This is the final column in a six-part series on drilling practices and improvement based on an industry study by James Miller & Co.

Why do upstream organizations have such a checkered past track record and an uneven current performance when it comes to knowing how to create excellent wells?
JM&C's research indicates that there are seven factors that are associated with the achievement of Alpha Status relative to drilling and the wells development processes. We call these the Seven Pillars of Alpha.
Asset quality is the single most important determinant of drilling and wells development performance. The underlying process used by an upstream organization to secure access to hydrocarbon reserves drives the overall value of asset quality. Regardless of popular, often sophisticated and nuanced approaches to accounting for reserves, the upstream organization structure, or other factors, the absolute limit of the asset (acreage, proven reserves, technical advantage, intellectual property, etc.) will determine the overall value of the drilling and wells development potential. Therefore, even the absolute best drillers and wells development personnel will be no better than the limit of the asset
Business model design and function are important elements of drilling and wells development performance. An upstream organization that focuses only on one basin (Western Alberta, for instance) has a different business model than does ExxonMobil. For world-scale production volumes, world-scale projects must be created that yield huge, economically viable reserves in terms of proven and unproven potential. For our Western Alberta organization, the focus on Alberta creates the need to drill a more consistent and common type of well than the wide array of different wells that ExxonMobil must routinely address and drill.
The business model plays a key role in the overall complexity of the organization required, the technologies required, the capital required, the legal compliance required and the overall risks involved in executing the tasks inherent in drilling and wells development.
Organization capability is the most poorly understood and poorly managed dimension of drilling and wells development. That there are differences in the quality of the organizations among the upstream industry is no epiphany. But, to the degree that the upstream industry has been guilty of organization practices that are nothing more than the lowest common denominator approaches, much is on the table for debate and action.
Organization capability presents one of the single most important opportunities for any upstream organization to create and capture value engineering opportunities that may potentially provide a "2X" gain in profitability resulting from a 2X improvement in costs, quality and overall well value.
JM&C's research has documented that organization capability is the single most poorly managed aspect of the wells development process. Beginning with faulty assumptions upon which management bases much of its decision-making processes and ending in skills and competencies of the people charged with execution and including nearly every conceivable aspect of organization design and function in between these two poles, real breakthrough opportunities await "discovery."
If assets are the single most critical limiting factor to long-term success, organization capabilities are certainly the lever that can be more effectively applied to create long-term high-value assets.
No upstream organization will ever achieve Alpha Status without the use of Alpha Processes. Process in many upstream companies is something to be avoided on the one hand, and on the other hand it has become a form of religious zealotry. In either of those two extremes no Alpha Status is possible. Too many companies see process discipline as something to be avoided. As a mature industry, we are only in our infancy when it comes to the design and deployment of effective process. Too often there is no process structure in place to guide (not necessarily govern) the drilling and wells development activities. This results in ad hoc approaches and faulty execution and learning.
The lack of effective process discipline adds variability, waste, inefficiency and longer cycles to the drilling and wells development processes.
The capacity to learn quickly and to learn effectively across all of the drilling and wells development activities is an essential success factor for any organization that desires to gain and sustain Alpha-level performance. Brett and Millheim first created the drilling learning curve model that reflects the interdependencies of time, learning potential, learning rate, well sequence and the technical limit. Gradually, the idea of learning as a competitive differentiator is taking hold in the industry. But the frame of reference of much of the learning curve experience seems somewhat myopic in that the learning, relative to drilling, is confined to a view that includes principally the commencement of drilling to the realization of bottomhole depth. Everything that happens before spud and everything that happens after realization of the target is glossed over as being outside of criticality to drilling and wells development performance. This mindset is the cause of many faulty assumptions and at the core of many errors in management.
We don't know what we don't know: Knowledge is important. Even the largest upstream companies hold incorrect assumptions about their peer group. Most of the opinions that we hear relative to the performance of other companies' drilling and wells development capabilities are anecdotal and not well-grounded in fact.
Even more disturbing is the lack of awareness of prior experience in drilling and wells development within the same company. In other words, the left hand doesn't know what the right hand is doing.
Most upstream organizations are aware of knowledge management. However, virtually all upstream organizations struggle with what knowledge management is and how to go about managing knowledge. The lack of awareness of what can be codified and used effectively versus that which is embodied in each of us as individuals is problematic.
Strategy is neither mysterious nor deterministic; it's a process to be managed. Typically, upstream strategy has been approached as an event-driven act that often resembles the blind leading the blind. Too often, incorporating poor advice by investment bankers and major global consulting firms and abetted willingly by industry executives striving to leave a good legacy, strategy has been much used and abused as the basis for many of the transactions that have reshaped the industry.
By the time the drill bit turns to the right, the dye is cast on risk and to a large degree on the inevitable outcomes. What happens from that point forward is largely predetermined - the losses, the flat time, the incidents and the results.
The Alpha Organization frames the business environment in which many decisions are made - large and small ones that affect the performance of the drilling projects that are designed and carried out everywhere the organization hopes to produce hydrocarbons. But, to understand how a company achieves and sustains absolute leadership in the performance results that matter, one must be willing to step back from the status quo.
Breakthrough performance can come only through better organization performance. Focusing on the well bore is part of the puzzle - and common benchmarking misses the major factors behind the wells development process.