VA Software and provide the information necessary to understand this opportunity. Of particular interest are the members of the board of directors. (http://vasoftware.com/) 

Corporations may look back on their decision to use Linux and other open source code as their biggest error. After all what were they thinking, you don't get anything for “free”! 

IBM WebSphere technology’s introduction in oil and gas.

There is a need to look at the past ten years in a different perspective in order to fully appreciate the scope of the concern that this research has for the hierarchical organization. This research is asserting the impediment to further progress is the hierarchical organizational structure or bureaucracy. And by invoking Dr. Anthony Giddens Structuration theory, which states society, individuals and organizations need to move forward together, or not at all, any disparity in the pace of change in one has to match the others, or failure occurs. Dr. Orlikowski’s model of technology structuration also becomes progressively more important during this discussion. 

It is implicit in this thesis’ hypothesis that at this time, society and individuals are or have moved on, and the organization, as represented in the hierarchical corporate organization is impeding further progress and performance. Alternate organizations are forming, or can be formed quickly and efficiently to eliminate the need for the organization in its hierarchical 

The hierarchical organization is directly supported through many tacit and explicit support structures. Key among them is the ERP system that represents the largest single IT investment of an organization. Support systems that provide the hierarchical capability, and specifically the ERP system, are now under direct threat of an insidious and contagious technology. This technology accelerates the organization’s performance to that which is matched by the performance attributes and expectations of society and people. Or as Dr. Dosi (1988) states, “technical progress generally exhibits strong irreversibility features.” This “progress”, as demonstrated in the prior technology examples is impossible to stop and needs to be fully understood and embraced as the only tactical and strategic method of dealing with it. (p. 1144) 

There has been much debate in the past few years as to whether technology was evolutionary or revolutionary. These past years have provided cold comfort to those who believed the best days of technology are behind us and that will be the end of the bubble, and the geeks. I am asserting that the technology revolution sustained a serious blow to its credibility and capability during the past four years. The only requirement for the technical revolution to continue is for the coup to trigger the signal. Metaphorically speaking, of course. 

I perceive these technologies to be a threat to the status quo of an organization because of the inherent ability of the technology to reproduce itself quickly. A good analogy would be the differences between a user that is networked and a user that is not. Contrast the abilities and productivity of a worker in the networked world with one of 10 years ago, where no public network, applications or communications occurred, compared to the ubiquity of today. No one would deny the impact that the Internet has had on an individual’s productivity. The easy access to abundant and inexpensive data and information, communication and new applications has provided a base of infrastructure that has facilitated innovation in all forms. This analogy is strengthened giving the significant impact that Dr. Dosi’s work on innovation will have in the future. 

The analogy of the worker over the past ten years is directly applicable in this instance. The difference being the individual is replaced for the purpose of the analogy, and represented by the organization. As opposed to having independent and unconnected islands of information and capability, there is a collective and co-operative interconnection between trading partners where more of everything is shared and learned through the enhanced collaboration of internal and external, self-organizing teams. 

Today many individuals have sought refuge in the collapse of the dot-com bubble to justify their refusal and incapability to fully exploit the technology resources that they have been provided. An inherent inability to learn the technology is a phenomenon associated with older generations that have a complacency or satisfaction with the status quo. This is leading them to be functionally illiterate in the working world of today, with only a vested pension, years of service or rapidly depreciating tacit knowledge that enables them to maintain their illusion of technology. Ultimately this will be at significant cost to those individuals. 

This scenario is not an alternative for the organization. Failure will occur swiftly to those organizations that cannot compete against the swiftness and productivity of self-organizing teams. 

Revisiting the earlier comments about SourceForge.net reflects few organizations could be organized with 850,000 developers working on 80,000 projects. The key is not so much the volume, but the associated quality of the products. Linux is unquestionably the champion in comparison to the Microsoft Windows alternative as are many of the open source products. To now transform the organization into a method for developers to earn their living may be the most productive and effective means of deploying those resources. The benefits derived from this organization can be distributed over larger populations of users and in collaboration with like-minded individuals or organizations. 

Like many of the individuals that refuse to understand, learn and exploit the technologies of today, some corporations may decide to ignore the opportunity and focus on the threats that are introduced through these technologies or reflect that it is not particularly relevant. However, unlike the individuals described as rejecting technology, through the competitive marketplace corporations will be rendered ineffective and inefficient far quicker than their human counterparts. 

Application of this point regarding oil and gas is particularly revealing. Through the process of this research it is apparent that the susceptibility of the industry to this risk is high. The saying that to be forewarned is to be forearmed might be pertinent and should be heeded by industry. 

One point that this research has noted, is that this issue has created a polarizing effect between members of the companies. The scope of change crosses all boundaries within an organization. 

The senior IT managers are almost unanimously concerned about the possibility of the toolset rendering the technical infrastructure ineffective. Their efforts to have an ERP system function effectively as required in these large organizations has been tremendously difficult and is not something that should be experimented with. Some of the comments regarding the research are: 

In many ways they have worked to fulfill their obligations to the company and now are subjected to serious threats that are beyond what they have the authority to consider. They are the managers, not the change agents. 

The following is a direct response to the issue of management push back just described, and was cut from a .pdf document and is quoted verbatim. 

“Web services are programs that allow systems to interact with each other over a network. They leverage open standards and the power of the Internet to allow businesses to interact with each other more easily than ever before. Because businesses have a rapidly growing need to work more closely together, the ability of Web services to support that activity in a standard, well-defined manner, have generated an enormous amount of interest and activity in the Web services arena.” 

“Of course, along with all the excitement comes a great deal of buzz, which can easily make you think that Web services are just another over-hyped technology. Although there is hype surrounding some aspects of Web services, Web services and the underlying XML technologies really do have tremendous value for today's enterprise.” 

“In this tutorial series we will show that Web services, while not a silver bullet, may change forever the way you integrate business processes. This applies to integrating with other companies' processes or with your own internal processes. They are the next logical step in the evolution of the Web. With Web services, we are moving to a new stage of e-business where businesses can exchange services and integrate business processes with one another.” 

“This brings the issue of Enterprise Application Integration (EAI) to another level, where you can incorporate multiple companies into a single business process, as well as more easily incorporate multiple business processes from one company into a single process.” 

“Driven by these important business needs, the Web services world is evolving rapidly and there is a great deal of innovation, clarification, and specification occurring. Among the important developments are the following:” These direct quotations are from an IBM document, the italics were added to highlight the parallel comments to the warning contained within this research report. It concludes the introduction by stating; 

“In short, IBM’s “WSDK” provides an entry-level platform and supporting toolset that make it simple and straightforward to create Web service-based systems. It will let you explore this emerging world of Web services and see what all the excitement is about.” 

Source is page 2 of “ws-intwsdk51ltr.pdf from IBM. 

This comment is written by IBM and reflects a similar message to the one being presented. The message is that IBM is providing this infrastructure; along with their Eclipse development environment to developers for free, which reflects two further points that I impute from this and other observations. The customers in many industries are resisting the changes that these toolset and technologies introduce, and IBM is moving the product into the hands of the developer in order to ensure that IBM earns a substantial position in the marketplace of web services and get the ball rolling in a difficult technology politically and conceptually, but not technically. 

In reviewing both Giddens and Orlikowski’s theories of structuration (and understanding the time frame of the late 1980’s and early 1990’s in which they were written) one recognizes the absolute brilliance and value of these individuals’ work. A comprehensive review of their models is highly recommended. However their brilliance may be overshadowed by the efforts of IBM to deal with specific issues regarding the technology inherent in Domino and Notes over the past two years. In retrospect I believe there is a tacit understanding of Orlikowski’s theories represented by IBM “middleware” product strategies. IBM’s inability to penetrate the marketplace with Lotus Notes as envisioned has been a frustration to its advanced users and developers as well as, we assume, IBM. Overcoming these problems and applying Orlikowski’s model is clearly the strategy that is being employed very effectively by IBM. It is also not surprising that much of Orlikowski’s consulting work has been in the area of the deficiencies that organizations experienced in integrating Lotus Notes. 

IBM has as much to lose from Web Services as they do to gain, as they operate in a very competitive marketplace. IBM poorly handled Microsoft and the changes due to the introduction of the PC in the 1980’s. This lead to a significant decline in their organization and in the early 1990’s, recall they were barely able to register mention to the “might” of Microsoft and Intel. This paper would assert that IBM came too close to meeting its demise and has learned substantially from that lesson. Applying the velvet glove and reacting to market changes is no longer their modus operandi. They are aggressively changing the market landscape in their favor to ensure their competition remains behind. 

It is critical to understand that Giddens structuration suggests that power be asserted to create new capabilities for the changes in organizations to occur. Through IBM this power has been exercised and the capability exists. The only requirement remaining at this point is for the organizational change to occur. On the basis of this theory these changes will occur with or without management support. 

During her consulting Dr. Orlikowski frequently referred to the work of Thomas H. Davenport. This work documents that collaborative computing does not lead to collaborative work environments. Policies and procedures need to be set by management to facilitate collaboration. Key to the policies is the need for alignment of collaborative incentives, training and organizational culture is consistent with the toolset. 

Organizations may believe their ability to control technology introduction is through the restriction of financial resources necessary for users to acquire the license to Workplace. This also has been considered and dealt with at IBM in the following manner. One form of the license that is available to developers is an "Extranet Server License" that provides the ability to license it to as many “outside users” as possible. This, of course, is at no cost which immediately waives the token $93 charge for the license. Therefore if I as the president of Genesys® deem someone a consultant of Genesys®, and provide them with a fully paid user license, this provides them with further unlimited use of the server and software and allows them to distribute the Workplace software to anyone, anywhere and for whatever reason. Or alternatively, this author could send certain staff an URL to Genesys®, server that permits them to use the product as they see fit, and this could in turn, in a very short period of time, enable Genesys® to have each and every staff member in your organization working off this product at the total cost to Genesys® of $93 and your organization $0.00. Astute technical readers will learn that this entire process can be conducted initially through port 80 (Web Browsing). This is, in my opinion, a reflection on the importance and value that IBM has placed on Web Services as their future and a very well executed and implemented product strategy. 

To further exacerbate these issues, Workplace provided upwards of 80% reductions in phone calls, phone messages and conventional internal emails. This is mentioned on IBM’s website demos. This is certainly a significant advantage and provides a capability to concentrate the overuse of those channels of communication. However, it should be evident that Workplace provides a far more efficient mode of communications then the other channels. This creates an even greater issue with respect to the impact that Workplace could have on an unsuspecting producer. Understanding the user’s propensity to seek the path of least resistance, Workplace has the potential to revolutionize the organization’s communications as well. This is one of the key aspects of the ability of the “other” participants on the joint operating committee to be able to use another producer’s capability if introduced to this facility. The ease of extending the collaborations between committee participants will enable the acceptance and use of the toolset. 

Of particular interest will be the management discussions that are carried out during their various meetings. To now conduct these meetings asynchronously codifies the understanding and reflects the ability to have individuals that would otherwise not be able to participate learn and contribute to the discussions. A further capability is the ability to reduce managements time to the salient points that need to be addressed, and eliminate the management time required for physical attendance, the logistics of attendance and the unnecessary time lost in scheduling. 

This tool’s power is unmatched in this author’s opinion. With this power comes significant gains in competitive advantages to those that are able to implement the technologies effectively, and disaster to those companies that are unable to pro-actively deal with this threat. Resistance is futile. The cause of current resistance is clearly understood. Companies have struggled for several years, and maybe for a decade to have the promise of ERP systems operational and functioning within their organization. 

From what I have seen in a few instances the results have been very successful. Web Services now challenges the entire infrastructure of the installed base of applications, communications and systems infrastructure that are otherwise in excellent condition and in many instances at the beginning of their useful life. The challenge that Web Services presents is two fold. The managers are not interested in tearing down what is operationally efficient. Why would they? 

Secondly, the infrastructure is under attack by an insidious technology that is impossible to ignore, yet has the potential, if not managed pro-actively, to create serious issues for the current software infrastructure and organizational structure. What purpose will there be for a structured hierarchy with its associated bureaucracy when self-organizing teams are able to perform more efficiently and effectively? An ERP system designed for facilitating the hierarchy is just as redundant. 

The moment in time that an organization realizes this technology was introduced somewhere in their organization, and as a result of the manner of its use, the questioning of the integrity of the organization’s data begins, or not. It should be asked as well, how many developers have downloaded these technologies from IBM and conducted the Web Services training that is being offered for free? 

This scenario may occur in a short period of time, or not. It should be asked where within the organization will this first appear? Will it be in the scientific areas, or the financial? The purpose of this research is to plan a proactive change management and knowledge management procedure to install the Workplace and IBM infrastructure toolset within the organization. Ensure that it meets the criteria of the management’s policies, that those policies in turn are designed to support the exploitation of the technology. These planning components are contained within Genesys® Software Corporation’s February 

2003 ERP proposal’s recommendation of the “study period”. In Dr. Noel Tichy’s book, he references Kaplan (1964), which states. “I have found that if you give a little boy a hammer, he will find that everything needs pounding.” (p. 291) However, this comment also adds significant credence to the issues discussed in this document namely that IBM’s workplace tool may be picked up by individuals seeking the alleged path of least resistance. And just as the little boy hammered everything, individuals will find the tool effective in many applications affecting their work, further exacerbating the issues regarding the ability of organizations to deal with these problems without the appropriate planning and strategy formulation. 

It is this author’s opinion that much of the change management initiatives that are driven by SAP integration are to facilitate the tools use. I believe this to be symptomatic of the Theory X method of management in that people need to be monitored and controlled in order to be productive. The Theory Y implementation would assume that people want to work and only need to be supported to do that work. Theory Y is consistent with what Dr. Dosi has asserted as required for innovation. In the previous analogy of the boy with the hammer, if the staff where to find the “hammer” or in this instance, the Workplace tool, would they soon learn that that a square peg will never fit into a round hole? (The SAP application?) I frequently refer to the behavior of groups as that which is consistent with how the Buffalo were almost rendered extinct. That the analogy of the abuse of the Buffalo is not dissimilar from the current expectations of consumers regarding energy. When the individual sees the Buffalo analogy they begin to appreciate the industry clearer, at which time I point out why the analogy is not valid. The analogy is rendered invalid when it is explained that the Buffalo were a renewable resource, had abundant alternatives readily 

available, and the economy did not live or die with or without its existence. 

These two analogies combined reflect another odd behavior. The behavior was the North American Natives effectiveness in killing Buffalo by running them off a cliff. It somehow draws the conclusion that SAP’s behavior appears consistent with the Native Americans. My point is this, it begs the question, what would have happened to the Buffalo if they just stopped running? Today companies have to stop the SAP styled Buffalo jump and consider other alternatives. 

Overall there is some good news. There is actually very good news in that Web Services are able to interface with legacy ERP systems in a very progressive manner. This technology can be managed in an effective manner to initially build off the legacy ERP and provide a direct transition over a reasonable period of time to accommodate the organizational and incremental technical change. 

This requires proactive management in the form of the appropriate change management initiatives that facilitate the innovations that provide the future sustained competitive advantages of the firm. These change management initiatives need to be orchestrated by management through the appropriate “change agents” (Genesys®) providing the counter management thinking to achieve the drive to change, and technology development. 

Being the “Change agent” is where Genesys Software Corporation has positioned itself in order to offer these software development and research services as a web services integrator to oil and gas producers. Please review the Genesys Software Corporation strategy summary provided in the February 2003 ERP proposal. It is also explicitly stated in Genesys®, February 2003 that these technologies need to be studied and adopted. The value proposition and overall strategy remain as they were documented in February last year, only the urgency in which firms should act is being revised. Genesys® has developed a full service solution to this issue, and is prepared to provide those potential clients that express an interest through the distribution of this research report.

B u s i n e s s  a t t r i b u t e s  o f  w e b s e r v i c e s

Web Services offer

the potential of low

cost, flexible

connections across

applications,

operating on diverse

technology platforms

The past number of years has seen Dr John Seely Brown and John Hagel III as the primary proponents of the web services paradigm for business. Much of their writing and consulting is done in this area and the effect of web services on management and business in general. Their efforts have recently focused on Web services almost exclusively and they have prepared a number of comprehensive writings on the subject.

A good summary of their opinions about the scope and magnitude of the changes are as follows. This quotation is from the article Orchestrating business processes – harnessing the value of web services technology. This article can be downloaded from their website Hagel & Brown (2002) 

“The buzz is spreading. There’s a new set of technologies on the horizon. Web Services offer the potential of low cost, flexible connections across applications operating on diverse technology platforms. The pay-off: substantial, near-term reduction in operating costs and improvement in asset leverage for businesses.” (p. 1) Hagel & Brown (2002) 

“Not so fast. True, businesses do have the potential for substantial savings in an increasingly demanding economic environment. But put the emphasis on “potential”. Realizing these savings is not simply a question of injecting a new set of technologies. To fully realize the economic potential of web services technology, senior mangers will need to adopt very different approaches to managing business processes. This article describes why different management approaches are required.” (p. 1) 

Hagel & Brown (2002) draw an excellent analogy in describing web services. An international meeting with 5 participants, each speaking a different language, would require up to 10 interpreters in order for any communications to occur. Web services are described as a parallel to the English language in this situation. The ability to conduct business is far simpler when everyone speaks the same language and can communicate with a shared meaning, glossary of terms, data structures, process management and other ERP style standards across 

multiple trading partners. Hagel & Brown (2002) 

“Of course, exploiting these growth opportunities will require much more than a new technology architecture. Very different organizational capabilities must be developed, including new skills, performance measurement and reward systems and organizational learning approaches. Even more fundamentally, business managers will need to adopt a new mindset – embracing shaping opportunities by helping to define and deploy standards, rather than simply hoping to adapt to a rapidly changing environment.” (p. 19) 

Hagel & Brown (2002) also state 

“However, none of this will be possible within the confines of existing enterprise architectures. To capture the largest business value creation opportunities on the horizon, management will need to “break on through to the other side” by embracing new technology architectures – and associated organizational forms – in a sequenced manner, driven by a clear understanding of, and demand for, real business value at each stage. (p. 20) 

This provides unequivocal support for the reorganization of an oil and gas operation on the basis of the joint operating committee. The need to reorganize is based on the effect that web services will have on an enterprise, 

and as both Hagel & Brown, and this paper have stated the alternative is hope for the ability to adapt to the changes associated with what this research calls the “integrated networked cluster”. In taking both their analogy of 

communications where no one speaks the same language, and the one articulated in this paper in which the networked effect over the last 10 years on individuals will be paralleled in the corporate environment, the impact of web services regarding the ERP systems can no longer remain an island of information. 

In addition, and of particular support for the reorganization to the joint operating committee, is the fact that Giddens and Orlikowski’s theories and models of Structuration reflect that the organizational structure is defined by 

legal agreements, industry norms, ownership, operational and other fundamental criteria that make it, literally the only viable organizational alternative. Alignment is currently the buzzword in the technology arena. Any initiative attempting to achieve alignment therefore requires the SJOC as its organizational basis. In addition to the aforementioned comments, a reference is provided from Dr. Rebecca Henderson (2002), who is the Eastman Kodak Professor of Management at the MIT Sloan School of management. She asks: 

“How can you manage these technologies and their inherent issues strategically? Will you be aware of the changes as they happen? Have you thought through how your organization will respond while simultaneously maintaining a “conventional” business? I venture to predict that the ability to answer these sorts of questions is likely to be the critical factor that will determine the business winners of tomorrow.” 

Her comment is made in reference to technology in general, however, it is a rather salient point and reflects the nature of the times we live in and the diligence that managers must pay to technology and is a further extension of this paper’s title “Plurality should not be assumed with necessity”. (p. 6). 

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) 

This certainly reflects the significance of the risk of having the IBM Workplace toolset introduced without the explicit support of management. In their document Compendium Overview Hagel & Brown (2002) state the following: 

“Changes in management practices, Control vs. Trust – mastering a different management approach discusses the fundamental shift in management practices required to realize the potential of Web services technology. Managers have perfected control-based techniques to ensure performance of business processes within the enterprise. When these techniques are extended across enterprises, however, they tend to limit the potential for collaboration, rather than enhance it. Control-based techniques may work if there is a clearly dominant business partner dealing with much smaller companies. Even here, though, the smaller companies will over time tend to migrate to work with business partners who have adopted a different management approach. A trust-based management approach focuses on the role of economic incentives in shaping and deepening collaboration. Rather than relying on market power to impose practices on business partners, this approach creates appropriate incentives to ensure coordination of activities in the most flexible and least expensive way possible.” (p. 4) 

This is where the Genesys® proposal addresses a key point. The need to have a third party negotiate and solve many of the inter-company issues regarding systems integrations needs to be handled effectively, and is part of the study period as proposed in Genesys®, February 2003 proposal. Another aspect of concern is the level of collaborations that are introduced and the level of collaboration that currently exists within the industry. Collaboration is not necessarily easy and I would suggest to fully explore and understand the concepts, opportunities and responsibilities requires much thought and training on the part of each individual. 

These comments are further defined in Hagel & Brown (2002) Control vs. Trust - Mastering a Different Approach.

“By focusing on end products, rather than the detailed activities required to deliver the end products, the trust- based approach creates the basis for a very different management model. Rather than supporting tightly coupled business activities, trust based approaches encourage much more loosely coupled business activities. Participants can be added and removed much more easily. More specialization can occur because loosely coupled relationships can accommodate more participants. Rapid innovation can occur in all areas of business activity because the loose coupling allows participants to change the way they operate without disrupting the operations of others.” 

In this article Hagel & Brown (2002) define many of the components of trust that need to be developed. 

That trust is not something that, once established is not required again, it is something that must be maintained as well. The four components of trust that need to be developed are as follows: 

“Expectations must be shared by all parties”. 

This is why the components of the joint operating committee best facilitate the collaborations and developments. Developing a shared vocabulary, shared understanding and / or shared meaning will facilitate the means to innovate based on that shared understanding. This is difficult, if not impossible to achieve in the control-based environment. (p. 3) 

“All parties must be sufficiently motivated to deliver against expectations.” 

Like-minded producers are interested in the same outcomes. Sharing of that objective between the companies represented in the joint operating committee is consistent with the trust fundamentals of Brown and Hagel. Brown and Hagel go on to suggest that individuals can be motivated in a collaborative forum through knowledge incentives. This is a particularly effective motivation as the learning of one can enhance the learning of others in the collaborative process. The indirect benefits to the capacity to innovate, or the appropriability as Dosi defines the term, would be long lasting and sustainable as a competitive strategy through this knowledge based incentive structure. The use of monetary incentives appears contrary to the collaborative process and would not be recommended as an individual motivation. 

“All parties must have the requisite capabilities to deliver against expectations.” As in the above item, the knowledge-based incentives would help to further the natural capability of the individuals participating in the collaborations. 

“Notification mechanisms must be in place to provide early warning of any potential shortfalls in performance or abuse of privileged access.” (p. 1122) 

In Genesys Software Corporation February 2003 the Internal Audit role was highlighted as the area in which much of this solution may fall under. I would assume that a greater role for the internal controls would be the result, and an understanding of those controls be better implemented to facilitate a higher component of trust. Hagel and Brown assert that through collaboration “more is better”. The tendency to want to limit the resources deployed to a project in the control model can have the effect of limiting the capability. This is contrary in the collaborative environment, and this comment is based on this author’s experience in earning his MBA from Athabasca through Lotus Notes, namely that the broader and more diversified the level of participation is, the greater the collaboration which leads to significantly greater results. This also indirectly demands that the knowledge within the collaboration must be higher, with a greater specialization of each individual participant. As an aside, the Workplace tool has developed and offers the person to person, person to process, process to person and process to process notification systems enabling a very diverse and “automated” method of establishing communications and notifications. (p. 1122) 

The trust method and its associated changes naturally take long lead times in order to implement effectively. This fact coincides with the long development times of Genesys Software Corporation’s February 2003 proposal, the time required to learn to collaborate, the management changes necessary etc. Hence the importance that is placed on the timely and dedicated move to effect these changes that is required. How can companies undertake this level of orchestrated change if they permit the Workplace tool to enter their organizations uninvited? 

Asynchronous communications. This paper cannot stress enough the value of asynchronous communications. Occasionally this research has noted and reflected on the areas where asynchronous has been effective. I feel a better description and application of why this method is of such value lies in the proposed SJOC. Asynchronous communication denotes that there is not the requirement of an immediate response. A telephone call is synchronous, and a letter or document is asynchronous. There is time to reflect and consider other points of 

view and accurately research and discuss the answer provided. This elevates the quality of communication above the chat room and provides real value in today’s business. It is also self-documenting and available to all the immediate team members of the joint operating committee to see how their discussion unfolded, and is available for search and reference in the years to come. 

Of note and interest, with 1,200 students and 1,200 graduates of their MBA program, Athabasca University has a database of all the asynchronous discussions of its students. (7,200 man years). This provides significant codified 

knowledge that was formerly only tacitly available. The ability to search and garner further information is valuable in determining research projects and program development for their soon to be announced Doctorate in Business Administration (DBA) program. This capability is also what Google is attempting to achieve through their new Gmail system. Privacy experts are concerned about the resale of unsuspecting users data, codified into valuable 

information regarding consumer trends and then sold to advertisers. The potential users response to Gmail is very interesting, in that their complacency reflects the extension of the ubiquity of the network in their lives. 

Asynchronous communications are critical to the facilitation of problem solving, innovation and overall communications. It is a concept that the IBM Workplace and WebSphere tool sets have ingrained in their structure as well. At this time particular mention of the WebSphere tool and its application of asynchronous functionality and process management is required. As stated elsewhere WebSphere is a collection, package or framework of IBM written Enterprise Java Beans. By implementing WebSphere with the ability to provide asynchronous functionality and process management, the same concepts that have been so effective in communications can also be brought to process management. Where the software manages the process, and collects a variety of input from different users, (and in the future users from other organizations.) whether it is in the processes optimal sequence or not. It is this author’s opinion that the asynchronous model’s process management is the key attribute and real 

value of web services. 

A possible scenario. You are the chairman of the SJOC and in this instance, as a member of the committee, you have always shared de facto operational control. In addition there was the financial accountability but that was more tacit then explicit prior to this revised Genesys® organizational structure. You therefore now have the tools and resources to effectively be accountable for the financial performance and specific attributes that are agreed to by the committee members. You have a particular difficulty in discussing and maintaining lease access to your facility due to the surface rights leaseholder. Incidents with them are few and far between but they have made it evident that he will not tolerate any interpretation of the lease agreement beyond what is understood at this time. 

His lawyer issued notice of this to you last year. You were also recently granted a reduced spacing and expect to fulfill the gas gathering and processing facilities to 100%. Surplus compression is available immediately due to some changes made by the committee in the operations de-bottlenecking. This opportunity combined with the revision in gas pricing reflects the opportunity to maximize the long-term investment made in the facility over the past few years. The application for reduced spacing was made due to the decline in production owing to a belief that the level of competitive drainage that is occurring from the adjoining leases. These leases are excluded from the area of mutual interest (AMI) of the committee, and are owned by a member of this committee. This type of problem could now be openly discussed in the joint operating committee, and with the variety of participants, the Chairman in this instance would collaborate in order to begin dealing promptly with the surface rights holder. 

The structured hierarchy would not have time to respond to the decline in deliverability attributable to the adjoining properties as quickly as the Chairman can by opening discussion of the issue both internally and externally. 

In this instance the engineer is faced with a technical, political and legal issue that is possibly affected through the collaborations at the joint operating committee. The direct participation of the other committee participants is augmented by the legal, accounting and other technical and professional discussions that are able to join the discussion from each of the companies. Instead of having only the Chairman of the joint operating committee dealing alone with another issue that will cost time and money in a busy schedule, the entire resources of the firms represented in the joint operating committee can be brought to bear on the problem in a virtual and rapid fashion, as required. 

What could not have been discussed and considered, let alone implemented and resolved in a timely manner, can now effectively be resolved in as little as weeks or months upon identification of the problems. This scenario reflects only the collaborative tool at work. Eventually the entire accounting, production, land, and legal forms processes and procedures, including electronic forms such as mail ballots and daily-drilling reports could be 

populated to the databases contained within the collaborative environment. This scenario accurately reflects the difficulties in dealing in the prairies, in the frontier areas of oil and gas, this scenario may best be represented by replacing the surface rights holder with either Greenpeace or The Sierra Club. Other software applications such as Accumap and 3D seismic interpretations could be presented and invoked by the toolset. With the potential of the entire ERP systems functionality, as described in the Genesys® ERP Proposal.pdf being invoked to support and align the SJOC, society and human resources. The need to clarify that holding the SJOC accountable is not, and 

should not be, construed as a capitulation of the innovation process and its inherent benefits to the four winds. 

A study was undertaken at Chrysler to determine why the changes to “teams” were successful in product development, as reflected in their cab forward design, yet the overall engineering and technical capability of the company declined. The Chrysler study reflects that the accountability of the committee (team) needs to be augmented by an internal management system that provides an overall focus and direction to the innovations. Management needs to create and guide the internal innovative science and engineering capability that is unique and a key competitive advantage. 

Review of Dr. Brown and John Hagel III’s writings has direct and pertinent value to this research and its associated proposals. The opportunity to better understand the Web Services paradigm can best be attained through a 

comprehensive review of their offerings and the IBM WebSphere website's. A distributable copy of their article “Does IT Matter, an HBR debate” is provided as part of this report. Particular attention should be paid to Dr. Brown and Hagel’s comments regarding Webservices. 

Dr. Anthony Giddens theory of structuration.

Dr. Giddens initially published in 1984 “The Constitution of Society: Outline of the Theory of Structure”, Berkeley, University of California Press and his theory is well articulated through the following excerpt from “Using the Structurational Model of Technology to Analyze an ERP Implementation” by Olga Volkoff, of the Richard Ivey School of Business. 

“From the perspective of structuration theory, adaptation is the joint effect of the actions of individuals and the institutional structures within which those actions take place. Structures such as business strategies, organizational culture, reward and control systems, patterns of communication, and professional norms both enable and constrain the daily activities of people, but do not wholly determine them. At the same time, while individuals can choose to act in ways that will either reinforce or alter those structures, their choices are not independent of the structures within which they take action. This “duality of structure” - the recursive (re)production of institutional structures through the ongoing daily social practices of individuals - allows change to emerge in ways that are not wholly predictable.” (p. 235) 

Volkoff also states 

“The three basic elements of this duality are the production of meaning, the exercise of power, and the invocation of social norms. Individuals act and interact on the basis of a shared understanding of their situation; through action that understanding evolves. Similarly, action depends on capability, and mobilizing the resources that deliver capability requires the exercise of power. Actions are also more or less likely to occur, or to be effective, depending on whether they are judged as legitimate or illegitimate according to the social norms of the organization.” (p. 235) 

Giddens’ theory of structuration is further defined by Orlikowski’s (1992) comments:

“the duality of structure refers to the structure of social systems: human actions create a social system’s institutional properties and these properties then serve to shape future human actions.” The notion of structuration has three aspects. (p. 402) 

Applying Giddens’ theory to this research is done from two perspectives. Firstly, from the perspective of how the current oil and gas organizational structure is defined through the social, legal and environmental influences that provide that structure, and of how the individuals can choose to act in ways that will either reinforce or alter those structures organization in turn provides structure to the social and human elements. 

The second application of Giddens’ theory in this research is from the context of what the IBM Workplace toolset (described elsewhere) will have on an oil and gas firm. As this research points out in its literature review of Dr. Giovanni Dosi, collaboration is a required element for firms and industries to enhance innovation. Focused on the dynamics of the SJOC, the proposed alternative organizational structure consists of internal (private) and external (public) self-organizing teams. This is proffered as necessary to facilitate the enhanced innovativeness of cluster-based producers. 

The joint operating committee has explicit legal, ownership, financial and procedural authority and control of the field operations as the standard of operations and conduct in oil and gas internationally. Financial investment in an oil and gas property qualifies for participation on the committee where the operational control is agreed to and implemented. This research asserts that this operational control has significant implications on the internal operations of the participating organization. The facility design, capital budget, legal agreements and the decision making processes are constrained, Giddens’ theory would state, by a variety of forms and structures that comprise the basis of operation for the entire industry. This process is collaborative, yet at a pace that is too slow for today’s business environment and certainly too slow for competition or innovation. 

At the same time the committee is not accountable financially. No performance reporting or criteria as to production targets or financial returns are required of the participants of the SJOC. It is the extension of the accountability of the committee beyond cost control that this paper recommends be undertaken in the collaborative environment created by the IBM toolset and implemented through an effective software development capability as proposed by Genesys®.

 

As Davenport (2002) states in The attention economy, 

“Strategy and Structure are mental constructs, important not in themselves, but for their impact on the people in the organization. Strategy and structure are also the vehicles for focusing attention.” (p. 51) 

Studying or analyzing the contrast between the above two perspectives reflects the severity of the change in oil and gas that could and should be orchestrated today. This paper states the impediment to progress is the hierarchical organizational structure. It is therefore explicit in Giddens’ theory, that in this instance, the advancement of society would be dependent on the removal of those organizational constraints that are inhibiting further progress. 

And based on what Volkoff had mentioned at the beginning of this structuration literature review. In expressing the duality of technology, that one key element regarding duality was the need for the exercise of power. This power is reflected in the form of a revised capability in order for the power to be exercised. It therefore needs to be asked in what form will the exercise of power necessary to trigger this change manifest itself? This research has determined that the existing power structure and change agent is the IBM Workplace toolset documented elsewhere in this research. The capability of both the tool and the strategy employed by IBM provide for the exercise of this power, and that irrespective of management’s planning and control, this toolset will be introduced into the organization and is therefore necessary to prepare and plan for this eventuality to ensure its constructive use. 

Another key component of Giddens’ theory is that there is an inherent risk of failure if the progress of one element is out of step with the other two. Society, organizations and people need to move in lock step to avoid failure. 

This has been explicitly interpreted for the purpose of this research that the progress of society and people is either inhibited or facilitated through the actions that form the organizations. Currently individuals and society are dictating larger volumes of energy be sourced and provided to the market. 

Therefore in summary, this research has applied Giddens’ structuration theory and concluded that for the limited purposes of this research the current hierarchical organizational structure is out of step with society and people. For the purpose of this research, structuration has been interpreted, as changes need to be made on the organization to match the further potential changes in society and people. This research asserts that Volkoff’s point of a change in capability be introduced through some exercise of power. IBM has introduced this change agent in the Lotus Workplace toolset. And therefore, structuration asserts that organizational change will occur or failure will be the result. It is assumed that the failure of the organization would be the outcome of this scenario, however that may be incorrect. 

In terms of the structure of oil and gas, the joint operating committee is a key aspect of the manner and method of industry’s operations. It has structure and therefore based on Giddens’ Structuration theory, defines and provides form and function, which has an impact on the remainder of the organization. Continuing to ignore the joint operating committee from an accountability point of view is, in this researchers opinion, what might cause the organizational performance to degrade. A viable alternative to using the joint operating committee has not been determined at this point, and even if there was a viable alternative, the ability to use any alternative organization would require the legal and cultural framework to be amended This has not been recommended nor even determined at this point in time. And on the basis that an alternative organizational opportunity has not been determined at this point and therefore would require substantial financial resources and time just to consider, the joint operating committee, with its minimum 50 year history and international use, is truly the only viable alternative available to oil and gas companies today. 

The lack of explicit recognition of the joint operating committee from an accountability point of view, and the tacit support of the traditional hierarchical bureaucracy are two of the primary reasons for the impediment of the classic ERP systems, such as SAP. These reasons are also the fundamental reason why those ERP systems are inadequate for the purposes of oil and gas, and it is asserted here that “SAP is the bureaucracy”.

Dr. Wanda Orlikowski’s structurational model of technology.

Dr. Wanda Orlikowski’s structurational model of technology draws upon Giddens’ structuration theory and presents a comprehensive framework for understanding the relationship between technology and an adopting organization. To highlight the difference between Dr. Orlikowski’s and others 

models Orlikowski briefly reviews three prior models of technology: 

Dr. Orlikowski’s structurational model of technology proposes two key aspects: the duality of technology and the interpretative flexibility of technology. 

The duality of technology means that technology is the product of human action and assumes structural properties: it is physically constructed in a given context and socially constructed through different meanings. 

The interpretative flexibility of technology suggests that technology is continuously constructed in social and physical ways, that there is a time space discontinuity (development is separated from use in both context and time) in traditional models, and that individual and social factors influence users working with and shaping technology. Orlikowski’s model of structuration has four specific components. 

This last point is key in the context of this research; management is not responsible for tearing down organizational structures. Change agents need to be introduced to provide a path for management to move towards. Transformation of the oil and gas organizational structure will occur due to the significance of the Web Services toolset. Will the industries response be proactive or reactive in its adoption? Structuration suggests that the outcome and implications of technology is not happenstance and that development of technology falls within the domain of management’s influence. 

This research attempts to document the issues and opportunities of today’s technology marketplace and provide management of oil and gas companies with the means to pro-actively manage the opportunities presented 

and mitigate the threats of technologies dark side and are contained within. 

For the purposes of this research, what will be referred to as the “management push back” has manifested itself in the non - participation in this research. It is this author’s opinion that as a result of this situation, there is a higher risk and propensity the web services technology will enter the organization via the back door. In essence structuration will be defining the organizational environment. 

Major obstacles create major problems in the implementation of technology. In addition to the management push back, other obstacles need to be addressed in the effective and efficient implementation of technologies changes. Many of the issues are more global in nature, and are beyond the scope of this research, but are addressed in the Genesys® February 2003 proposals study period. 

Conclusion regarding Dr. Giddens’ and Dr. Orlikowski’s literature.

The important component of this literature review is the Orlikowski (1992) understanding of the “duality of technology” and the “interpretive flexibility of technology”. The need to control and develop the technology within an organization is critical to this technology’s use and ultimate value. The technologies influence in the future behavior of the organization is in turn defined by the technologies use by the users. There is a symbiotic relationship between the use and development of technology, and that these “are separated in both time and context” (p. 235). How does SAP deal with this point? 

It may be controversial to assert that the strategic management of the oil and gas industry has muddled along over the past few decades. The viability of the industry has always been at issue and the need to “survive” appears to have driven organizational developments. The National Energy Program, the decline in oil prices, deregulation and take away capacity issues took significant time and effort to overcome. Much of the industry today is still constrained in its thinking regarding their strategies and needs that are not optimal for this high commodity price environment. It is this high commodity price environment that is the “change” agent that will facilitate the decline of some producers. 

The time for the independent producers within the Calgary based cluster to think in this context is today. To expect that the innovations that are required for the industry to move forward will be developed in the “cottage industry” approach is wrong. The constraints of software development, as detailed in Genesys® February 2003 proposal accurately reflect the issues of the cottage industry approach. With a collective $70 billion dollar revenue stream, the producers expectations in this regard extend well beyond the surreal. 

Just as the French began a comprehensive study of trench warfare after WW1, the methods and means of competition today are not dependent on the methods and means that have brought this industry to where it is today. And just as the strategic thinking that provided the French with the ultimate defense of its borders, or the Maginot line, companies today continue on with the thinking that has brought this industry to where it is, and not to where it needs to be to face the future. 

As structuration theory describes and reflects, we are constrained by what we are and what we do. Elimination of those constraints requires a “clean slate” and new methods in order to overcome many of the legacy related issues that currently permeate management’s thinking. These constraints are just as much internal to an organization as they are external through management’s selection and deployment of their associated vendors. Does any producer truly believe that the constraints of code and customers, as detailed in Genesys ® , February 2003 development proposal, will be overcome by any of today’s software providers? 

D r . G i o v a n n i  D o s i

Summary and application to oil and gas firms of Dr. Giovanni Dosi’s article. “Sources, Procedures and Microeconomic Effects of Innovation.” 

September 1988, Journal of Economic Literature Volume XXVI pp. 1120 - 1171 

Introduction

Dr. Giovanni Dosi’s article discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The key aspects of Dr. Dosi’s theories that make them directly applicable to oil and gas are the innovation theories application to earth science and engineering disciplines. These disciplines are key to the capability and success of oil and gas firm’s search, and production of, hydrocarbons. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. 

With the substantial upward revision in pricing of oil and gas commodities, new microeconomic models are developing based on these pricing realities. It is this research’s assumption that the search, discovery and production of hydrocarbons and the underlying earth sciences and engineering will develop faster than in the past, and at the same time, become more of a differentiation between the producer’s capability. Consistent with the revisions in the underlying sciences is the need for the development of alternative organizational structures and processes designed to support the acceleration of scientific and technical innovations. It is the understanding and application of the sciences that would be enhanced through collaboration through the joint operating committee, ultimately leading to an enhanced overall innovativeness for the producer. Mr. Matthew R. Simmons (http://www.simmonsco-intl.com/) states the science and technology of oil and gas is second only to the the space industry. 

Petroleum companies’ business models have begun to undertake significant transformations in the form of higher risk profiles and different assumptions regarding the allocation of capital risks. These are accurately reflected in Encana’s Greater Sierra and Cutbank Ridge properties in Northern British Columbia, and the commercial development of the oil sands in Alberta. 

Dr. Dosi’s paper discusses and asks what are “the sources of innovations opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities”? (p. 1121). 

This research in oil and gas attempts to focus the points of: 

There are two major issues identified by Dr. Dosi: 

Dr. Dosi then makes the statements that, 

“The search, development and adoption of new processes and products 

in market economies are the outcome of the interaction between:” (p. 1121) 

“Capabilities and stimuli generated with each firm and within the industry 

of which they compete.” 

For the purposes of this research in oil and gas the focus will fall primarily on the organizational capability of the firm. It should also be emphasized that innovations are based on both the firm and the industry. Co-ordination of the capabilities and stimuli of both the firm and the industry would therefore need to be advanced through changes in the organizational structure. (p. 1121) 

“Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc.” 

“Additional issues include the conditions controlling occupational and geo - graphical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulations, tax codes, patent and trademark laws and public procurement.)” (p. 1121) 

Based on the capabilities and stimuli of innovation present in the oil and gas sector, particularly the microeconomic effect of the commodity prices, it is reasonable to conclude that independent producers of oil and gas would be an area where significant innovation can and needs to occur. The primary reasons for the future enhanced innovation is due to the following analysis of the industry. 

The capacity to enhance reserves is significantly more challenging than as little as five years ago. Exploitation is generally expected to continue, however, an enhanced role for various degrees and types of exploration is expected to commence. The energy frontier brings many new risks and complexity in the area of technical, political and the environment. These account for much of the changes in stimuli and capability that Dr. Dosi states are required to facilitate further innovation. Secondly, the microeconomic trends associated with changes in the relative prices of outputs. Oil and gas prices are beginning to reflect the scarcity, importance and value of these commodities to society. 

Although Dr. Dosi states that the majority of his paper is based on a products improvement and development. It is just as appropriate for internal and external business processes, and the organizational structure of an oil and gas firm to be redefined to enable, and facilitate innovation. This innovation would further the development of the scientific infrastructure of oil and gas exploration and production. That is the hypothesis and purpose of this research paper and Dr. Giovanni Dosi’s theory will be described in the following sections with its specific application to oil and gas. 

Searching for innovation - The General Patterns

In his analysis Dr. Dosi asserts that the amounts of capital expended in the pursuit of research and development is augmented by a large indirect expenditure of “learning by doing” (p. 1124) and “learning by using” (p. 1125). These costs are tacitly incurred and difficult to identify and quantify, and that countries, industries, companies and individuals can and do innovate at different rates. 

These costs are further quantified by classifying these into the following 

four categories: 

Each of these four categories of the costs of innovation can be directly or indirectly applied to the organizational structure. And this research would restate a salient point of Giddens (1984) structuration theory; and ask how much of an oil and gas company’s innovativeness is attributable to the capabilities defined by the organizational structure? 

Dosi then sets the stage with his research questions: 

First the nature of the process of a firm in taking a promising technology, or economic opportunity and seeing it to its actual development. “That is, what do people actually do? How do they search? Why do sectors differ in their search procedures and effectiveness?” 

“Second, one needs to determine the direction that technological change is taking society? Are there other factors in the patterns of technological change?” (p. 1125) 

Thirdly, Dosi asserts there is a “propensity to innovate” that needs to be identified and asserted as to what a company is “capable of” which is not easily replicated, and different based on unique and mutually supporting internal (the organizational structure) and external components. Stating that these are the result of two identified phenomenon, which will be discussed in the next section. (p. 1125) 

In oil and gas varying rates of capability can best be compared by analyzing revenues per employee as an indicator of innovation. For example, Canadian Natural Resources Ltd.’s (CNRL) 2002 annual report reports it has achieved almost $3 million in production revenue per employee whereas during 2001, a time of higher oil and gas prices, Vintage Petroleum Ltd attained approximately $950,000 in revenue per employee. These differences in performance are imputed to be the overall net result of the cumulative investments, in both organizational and science based capabilities, and innovativeness of the firms. In 1980 this factor was calculated for Aquitaine Company of Canada Ltd, which was one of the first to attain the level of slightly over $1 million revenue dollars per employee. This therefore does not reflect well on the performance of Vintage and reflects, that all things considered, CNRL has achieved three fold productivity increases in comparison to Vintage and of comparatively high performing firms in the industry during the early 1980’s. 

These disparities in revenues are assumed by this research paper to be a result of the cumulative direct and indirect investments by these firms in innovative capability, again all things being equal. Questioning of this factor will be conducted to dispute the conclusions contained within this report, however, this paper asserts that production revenue per employee is an effective means of determining a company’s capability regarding the application and use of the appropriate sciences and innovativeness. With respect to Dr. Dosi’s work, what is it that CNRL does and Vintage doesn’t do that creates such disparity?

 

Innovation: The characteristics of the search process.

Much analysis has been undertaken to determine the actual outputs from innovation and compare those to the input costs and attempt, as one does in today’s technology environment, to determine a return on investment on technology, innovation, research and development. 

Dosi reviews a number of studies that focus on quantifying the output part of the equation. These are comprehensive in their number, heterogeneous in their conclusions, yet, Dosi feels he has been able to find a number of threads that determine which factors or characteristics are influential and of crucial importance in the economics of technological change. 

Problem solving of technical paradigms, the purpose of innovation.

Dosi states (1988) “In very general terms, technological innovation involves or is the solution to problems.” Dr. Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and un-codified capabilities, or tacit-ness” as Dr. Dosi (1988) describes “on the part of the inventors who discover the creative solution.” (p. 1125). This statement accurately describes this authors opinion regarding the collaborations that should be undertaken by the SJOC.

It is therefore asked specifically, how can the knowledge, information and capability of oil and gas firms solve the technical and scientific problems of the future? How can a firm more effectively employ its capability to solve problems and facilitate the discovery of new problems and creation of their solutions? Clearly some companies are more effective at this process then others, but this research in oil and gas asks, is there a means for an organization to provide a quantum increase in its ability to innovate that leads to higher trajectories of performance based on production revenue per employee? 

Genesys® has documented and identified the issue regarding the IBM Workplace / WebSphere toolset, and its effect on corporate ERP systems and has proposed a solution to industry based on a fundamental value proposition. These solutions are documented in this research and the February 2003 ERP proposal contained in this reports appendix. Oil and gas firms should seek to undertake these solutions as the beginning of their move towards a more innovatively capable organizational structure. 

Dr. Dosi asserts a crucial point in that technology and sector specific variety of knowledge, based on innovative search, implies different degrees of tacit-ness of the underlying knowledge of the innovative success. This helps to explain the differences across sectors of the typical organization’s capabilities to conduct research and innovative activities. Whatever the knowledge base on which innovation draws, each problem solving activity implies the development and refinement of “models” and specific procedures. 

Dr. Dosi believes there is an underlying strong tie-in between the natural sciences and the development of technologies. Using the Aristolian and Platonic “paradigms” of understanding of science, when these scientific paradigms are proven to be more complex or different, the underlying technology change can replicate that seen in the natural sciences. 

This researcher asks, if the knowledge of the underlying oil and gas sciences increases in its understanding, what organizational structure can best facilitate innovation? Would “any” organizational structure have a requirement to parallel the changes and developments in the sciences? How are the scientific problems, the refinement of models, the discovery and success of innovative thinking communicated throughout a bureaucracy? Self-organizing teams, as represented by the joint operating committee, provide the most effective and efficient means of organizational structure. 

Technological Paradigms and Patterns of Innovation: Technological trajectories.

The definition of a technological trajectory is the activity of technological process along the economic and technological trade offs defined by a paradigm. Dosi (1988) states “Trade-offs being defined as the compromise, and technical capabilities that define horsepower, gross takeoff weight, cruise speed, wing load and cruise range in civilian and military aircraft.” This research assumes the technical trade-off in oil and gas is accurately reflected in the commodity pricing. (p. 1128) 

These trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs the change and is usually abundant and available at low costs. For innovation to occur in oil and gas, this paper asserts that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers for a number of technical paradigms which will provide companies with fundamental innovations. 

An excellent example of this would be the discovery of the north-south orientation of horizontal under-balanced drilling in the Jean Marie formation of British Columbia, where knowledge and collaboration lead to a fundamental low cost solution to a technical problem. This simple change, reflecting the effect of the thrust of the Rocky Mountains, has lead to significant findings and deliverability of gas. 

Technology: Freely available information or specific knowledge.

Dr. Dosi notes that although the free movement of information has occurred in industries for many years, yet has never been easily transferable to other companies within those industries. The ability to replicate a competitive advantage from another company is not as easy, and may indeed not be worthwhile doing. Dosi (1988) goes one step further and states, “even with technology license agreements, they do not stand as an all or nothing substitute for in house search.” A firm needs to develop “substantial in-house capacity in order to recognize, evaluate, negotiate and finally adapt the technology potentially available from others.” Therefore why bother, and why not just focus on the need to increase the company’s own unique and specific competitive sources and directions. (p. 1132) 

This also imputes that the free flow of information between producers through collaborations in the joint operating committee would increase the knowledge, yet not expose anyone of the specific organizations to any specific losses of key knowledge or proprietary information or capability.

 

Information’s shelf life expires faster each day. Knowledge and information need to be employed and deployed where and when they are required. This research’s collaborative method of employing the intellectual property might facilitate a greater value, to the participating producer, and would provide the groundwork for future innovations and expansion of the underlying engineering and earth sciences. And although no specific proof of this can be sourced at this time, today’s hierarchical organizational structure is the impediment to the speed of innovation developments, its adoption and application, and it is asserted through this paper that this is tacitly understood.

Dr. Dosi (1988) cites the dichotomy of Adam Smith in that organizations are comprised of those that “system learning effects on economic efficiency by way of the division of labor, and the degrading brutality of repetitive and mindless task simply for some workers. These support the “how to do things” and “how to improve them” (p.1133). 

This dichotomy reflects the challenge of improving the processes and products through trial and error, with heavy emphasis on the error. The ability to accurately predict the success or failure of a new idea contains inherent high risks and hence high rewards. This is one of the constraining factors in implementing innovative thinking, in that no one wants to be proven wrong. Whereas, even if the idea fails the ability to test the theory, the failure may ultimately lead to and may be the key to discovery. 

Society dictates certain norms employed by staff is, to do as they are told and in some cases not to think. Even if they do think of other ways, cultural influences may silence otherwise worthwhile suggestions and innovations. This is the area that needs to be fully comprehended and why Dr. Wanda Orlikowski’s model of technology structuration needs to be considered. It states that technology is a component of society and organizations, and therefore society and human resources have to move forward in concert, and that power needs to be asserted to affect change. An imbalance in the three components leads to failure. If all staff became innovative overnight, it would probably precipitate the rapid decline of a firm. 

Dr. Dosi asserts that the structure of financing innovation is constrained by the budget process, rules and meta rules that companies will spend x% of sales on research and development, and that this style of thinking curtails these factors when interest rates are high or profits are low. These facts help to precipitate the need for a longer-term approach to innovation. Dr. Dosi asserts organizations need to move beyond the next quarter’s performance criteria and build sustainable competitive advantages for the future. With the current low interest rate environment, and the essentially free access to information are two key drivers for a major trend in innovation. Companies unprepared for the outcomes of their competitor’s innovative investments may discover problems earlier then they expected. Nonetheless the purpose in budget rules and regulations are how managers seek to control the future and reduce the uncertainty inherent in innovative search without eliminating it. 

A strong balance needs to be achieved in dealing with the difficulties of managing an enterprise in the future. As described above, the day-to-day management must be handled properly, yet the future is highly dependent on innovations in the sciences of oil and gas. Can the hierarchical structure of today’s organization continue to serve these two disparate objectives? Does the firm need to employ alternate styles of organizational structure that serves both ends of this phenomenon? 

Opportunities, incentives, and the inter-sectoral patterns of innovation.

Discussing the nature of the opportunities and knowledge on which innovations are drawn. And the manner that incentives lead profit motivated actors to innovate and or imitate. It is Dosi’s argument that the innovation process helped to explain why sectors differ in their modes and rates of innovation. Moreover, firms within each industry differ in their propensity to innovate. This research in oil and gas is extending this thinking to further define the industry as a “cluster” as Dr. Michael E. Porter has documented in his work on competition, and his definition of a cluster being a local area that has developed significant competitive abilities that competes on a global scale. Silicon Valley is an example of a cluster in high technology. 

To facilitate the effective and efficient means of competition within a cluster requires collaboration amongst its participants. This is the key to extending the reach and understanding of the science within the cluster for the benefits of each organization. It is the cluster vs. cluster that is the basis of the competitive force in the near future, especially as many of the independent producers that this research is directed at are in pursuit of international opportunities. 

It should also be questioned that in the search for oil and gas, how much of the scientific capability of a producer is dependent on a standard or historical basis of competitive understanding and capability, and how much is based on a future understanding of cooperation within a cluster and / or competition against unknown and unseen global participants? 

Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Dr. Dosi introduces the theory of Schmookler (1966) and asked “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovative inputs. Using the factor of revenue per employee helps to define and clarify the value in assessing the observed inter-sectoral differences of an oil and gas company in investment outcome. This also reflects that “different incentive structures” and “different opportunities” are also the product of the organizational structure. This is made explicit in this research paper by invoking Giddens structuration theory. This paper is stating the ERP system that tacitly and explicitly supports the bureaucratic hierarchy is also a component of Dosi’s (1988) “different incentive structures” and “different opportunities” as they indirectly affect the capacity to innovate. 

Technological opportunities: Exogenous Science and Specific Learning.

Technological paradigms have been directly linked with major scientific breakthroughs, from the discovery of the transistor to the development of modern computer technologies. Dr. Dosi is stating that these links between science and technology have been very evident since the days of Leonardo da Vinci and Galileo. What was unique to the 20th century was that the need to generate and utilize scientific knowledge, was internal to, and often a necessary condition of the development of new technology paradigms. Up until the end of the 19th century, most technological innovations were the developments of imaginative craftsmen. Many of the 20th century developments were the result of multiple disciplines, such as physics and microelectronics, whose scientists were awarded the Nobel Prize in 1962 for the semi-conductor. 

Dr. Dosi then concludes that scientific input into the innovation process is evidence of the importance of factors exogenous to competitive forces among private economically motivated actors. This is subject to two important qualifications. 

Science and technology are self-fulfilling in their developments. 

Scientific advances play a major direct role, especially at an early phase of development of new technological paradigms. 

These points support Dosi’s (1988) assertion that “general scientific knowledge yields a widening pool of potential technological paradigms,” where the greatest value is attained in the earlier stages. Dr. Dosi analyzes the specific mechanisms through which a few of these potential paradigms are actually developed economically, subsequently applied, and that often have become dominate in their industry. The process of selection depends on the following factors (p. 1136): 

“The nature and interests of the bridging institutions between pure research and economic applications.” (p. 1136) 

“Institutional factors that drive the technology or science, such as (the military)”. (p. 1137) 

The selection criteria of markets and or techno-economic requirements of early users. (p. 1137) (NASA, Pentagon the FDA and Nuclear Reactors for the Navy) 

Trial and error associated with the Schumpeterian entrepreneurship. 

Dr. Dosi (1988) continues on to assert that much of the innovativeness of a firm is dependent on technology more than science, and is based on several implications. The first implication being the net benefactor of the cumulativeness, tacit-ness and technological knowledge implies that “innovation and the capabilities for pursuing them are to an extent local and firm specific”. Secondly, the “opportunity for technological advances in any one economic activity can also be expected to, and constrained, by the characteristics of each technological paradigm and its degree of maturity”. This is further defined by the technological and scientific capabilities, and the advances made by suppliers and customers. (p. 1137) 

How can the oil and gas sector sponsor or drive this capability, is this happenstance, or is there an invisible hand at work. If there were a more direct approach in innovation, what would the effect be? Dr. Dosi (1988) references Scherer who states that this “inter-industry component must be attributed to upwards of a 42.5% variance in industry.” 

This research paper is imputing that innovation should now be considered an operating strategy that provides a significant means of competitive differentiation. The idea of technological paradigm bound industry and innovation is consistent with the findings of Simon Kuznets (1930) and Arthur Burns (1934) about a “secular retardation in the growth of output and productivity from the gradual exhaustion of technological opportunities along particular trajectories.” (p. 1138) 

“New technology paradigms stimulate and reshape the patterns of opportunities of technical progress in terms of both the scope of potential innovations and ease with which they are achieved.” This is stated as the possible reason why we have not seen an approach to a “stationary state”. (p. 1138). Or has the theory of constraints now invoked the “Limits to Growth.” 

Two separate phenomenon are observed as a result of this:

“First, new technological paradigms have continuously brought forward new opportunities for product development and productivity increases.” (p. 1138) 

Secondly “A rather uniform, characteristic of the observed technological trajectories is their wide scope for mechanization, specialization and division of labor within and among plants and industries”. This paper extends this phenomenon to include the organizational structure and the method of parsing out tasks and roles based on the processes requirements. (Accountants, engineers, geologists etc.) (p. 1138) 

How much of the current domestic capability of the oil and gas industry in Canada can be further exploited as the base of science and innovation? And can this “cluster” provide an international producer with greater competitive capabilities in the global marketplace? What is the plan to house this capability, and will the bureaucracy as represented in the structured hierarchy survive and prosper with global competitors? Is there an understanding and/or expectation that the constraints that bind the organization, such as the ERP system, will inhibit the transformation to a new global competitiveness? 

Ronald Reagan said about implementing Reaganomics, “if not us, then whom, and if not know, then when.” This paper asks the same question regarding the proposed organizational structure and technical ERP developments of Genesys® in oil and gas. 

Appropriability of technological innovations.

In light of the previous statements, what are the incentives to invest in the discovery of innovations and there development? Will these depend on the incentives that interested and motivated agents perceive in terms of expected economic returns? Dr. Dosi calls “appropriability” these properties of technological knowledge and technical artifacts, of markets and the legal environment that permit innovations as rent yielding assets against competitor’s imitation. 

Dr. Dosi (1988) notes a study conducted by Levin et al 1984, in which they studied the varying empirical significance of appropriability devices of patents, secrecy, lead time, costs and time required for duplication, learning curve effects, superior sales and service efforts. Levin found that the “lead times, learning curve advantages combined with marketing efforts appear to be the principle mechanisms of appropriating returns from product innovations. The most appropriate for process innovations were learning curves, secrecy, and lead times”. Dosi (1988) also observed, “that lead times and learning curves are relatively more effective ways of protecting process innovations, and patents a more effective way to protect product innovations.” Levin concludes that there appears “to be quite significant inter-industrial variance in the importance of the various ways of protecting innovations and in the overall degrees of appropriability”. (p. 1139) 

Levin states that the control of complementary technologies becomes a rent-earning firm-specific asset. Dr. Dosi (1988) states “in general, it must be noticed that the partly tacit nature of innovative knowledge and its characteristics of partial private appropriability makes imitation a creative process, which involves search, which is not wholly distinct from the search for new development, and which is economically expensive - sometimes even more expensive then the original innovation, and applies to both patented and non- patented innovations.“ (p. 1140) 

The driving forces of technical change.

Dr. Dosi summarizes that businesses commit to innovation stemming from exogenous scientific factors and endogenously accumulated capabilities developed by their respective firms. 

Dr. Dosi’s (1988) general point is that “the observed sectoral patterns of technical change are the result of the interplay between various sorts of market-inducements, on the one hand, and opportunity and appropriability combinations, on the other”. (p. 1141) 

What opportunities are and will be constrained by not adopting a more innovative organizational structure? If the geological and engineering sciences progress in a substantial manner in the next 5 years, (and there is no evidence to support that it will or will not) how will oil and gas companies adopt, employ, test and prove these science’s development without an enhanced capacity to innovate. How much of the drive towards innovation is the beginning of the understanding necessary to expand the science? How much of an inducement are the current commodity prices providing the global competition to innovate? Based on the proposed technical and organizational changes of this research, the ability to establish a forum where the science and technology is collaborated between the organization and sponsored research institutions would facilitate greater internal innovative capability based on its scientific and technological capability. 

Dr. Dosi discusses the relative merits of these “appropriabilities” and defines them further by classifying them as either as “market pull” or “technology push”. The justification for this research to continue is based on the market pull categorization of appropriability of innovation in today’s oil and gas market. And it is reasonable to assume that innovation in oil and gas will occur on both the producers’ behalf as well as the energy consumer. This paper is not asserting that efforts in the past were not innovative or moved the science substantially. The issue this paper is raising is that the pace and speed of the science’s development in the near to mid-term will accelerate based on the fact that, globally and in Canada, reserve replacement has become progressively more challenging, and the prices realized for the commodities has begun to reflect these challenges. Dr. Dosi (1988) concludes this section with “Finally, the evolution of the economic environment in the longer term, is instrumental in the selection of new technological paradigms, and, thus in the long term selection of the fundamental directions and procedures of innovative search.“ (p. 1142) 

Inducement factors, patterns of technical change, and irreversibility.

Technology paradigms are almost immediately more effective than the previous technology. The only reason the paradigm may have been changed or created is due to a fundamental input price change. Dosi (1988) states that a fundamental implication of this view is “technical progress generally exhibits strong irreversibility features.” (p. 1144) 

This paper has no other evidence than the previous statement that the proposed joint operating committee’s reorganization to include financial performance accountability would or would not provide a higher level of organizational performance, and as stated before, failure of this research’s hypothesis would ultimately lead to the appropriate solution. And that irreversibility of that performance would be evident if this research were funded further. 

This research proposal and report has not been funded by industry, nor was there any information forthcoming that funding would occur. However, this paper asserts that the level of individual understanding and support within the industry that the initial research proposal attracted, is evidence of its viability and the probability of eventually proving its hypothesis valid. As stated before, failure to prove the science or innovation is at times the first step in determining success, and that the tacit-ness that the concepts put forward are sound and worthy of further study. And this initial funding failure reflects more the political structure of organizations, and not the failure of this research to prove its hypothesis. And it is stated unequivocally, that the manifestation of the political issues were as a result of the breadth and scope of organizational dynamics that is, are, or will be affected by the concepts put forward. 

Genesys Software Corporation is grateful to IBM Corporation for their support in providing the toolset and licenses necessary to further pursue this research hypothesis. 

The externalities of the innovation process.

There is and always has been certain elements of innovation that are developed outside of the current application of technology. Dr. Dosi cites the bicycle’s benefit from the manufacture of shotguns and the understanding of constant chemical processing that have allowed innovation to occur in food processing. Dr. Dosi refers to these as un-traded interdependencies and states they represent an important link between innovation studies and the regional economics of technical change. Based on scientific data prepared and provided during 1945 to 1976 Pavitt, (1984) and Pave (1984) identified four major groups of manufacturing industries, namely: 

Supplier Dominated Sectors. 

Most innovations are process innovation embodied, as Dosi (1988) states “in capital equipment and intermediate inputs and originated by firms whose principle activity is outside the sectors proper.” Industries such as wood products, basic metal products, agriculture, textiles, clothing, leather, printing and publishing “where endogenously generated opportunities are rather limited and so are R and D expenditures.” These industries are innovative on the process mostly and heavily focused on best practices. (p. 1148) 

Specialized suppliers. 

Innovation is primarily product innovations that enter most other sectors as capital inputs. Opportunities for innovation are generally abundant but are often exploited through informal activities of design improvement. Idiosyncratic and cumulative skills make for a relatively high appropriability of innovation, such as German machine tool makers. 

Scale intensive sectors. 

Innovation occurs in both process and product where production involves mastering complex systems and the manufacture of complex products. Economies of scale are evident and abundant, firms are usually large, devote a large proportion of resources to innovation and tend to integrate vertically into manufacturing their own equipment. Industries include transport equipment, electric consumer durable, metal manufacturing, food products, glass and cement. 

Science based sectors. 

Innovation is directly linked to new technological paradigms made possible by scientific advances: technological opportunity is very high, innovative activities are formalized as R and D labs, investment in innovation is high, with a high proportion of the product innovation entering a wide number of sectors as capital or intermediate inputs. Firms tend to be big and include electronic industries, most of the organic chemical industries, drugs and bioengineering. Aerospace and military related activities share with science based sectors. 

If science based sectors are not where the oil and gas industry currently resides it is certainly the classification that it belongs to. It is also questionable as to which category of industry oil and gas may have been considered belonging to previously, in fact many may have considered oil and gas to be a participant in supplier-dominated sectors. This research would assert that the analogy of a “bank”, where investment provides a proportional return has been the mindset for too long in the oil and gas industry. This researcher asserts that the market pull factors of appropriability have moved oil and gas definitively within the fourth category as a science based sector, and therefore oil and gas should base their organizations on the requirements of a firm within that category. 

Inter-sectoral differences in innovativeness and economic performance.

Dr. Dosi discusses the phenomenon introduced in Part IV and considers the relationship between innovative activities and the dynamics of industrial structures and performances. Why do some companies attain greater value from innovations? It is this paper’s assumption that the cumulative investments made in oil and gas lead to variances between organizations as reflected in the cumulative production revenue per employee. Are there additional attributes beyond the investments that assist in making innovation in oil and gas more valuable? 

Dr. Dosi’s (1988) reference to the Schumpeterian hypothesis, “that bigness is relatively more conducive to innovation, that concentration and market power affect the propensity to innovate” It is obvious that Dosi does not subscribe to this theory, and this research paper asserts that the bureaucracy of the large hierarchical structures have and may be one of the impediments for this, and if it is not an impediment to innovation, it must certainly be an impediment to the speed at which a firm can innovate. 

First, although there are log linear volume of R & D expenditures and patents when compared with the size of the firm, upon closer investigation, estimates show roughly non-decreasing returns of innovative process to firm size. This is possibly attributable to the fact that very large and very small firms conduct most R&D. 

Second, although the expenditures in R & D incurred by large firms are impressive from a total expenditure perspective, the aggregate expenditures of small firms on a global basis becomes far greater in aggregate than the large businesses. This is where the implementation of collaborative tools to the innovation process of large firms may be able to leverage the firm’s investment better for the producers’ own purposes. 

Third, money is not necessarily a good indicator of innovativeness. Large variances within industries can clearly be identified irrespective of firm size. Dosi (1988) provides three caveats to the three differences noted. 

“Statistical proxies cannot capture aspects of technical change based on informal learning.” (p. 1152) 

Collaboration is a fundamental component of informal learning, development, documentation and exploitation of knowledge. Apple Computer spends roughly $400 million per year in R & D. Hewlett Packard spends approximately $4 billion on R & D and is beginning to earn less returns on there investments. The scope of Apples innovation span operating systems and software, manufacturing and processors. This scope compares favorably, from an innovative standpoint to the efforts of Intel, Microsoft and Dell collectively. 

These other firms do not necessarily have an internally generated capability, and hence need to find out what other companies are doing and how to implement those capabilities internally. 

Another aspect that this paper submits for consideration is the amount of success that the integrated international firms (the seven sisters) have earned as a result of their previous innovations vs. their discovery of the large and prolific fields many decades ago, and how much of the international independent’s success is attributable to past innovativeness? Will a third generation of producer arise to challenge these two prior generations? 

Flexibility and economies of scale.

Most of the innovation occurring during the industrial revolution has been via the technical trajectories of increasing mechanization of production and increasing exploitation of economies of scale. However, these innovations have been on the basis of the trade-off between volume of production and flexibility of the production lines. 

Robotics has had a tremendous impact on the makeup and mix of production runs and flexibility, the efficiency of small production runs, and the likely increase in the importance of plant related economies of scale. 

Therefore it is concluded by Dosi that the increased flexibility afforded by robotics and automation, motivated primarily through the more speculative nature of demand prediction, has had the effect of decreasing the productivity effect of additional innovations. Ultimately, however, the expectation of the innovations effect is that it will move the costs lower over the smaller production volumes. We are now clearly seeing this in the innovation and diversity of offerings in the vehicle industry. 

In oil and gas we see what might be considered a parallel situation. The business cycle is more dependent on the reserve life of new reserves. With rapid three-year declines, specifically in gas, the question becomes: is this a product of the cumulative innovativeness in exploiting the technologies that have developed? Or is the use and application of oil and gas technology yet to be tested against a more exploration style mindset consistent with the risk - reward of the current market pricing of the commodities. 

Either way it appears that the exploration and exploitation of oil and gas reserves has and always will be a function of the technology based on the underlying sciences. This is undeniable, and may also be the cause of the shorter-term life cycle and diminished size of new reserves, which is agreed by most to be a trend that will continue. This reserve size and deliverability is paralleled in Dosi’s discussion of how innovations in industrial companies have been diluted by demand prediction and lower production volumes. 

This researcher asks again how the structured hierarchy will facilitate the innovation necessary to exploit these smaller reserves? Are the predominately larger international independents now capable of meeting the demands of deploying their capital in progressively smaller reserve pools in an efficient and effective manner to maintain their production profiles? 

Innovation, Variety, and Asymmetries among firms.

As technical paradigms are introduced companies accept and use these innovative capabilities at different rates. This rate of acceptance can be classified as early innovators, imitators and fence sitters. Thus a satisfactory understanding of the relationship between innovation and distribution of firms structural and performance characteristics also implies an analysis of the learning and competitive process through which an industry changes. 

We have also seen over the past fifteen years an interesting trend that has created significant differences in the stratification of the oil and gas industry in terms of the size of the producer and their associated innovativeness. The small organization was able to purchase reserves and facilities from the open market, or their previous owners, only to substantially increase the inherent value through increased production and / or performance. We can conclude that the bureaucracy inherent in the hierarchy had stifled the innovativeness in the larger organizations and most disturbing is the lack of concern or identification of this as an issue over the past 15 years. This may also reflect most accurately Exxon’s current difficulties, and a similar trend that might occur in the large independents. 

This lack of innovativeness is not a long-term sustainable situation for either the integrated international producer or the current large international independent producer. It was the smaller innovative companies over the past 15 years that have increased their size and capacity, and through mergers and other various modifications, affected the landscape of the oil and gas cluster. 

The trend of smaller producers purchasing properties appears to have come closer to its ultimate end, and I would think with the blessings of the management of the larger international producers such as Exxon. The end being that the market for properties does not provide the upside in terms of applying innovative thinking to the overall situation. However the two major problems that were unaddressed by the bureaucracies of the “Exxon’s” are now the impediments to any forward movements by the targeted audience of this report. These two impediments remain unidentified and unresolved by these larger organizations, and reflect the following two characteristics: 

Firstly, the large class producers have generated little or no innovations in the past 15 years. 

Secondly, the business cycle continues to shorten, with only a three-year life cycle on reserves from drilling in the western sedimentary basin. 

These 2 issues make for interesting challenges in the years to come. The question will then become, how will much larger independent oil and gas companies learn to innovate in a bureaucracy? It also provides an understanding of how an organization that is able to innovate could compete more substantially, or are these capabilities and inherent positions static? 

It should also be noted that few industries have the luxury of a three-year product life cycle. Companies such as Intel have been able to compete in industries with 18-month product life cycles that reflect product pricing and technical exploitation that at least parallels the scientific difficulties in oil and gas. Therefore the ability to compete on the world stage will only become exceedingly more difficult as the business cycle continues to shorten. The performance of the bureaucracy will undoubtedly be challenged soon. 

Innovation and industrial change: Learning and Selection.

The Innovative Process and industrial structures

Dr. Dosi (1988) asserts that the makeup of industries and companies is attributable not only to the endogenous force of competition. Innovation and imitation also make up the fundamental structure of an industry, or in the case of this research, the local cluster. “Market structure and technological performance are endogenously generated by three underlying sets of determinants.” 

Each of these components is evident in the marketplace of an oil and gas concern today as reflected in: 

“The structure of demand,” 

The insatiable demand of the American marketplace for energy is critical to the advancement of that society. American society faces real challenges in the form of the developing third world economies, which have new and sustainable competitive advantages. 

“The nature and strength of opportunities for technological advancement.” 

The nature and opportunities for technological advancement lead one to believe mankind has never faced the level of opportunity and acceleration possible today The mechanization of the past 100 years combined with the mechanization of intellectual pursuits combine to markedly appreciate the value of human life. 

“The ability of firms to appropriate the returns from private investment in research and development.” (p. 1158) 

This third item leaves much to be desired. Will investments in research and development become more commercial in nature? Will innovation be a critical component of the methods a company uses to compete in the very near future? 

Characteristics of Innovation and Patterns of Industrial Change.

Dr. Dosi states that the rate of change and observed dynamics of industrial performance can be attributed to the following components: 

This research asks: what would be the effect of increasing the exposure from a single firm, to collaborating between several firms through the joint operating committee? Would this not facilitate a marked increase in “cluster” knowledge? And would this knowledge therefore facilitate an increased rate of collaborations leading to an increased level of understanding and pace of innovativeness and scientific knowledge? 

Extending the knowledge from one firm to a “cluster” of similar producers. 

This point is critical, because a firm may call themselves innovative and participate within an innovative cluster, but that does not make the firm innovative. The internal capability leads to an advanced selection among firms, with laggard firms selecting other laggard's. 

Dr. Dosi (1988) states that his general interpretative conjectures are: (And these are important considerations in determining the capability and capacity to innovate.) 

Firstly “The empirical variety in the patterns of industrial change is explained by different combinations of selection, learning, and diffusion and different learning mechanisms.” (p. 1159) 

Secondly “The nature of each technological paradigm, with its innovative opportunities, appropriability conditions and so on help to explain the observed inter-sectoral differences in the importance of the above three processes.” (p. 1159) 

Each successful innovation creates an asymmetry effect, or an overall increase in competitive position of the entire industry. However, that does not necessarily increase the competitiveness of all the participants of the entire industry. (Here Dosi invokes the structuration theory that society is a benefactor of the organization’s efforts.) The ability of laggard companies to improve their competitive position helps to form new positions within their industries. These laggard companies generally are able to move further and quicker through their imitation of leading companies. However, the primary differentiating component of competition based on innovation in process and product is attributable to the innovative capability of the firm. 

Dr. Dosi finds these points difficult to quantify and prove, but may be tacitly understood. This research asserts that that was the case in 1988 at the time this article was written, however, the laggard’s ability to “keep up” or even “catch up” progressively diminished through the application of information technology during the 1990’s. This may best be reflected in the expectation that a “laggard” such as Vintage might challenge CNRL in production revenue per employee performance. 

There is a determining paradox for the ability to innovate based on imitation or strict Research and Development. Companies can copy other’s innovations in industries with minimal asymmetry, (where they are all the same). Whereas industries that are asymmetric or have large variances in their capabilities are best served by differentiating themselves by pursuit of Research and Development. As reflected in the earlier analysis, Vintage and CNRL are demonstrating large variances in the capabilities as participants in the industry. This reflecting that investments in the capability to innovate would be valuable and critical for the industries’ competitive performance. 

Some Conclusions

The conclusion from this is clear; innovation is a competitive strategy, particularly to the local cluster of large independent producers. If this innovation is valid and employed in any industry, it will seek to further the values attained by the adopting company by increasing that company’s competitive capacities. This point forms much of the management recommendations contained within this paper. 

A “best practice” provides little in terms of sustainable competitive advantage, whereas innovation places management’s focus on the organization. The best practices focus on process does not affect the issue, or invoke any change. Organizational structure mapped carefully to the most efficient process should be the objective, and the attainment of such should be the goal and realization of an increased organizational trajectory. What do organizational best practices have to do with the capability of a company or its products? 

Dr. Dosi also asserts another interesting point in the application to oil and gas. The performance of innovation within an industry and its appropriability is dependent on 

The capability of the supporting sectors in innovating and developing new technologies, procedures, and methods to extract oil and gas have been remarkable. This is probably attributable to two things, the entrepreneurial nature of the province of Alberta, and the huge volumes of capital expenditures employed by the oil and gas sector. Yet, this has occurred in somewhat of an ad-hoc fashion, similar to what had happened during the 1800’s in developing North America. And as Dosi noted, this ad-hoc method ceased to be a means of further innovation in the 1800’s. We can then ask will the adhoc method cease to be a means of innovation for oil and gas? Companies must begin to directly fund the development of further innovations in the service sector. This can no longer be done in a non-Schumpeterian fashion, e.g. if a small supplier has an innovative idea it should be exploited by that company (such as Genesys® research). This will also have the tendency to limit the exposure of the innovation to the local cluster as opposed to the global industry. Expectations that the small service provider will be able to prove the theory and application are foolhardy in the context of the earlier discussion of success and failure. If the success or failure of the innovation by the small service provider is proven at their own costs, generally their ability to commercialize and monetize their investment is limited. This has lead to the eventual withdrawal of capital from the service sector for the purposes of further innovation, research and development. 

If the innovativeness as displayed by the capabilities of the oil and gas sector in western Canada are a basis of comparison, the opportunity to leverage this technical capability and move the technical paradigm from Western Canada to a dominant global position exists. The alternative is a further extension of the current trend of the Houston based independents to the 1970’s era “branch plant management” style of operation. 

An interesting outcome occurs from this. Dr. Dosi states that not all efforts are successful, many fail, and from the failure sometimes the most important lessons are learned, and all inherently understand this. The ability of an industry to learn through their collective efforts will mitigate the subsequent similar failures and their costs, and enhance the success over a larger population of companies. This “cluster” of western Canadian based international independents as Porter would call it, competes against other clusters of oil and gas producers based in Houston, Aberdeen, Moscow, Beijing, and Riyadh. This is collaboration’s benefit well described. 

Returning to the comparison of Vintage and CNRL, and in reviewing the material that Dr. Dosi has established in this literature review, the acceptance of the production revenue per employee as a factor of comparison should be established. Production revenue per employee will begin to help establish, both the measure of innovativeness of a producer, and a means of direct comparison between producers. The value of this measurement tool has validity currently through; 

One of the more controversial aspects of this research may be the suggestion to establish the production revenue per employee factor as a means of comparison, and particularly, the manner of comparison to determine the financial viability of the producer and a pre-curser to future earnings capability. 

Conclusions on the review of Dr. Giovanni Dosi.

The innovativeness of an oil and gas producer will be based on its capacity to find and produce the resources around the world more effectively than its competitors. Further expansion of earth sciences and applied engineering are required in order to maximize the producers’ opportunities and returns. Based on Dr. Dosi’s theories as described above, innovativeness and technology will expand the use and capability of a producer by expanding their understanding of the underlying sciences. 

The stimuli and microeconomic conditions necessary to facilitate innovation, being the commodity pricing and the potential as a result of the reconfiguration of the organization around the SJOC, are prevalent. 

Further expansion of the sciences would be carried out in a collaborative environment to leverage the tacit knowledge of the firm’s workers in collaboration with its partners and suppliers. This needs to be carried out in a commercial context within the structure of an organization capable of facilitating the collaborations and innovativeness. This is why it is this paper’s assertion that collaborations, through the SJOC, provides the greatest hope for the company to realize the future potential increase in value from the advance in science. 

Self-organizing groups have proven to be effective when common interests motivate them. The joint operating committee participants have the financial interest in the property and hence consistent motivations. Enhanced collaborations through the IBM Lotus Workplace facilities described in this research, backed up by an enterprise resource planning capable software development team, such as that proposed by Genesys Software Corporation is expected to affect the performance trajectory of the producer subscribing to this research. 

If this is not the situation, what organizational structure in oil and gas could facilitate the greatest innovations? At this point no other alternative has been suggested that would be able to potentially match the structure discussed above. To suggest that the hierarchical bureaucracy could lead to substantial differentiation in the appropriability of a firm’s capacity to innovate is not valid on the surface. As described in the Orlikowski section of this literature review, it is proffered that the organizational structure is the impediment to the advancement of society and people, and if we invoke Dosi’s theory, the hierarchy’s bureaucracy is the impediment limiting the further advancement of the associated sciences of oil and gas and producers innovativeness. 

Recall at the beginning of this paper it was noted that Dosi asks “what are the sources of innovation’s opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities?” It should be made explicit that the revised commodity pricing of the past few years provides a significant reallocation of resources towards the further development and exploration of the underlying oil and gas sciences. This is the opportunity that exists and to a large extent is an entire new way of operating oil and gas companies in an integrated network clustered environment. These commodity-pricing effects also point out the scope and magnitude of the changes facing an oil and gas organization. The strategy and operations will be affected in ways that cannot be predicted. This is also the reason that the CEO needs to be approached, as only s/he can champion this level of change within the organization. 

Therefore this research’s recommendation is that key to the endogenous capability that is a cornerstone of the innovative process, a reorganization of the hierarchical bureaucracy to self- organizing teams be undertaken. This recommendation is with the express purpose of combining the operational control of the joint operating committee, with direct accountability for the decisions the committee makes. 

Quality of Dr. Giovanni Dosi’s work.

Dr. Dosi was 35 at the time this documents writing, and to have produced such a significant work at such a young age is a substantial accomplishment. Review of his Curriculum Vitae reflects that since the writing of this paper he has been recognized as possibly one of the premier thinkers in the area of innovation. In terms of the quality of this work, few papers are produced of this quality and it was a great pleasure to learn and apply this thinking to the oil and gas industry. 

Dr. Dosi’s subsequent works have been more specific and detailed in certain areas that may have direct application today. The opportunity to review these documents will be one of the first tasks to complete should this research and software development be funded and continued.

Plurality should not be assumed without necessity. 

Dr. Noel Tichy

Dr. Tichy states that the level of change (circa 1983) is accelerating and companies need to look towards strategic change. He describes this change as more fundamental in its nature then the incremental changes that management introduces through their traditional experience-based management philosophies. Stating the need for change should be strategic in nature and more involved than limiting changes to re-organizations. Dr. Tichy feels that changes need to be more fundamental and include the technical, political and cultural components of an organization to ensure that these changes are adopted as they are designed to do. 

Summary of and application to oil and gas firms of Dr. Noel Tichy’s book;

“Managing Strategic Change Technical, Political and Cultural Dynamics.” 1983, John Wiley & Sons. 

Chapter 1, Strategic Change Management: Organizational Development Redefined.

The three major change initiatives of this proposal are: 

These three proposed changes are analyzed based on the technical, political and cultural criteria Dr. Tichy introduces in his book. 

Dr. Tichy (1983) states that there are nine change levers that management can use to make strategic changes effective. These levers form the basis and structure of his book and are summarized as follows: 

The complications and complexity of the environmental elements becomes more difficult to identify and manage. This requires changes to the means of evaluating the environment and may include the development of new information systems. 

Clear mission statements of how the changes are affecting the overall purpose of the firm can help to align the organization to meet the new requirements. 

Revising the overall and operational strategies of a firm to meet the new organizational objectives. 

The ability and capability of an organization must be constantly developed to meet the needs of the organization’s future requirements. This is particularly relevant when it is considered in the context of the strategic change initiative. 

New technologies such as web services, and the organizational changes introduced in this proposal require the training and development of staff and management. 

As this proposal suggests, the ability of the organization’s communication networks continue to be constrained by its overuse. Email and phone mail communications have saturated the user’s capacity to communicate and needs to be augmented through different channels. 

This is one of the major issues that this proposal foresees as a result of the Workplace and WebSphere technologies. These technologies will replace and circumvent the traditional forms of communication due to their efficiency and effectiveness. The training and management of these and other new networks has / will become an area of concern as a result of the issues regarding the saturation of users and their capacity. 

The processes of the organization’s communication and hence problem solving capacity are intimated in the previous point regarding prescribed networks. These points are also an issue for the independent petroleum producer, which needs to consider how to augment its decision-making processes. 

The joint operating committee has the operational decision making power. To more directly associate the operational decisions of the committee with the implications and accountability of those decisions, there needs to be a realization by the committee participants of the impact of these decisions, and therefore, be accountable for the implications of the decisions. Dr. Tichy suggests that the blurring of the decision-making only increases as the complexity and lines of authority increase. 

The motivation of the staff and management to undertake the required work needs to be considered in any change management initiative. Motivation based on financial incentives does not sustain the organization in the long term and only leads to additional future costs. The need to augment the traditional organizational forms of compensation suggests other incentives should be introduced. 

The method of motivating staff that this proposal suggests is through enhanced and extensive employee training and education. As documented elsewhere the need to have training and education as rewards for work is effective both for the organization and the employee. Making explicit these forms of motivation will increase employee performance. 

As can be tacitly understood, the need to recognize and deal with the various cultural influences within an organization needs to be addressed for the change management initiative to succeed. The ability to address the needs of these groups and have them sponsor and support the change initiative is required. Of particular difficulty is the fact that the members of the joint operating committee are populated by other independent organizations. 

These nine points are considered in the context of the political, technical and cultural frameworks of an independent producer. The ability, capability and success of any major strategic change initiative require that these three strategic change management tools be considered and implemented. Additional consideration should be applied to the implications that change in one-area impacts on the other two. 

Dr. Tichy (1983) observes that there are times when strategic change becomes necessary. These times are identified by the following categories and are applied to the environment of the independent petroleum producer. 

Key to the oil and gas industry is the environmental variables that make up the competitive environment. The change in commodity prices over the past five years is asserted as the key structural and strategic change affecting the independent producer. These product-pricing changes are predicated on the scarcity of the underlying resource and reflect the compensation and costs associated with a new competitive environment. 

This level of fundamental change reflects, and this proposal asserts, that the entire basis of oil and gas production and exploration has changed in fundamental ways. The levels of change being introduced by the commodity price changes are unparalleled in this industry’s history. 

The capability of an oil and gas organization requires diversification to include an enhanced basis of innovation. Reliance on exploitation has or will be augmented by an anticipated increased reliance on exploration. These changes in a producer’s capability will therefore create a need to better understand and match the anticipated change, and pace of change, of the underlying sciences and engineering disciplines. 

Technology is a key component of the Structuration theory of Giddens and explicitly noted in the model of Structuration of Orlikowski. Are the management of North American based companies underestimating the technological changes that are occurring in the software and hardware area? This proposal argues that the level of change that all businesses will experience in the next five to ten years will be the most dramatic and may accurately reflect the level of change that has occurred over the past 50 years or more. 

People are another key component of the Structuration theories this proposal discusses. The need to address the changing motivations and needs of a technically capable staff in an oil and gas company will continue to accelerate. The demands of time will continue to be an issue due to the technologies’ capability of virtually always being at “work”. The reality of depreciated loyalty of the past few years will not be resolved as a result and may begin to be a substantial issue. 

As described above, the application of the theory and writings of Dr. Noel Tichy has direct application in the context of the oil and gas producer. Tichy’s theories provide significant support to the recommendations within this proposal. Each of the four bases that Tichy suggests as individual justification for implementing major strategic change are supported in this analysis. 

Will the “branch plant” mentality that many of the American based subsidiaries proliferate? And hence will Calgary lose the ability to compete as a “cluster” within the global oil and gas industry. 

Chapter 2, Organizational Models.

Dr. Tichy asserts a variety of myths that perpetuate the reasons for the management behavior seen in organizations. Dr. Tichy (1983) uses many of the myths that were identified in Dr. Henry Mintzberg’s in 1973. The three particular myths, and their actual effect are as follows. 

“Managers are systemic planners”. 

Tichy asserts that it is reasonable to assume that managers will not do much systemic planning prior to launching of any major strategic change initiative. 

“Managers rely on formal computerized management systems”. 

Actual data employed in the support and analysis of change initiatives is considered to be minimal. The decisions and actions of management are based on the small and frequent interactions that managers employ in implementing the day-to-day activities of the organization. These interactions and data are not recorded by the organization and are therefore not readily available for analysis or comparison. 

“Management is fast becoming a science.” (p. 38) 

This myth is eliminated when the interactions of managers as noted in item 2, are based on “the intuitive and implicit models of organization and change”. And management’s understanding of those models is based on their perspective of the organization. 

Dr. Tichy (1983) states that basing the major change initiative on “the intuitive and implicit models are 1) consonant with the problems that need resolving and 2) consonant with the models of the other people with whom he or she must collaborate.” Until the management is aligned around the specific organizational model difficulties in implementing the change initiative, unnecessary conflict will occur. (p. 39). 

This research is basing its suggested organizational model and development on a variety of existing structures and models as defined by Dr. Tichy (1983). These models include: 

“Classical mechanistic model.” 

The traditional hierarchy with its defined chain of command and span of control are augmented by its highly defined job description for each participant within the structure. This is the premier method of organization in oil and gas primarily because of its generic nature and intuitive understanding by those within non-management positions. The advantage of this model is its consonance between the participants within the structure. 

Over the past few decades the only revisions made to this style of organizational structure has been its optimization through the flattening of the hierarchy. To suggest further optimization of this model as a means to enable enhanced innovation and change management is considered for the purposes of this research as foolhardy. 

The advantages of this structure are to be salvaged and used in the Genesys® model of organizational optimization that this research details. It would be just as foolhardy to suggest the standard hierarchy be eliminated before an acceptable model has been developed, tested, optimized and accepted as the standard, and the role of many of the existing functions of a firm may best be managed in the long term by a traditional hierarchical organizational structure. 

“Human resource organic model.” 

Is best defined by the bureaucratic vs. organic style of organizational structures. These have best been defined by Theory X and Theory Y management systems. The bureaucratic or Theory X method of management assumes people need to be disciplined and monitored to ensure that the work is done, vs. the organic or Theory Y understanding. Theory Y assumes production is best facilitated through the acceptance that people are motivated internally to work and produce. 

Dr. Tichy asserts that the downfall of this thinking is the movement to the “optimal” system is through pursuit of the most well defined theory Y or organic model, which has proven not to be the case. Nonetheless the need to maintain theory Y based strategies is stated explicitly to ensure that no incorrect assumptions are made. 

“The political model”. 

Dr. Tichy (1983) states that there are a variety of political forces that influence and define the organizational model. The six types are as follows. 

“Commander power configuration.” 

Reflects the influence of the founding entrepreneur in the organization. Since this research is focused on the international independent producers, this political force is limited in its application. 

“Continuous chain power configuration.” 

Where the major political influence is a group of closely held shareholders, or the organization is a subsidiary of a larger organization. This is a political influence that is identified as being an impediment to this research. The “branch plant” method of management has become the standard for many of the subsidiaries of larger American independent producers. It is well known that this “branch plant” method of management is not the optimal method, and this research proposal would suggest, that until subsidiaries can exhibit the more advanced capability of effectively and efficiently managing their assets, their ability to optimize their assets will continue to wane irrespective of the local management talent. 

The preferred method of management by a larger group is that which Shell Canada Ltd has traditionally employed. In which the Royal Dutch Shell group relies heavily on the securities and regulatory environment of Canada to ensure their investments are optimized and managed effectively. 

“Closed system power configuration.” 

The closed system is the traditional organizational method of influence and power used within Government organizations. 

“Missionary power configuration.” 

Where the leaders personality defines the organization and is the center of power within the organization. This method of organizational influence may have peaked as a result of the securities irregularities in the United States in the past few years. The super star CEO is less acceptable as a result. 

“Professional power configuration.” 

Where disparate groups, such as medical Doctors and administrators in a hospital, provide the overall management drive of an organization. This again does not have any direct application to the oil and gas industry. 

“Conflictive power configuration.” 

This type of political influence reflects the situation in the joint operating committee. Where internal and external power coalitions are divided and politicized. As detailed in this research, conflict as a tool needs to be better understood and implemented by industry. The ability for conflict to clearly identify the “right and wrong” in a situation can help to mitigate the muddling style of decision making that compromise invokes. (p. 48) 

Dr. Tichy asserts the political, technical and cultural influences need to be addressed in the context of the whole organization. Focusing on one factor should be in the context of the other two. 

Development of The Genesys® Model of Strategic Innovation.

The appendix to chapter 2 of Dr. Tichy’s book provides a template or model to use for the development of the appropriate model for an organization. This research proposes the “The Genesys ® Model of Strategic Innovation.” (Appendix “A”) as a discussion point and beginning of the development of a usable model to be used during the actual research that this proposal recommends. This model is academic in its nature and should not be implemented without the appropriate groundwork and necessary supporting research. 

In the four-step process that is summarized as follows, each step is premised by Dr. Tichy (1983) as a “Helps” to…, and “develop” … These variables and categorization's for the purpose of this research proposal are limited to the scope of the areas of direct impact of the technology and organizational changes proposed. The other important consideration is the reiteration that this should be considered as a preliminary draft and that the Genesys ® model will be developed further through the research and study period proposals. 

Step one. 

“Determine a set of key variables that identifies the new organizational perspective.” Please see “The Genesys® Model of Strategic Innovation.” 

Step two. 

Helps to establish “a higher-order-concepts components” of the model. “These are variables that cluster together to form broader categories, the basic building blocks of the model”. 

Step three. 

“Helps to develop a framework for a dynamic model, including the causal connections between model components.” 

Step four. 

“Helps develop a graphic representation of the dynamic model.” (p.56) 

Please see Appendix “A” to this thesis, “The Genesys® Model of Strategic Innovation.” 

Chapter 7. Change strategy.

Dr. Tichy (1983) introduces the change strategy implementation as consisting of three components. 

It should be reiterated that these are developed around the three change system dynamics of political, technical and cultural components. Another aspect of these theories is the need to have them developed and operating in concert with one another. Alignment of each dynamic system to the overall change strategy is important for the success of the change initiative. 

Key to the understanding of the alignment of the three systems is the fact that they are not tightly integrated, but loosely woven. The systems interact but not in wholly predictable or definitive manners. In order to achieve the strategic change initiative, the need to un-bundle the loose coupling is required. It is also necessary to develop a vision or image of the prospective organization in order to have the re-coupling of the loosely woven dynamic systems, the political, technical and cultural, operate in the desired fashion. 

The strategic change objective.

The purpose and goal of change should be well defined and understood. The aim of this thesis and its model is stated as follows: 

“The Genesys® Model of Strategic Innovation.” is designed to augment the independent oil and gas producers’ existing strategies to accommodate the need for greater innovation. This assumption is based on the revised market conditions that now require that speed and capability of innovativeness demand organizational and technical changes that are complex and interrelated. 

Guidelines for developing a change strategy.

The objective here is to map the needs and capabilities of the current organization and its definition to the future organization proposed in this research report. Once the two definitions are analyzed and determined there will be the need to define the technical, political and cultural changes, and their implications and structure . Key to these is to ensure the following components and guidelines are in place Tichy (1983). 

Chapter 8, Technical change strategy.

Critical to the success of “The Genesys® Model of Strategic Innovation” is the development of technologies that will support the underlying strategic and organizational changes required. Structuration theory notes that constraints are defined through the development of past technologies and market forces. The need to support a new strategy based on the needs of the future requires a minimum of the technical constraints of what is, can and should be possible. These points accurately reflect why Genesys®, February 2003 development proposal provides such value.

 

Dr. Tichy (1983) begins with an excellent summary of the technical aspects of strategic change with the following quote. “Technical change strategies alter the information-processing capacity of the organization. The strategies involve adjusting components of the organizational model. These adjustments are made either to increase or decrease the organizations capacity to deal with uncertainty brought on by changing environmental condition, new technological developments, or complexities in the tasks.” (p. 203) 

The information processing capability of an oil and gas concern needs to be increased to enable: 

New technological developments.

Technologies offer greater levels of automation, collaboration and interaction. The capacity to operate beyond the firms own internal systems and interact with suppliers and partners is a definitive requirement for the future. These developments require new technologies be developed to achieve those means in an effective manner that matches specifically the requirements of the business. 

Increased complexity of tasks.

As detailed in the innovation review of Dr. Dosi’s theory the need to innovate has become a basic requirement of an oil and gas firm to deal with the increasing pace of the underlying earth sciences and engineering disciplines. 

The capacity to keep pace and understand the implications of the scientific changes is asserted in this research as a fundamental competitive requirement.

 

Dr. Tichy writes that as the operating environment becomes more complex and difficult the need to organize towards a more “organic” form, and away from the more mechanistic forms of organization structure is required.  Complexity requires a closer and tighter alignment of the organization towards the overall strategy of the firm. These should be considered as two of the key justifications to move towards a business unit structure, such as this research’s recommendation to use the joint operating committee as such. Use of the joint operating committee supports the legal, investment, operation, decision-making and cultural environment of oil and gas firms, providing strong alignment of the organization. 

Without the ability to develop systems around the joint operating committee the alternative would be to continue with the development of SAP like hierarchical organizational structures of accounting, land and production, which are inappropriate for oil and gas from an alignment point of view. 

Dr. Tichy offers many tools and techniques in aiding the organizations transition from the current to future organizational structure. These tools and techniques are beyond the current scope of this research proposal and will be used to implement the appropriate changes when companies subscribe to Genesys®, research and development proposal. These tools involve the altering of the processes of control, reward, communications and conflict. 

It is important to identify the conflict process as a key to the future success of this research, and the ability of successful oil and gas firms. Conflict has been anathema as the cultural operative in Canadian oil and gas. The “do as your told” mindset has been the key to the long-term survival of the individual employee, and the “muddling along” in terms of strategy development has traditionally been the means of the industry over the past 20 years, and as detailed elsewhere in this thesis, inappropriate for the future of this industry. Conflict is a powerful tool and an effective method for management to deal with issues. The compromise of an organization’s strategy is usually the outcome of conflict avoidance. The ability to align the organization will require that conflict be identified and resolved as it occurs, as opposed to the traditional conflict avoidance methods. This will be of particular value as the conflict between suppliers, and particularly between partners, becomes more dependent and critical to the ability of the firm. 

Chapter 9, Political Change Strategies.

The various political influences that affect the change strategies of an organization are many and dynamic. According to Dr. Tichy (1983), the following are generic in nature and are therefore discussed in this research proposal. The need to identify and integrate other political influences will be required on a go forward basis, once Genesys ®, research and development proposals are undertaken by industry. 

“Succession concerns.” (p. 227) 

These are beyond the scope of concern of this research and are therefore not discussed. 

“Goal concerns.” (p. 228) 

The effect of overall strategic and goal changes can have significant impact on the internal politics of a concern. The winners and losers of groups and individuals as a result of the movement from a cost containment strategy to that of a innovative leader should not be underestimated or unplanned for. 

“Means of doing the work concerns.” (p. 229) 

These political concerns are affected through this research proposal’s changing of the organizational structure to include the joint operating committee as the means of financial performance accountability. These work methods are through the relatively new means of collaboration, conflict management, and beyond the scope of the current organizations direct influence, command and control. 

“Environmental concerns.” (p. 230) 

As noted elsewhere, the environment that oil and gas concerns find themselves is increasingly changing. The commodity pricing and reduced reserve life are two of the major changing components that are part of the political landscape changes. Various individuals and groups may or may not benefit as a result of the internal changes and emphasis. The winners and losers of these changes may also be more perceived then actual. Moving from a “banking” basis, where the motives are to provide a stable return, to a “scientific” basis is a dramatic change for the industry. Who will survive and who will prosper as a result of these environmental changes? 

“Reward reallocation concerns.” (p. 230)

The effect of changes in employee compensation and reward can have effects on the performance of the organization. These political influences have a tendency to affect the employee’s personal motivations directly and therefore planning for the effective and efficient implementation of these changes needs to be done. Of particular concern is this research proposals recommendation that the enhanced benefits of these changes be education and knowledge enhancement as opposed to the traditional financial compensation. It is also important to understand the implications and effects of these changes on the makeup and capability of the human resources. 

Developing political strategies.

Dr. Tichy (1983) defines political uncertainty as “the degree of stability and predictability with regard to the bargaining and exchange relationships among interest groups over the allocation of resources, power, prestige, etc.” And “Organizations must either minimize political uncertainty or else develop mechanisms for managing it.” (p. 231). 

It is clear to this author that the scope of change that is being considered in this research is significant and accurately reflected in management’s actions to date in tacitly, but not explicitly, supporting this proposal. The political influences of these strategic changes should not be underestimated. The additional aggravating factor is that the traditional political influences that have operated in a classical hierarchy are rendered less effective in a more business unit or politically democratic structure that includes direct influence by outside interests through a more dynamic joint operating committee. 

It is asserted throughout this research that the capacity for an oil and gas concern to continue with the status quo is of limited value due to the environmental issues of commodity pricing and reserve replacement. 

Acceptance of the move from a “banking” to a “scientific” structure and the associated political issues requires a more direct management approach to reducing the risks identified. 

Politically organic strategies.

Faced with the complexity of the political issues that arise from the change strategies, organic strategies would enhance the capacity of the firm to “enable the organization to manage major disruptions triggered by the environment which alter strategic contingencies within the organization. Tichy states “The politically organic organization is able to manage goal conflicts, conflicts over the means for goal accomplishment and succession issues through democratic procedures.” (p. 241) 

Dr. Tichy reflects on the irony of democratization of the workplace being a radical thought in western-based economies. The democratization and freedom that has occurred over the time period since Dr. Tichy’s book was written is by far the greatest the world has ever seen. Taken in the limited context of “economic” freedom China alone would support that claim. 

As Giddens structuration theory notes the need for the organization, society and people to retain a balance is required to avoid failure. Therefore there is a need to parallel the societal changes with organizational changes. And in using Giddens theory it would be predictable that these un-reconciled changes might manifest in the collapse of the organization or the regression to a less democratic society, with only one of these alternatives being viable or probable.

 

Development of political change strategies.

Dr. Tichy (1983) suggests the following guidelines in determining the development of the political change strategy.

 

Clearly the political uncertainty is stratospherically high.

There is a diversity of management structures that extend from pure independents to the branch plant methods. However, each employs similar systems and structures and is therefore limited in their competitive and structural capabilities as the future leaders move to a more scientific basis. 

It should be asked how the political environment could be linked to a hierarchical based, bureaucratic, SAP style of ERP system.

The image that this proposal asserts is that of a globally competitive independent producer whose capability is effective and efficient: 

Summary of the political change strategy.

We have seen a regression in the management of several of the oil and gas firms in Calgary, to that of what might be described as a “branch plant management” style. These changes have significant implications for all of the companies in this industry by way of the ability to extend the “cluster” that has been developed to a more “global cluster”. The “branch plant management” style that has been established at some of the oil and gas companies is as a result of the parent firm’s perception regarding this industry’s ability to manage itself. This has lead to a variety of firms now being operated from distant head offices that reduce the effectiveness of the local organization, and would now have a greater effect on the capability within all companies within the Calgary “cluster”. 

The political situation as detailed above lends credence to the technical changes proposed through this research and provides further justification of the proposed Genesys® development. The outcome and direction of the “cluster” needs to be determined and developed based on innovation based competitive advantages. The need to assert a capability that is global in its scope and application is within the domain of the current management, and this research asserts is the primary political issue to be addressed over the next few years. Waiting for these decisions to be made is an inappropriate stance for this industry leadership. 

Chapter ten, Cultural Change Strategies.

The cultural influences within an organization need to be reviewed from a variety of perspectives. This review is required in order for the organization to attain an alignment with the political and technical influences of the strategic change initiative. The current overall culture of oil and gas is predominately focused on the competitiveness of the individual. The ability of the firm to now focus on the team oriented nature of new technologies needs to be addressed and dealt with through the change management initiatives introduced in this research. 

The “culture” also needs to reconsider the nature of co-opetition amongst producers as represented in active participation and sharing through the various joint-operating committees. This culture of sharing will be a difficult and necessary component of the ability of the producer to enhance its competitiveness through innovation and cooperation within the “cluster.” These points accurately reflect the need to incorporate the knowledge, education and training motivations of the people involved. 

Dr. Tichy (1983) writes “The cultural system glues the organization together because it provides members with cognitive maps with which to understand and influence behavior in the organization and provides a social justification for what people are doing.” (p. 253) 

Of particular concern since the time that Dr. Tichy wrote this book is the “message of the month” style of management that many employees have been subjected to. These have culminated in a variety of initiatives that have flattened the hierarchy with little of the promised changes from these initiatives materializing. The commitment to cultural strategic change is necessary for management to overcome employee’s preconceived notion of the “message of the month”. Although this is beyond the scope of this research, it reflects the level of planning required ensuring these changes materialize. 

To a great extent the culture of the company is a significant issue from a change management point of view. The innovations and sharing of ideas, although part of the past and current culture, are moving into the area of being a primary competitive advantage and capability. Culture therefore becomes a key component of making the political and technical changes, and therefore their alignment to the cultural components. 

Cultural alignment.

Dr. Tichy (1983) states tasks are the results of strategies, as he states “strategies imply tasks” (p. 260). This point reflects that innovation and the culture of the organization are key to creating greater innovation. This is implicit and therefore requires policies be supportive of the sharing of information, the development of ideas, both within the organization, partnerships and suppliers. 

A controversial component of this research is that conflict would need to be fostered to enable the more rapid innovativeness desired. Conflict, and its good partner controversy, appears in contrast to the harmony that most individuals seek to attain in organizations. Conflict as a tool, and conflict resolution are two additional components that need to be developed in concert within the culture of an innovative oil and gas producer. Conflict provides a means of identifying issues and determining the appropriate solutions. The compromise methodology maintains the status quo, whereas conflict provides the means to move organizations in different directions. In other words alignment will not be a smooth road. 

Dr. Tichy (1983) writes “The culture of the existing organization is generally driven by operating concerns which are short term, certain, predictable, and control oriented, whereas, the culture to support innovation must be supportive of uncertainty, risk, long-term plans, and assume failure is good in the early stages.” And “Organizations that are very good at doing something for the millionth time are not very good at doing something for the first time”. (p. 263) 

How the organization enhances their capability to innovate is of concern. The existing culture may conflict with the desired culture to support the political and technical changes needed for innovation. The need to identify and create the appropriate culture is a key component of the strategic change management initiative. 

Comments regarding Dr. Tichy’s writings.

Considering the time frame that Dr. Tichy wrote his book (1983), and the dearth of writings that support these theories, suggest that his writings are either comprehensive enough in their initial release, or did not receive the necessary support to achieve a more “commercial” level of acceptance. 

In reviewing his book it is clear that the majority of the work is substantially beyond the time frame when it was written. I would assert that the level of change that has occurred since 1983 has been significant enough for management’s time and effort being consumed by the changes itself. This will continue as we move into what I suspect will be an increased level of change. Management needs to adopt these strategic change management initiatives in order to ensure that the difficulties that were present in the past do not carry on in the future. 

In other words, Dr. Tichy’s ideas are becoming more prevalent currently and need to achieve a greater acceptance and distribution. It would be appropriate for this text to be updated to the current time frame and re-release his writings so that management can include these theories in their tool kit. Genesys® is a research and software development firm implementing a strategy and structure that builds on the dynamics of knowledge management and innovation. 

Interpretation 

Substantial support for the reorganization of an oil and gas firm around the business unit of the joint operating committee has been established through the theory and discussion of Dr. Anthony Giddens Structuration theory and Dr. Wanda Orlikowski’s technology model of structuration. Structuration reflects that the structure of organizations is formed by the actions and interactions of society, people, and organizations. This is further supported and defined through the legal and cultural requirements of society and organizations. 

It is these legal, financial, operational and cultural actions and interactions that formed around the joint operating committee over the past 50 years, and therefore these requirements cannot be ignored in forming new forms of organizational capabilities. The joint operating committee has operational control, yet as a result of a myriad of historical and traditional issues, operates without the responsibility and accountability for the financial performance of the business unit or the firm. 

The need to accelerate the capability of an oil and gas organization to match the acceleration and understanding of the underlying sciences has also been established in this review of Dr. Giovanni Dosi’s work in innovation. Dr. Dosi’s work has provided excellent insight and direction of what is formally required within an oil and gas company to become a “science” based competitor. The need to adopt this method of competition is supported not only through Dosi’s work but also the fundamental change that has occurred in the industry over the past few years. The “banking” form of competition, which is based on the predictability of financial returns of ten percent in oil and gas, are no longer valid and the industry is now turning to a more capability based form of competition. 

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. 

Consistent with the organizational changes established as required is the need for the ERP system to explicitly support those changes. The current style of SAP application tacitly supports the hierarchy and is therefore unable to recognize or support the joint operating committee, or an innovative producer. 

Management implications.

Dr. Dosi documents that businesses commit to innovation stemming from exogenous scientific factors and endogenously accumulated capabilities. The implication of this is that the key to the endogenous capability that is a cornerstone of the innovative process is a reorganization to enhance the organizations capacity and capabilities. And as The Genesys® Model of Strategic Innovation reflects, these capabilities are comprehensive, diverse and mutually supporting. It should be clearly and explicitly stated that the commitment to the Genesys® ERP proposal of February 2003 is the beginning of the producers’ transition to a science-based form of competitive structure. 

A major part of this report documents the serious nature and potential fallout as a result of web services and collaborative technologies and their impact. Thankfully we are talking about the strategic value of innovation as opposed to audit issues regarding data integrity. Knowledge management imputes that knowledge needs to be available to manage. The majority of the industry’s knowledge is contained tacitly within the human resources of the organization, and therefore limits its value and availability. The collaborative environment recommended provides the beginnings of the codification of the knowledge contained within the organization and make it available to the areas where it is required. 

Ms. Dianna Farrell (2003) of the McKinsey Global Institute made an interesting comment regarding the productivity research undertaken by them. 

In the October 2003 Harvard Business Review, the following comment was made:

 “The levers that matter vary form industry to industry. That explains why the IT applications with the greatest impact are often tailored to particular sectors. We found, in fact, that no general-purpose application had much effect on productivity.” (p. 110). 

Recommendations 

The key recommendations of this report are high level and directed specifically at the CEO’s of the major independent producers. Much of the work that this report suggests should be undertaken as a minimum. The scope of the prospective research is comprehensive and carries implications that affect the entire organization, its makeup and competitive structure. Genesys Software Corporation should be retained to employ The Genesys® Model of Strategic Innovation and the February 2003 ERP development proposal. Further referral to those documents also highlights the recommendations that are supported by the following. 

Facility Selection. / Performance measurement.

Select a facility that meets one of the following requirements, or, has potential to be the subject of scientific innovations.

 

1) An area where some scientific theories are developed and ready to be attempted to be proven or disprove the science.

 

2) Producers that are close partners that would be willing to jointly sponsor and participate in this research as they have comprehensive operations in similar areas. 

3) Producers that have logistical, organizational or management issues that are difficult to overcome and have been unresolved for a significant period of time. 

4) A property that may have been packaged for sale due to the low level of performance or other difficulties. 

Performance measurement. 

Select various performance criteria that are financially based and reflect the organization’s and the selected facility’s current capability. Adoption of this research’s production revenue per employee criteria reflects the disparity of the producers’ capability and should be enhanced with other criteria such as net profit per employee and / or capital costs per employee. 

Establish new criteria of innovativeness based on the following. 

1) Determine the point that the level of innovativeness that the company competes at. 

Establish an overall objective of “how” innovative the research participant wants to become. 

2) Develop a team code of conduct for participants in the research. 

A definition of shared meaning, glossary of terminology should be agreed to and established. 

3) Document and quantify the knowledge contained within the facility. (Knowledge Management) 

4) Document and quantify the direction of technology and science in the pertinent fields of the facility. 

5) Identify the components of scientific and engineering capability of staff. 

Measure their “appropriability” from an innovation standpoint. 

6) Use the “work order” system within Genesys®. 

Use tools to project manage the proposed innovation. (Adopt collaborative project management tools.) 

7) Evaluate the response of employees to enhanced education and training. 

8) Employ The Genesys® Model of Strategic Innovation. 

Map the movement from current organizational status to the future objective. 

9) Establish a generous “innovation budget”. 

Although the budget process may constrain the innovativeness, the need to control costs is a requirement of accountability. 

10) Make explicit the results of failure. 

Failure may help to define the method or direction of the future innovation. Encourage “risk taking” in an accountable environment. 

11) Establish a tie between the oil and gas industry. 

The Genesys® Model of Strategic Innovation, and the recently announced Athabasca University Centre for Innovative Management Doctorate in Business Administration (DBA) program are excellent starting ground for the development of these management tie-ins. 

12) Employ the change management toolset of Dr. Noel Tichy. 

Focus on the political, technical and cultural influences in this changed environment. Genesys® will evaluate these measurements during the research period and prepare them for future comparison purposes. Research results of all of the producers participating in this research will be provided as generic benchmarks and comparison purposes. The old saying that you can’t compare what you do not measure is very appropriate for this research. Another key point will be the effect on other facilities of any innovation or enhanced understanding. These also will be evaluated and measured by Genesys® during this research to determine any residual effects. 

13) Commence the Study Period. 

Serious consideration should be applied to the development of the study period as recommended in the Genesys® ERP proposal of February 2003. Time to implement these changes is significant and based on the outcome of the study period. Should the results of the study period not provide the value that is anticipated, then the study at least has proven that the method of software development is invalid. This reflecting a period of time when risk taking and the associated rewards are substantial in comparison to the past. Implications for industry. 

This authors conclusion regarding the global economy is: 

Markets are effective in determining who “wins” or “loses”. It is therefore stated that this author’s concern is that should the points recommended in this research proposal not be acted upon, the implication may be that the proliferation of the branch plant mentality will accelerate and render the Calgary marketplace as a secondary participant in the global energy industry. 

B i b l i o g r a p h y

I wish to formally thank Dr. Elizabeth Moxley-Paquette for her supervision of this thesis. Her guidance and contribution is much appreciated. I also want to thank all the professors and staff of Athabasca University’s Centre for Innovative Management that have helped me to realize the value and significance of this high quality education. 

A p p e n d i x e s

Appendix “A” Genesys Software Corporations February 2003 proposal entitled. “Developing ERP Systems for Oil and Gas Users.” 

Appendix “B” Harvard Business Review, June 2003 “Does IT Matter, An HBR Debate” distributed without copyright protection.