AHI & Value
Before we can delve into the intricacies of Asset Health Indices, we need to take a step back. AHI aims to create organisational value through its implementation, but that first requires the organisation to understand what value is. So what does the word ‘value’ mean to your organisation? Let’s dig a little deeper into the concept of value with a recent post by Dean Griffin.
We hear a lot about ‘creating value in our business’, ‘creating value for our customers and stakeholders’ but what does this mean?
I have participated in some heated and passionate debates on what ‘Value’ is and what it isn't. I have concluded that, unlike a modern actor or music stars name, we probably need to add additional words to the term ‘Value’ to explain our intent. TC251, the committee responsible for the initial drafting and ongoing development of ISO 55001 the Asset Management System standard, and the Institute of Asset Management UK have already started this process by adding ‘of’ and ‘from’ to the word. Cunning I know, but I think that they have hit on something.
I believe, to understand the entire situation, we need to step back and take a broader look. Asset Management as a defined field is relatively new however, the activities contained within it are much older and have existed since the first businesses or services started. To justify the new field, we need to justify our approach and existence. If you don’t add something in the modern world of quick returns and instant gratification, then whatever you do will not have much credibility and legs. I try and refrain from using the word ‘value’ here deliberately. So, what do we do? Well we do what any self-respecting organisations do, we sprinkle emotive words across our offering. The problem is that the word ‘Value’ has a meaning as a noun and another as a verb, throw in some adjectives and boom you have another implication or meaning. So why do we continue to do what we always do and argue over a single word? Come on, there are some highly intelligent people debating and fighting over their view. This is a bit left field but let’s use other words in connection to value to add meaning and context. ‘Value of’, ‘Value from’ are excellent starts! Both are equally correct and both are equally valid and relevant for an organisation on the asset management path.
We could also start to use terms like ‘Financial value’, ‘Organisational Value’, and ‘Organisational Values’ (hint, the ‘s’ on the last one makes the term very different to the previous one. Some organisations don’t understand the difference unfortunately).
So now we can have an informed conversation on the term ‘Value’. The first comment we should make is, ‘please define the type of Value you are referring to’… ‘well that would be ‘financial value of our assets’ (the book value for example) or ‘financial value from our assets (increased ROE, ROA or ROIC or profit for example). It all sounds so simple and on the face of it, it probably is. Like when we define our business objectives, the context is so important and relevant. Why should it be different when we are defining and quantifying benefits or worth?
Therefore, value can be financial, nonfinancial, tangible or intangible; as long as we associate the word with an appropriate other word. All, are equally important to private and public organisations, stakeholders and any interested parties. Our inability to make a complex issue simpler is compounding this ongoing debate. Step back and think about adding a term or word that helps to add context and specific meaning or intent.
In my opinion ‘Value’ means so much and is quite wide in definition. ‘Financial Value of assets’ is tangible and specific. ‘Financial Value from assets or asset management’ is the benefit quantified in currency. Let’s be clearer in our communication, let’s be specific when we talk about ‘Value’. Our credibility lies in the ability to be accurate and not to use generic and ‘fluffy’ marketing speak!