No One Starts Out Wanting to Provide Bad Service.

Most people on the planet have a shared set of physical, intellectual and emotional needs. These needs are identical at the “physical” level (i.e. food, water) and similar at the “emotional” level (i.e. security, acknowledgment, etc.). We humans fulfill our physical and emotional needs in many different ways and at different times. We physically labor to meet the physical requirements of survival…to earn money to buy food and drink. The time commitment required to labor during the work week to meet our physical needs is not inconsequential. You know this. We generally spend much more time conscious with our co-workers than we do conscious with our loved ones. The emotional needs of the humans do not pause between the hours of 9:00am and 5:00pm….as a result we need and seek emotional and intellectual fulfillment during our physical work hours.

The emotional needs of the American enterprise are as genetically similar across organizations as they are among humans - corporations consist of humans. It is arguable that most of us like praise and will work for it. We want to do good and we want to be good. These are atomic-level truths.

As a result, I believe that we manifest our individual work tasks and environments to provide for emotional aspects of our very human needs. Since these atomic-level aspects are bouncing around in the organizational consciousness…and organizations are collections of people…how is it that some organizations just end up providing bad service (which is a perfect mechanism for acknowledgment and thus emotional fulfillment). Now certainly these organizations don’t start out intending to provide bad service… they don’t sit down in the Board room and declare [bad service] as a strategy…furthermore most organizations would deny their possible inclusion in the list of bad service providers…yet….we see it and live it every day.


Bad Service and the Proprietary Network

I have seen the connection between the evolution of bad service and the proprietary network too many times to not comment on it. OK…what am I saying?? Many times, when there is a technology shift the new form of technology either becomes open standard or proprietary. In the instance where the technology becomes proprietary, the customer develops a weird sort of dependence on the technology. As this relationship lengthens it is, in my experience, not atypical for the technology or technology-based service provider to convert to a cash harvesting mode reducing development in research and development.

What then happens is that a newer, potentially-displacing technology develops and the market begins to see new things and want new things from incumbent service providers. The process has a tendency to creep slowly in most instances. The incumbent though has built a revenue model and compensation scheme that would be put at severe risk if the newer technology were adopted wholesale by the incumbent. Since the underlying technology doesn’t evolve, the incumbent becomes unable or unwilling to meet product development requests whose origin derives from the attributes of newer technology (i.e. I wish your product could do this or that or the other). After awhile, employees of the incumbent service provider become overly proficient at repeating the word “no” to customers. When lack of R&D investment forces the customer-facing employees to repeat the word “no” excessively…those customer-facing employees no longer get to see smiles and hear words of congratulations from customers. In other words, they lose the ability to get their daily affirmation from the market, the acknowledgment they want and thus the emotional fulfillment they need. After a while people that can’t get what they need develop bad attitudes…I know I do. Then comes the bad service.

A Specific Example

I know of a company that provides mission critical data services. This data has historically been provided over a proprietary network. The data provider would come in and sell its equipment and servers, etc. as infrastructure over which to deliver the data. Initially this is what the market wanted and customers loved it. The company was nearly the only game in town and it made a ton of money. Its compensation structure revolved around proprietary data transport mechanisms. The problem was it made too much money off of the transport to want to change…life was good and they were getting fat.

Along came the Internet.. a cheap way of getting data from point A to point B. This open transport standard allowed new things to be done with data..these are new things that customers started to think about and request of incumbent service providers. However, the old technology inhibited their ability to provide these things. They were forced to say “no” too many times. This repeated “no” began to take on an almost angry tone. The lack of internal product development was killing the company not only by virtue of diminished comparative product features but the resulting negative attitude cast on its customers by its customer-facing employees. I know of at least four examples of this.

My point is this. I think the flexibility of internet protocol has caused non-adopting companies to fall from grace for reasons I would never have envisioned. Technology providers who didn’t adopt early enough developed bad attitudes and alienated customers. Who would have thought this was going to happen?

Did Someone Here Order 90 Space Shuttles?

I saw this graph the other day. It plots the age distribution of various industry workforces. It suggests that the Oil and Gas industry has the highest age workforce.Telecom has the youngest age workforce and airlines are sort of middle of the pack

Oil's workforce age distribution reflects a higher mean than others for several reasons: (i) operating experience is the most important thing in this industry and this comes with age, and (ii) the oil industry has a clubishness about it that supports the notion of "tenure"...almost in a professorial way, and (iii) America's youth has had a declining interest in pursuing a career in oil.

One could argue that the oil industry will someday have a manpower issue. By looking at the graph one would conclude that this industry is not alone. An average human may find comfort in the notion that "all industries" are in trouble. But the relative magnitude of distress to be experienced by each of these industries compared in the graph is, in my opinion, substantially different.

As US labor has learned from its highly-capable manufacturing competitors in China (among other locations), substitution of one workforce for another is not overly disruptive to the manufacture of many types of products. It is, in fact, encourage for those products based on labor-dollar efficiency. This has the positive result to US labor of allowing those workers substituted to pursue a higher complexity calling and thus higher real earnings. However, maybe not every labor sector depicted is in the same boat "manufacturing"....what's different about oil?

Difference: The location and extraction of hydrocarbon-based fuels is highly scientific and multi-disciplinary. In addition, this science is augmented substantially by accumulated experience. As a result, workforce substitution is not that easily performed. That's why we and the Russians raced after so many German scientists near the end the end of WWII (See Werhner Von Braun..."Operation Paperclip"). They had the best rocket scientists in the world. If these scientist had been lost to another country...our space program would have lagged for years. Same thing in Oil. When this workforce starts retiring en masse we are going to have some problems unless we can increase the work capabilities of those left standing to super human levels.

The current day rates for offshore drilling rigs are at all-time highs. There are currently nearly 90 offshore drilling vessels under construction (www.coltoncompay.com) that can be deployed over the next 4 years. While this may seem to be a solution to declining production curves of today's reserves...my question is this..."who is going to staff these rigs...and who is going to teach those intended to staff these rigs how to operate them?"

This is a picture of a drilling control room. A drilling rig is a highly-technical piece of equipment. Imagine, as an example, an additional 90 space shuttles showing up off the assembly line ready for our use...imagine the incremental infrastructure and training required just to get an additional shuttle operating at the same time as our other active space shuttles. I would think that the value of knowledgeable shuttle crews would go up substantially. Likewise, owners of drilling rigs would pay substantial market premiums to rig crews in order keep their rigs active....so as to make the interest payments to the bank that loaned for their construction. While this will, in fact, attract more oil industry labor pool applicants...it will not solve the implicit labor shortage for a long time.

So my conclusion is that the degree of labor shortage problem indicated by the graph is much greater than meets the eye. What is really going to happen on the rigs is that the better crews are going to go onto the better rigs. The older rigs are going to have to live with the "less-better" crews. As a result, the drilling contractors with the older fleets are going to have to buy the new rigs to get the better crews back...and they will pay premiums to do this.

Furthermore, the increased number of rigs will scatter to drilling plays all over the world rather than reflect a few geographic concentrations (as was the case in the Gulf of Mexico for so many decades) which exacerbates the problems of training crews and managing projects. As gravity attempts to pull the energy industry from its historical epicenter in Houston, Texas...what are companies based here going to do to prevent this? How will they manage against increased competition?