VALUE-BASED DECISION MAKING

­— E X E C U T I V E W H I T E PA P E R —
Value-Based Decision Making Data is everywhere! SCADA, the Industrial Internet of Things (IIoT),
and smart systems are all producing more and more data. The use
of analytics is becoming increasingly important in the area of asset
At the core of the ISO 55000 asset management standard is the
management.
concept that assets exist to generate value for the organization and its
stakeholders. Value-based decision making (VDM) is an approach that

2 Trillion
helps organizations align decisions to realize the most value from their
assets.

ASSET MANAGEMENT
UNDERUTILIZED ASSETS
DOES NOT FOCUS ON THE IN THE USA ALONE
ASSET ITSELF, BUT THE ~ MIT SLOAN MANAGEMENT REVIEW
VALUE
THE ASSET CAN Utilities are increasing their use of analytics to make sound business
PROVIDE TO AN decisions based on this data.
ORGANIZATION
~ ISO 55000 ASSET MANAGEMENT –
OVERVIEW, PRINCIPLES AND TERMINOLOGY

In a nutshell, the VDM approach first involves developing a value

framework to comprehensively assess the benefits of every investment
under consideration. This framework is then used to assess all
investments using a common scale so that trade-off decisions can
87%
OF RESPONDENTS ARE CALLING
FOR THEIR ORGANIZATIONS TO
be made with confidence. Finally, VDM helps organizations identify STEP UP THE USE OF ANALYTICS
TO MAKE BETTER DECISIONS
the optimal combination of investments and timing that respects all
~ MIT SLOAN MANAGEMENT REVIEW
funding, resource and service level constraints, and delivers the greatest
value to the business. Today, analytics are most commonly used to predict future
outcomes (predictive analytics) and improve business performance
(optimization). However, the adoption of these and other analytics

What Is Value? techniques will increase significantly into the future.

Businesses often struggle to decide which asset-related projects

should get the most attention. Requests to spend money can be BY 2018, DECISION
wide-ranging, which makes it difficult to choose the “right” projects to OPTIMIZATION WILL
NO LONGER BE A
execute among the many diverse and dissimilar requests for funding.
NICHE DISCIPLINE;
These decisions should be based on the value each project delivers. IT WILL BECOME A
How does your organization define value? Is it: BEST PRACTICE IN
LEADING ORGANIZATIONS.
• Reduced costs?
~ GARTNER – 100 DATA & ANALYTICS
• Increased revenues or financial benefits? PREDICTIONS THROUGH 2020

• Improved service levels?

• Reduced risk of an environmental or safety incident?
• Happier customers? The use of analytics to decide how and when to invest in an
The answer is YES! All of these things represent value, but they do so in organization’s assets is a key theme of the ISO 55000 and PAS 55
different ways. To properly assess value, it’s important to consider all the asset management standards.
ways a project helps your organization reach its strategic objectives. We At Copperleaf, we call this Value-based Decision Making.
call these value measures. Some are unique to a specific department,
while others can be general benefits across an organization. Figure 1
shows some of the types of value measures a typical utility might use
to assess the contribution of different projects.
Key Driver of ISO 55000
Copperleaf Value Framework CONSISTENTLY AND FULLY ASSESS THE VALUE RELATED TO
ANY PROJECT OR INVESTMENT—BASED ON ECONOMICS AND RISK

Creating a value framework is a best practice that will help ensure the
assessment of value is comprehensive, repeatable, and aligned to the
strategic priorities of your organization. The Copperleaf Value Framework
provides an objective, consistent and practical way to assess the benefits
of any project or investment—based on economics and risk.
The Copperleaf Value Framework includes an enterprise-wide view of the
value measures that support the organization’s goals as well as the models
used to calculate how projects affect those measures. We call these value
models. The value framework also maintains a set of agreed definitions:
• Risk matrix: quantifies risk into various severity levels, defines the
organization’s risk tolerances, and aligns to a common scale.
• Guided questionnaires: used to consistently assess a project’s
contribution. This simplifies the assessment of value and reduces the
subjective assessment of benefits.
• Agreed financial parameters: ensures loadings, NPV, IRR and other
financial calculations are performed consistently across all projects.
• Value measures: should be defined for everything that delivers value
to the organization. At least one value measure should be defined to
support each strategic goal.
• Value models: used to calculate how a project contributes to one
or more value measures. These value models ensure a consistent
assessment of value across your organization.
The Copperleaf Value Framework Library is an extensive collection of
best practice value models proven by thought leading organizations
across multiple industries. This constantly evolving body of knowledge
helps new clients streamline the implementation of a value-based decision
making approach and ensures their value framework will continue to be
aligned with industry best practice into the future.

> F igure 1: Copperleaf’s Value-based Decision Making (VDM) approach

Make Optimal Decisions DECIDE ON THE OPTIMAL SET OF INVESTMENTS, ALTERNATIVES &
TIMING THAT DELIVERS THE GREATEST VALUE TO THE ORGANIZATION

Making decisions about which projects to execute, and when, can be extremely complex. Most organizations are
faced with requests to do more than they are able to afford, or can successfully staff. Therefore, they must select
the right projects to pursue, and understand what the impact of deferring the rest of the projects will be. To
complicate matters, when dealing with physical assets, their condition is constantly changing. Deferring a project
exposes the organization to more risk, and the value of that project changes as these risks increase.

Finding the right solution with so many moving parts requires a mathematical optimization technique to analyze
the problem and determine the optimal solution. Best practice requires that as projects are shifted in time, the
value be recalculated, so that the impact of every deferral is understood and taken into account in the decision-
making process. This approach analyzes millions of potential outcomes before settling on the right one—the one
that delivers the most value while respecting all of the constraints.

Decision Making Maturity & ROI HOW DOES YOUR ORGANIZATION MAKE DECISIONS TODAY?
WHERE DO YOU WANT TO BE?

Value-based Decision Making is an important part of any organization’s
asset management strategy. Making the right decisions at the right time
can help save millions of dollars, improve performance, and proactively
manage risk.
Copperleaf’s Value-based Decision Making methodology and software
immediately delivers significant returns by:
• Increasing the value delivered by investment portfolios by tens of
millions within the first planning cycle
• Demonstrating an effective risk management strategy
• Aligning all investment decisions to the strategic objectives of
the organization
• Optimizing the use of scarce resources

Copperleaf Technologies
2920 Virtual Way, Suite 140
Vancouver, BC V5M 0C4 Canada
www.copperleaf.com