16.842: stakeholder value network analysis for large oil ... · stakeholder value network analysis...
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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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Stakeholder Map: 14 Stakeholders and 74 Value Flows
10 © Wen Feng 2009
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Stakeholder Map: Information Flows
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Stakeholder Map: Goods/Service Flows
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“Hub-and-Spoke” Model for BP: Only Direct Relationships
15 © Wen Feng 2009
BP Whiting Case: Step 2 – Quantifying
Inputs/Outputs Steps Techniques
Step 4: Analyzing
Network Measurements Definition and Network Statistics Construction
Step 1: Mapping
Step 2: Quantifying
Step 3: Searching
Stakeholders and Their Roles, Objectives, and Needs
Qualitative Model of Stakeholder Value Network
Document Survey, Stakeholder
Visualization
Scoring (Intensity, Importance, and
Interview, and Network
Quantitative Model of Stakeholder Value Network
Questionnaire for Value Flow
Timing)
The Solution Space of Value Paths between Any Two Stakeholders
Object-Process Network (OPN) or Matrix Multiplication
Important Paths/Outputs/Stakeholders/Flows
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
Inputs/Outputs Steps Techniques
Step 1: Mapping
Step 2: Quantifying
Step 3: Searching
Stakeholders and Their Roles, Objectives, and Needs
Qualitative Model of Stakeholder Value Network
Quantitative Model of Stakeholder Value Network
The Solution Space of Value Paths between Any Two Stakeholders
Important Paths/Outputs/Stakeholders/Flows
Document Survey, Stakeholder Interview, and Network
Visualization
Questionnaire for Value Flow Scoring (Intensity, Importance, and
Timing)
Object-Process Network (OPN) or Matrix Multiplication
Step 4: Analyzing
Network Measurements Definition and Network Statistics Construction
19 © Wen Feng 2009
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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
Inputs/Outputs Steps Techniques
Step 1: Mapping
Step 2: Quantifying
Stakeholders and Their Roles, Objectives, and Needs
Qualitative Model of Stakeholder Value Network
Quantitative Model of Stakeholder Value Network
Document Survey, Stakeholder Interview, and Network
Visualization
Questionnaire for Value Flow Scoring (Intensity, Importance, and
Timing)
Step 3: Searching
Step 4: Analyzing
The Solution Space of Value Paths between Any Two Stakeholders
Important Paths/Outputs/Stakeholders/Flows
Object-Process Network (OPN) or Matrix Multiplication
Network Measurements Definition and Network Statistics Construction
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.
Image by MIT OpenCourseWare.
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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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
Image by MIT OpenCourseWare.
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
∑
Image by MIT OpenCourseWare.
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
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16.842 Fundamentals of Systems Engineering Fall 2009
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