Creating a roadmap to asset certainty has always been pivotal through my 26 year corporate and entrepreneurial career, operating global infrastructure projects and businesses and deploying USD$3bn of mission critical infrastructure across 4 continents and 16 countries.
Over this time I have learnt many lessons along the way which are extremely relevant to the life of a property investor and developer – I hope this short blog enables you to continue your growth with an ever increasing divergent perspective on your asset (be that a property or a business, or both) – allowing risk mitigation and opportunity identification to work hand in hand with high level bigger picture ‘macro’ impacts and detailed ‘micro’ analysis.
Our Team was one of the very early adopters of PAS55, now ISO 55000 Standards for Asset Management which enabled us to consider every stage of the asset’s lifecycle – this included property, engineering assets, power stations, data centres and water infrastructure etc. Whilst many lessons in this complex yet essential management system were experienced whilst operating projects often in the USD$100m+ range, the following 7 lessons stand out as a solid start to understanding how to create a roadmap to maximising the certainty of the performance of the asset.
1). Start with the end in mind – but whose end and whose mind:
Is it the Funder, JV partner, Developer, Land owner, Local authority, Off-taker/purchaser, Tenant/guest? Owner? Operatives? and the list goes on. One valuable piece of advice that has stood me in good stead all my career – ‘Walk a mile in another person’s shoes’.
See and listen to all sides of any negotiation and business case before pitching your angle. It is surprising how often others ideas can if integrated with yours create a more robust and mutually beneficial return. Proactive and also reactive negotiations (when crisis situation is experienced and emotions are running high) will benefit immensely with this approach and enable a win:win to be identified, if at all possible.
2). Protecting the cashflow/income stream is critical:
Almost all commercial business/asset valuations are based on cashflow, income and profit being solidly underpinned and demonstrable. Experience shows that in increasingly complex business models, multiple streams of income exist and sources may not be unrelated so thorough due diligence and testing is required to ensure robustness of business plan assumptions minimizing concentration risk and successful realisation of results.
3). Manage your costs with a passion:
This sounds obvious but what you spend your precious capital on and how your spend it, could significantly affect your assets operation and therefore the cashflows that underpin your businesses valuation. Examine the cost/benefit of each part of your investment. Many of you know that Formula 1 has been a passion of mine for 20 years now and it was the unique Frank Williams of the Williams F1 Team who is famed for whenever anyone presented him an order/contract/cheque/idea, he would demand “How does this make the car go faster!!!”. Now there is a leader and a team with a singularly focused and recognised objective.
4). Reliability is your assets backbone:
Frank Williams makes a poignant statement in our last point and it won’t be lost on him that speed does not equal competitiveness, as reliability must be added into that equation. Reliability is not about pure maintenance (although this is incredibly important too), it is designed into the asset in the same way health and safety is, through The Construction (Design and Management) Regulations which effects now almost all construction projects.
Mike Hawthorn of motorsport fame once said that “If I can drive it home afterwards it was over-designed”. Mike died on his way home in a car accident. We must think of the full asset cycle.
5). Establish highly systemised operations:
People error will always be close to the top of your categories of failure – minimise this from the outset. I have witnessed at first hand many design flaws, system errors, losses of power, fibre connectivity breaks, reduction in resilience in all kinds of infrastructure, yet inevitably, when a detailed Root Cause Analysis (RCA) has been conducted it is human error through poor decision making, inappropriate design, budget constraints, operating error, lack of proper training, which resulted significantly to the loss occurring.
Your ability to effectively audit your business and operations will pay a handsome return for you – don’t miss this stage out with the assumption that all is well – make sure it is proven to yourself and your team.
6). Plan for the right outcome for all stakeholders to create shared value:
Too often have I witnessed the ‘bayonetting the wounded and robbing the bodies’ approach to profiteering. When you truly operate in all stakeholders interests you can see all parties values, efforts, contribution and the pleasure of collaboration, the fulfilment becomes a core criteria for all. The creation of shared value can be achieved if we open our eyes to the wider stakeholders and positive contribution and societal impactfulness.
7). Evergreen asset:
Time = Money. A fit for purpose design of an asset, with corrective, preventative and predictive maintenance embedded at a detailed level will gain the optimum utilisation of the asset and maximum ‘up time’ or time in service creating the desired revenue.
The evergreen element is hugely important to enable response and adaptation to the external environment – factors effecting the asset and out of your control (although frequently predictable if attention is paid in the right areas) such as, government subsidy changes, economic environment, interest rates, weather, climate change (if the asset has a long life time), competition, legislations etc etc. In a simple word: Anticipation.
I hope these 7 key lessons from my Asset Management background will highlight and reinforce to you the critical importance and connective relationship between the secure and optimized longevity of an asset, its operating systems and underpinning of its economic equation.
I will leave you with one final question for you to ask yourself and your team – “What will make our car go faster and be more reliable?”