By: David Smallbone, Associate Director, Asset Management Advisory, KPMG
Advances in technology, data and analytics have paved the way for smarter, faster and more robust decisions, but are asset-intensive organisations in the transport industry ready for digital transformation?
For all the hype around digitisation, artificial intelligence and the ‘Internet of Things’, solving the fundamental Asset Management challenge of balancing cost, risk and performance remains a people-intensive task. Transport organisations currently rely on the experience, agility and ability of their people to deal with complex problems. However, this all comes at a cost that is increasingly under scrutiny from customers, regulators and shareholders alike.
Can our current Asset Managers keep up? Does a ‘digitally-transformed’ Asset Manager of the future hold the key to meeting these increasing demands?
Traditional Asset Management is ripe for disruption
The perfect storm is approaching. Transport organisations own ageing asset portfolios, with every failure under increased scrutiny from customers, regulators and government. New technologies are emerging, bringing both solutions and threats, with issues such as cyber security coming to the fore. Culture, operating models and legacy systems can leave organisations slow to react, working in silos and resistant to change. However, doing nothing will result in customer dissatisfaction, potentially followed by intervention from regulators
In other sectors, the mismatch between the speed of technological advancements and organisational change has led to industry-wide disruption. Finance and retail companies have had their wake up call and have adapted to new models. Where banking previously thought itself immune, fintech startups have transformed the way customers approach banking, and now the traditional players are developing their own incubators. In retail we have seen the high street come under attack from big online retailers (and lose).
Digital disruption is as much about the people as it is the assets
New and innovative solutions for transport assets are emerging – assets are becoming smarter: self-diagnosing and better connected, transmitting data direct to asset managers. Yet if asset managers are overwhelmed by the data, they revert to their tried and tested spreadsheets.
People are (usually) the biggest component of the lifecycle cost of an asset. By accelerating, automating and removing unnecessary steps from people-related processes in Asset Management, organisations can unlock operational efficiencies and improve the bottom line. To do so, we must first understand where these value opportunities exist in our operating models.
Whether we are trying to ‘right-size’ a new organisation for a new high speed railway line, deal with the impacts of energy transition on transmission and distribution infrastructure, or deliver co-ordinated Asset Management across increasingly devolved transport networks, the question is the same. If we currently have a team of 100, will better tech let us do it with 10, and what are the implications for the other 90? How do we prepare the future workforce with the skills required to excel, and how do we manage the transition?
Asset Management is not magic. There are established methods for evaluating cost, risk, performance and uncertainty in decisions. Stakeholders have lost patience in organisations blaming data and information silos. The transactional processes in HR and Finance have been targeted through machine learning, artificial intelligence and robotic process automation over the last few years, and it is arrogant to believe that Asset Management is immune.
Taking advantage of ‘the machines’ to capture, process and exploit data is a given. Any organisation that is not relying on its digital slaves to relieve the burden on its beleaguered humans deserves to be disrupted. The disruptors think they can beat your engineering judgement, but you can get there first if you engage your people in designing better digital solutions. The machines need to learn – your people need to teach them.
Success depends on tangible benefits
Your organisation is aware of the threat. CEO statements in your annual report extol the importance of ‘Digital’. Your business may have a Digital team, charged with identifying radical new ways of working. But the business cases associated with these ideas don’t always stack up, and digital programmes aren’t delivering.
A typical scenario starts with a supplier-driven solution, such as a sensor for detecting faults on a bridge. A pilot suggests an 80% success rate and a multi-million pound programme for instrumenting the network is instigated. Five years later, everyone is drowning in a data lake, the useful data is still on Steve’s laptop and the same maintenance contracts are in place with no money saved.
To truly drive successful transformation, the business case needs to come from the top down. An overarching business desire and commitment to change is essential, whether for performance improvement or cost and risk reduction. Technology is only ever the enabler – what will it cost to obtain the data and to do things differently? What are the benefits of the change?
The difficulties of implementation cannot be ignored. Digital transformation requires meaningful change management. Transport organisations are well-known for their embedded cultural challenges and resistance to change. Incentives and rewards for embracing and driving the required change need to be aligned to strategic goals to get your employees on board. And the organisation needs engagement at all levels, from board directors to front-line operations.
Finally, plan to ‘cash out’. The best business cases capture the changes required. Are you releasing employees from mundane tasks, upskilling and redeploying employees, or using this as an opportunity to revisit contracts? Does a 10% reduction in process time equate to a genuine saving or just more time drinking tea?
The future of Asset Management is coming. ‘Asset Intelligence’ is not just intelligent assets and infrastructure, but an organisation-wide approach to smarter ways of working, ready for the digital age. You and your teams need to align your strategic vision, investment cases and technology solutions to deliver real improvements to your day job. You need to find quick wins in the short term, and have a plan to evolve with future roll-outs of even more advanced technology. Organisations that build this into their strategy will lead this disruption, rather than be victims of it.