The Board's Strategy Role in Asset Management
Last week I had a day trip to Canberra and as I waited in the pre-dawn darkness for my cab to the airport, it only took a moment to swipe my phone and find out that it was currently -4.7 degrees in the capital (feels like -7.7!). However inconvenient for a Queenslander, I had no hesitation in carting my winter coat, gloves and scarf, because I knew I would need them.
Prior to the 1840s the concept of a weather report didn't exist. The transmission of information was so slow that by the time weather information arrived, it was too late for it to be useful. Weather was largely a surprise.
That all changed with the introduction of the electric telegraph, when for the first time, people had what James Gleick describes as 'some approximation of instant knowledge of a distant place'. They could be warned, for example, that rain was coming from the North, before it rained. The idea was transformative and by the 1850s governments had begun to establish meteorological offices.
Value is created only when customer needs are met. Weather information has little value if the weather has already passed.
Asset Managers are often concerned with asset performance, whereas the board is concerned with company performance. From the board's perspective, value is measured in terms of the outcomes for the company as a whole, rather than for any individual asset, or group of assets. The two however, are inextricably linked. Just as today's temperature is tomorrow's weather report, today's asset data is tomorrow's financial statements.
Value creation is at the core of the board's strategy role. It requires an outward looking perspective, to understand what stakeholders value and how that value can be delivered. Effective boards see asset management as a competitive advantage, not just as a compliance obligation.
Are you creating value, or delivering yesterday's news?
This series of five articles is now available in a single downloadable document. I hope you'll find it valuable.
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