Focus on Levels of Service to Communities
For physical infrastructure, the overriding purpose is to deliver service to our communities. That is, to deliver safe drinking water to their taps, reliable energy, effective transport services (transit and roads). The overall safe disposal of waste. The physical assets to support the social services of physical and mental health, education, law enforcement, the arts.
A principal concept in good practice management of physical assets generally is ‘optimizing cost, risk and performance’. All organizations need to balance cost against outcomes, taking into account the very wide field of risk – which includes not only public and worker safety, but compliance to laws, and risks to competitive position and reputation. Poor delivery is for many companies the biggest risk in practice: if customers don’t like your products or services, they will go elsewhere for them.
However, this general formulation is more specific for infrastructure. To begin with, plenty of infrastructure is essentially a monopoly, which of course is one reason why it is so heavily regulated. (The other reason is that it is so essential to society.)
For infrastructure, the most important goal is around the required levels of service – what performance you actually deliver - and the balancing act is the trade-off between service and cost to the communities directly or via public funding, now and into the future.
It’s still about optimization – the best trade-off of competing requirements - but let’s put it as optimizing levels of service, cost and risk. The first thing is to define the service.
Even if profit and financial value is the primary goal for your shareholders – if your organization is privately owned, for example by a pension fund motivated to maximize returns on the pension-holders – for infrastructure that will be an increasingly close negotiation around what profit you can make against reliable delivery of the services.
For many providers of infrastructure, for cities or public utilities, profit is not the point. Bond ratings and budgets are still essential, of course, to be financial responsible and sustainable. But they exist to deliver services.
Some service targets may be legally defined – water quality measures, for example – or highly regulated. Some may be a negotiation with your customers about what they need, for example from a park.
Above all, you need to be clear about what you are there to deliver, and then build that through your structure and management systems to determine the optimal how. (See alignment, above.)
Levels of Service - This is most clear in effective regulatory regimes for infrastructure, which define service explicitly. <Ofwat DG measures here> <MH form of words here as well>