Where is the Asset Management Discipline Going...

This installment concludes the Foundational Thinking miniseries.?This miniseries provided a perspective that is only one thread in a large asset management canvas.?This canvas is made from many overlapping threads that represent shared and similar experiences from Asset Managers all over the world.?The thread in this Foundational Thinking miniseries detailed a chronology of asset management development for one industry sector, that is for US Federal facility asset management.?Other threads chronicle similar asset management stories.?When woven together they create a canvas, a foundation that many different types of organizations can use to paint a bright and successful future.

This miniseries’ storyline began in the late 1980s with Fragile Foundations that alerted policy makers that US public infrastructure was beginning a period of accelerated decline.?The seeds for this decline were planted decades before.?Coming home from World War II the US directed energy into major building programs for public infrastructure, transportation, education, and manufacturing.?

A rush of capital meant many new things in a short period of time.?These new capital assets required maintenance but not a significant repair budget at first.?As this built infrastructure aged so did the requirement for repair and renewal grow, but lacking disciplined asset management most organizations did not plan for ballooning major repair and renewal requirements.?This bill started to come due at scale about 30 years later.?Fragile Foundations was one of many early warning signals for a massive renewal budgetary tidal wave.

A law of physics states that every action has an equal and opposite reaction.?Axioms to this law play out across the annuals of human history.?Not being prepared for this tidal wave renewal requirement degraded and suppressed the continued stream of benefits derived from these assets.?Fragile Foundations prophetically states:

“…unless we dramatically enhance the capacity and performance of the nation’s public works, our own generation will forfeit its place in the American tradition of commitment to the future.?Without such an effort, our legacy will be modest at best.?At worst, we will default on our obligation to the future, and succeeding generations will have to compensate for our failures.”

This tidal wave renewal requirement dictated redirection of substantial sums to unanticipated capital asset repair and renewal requirements. This reaction took capital away from other priorities that had many impacts and consequences including lower overall output and increasing capital asset total ownership costs – because reacting to problems is always less efficient then proactively mitigating them.? When requirements overwhelmed resources deferred maintenance backlogs grew and levels of service and quality declined.?Necessity being the mother of invention, realization of this causal relationship was the genesis for disciplined asset management.

?As chronicled in this newsletter, the initial response in the 1980s and 1990s was to understand and describe the problem.?This resulted in the development of vocabulary (such as deferred maintenance backlog) and metrics and measures (such as the Facility Condition Index (FCI)).?This quickly evolved into adaptive use of leading management approaches (such as quality management / ISO 9001) and development of performance management strategies (such as targeting?facility maintenance budgets at 2-4% of a portfolio’s present replacement value (PRV)).?

Next emerged organizations to help professionals learn, understand, and apply asset management methods and techniques (such as the Institute of Asset Management (IAM) and the Institute of Public Works Engineering Australasia (IPWEA), with many others coming on line to support different industry sectors and markets across the world).?This raised asset management competency levels that supported development of more advanced standards and standards of practice, most notably the British Standards Institute’s (BSI) Publicly Available Specification – 55 (PAS 55) titled “Specification for the Optimal Management of Physical Assets” that led directly to the development the ISO 55000 – Asset Management standards series.?

As these standards came online organizations and regulatory bodies began to adopt and apply them to assure benefits, trust, and value realization from assets.?This started with efforts to better “manage assets” that has methodically evolved in ways to better practice “asset management” as is detailed in the ISO Technical Committee 251 article titled: “Managing Assets in the Context of Asset Management”. ?This progression is perfectly natural because to understand asset management one needs to first understand how to manage assets.?This work involved borrowing, aligning, and integrating best practices in maintenance management and asset life cycle management to inform and mature the discipline of asset management.

Success and benefits in this pursuit pushed development of asset management forward into a management system discipline.?Today, many individuals and organizations are just beginning to realize what the ISO 55000 Asset Management standards series are saying when it states: “Asset management does not focus on the asset itself, but on the value that the asset can provide to the organization”.?

In the course of management system development, it is helpful to understand that asset management systems are a relatively new discipline.?Specifically, ISO 55000 standards were only published in 2014, and ISO’s management system innovation through introduction of a harmonized level structure (HLS) is also about ten years old. ?Through a management theory history lens, the speed of asset management system adoption is nothing short of remarkable.

Knowing where we have come from, which was the purpose of the Foundational Thinking miniseries, is helpful to figuring out we are going as a professional discipline.?To help in this pursuit, the following observations are drawn from content covered in this miniseries:

• The Evolution of Asset Management is Responsive to Macro Trends.?History has shown that asset management evolution has been guided by reactions to things, mostly bad things, that happen beyond the scope of managing assets.?This includes choices to underfund asset life cycle requirements, technology innovations, globalization, climate change, etc.?The result is the emergence of disciplined asset management to help organizations look beyond assets and understand that management of organizational risk and performance can be optimized through effective asset management.
• Asset Management Evolution is Biased Towards Response to and Avoidance of Consequence.?People and organizations tend to be risk adverse, and therefore proactive asset management advancements are rare.?In most cases, an organization must understand that serious loss or failure to achieve critical objectives is linked to asset management decision making before it is willing to embrace a disciplined asset management approach.
• Asset Management Innovation is Led through the Actions of Individuals.?Nothing within an organization happens without someone doing something.?So even though progress implementing asset management improvements can be challenging, every advancement is linked to the actions of individuals.?The point of this observation is to not give up hope.?Asset Managers are leaders and need to be persistent in doing the right thing in terms of implementing disciplined asset management, because if you don’t no one will.?The successes and the obvious trend of asset management improvements chronicled in this miniseries were all because of the actions of individuals.
• All Successful Asset Management Transformations are Top-Down Driven.?Even though every asset management advancement is led through the actions of individuals, no organization will embrace disciplined asset management if it is not championed and led through a top-down action or activity.?This is based on how ISO 55000 standards center performance management through the coordination of three perspectives: 1) assets (life cycle management activities), 2) asset management (activities that focus on risk-informed resource and investment decision making), and 3) the asset management system (the means used to coordinate asset and asset management performance). Only executive level decision makers have the span of control required to direct this level of coordination and this establishes the necessity that all asset management transformations be top-down driven.
• Asset Management Success is Derived from Benefit Realization.?Asset management is and must be outcome oriented for it to be successful.?These outcomes can be evaluated in terms of asset performance, but true asset management success is only measured through the realization of benefits for the organization.?Managing asset performance for the purpose of asset performance is a losing asset management strategy.?Managing asset performance for the purpose of organizational success is a winning asset management strategy.
• Sustainable Asset Management is Driven by Culture, not Strategy. ?Peter Drucker coined the famous phrase – “culture eats strategy for breakfast”.?Disciplined asset management improvement strategies that do not positively contribute to an asset management culture will be short lived.?Implementation of an ISO 55001 conforming asset management system includes multiple levels of continual improvement that can be engineered to develop a positive, self-reinforcing asset management culture.
• Managing Assets is Responsive, Asset Management Requires Proactive Leadership.?All organizations own and manage assets, and most organizations view managing assets as a responsive activity (e.g. as an overhead expense) – that is ensuring the asset serves its intended purpose.?Only some organizations go on to implement disciplined asset management.?Every disciplined asset management implementation is a leadership decision, and only some organizations do so proactively.?Those that learn to do so are best prepared to successfully achieve their objectives and adapt to changes in their environment.?These organizations understand that (management) systems are greater than (management) goals.

These observations are drawn from sources in this miniseries’ chronology.?They provide insight but are not determinative of where the asset management discipline is going.?As detailed in the last Foundational Thinking miniseries installment, the National Academies of Science, Engineering and Medicine’s (NASEM) Strategies to Renew Federal Facilities, most organizations are still challenged by understanding the relationship between the “managing assets” and “asset management” concepts.?

This recognizes that there is more work to be done.?Some may view implementation of asset management as going too slow.?One can interpret this as resistance to or not being supportive of asset management, when the reality is different.?This miniseries’ chronology showed the opposite.?Significant progress has been accomplished over the last few decades that first identified the need for asset management and evolved it into a disciplined approach.?The transition point is marked with the first publication of ISO 55000 standards in 2014 that expanded asset management’s aperture from physical asset life cycle and maintenance management to a means for value generation inclusive of intangible assets.

All change involves actions that generate reactions.?As an industry, we have come a long way from how we understand asset management.?In the late 1980s as highlighted in Fragile Foundations we were just becoming collectively aware of the need for a systematic approach to manage asset portfolios.?Today, as highlighted in Strategies to Renew Federal Facilities we not only have a defined asset management discipline but we are also learning how to use it to transform large and complex organization management systems. ??This shows that in a relatively short span there have been many major advancements in asset management, and just in time…?

Going forward asset management will continue to evolve and absorb and apply other best practices just like it did with application of life cycle and maintenance management of physical assets.?This evolutionary horizon includes further incorporation of enterprise organizational change management, digital transformation, and artificial intelligence to name just a few.

?As has been demonstrated throughout this Foundational Thinking miniseries, Asset Managers will find a way.?It may not always be direct or efficient.?If history is a gauge, we know that the best ideas will rise to the top.?This is the underlying story told through this miniseries’ chronology.?We can also expect that as organizations learn about asset management’s benefits accelerated pathways for limitless asset management will emerge.?In this way asset management will be recognized as the proactive force it is to solving the world’s toughest and most complex problems.?All of which require expertise in asset management because they involve the management of things that are valued.

Written by: James J. Dempsey | August 22, 2023

#assetleadership #assetmanagement #investmentstrategy #riskmanagement #enterpriseriskmanagement #iso55000 #iso55001 #facilitymanagement

Helpful Links:

NASEM – Strategies to Renew Federal Facilities. https://nap.nationalacademies.org/catalog/26806/strategies-to-renew-federal-facilities

Fragile Foundations: A Report on America’s Public Works

https://www.infrastructurereportcard.org/wp-content/uploads/2017/03/1988-Fragile-Foundations-ExSum.pdf

ISO Technical Committee 251 article:?Managing Assets in the Context of Asset Management

https://committee.iso.org/sites/tc251/home/news/content-left-area/news-and-updates/new-article-managing-assets-in-t.html ?

AMP Newsletter on Pathway to Limitless Asset Management

https://www.dhirubhai.net/pulse/pathway-limitless-asset-management-jack-dempsey/

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