Organization-Wide Physical Asset Management. Dharmen Dhaliah
approach.
Physical Asset Management: An Organizational Challenge was published in October 2016. One of the main reasons I wrote the book is that there is a pressing need for radical changes in organizations in order to overcome the challenges in implementing a holistic approach to managing physical assets.
After several years working in both the public and private sectors, in different industries, and, most importantly, in different functional areas, I have witnessed firsthand how physical assets are managed from different perspectives. Over my years of teaching and interaction with many asset management practitioners, I have heard and observed how organizations struggle to balance cost, performance, and risk with regard to the management of physical assets. The question is, what should we do about it, or—even better—what are we doing about it?
Just “bitching and moaning about it,” as E. Goldratt likes to put it when he talks about the theory of constraints, will not help overcome the challenges.
It’s time for us asset management practitioners to do something different, even though it will be a daunting undertaking. We need to take the bull by its horns and lead a radical transformation in organizations to be able to meet the requirements of asset management as specified in its definition as per the ISO 55000 standards. There are so many standards, documentations, conceptual models, articles, and other resources out there teaching us how to implement asset management. Almost every week we hear about webinars, conferences, or workshops being held to train and certify staff in asset management. But is that enough? When we talk about asset management in an organization, we are talking about a system—not a project or a program. And when we talk about a system, we need a systemic approach to be successful.
Dr. W. Edwards Deming explained that any organization is a system, that is, a network of interdependent components that share a common goal. In his theory of profound knowledge (TPK), Deming outlines four elements which are crucial to manage such a network of interdependencies: appreciation for a system, knowledge about variation, theory of knowledge, and knowledge of psychology. The four elements of Deming’s theory tie into his popular and globally adopted fourteen points for total quality management. Deming believed his theory of profound knowledge was so important, because it would help the transformation process within organizations.
To realize maximum value from the transformation process of such a complex system as an organization, it is very important to understand the value chain(s) that exist. Value chain analysis is essential to demonstrate the causes and effects that activities have on each other to generate best value in the process. Michael Porter’s value chain analysis is a great tool that can be applied in the development of an asset management system.
During the process of realizing value, any system will have constraints. The theory of constraints developed by Dr. Eliyahu M. Goldratt can be helpful in improving the asset management system by taking a methodical approach using its five focusing steps to eliminate those constraints and achieve the system’s goals.
In this book, we look at asset management in an organization as a system of a complex network of interdependencies, consisting of interrelations and interactions. This innovative approach to asset management is inspired from when I was completing my MBA program at Heriot Watt University, Edinburgh Business School. One of the courses in the program was Strategic Risk Management, and the approach to the enterprise-wide risk management system (EWRMS) caught my attention. The goals, challenges, and principles of EWRMS are so similar to those of organization-wide physical asset management that they can be readily applied to building an effective asset management system in any organization. The book elaborates on this approach and how it applies to the complex network of interdependencies existing in an asset management system.
We also look at the system from an organizational perspective and apply systemic thinking to analyze the interdependencies. Throughout the book we are going to use Dr. Deming’s theory of profound knowledge to build the asset management philosophy/approach, Michael Porter’s value chain analysis to develop the asset management system to realize value, and Dr. Goldratt’s theory of constraints to continuously improve the system by eliminating constraints. This will help the transformational process desperately required to implement an organization-wide physical asset management.
As Dr. Deming puts it, “Everyone doing his best is not the answer. It is first necessary that people know what to do. Drastic changes are required. The first step in the transformation is to learn how to change.” We need to do something different by building on the tons of tools, methodologies, and standards available to transform organizations. It is time to reach out to all the asset management practitioners and everyone else in the organization who deals with physical assets in one way or the other—from maintenance professionals to the project manager who delivers capital projects, to the operator who operates the asset, to the decision maker who makes investment decisions, to the financial analyst who prepares the capital budget, to the accountant who puts together the physical asset valuation report, and to others. The message must be “Business as usual will not cut it anymore. It’s time for a paradigm shift!”
It is time we bring everyone together to understand the holistic approach of managing physical assets over their entire lifecycle; to understand how our actions/inactions or decisions can impact the effectiveness of the process; to understand how working together will make better use of the resources at our disposal; and to understand how harmonization and collaboration can help make better decisions.
There are conferences and training programs taking place every day globally on the subject of asset management, mostly concerned with the strategies and tools. They tell you that there is a problem, but they don’t tell you how to resolve it. This book attempts to provide some solutions to the problem while applying some of the strategies and tools.
Managing physical assets in a chaotic style is not good enough. In other words, it’s time for all of us to embrace the organization-wide approach of managing physical assets and start the transformation process!
This should not be a moment but a movement—a movement to transform an organization. For that to happen we have to face the “beast”—the complex system of interdependencies in organizations.
Writing a book is really a collaborative effort to effectively gather thoughts and perspectives from different sources. Sources of inspiration are important, and this work is a synergistic product of many minds, different philosophies, and various brilliant expertise.
First of all, I would like to bow to the great work and heritage that Dr. Deming, Dr. Goldratt, and Mr. Michael Porter have left us. Their contribution has set a foundation that we practitioners in every industry are still using to advance our respective fields. In the book Quality Involvement Flow: The Systemic Organization (Lepore, Montgomery, and Siepe), the authors have done a brilliant job in combining Deming’s and Goldratt’s works. Thank you for providing that perspective.
Next I would like to praise and acknowledge the inspiring work of authors Dr. William Wallace, Neil McClure, and Shai Davidov in the Strategic Risk Management Course from Heriot-Watt University Edinburgh Business School’s online MBA programme. A big thank you to Heriot-Watt University for allowing me to use the concepts in the course text and apply them to physical asset management.
A huge mention to Dr. Arnold Yuan, Associate Professor at Ryerson University, who provided me with some invaluable insights on his teaching and research experience.
A big thank you to all my colleagues, peers, and students and to all my network with whom I have interacted at conferences, on social media, or in seminars/ webinars. One way or another, they all inspired me in writing this book—their questions, perspectives, experience, challenges, successes, and struggles.
A special mention to the fresh graduates and professionals interested in getting in the asset management field. You are one of the main reasons I wrote this book. I hope you will enjoy it and wish you all the best in asset management.
A big thank you to Darshana Appadoo and Balraj Appadu for their Creative skills in putting together all the graphics in the