Your maintenance team identified a failing condition in a critical asset. A maintenance intervention was successfully planned, scheduled, and executed, avoiding an estimated $200k in catastrophic equipment repair and $1.5M in production loss.

Two questions:

1. How much money did the company save?
2. Why is the answer ZERO?

The second, of course, is a trick question. My apologies, but I do have a point to make.

There is no shortage of claims about cost reductions and operational performance improvements from mature and effective maintenance programs. This is simply not true, at least not directly. Anecdotally and in isolation, there is a clear win here. However, to realize these savings, we must apply a broader perspective.

Why? Here’s a dirty little secret: With maintenance, we’re not managing asset cost and performance — we’re managing the maintenance burden. Here is what I mean.

On the cost side, the number of tradespeople and contractors in your organization’s labour pool remains the same. The maintenance budget remains unchanged and will almost certainly be entirely spent (if not exceeded) by year-end.

On the performance side, the organization may have avoided this production loss incident, but what about others? Another asset failure might be around the corner, and if not detected, it could cause a more significant unplanned production loss impact. This avoided event may or may not have improved overall operational performance.

Here is the deal — even the worst-performing maintenance programs solve some problems and avoid certain production losses and incurred costs. We are just playing “whack-a-mole” and not saving anything unless we’re significantly better now and in the future than we used to be.

We cannot save anything unless we realize a net reduction in asset cost and/or a net increase in asset performance. As such, the maintenance burden is a causal and leading indicator of the effect and result of asset cost and performance. Solving more asset-related problems will reduce cost and performance risk by sustainably reducing our organization's overall asset maintenance burden.

My point is that we directly manage the maintenance burden and indirectly manage the asset cost and performance.

Asset maintenance should be as much as necessary, as little as possible

This sounds like a satisficing statement, but it is an optimizing statement.

An Asset Performance Management (APM) practice seeks to optimize asset cost, performance, and risk by identifying the best asset maintenance strategies and tactics within an organization's operating context. The objective of APM is to minimize the asset maintenance burden. However, the organization must be skilled at asset health and condition management within an APM framework to achieve net gains. This is not quickly or easily done, but it is possible.

When consistently and well applied across many assets, asset risk reduction reduces the organization's overall maintenance burden over time. This solves asset problems, freeing people and budget resources to solve the next asset-related issues. Asset risk reduction indirectly reduces asset costs and increases operational performance.

Ultimately, this returns more value to the asset-owning organization’s stakeholders, representing meaningful savings to the company (which takes us back to the original situation and questions).

From a theory of constraints perspective, this potent and necessary compounding effect creates value by reallocating finite resources to higher-value maintenance activities, which maintenance and asset management leaders are responsible for.

We can have our cake and eat it, too. This compounding value feature is necessary to ensure our net maintenance value delivery is more than zero. This is the path to operational excellence.

Managing the Maintenance Burden was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

The idea of “slack” comes from Eli Goldratt’s famous book The Goal — Introduction to The Theory of Constraints. I have a well-loved copy of the business graphic novel version of The Goal. TOC is a management philosophy that focuses on identifying and managing a system's constraints (limitations or bottlenecks) to improve its overall performance and achieve its goals. The core idea is that a few constraints always limit a system, and improving these constraints is the most effective way to increase throughput.

In the TOC context, slack refers to the excess capacity or underutilized resources within a system, especially outside of the constraint. It represents the potential for work to be done faster than the rate at which the bottleneck (or constraint) can process it. Slack can be desirable or undesirable depending on whether it exists in bottleneck or non-bottleneck activities.

In an asset management context, slack provides degrees of freedom in managing resources to generate value from the organization’s assets. Some slack is desirable and necessary to improve performance.

Too often, our organizations get stuck in a situation where they lack enough resources to manage their assets’ expectations. In a TOC sense, our bottlenecks slow our productivity because we are resource-starved. It certainly feels like we lack the necessary resources. However, in many instances, this is an illusion.

I’ll give you an example. Years ago, I met with a plant manager when I was a large utility's principal reliability engineer. He told me his plant had too many PMs (preventive maintenance work orders) for his maintenance department to handle. He felt he didn’t have enough tradespeople or budget. This surprised me, as our operational performance benchmarking suggested our costs were too high and we had too many people, so I investigated.

I had our maintenance process specialists simulate all our PMs in our CMMS/EAM system (manually adding others that were not automatically triggered) over six years. I compared the total annualized PM hours to the available maintenance resources from the crew of 35 tradespeople. Guess what I found? We only had enough PMs to keep our people busy 13% of the time! That number is low for a mature maintenance organization.

When I shared this information with the plant manager, I asked, “What do you think the other 87% is?” I shocked him with my answer: reactive maintenance. I said, “You don’t have a problem with too many PMs; you have a problem with too much reactive work.” The problem was not a lack of people or budget. The problem was that they were stuck in a vicious reactive maintenance rut.

Initially, he wasn’t pleased that I had exposed his organization’s maturity gap, so I agreed to work with him to improve performance. We did this over time by substituting his maintenance team’s reactive work with proactive work. We got unstuck. We fabricated slack.

Reactive work is maintenance’s equivalent of Parkinson’s Law, which dictates “work expands to fill the available time”. If you don’t have enough proactive work available, then by definition, reactive work must fill the available work capacity. This is a gravity suck to mediocre performance where it feels like there isn’t enough resources, but that’s not the case at all. It is a scarcity of slack and a loss of any degrees of freedom, representing the inefficient and ineffective use of your vast and scarce resources. That is a problem worth solving.

The key to operational excellence in asset management is applying leadership’s agency to reallocate its finite resources to higher-value activities. This means shifting its vast and scarce resources from low-value activities (TOC’s non-bottleneck activities) to high-value activities (TOC’s bottleneck activities). When the activities are executed, problems get solved, freeing up resources (people, budget, and time). These freed resources generate slack in the organization’s resources. Some of that slack can be given to the organization’s stakeholders in the form of value. The remaining slack can be reinvested into the organization to solve more problems, generate more slack, and create more value.

This compounding effect from slack fabrication is the secret sauce. To achieve slack, we must reallocate our resources, solve more problems than before, and reallocate some more. It’s a recursive loop caused at the shop floor and equipment level, with the effects eventually felt at the plant’s bottom line as value is created, carved out without the need for additional resources.

This doesn’t only apply to maintenance, only one of forty subjects in asset management. As a global attribute, slack gives you the freedom to get unstuck and supercharge your organization’s capability through competent people, quality process work rates and volumes, and technology utilization. It provides decision-making freedom to choose higher-value activities that increase asset performance, decrease costs, and limit risks across the lifecycle.

Slack is the objective because it gives us the degrees of freedom to deliver more value with fewer resources — the holy grail of asset management. Top performers provide a 3–5% annualized total shareholder return (TSR) premium. Isn’t that worth seeking? You already have the available resources in your current value leakage. Let’s discuss resource slack and how to fabricate it in your organization.

SEE. THINK. DECIDE. ACT.

Fabricating Slack was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

Keynote Abstract:

Canada suffers from a productivity crisis in the industrial and infrastructure sectors, whether ownership is public, private, or publicly traded. We have lost and continue to lose ground to our peers and competitors by many measures. All asset owners owe their stakeholders (owners, public, regulators, etc.) high production or service performance at low cost and acceptable risk. Superior productivity means a sustainable and resilient low unit cost or cost of service.

Our organizations are mired in middling performance in this respect. The status quo can’t continue, or at least it shouldn’t. Recent efforts and transformations focused on people, processes, and technology haven’t often enough been able to lift organizations out of the gravity suck of mediocrity. The wicked villain is value leakage, the manageable value that could be delivered but has not. There lies the opportunity.

The emerging profession of formal holistic and strategic asset management, in the way it has been offered and delivered, isn’t always perceived as the solution to operational leaders’ problems. Even when adopted, asset management systems and practices have struggled to move the dial on our aims of improved value delivery through asset cost, performance, and risk.

Fortunately, there is a way to see our risks and opportunities more clearly, provide enhanced feedback for fresh foresight with which to manage, and marshall our forces for improved results. This can all be done reasonably quickly and pragmatically, with a back-to-basics focus and leap forward with AI to employ asset management fundamentals, principles and practices that increase organizational capacity to better utilize our existing finite resources. This represents a new and novel approach, a management system framework built for leadership to direct the organization to higher-value activities through improved decision-making to achieve better outcomes with fewer scarce resources.

Now is the opportunity to strengthen our competitiveness and resilience in serving our stakeholders and Canada within our borders and against a global marketplace.

A Salve for Canada’s Productivity Crisis was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

The APM Framework distills information into knowledge to enable decisions optimizing asset cost, performance, and risk.

SCIO has presented its Asset Performance Management concept, principle and practice, with asset condition, in a value chain. Here, we show how APM works within a broad operational asset management system.

SCIO has developed an integrated and functional asset management system for leadership to reduce and eliminate value leakage on their odyssey to operational excellence.

The APM Framework fits within the operations asset management practices in the top left grey box with strategy deployment, risk management, investment planning, and APM all underpinned by sound decision management. These are what SCIO considers core practices, the critical mass of having a functional asset management system in the operation and maintenance phase of the asset life cycle.

The management system also has a value network map to monitor performance objectives through a cascading series of leading and lagging metrics from our practices to our desired business outcomes. Last but not least, the system has governance features, including management review, audit and assurance, continuous improvement and innovation. The management system can be built and implemented as a self-financed achievement model starting with any element.

The APM Framework includes a playbook outlining the business processes and expectations, training courses for APM principles and practices to develop people’s competencies, and a software solution to manage asset cost, performance, and risk.

The APM Framework serves as a middle ground, bridging the two valid but different perspectives of leadership and practitioners on asset performance management. It distills information from the organization’s Enterprise Asset Management (EAM) and Asset Performance Management (APM) applications and subject matter expertise as knowledge to make decisions that optimize asset cost, performance, and risk.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo and achieve optimal performance outcomes. See. Think. Decide. Act.

APM in an Operations Asset Management System was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

Putting it all together — the value chain shows how decisions to apply resources to manage asset cost, performance, and risk deliver value.

SCIO has presented its Asset Performance Management concept, principle, practice, with condition. Now, we show how it works within a simple asset-planning value chain.

Asset management is the coordinated activities of the organization to deliver value from its assets. The value chain presented above shows the flow of resources applied through our decisions on which activities to undertake to efficiently and effectively manage our assets, which delivers value to the organization and its stakeholders.

We accept that our organization has people, business processes, and technology (as well as financial resources) at its disposal. The people in our organizational structure have specific competencies to get things done. Our processes represent what we say we do in the form of documented policies, standards and guidelines, business processes, and procedures. Our technology is our digital asset base, including application architecture, data and analytics infrastructure, and business intelligence tools. We apply the capabilities of these resources together as tools in our asset management toolbelt.

Every organization, whether a financial service company or another, has people, processes and technology. The unique feature of asset-intensive organizations is that they must apply those elements to their assets to generate value.

Distilling asset management to its core means managing asset cost, performance, and risk simultaneously. We've outlined how this works in principle and practice in our Venn diagram, the Magic CPR Triangle, the APM framework, and the vector quantity asset condition articles.

Our choices on which activities to undertake (or not) determine the finite resources we apply to manage our asset cost, performance, and risk. Operational leaders and asset managers make these decisions, directing our vast and scarce resources to higher-value activities.

Finally, we have the Value Framework, a set of outcomes the organization seeks to fulfill its strategic organizational objectives by meeting specific asset management objectives. Value may be financial or non-financial, won (value delivery) or lost (value leakage) across the asset lifecycle.

Financial value includes incoming revenue from selling products and services (with asset divestiture) and outgoing spending for capital and expense costs associated with creating and managing assets applied to raw inputs, labour and materials on tangible and intangible assets.

Non-financial value drivers include health and safety performance, environmental stewardship, customer service, and sustainability or ESG. These drivers ensure safe and compliant operations while maintaining the organization’s reputation with stakeholders to meet an ever-evolving market, commercial and social license environment.

The value chain starts with our resources and ends with value delivery. In the middle are our decisions on what activities best manage asset cost, performance and risk. It all has to work together like links in a chain.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo and achieve optimal performance outcomes. See. Think. Decide. Act.

The Asset Planning Value Chain was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

A quick & easy, enabling quantitative Asset Condition Management (ACM) framework.

SCIO has presented its Asset Performance Management concept, principle and practice. Now, we share a novel, quick, and easy way to establish a helpful asset health and condition core sub-practice that enables an effective quantitative APM model for better predictions and asset planning.

Answer Me These Questions Three

The fundamentals of asset condition management are exceedingly simple. They are characterized by answering three straightforward questions:

1. How much damage is there?
2. How fast is the damage accumulating?
3. How much damage can we sustain before we must intervene?

While asking these questions is simple, answering them well can be complicated.

To answer question 1, we need to link the damage to a failure mode consisting of a component (noun) and damage mechanism (verb). The condition of a complex asset may have many failure modes. In assessing how much damage, we need a measure that is preferably both objective (repeatable with low error) and quantitative (ideally a range and confidence interval). Less desirable subjective and qualitative measures can work, too.

To answer question 2, we need to know the rate of damage change. The damage rate may be a function of calendar time, operating time, or throughput. In reliability engineering, this is related to the P-F interval, the period between when an asset fault is observed and when it is predicted to fail — see the P-F Curve diagram below. In risk management, the timing element is sometimes referred to as risk velocity, which is how quickly a risk might become realized as an undesired event.

To answer question 3, often the most challenging question, we must know the limits to service life and asset integrity to intervene before we suffer the undesired consequences of failure. This limit is also highly correlated to the organization’s shared risk tolerance.

All asset owners want to express their assets’ health and condition. Yet, they don’t often attempt to answer the three questions directly. Or if they do, they can’t express answers with a high degree of confidence.

That can be okay; it’s not easy. The degree to which we struggle indicates two things. First, we don’t have enough knowledge (or the inverse — have a high degree of ignorance) about the asset condition. Second, our ability to make quality decisions about the asset’s management is impaired.

An element of quality decision-making is applying the value of information, which is the cost-benefit of seeking more knowledge to reduce uncertainty and improve confidence. In an asset condition context, if we cannot reduce our uncertainty by increasing our knowledge cost-effectively, then asset condition management might not be an effective strategy for asset performance management if there’s not enough confidence to make quality decisions.

Asset Condition Assessment Levels

This is why applying the proper degree of rigour in assessing and evaluating asset condition is essential. Fortunately, asset condition management practice offers a progressive approach that has cost-effectiveness built in.

There are three asset condition assessment levels:

Level 1 — Nominal qualitative

Level 2 — Basic quantitative

Level 3 — Advanced quantitative (the works)

Level 1 is a desk-type exercise performed without much real-world data or evidence. This initial (often one-time) assessment often utilizes nominal design lives and is often more qualitative than quantitative. This can be sufficient, particularly early in the asset life cycle. When Level 1 becomes insufficient, we move to a Level 2 assessment.

Level 2 takes the assessments from Level 1 and adjusts them with data and evidence from observations, inspections, and tests. In Level 2, we are beginning to be more quantitative than qualitative. Here, we develop simple algorithms for asset health measures and indices, answering the three questions. We develop simple life cycle cost-benefit analyses on asset run, repair, or replacement decisions. Level 2 assessments may be iterated periodically with increasing knowledge, rigour and complexity. Most medium- and high-criticality assets fall into this category, having various degrees of assessment sophistication. This can be sufficient, too, except when assets are aging and there are high consequences for loss of asset integrity. If and when Level 2 becomes insufficient, we move to a Level 3 assessment.

Level 3 is the most advanced quantitative assessment class, requiring the highest degree of asset condition assessment rigour (with accompanying effort and cost) and is reserved for high-criticality assets, particularly those with material safety and environmental and financial consequences. In Level 3, it is generally worth spending more time, effort, and money to gain high-confidence evidence into asset condition (although the specific value of information principles still apply). Let’s call Level 3 “the works.” Here, we develop advanced remaining useful life (RUL) models to support life cycle cost business decisions for high-criticality assets. For instance, in Level 3, we might perform computer model simulation, advanced materials analysis, and fit-for-service assessments to support our mechanical integrity evaluation.

Asset Condition as a Vector Quantity

Usually, asset condition is graded on a qualitative 1–5 scale from poor to excellent. This is a scalar approach using only a magnitude. SCIO’s approach takes asset condition as a vector quantity consisting of both a magnitude and a direction, making it much more useful.

We start with the magnitude but apply a 0 to 9 scale, with each score signifying more specifics than is possible with a 1–5 scale.

Here is what a magnitude condition score can look like. Note that labels and definitions can be adjusted to suit the organization and align with its risk management framework.

Magnitude: Score Condition on 0–9 Scale:

9 — Excellent. Near perfect or new

8 — Very Good. Easily manageable, requiring minimal resources

7 — Good. Manageable with available resources

6 — Acceptable. Manageable but with growing cost pressures; have flexibility to reallocate resources

5 — Acceptable. Manageable but with growing performance pressures; have flexibility to reallocate resources

4 — Moderate. Resources stretched to maintain the cost of service; flexibility limited in reallocating resources

3 — Severe. Insufficient resources; growing threat to integrity, service plan, customer service, compliance

2 — At Risk. Insufficient resources; reaching the threshold of risk tolerance; significant threat to integrity, service plan, customer service, compliance

1 — Not Fit-For-Service. No longer fit for service, beyond acceptable risk tolerance; imminent threat to integrity, service plan, customer service, compliance

0 — No Service. Inoperable or failed

We consider asset cost, performance, and risk for each assessment simultaneously, as we learned in the Venn Diagram and the Magic CPR Triangle.

With the magnitude sorted, we now focus on the direction in our vector quantity.

The direction portion of the vector quantity establishes the dynamic relationship between changing asset conditions with changing asset spend over time and separately changing asset conditions with changing asset performance over time.

This is achieved by asking a set of straightforward questions like, “If we continue to manage the way we have been (meaning the same strategy and resources), how does the asset condition change in five years?” and “How much investment will it take to improve asset condition by two increments? Which improvements specifically?” These questions are surprisingly easy to answer with subject matter expertise backed by professional judgment based on data and evidence where available.

When establishing those two relationships, we also establish the truly important relationship: changing asset spending with changing asset performance. Therefore, the asset condition vector is a proxy for understanding our relationship between asset spending and performance.

Of course, this ACM vector quantity framework can also integrate existing and future advanced asset life cycle cost and remaining life models for the most complex assets.

This is powerful not just because we can understand an individual asset's cost, performance, and risks but because it can set the initial conditions for a network model of many assets within a system, unit, or plant. It enables a valuable yet straightforward quantitative whole-plant Asset Performance Management (APM) model for predictions, identifying risks & opportunities, and improved asset planning to reallocate the finite resources where they are best suited.

One of the best things about the Asset Condition Management framework is that it is quick and easy to implement, covering all moderate and high criticality assets in mere weeks. The condition quantitative vector approach is more elaborate than the traditional scalar qualitative approach, but it doesn’t take much more time to implement. In the end, it enables a complete plant APM quantitative model. That is an excellent bang for the buck, which will supercharge your organization’s asset planning capabilities.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo to achieve optimal performance outcomes. See. Think. Decide. Act.

Asset Condition as a Vector Quantity was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

A simple, practical accountability model for optimized asset planning decision-making.

In previous posts, we presented the SCIO CPR Venn Diagram and CPR Isoquant Diagram as aids in conceptualizing and seeing in principle and practice how to optimize asset cost, performance, and risk.

We have already described how the principle works across different levels in the asset hierarchy while being helpful for operational leaders and asset management practitioners in the organizational structure. Today, we will explore taking the practice from the “what” and into the “how” applying sound asset management techniques.

The first step is to establish a middle ground. Operational leaders have a valid asset management perspective where asset cost, performance, and risk are rolled up to the P&L level for one or more facilities across a business unit or group operations. Practitioners, meanwhile, have a different but valid asset CPR perspective spread across hundreds or thousands of individual equipment assets. These valid but different perspectives often challenge aligning operations and asset management objectives. We nod that we’re aligned when, in reality, we’re not as aligned as we ought to be.

I call this middle ground the “island of resolution” because this is where leaders and practitioners come to resolve asset performance management objectives. Leaders can travel to this place with their perspectives and strategic objectives intact and have meaningful conversations about asset performance management without getting into the weeds. Similarly, practitioners can travel to this place with their perspectives and tactical objectives intact and have meaningful conversations about asset performance management without seeing fully how everything rolls up.

If facilitated well, this results in a robust discussion and, more importantly, the resolution of asset management expectations against capabilities, resulting in solid asset management plans aligned with organizational objectives.

The diagram above shows the middle ground between leadership and practitioners. The idea is to divide the facility or plant into two or three dozen systems. Select too few systems, and you won’t cover enough plant, or each system is too big to see what’s happening or about to happen. Selecting too many systems will cause your organization to be unable to manage each system systematically with sufficient rigour.

You don’t have to cover the entire plant, just the essential assets. The Pareto Principle or 80/20 rule is in full effect. You want to select systems that cover over 80% of your asset cost base, over 80% of your expected asset performance losses, and over 80% of your evaluated asset risk.

The time horizon is also a paramount consideration. We need to manage all time horizons simultaneously: short-term, medium-term, and long-term across the entire asset life cycle. However, our plans should be tailored for a medium-term 3–5 year mission period.

For each system, we consider the boundaries, operational context, levels of service, life cycle and maintenance strategies, resources, budget, standards and business processes, technologies, and associated operational risks.

In a workshop setting, as a team of operational leaders, asset managers, and technical subject matter experts, we compare asset cost, performance and risk expectations against assessed asset performance capabilities. The gap is managed using sound problem-solving and decision-making (PSDM) methods. Each system is evaluated periodically and systematically, say once per year.

The deliverable is a set of choices and decisions on asset strategies and tactics documented in asset management plans (AMP). These living documents are updated as new knowledge becomes available to continuously evaluate evolving asset cost, performance, and risk dynamics. Plans are executed. Risks are managed in the operational risk register. Asset performance objectives are monitored, and adjustments to plans and resources are made. Value delivery is assured as asset performance management expectations are met or exceeded. If done well, positive track records are established and compounding value creation provides dividends to stakeholders and enables further improved asset performance management capability.

Full accountability requires stark transparency. This simple, practical asset performance accountability model forces alignment between leaders and practitioners to collectively make asset planning decisions that meet organizational objectives. Everyone is happy! It is quick and easy to implement.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo to achieve optimal performance outcomes. See. Think. Decide. Act.

Aligning Asset Cost, Performance, and Risk Objectives was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

Principle and Practice to Optimize Asset Performance through Cost, Performance, and Risk

If we distill operations and asset management to its core, it is about efficiently and effectively managing asset cost, performance, and risk.

A recent article presented a Venn diagram concept to simultaneously encourage cost, performance, and risk management to optimize asset performance. Now, we develop that concept into a principle and practice asset managers can apply to realize value creation from that optimization opportunity.

In our operations and asset management practices (for those willing to see), we aren’t likely to be at optimal cost, performance, or risk at the asset equipment or system level, the asset production unit or plant/facility level, or the group operations or business unit levels.

Let us introduce what we call the “Magic CPR Triangle.” The triangle represents three undesirable asset management traits: maintenance cost, operational performance loss, and operational risk (CPR)— all expressed in dollars. Cost is the total cost of ownership, including both opex and capex, labour and materials for routine and major maintenance, and life cycle refurbishment and replacements. Performance is the operations production and service losses that may be financial revenue and commercial impacts or non-financial safety, environmental, or reputational damage. Risk is defined simply as future potential costs and performance losses that have yet to be realized.

What is “magic” about the triangle is its dynamics. Our Venn diagram expressed the trade-offs between cost, performance, and risk. The magic triangle forces us to understand our ability to control these three elements together as we optimize how we manage our assets and maximize the value delivery. This triangle has two key features.

The first dynamic feature is the triangle area. We want low cost, low performance loss, and low risk, so we want the triangular area to be as small as sustainably possible. Make the triangle smaller and smaller by finding and implementing strategies and tactics to reduce the CPR losses. Optimizing makes the surface area smaller, but you can only optimize so far; there’s a natural limit with diminishing returns.

If you compare the larger light blue triangle with the smaller dark blue section in the diagram at the top, you see the difference in area between optimal and suboptimal asset performance management. The trick is to see and act on the controllable amount to create value. Incorporating productivity improvements and innovation can push those natural limits and expand the degree of controllable CPR.

The second dynamic feature is that the sides of the triangle always seek equilibrium, meaning the edge lengths will always seek to resolve the angles. For example, suppose you reduce asset spending to the point of underinvestment. In that case, the cost edge gets shorter and becomes disconnected from asset performance loss and risk. This means the risk edge and/or the performance loss edge must lengthen to return the triangle to equilibrium. Increasing or decreasing one of the cost, performance, or risk variables has a causal effect on the other two variables.

So what? The CPR triangle represents a productivity (cost of service or unit cost) measure with an element of risk to future productivity. Another way to look at the magic CPR triangle is how an old boss of mine interpreted the principle. He said this represented the asset’s Cost of Unreliability. I think that’s a healthy way to look at it.

That is the principle. How do we put it into practice? Let us now introduce the CPR Isoquant Diagram.

The CPR isoquant diagram is a simple analytic representation of the magic CPR triangle. We have Cost on the y-axis and Performance Loss on the x-axis, the same as the triangle. From our current CPR asset state, our desire to optimize means moving towards the origin with reduced cost and performance loss. Increasing risk pushes the asset CPR state away from the origin over time; decreasing risk pulls towards the origin.

The diagonal lines are lines of equal impact. This means that along the same line, as cost and performance loss change, the total impact remains the same. So, to improve asset CPR performance, you want to cut across the isoquant lines towards the origin for value gain to the optimized state limit and frontier (denoted by the dotted line). On the other hand, worsening CPR performance cuts across isoquant lines away from the origin for value loss or leakage.

The value of this visualization is to track how the asset CPR performance changes over time based on how well we manage the asset. It is helpful to monitor changes with the realization that increasing or decreasing costs may or may not improve the total impact based on the resulting performance change. Similarly, increasing performance may or may not improve the total impact based on the resulting cost change. This visualization represents an asset-level cost-benefit business case.

The beauty of this visualization is it works on many different levels. It works at the asset equipment level but can aggregate rolling up to the asset system and production unit levels, the asset plant and finally, the asset group operations level.

The CPR isoquant diagram is a useful frame or lens for exploring risks and opportunities for asset performance and value delivery. It can serve as the basis for asset management plans and AMP artifacts. It is as meaningful to the senior operational leaders as asset managers and practitioners.

I sometimes call this the “asset accountability model,” where we can apply my See. Think. Decide. Act. motto. The isoquant CPR representation allows us to see real-world asset cost, performance, and risk dynamics. It enables us to think about strategies to optimize, decide on various tactics, and act to implement and realize value outcomes. It is all visible, and there’s no place to hide. If you want better results, you have to do something different and better.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo to achieve more optimal performance outcomes. See. Think. Decide. Act.

The Magic CPR Triangle was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.

You can’t have it all — but you can get close enough for jazz, and operational excellence.

Every asset owner (and its service providers) owes their stakeholders the best performance at the lowest sustainable cost at an acceptable risk. Are we consistently delivering maximum value? Not likely. That’s a golden opportunity.

Our general unwillingness or inability to see and explore risks and opportunities in our activities obscures value leakage, defined as the additional and controllable value we could deliver but neglect to do so.

We have business management conversations about operational performance, or asset costs, or operational risk separately. Rarely do we discuss all three simultaneously, so we fail to resolve their interactions. Our organizational structure with competing departments, short-term business objectives, and self-imposed constraints all but assure sub-optimal outcomes.

This Venn diagram resembles the classic project management trade-off maxim, “You can have two of cheap, good, or fast, but not all three,” wherein the belief is you can’t have it all. While these trade-off relationships are accurate, this adage has a significant impediment — it is satisficing thinking, which is ultimately self-limiting.

Through years of operational performance benchmarking, I've learned that the top performers, the pacesetters, do a lot more optimizing than satisficing. The limiting satisficing mindset many leaders and organizations hold is that we don’t need to (or can’t) be best practice in everything. While I believe that is true, it is also true that great performers are very good at many essential things.

These organizations constantly seek to optimize asset cost, performance, and risk to deliver higher value. They fail to succeed at perfection but keep moving toward higher performance, lower cost, and lower risk. Indeed, you can’t have it all, but you can get close enough for jazz, or more importantly, closer than your competitors and peers and better than where you were — that’s value creation.

But how do we know if we’re optimal? Unless your organization is a pacesetter in operational performance, there’s likely plenty of inefficiency and ineffectiveness, which suboptimizes and generates value leakage. Practically speaking (especially at lower asset levels), spotting optimal asset management is elusive. It’s much easier and more evident to be able to spot suboptimal evidence like reactive maintenance, operational events and near misses, and underlying operational risks ready to be realized. But you must be curious to look and see.

To seek better outcomes, you must be willing and able to do things differently. You must question the value return on current activities and choose to reallocate to higher-value activities. That is the operational and asset management leaders’ job to be done.

SCIO’s Asset Performance Management (APM) framework empowers you to challenge the status quo to achieve optimal performance outcomes. See. Think. Decide. Act.

The Venn Diagram of Asset Cost, Performance, and Risk was originally published in SCIO Asset Management Inc. on Medium, where people are continuing the conversation by highlighting and responding to this story.