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 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
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 Stimulation
Sti l ti from
f
BP
•Economic
•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
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
10
© Wen Feng 2009
Stakeholder Map: Political Flows
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
11
© Wen Feng 2009
Stakeholder Map: Information Flows
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
12
© Wen Feng 2009
Stakeholder Map: Goods/Service Flows
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
13
© Wen Feng 2009
Stakeholder Map: Financial Flows
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
14
© Wen Feng 2009
“Hub-and-Spoke” Model for BP: Only Direct Relationships
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
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
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
0.11
0.33
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
0.02
0.07
0.12
0.17
0.22
0.22
Very
Extremely
Not
Somewhat Important
Time Scale
Time Scale
Importance Scale
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)
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
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
e
v
a
h
s
l
a
i
r
e
t
a
m
l
d
a
i
e
t
v
n
o
e
m
d
i
e
f
r
n
n
o
C
bee
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
Most Important SH for BP
0.8
0.8
0.6
0.6
WSO
WSO
1
WSO in the "Hub-and-spoke" Model (20 paths)
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
p
sa in fr lp lp
En
tis io om to
vi
fa ns
ro
ct fr ufg isg
nm
io om t
en
n
o
f
l b
ta
l m Fu rom p to p
el l
pm
i
s
p
t
En
ig
at from to
vi
ng
io
ro
nm In Ne n fr bp o
en ve ws om to
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
r
en
pl ity m to
vi
oy fr uf 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
l
fro m lp
nm in
T
en fras axe m is to 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.