Asset Management, the beginning, pt 2.

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“The farther back you can look, the farther forward you are likely to see” Winston Churchill

Until around 1996 the terms ‘Asset Management’ and ‘Strategic Asset Management’ were practically synonymous.  But with the increasing popularity of the term ‘Asset Management’ to describe a wide variety of activities, as described in Pt 1, there was a need for a term that could differentiate decision making from the doing so, in  January 1999, when the Asset Management Quarterly became fortnightly and thus needed a name change, I chose “Strategic Asset Management”, popularly known as SAM.

This was to stress that Asset Management wasn’t maintenance and reliability, or capital acquisition, or Treasury asset sales or many of the other associated activities, but rather what later became known (in ISO 55,000) as ‘the alignment of asset activities with the goals and objecitves of the organisation’   

The first issue of SAM, January 1999, explained the name change, and in doing so, focused on what differentiates asset management from what went before.

The real key to being strategic is where you focus your attention. If you focus on what you are doing you are carrying out an operational task; if you focus on how you are doing it, seeking to ‘tweak it’ or do it better, then you are engaged in a tactical activity. Both of these are necessary and important. However, they are not strategic. The strategic task is the one that focuses on the outcome, or the purpose….What constitutes a ‘better’ outcome, however, is not for the maintenance manager to decide. A ‘better’ outcome is one that moves the agency in the direction of its strategic vision.   

By way of illustration, take the construction of a new hospital. If the questions you are asking yourself are ‘what is the purpose of this new hospital; what needs are we providing for, should we be providing them or should they be provided by others, or should they not be provided at all; is a new hospital required or are there better means?’, then you are focussing on the outcomes – ie being strategic.

Asking yourself ‘should this construction be carried out as a ‘design-construct’, ‘build-own-operate’ or some other form of contract’ is asking tactical questions. If you ask ‘how do I ensure this construction comes in within time and budget and is of the right quality’ then you are engaged in an operational task.

Thus ‘Strategic’ is not the same as ‘Important’.  ALL aspects of asset management are important.”

In January 2014, the first international standard in asset management, ISO 55,000 was launched, and with this, we came to the end of the beginning of Asset Management.  No longer a novelty, a new-comer; Asset management arrived.

For What Happened Next see: AM – The third wave

Asset Management: beginnings, pt 1.

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In Australia, interest in asset management arose as the result of a series of eight parliamentary reports in South Australia in 1986/1987 modelling the likely cost and timing of renewing all the State’s major infrastructure assets.  

The projected costs were so large that they would have absorbed  the State’s total capital budget within the next 10 years if urgent action was not taken.  To address this problem, the recommendations in the reports covered possible planning and accounting reforms as well as engineering and maintenance changes.  

Following the Public Accounts Committee’s Reports,  a major SA Government Task Force was established that reviewed,  then agreed and  reinforced all the ideas presented in the reports.  This led to the formation of a Cabinet sub-committee to consider the issues raised, This provided high level impetus for the development of asset management. 

Further support was provided by the Auditors-General who were appalled to find that no public sector department. not even the statutory authorities, had decent asset registers and they made this a requirement. 

But the most significant change was that led by the Australian Accounting Standards Board.  At this time the board covered accounting standards in both the private and the public sectors.  The private sector used commercial standards with accrual accounting but the public sector used cash accounting. The board wanted to standardise on accrual accounting for both but was concerned about how this would be received. When it learnt that the Parliamentary Public Accounts Committee in South Australia was promoting the idea of accrual accounting to better understand and deal with infrastructure asset management, it was encouraged to push ahead. Within two years of the release of the final PAC report, the board had released Exposure Draft 50, the model of accrual accounting for local government.

The introduction of accrual accounting meant that local, state and federal government departments were required to move from their previous practice of simply recording annual cash in and cash out, to establishing balance sheets and recording, for the first time, the depreciated value of their infrastructure and other assets,

You might think that an accounting change would be of no interest to maintenance engineers.  Fortunately @Roger Byrne was not your ordinary maintenance manager.  He had already been in the habit of including economic and planning issues in briefing notes for his clients and he quickly seized on the opportunity this change presented for maintenance engineers.

It was these briefing notes that later provided the content for the first local government asset management manual which subsequently became the IIMM we all use today.  So through top down interest and bottom up capacity building, Australia took an early lead in the development of asset management.

The Parliamentary Reports created a lot of interest Australia wide. No other state was prepared, or even able, to duplicate the research for their own constituency but all infrastructure agencies recognised that the conclusions reached applied as much to them as it did to their South Australian counterparts.  The CSIRO’s Engineering and Construction division took an active interest, as did State Treasuries and the Auditors-General.

With these organisations,  I continued to develop the ideas that had arisen and, after advising governments, commissions of audit, and infrastructure agencies themselves, I created ‘The Asset Management Quarterly’ publication in 1994 to share with others what I was learning.  Then, in 1996, noting that lots of interesting things were being done in the name of asset management – but nothing was being documented, I launched the International Asset Management Competitions where the awards went to the best documentation of good asset management practice.  They ran between 1996 and 2000 and in 1998 AMQ International launched the world’s first asset management website with information on asset management freely available to all.

The term ‘asset management’ started to become very popular and everyone wanted to get in on the act.  One day, flying from Sydney to Canberra my seat companion described herself as an asset manager – on questioning it turned out that she was actually a real estate developer!  Once off the plane and into a taxi,  on the taxi radio I heard an advertisement for ‘asset management services’ – which turned out to be office cleaning!   Yes, asset management had become the buzzword  ‘de jour’.

To be continued….

A REQUEST

I am currently working on a book about our beginnings and would love to speak with anyone about their recollections pre 2014.

Please leave your name below and I will contact you.

AM – The Third Wave

Homo Sapiens is a pattern seeking species

it is how we advance. We seek patterns to find meaning. Me, I look for patterns in AM development. I seek the characteristics of the different stages (that I now think of as waves rather than as revolutions, as explained in the last post) and how each builds on the one before and takes us further. This helps me to see not only where we have been but also where we can go. Each wave has its own focus, viewpoint, key players and sources of support as well as constraints. Below is a table illustrating some of the characteristics of the first three waves that I see. What do you think?

Where we have been and where we are

Waves 1 and 2 you will readily recognise, for they reflect where we have been and where we are.  Wave 3 is where we need to go next.  This is the visioning stage where asset management teams, use their appreciation of ‘line of sight’ or the necessity for asset actions to support organisational objectives to guide decisions on both new and existing infrastructure. This is where AM teams need to anticipate, communicate, and prepare for the inevitable shifts in attitudes, governance and demand, that are now occurring and will continue to occur as demographics, climate and technology change. Turning around large infrastructure portfolios is not an overnight task. It takes intelligent planning and communication. This is Wave 3.

Where we are going

Communication, anticipation, action. In Wave 3 AM teams help their corporate managements to explicitly recognise that the asset portfolios and management practices they have now are a reflection of the past, and that the future will be very different from the past and will involve new thinking.  This may seem obvious, but it is not necessarily happening at the moment. Sometimes it seems that it is easier to assume that nothing will change very quickly so we can continue doing what we have always done. And sometimes the lure of the new and shiny leads to adoption of the new without sufficient examination.

The Wave 3 challenge is not to jump straight into the new and exciting, but rather to determine how best to reduce the twin dangers of changing too early, and of moving too late.

The biggest change will require us to ask what changing circumstances and future communities will DEMAND of us, what the new needs will be, and not to look at new technology as merely an opportunity to change the way we SUPPLY the current needs of our customers and community.

From Supply to Demand. In the past most of the information we have needed for our decision making in asset management has been internally generated and recorded in our Asset Information Systems. This has been solely supply side information. We still need our supply side information. But this will not suffice. Knowing what we CAN do is not enough. We need also to look at what we MUST do. For this, we will increasingly require the ability to understand and anticipate future demand change. This is why our our asset management teams will need to expand to include the talents of many other professionals, as I have suggested in the table above.

Is your Asset Management Team prepared?

Is your Asset Management team prepared to tackle the third wave?  If you are not sure, then a good place to start would be with “Building an Asset Management Team” by Ruth Wallsgrove and Lou Cripps.  This will help you recognise not only requirements but also the many new possibilities. Here is a short excerpt “What kind of people does an AM team require?”

Note:  When you buy “Building an Asset Management Team” you not only get the very latest thinking in AM teamwork, but you  pave the way for future developments, for Ruth and Lou are donating all their proceeds (ALL, not just profits) to Talking Infrastructure. 

So go ahead, click this link to get your copy.  You can get a Kindle version for less than $10. In this case value greatly exceeds cost. It’s priced low to maximise the number of teams that can gain access. Spread the word!

 

NOT a Revolution

I was wrong. Movement from maintenance to asset management, to strategic asset management is NOT a revolution. Why not?

In 2018, for the IPWEA’s online journal, Jeff Roorda and I sketched out what we saw as the general pattern of these individual journeys and what this suggested about where we would go next.  At the time there was a lot of discussion about the third (and for some) the fourth industrial revolution. We needed a sexy title for our paper so we called it ‘The third AM Revolution’. 

We saw AM moving from the pre-AM stage of maintenance only to the first stage of data collection, or ‘asset inventory’, to the second stage of performance and alignment, or what we call ’Strategic asset management’ – the stage we believe most of Australia is now in –  to a new third stage, our ‘third revolution’ that we are calling ‘infrastructure decision support’.

We now see that ‘revolution’ was the wrong word.

Revolutions have connotations of what was previously important getting the chop – quite literally in the French Revolution!  Although each of the three stages we identified are still important because they represent different mindsets and approaches, different groups of players and different techniques, they do not discard what went before.  Instead they increase our understanding of their value and make them stronger.

Let’s see how that works. 

0. Before AM there was maintenance. Maintenance specialists firmly believed in the value of their work, and they were right.  Unfortunately they were unable to convince others, especially finance.  When AM came along it provided a framework to demonstrate that not only was maintenance able to fix what was currently broken – it could also help prevent more breaking down in the future. That is why so many maintenance engineers were keen to see AM adopted by their organisations.

1The first stage of AM, naturally, was to establish an asset inventory. We needed to know what we had to manage. 

2. With enough basic data we were enabled to take the next step use the data collected for performance improvement. When we did this, we became much more aware of data quality and coverage. That first stage of data collection did not get the chop, now we wanted more.  Instead of data being required simply for a mandated balance sheet (e.g. a storage location) it was increasingly seen as  necessary, indeed essential for progress, and so demand for more data, and for data of a higher quality with greater coverage has continued.  

3. The coming third stage is what will bring all of these stages – maintenance, data collection and performance improvement or strategic asset management – together, for it is at this third stage that asset managers finally reach the stage that they have desired for a long time. Asset management is able to get (and worth a) place at the board table! 

So not a revolution.  But what?   

We could simply call them ‘three stages’ and be done with it. This, however, would not show the connection between them, how each builds on what went previously, so we are calling them waves, for like waves they build on each other and get stronger. 

Why is this important?

Because now that it is so easy to access detailed information about the second wave of strategic asset management or performance improvement (IIMM, PAS55, ISO 55,000) there is a temptation is to dive in at this level.  But without attention to the first wave of data collection and without strengthening the pre-AM stage of maintenance, such attempts lead to failure. Under-developed countries wanting, and needing, to do fast catch up with the developed world are at particular risk. 

They are being pressured ‘to do asset management’ in order to get the strategic asset management, second wave, benefits but the importance of funding and training at the earlier stages, particularly maintenance is not being recognised and dealt with.    Every stage – maintenance/pre-AM, data collection/asset inventory, and strategic asset management/performance improvement or alignment –  requires a different focus, different tools, different groups of players.  

I will talk about Wave 3 – where we go next – in a later post.

Q: Does this development pattern make sense to you?  

Can you recognise it in your own organisation or others?  Is it obvious, or do you see an alternative pattern to your own asset management journey? 

Coming Next: The Three Waves

Why understanding them can help you move closer to your ultimate goal.

Why Bother with History?

Ten years ago, on LinkedIn’s Asset Management History Forum, I asked  “Why bother with history?” It was the most animated discussion on the forum. Now, with ten more years of history behind us, have we learnt more or do you agree with Jan Korek’s view that history is irrelevant?

This was Jan Korek’s opening statement:

“I have never subscribed to the suggestion that you need to know where you’ve been, to know where you’re going! History, to me, is little more than a badly-drawn representation of the past, based on an exaggerated impression of successes….. and an amnesia of the failures. 

Having been deeply fascinated by Asset Management for a score or more years, and am still working at the blunt edge of the process, I have had to change, adapt, forget much and learn more along the way. So what do practitioners, or the process, gain from a knowledge of when (or why) some obscure government department became notionally interested in the stewardship of infrastructure assets? I would suggest very little. 

Anyone who has been in Asset Management for a period of time will have grown their own unique history based on any number of influences. So what is to be achieved in distilling each individual story into an homogenised, badly-drawn fiction? Experience shows that we even fail to avoid the mistakes of the past, even when we know the history involved. The news, each day, is full of such examples. 

What seems more important is the future, “Where are we now”, and “Where to from here”? Or to put it another way, you need to know where you are now, to know where your going.” 

A compelling set of arguments. 

Opening for the other side was John Hardwick.

Wow!

What a start to the year you go away for a couple of days and a great discussion begins. I can only say that everything i have implemented has come from others.

I have implemented knowing what worked and what didn’t. I have used this to significantly change the way my organisation does Asset Management. I am only new in comparison to many of you but it is your collective knowledge i have used.

Also I have used your history and stories that have helped many other companies not make the same mistakes.  I am a strong believer that we learn from our mistakes and not to make them again. 

If this is the case it is critical for new organisations implementing Asset Management to have access to some of the good the bad and the failures.

I have given more then 20 organisations access to my staff and myself over the last twelve months to learn from what we have done and the mistakes we made. The best part is I learnt so much in return it has been amazing.

History allows us to tell stories that help others conceptualise their path to hopefully a more successful future. 

Also a compelling set of arguments. 

What’s your view?

How has your understanding of AM history enabled you to be a better asset manager?