Industries having long asset life cycles pose particular challenges for the delivery of sustainable value.

Managers must deliver value by balancing short-term performance with the long-term development and sustainability of their businesses. Often, managers are prisoners of investment decisions made long ago by their predecessors, and may never be called to account for the ultimate consequences of their own investment decisions.

Long-established business models are breaking down. The old, integrated 'cradle to grave' management models are being replaced by networking models in which 'command and control' management practices are increasingly being replaced by more nimble management skills.

Utilities | Pharmaceuticals | Oil & gas | Heavy process industries

Utilities - asset management

In general, as assets (for example water networks, electricity transformers) age their performance deteriorates – so utility companies must constantly add, replace or repair ageing assets. Utility customers, regulators and capital markets are ever more critical of service levels and increasingly unforgiving of service failures. Regulators are increasingly looking closely at investment plans, operating plans, profitability and long-run customer serviceability.

read more »

Testimonial
“What we now have is a high level picture of the life cycle of our key assets. The value cycle allows us to analyse many investment scenarios where knowledge of asset performance and condition may be uncertain, to build a better picture of the long-term consequences of our strategies"  
Scottish Power Systems Asset Manager

Pharmaceuticals - portfolio management

A particular issue in pharmaceuticals is that companies need to make the vast majority of revenues and returns whilst their drugs are still in patent. Patent lives are fixed – usually 20 years from filing. But it’s getting harder to develop new drugs; increasing regulation also means that the process takes longer and longer – eating deeper and deeper into patent exploitation windows.

One of the current hot topics in ‘big pharma’ boardrooms is the phenomenon of expiring patent pools and the echo of empty R&D pipelines. It is inevitable that some current industry giants simply will not survive this phenomenon in their present form. Managing a “balanced portfolio” of products – both in development and at market – has now become a critical value management skill.

read more »

Testimonial
“The value cycle approach has completely changed our previous world-view. Having invested substantially in recent years in internal discovery, we had implicitly assumed that the future would be assured. Now we have realised that we need to manage the pipeline more aggressively by looking for external opportunities at all stages of product development”
Pharmaceutical Strategy Director

Oil & Gas - field life-cycle management

Oil and gas fields are self-evidently finite assets, albeit having lives that span decades. At the field planning stage, critical investment decisions must be made about production capacity sizing and rates – balancing a wide range of operational, strategic and financial factors over the projected life of the field. Total field value must be balanced with risk management which includes technical risks and future energy prices.

Also, as the field approaches the end of its life and production (inevitably) begins to fall, energy companies must constantly reassess their remaining options, including investments to reduce lifting costs, to extend the life of the field by increasing economically recoverable reserves, or to dispose of the asset to other operators.

read more »

Testimonial
"For the first time ever we have a “big picture” of the entire oilfield over the remaining years of its life. We can explore many capital and operational options without risk; and by eliminating unattractive options quickly we can focus hard on the options we need to examine in more depth, using the detail tools where necessary. All in all, a breakthrough in strategic oilfield planning"
BP Forties Field Planning Manager

Heavy process industries - capacity planning

Heavy chemicals (for example cement, petrochemicals) have unique economic characteristics, including huge entry (investment) costs, high global distribution costs, customer purchasing power, difficulties with product differentiation, and (often) price regulation.

Up front, the sizing and location of production capacity must be assessed for future value and risk over decades rather than years. Market conditions can change rapidly, however, even during the construction period of a chemical plant. Capital investment decisions are therefore highly risky – and usually lock a company into a strategy for the long term.

Managers and investors may therefore have very different planning horizons – and different management groups, investors and regulators find it difficult to communicate effectively.

Testimonial
“Valculus has proven hugely useful in exposing and integrating a wide range of management views, helping us to work better together as a senior management team and enabling us to articulate our investment proposals to the market and other stakeholders”
Chief Executive, Global Chemical Manufacturer