Rig Up

    August 24, 2016 11:12 AM by Dr. Scott M. Shemwell

    Volume 5 Number 16—August 24, 2016

    Recently the U.S. oil drilling rig count is steadily increasing week over week. This despite crude oil prices remaining below $50 per barrel.

    This seemingly defies logic and conventional wisdom—perhaps not! For over a year, this blog has addressed issues surrounding the structural realignment of the oil and gas industry.

    Enabled by a suite of technologies, firms are discovering that profits can be found in assets that are managed differently than in the past. This bodes well for some economic actors and ill for others.

    Blasting along at $100 oil, many were lulled into the belief that the good times would continue indefinitely. Bankers loaned, operators spent and expense accounts were lavish. As all now know, bankers are left with bad loans, some operators are bankrupt and expense accounts shut down.

    Those that have renovated their cost structure are adding shareholder value and perhaps we are seeing the emergence of a transformed sector. Economic laggards do not have the luxury of time on their side!

    Previously, we discussed the Convergence of Exponentials and its impact on the ability of firms to drive profitability in tough times and perhaps now, restructured markets. Reducing operating costs and increasing asset performance using knowledge is showing success during a deep energy recession.

    Some still argue that the so called Big Crew Change will drain the sector of much experience and expertise. The counter point is that this event is largely past.

    The same case can be said for the current oil price trading range. While cyclical and subject to geopolitical issues, perhaps $100 oil is a thing of the past and not likely to be seen again.

    Analysts keep pushing out the expected date for the return to strong prices. One now predicts the rebound will be delayed to 2019 when current offshore production peaks and long idle equipment and personnel are put back to work.

    However, by 2019 shale and others may have captured market share at significantly lover break even points. This market segment may not materialize as many hope.

    According to OPEC Secretary General Abdalla Salem El-Badri, “Any increase in price, shale will come immediately and cover any reduction.” Does this basically put a cap on the crude oil trading range?

    Almost 15 years ago, we wrote, “Building on the theme that hope is not a strategy, many organizations deserve the IT (Information Technology) they have. Hope that IT would bail the firm out and by itself drive change that has been misplaced.” This was addressing a disruptive force from that era.

    Waiting and hoping for a rebound is not a good strategy today either. If some can get their cost structure aligned with the current market, others can as well as new disruptive forces shape markets again. Might be time to “rig up” a better business model.

    How well is your organization prepared for sustained current market conditions?

    About the Author
    Dr. Scott M. Shemwell has over 30 years technical and executive management experience primarily in the energy sector. He is the author of six books and has written extensively about the field of Operations Excellence. Shemwell is the Managing Director of The Rapid Response Institute, a firm that focuses on providing its customers with solutions enabling Operational Excellence and regulatory compliance management. He has studied cultural interactions for more than 30 years—his dissertation; Cross Cultural Negotiations Between Japanese and American Businessmen: A Systems Analysis (Exploratory Study) is an early peer reviewed manuscript addressing the systemic structure of social relationships.

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    Awareness 101

    August 4, 2016 11:24 AM by Dr. Scott M. Shemwell

    Volume 5 Number 15—August 5, 2016

    Military and aerospace professionals discuss at length the need to have Situational Awareness (SA). This is code for having a correct understanding of events one faces during critical periods.

    However, there is a counter argument. We are all aware of our situation, it’s just that many of us misinterpret our surroundings.

    According to its proponents, individuals have Situational Awareness as a result of training and practice in difficult settings. In other words, it is a learned capability.

    So why do even well trained and very experienced individuals lose or misunderstand what is happening around them and either blunder into trouble or take actions that may make their predicament worse? Throughout this series, we have discussed issues such as complacency, “Got-to-Get-There-Itis” and other behavioral problems. Often, our unsound mental models can get any of us into difficulty at any time and in any setting.

    Athletes training for the 2016 Summer Olympics realize that they need to “peak” at just the right time. They cannot remain at the very top of their game on a constant basis. This is true for those of us less gifted with athleticism as well.

    Commonly called, “In the Zone” athletes have a feeling of total control over their situation. From the book, Flow: The Psychology of Optimal Experience, this positive experience has been expressed as a flow. Achieving as many of the following nine components of the flow increases the “feeling of total control” over the situation.

    •    Challenge-skills balance—confidence one has that his or her skills can meet the challenge
    •    Action-awareness merging—severe focus on the tasks at hand
    •    Clear goals—exactly what is required to accomplish the goal
    •    Unambiguous feedback—constant and real time focused feedback
    •    Concentration—like a laser beam
    •    Sense of control—belief one’s actions can directly affect the outcome
    •    Loss of self-consciousness—“occurs when you are not constantly self-aware of your success”
    •    Transformation of time—effectively individuals lose the sense or tack of time
    •    Autotelic experience—internally, not rewards driven (love the job)

    Whether we “go to our gut” or sink to the “level of our training,” those managing critical infrastructure must know when to peak. Behavioral scientists indicate that this learned (but hardwired) Intuition is, “formed by a collection of beliefs, experiences, and memories.” It follows that our gut level intuition is a function of our level of training.

    Our personal Situational Awareness must also contain an element of the awareness about our individual state. A true understanding of our strengths and weaknesses as well as cognizance about how to capitalize or mitigate is true SA.
    The ancient Greeks apparently coined the term, “Know Thyself.” In this context, perhaps we can rephrase it as “Know Thy Situation.”

    Casual use of the term, “Situational Awareness’’ is in vogue now, particularly when consultants discuss subjects such as Leadership and Safety. As with other managerial buzzwords, we must look below the surface for the depth or lack thereof of these statements and initiatives based on them.

    How does your organization know its Situational Awareness is on target?

    About the Author
    Dr. Scott M. Shemwell has over 30 years technical and executive management experience primarily in the energy sector. He is the author of six books and has written extensively about the field of Operations Excellence. Shemwell is the Managing Director of The Rapid Response Institute, a firm that focuses on providing its customers with solutions enabling Operational Excellence and regulatory compliance management. He has studied cultural interactions for more than 30 years—his dissertation; Cross Cultural Negotiations Between Japanese and American Businessmen: A Systems Analysis (Exploratory Study) is an early peer reviewed manuscript addressing the systemic structure of social relationships.


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    The New Knowledge Management Normal

    July 20, 2016 12:51 PM by Dr. Scott Shemwell

    Volume 5 Number 14—July 20, 2016

    A recent article lamented the prospect that the upstream oil and gas sector has reduced its workforce so dramatically, that future economic recovery may be difficult.  Time will tell but there is a contrarian perspective.

    As this and other pundits have commented, technology is changing the sector’s landscape and rapidly.  The often stated, “Do more with less” with enabling technologies has been the staple of industry transformations.  With a number of case studies across all industries, the statement is hard to rebuke.

    A Little History

    One suspects that as with the aftermath of multiple sector collapses of the 1980s, 1990s, and early periods in this century, somehow the sector will one more time muddle through.  One major similarity between the 1980s and 1990s and today is the explosive growth of technology and the subsequent enabled business process transformations.

    The 1980s saw the rise of CAD and decline of manual drafting.  Interestingly, now CAD is dramatically changing as well.  A similar transformation began with geophysical and petrophysical stand-alone graphics interactive workstations.

    Likewise, changes in how data were handle can be traced to this period as well.  There are many other new information technologies including the conversion of the back office beginning with the introduction of the IBM 360 (Mainframe).

    Drilling and production technology and processes were changing as well.  In the 1990s, the industry experimented with new business models integrating the supply chain more tightly into “risk sharing and profit sharing” relationships.

    These were major changes and some worked better than others.  This author was briefly the CIO for the Terra Nova project and it was one early example of global collaboration using the Internet, i.e., use of email to exchange information and engineering files as well as video conferencing.

    Today, the sector has more mature as well as significantly enhanced information tools at its disposal.  Yet in some ways this and other sectors have not matured as rapidly as the enabling technology has grown.  One example of this shortcoming is Knowledge Management.

    Value from Knowledge

    The current Knowledge Management (KM) construct is about 25 years old.  A definition of that period accredited to the Gartner Group is still in use today, “Knowledge management is a discipline that promotes an integrated approach to identifying, capturing, evaluating, retrieving, and sharing all of an enterprise's information assets.  These assets may include databases, documents, policies, procedures, and previously un-captured expertise and experience in individual workers.”

    Capturing the vast understanding from the departing workforce; Baby Boomers and making it available (sharing) to those who will lead the business and engineering challenges over the next 25 years is one of the current charters for Knowledge Management champions.  But is a 25-year-old technology model adequate for the next 25 years?

    One of the challenges is that technology definitions are often ambiguous and in uncertain context.  This lack of a common vocabulary can dramatically weaken an organization/industry Culture.

    A strong Knowledge Management Culture is required if the value of KM is to be unleashed.  Having a conjoint morphology is critical.  Previously for a Culture of Safety, we defined, “This is functional Interdisciplinary Common Vocabulary (ICV) as opposed to traditional interpersonal communications models.  Not all members of an organization will speak the same human language, e.g. English, this is process communications from the past.  In this new linguistic framework, the syntax, phonology, morphology, and semantics of a common language of safety will bridge traditional dialectal barriers as a functional ICV will be foundational.”

    From this cultural perspective, KM as outlined and currently practiced by many is outdated.  Additionally, it does not capitalize on technological changes since its inception.

    Capturing, retrieving, sharing, etc. are not direct actionable decision-enabling tasks.  To meet the business imperatives a new KM model is needed.  One that is based on a functional ICV.

    From Motorola’s Six Sigma philosophy, the construct of DMAIC can be applied to KM.  These five components of the model are:

    •    Define—the Problem Statement process
    •    Measure—Key Performance Indicator (KPI) selection and data collection processes—leading indicators preferred
    •    Analyze—Identify gaps between actual performance and expected or desired behavior.  Causal analysis and rank order improvement portfolio development.
    •    Improve—Set of potential solutions identified and tested, i.e., process simulations.
    •    Control—Implementation of a monitoring and update (feedback) plan, including Verification of new process.

    In other words, this becomes a KM Adaptive Control System similar to those used with Digital Oilfield “Smart” solutions.  Incorporating this approach, KM solutions become proactive decision supports processes.

    Advanced models may include process simulation.  For example, a Drilling Risk Assessment Mental Model Simulation is available.  A model like this enables organizations to confirm various scenarios as part of a computer simulation decision-making process.

    Operational Excellence (OE) can be defined as a function of six criteria; top asset performance, a stellar reputation, comparative advantage of capabilities, culture of high performance, world class HSSE and best in class processes and systems.  Firms seeking to attain OE Leadership must effectively address all six criteria.

    Traditional Knowledge Management does little to effect OE.  Mostly likely this model will underperform best in class firms at most.

    However, the KM Adaptive Control System described herein enables knowledge stores to be converted into actionable workflows with feedback so that the workflow can “learn” going forward.  Moreover, instead of sharing knowledge, it is imparted on those using the workflow solving field operational and risk management problems.

    A Functional Interdisciplinary Common Vocabulary is the critical component of KM Adaptive Control Systems.  Without, this Lexicon, these multi-variant systems cannot work (communicate) properly.

    Organizations capitalizing on knowledge in this manner enable Operational Excellence and the stakeholder value associated with successful OE initiatives.  Knowledge Management no longer has the look and feel of an IT activity, but now the Core Competency of the firm!

    How does your organization make its Knowledge Actionable?

    About the Author
    Dr. Scott M. Shemwell has over 30 years technical and executive management experience primarily in the energy sector.  He is the author of six books and has written extensively about the field of Operations Excellence.  Shemwell is the Managing Director of The Rapid Response Institute, a firm that focuses on providing its customers with solutions enabling Operational Excellence and regulatory compliance management.  He has studied cultural interactions for more than 30 years—his dissertation; Cross Cultural Negotiations Between Japanese and American Businessmen: A Systems Analysis (Exploratory Study) is an early peer reviewed manuscript addressing the systemic structure of social relationships.

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