Relentless Pursuit of Sophistication - musings on the development of asset management

More than ever this year, the Christmas and New Year break was a time for reflection. This may have been the result of no house guests and a more than ample supply of alcohol. Nevertheless, I reflected that I had been operating within or at the margins of asset management for over 25 years. A little Google research told me that we have now had the ISO55000 standard for 7 years, PAS55 was launched 17 years ago and the Institute of Asset Management 27 years ago. I am not sure why significant steps forwards in asset management always occur in a year ending in a 4 but I’m sure this has to be more than a coincidence.

The question this raises is simple. Given that some organisations have been engaged with the emerging discipline since the outset, “are we nearly there yet?”. Another quick Google search told me that over 300 organisations are now certified, but as we all know, certification is but a step on the journey, indeed you only need to score 3/5 against the IAM anatomy to achieve certification. So, what is it that differentiates the truly leading organisations from the asset management sheep? I am privileged to have worked for some great (and not so great) asset management organisations both as an employee but more recently as a consultant and the great organisations are continually driven to get better and better over time in their asset management approaches to deliver them the competitive advantage or industry recognition they desire. I call this “the relentless pursuit of sophistication”.

The relentless pursuit of sophistication

Asset management is a simple concept, we all do it with our homes, cars, bicycles and “assets” as part of our daily lives. Most of us manage to do this without sophisticated decision support tools or even an excel spreadsheet. We have an implicit understanding of the costs, risks and performance associated with these “assets” and make value-based decisions in our heads. Is something worth repairing, am I happy with the reliability or can I justify buying a new shiny car are all examples of us effectively using our value-based judgement to manage our own assets. But if we won the lottery and instead of having a single car we had dozens, or we became a property tycoon and had hundreds of properties in our portfolio then the complexity of our asset base becomes more than we can handle in our heads. We thus need to become more sophisticated in how we understand and continue to be able to manage the assets effectively. Most asset owning organisations have hundreds of thousands or millions of assets in their portfolio. To manage these effectively those organisations need to develop sophisticated methods to aid their decision making. Having worked with many of these organisations I think there are five guiding principles that are common to seeking this “relentless pursuit of sophistication”.

Empowered to be Curious

In the absence of anything else, asset management starts with “curious people”. The reason some people manage their car or house well throughout its lifecycle is because they are naturally curious, interested and engaged with the outcome of how they manage it. In organisations we don’t necessarily have the same personal investment. We have “day jobs”, targets, teams and bosses that all require our attention and little spare time for being frivolous. But all too often I see management reports where no one asks, “what is really going on?” and / or “why do we do it like that?”. I see asset management teams working all hours to produce regulatory business plans that will just arrive at the same predictable results. We are not getting the most value from these people. As consultants we regularly get asked to investigate areas of underperformance, this normally involves us speaking to the responsible individuals and teams and getting their hypotheses and hunches into the root causes of the problem. Often it is merely the constraints placed on the individuals that prevents them from pursuing their natural curiosity to solve these issues themselves. My first principle is therefore “empowered to be curious”. Exceptional results can be delivered by curious people who are given permission and some headroom to explore “what is really going on” and challenge traditional thinking and decisions in their organisation. I recommend it to you and your teams – it is immensely satisfying and actually fun!

Align from strategy to spanner

In my consulting life I have been presented with some brilliant asset management policies, strategies and plans. The documents are well written and demonstrate an impressive grasp of the issues and interventions to resolve them. Being “curious” myself, and having spent many years building, operating and maintaining assets, I naturally seek out the front-line operations and maintenance teams to see how these mighty works have improved their day to day lives. Sadly, it is at this point I often encounter a very different perspective. All too often the operations and maintenance teams are unaware of the existence of asset management. They describe a world of under investment, bureaucracy and the apparent ambivalence of the corporate centre. I have a simple test for this. I ask the question “does the asset know yet?”. Purists argue that I should be asking this question on behalf of the customer or shareholders, but I maintain that asset management should make a difference to how we manage the assets throughout their lifecycle. If we do it right the value to customers and shareholders will follow. If we aren’t “making a difference” then quite frankly we are wasting our time and the organisations money. So, my second principle is “align from strategy to spanner”. The Institute of Asset Management and standards such as ISO55000 provide good guidance on creating “line of sight” and suggest how policies, strategies and plans should align and cascade. Whether your organisations choose to adopt these or not, make sure your asset management efforts are not mere theoretical constructs and they permeate right through your organisation to affect the people actually doing the work on the assets that ultimately deliver the service to your customers.

All that glitters isn’t good asset management

How often has someone tried to convince you that the new shiny software, AI Engine or virtual reality headset is the “life, the universe and everything” solution to all your asset management problems. Well it might be, but it’s unlikely unless you have some of the fundamentals in place to allow that system to work. An asset register, asset hierarchy, asset failure, condition, performance and cost data, asset attributes, maintenance plans and records are but some of the essential building blocks for any of the shiny new toys to work. It would be like buying Microsoft Excel and expecting it to unilaterally solve your tax return. Even if you do have all the building blocks in place, this doesn’t excuse you from the need to continuously keep them up to date through good housekeeping. Time and time again we work for organisations that throw thousands of pounds at some of the building blocks in response to a crisis (which is sometimes the implementation of a new system), only to then fail to maintain that data once the crisis has passed.

Don’t get me wrong, in the pursuit of sophistication there is a place in asset management for clever systems and tools, but they are rarely the panacea they are made out to be. Colleagues in the water industry may remember one of the water companies investing heavily in a decision support tool to help produce their regulatory business plan. Because they didn’t have some of the building blocks they had the software vendor provide them with many of the rulesets about maintenance and asset failure that were needed to run the system. Well it worked, the company were able to press a button and get a fully optimised investment plan for the next period. Unfortunately, they couldn’t explain why the answer was the answer nor write the plan narrative the regulator required. Going back to where I started, we all know the answer to “life the universe and everything” is 42, being able to explain why that is the answer is more problematic. So, my third principle is “all that glitters is not good asset management”. Commit the time and resources to putting in place and maintaining the essential building blocks necessary for your asset management tools and systems.

Good decision making is CRaP

Much to my boss’s dismay, I have a fairly irreverent approach to life. I rationalise this to myself as merely attempting to make a potentially dull subject more interesting. So, it is with joyful childishness that some of the underlying principles of asset management decision making; cost, risk and performance can be abbreviated to CRaP. Childishness aside, it is in a large part through the pursuit of becoming more sophisticated in our understanding of these three aspects and in how we can make decisions that balance between the three, that we become more sophisticated asset managers. The best organisations continually seek to improve the granularity, accuracy and coverage of these criteria, often using a common currency to enable their tools and systems to effectively prioritise and optimise between them in pursuit of their organisational goals. For example, if an organisation can accurately and transparently calculate “what it wants to pay” to achieve a given level of risk and performance, it dramatically changes their relationship with their supply chain and delivery organisations. The same organisation would understand the “value” of investment as a combination of CRaP and be able to make decisions accordingly. My fourth principle is therefore; “good decision making is CRaP”. All your decision should be based on these three aspects and maximising the value across them for your organisation.

The future is real-time

I am often asked “what is the future of asset management?” or similar questions, often from individuals who have just seen something new and “shiny”. But my reservations aside about “shiny things”, this is a valid question that deserves consideration. Whilst I do not claim to have the perfect answer to this, I do have an answer which may merit debate. My asset management experience has largely been in the UK, and primarily with regulated companies. Asset management took root early in these organisations, in a large part due to being driven to produce better evidenced and more efficient business plans by their respective regulators. As such, and certainly initially, asset management became an annually, bi-annually or regulatory review driven activity. As mentioned above, in many cases asset management became a business function isolated from operations and the asset management plans and strategies that were produced were not typically affected by real time events and performance. The enterprise asset management systems, decision support tools and models used in asset planning were large, cumbersome and could take days to produce a single iteration of the plan.

But the need has evolved. In the current climate of Brexit and COVID there is a need for plans to be resilient and responsive to emerging events. This means that organisations need to re-plan and course correct more frequently using up to date information to inform those decisions. Fortunately, technology can now provide near real time information into our decision support tools. Companies can now embrace connected sensors, virtual reality and digital twins to link the operational business back into asset management, automating critical data capture and analysis. This has the added benefit of removing some of the manual counting, inspection and assurance activities that still prevail in our businesses whilst improving the cost, safety and accuracy of those activities. Importantly this means that quinquennial or annual plans can now be reviewed monthly, weekly and daily, moving our asset management decision making towards real-time. My last principle, and my personal prediction for the future of asset management is therefore “The future is real-time”. Organisations should plan to use digitally connected assets and digital asset management methods to drive the “drumbeat” of asset management processes towards real-time decision making.

To conclude

So, to simply answer my original question “are we nearly there yet?” No, we aren’t. But many organisations are making great strides beyond mere certification. These leading companies are all relentlessly getting more sophisticated in their approaches, building on solid foundations. But the cautionary tale in this essay is to start with the essential building blocks of empowered curious people, make sure you align your asset management efforts from “strategy to spanner” and don’t think there are easy technological solutions if you don’t have some of the fundamental building blocks in place. Whether at the beginning of the journey or one of the leading organisations, your decision making should always be CRaP and whatever 2021 throws at us, moving your decision making towards real-time will enable you to re-plan and respond more effectively. Please feel free to contact me, Steve or my co-authors Jen and Allan or through the various social media channels we will use. We are jointly running a series of webinars on this topic for the IAM which are available through the IAM website. I will therefore sign off with a “Happy New Year” but what I am really looking forward to is us all having this cracked for the next big milestone in 2024.