In 2016 Harvard Business Review (HBR) published an article by Eric Almquist, John Senior, and Nicolas Bloch with the title “The Elements of Value”. It had the subtitle “Measuring-and delivering-what consumers really want”.
I am going to draw a parallel to this HBR article from the lens of Asset Management. My goal is to simplify the concept of value which remains a stumbling block for many when creating Strategic Asset Management Plans (SAMPs) and Asset Management Plans (AMPs).
Before I get started, I make full acknowledgement to Bain & Company Inc for their Elements of Value Model (2015) which serves as the foundation of this article.
This article is intended to connect Value and Asset Management to influence a new lens of consideration (and conversation). It is not intended to be a lesson in Asset Management.
So…
- What is Value? Anything that you want it to be!
- What is an Asset? Anything that delivers Value!
- What is Asset Management? The coordinated linkage of Assets and Value with the continual goal of achieving a desired balance of Cost, Performance and Risk. (aka Assurance).
To test thinking I am going to use a sports club as the underlying example. It could be football, baseball, cricket, swimming, it really does not matter what type of sport. It may be one team or a network of teams, it does not matter. We love sports and sports are of value to us all (directly and indirectly). The 1999 film about baseball “For love of the game” sums it up.
The Elements of Value (EoV) Model
In short, the EoV positions value elements a hierarchy. (Similar to the Maslow Hierarchy of Needs). The elements can be considered “why people buy things.”
At the base of the EoV is Functional Value. This type of value makes our lives easier. It is tangible and we can see it and feel it around us.
The next level is Emotional Value. This is where our inner self has a preference towards something. It is usually more immediate in nature. It is our ego to choose what we want, and it is personal. It is intangible but we can see it and feel it around us.
The next level is Life Changing value. This is longer term and is more of what we want to become. It builds on our emotion but is driven more on our values. It is somewhat intangible but we and others are likely to see it and feel it.
Finally, there is Social Impact. This is all about contribution. It may be purposeful, or it may be accidental. It focuses on the value that will be left behind after we have gone from what we do and who we are.
How does this relate to Asset Management?
A sports club exists for many reasons. It provides an outlet for physical activity. It brings people together to compete and improve themselves and has a social aspect. It has a development path for players and committee members to gain a range of skills. A sports club provides the community with direct and indirect value and the list is really whatever anyone wishes to add to it. Value is in the eye of the beholder.
The challenge in Asset Management is to translate these needs and expectations of stakeholders (of the sports club) into tangible objectives for the purposes of planning for sustainable [and affordable] value.
This is the purpose of a Strategic Asset Management Plan (SAMP). Whatever the value is (or needs to be) is supported by something. That something is likely to include things like people, systems, equipment, funding, commercial arrangements, maintenance, operations, replacement of old equipment etc. The SAMP explains the sports club approach to doing Asset Management and is intended to align to and support an organisation’s strategic goals. A mature organisation may choose to include considerations of “Life Changing” and “Social Impact” value in their view. (Potential and Future Value). Asset Management is “working on the organisation and asset portfolio” (Top Down). The SAMP will call out specific Asset Management Objectives and may include requirements such as:
- Accessibility to players for promotion (times per month – security needs)
- Gym facilities (hours per day, safety, security)
- Merchandise (supply chain, storage, distribution)
- Player and community development (education programs and facilities)
- Spectator access during games (crowd numbers per game now and into the future)
- Catering during games (could be fulfilled by external catering or by the club)
- Transportation of players and fans.
- Club facilities (Parking, access, disability, restaurant)
The Asset Management Plan (AMP) on the other hand informs stakeholders of what needs to be done with assets to deliver what is stated in the SAMP. It will include resourcing plans and time-based activities and sets out to deliver the optimal balance of cost, performance, and risk. An AMP represents the Management of Assets or “working in the organisation and asset portfolio” (Bottom Up).
AN AMP will address what will be done and may represent a collection of similar asset classes or individual assets. The AMP will address the above examples with a view on sustaining the outcome through informed decision making.
- Accessibility to players for promotion. [Required infrastructure and services]
- Gym facilities [Electrical costs, staff costs, insurance costs, hours of operation, maintenance, operations]
- Merchandise [inventory purchase and storage costs, insurance, POS systems]
- Player and community development [classroom facilities and cost of training]
- Spectator access during games [cost of the grandstand vs the revenue allocated from ticket sales]
- Catering during games [could be fulfilled by external catering or by the club?]
- Transportation of players and fans. [rent or own vehicles?]
- Club facilities (Parking, access, disability, restaurant etc)
Summary
Asset Management supports the delivery of sustained value with a deliberate focus on balancing cost, performance, and risk. Every organisation on earth is converting demand to value. Every organisation on earth has assets that deliver value. They may be intangible; they may be tangible or a mixture of both. Asset Management will assist.
Defining value in words that resonate with your stakeholders is critical. Describing value in our plans can sometimes feel like an invitation of future scope creep. When done purposely through engagement with stakeholders, it can instead drive accountability for outcomes and alignment. A mature organisation embraces value and uses it as a lead indicator for improvement and opportunity.
Are you successfully translating your stakeholder needs to Asset Management objectives?
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