MIT16_842F09_lec02b

MIT16_842F09_lec02b - Stakeholder Value Network Analysis...

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Unformatted text preview: 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 Introduction: “Hub-and-Spoke” Model and Value Network Political Future Project Approval Information Federal Support Market Stakeholders Goods/Service Nonmarket Stakeholders The Focal Organization Financial Project Lobbying Regulatory Approval Local Host-Countr Host-Country Government Economic Community Project Workforce Approval Support Investors Governments Investors Political Groups Investment Employment Environmental Compliance ROI Taxes High-grade Goods Suppliers ENTERPRISE ENTERPRISE Customers Logistical Support Project ENTERPRISE Revenue Sharing Low-grade Goods Investment Trade Associations Communities Communities Technology Reqts Employees “Hub-and-Spoke” Stakeholder Model (Adapted from Donaldson and Preston, 1995) Sales Revenue Host-Country Corporation Technolog Transfer Environmental Impact Plan Technology Product Political Influence Product Subsystems Policy Support NGO Contracts Consumers Suppliers Stakeholder Value Network (Feng, Cameron, and Crawley, 2008) 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 Document Survey, Stakeholder Interview, and Network Visualization Step 2: Quantifying Questionnaire for Value Flow Scoring (Intensity, Importance, and Timing) Step 3: Searching Object-Process Network (OPN) or Matrix Multiplication Step 4: Analyzing Network Measurements Definition and Network Statistics Construction 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 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; – 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 thelower 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 Step 1: Mapping Document Survey, Stakeholder Interview, and Network Visualization Step 2: Quantifying Questionnaire for Value Flow Scoring (Intensity, Importance, and Timing) Step 3: Searching Object‐Process Network (OPN) or Matrix Multiplication Step 4: Analyzing Network Measurements Definition and Network Statistics Construction 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 2 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 LOCAL GOVERNMENTS (LG): Chicago; Whiting, Hammond and East Chicago ROLE: Serve for the Local Public Value Flows INPUTS: •Taxes from BP E i Sti l ti f •Economic Stimulation from BP •Environmental Compliance from BP •Political Support from Indiana State Govern •Political Support from Illinois State Repres •Support from Local Public •News from Public Media OBJECTIVES: •Develop the Local Economy •Protect the Local Environment •Sustain/Increase Political Support SPECIFIC NEEDS: •Taxes •Employment E l t •Cheap Energy •Environmental Protection •Political Support from State Governments •Support from Local Public •Support from Public Media Stakeholder Characterization Template 3 Stakeholder Map: 14 Stakeholders and 74 Value Flows ave ls h eria at ial m oved en t fid rem Con een b 10 © Wen Feng 2009 Stakeholder Map: Political Flows ave ls h eria at ial m oved en t fid rem Con een b 11 © Wen Feng 2009 Stakeholder Map: Information Flows ave ls h eria at ial m oved en t fid rem Con een b 12 © Wen Feng 2009 Stakeholder Map: Goods/Service Flows ave ls h eria at ial m oved en t fid rem Con een b 13 © Wen Feng 2009 Stakeholder Map: Financial Flows ave ls h eria at ial m oved en t fid rem Con een b 14 © Wen Feng 2009 “Hub-and-Spoke” Model for BP: Only Direct Relationships ave ls h eria at ial m oved en t fid rem Con een b 15 © Wen Feng 2009 BP Whiting Case: Step 2 – Quantifying Inputs/Outputs Steps Techniques Step 1: Mapping Document Survey, Stakeholder Interview, and Network Visualization Step 2: Quantifying Questionnaire for Value Flow Scoring (Intensity, Importance, and Timing) Step 3: Searching Object-Process Network (OPN) or Matrix Multiplication Step 4: Analyzing Network Measurements Definition and Network Statistics Construction 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 16 © Wen Feng 2009 Questionnaire for Value Flow Scoring Ranked by the stakeholders receiving these value flows or Ranked from their own standpoint ave ls h eria mat ed tial mov den n re nfi Co bee Importance Scale 0.55 0.78 0.98 Always 0.11 0.32 0.54 0.76 0.95 0.98 Next Year 0.07 0.22 0.36 0.51 0.65 0.66 2-3 Years 0.04 0.11 0.18 0.26 0.32 0.33 > 3 Years Time Scale 0.33 0.02 0.07 0.12 0.17 0.22 0.22 Very Extremely Not Somewhat Important Time Scale 0.11 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: Economic Stimulation BP Score = 0.95 Opinions LG Score = 0.76 News PM Score = 0.76 BP 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 Document Survey, Stakeholder Interview, and Network Visualization Step 2: Quantifying Questionnaire for Value Flow Scoring (Intensity, Importance, and Timing) Step 3: Searching Object-Process Network (OPN) or Matrix Multiplication Step 4: Analyzing Network Measurements Definition and Network Statistics Construction 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 19 © Wen Feng 2009 Value Path Searching: Object-Process Network (OPN) ave ls h eria at ial m oved en t fid rem Con een b 20 © Wen Feng 2009 BP Whiting Case: Step 4 – Analyzing Inputs/Outputs Steps Techniques Step 1: Mapping Document Survey, Stakeholder Interview, and Network Visualization Step 2: Quantifying Questionnaire for Value Flow Scoring (Intensity, Importance, and Timing) Step 3: Searching Object-Process Network (OPN) or Matrix Multiplication Step 4: Analyzing Network Measurements Definition and Network Statistics Construction 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 21 © Wen Feng 2009 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. All the value paths from BP to BP 0.6 Top 18 (0.4) Path Score 0.5 Top 35 (0.3) 0.4 Top 97 (0.2) 0.3 .1) Top 238 (0.1) 0.2 Top 1077 (0.01) (0.01) 0.1 All 5039 0 1 501 1001 1501 2001 2501 3001 3501 4001 4501 5001 Path No. Image by MIT OpenCourseWare. 22 © Wen Feng 2009 BP Whiting Case: Insight A – Important Paths ave ls h eria at ial m oved en t fid rem Con een b 23 © Wen Feng 2009 BP Whiting Case: Insight B – Important Outputs Weighted BP Output Occurrence 0.16 0.14 21 ∑WOO = 1 Top six outputs from BP 0.12 i =1 WOO 0.10 0.08 0.06 0.04 0.02 ym en tt o an H O pi to CS P pe ne lin w ge es ne ra to rs rs to ns tio ca di na Ca o tt en Pa ym Pa Sp ec ifi te w ne to d an m de h ra ne ge ch O Pr od uc er s ce P in at Ca na di an rn te in to o tt en Te c ym Pa H io na en ym lf tt o m Pa its of Pr an CS ia ed O G bl pu to o nf ei nc ra su as h Te c ic to n io at rm fo In es N ve go al er ed .f to U .S st rn ia ed m ve o pu bl ic go te ta as on ni pi Ta x O to es rn n er lic In di an o lo ca lg ov ub er lp ca lo ia pl Ta x om lc En vi ro nm en ta et to nc re tu uc str ra nf lI ca n lic ub lo ca lg lp ca lo Ta x es to o tt ov rn ve er en Lo Em pl oy m U to y rit go ov er ed .f .S n io at ul m cu er gy se sti al lG to lo ca ca Lo to n tio ga ic En n lic ub lic lP ub lp ca lo o st el om on Ec ro vi En Ec on nm en om ta ic lm sti iti m ul at Fu io n to lo ca lp ub lic 0.00 Image by MIT OpenCourseWare. Score Sum of the Value Paths Beginning with a Specific Output Score Sum of All the Value Paths for the Focal Organization † Weighted Output Occurrence (WOO) = † 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 WSO in the stakeholder value network (5039 Paths) 1 WSO in the "Hub-and-spoke" Model (20 paths) 1 Most Important SH for BP 0.8 0.6 0.6 WSO WSO 0.8 0.4 0.2 0 0.4 0.2 bp pm lp isg ufg lg ngo inf cg 0 isr cho chp csp ntg Stakeholder Image by MIT OpenCourseWare. bp lp ufg pm isg inf csp ngo ntg cho chp cg isr lg Stakeholder Score Sum of the Value Paths Containing a Specific Stakeholder Score Sum of All the Value Paths for a Focal Organization † Weighted Stakeholder Occurrence (WSO) = † 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 er m i N ts f ew ro s m N fro isg ew m t Su s pm o b p p fr Bo O por om to un p u da O inio t fro pm fg r p n m to Po y co inio s fr lp bp lit n n o t ic dit s fr m l o u al i o g f in ons m to g Ec on O flue fro isg pm om p nc m to ic inio e fr ufg pm sti ns om to m fr u is ul om fg g N at En at io Su ion ngo to is vi na p fr ro l p po om to g nm er rt f b pm en ta O mits rom p to l s pi En at ni fro lp lp isf on m to vi ro ac s f uf is nm tio ro g g en n m to f l b ta l m Fu rom p to p iti els lp pm En ga fro to vi tio m n ro g nm In Ne n fr bp o ve ws om to en ta stm fr b lp o p l Po app ent m to lit ro fr pm lp ic va om to al Ec su l fro inf lp on pp m to om ic Ne ort ng bp sti w fro o t m sf m ob u r En In lati om isg p er flu on pm to Fr lg gy en fr ie nd s c om to ly Em ecu e fro bp inf rit m t en pl y vi oy fr uf o lg ro m om g t nm e o en N nt f bp cg ta ew ro to lp s m u ol fro bp fg En L ic vi oca y m p to ro li f nm n Ta rom m t lp en fras xe is o i ta tru s f g sg lc r t om ctur om o n pl e f bp go ia ro nc m to l e f bp g ro m to l bp p to lg lp ca Lo WVFO BP Whiting Case: Insight D – Important Value Flows 0.07 0.06 Weighted value flow occurrence (Top 30 out of 74) 30 ∑WVF O = 0.816 i=1 0.05 26 74 ∑WVF O = 1 i =1 0.04 0.03 0.02 0.01 0 Image by MIT OpenCourseWare. † 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. Score Sum of the Value Paths Containing a Specific Value Flow © 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 MIT OpenCourseWare http://ocw.mit.edu 16.842 Fundamentals of Systems Engineering Fall 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms. ...
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