Now there is a broader definition of asset management in ISO 55000 of “co-ordinated activity of an organisation to realise value from… an item, thing or entity that has potential or actual value to an organisation”. This is deliberately wider than physical assets.
ISO 55000 appeared only three years ago, in the same family as ISO 9001 on quality management systems. Awareness is turning into mainstream excitement as organisations realise the potential value asset management releases for them.
But how do you know every pound is being well spent – that it contributes to your vision and strategy?
Asset management is a structured way of assuring delivery of your goals and maximum exploitation of your assets over time. I do not mean simplistic sweating, but deriving sustained value by balancing cost and performance with risk mitigation.
This is why large insurance discounts are being offered to leading Australian electricity companies that can demonstrate understanding and mitigation of their risks. Informed investment funds such as IFM are no longer using the single dimension of money or share price to choose new acquisitions, instead they are assessing true value and potential value over time. Like Canada, more countries are explicitly fostering public sector capability to derive maximum value for their taxpayers.
Value is a slippery word. But that is also its point. You must have clarity of purpose and be explicit about what is valuable to you. Your stakeholders have very clear views – do you need to understand them better?
Three significant ideas are gaining ground currently: the difference between asset management and managing assets; the part that culture and leadership plays; and the clarification of value.
Managing assets is what you do to your widgets, but this can only be known to be valuable set in a strategic context of asset management. Do you need any assets? And which ones? What should you spend on them for known benefit? Organisations that miss this point treat asset management as a responsibility delegated to maintenance or IT functions.
Michael Porter’s value chain is a concept familiar to business leaders and schools. Asset management is a means of ensuring that value can be delivered in a structured and predictable way. This does not replace operational excellence and other essential factors, but integrates and directs them.
The real value can only come from cross-functional collaboration. Developing such a culture is challenging and that’s what good leaders need to do. Asset management organisations distribute responsibility throughout the organisation and pay attention to interfaces, where processes can break down most easily.
A trend that is sure to burgeon is assets as a service. An example is Rolls-Royce aero engines, which are owned throughout their lives by the maker; they are maintained, exchanged and upgraded with Rolls-Royce responsible throughout, while the airline pays for thrust by the hour.
Doing asset management is simple; doing it well is not easy. We all manage our assets, but how well?
National Grid has derived tangible benefits in both gas and electricity in the UK and United States, and is committed to developing its already capable workforce. The City of Calgary has not only implemented asset management for its public assets, it saves money and has more satisfied citizens by doing so, and recovered more quickly from catastrophic floods in 2013. How do you compare?
In the next decade we shall become so used to this approach that stakeholders will quickly turn on organisations that fail to think this way. It may take two decades for national and local governments to reach the same position, but once implemented, taxpayers will not permit backsliding. It’s just good management.