Beginning the Journey From Managing Assets to Asset Management
In light of Te Waihanga The New Zealand Infrastructure Commission’s forthcoming report on asset management maturity, Asset Dynamics’ Andrew Gatland contemplates a national asset management journey.
Local Water Done Well is asset management done well
Local Water Done Well will bring about transformative change in how water services are provided in New Zealand. However, such a significant change represents an opportunity that goes beyond the water industry and could catalyse an evolution of professional asset management capability across the public sector. A national asset management journey would enable New Zealand to join global leaders in realising full value from our physical assets and result in a more productive economy, improved environmental outcomes, and enhanced wellbeing for New Zealanders.
Viewed through an asset management lens, many of the issues identified in the Three Waters Review can be attributed to too much "managing assets" and not enough "asset management", a common observation in organisations that are at an early stage in building their asset management capability.
What is the distinction? Put simply, managing assets places the focus on assets doing things and people doing things to assets. Such an approach fragments and simplifies to expedite decision-making and actions – perfect for getting things done in a reactive and short-term focused environment, but not so good for delivering sustainable value over the long-term.
Asset management is far broader in scope and ambition and involves an entire organisation and its supply chain working together to realise maximum value from assets over different planning horizons. It embraces systems thinking and views the organisation as a complex collection of elements and relationships interacting with its external environment. Investing in the development of asset management capability can result in an organisation realising emergent outcomes that cannot be achieved in a “managing assets” context.
An asset management journey for New Zealand
Improving asset management is often described as a journey. This is because creating the right culture and capability for asset management is a long-term process, achieved by taking many small but steady steps in a consistent direction.
So, what should New Zealand do to commence a journey from managing assets to asset management?
Development and education of company directors in asset management
Considering its importance to modern society and the success of many organisations, it is strange to think of asset management as a relatively young business discipline. The term is believed to have been first used in the 1980s, and standardisation only commenced in 2004 with the development of BSI’s Publicly Available Specification (PAS) 55:2004
For this reason, asset management has yet to be fully integrated into relevant undergraduate degrees and postgraduate programmes, let alone advanced executive education. Aside from asset management practitioners who have gone on to become directors, boards are therefore unlikely to have a strong grounding in modern asset management concepts and thinking. This limits the effectiveness of the board in its asset management roles including developing asset management policy, creating the right organisational environment for asset management, and holding management teams accountable for establishing and continually improving systems and practices.
There is an opportunity for New Zealand to develop world-leading competence in governance for asset management. Just as competence frameworks are required to provide assurance that personnel will be effective in their roles, asset management competence frameworks for directors should be developed, supported with appropriate learning and development resources.
To achieve this, a starting point would be to learn from the experiences of building governance capability in occupational health and safety management over recent years. The need for reeducation of directors in occupational health and safety management was initiated by the passage of the Health and Safety at Work Act 2015 which was the most significant reform of this legislation in twenty years. Directors now face the potential of criminal liability if duties are not discharged. Unsurprisingly, training for directors in the governance of health and safety management systems has become a key focus for organisations such as the Institute of Directors.
Considering the events in Havelock North that triggered the Three Waters Review it could be argued that the stakes are as high for asset management as they are for occupational health and safety management.
Increased independent scrutiny of asset management inputs of organisations managing critical assets
In many circumstances government and regulatory scrutiny of organisations managing high criticality assets has been limited to considering outputs such as asset management plans, and outcomes such as service performance and safety.
The problem with outputs is that externally published documents provide at best high-level summary information, and at worst an overly positive perspective to maintain stakeholder confidence. The problem with outcomes is that lagging performance indicators generally reflect the effectiveness of decisions and actions taken many years in the past, which may not be representative of the quality of decisions and actions being taken right now.
Although evaluating asset management inputs such as the systems, processes and practices developed and applied by an organisation can be challenging and costly, it is an essential perspective to really understand whether the organisation is set up to deliver asset management and realise sustainable value from its assets.
One avenue open to New Zealand organisations is to align with or become certified to ISO 55001, the international standard for asset management. Updated in 2024, the ISO 55000 series of standards define asset management concepts and terminology, and guidelines and requirements for an asset management system. At last count well over three hundred organisations are certified to ISO 55001 globally, with certifications in over 40 countries.
Australia has seen world-leading adoption rates with over 75 organisations now certified. This has been supported by state governments that are using the standards as a basis for gaining assurance that critical infrastructure is being managed effectively. Mechanisms such as Victoria’s Asset Management Accountability Framework and New South Wales’ Dam Safety Management System are driving organisations to establish asset management systems capable of certification to ISO 55001.
In New Zealand, economic regulation of the electricity distribution sector does go some way to considering asset management inputs. Electricity distributors are required to periodically disclose their asset management maturity against a heavily truncated version of the PAS 55 standard (upon which ISO 55001 is based). Although this process relies upon self-assessment, there is some evidence that this has advanced asset management thinking in the sector, with 70% of the 29 organisations publicly stating their intention to align or certify to ISO 55001, and half currently following an action plan to achieve this.
Te Waihanga New Zealand Infrastructure Commission’s report on asset management maturity shows that asset management-inputs based regulation is likely to be having an effect as organisations in this group, including the electricity distributors, outperform others in asset management maturity.
Regular and objective evaluation of asset management inputs by competent assessors would ensure that organisations managing high criticality assets have established and implemented a credible asset management system, understand the risks in their assets, and are continually planning and delivering evidence-based improvements.
Increasing diversity of thought in asset management
An abiding misconception about asset management is that it is a purely technical discipline. While it is true that strong technical competencies are critical for asset planning, life cycle delivery and reliability engineering, moving from managing assets to asset management requires the coordinated contribution of all parts of the organisation including the board, as discussed earlier.
An overwhelming focus on technical matters has the impact of limiting the scope of asset management discussion as well as the people who are involved, both at an industry level and within organisations. This is problematic because the root causes of asset management issues are often not technical in nature and relate instead to leadership and governance, culture, strategy, and organisational design. Bringing together teams with diverse knowledge and perspectives creates opportunities for action that extends beyond industry and functional lines.
Member organisations of the Global Forum on Maintenance and Asset Management, such as the Asset Management Council and the Institute of Asset Management have contributed to the Asset Management Landscape which seeks to comprehensively identify and define asset management subjects. These publications make it clear that for us to move from managing assets to asset management we need to create stronger and more effective interfaces between asset management and functions including finance, risk and assurance, human resources, procurement, and information management.
Within organisations there is considerable benefit when these interfaces are defined and controlled. This is partially due to process improvements and identification of opportunities to remove waste, but the greater benefit comes from people deeply understanding how their own role and the roles of others contribute to the organisation delivering value. In many cases this understanding has led to significant advances in asset management maturity, such as when technical teams work with their counterparts in risk and assurance to fully harmonise asset management decision-making processes with the enterprise risk management framework of the organisation.
Conclusion
The Three Waters Review has created national awareness of the importance of effective asset management. There is an opportunity to channel this awareness into commencing an asset management journey in New Zealand with the goal of becoming global leaders in realising value from physical assets.
There is no reason why New Zealand cannot do this – excellent asset management does not require the largest organisations, the most advanced technology or the greatest level of funding. It does however require leaders with a long-term orientation and a willingness to learn, mechanisms that hold organisations accountable in the right ways, and a joined up asset management community of practice that draws upon broad knowledge and capability.