14 Reasons your assets are so complex
If your business is asset-intensive, a significant cost sink hole is likely to be opening up, is far wider than it should be and it’s growing year on year.
If you want to make rapid and significant improvements to your bottom line, then you need to look here. Let me explain…
The operation and management of assets in asset-intensive businesses are a big driver of cost into the bottom line. But assets don’t operate in isolation, they are usually part of a broader set of systems and processes that are all interconnected. Making any changes to how your assets are managed can introduce cause and effect feedback loops that compound and amplify the gains or losses that result.
Small optimisations in one area can compound quickly into large sustainable financial improvements. But conversely, changes can also result in large, crippling financial loss and disruption to the business.
Making any change to the “system” introduces a level of risk that raises exponentially the closer these assets get to the operation of the business.
We call this scenario complexity. Cause and effect is difficult to establish. The real underlying costs become difficult to measure. There’s high risk making any kind of change.
Most organisations deal with this complexity by just not poking the bear. To be honest, that’s probably the right strategy unless you have a structured approach to manage the complexity.
Not poking the bear however is an expensive option. Cost that is unmanaged has a way of increasing over time and that’s were most asset-intensive businesses find themselves with large ballooning levels of cost accumulating year on year, mostly invisible.
Are your assets complex in this way? Here are 14 reasons or markers for complexity.
Volume – The sheer volume of assets drives the need for large capital investment programs and expenditures for deploying and maintaining assets
Geographic – The need to maintain assets that are often geographically dispersed, remote and difficult to access
External environment – The need to operate in environments that are harsh and exposed to the elements
High asset availability – The need to maintain assets continually whilst keeping asset availability high – fly the plane whilst you overhaul the engine!
Integrated system – Individual assets almost always operate as part of an integrated system whereby they contribute to a broader function and output and therefore a change to that asset in the way it maintained can have a cascade impact or unintended consequence downstream
Irregular performance that can’t be represented by the asset team in meaningful patterns that can be understood and triaged
Lack of clarity on the return on investment for the maintenance and renewal decisions being made
Never knowing what you’re going to get at budget time – All these risks come out of the woodwork that aren’t on the enterprise risk register
Chaos reigns – The Head of Assets always has their head on fire!
There’s always plenty of ideas to reduce cost but they never get priority because the next disaster is here, and running around instead with a superman cape saving the day is just more fun
The risk of too much risk management – Typically, in large organisations the risk profile has been built up incrementally over many years in response to discrete events. Layers upon layers of risk control some managing risks that don’t exist anymore! and they arent regularly reviewed by the organisation or freshly scrutinised with an independent lens
‘Confidence before realism’ grey haired managers – Those who supposedly have all the asset knowledge in their head, know exactly what assets need replacement etc but can’t demonstrate any form of logic / systemic approach to how they prioritise their investment and expenditure and no have no data to evidence decisions
Are your asset managers data driven asset managers? Data-driven asset managers are those who maximise the value of data from the field and treat it as a strategic asset using it for generating insights and critical decision making
No prioritisation approach to where expenditure is being made – There is always more to do than money available so smart constraints will need to be applied to ensure safety and regulatory compliance isn’t compromised, desired performance levels achieved but asset investment is managed within available capital funding. We call this the balance of cost risk and performance - Essentially this is what good asset management boils down to…
In any business, long-held assumptions and business norms are typically great places to test the cause-and-effect relationships and form views on areas where the business can be more efficient in creating its value. After all, our assumptions impact our ability to think, reason, create and imagine and can ultimately hold us back.
Coming back to asset complexity. Core to any asset-intensive business is operational efficiency because of the scale of the dollars consumed through the operation and maintenance of those assets. Even seemingly small % efficiency gains in service delivery processes can amount to large sustainable financial improvements.
For all the reasons above there are significant costs locked up due to asset complexity and by acknowledging this and being able to unpack them in a structured way you can go a long way towards becoming a more efficient business. This coupled with constructive challenge through a fresh pair of eyes can identify unexpected opportunities where new forms of value can be created and or efficiencies realised.