Integrate data and leverage technology to optimize asset efficiency.
New technologies and analytics are being used more frequently in the industry to save money, reduce risk, and improve the reliability of assets. Since the development and adoption of this smart-asset management, several industries have changed the way they design and construct assets. However, there is room for the capital projects industry to catch up.
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Currently, project owners and contractors still favor the use of bespoke designs for each project. These designs tend to focus on construction and operations specifications outlined at the start of a project rather than long-term needs or even secondary uses of the space, such as commercial or residential space on top of a rail station. The use of data and analytics—from historical operations and maintenance data to trends in consumer behavior—enables owners to optimize assets at the outset of a project to be more cost-effective and better support user needs throughout their life cycle.
Data analysis can also be used to help standardize certain design elements and even design modular components, creating greater predictability and less variability. The use of modular features will help to future-proof designs, as assets will be more easily upgraded using exchangeable features—an ability that will become a necessity given the increasing speed of change in technology and user behaviors.
As GE’s Association of Southeast Asian Nations (ASEAN) CEO Wouter Van Wersch put it, “For a typical gas-fired power plant in ASEAN, capex represents around 30 percent and opex around 70 percent of the total spend over the life cycle of the asset. Despite this, many owners still view power generation as a capex-only investment, which is a recipe for disaster. Optimizing the operational efficiency during the design process with the right operating platform and analytics is key for better outcomes and optimum performance.” Asset developers and operators can capitalize on this opportunity by deploying an integrated asset data approach and by building the internal capabilities to extract the most value out of the information.
The availability of data also allows asset owners and operators to take a more customer-centric approach. For example, detailed network analysis on congestion and how customers are using roads has enabled a better understanding of where maintenance or new design solutions are needed. Such advances have also enabled real-time transparency—both for users in determining which route to take and for operators in designing traffic lights and using dynamic pricing.
Develop a digitization strategy that drives productivity and innovation while protecting against cyberattacks.
An excerpt from The Cyber Risk Handbook, published by Wiley with a contribution by McKinsey partners.Read the blogpost
The ability to access and analyze data has mushroomed over the past decade, sending organizations scrambling to figure out their digital strategy for capitalizing on these opportunities. However, as companies pursue more ambitious digital strategies, they potentially become more vulnerable to cyberattacks that can cripple operations and cause reputational damage.
As highlighted by Microsoft Senior Director of Global Security Strategy and Diplomacy Paul Nicholas, “The question is not if you will be attacked, but when. Hence, having a clear strategy on prevention and mitigation is key, especially around recovery of critical systems. Readiness, responsiveness, and resilience represent the virtuous cycle for every company to focus on.” As organizations develop a digitization strategy, they will need to make cybersecurity a fundamental design decision in the underlying technology architecture.
The unanimous consent among cybersecurity experts, responding to participant concern, was that cloud computing should be embraced and ultimately provides a safer option than other solutions. Nicholas stated, “The scale of cloud can help recognize an attack and allow development and rapid deployment of protection that rapidly protects and defends everyone.” Participants observed that the recent WannaCry ransomware attack was largely due to connected equipment that had not been updated with current security patches—an issue the cloud could easily solve. The only caveat was that core systems for critical infrastructure (for example, national energy grids) should be kept in an isolated and physically accessible location with 100 percent control maintained by the operators.
Shift from rules-based to outcomes-based procurement for operations providers.
Globally, governments spend trillions of dollars procuring services from its local private-sector providers to operate its infrastructure assets. Given the nature of the public funds, a great deal of time and effort is spent ensuring that each transaction is compliant with myriad rules, regulations, checks and balances. While compliance and costs are critical decision factors, too often pressure for short-term savings can lead to long-term challenges. GII participants agreed that a procurement approach focused on outcomes and value, with quality-related decision criteria such as past performance, ultimately achieves more for the project owner and the public.
Incorporation of quality dimensions is a change owners can make nearly immediately, but the discussion also surfaced some longer-term opportunities. Notably, this included the introduction of functional and outcome-based deliverables, such as uptime, availability and functionality goals, rather than specific tasks. For example, a maintenance contract for green surfaces along a roadside might require that a contractor ensure sightlines remain visible and drainage unhindered, rather than specifying a lawn be mowed once per month. This revised approach opens the door for innovation, but requires a change in most procurement departments. Participants also noted that long-term operations procurement and contracting must incorporate flexibility to evolve as needs change over the life span of an asset.
Additionally, the nature of these policies will vary based on the level of government development. “In developing countries, regulations and processes are not sufficiently mature to support consistent development,” noted Nigeria’s Minister of Transportation Chibuike Rotimi Amaechi. “Many of the building blocks are still in flux.”