High-Performance Asset Management

High-Performance Asset Management

1 | High-Performance Asset Management

A superior asset managementcapability is crucial for utilities thatmust manage these complexitieseffectively. For some utilities, itrequires a radical change in mindsetto move from resource-driven toasset-driven decision making. Forother companies, the information-intensive nature of asset managementis placing increasing strain onmodestly integrated systems that weredesigned for a different set of needs.

Accenture has developed an extensiverange of asset management servicesand solutions that address theseissues and gaps. High performanceasset management is dependent onthe development of a number of corecapabilities. This document provides asummary of Accenture's views gainedthrough experience with over 100asset management organizations andaddresses asset managementcapabilities including:

Investment Management

Decision Support Processes and Tools

Technical Management

Capital Program Delivery

Information Management

Integrated Asset and Work Manage-

ment Systems

Cost pressures and customer expectations are rising, mergers/acquisitions aredeveloping, and customers are increasingly concerned about quality ofservice. At the same time, utilities have to manage the risks of their agingasset bases and workforces.

Transmission and Distribution utilitiesare operating in an increasinglycomplex environment.

De-regulation andmarket liberalizationare renewing focus oncosts and performance


Transmission and Distribution Utilities—Drivers forAsset ManagementTransimission and Distribution (T&D) utilities are deliveringservices to consumers in an increasingly complex world.

• Deregulation, unbundling, and market liberalization areprogressing globally

• There is growing focus on cost and quality of service• Many first-generation T&D networks are nearing the end

of their technical lives, resulting in significant levels ofasset replacement and focus on asset performance

• Some utilities are experiencing significant increases inenergy demand

• Recent blackouts in the US and Europe have raised theattention of regulators, the public, and politicians onsecurity of energy supply

These factors have increased the need to manage T&Dassets more effectively. Compared to other asset-intensiveindustries, asset management is a relatively new businessdiscipline within utilities. However, the interconnected anddistributed nature of T&D assets means that a simpleapplication of leading practices from other industries is notpossible.

Asset management comprises a set of activities thatsupport businesses in driving sustainable economicperformance while meeting service targets expected frominfrastructure assets. It is about understanding andmanaging the delicate balance between cost, risk, andperformance. (See figure 1)

What Is Different About Asset Management?

All T&D utilities already manage their assets to varyingdegrees. So what is so different about Asset Management?The truth is that asset management thinking already exists

Balancing Drivers

Shareholders AssetsRegulators

and

Consumers

The 2003 US/Canada blackoutcost the US economy more than$10 billion

Figure 1


in many utilities. Frequently, however, it is fragmented,inconsistently applied, and inadequately supported by toolsand information. Asset management practice may also beconstrained by existing processes or skills. HighPerformance Asset Management is a pervasive guidingbusiness discipline that defines how the business willmanage its assets. There are some key indicators regardingwhether a company has these capabilities:

• Asset managers can clearly articulate the implications ofinvestment budget changes to senior management

• Asset investment planning includes processes to optimizecosts, performance, resourcing, and outages

• Predictive tools are in place for network assetperformance

• Fact-based, asset decision making is employed across allasset classes

• Key Performance Indicators are in place for decisionmaking quality

• Compliance with operating, maintenance, regulatory, andother policies and procedures approaches 100%

• Robust information strategies are in place, underpinnedby a thorough understanding of the information anddecision support requirements for the asset managementfunction

Why Is Asset Management Difficult?

Many factors make high performance asset management inT&D utilities a difficult undertaking:

• Balancing financial, technical, risk, and operationaldrivers is complex and requires a step change inmanagement and operational processes

• The interconnected, distributed nature of network assetsnecessitates complex analysis and interpretation

• Diverse asset classes, heterogeneous design approaches,and numerous material specifications complicateanalysis

• The relatively long life of many assets means that effectsof poor decisions must be managed for an extendedperiod

• Regulatory considerations and the potential forregulatory clawback constrain decision making flexibility

• Poor information from multiple legacy systems withlimited integration and inadequate user tools restrictpotential for investment analysis and monitoring

• Multiple small projects, particularly for distribution,make analysis of all investments impractical

• Organization issues, such as workforce practices andorganization structure, can severely constrain flexibility

Differentiating Capabilities for Asset Management

Accenture has developed models for the processes,organization structures, skills, and systems required todeliver high performance asset management. Accentureterms these 'differentiating Asset Management capabilities'that allow some T&D utilities to transcend what are oftenhighly challenging markets and outperform their peers. These capability models have been developedthrough over 100 projects with utilities worldwide andthrough Accenture's own research into high performance.

Accenture's Solutions for Asset Management inTransmission and Distribution

Accenture offers an extensive range of services andsolutions for T&D utilities in Asset Management and WorkManagement. Clients engage Accenture in a variety ofprojects ranging from 1 week diagnostics to multi-yeartransformation programs and system implementations. Inaddition, Accenture has alliances with a number ofapplication vendors and with specialist service providersthat complement its portfolio of services and solutions.

For a number of asset management capabilities, likeInvestment Management, Technical Management(Engineering), Risk Management, Contract Managementand Information Management, Accenture offers thefollowing services:

Business DiagnosticsOperating StrategiesProcess Design and ReengineeringPlanning ToolsImplementation of Information SystemsDesign and Implementation of Decision Support ToolsLearning and Development Solutions Including ContentSourcing and Supply-Chain Strategies and SolutionsBusiness Change ManagementKnowledge Management Tools and Processes

Investment Management: improving theplanning, allocation, control, and review ofcapital and operating spend

Accenture's Point of View on InvestmentManagement

Investment management processes are fundamental to theeffective development, tracking, and reporting of capitaland operating spend. Investment management covers theprocesses, tools, skills, and organization structures requiredto develop robust investment plans that are needed todeliver necessary network outputs in an efficient manner.Investment management does not end, however, with thedevelopment of the asset investment plan. Investmentmanagement processes also include the mechanisms tomonitor the plan, allocate and re-allocate funds, and reviewthe effectiveness of decisions after investment iscompleted.

Accenture believes that investment management is a corecapability for utilities that need to deliver more from theircapital and operating investment programs. (See figure 2)

Keys to high-performance asset management in utilities arethe investment management processes of planning,budgeting, allocation, and authorization of funds, and themonitoring and control of spend. Accenture has workedwith a number of utilities to make this a differentiatingcapability that effectively manages the tradeoffs between

performance, risk, and cost. Core to this area are robustprocesses, organization, and governance structure, butthese have to be supported by suitable information andtools to enable more effective decision making.

Accenture believes in 'total investment management,'considering the total spend including operating costs inthe investment management processes. It is only by fullyintegrating at the planning stage that the capital andoperating expenditure linkages can be understood andmanaged effectively.


Control

After yearWithin yearPrior to financial year

BudgetingPlanning Control Review

Allocation

Re-allocation

Figure 2


Solutions for Investment Management

Accenture has developed a comprehensive blueprint forinvestment management capability in T&D utilities. Thisblueprint has been refined by working with a number ofgas, electric, water, and wastewater utilities. Components ofthe solutions include:

• Comprehensive diagnostics for investment management• Process architecture for core investment management

processes• Organizational design blueprints for different types of

businesses including roles, responsibilities, and interfaceswith other parts of the business

• Approaches for allocation across multiple units

Typical Benefits

The investment management capability targets providing anew level of rigor to the development of plans, allocationof resources, and monitoring of progress. Potential benefitsto be gained can be significant across a range of areas:

• Improved decision making leading to higher returnsthrough capital efficiencies or additional outputs fordollars spent

• Superior audit trail for decision making which canreduce risks of non inclusion of capital in the regulatoryasset base

• Enhanced integration of capital expenditure, O&Mexpenditure, revenue, outage, and resource planning,leading to better investment optimization and lowercosts of rework

• Better capture of best practices and issues in projects


Decision Support Tools: improving thequality of decision making for T&D utilities

Accenture's Perspective on Decision Support Tools

Decision support tools cover a wide variety of InformationTechnology (IT)-supported tools that enable a business toimprove the quality, speed, and consistency of decisionmaking. Unlike integrated asset and work managementsystems that are discussed in a later section, decisionsupport tools are commonly smaller, rapid-build tools thatprovide focused and quicker benefits.

Decision making in T&D utilities is becoming increasinglycomplex as businesses try to balance conflicting objectives.Traditionally, decision making has been accomplished usingrelatively little support and has relied heavily on thejudgment of experienced engineers. This approach tends toresult in (see figure 3):

• Systematic errors based on individual biases • Variation in decision quality across different business

units• Poor audit trails for decision making

The issues are particularly large for strategic and policyareas where complex, longer-term issues make unsupporteddecision making especially questionable.Increasingly, utilities need to provide robust justification for

levels of investment across different asset classes anddifferent drivers of spend. This is particularly importantwhere safety or other risks are being managed. Decisionsupport tools provide a mechanism to significantly improvedecision making through (see figure 4 on next page):

• Taking the implicit knowledge of the business andmaking it explicit (business rules)

• Using a set of consistent tools across the business• Allowing a breadth of analysis that is not possible

without analytic support

Strategic

Poor supportConsensus cultureRough & ready analysisLittle risk consideationLimited commercial exposure

Typical Issues with Decision

Making Capabilities

Policy

Tactical

Operational

Change in decision criteriaLimited commercial skillsDepartmental silosResistance to change

Support

Valu

e

Figure 3


A key initial part of decision support tool development ismaking implicit knowledge explicit. Typically, a utility hashuge knowledge bases that have been developed throughexperiences and skills of their engineers. The tooldevelopment process utilizes this knowledge and converts itto a set of robust business rules that can be used to driveinvestment decisions.

Solutions for Decision Support

Accenture has developed a broad range of decision supporttools for T&D utilities. Specific tools are typically developedthrough rapid-build projects using a variety of softwareoptions to meet the needs of the particular businessproblem. Accenture has also developed a series of decisionsupport modules that can be leveraged for morestandardized analysis, such as asset depreciation, failurerates, and aging. This considerably speeds up development.

Accenture has developed decision support tools across arange of areas, such as:

• Economic models for T&D businesses• Replacement volume forecasting• Safety and technical risk assessments• Prioritization of competing projects with and across

asset classes/investment drivers• Optimization of outages and resources

Typically, these tools are developed using a rapiddevelopment approach. This comprises an iterative build inclose cooperation with utility business experts. Accenturehas developed a design guide that provides a robust,structured methodology aiding the development ofdecision support tools for T&D utilities. Depending on thecomplexity, these can be maintained as standalone tools orintegrated later into existing corporate systems.

Examples of the types of software used for decision supporttool development are (see figure 5):

• Crystal Ball and @Risk for Monte Carlo analysis• XLStat for multivariate statistical analysis, such as

Principal Component Analysis• Powersim for systems dynamics tools• Criterium Decision Plus for SMART analysis • OLAP tools for rigorous data analysis• Excel

Typical Benefits

The development of decision support tools enables arobust, structured, and fact-based approach to businessdecision making. Potential benefits this can provide to thebusiness are:

• Improved decision making leading to higher returnsthrough capital efficiencies or additional outputs fordollars spent

• Supports knowledge management by providing astructure to capture and structure the implicitknowledge of the business

• Supports regulatory negotiations through developmentof a rationale for required levels of spend

• Provides a mechanism to address capital expenditure,O&M expenditure, revenue, outage, and resource issuesin a single tool

Figure 5

Figure 4

Accenture's Experience in Technical PolicyDevelopment and Implementation

Technical management covers the processes, skills, and toolsrequired to develop, implement, monitor, and reviewcommercially and operationally astute technical policies,procedures, and specifications.

Technical policies, procedures, and specifications providethe drivers for the majority of T&D capital and O&Mexpenditures. Typically between 60% and 80% of atransmission or distribution utility's spend is directly orindirectly impacted by these policies. However, policies,procedures, and specifications tend to be treateddominantly as technical considerations and do not receivethe degree of scrutiny their implications warrant.

Typical areas of weakness in this area are:

• Commercial awareness of the technical managementfunction

• Poor information and decision support to aid thedevelopment of policies

• Inadequate risk management capabilities• Poor incorporation of operating constraints in

development of policies, leading to difficulties inimplementation


• Insufficient level of detail in policies to ensurecompliance

• Effectiveness of policy implementation is commonlypoor

Accenture believes that a number of mindset changes arerequired to transform the technical policy area (see figure6):

• View the technical policy area as a core component ofasset management, not simply a engineering, safety, andcompliance group

Technical Management: development andimplementation of commercially soundtechnical policies

Strategic

Policy

Strategy

Policy

(direction, standards)

Management Procedures

(mgt. control, roles, responsibilities)

Work Details

(detailed steps for executing work)

Specifications

(equipment and materials)

Figure: 6Example of a policy hiearchy

• Treat technical policies as investment proposals,complete with business cases

• Ensure that the skills, information, and tools are in placeto support better policy decision making and monitoring

• Readdress the level of discretion in policies; what isoften dismissed as a mandatory investment commonlyhas a degree of discretion

• Ensure that there is a consistent hierarchy of policies,procedures, and specifications that link in a coherentmanner all the way from the business strategy to workin the field

• Use implementation training and compliance monitoringto manage risks and garner best practices

Solutions for Technical Policy Development andImplementation

Accenture has worked with utilities to support them indeveloping their technical policy capabilities. We often workon business aspects of the policy area, rather than thedetailed technical analysis. However, we have alliancepartners with strong capabilities in more technical aspectsthat we work with where appropriate.

Areas where Accenture can support utilities include (seefigure 7):

• Technical policy capability diagnostics and best practiceassessments

• Information and tool requirements development• Decision support tool development to assist policy

development• Implementation support through Accenture Learning

Services

Technical policy diagnosticsAccenture has developed a range of diagnostics that enableutilities to get a detailed view of strengths and areas forimprovement in their technical management capability.Unlike many comparative assessments, this diagnostic doesnot rely on comparing difficult-to-interpret benchmarks.Rather, it looks at the underlying organization structures,processes, skills, and tools to assess the capability.


Typical Benefits

Addressing the technical management area with an assetmanager's mindset can yield significant benefits to utilities:

• Development of commercially aware policies that are alsooperationally efficient can provide significant costreductions in capital and operating spend

• Improved compliance levels can reduce risk levels andreduce costs

• Development of an integrated risk managementapproach can help constrain costs and limit safety,environmental, and network security risks

• A structured business process for policy development canimprove the utility's ability to capture working practicesand issues from work management teams

Development Staff

Trigger

Policy ReviewDevelop

Policies

Rollout

Policies

Ensure

Compliance

Monitor

Effectiveness

Governance

Cross-functional team to support policy lifecycle

Implementation Staff

Feedback Process

Figure 7

Accenture's Experience Aiding Capital ProgramDelivery

Capital program delivery covers capabilities required toensure that capital projects are delivered effectively aspart of an overall capital program plan. Accenture's focusis concerned with the asset management perspective,rather than the actual delivery of capital projects. Thismeans that the emphasis is primarily at the program level.

Many T&D companies are currently facing major increasesin their capital programs coupled with continuing costpressures. This places greater pressure on cost effectiveand timely delivery of the plan, particularly where thereare issues of network accessibility. The capital programdelivery capability is targeted at improving effectivenessthrough):

• Managing the linkages between the capital plan andother plans (e.g., outage planning and maintenanceplanning)

• Ensuring that the overall capital program is beingmanaged efficiently

• Developing the strategy for sourcing materials andservices for capital projects

• Ensuring that appropriate reports and tools areavailable to manage the overall program and to providelinkage to the investment management processes

Solutions for Capital Program Delivery

Accenture has worked with utilities, oil companies, andother asset-intensive businesses to help developorganization models, processes, and systems to delivercapital programs effectively. Areas that Accenture typicallysupports are:

• Development and implementation of sourcing strategies• Supply chain optimization • Development of appropriate alliance models for

construction• Definition and development of reporting and tool

requirements• Development of collaborative project management and

workflow solutions to support delivery of major capitalprojects


Capital Program Delivery


Typical Benefits

The capital delivery program capability is focused onensuring that benefits identified in planning are capturedthrough efficient management of the overall capital plan.Typical benefits that utilities can deliver through thiscapability are:

• Lower overall capital and operating costs by improvedoptimization of the plan

• Material and service cost reductions through improvedsourcing strategies and supply chain effectiveness

• Improved capture and management of capital plan risks

Accenture's Perspective on Asset InformationManagement

Information management is the capability to define andmanage the data, report, and decision supportrequirements for asset management. This capability doesnot include the development of decision support tools orsystems, but it does form a vital input into theprioritization and coordination of these activities.

One of the key elements of a strong asset managementorganization is the ability to make sound decisions basedon a balance of technical, financial, and risk factors. Mostutilities have a large number of information sources andmodels that support decisions, having fundamental impactson risks and the opportunity for value creation ordestruction. Given this, the ability to define businessrequirements accurately and manage their quality is a keycomponent.

Typical issues that T&D utilities face are (see figure 8):

• Different tools and data sources used across the business• Silo behavior of business units resulting in inadequate

sharing of information and multiple instances ofredundant data capture


• Inaccurate tools, often developed without theknowledge of the wider business

• Inadequate understanding of the business value ofdifferent types of data, resulting in poor prioritization ofsystems development and quality improvementinitiatives

• Poor control of data quality at capture, input,aggregation, analysis, and reporting

• Absence of a consistent strategy for asset data and toolrequirements

Asset Information Management

Data

CaptureData

Entry

DSTs

Standard Reports

Processing and

Data Storage

Operational

Systems and

Warehouses

Analytical/Querying Toolsets

Toolsets and

Analysis

Key

Decisions

User Requirements

Definition

Figure 8

These issues have harmful effects in two areas. The first isdegradation in the ability to make effective decisions. Thesecond is the substantial additional cost from duplicationof systems, data capture, and data entry, resulting frompoor data, information, and tool control.

Accenture defines four areas of asset informationmanagement capability:

Governance is the process that ensures data requirementsof the business are captured, assessed, prioritized, andimplemented effectively. The governance structure includes:

• Processes, roles, and responsibilities of all resources whocapture, input, or use data

• Reporting and monitoring requirements for informationmanagement

• The governance approach for making decisions on dataissues

Management information is the coordination ofrequirements capture for business reporting. Managementinformation includes the aggregation, filtering, and slicingof operational data to provide support for decision making.

Tools and analysis covers tools required to manipulatedata, providing meaningful information to support decisionmaking. Information management covers:

• Defining the governance structure for development andmaintenance of business tools (typically not majorsystems)

• Developing and maintaining the register of tools used inthe business

• Providing a key interface between asset managementand the IT organization

Data quality consists of the processes, tools, andprocedures for understanding the quality of data andimplementing improvements. Data quality includesconsideration of quality at capture, input errors, andgranularity or synchronicity issues. The informationmanagement capability is focused on driving businessimprovements in this area. Typical components include:

• Primary source analysis, to understand where, when, andby whom, primary data should be collected

• Development of initiatives with the business to improvedata quality


Solutions for Information Management

Accenture has worked with asset management functions inutilities, helping them improve their management ofbusiness information. As a result of this work, we havedeveloped a comprehensive diagnostic toolset that allowsutilities to rapidly:

• Understand their current level of capability• Identify areas for future development that will provide

the greatest value

Accenture also has experience helping utilities developindividual components of their asset informationmanagement capability:

• Governance strategy, processes, roles, and responsibilitiesfor the information management group

• Structured capture of business requirements for theasset management function

• Development of decision support tool registers and plansfor their development/ retirement

• Development of high-level data models for assetinformation

Typical Benefits

Asset information management is a significant enabler ofbenefits to the business. Typical benefits that can beachieved include:

• Improved decision making driven through toolstandardization

• Lower levels of time spent maintaining multiple modelsand databases through the identification of tools forrationalization

• Effective and efficient development of systems bymaintaining a robust set of business requirements fordata and tools

• Improved data quality, reducing the levels of reworkrequired by identifying and driving improvementinitiatives in the business

• Potential reduction in risk from poor data quality


Description

Asset management and work management systems allowintegration of work, asset, outage, and resourcing data,providing the utility enhanced, integrated information andtools to support improved decision making.

Accenture's Point of View on Integrated Asset andWork Management Systems

Typically, utilities use a large number of systems and end-user solutions to manage assets. These are generally theresult of:

• Development of systems on a point basis with poorlinkage to an overall IT strategy

• A set of legacy systems that were originally specified tosupport a company with different asset managementrequirements

In addition, T&D utilities commonly have issues with thequality of data capture and input. This results in additionalpost-processing that requires considerable time and effort.Data exploitation capabilities for poorly integrated systemsare often inadequate and reporting, decision support, andplanning tools generally do not meet the growingrequirements and sophistication of today's utility assetmanagers.

Development of integrated systems for asset and workmanagement can provide the tools to allow the businessto move to a new level of sophistication. Accenture callsthis Enterprise Asset Optimization. Enterprise AssetOptimization is driven through a strong focus on reports,models, and information required to support the keybusiness decisions of the asset management function.

An integrated asset and work management capability canprovide major benefits to the business including:

• Direct improvements in both long- and medium-termcapital program planning processes

• Increased confidence in medium- and short-term assetreplacement planning and maintenance

• Development of integrated risk management throughanalysis of technical, safety, asset performance, andcommercial data

• Facilitation of improved field data capture• A fundamental change in the way asset data is

captured, stored, accessed, and used to drive better-informed maintenance and asset replacement decisionmaking

• Reductions in systems-related costs- Improved data capture and entry- Single database allowing retirement of duplicate

systems

Integrated Asset and Work ManagementSystems: driving a step change incapability


- Reduced data cleansing and manual integration- Retirement of many end user tools

Solutions for Integrated Asset and WorkManagement Systems

Accenture has experience in developing integrated utilitysystems that allow users to seamlessly navigate betweentechnical and financial data, from planned assets toexisting assets, and across risk, performance, and otherviews of the business. As well as implementing majorsystems, Accenture also aids T&D utilities by helpingincrease the value obtained from existing tools through theaddition of new components, such as decision support toolsor reports. Our experience working with asset managementbusinesses allows us to focus on the improved decisions thebusiness could make, thereby improving focus on high valuecomponents of relevant systems.

Typical Benefits

The development of business process-integrated work andasset management systems provides the business impetusfor a significant step change in the efficiency andeffectiveness of the asset management function. Typicalbenefit areas that can be addressed include:

• Planning efficiency from the provision of improved toolsand access to information

• Development of integrated plans that provide improvedlevels of integration across expenditure types, resourceplans, and outage plans. This can enable improvedbundling of work to reduce costs and typically results inlower levels of plan rework

• The system enables enhanced risk managementtechniques to be used by integrating diverse informationtypes such as technical, performance, financial,consumer, and plan information. This can result in lowercosts to manage risks and/or lower levels of noncompliance


Improving asset management capabilities is only oneelement of driving performance in T&D utilities.Transformation of the field organization is a key element indelivering benefits from improved asset managementcapabilities. The ability to effectively manage the transferof work to the field organization and the capture anddelivery of vital asset and project data back to the assetmanagement function are particularly important.

Accenture's Utilities Industry Practice

Accenture's North American Utilities Group works withelectric, gas, water, and wastewater utilities building bridgesto meet rapid marketplace change. Our extensive utilityknowledge-combined with an integrated suite of methods,people, and assets-provides executives and their teams withthe necessary strategies and tools to position theirorganizations for success in the new market realities. In anindustry where change and reinvention have become thenorm, experience is a critical asset.

• Over 30 years experience in the industry• Our more than 7,000 utility industry personnel work

with approximately 305 clients in 43 countries to meetthe unprecedented changes facing today's utilitycompanies.

• Accenture serves 72 percent of the Fortune 500 Utilitycompanies in North America and 83 percent of theGlobal Fortune 500 utilities worldwide

Key Capabilities Beyond Asset Management

Copyright © 2005 AccentureAll rights reserved.

Accenture, its logo, and Accenture HighPerformance Delivered are trademarks ofAccenture.

About AccentureAccenture is a global management consulting, technology services andoutsourcing company. Committed to delivering innovation, Accenture collaborateswith its clients to help them become high-performance businesses andgovernments. With deep industry and business process expertise, broad globalresources and a proven track record, Accenture can mobilize the right people,skills and technologies to help clients improve their performance. With more than100,000 people in 48 countries, the company generated net revenues of US$13.67billion for the fiscal year ended Aug. 31, 2004. Its home page iswww.accenture.com.

Contacts

For more information or to discuss high-performance asset management for T&Dutilities, please contact:

Paul [email protected]

David [email protected]

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