Episode 2: Asset Management The Concept Model

Asset management is an intriguing field. We can think of it as a mixture of:

  • art
  • innovation
  • strategic thinking
  • planning

This means working with technical elements and collecting asset data is 100% demanded. 

Models are key helpers when making decisions based on the information received. The decisions themselves must be related to the objectives of the stakeholders. 

What do they want to achieve with an asset? 

If the specified percent of utilization isn’t met, then the asset has failed shareholders’ expectations. In this case, an analysis of the activity is made to understand the reason for its failure and to find a solution to the problem. 

The influence of the stakeholders is the reason why asset management models operate within the ‘stakeholder circle’. 

In this chapter you will: 

  • Find out what a model is 
  • Look at the Conceptual Model of Asset Management 
  • Learn more about the processes and principles that build it 
  • Look through a bunch of examples

What is a model?

The model is a graphic representation of several ideas. Models have been developed for people’s convenience. Through them, we can more easily understand the ideas presented. 

Asset Management Council (a membership-based, nonprofit organization) has created its’ own three models to explain: 

  1. The ‘why’ of asset management; 
  2. The ‘what’; 
  3. And the ‘how’ 

These three Council models represent the three levels of asset management: 

  1. Strategic 
  2. Tactical 
  3. Operational 

The Concept Model introduces strategic decision making. The System Model is dedicated to tactical decision making. The Capacity Delivery Model is operational decision making. 

This episode is dedicated to the Asset Management Concept (AMC) Model. The rest will be discussed in detail later.

What is Asset Management Modeling?

It is a complete system for managing the lifecycle of controlled assets. Asset management models use different criteria to maximize:

  • productivity
  • efficiency
  • resources

How do the models work?

The three AMC models are combined to form a comprehensive framework. It serves as a benchmark for professionals and organizations.

Concept Model of asset management. Nature and Purpose

The Concept Model of asset management represents mainstream thinking in the industry. 

It shows you how to handle the complexity of the discipline by separating it into related parts. The model serves as a framework through which the main parts of AM can be: 

  • Identified 
  • Documented 
  • Connected 

The stakeholders’ influence places the Concept Model in the ‘stakeholder circle’. It’s the regulator of all decisions and actions taken by the organization. Let’s understand how and why it has this effect.

Stakeholders

The Stakeholder Circle is the first component of the Concept Model. Here the stakeholders are presented as encompassing and influencing all asset management activities. Their actions may be navigated or affected by organizational decisions or activity.

The stakeholders create the organization and determine the needs and constraints of the business. They play a major role in all asset management processes, plans, and decisions. 

Do you know what that means? 

ANSWER: Stakeholders take part in all models of the Asset Management Council. Moreover, they occupy the upper levels. 

And who do we call a stakeholder? This can be: 

  • investors 
  • local governments 
  • state governments 
  • private personas 
  • organizations 
  • partners 

In terms of asset management, stakeholders in the organization may be internal or external. 

They set requirements for guidance to meet organizational goals. These requirements usually include the expectations of: 

  • the shareholders 
  • regulators 
  • employees 
  • customers 
  • suppliers 
  • the general public 

Stakeholder expectations should be recorded and communicated. They can be reflected in a statement of stakeholder needs and must address all mandatory requirements as well as the needs of different stakeholder groups. 

The requirements may include: 

  • criteria for decision making 
  • safety and environmental issues 
  • profit and financial needs 
  • community expectations 
  • volume and quality of the product

The Four Principles of Asset Management

The second part of this chapter deals with the principles of asset management. They are a synthesis of the goals that stakeholders set. Let’s list them: 

  1. Output Focus 
  1. Capabilities 
  1. Level of Assurance 
  1. Learning Organization 

The ISO sets out the fundamentals of Asset Management – Value, Alignment, Leadership, Assurance. 

The principles and fundamentals go in pairs as follows: 

  • Output Focus – It aims to provide value 
  • Capabilities – They’re aligned with the stakeholders’ objectives and needs 
  • Level of Assurance – Assurance that the asset will achieve the desired outcome 
  • Learning Organization – Based and developed on leadership & culture 

It’s time to dig deeper into the essence of the Concept Model – the fundamentals.

Output Focus

Every organization and its assets must be dedicated to achieving certain results. This is the first principle of the Concept Model 

Here you provide an answer to the question: What is the used asset for? 

The focus falls on the provision of output. It must be consistent with the organization’s objectives. These business goals are usually set out in external agreements that the organization is committed to achieving. 

Output can be defined in different ways. Methods of measuring results have to be coordinated so that it is clear if the production or service has been delivered. 

Capabilities

The second principle is capabilities. Both organizations and assets possess capabilities. 

An asset perceives the ability a person assigns to it. For example: 

Chairs are made to serve for seating. However, stakeholders can use them instead of a ladder when replacing burned-out lightbulbs. 

The essence of asset management lies not in the physical asset itself, but its capabilities. 

Asset capabilities have three aspects. We looked at the first one in the previous paragraph. It is related to the capabilities of the assets. The second aspect is related to people and their competencies and skills. They are also defined as capabilities. Third are the devices, equipment, and processes owned by the organization. 

Abilities are required to perform desired actions. In this way, assets fulfill their primary task – to provide value. 

Level of Assurance

The third basic principle is the Level of Assurance. The question you have to answer here is: 

What is the likelihood that an asset (will) fail to meet organizational goals under certain conditions while also maintaining the balance between: 

  • Risk 
  • Finance 
  • Value 
  • Quality 

The level of assurance is associated with risk. The probability that when X happens, Y will follow. 

Risk is a key concept in asset management, and according to some, the most important of all. In the context of asset management, it can result from many different causes. Some of the risks that affect asset’s productivity are: 

  • Financial markets 
  • Unsuccessful projects subject to legal action 
  • Regulatory failures 
  • Accidents 
  • Natural disasters 
  • Human mistake 

Conclusion: The risk is directly related to the value that the asset produces. 

Learning organization

The fourth basic principle of asset management is the learning organization. It is the most influenced principle of the four by workplace culture and management style. 

This principle is an evolution of a set of business attitudes and aspirations that transforms the assets from a bunch of equipment and processes to property of the people. 

Members of a learning organization are always looking for a way to: 

  • develop 
  • increase productivity 
  • improve the process 
  • provide a higher quality of the product they produce

The Plan-Do-Check-Act (PDCA) process

We examined the basic principles and their characteristics. Our next task is to connect them through a process that fully embraces their uniqueness. 

The concept model of asset management displays four processes. They are part of a continuous improvement cycle – plan, do, check, act. 

Each process is bound by one of the principles – Output Focus, Capabilities, Level Assurance, and Learning organization. 

Let’s look at the four processes. They are based on a training and improvement cycle developed by Dr. Walter Shewhart. He calls it Plan, Do, Check, Act (PDCA)

STEP #1: Plan the process

The first step of the cycle (Plan) identifies the need to improve processes. Here you have to analyze the available data and find out what indicates that a change is needed. Information should be acquired from a wide range of sources (staff, customers, stakeholders, etc.). 

Example of data which may state a need for change: 

The maturity of the asset? Lack of support? Poor operating instructions? 

STEP #2: Do the planned actions

In phase ‘Do’, the change is being executed. Every action taken on the path of change is carefully tracked and recorded in case it later turns out to be crucial for the success or failure of the new process. 

At this point you will need to be able to explain how you made the change – what plan did you follow, what were the major decision, did problems occur? 

STEP #3: Check if the stated intent of the plan is achieved

Step ‘Check’ is dedicated to monitoring the change. You need to keep track of the progress and effectiveness of the change. Then you’ll compare the data and see whether they fit the criteria for success. 

We recommend you to compare the data received after the change with the one before the change. 

You need to answers the following questions: 

  1. Have we achieved our organizational goals? 
  2. Did we do what was required of the plan to enable a smooth transition and improvement? 
  3. Are there any expected / unexpected consequences of the change? 
  4. What has been achieved and learned? 
  5. What recommendations can I give to management?

STEP #4: Act on any deviations found during the Check process

Well, you managed to plan the change so far. You were able to execute it. You even analyzed the whole process. 

Time for a coffee break? Not exactly… You can grab a cup of coffee but then return to finish what we started 

The last part of the PDCA process is the Act. Here’s a template that will make things easier: 

After completing it, evaluate your answers and: 

  • Edit the master plan if necessary 
  • Make another change / Stick to the current one / Don’t change anything 
  • Organize all available data 
  • Repeat the PDCA cycle 

The Shewhart system requires continuous improvement of one process until all variations in results are minimized. Organizations that manage assets well plan, check and act on deviations a lot. 

On the other hand, organizations that fail in AM almost forget about the planning part. They spend a lot of money doing stuff and neglect to Check and Act.

Let’s review what we have learned

When we unite the stakeholder community together with the four principles through the PDCA process, we get the Concept Model of Asset Management. 

Let’s summarize how the model mechanism works: 

  1. The Output Focus translates the organization’s goals into technical and financial decisions, plans, and actions. 
  2. Capabilities are required to perform the desired actions. Through them, assets fulfill their primary task – to provide value. 
  3. Asset management provides a level of assurance that assets will complete their assigned tasks. 
  4. The learning organization helps by improving and refining the work process. It is always looking for and finding more effective ways to work. 

The mechanism operates thanks to the Plan-Do-Check-Act process. 

Within the models of asset management, the concept model is the process of reviewing and improving the plan. 

The next step to mastering Asset Management is the System Model. But we will embark on this adventure next week. See you soon!

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