16.842: Stakeholder value network analysis for large oil ... · Stakeholder Value Network Analysis for Large Oil and Gas Projects Wen Feng ... Mapping Step 2: Quantifying Step 3:

Stakeholder Value Network Analysis for Large Oil and Gas Projects

Wen Feng

September 18, 2009

OUTLINE

� Introduction/Motivation

� Methodology/Case Study

� Conclusions

2 © Wen Feng 2009

Introduction

� Who are stakeholders? � A stakeholder in an organization (corporation, government, project, etc.)

is “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman, 1984).

� Why we care about stakeholders? � In order to ensure the organization’s “long-term success” (Freeman and

McVea, 2001; Moses, 2004; Mostashari and Sussman, 2005; Crawley, 2006).

� What’s the limitation of current stakeholder models? � Only examine the direct relationships between the focal organization and

its stakeholders, like “hub-and-spoke”, ignoring their indirect relationships and the interactions between stakeholders on the network level (Rowley, 1997; Mahon et al., 2003; Lucea, 2007).

3 © Wen Feng 2009

ENTERPRI

PoliticalGroups

TradeAssociations Communitie

Investors

Employees

Suppliers CustomersProject

Investors

ConsumersSuppliers

Host-CountryCorporation

LocalCommunity

NGO

Host-CountryGovernment

s

ENTERPRISE

Introduction: “Hub-and-Spoke” Model and Value Network

Market Stakeholders Nonmarket Stakeholders The Focal Organization

SE

“Hub-and-Spoke” Stakeholder Model (Adapted from Donaldson and Preston, 1995)

Governments

ENTERPRISE

Governments Political Groups

Trade Associations Communities

Investors

Employees

Suppliers Customers

Stakeholder Value Network (Feng, Cameron, and Crawley, 2008)

Project

Investors

Consumers

ENTERPRISE

Sales RevenueProduct

Suppliers

Product Subsystems

Contracts

Future ProjectApproval

Host-CountryCorporation

Logistical Support

Revenue Sharing

Local Community

Workforce

Employment

NGO

Environmental Impact Plan

Environmental Compliance

Economic Support

Political Influence

Project Lobbying

PolicySupport

Federal Support

ROIInvestment

RegulatoryApproval Host-Countr

GovernmentProjectApproval

Taxes

Political Information

Goods/Service

Financial

Investment

High-grade Goods

Low-grade Goods

TechnologTransfer

Technology Reqts Technology

4 © Wen Feng 2009

Motivation

� Indirect Relationships: � Understand the impact of both direct and indirect relationships

between stakeholders on the success of large oil and gas projects.

� Strategies with Reduced Complexity: � Apply such an understanding to inform decisions on stakeholder

management strategies in a positive way and with reduced complexity.

� Communication Platform: � Build a common platform for engineering, external affairs,

commercial, and management within a project to communicate important information about stakeholders.

5 © Wen Feng 2009

Methodology Inputs/Outputs Steps Techniques

Step 1: Mapping

Step 2: Quantifying

Step 3: Searching

Step 4: Analyzing

Stakeholders and Their Roles, Objectives, and Needs

Qualitative Model of Stakeholder Value Network

Document Survey, Stakeholder Interview, and Network

Visualization

Quantitative Model of Stakeholder Value Network

Questionnaire for Value Flow Scoring (Intensity, Importance, and

Timing)

The Solution Space of Value Paths between Any Two Stakeholders

Object-Process Network (OPN) or Matrix Multiplication

Important Paths/Outputs/Stakeholders/Flows

Network Measurements Definition and Network Statistics Construction

6 © Wen Feng 2009

Case Study

Canadian Heavy Oil Producers

Canadian Heavy Oil Pipelines

BP Whiting Refinery Fuel Consumers

• BP Whiting Refinery Modernization Project

– Whiting Refinery: located in northwest Indiana, with more than 100‐year history;

– Modernization Project: 2007‐2012, $3.8 billion, + 1.7‐million‐gallon gasoline/day;

– Stakeholder Support: new water permits for increased discharge of ammonia and

suspended solids, issued by Indiana Department of Environmental Management

(IDEM) and EPA;(IDEM) and EPA;

– Stakeholder Opposition: an unanticipated firestorm of protest from Public Media

(Chicago Tribune, Chicago Sun‐Times, etc.) and Local Public (in Illinois), concerning

water permitting;

– BP finally promised to keep the lower discharge limits and could be forced to cancel

the project;

– Managers’ Mental Model for Stakeholder Importance: Indiana State Government

(IDEM) and U.S. Federal Government (EPA) are the most important stakeholders.

1

BP Whiting Case: Step 1 – Mapping

Inputs/Outputs Steps Techniques

Qualitative Model of Stakeholder

Value Network

Quantitative Model of Stakeholder

Value Network

The Solution Space of Value Paths

between Any Two Stakeholders between Any Two Stakeholders

Important

Paths/Outputs/Stakeholders/Flows

Step 1:

Mapping

Stakeholders and Their Roles,

Objectives, and Needs

Step 2:

Quantifying Step 3:

Searching

Step 4:

Analyzing

Document Survey, Stakeholder

Interview, and Network Visualization

Questionnaire for Value Flow Scoring

(Intensity, Importance, and Timing)

Object‐Process Network (OPN) or

Matrix Multiplication

Network Measurements Definition

and Network Statistics Construction

2

tt t

Stakeholders and Their Roles, Objectives, and Needs • Stakeholder Identification

– Environment: Market and Nonmarket;

– Attribute: Power, Legitimacy, and Urgency (Mitchell et al., 1997); – Clustering: Aggregation (by role/function) and Hierarchy (by jurisdiction/control).

• Value Flow Definition

Value Flows

ROLE: Serve for the Local Public

OBJECTIVES: OBJECTIVES: •Develop the Local Economy •Protect the Local Environment •Sustain/Increase Political Support

SPECIFIC NEEDS: •Taxes E l

INPUTS: •Taxes from BP E i S i l i f BP •Employment

•Cheap Energy •Environmental Protection •Political Support from Indiana State Govern •Political Support from State Governments •Support from Local Public •Support from Local Public •Support from Public Media

•Economic Stimulation from BP •Environmental Compliance from BP

•Political Support from Illinois State Repres

•News from Public Media

Stakeholder Characterization Template

LOCAL GOVERNMENTS (LG): Chicago; Whiting, Hammond and East Chicago

3

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erials mat

t f Con iden ial

been removed

Stakeholder Map: 14 Stakeholders and 74 Value Flows

10 © Wen Feng 2009

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erials mat

t f Con iden ial

been removed

Stakeholder Map: Political Flows

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erials mat

t f Con iden ial

been removed

Stakeholder Map: Information Flows

12 © Wen Feng 2009

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erials mat

t f Con iden ial

been removed

Stakeholder Map: Goods/Service Flows

13 © Wen Feng 2009

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erials mat

t f Con iden ial

been removed

Stakeholder Map: Financial Flows

14 © Wen Feng 2009

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materia al ti

f Con idenbeen removed

“Hub-and-Spoke” Model for BP: Only Direct Relationships

15 © Wen Feng 2009

BP Whiting Case: Step 2 – Quantifying


Step 4: Analyzing


Step 1: Mapping

Step 2: Quantifying

Step 3: Searching



Document Survey, Stakeholder

Visualization

Scoring (Intensity, Importance, and

Interview, and Network


Questionnaire for Value Flow

Timing)




16 © Wen Feng 2009

d e Importance Scale

0.11 0.33 0.55 0.78 0.98

Always 0.11 0.32 0.54 0.76 0.95 0.98

ime

Scal

e Next Year 0.07 0.22 0.36 0.51 0.65 0.66

2-3 Years

T 0.04 0.11 0.18 0.26 0.32 0.33

al ma t er

en t i movnfi d re

C o been

Questionnaire for Value Flow Scoring Ranked by the stakeholders receiving these value flows

ials h or Ranked from their own standpoint

eav

> 3 Years 0.02 0.07 0.12 0.17 0.22 0.22

Time Scale

Not Somewhat Important Very Extremely

Importance Scale Note: 1. All the 74 value flows can be categorized into the above table;

2. The score for value flow equals the product of its Time and Importance scales; 3. Time scale is nonlinear while Importance scale is linear;4. Higher score is chosen for two simultaneous Time rankings; 5. All the scales and scores have been normalized

Image by MIT OpenCourseWare.

17 © Wen Feng 2009

Quantitative Model for Stakeholder Value Network

� Value Propagation Rule:

� Value Flow: the output of one stakeholder and the input of another.

� Value Path: a string of value flows connecting a group of stakeholders.

� Flow Score: preference for a value flow ranked by the receiving stakeholder.

� Path Score: the product of the scores of all the value flows along that path.

� The Multiplicative Rule:

BP

Economic Stimulation

LG Opinions

PM News

BPScore = Score = Score = 0.95 0.76 0.76

Path Score = Score of Economic Stimulation × Score of Opinions × Score of News = 0.95 × 0.76 × 0.76 = 0.549

18 © Wen Feng 2009

BP Whiting Case: Step 3 – Searching


Step 1: Mapping

Step 2: Quantifying

Step 3: Searching







Visualization


Timing)


Step 4: Analyzing


19 © Wen Feng 2009

ve ha

erials mat

t f Con iden ial

been removed

Value Path Searching: Object-Process Network (OPN)

20 © Wen Feng 2009

BP Whiting Case: Step 4 – Analyzing


Step 1: Mapping

Step 2: Quantifying





Visualization


Timing)

Step 3: Searching

Step 4: Analyzing





21 © Wen Feng 2009

Top 35 (0.3)

Top 97 (0.2)

Top 238 (0

Top 1

Top 35 (0.3)

Top 97 (0.2)

Top 238 (0

Top 1

Solution Space of Value Paths

� By the method of OPN (or Matrix Multiplication), all the value paths between any two stakeholders can be obtained.

� Specifically, the value paths (value cycles) beginning from and ending with the same stakeholder will be taken as the solution space to study the implications of value network for that stakeholder (the focal organization).

� Assuming BP as the focal organization, the following analysis demonstrates how to capture the important paths/outputs/stakeholders/flows for BP.

Path No.


Path

Sco

re

All the value paths from BP to BP 0.6

Top 18 (0.4)Top 18 (0.4)0.5

0.4

0.3 .1. )1)

0.2 077 (0.01) All 5039077 (0.01) All 5039

0.1

0 1 501 1001 1501 2001 2501 3001 3501 4001 4501 5001

22 © Wen Feng 2009

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materia al ti

f Con idenbeen removed

BP Whiting Case: Insight A – Important Paths

23 © Wen Feng 2009

Econo

mic sti

mulatio

n to l

ocal

publi

c

Fuels t

o loc

al pu

blic

Enviro

nmen

tal m

itigati

on to

Local

Public

Econo

mic sti

mulatio

n to l

ocal

Govern

Energy

secu

rity to

U.S. fe

deral

gove

rn

Employm

ent to

local

publi

c

Taxes

to loc

al go

vern

Local

Infras

tructu

re to

local

publi

c

Enviro

nmen

tal co

mplian

ce to

local

gove

rn

Taxes

to Ind

iana s

tate g

overn

Opinion

s to pu

blic m

edia

Taxes

to U.S. fe

deral

gove

rn

Inform

ation

to N

GO

Tech as

suran

ce inf

o to p

ublic

med

iaPay

ment to

CSP

Profits

to in

terna

tiona

l fina

nce

Paymen

t to Can

adian

HO Prod

ucers

Tech de

mand t

o new

tech

gene

rators

Specif

icatio

ns to

CSP

Paymen

t to Can

adian

HO pi

pelin

es

Paymen

t to ne

w gene

rators

BP Whiting Case: Insight B – Important Outputs

0.16

0.12

0.10

0.06

0.04 0.02

0.08

0.14

0.00

WO

O

W eighted B P Output Occurrence

WOO i =1

21

∑ = 1Top six outputs from BP


Score Sum of the Value Paths Beginning with a Specific Output � Weighted Output Occurrence (WOO) = Score Sum of All the Value Paths for the Focal Organization

� WOO points out the high-leverage outputs BP can use to have the greatest affect on improving its own inputs (specific needs) at the end of value paths. Resources to increase these outputs should be allocated in this order.

24 © Wen Feng 2009

BP Whiting Case: Insight C – Important Stakeholders

1

0.8

0.6

0.4

0.2

0 bp pm lp isg ufg lg ngo inf cg isr cho chp csp ntg

WSO

WSO

WSO in the stakeholder value network (5039 Paths)

1

0.8

0.6

0.4

0.2

0 bp lp ufg pm isg inf csp ngo ntg cho chp cg isr lg

WSO in the "Hub-and-spoke" Model (20 paths)

Stakeholder Stakeholder

Most Important SH for BP

Image by MIT OpenCourseWare. Score Sum of the Value Paths Containing a Specific Stakeholder � Weighted Stakeholder Occurrence (WSO) = Score Sum of All the Value Paths for a Focal Organization

� WSO identifies the most important stakeholders who have the most effect on turning BP’s outputs into good inputs for the success of the project.

� Comparison 1 (with BP Managers’ Mental Model, on Slide 7): Public Media (pm) and Local Public (lp) are the two most important stakeholders for BP, which have been confirmed by the later facts but ignored in managers’ mental model at the beginning.

� Comparison 2 (with the “Hub-and-Spoke” Model, on Slide 15): the Value Network model is closer to the later facts on important stakeholders, through considering the indirect stakeholder relationships.

25 © Wen Feng 2009

BP Whiting Case: Insight D – Important Value Flows

Local

perm

its fro

m isg to

bp

News f

rom pm

to uf

g

News f

rom pm

to bp

Suppo

rt from

lp to

ufg

Opinion

s from

lg to

pm

Opinion

s from

isg to

pm

Bound

ary co

nditio

ns fro

m ufg t

o isg

Politic

al inf

luenc

e from

ufg t

o isg

Opinion

s from

ngo t

o pm

Econo

mic sti

mulatio

n from

bp to

lp

Suppo

rt from

lp to

isg

Nation

al pe

rmits

from uf

g to b

p

Opinion

s from

lp to

pm

Enviro

nmen

tal sa

tisfac

tion f

rom lp

to ng

o

Fuels f

rom bp

to lp

Enviro

nmen

tal m

itigati

on fro

m bp to

lp

News f

rom pm

to lp

Invest

ment fr

om in

f to bp

Enviro

nmen

tal ap

prova

l from

ngo t

o bp

Politic

al sup

port f

rom isg

to lg

News f

rom pm

to in

f

Econo

mic sti

mulatio

n from

bp to

lg

Influe

nce f

rom uf

g to c

g

Energy

secu

rity fro

m bp to

ufg

Employm

ent fr

om bp

to lp

News f

rom pm

to isg

Friend

ly en

viron

mental

polic

y from

isg to

ngo

Taxes

from bp

to lg

Local

infras

tructu

re fro

m bp to

lp

Enviro

nmen

tal co

mplian

ce fro

m bp to

lg

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0

WV

FO

W eighted value flow occurrence ( T op 30 out of 74)

WVF O = 0.816 i=1

30

∑WVF O = 0.816 i=1

30

∑ WVF O = 1 i =1

74

∑


Score Sum of the Value Paths Containing a Specific Value Flow� Weighted Value Flow Occurrence (WVFO) = Sum (Score Sum of the Value Paths Containing a Specific Value Flow)

� WVFO (and WSO) can be used as the guidance to build a smaller Stakeholder Value Network consisting of the most important value flows (between the most important stakeholders) to reduce the network complexity.

26 © Wen Feng 2009

Conclusions

� Rigorous Framework: to understand the qualitative/quantitative impacts of indirect relationships between stakeholders on the success of large oil and gas projects;

� Reduced Complexity: highlighting the important stakeholders (WSO) and the important value flows (WVFO), which can be used to construct a smaller model for more detailed analysis;

� Strategic Insights: identifying the critical value paths to engage stakeholders and prioritizing the high-leverage project outputs (WOO) to allocate resources;

� Transparent, Collaborative, and Alive Platform: for different teams in a project (and for different stakeholders) to share important knowledge that is otherwise difficult to express or communicate (through filling in the questionnaire and updating the results).

27 © Wen Feng 2009

28

© Wen Feng 2009

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Documents

16.842: Stakeholder value network analysis for large oil ... · Stakeholder Value Network Analysis for Large Oil and Gas Projects Wen Feng ... Mapping Step 2: Quantifying Step 3: