The 1-2-3 of Strategic Asset Management

Tape MeasureStrategic Asset Management doesn’t have to be difficult.  It can be as simple as 1-2-3.

  • One principle
  • Two types of question
  • Three asset measures

The One Principle: All strategic questions are portfolio questions

In other words if the question you are asking relates to a particular asset or just one part of a portfolio it is an operational or a tactical question to be dealt with by managers at that level. Strategic questions, that is portfolio level questions, need to be addressed ‘at the top’.

The Two Types of Strategic Questions – Direction Questions and Decision Questions

Direction Questions are those that help the agency see its current position and the direction it is moving in, and the direction it wishes to move in
Decision Questions are those that evaluate a particular capital proposal (new, renewal, modification or disposal) – but always in the light of the total portfolio.

The Three Asset Measures

1. Capacity – answering the question “how much?”
2. Condition – answering the question “what state is it in?”
3. Suitability – answering the question “how fit for purpose?” or “how effective?”

All three measures need to consider the context of the question, for example, when answering the ‘how much’ question we are simultaneously looking at ‘how much do we need’ and ‘how much have we got’. Knowing one without the other gives no basis for action. Similarly ‘what state is it in’ must be answered in the light of ‘what state do we need it to be in’. And ‘how fit for purpose?’ means understanding the requirements of the desired purpose.

For today’s Infrastructure Decision Making, a key question is:

How long do we WANT it to last?

All contexts have an implied time line. We used to believe that this time line was, effectively infinite, or at the least, very long. We would aim for ‘sustainability’ interpreted as keeping the asset operational for as long as possible.

Today, our strategic decision-making requires realising that this effectively infinite time line no longer applies.

Much more effort is now required to determine not only how long could it last, but how long – in the light of changing demand and supply – do we need it to last. This could well be the most significant strategic asset management decision that we now make.

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