Paul Casto with GE Digital
On this week's Industrial Talk Podcast we're talking to Paul Casto, APM Industry Principal with GE Digital about “Managing Business Case ROI Risk”. Get the answers to your “ROI Risk Management” questions along with Paul's unique insight on the “How” on this Industrial Talk interview!
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Company Website: https://www.ge.com/digital/
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Welcome to the industrial talk podcast with Scott Mackenzie. Scott is a passionate industry professional dedicated to transferring cutting edge industry focused innovations and trends while highlighting the men and women who keep the world moving. So put on your hard hat, grab your work boots, and let's go
again, thank you very much for joining industrial talk the number one industrial related podcast in the universe. And it celebrates you industrial heroes, you are bold, you're brave, you're daring greatly. You're solving problems. You're innovating, and you're changing lives. You're changing the community, you're changing the world each and every day. If you're passionate about industry, yeah, this is where you need to be. Because we love to educate. We love to collaborate, and definitely love to innovate. Alright, in the hot seat, podcast, GE Digital is the company. And what's great about this particular conversation, we're going to talk a little bit about risk management and ROI on your asset management projects. Yeah, you need to deliver. So let's get cracking.
We're also sponsored by occurrent. And Fluke reliability, go out to their websites, both companies passionate about into your asset management, your your maintenance, and making it easy for you to achieve that uptime that is necessary for your for your, your project for your, your business, it's important, that's accurate, and Fluke reliability. Alright. I've been gone for a couple of weeks. And the reason I've been gone for a couple of weeks, I've been very fortunate to be able to attend broadcast from smrp, which is the Society of maintenance and reliability professionals. That was in St. Louis. And then I just zipped on up to Cleveland for the manufacturing and technology show. And both events were just absolutely spectacular. But here is what I learned. Write this down. I know you know it, but I'm gonna have to just say it anyway. Everyone, and I mean, everyone was talking about upskilling reskilling, how do I? How do I deal with my resources that are necessary to keep my doors open? And my business moving forward? Now there's a couple of conversations that are associated with that. That's one, we need people always, always always you need people? And what are the strategies around getting that done? And then to what innovation? What technology can we deploy to help create that business of resilience? So when we're at smrp, they're talking about keeping that asset up and running, managed properly, and and delivering results? And then at the manufacturing and technology show? What do we do? How do we keep people coming in? What do we how do we inspire, inspire our youth to be in into or get into manufacturing? Get into the profession of, of just, you have no idea what was just out there. If you are considering I just ask that you look at this stop. Because if you're young, and if you're considering a profession, I'm telling you, it's ripe, it is spectacular, it is innovative, you're you're going to be at the cutting edge of technology cutting edge of strategic directions for these particular companies. They need you. And that's why this particular podcast is here. Because we want to make sure that you get everything you can go out to industrial talk.com. And we have an education platform. We have all these great articles representing all these wonderful, skilled industrial professionals. You got to read them or listen to them. We got the videos out there. It is truly a great place to be able to begin your journey in the world of industry in the world of manufacturing in the world of industrial for Dotto. It is all out on industrial talk.com We try to have fun, because it is fun. We try to make it entertaining, because it is because it deserves that type of attention. So anyway, let's get on with this interview with Paul. So my a bit very fortunate. He was very busy at smrp. And I believe he is chair of smrp this time around. And boy does he has stuff to say and it's stuff that is very important, especially in today's world. You know, we talk about some of the challenges that have taken place within the COVID COVID pandemic, whatever you want to call it. And yeah, they're real. Don't get me wrong. It's challenging. But one of the great Things that I get out of it. And it was great to see people at these events, getting back to normal, collaborating, and really from the heart, and a desire to truly collaborate and solve problems. Paul is leading that effort at smrp, we're going to have a number of other great conversations. But if you go out to his stack card, yeah, he likes education. He, his, his business card is just way too small for how many things that he does is just as so it's not worth even trying to get all his education. God he is so committed to
asset management, reliability, maintenance, everything, he is a leader. So anyway, with that said, enjoy the conversation. Paul, welcome to industrial talk, thank you very much for finding time in your busy schedule to share and impart your wisdom and knowledge into the world of asset management, maintenance, and reliability, big time, I'm sure the listeners will grow to appreciate. I mean, you got some mad street cred out there, you do. And I was looking at you, and I'm not going down your bio, but reality is, if you go out to his LinkedIn profile, it's not as impressive as the bio that I received, because it just has you like education. And you're constantly educating, which
is that it's a fast changing world. And if we're gonna, you know, remain relevant, we have to keep our skill sets up.
You know, that's that's a whole nother conversation to have. That's a whole nother topic. Because I, I don't know how anyone, especially today, in this particular world, is not committed to some form of disciplined education, whatever it might be read a book, I don't care, whatever it might be. Daily, because you're absolutely right. It's, it's blistering fast even I can't keep up with it. Well, that's not saying much. Yeah, don't don't lose. Don't think about that listeners, I can. So for the listeners out there, Paul, give us a little background, little 411 on who you are. And then we're going to venture into managing business case, ROI risk, which is an important topic.
What's your so I'm Paul caspo, I've worked in this maintenance reliability asset management space for a number of years, I had a great opportunity several years ago to lead the reliability team for Eastman Chemical, they were really an industry leader Well, before I got there, and that's where I started my foray into really asset management, asset performance management, that that whole space, they were a user. I left Eastman with some other plans, but ended up with Meridian doing asset performance management, or I just call it APM. Globally, for a lot of customers and a lot of different industries. And then, as time went on, we had a buyout from GE. And so we're now at GE entity and my current work is a lot around, I would call it maybe front end engineering, helping customers identify what their business outcomes really are figuring out what kind of value they need to create, to achieve those business outcomes. And, and then after we do all that, we can worry about potential solutions to create the ROI, those three things that really need to be linked together. So I'm doing quite a lot of work in that area, as well as risk management, I'm doing some, some more of all things graduate work around risk management, and how do we manage the risk of ROI. Many times people build business cases and the business cases say I'm going to deliver such and such ROI, but, but deliver less.
It's interesting, especially the topic of risk management ROI, the financial component around the maintenance, reliability and asset management profession. Not to not to say that there's been snake oil salesmen out there, there have been and they, they they sort of diminish, unfortunately, the realities of an asset management reliability program within an organization and you're going to have to try to sort of distill that and get rid of the negative stuff because the the value is there. Is that not right, Paul?
Yeah, that that is correct. A few years ago, I actually did a study around this area, we went into our CMMS system pulled out all of our labor hours, all of our, our material hours, everything that we could put together in terms of, of the cost of these projects and looked at the returns and, you know, a good self respecting reliability project, in actuality should deliver over 100% return. Now, it goes up and it goes down. Some of them aren't nearly as successful as others, but it, it is a really high value area to be working in, if you can figure out how to properly execute it.
So that just brings us to the point of let's, let's talk a little bit about that from a. How do you develop now? I'm not going down the road of the CMMS. And, and bad data and pencil Web? That's a whole other conversation. I got it. But how do we build a the elements of a business case so that we can begin to truly and discipline a insights into the financial benefits associated with this particular case?
Well, the first thing we have to do is we really need to understand the business outcomes, what what are the drivers that the businesses are looking for? You know, as engineers, many times I say, we get caught up in the elegance of the technical solution. And, and we decide we need to implement this new technology, without really considering what we're there to do. And what we're really there to do is to create value for our companies, and to put together projects that give our companies the best opportunity for success. That's possible, you know, we live, we live in a probabilistic world not a deterministic world, and nothing is for sure out there. But when we start looking at projects, and return on investment, the place to start really is what are we trying to accomplish from a business perspective? The second part of that is what value do we need to create? And then and then we'll put together the project?
Just for clarification, what are some drivers what sort of give us an example of what outcome of a business give us just sort of a basic ones like, I'm a business, I'm looking at this?
Sure. This great example, a few years ago, I had Vice President calling me up, and they were very professional and nice. And he says, You know, I could deliver another million dollars to the bottom line, if I could just get over some reliability issues with my equipment? Well, I came out of the construction industry. And what that meant to me was, oh, boy, I really better get cracking here. So that's a great example, he could deliver another million dollars worth of profit to the bottom line of the company if he could get the equipment to run. So that's a great, great business proper.
See, and I can see that because you're you're talking with that particular example, an asset, the uptime production. And so that that's real time. And And typically, something like that just requires a little analysis on those assets that they've targeted, does that correct? Well, sometimes it's,
it's a little harder than that. But we do need to go in and do an analysis of why are they losing this? You know, what, what are the problems? And and, you know, what we'll find is, we'll find that some of the problems are definitely equipment related. There have been unexpected breakdowns, other other issues. But I typically also find that there's opportunity on the operation side, they're not running their equipment up to standard, they're not following good processes. And I have to say, to this vice president's credit, we actually contributed more than a million dollars, you know, we did an analysis went back and talked to him, and he focused quite a bit of energy around running a better operation, we focused on getting the equipment to run better, and together, we actually contributed more than then our target.
Wow. That sounds cool. I like that. I like that approach. And I like that focus. So what we have, from a from a business case perspective, we've got to understand the outcome of the business. Got it? Number two, is, are there steps in this that we need to be aware of?
Yeah, well, you need to understand the business outcomes. And then the next step is to figure out what value you need. And there are different types of value. You know, there's what I call hard value, that that's the easiest part, it shows up over on a company's financial statements, we sell more product, we increase the revenue, we reduce our maintenance cost, or our spares cost, we lower the cost of goods sold, both of which improve gross profit, that's one kind of value. Often what happens is we may go in and work with a customer and we may focus for six months in an area. And let's say we reduce the maintenance costs 10%. Now we have a choice. Do we take that out of the budget? Or do we reallocate that to another area of the facility that needs improvement? I call that firm value. And then of course, there's risk reductions. And that's at the heart of what we do in reliability it is it is finding that we've got a bearing problem a month before the actual failure, ordering that Barry planning the work and replacing that bearing and nobody even knows about it. So there's a lot of risk reduction activities and and then lastly, there's our intangible values. It's it's how we do our work. It's all of those things that fall into that category.
So, back to the example that you provided about a million dollar bottom line value, you were focused on the assets, but then the VP would be focused on the operations, which, which would pretty much fall into say, let's say, tangible value, that, you know, how can we be more efficient, whatever that whatever that focus needs to be? I like that. That's correct. Give me an example of risk reduction sort of nebulous. From my perspective, what is that?
Well, let's, if we think about these projects, let's just think about what happens with a project. Oh, we may do some front end engineering, then we do detailed design. And if it's a software related project, as many of them are today, we do some internal testing, we do user testing, then we go live, right? We go live, and many times the customer doesn't have a plan. What happens after we start this new system up? Whether it's a CMMS system, an APN? system, some other system? We started it up? Now what so there's a lot of risk associated with that. And those, those those risks, if we aren't thinking and planning ahead, could be in a variety of things. No, Postville go live value creation plan. How about this one, this is huge. And all these projects, it is an adaption governance, and a chain management plan. We're changing the work processes that everybody use, we're changing the technology, they're tools. And if we don't put an adoption plan in place, that's a huge risk that can negatively impact the return on investment. Now, the flip side of that is we typically think about risk in a negative sense. But let's step back and say, how about if we manage these things? Well, how about if we have a good value creation plan, we've done great change management, we're focused on the business outcomes, there's an upside to risk, you know, without any without risk, there is no opportunity. But if we properly manage this, we can actually create additional value.
I like it. And you're absolutely right, I think what happens is we get, we get all just sort of sucked into the value of all of this and the hype, and it makes sense. And it looks good on paper. But then when it gets down to execution, that human element comes into play, and then it gets a little squishy, and I like the fact that you have an adoption, governance plan and change management, and everybody else. I very rarely do people say, Gosh, I like change.
You're, you're you're correct. Yeah, people, you know, they want to know, well, why should I change? What's in it for me? Why do I need to do this? What are you going to do with this data after I start recording it, all kinds of things, you know, that come together everything from from creating a platform, you know, the old burning platform of why we need to change to integrating short term wins into the whole program, everybody has, you know, wants to play for a winner, and they don't want to wait two years to be a winner.
No, nobody. It that's, that's sad. Because that happens quite frequently. And, you know, you have the people that are saying, hey, it's gonna take three to five years, I can't even think in those terms, three to five years. And before I, I get a win, or I, and after a while, you're just sort of feel like you're digging a ditch out there, you see the value, but you're still digging a ditch? How do we create a situation where we can experience some short term victories? You have to be proactive
about that, you know, I always think about implementation. And when I talk to people, I sort of propose a new, a new way to implement, you know, we, we often, you know, go live, we've trained the masses, we've shown him Oh, go do criticality analysis, go do FMEA. Now go forth, and use all these new tools and technologies, yet, we need a more focused plan, we need a focus plan of those. What are the high value areas out there? What are my constraint points? Where am I spending too much money? And and then what are we going to do around those those things to create a value plan where we can actually actually deliver that value. And while we're doing all of that, we're going to plan proactively short term wins, you've got to think ahead. You know, you just can't wait for things to happen. Because as we just said, everybody wants to see progress and they don't want to see it. 24 months they want to see it three months, right? So you have to plan these things. It's you just can't wait for them. This is hard work. You know, this may sound easy, like you know, that this was really hard work of planning in detail what you're going to do. It's
interesting culturally that typically US companies mean, in general, we look at quarterly financials, we just do. And and we're very rational, maybe I did the same thing, right? Very rash. And if I don't see value to my bottom line, because I'm looking at it, I'm looking at, and I want to see some values. Now, I think that that is a great approach. Now, when we start talking about that planning, making sure that you have those little victories planned out, you're monitoring it, I think it goes a long way with developing that sustainable discipline going forward, right, because it is a human equation when we start talking about deploying these solutions.
It is and and you know, it's a step by step process. You know, like I said earlier, we need to know, what are the high value areas? What are we going to do once we get there? Oh, we're going to do root cause analysis? Or we're going to do FMEA? Okay, then the question becomes, who's going to do that work? Well, you're going to give it to Bill and Bob, who are already at 110%? Are you going to really step back and say, I'm going to make resources available? And then what skills and support do those resources need to be successful? And, and then, of course, we've got to build some, you know, a project plan and metrics around that plan so that we, we can proactively monitor our progress.
And if you're going to want to pull out that ROI, you're going to have to you can't just pencil whip this, you can't just so here's my challenge, Paul, and how do we do this? His organizations are fluid, they're coming and going, people are coming and going and going there. And if you don't have a, an organization that has some sort of continuity between people coming and going, then you're you're ready resources that are available that you dedicate it to this particular project becomes suboptimal, for lack of better? How do we organizations create some sort of continuity and manage that risk? Because that's a risk to be able to sustain it going forward? You got the big, you get the victories? How do we do that?
That's really hard. And in a lot, yeah. And let's think about this happen over the long term. You know, our most successful customers or people that I work with, a lot of it starts with leadership at the top, you know, the leadership understands reliabilities important, it understands that we need to create value. And many of those organizations have grown those leaders up through the organizations with different roles and different assignments. And they understand all that. Now, what happens to those organizations later on, you know, there's the lifecycle to everything, sooner or later, those people may or may retire. Now, the leaders that have established there, and if the organization has renewed itself, then great, but lots of organizations, then people come in from the outside, they weren't raised the same way in the same culture around reliability, it is really hard to maintain that over the long term. It takes great leadership, real vigilance. And it takes a dedication by the company to understand well, you know, these are key elements to our success. And that's a risk, you know, companies, you know, we're mostly working with asset risk risk around unexpected failures, risk around injuries and safeties, and si s and compliance. But companies have these enterprise risk management organizations, that's they're worrying about bigger risk, you know, they're worried about people and, and money and finance and hedging, and, you know, the overall organization. So that's a risk that may not be managed just by us, but needs to be managed by the company at a
higher level. Yeah, and you're spot on, because I've been fortunate enough to be a part of a number of organizations. And that has always been the greatest challenge. It's never, it's never about whether these programs will deliver because they will. It always gets down to the tenacity, the focus, and I would have to say energy of the team, the individual, the leadership, and creating that continuity, because it's, it's, it's out there. And what always fascinates me, Paul, is we've had this conversation like we were at smrp 29/29 year we're still talking about companies that need to begin to embrace the principles behind asset management, reliability and maintenance and and that it's out there and professionals like you and others can constantly strive to figure that out, and it just always fascinates me that we're still having In this conversation over and over again,
well, I'm gonna go back to what I said a few minutes ago, the reason we have this conversation over and over again, is because it is really hard, right? It's easier, it's easier for leaders to go, you know, a company to go out, I'm just going to go buy some new equipment to increase my capacity. Well, they go buy that equipment, well, that's sort of a proven process to buy the equipment, it's all equipment, they start the equipment up, you know, that's much easier to manage that it is culture, and people it takes, it takes discipline, to stick to these processes that we know that work, it takes discipline, and it takes leadership to make sure that we're sticking to those things. So it's not the it's, it is like a goldmine, or maybe I should use a bariatric, put this value in barrels of oil here lately, that this is an area that is very fruitful in terms of benefits to companies. But but it really is hard.
One last question. And I've always I've never had a real straight answer. So let's say I'm an organization, I'm pretty inefficient, I there's, there's a lot of low hanging fruit, we develop a plan of creating some victories, and we do everything that we need to do and we, you know, year one, we've got massive savings, we've got massive and positive ROI. Year two, it starts to, you can't you can't achieve the same success because you're just becoming more efficient. Is there a point where it just starts to, like you're as efficient as you possibly can? Or is there always going to be a positive ROI?
Well, the better you get, you know, those last incremental values, you know, you're exactly right. It's easier upfront to do a lot of things. And the more mature we get, you know, as I sometimes have the old saying, is the juice really worth the squeeze? Right? You know, how much money is it going to cost me to get that last percent of availability? And is it worth it? You know, there comes a time when you need to optimize everything. So the answer is, you know, that's typically a long road, you know, to get from, I'm just starting to, to where now I really needs to be optimized. But but there is an optimization point associated with this.
Yeah. And what's interesting, unfortunately, when you start to deploy maintenance dollars, right, dollar, it's $1 off the bottom line, dollar dollar, right. And it's not a depreciated type of expenditure. And so what happens with the fluidity of organizations, other leadership's come in, why do I have to spend that dollar on the maintenance? And then it then it's, it's, it's a cycle? Yeah.
And it shows up, if they cut the maintenance costs, this monkey shows up on on on your neck. That is why that is why it is really important for us to have good sound business cases. You know, McKenzie did a study a few years ago, and they looked at large software projects, you know, when we have those, whether it's CMMS, or, you know, SAP or whatever it might be, yeah, you know, typically, they found that typically, those projects delivered 30%, less than the projected ROI on those projects, right. So our leadership sort of starts to view a lot of this as a risky business. This is risky business. So. So that's why it is really important for us to have a good well developed business cases, good execution plans value free, and we need to start delivering, we have to deliver what we promise. I like the fact that you have to deliver, I think God are the days when you can sort of just sort of ride on in on a white horse and say, I've got the technology solution, and then right on out and it never, never achieves the objective. And then everybody has a surly or salty opinion about what just took place. And then they just, that's why the culture. That's why there's a reluctance to deploy some of these things because everybody's been burned. And I mean, everybody.
Unless you're true, Greenfield and that just started from scratch. Maybe that's a different nap. But that's rare. That is big time rare. So anyway, that that's just, that's where we're at. All right. I want to make sure that everybody understands how do they get ahold of you?
They can reach me, the easiest way is probably by email and that is called Dos Passos. da s. E. firstname.lastname@example.org. They can reach me there. I'd be happy to talk to anybody give them you know, give them some resources. There's lots of material out there. We were just together last week, that week before last smrp and that that stuff is online. So lots of info Automation.
It's, it's if you're thinking that it's hard to find information listeners think again because organizations like smrp, Paul, others, other practitioners that are passionate about reliability, asset management, maintenance and, and developing the solutions around that. It's all out there. It's an important professional. I've always been very bullish about it. And I've been, because everybody just is so collegial. Everybody wants to help everybody to be successful. It's an it's an interesting culture that exists within the, the realm of maintenance and asset or liability and all that good stuff. This is alright listeners. That's Paul. He's with GE. And we were definitely talking about ROI. We're gonna wrap it up on the other side, do not hesitate or do not go away, because we will be back and we will have this conversation on how to get ahold of Paul. So stay tuned.
You're listening to the industrial talk Podcast Network.
All right, a final shout out to Paul Casto. Go out to his card. Paul castle on LinkedIn. You know, you type in his name, that's ca sto comma, G, you will find Him and you will realize how much work he does within the maintenance, asset management and reliability space. He is a leader. So don't hesitate contacting them. All right. Again, we've got to educate. We've got to collaborate. We've got to innovate. There are challenges facing industry going forward. Heard that smrp heard that at maintenance and the technology, manufacturing and technology show. Absolutely important. Go to industrial talk.com We're gonna continue to add to it we're gonna continue to highlight great, great professionals and companies dedicated to your success. All right. Be bold, be brave, daring, greatly hang out with people who are bold, brave and Daring Greatly like Paul, and you're going to change the world. Thank you very much for joining the industrial talk podcast. We will be back with another great interview shortly.
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