A strange business

Some years ago, for SAM, Ype Wijnia and Joost Warners, both then with the Essent Electricity Network in Holland, argued asset management was a strange business.  Consider, they said:

A typical Asset manager works with an asset base that is very old. For example, at Essent Netwerk the oldest assets in operation are about 100 years old, and the average age of the assets is about 30 years. Each year about 3% of the asset base is either built or replaced. Typical maintenance cycles have a period of about 10 years. So, about 13% of the asset base is touched on a yearly basis.

This means our basic job is more like staying clear of the assets and letting them perform their function than it is like actively doing something with them, as the term Asset Management suggests. Therefore it might be wiser to call ourselves asset non-managers.

The strangeness of Asset Management increases further if you look at the portfolio of asset and network policies. From long experience with managing assets, most policies have reached a high level of sophistication and they address not only the general situation but all kinds of possible exceptions which have been encountered over the period since the policy was put in place. Those exceptions have exceptions of their own, requiring further detailing of the policy.

In the life cycle of a policy, attention therefore drifts from the original problem to managing exceptions. This means that as the sophistication of the policy grows, the knowledge about why the policy was developed in the first place diminishes.

Exaggerating a little bit you could say that Asset Managers do not manage most of the assets, and in case they do, they haven’t got a clue why they are doing what they are doing. You would expect a system that is managed this way to collapse very soon, but somehow it does not, as the electricity grid in Europe has a reliability of about 99.99%.

However, this way of managing assets can only work in a stable environment with stable or at least predictable requirements for the assets.  Unfortunately, the world we live in is nothing like stable.


One Thought on “A strange business

  1. Milos Posavljak on May 27, 2018 at 2:16 am said:

    The nature of the portfolio is low variety, high volume. Although complex, it is on the lighter side of infrastructure portfolio complexity. This allows for a greater pace of asset management advancement, one which decreases with portfolio variety increases. (https://hbr.org/1979/01/link-manufacturing-process-and-product-life-cycles) If we were to transpose Exhibit I onto asset management, hydro and pipeline assets would be in the bottom right corner, while community infrastructure would be in the top right corner, this categorization is void within the manufacturing field.

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