By Jim Fitch
Practicing Oil Analysis Magazine
The definition of an asset is something that delivers future value (such as a machine that produces your widgets year after year). Conversely, a liability is something that can consume your assets in the future (such as negligent or faulty reliability practices). Like an endless string of mortgage payments, the long-term cost of such liabilities can be enormous as they chisel away at a company’s assets and profits.
Knowledge is often referred to as intellectual capital. It is an asset that is usually acquired at some expense (college tuition, for example). Like a wise old teacher, machine failure is a bountiful source of knowledge. It comes at an expense (downtime and repair bills), but when we learn from it, then it offers the opportunity to produce sizable returns. This is why it is often said that intrinsic machine reliability is 99 percent failure. Phrased another way, we need failure in order to attain and deploy the knowledge that insures reliability and greater future profitability.