Competitive Advantages – Corporate Level
The
beginning is the most important part of the work.
-
Plato
Balancing Perspectives
The
previous chapter provided a brief overview of how the MSC can be applied via a
hierarchy of objectives, or a structured approach. The structured approach
consists of linked objectives through three fundamental levels, namely
corporate, strategic and functional. (See Figure 2.1) The first step in defining
this hierarchy commences at the corporate or executive levels of management. This
is done through the definition of the competitive advantages, or corporate
objectives, of asset management.
The
definition of competitive advantage, within the context of the MSC, refers to
the set of unique or hard to duplicate abilities, competencies and capacities
contained within an organization that allows it to better compete within the
markets that it operates in. These are the desired levels of performance that a
company is going to need in order to better compete within its chosen markets.
The
task of defining how asset management can contribute to a company’s competitive
ability is one that is becoming increasingly complex. One of the distinguishing
features of asset management in the beginning of the 21st century is the
increasing need to make decisions based on an element of compromise. Although
the need for improved financial performance is paramount, it cannot be gained
at the expense of other important factors. A decision to purchase assets for a
lower initial price needs to be balanced against potentially higher life cycle
maintenance costs. Similarly a decision to increase levels of safety needs to
be balanced against the potential additional costs that may be required.
The
extent of these decisions, and their impact on shareholder value, has placed
asset management in an almost unique situation. More than most other managerial
disciplines, asset management is about striking a balance, whether balancing
the requirement to release value with the responsibilities of managing risk, or
balancing the requirements for short-term gains with the needs for long-term
profitability. This remains the principal challenge for asset managers in the
foreseeable future, maintaining the balance between profitability and other
responsibilities, between short-term gains and long-term shareholder value and
between acceptable and unacceptable risk taking.
These
challenges have contributed to the need for a framework for administering asset
management, a framework that provides the mechanisms to manage these issues,
and others, to ensure competitiveness in both the short and long-term. The MSC
provides a framework to assist companies in understanding how to make asset
management a source of competitive advantage. This needs to take into account
the range of pressures acting on this area. As such the rigorous application of
the principles of the MSC begins by first defining the challenges that an
organization faces in its chosen markets, and second through asking six
fundamental questions in the defined areas of importance of asset management.
(See Figure 2.2) While these areas are not always all applicable, there are few
examples of additional requirements in the history of applying this management
tool5.
The
defining feature in all of these areas is the recognition that modern day industry
is more dependent on machinery than at any time in history. The effects of this
dependence are at the heart of the area’s growing importance to the operational
performance of companies that need to manage physical assets.
Productivity Perspective
How can asset management contribute to the ability to produce
more?
While
a great deal of asset management is dependent upon machinery design and
maintenance, much also depends on the individuals utilizing the machinery and
the environment in which it operates. This introduces a variable that marks
asset management as different from the majority of areas of routine corporate activity.
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5
Issues such as customer and stakeholder perspectives are addressed later within
this chapter.