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An Approach for Systematic Asset Optimization

This three-step approach enables governments to effectively utilize and manage their various assets for maximum financial and political benefit.

The asset base of many governments is massive and diverse, encompassing everything from land to public data. The International Monetary Fund notes that nonfinancial assets owned by governments in major developed countries can range from 34% to 94% of GDP, with a value in the trillions of dollars.

In difficult economic times, governments frequently choose to divest or privatize these assets as a reactive, short-term budgetary fix to cut costs. The potential to maximize returns on these assets has gone largely unrealized. A more compelling solution is asset optimization. This systematic effort enables governments to fully utilize and better manage their assets to maximum financial and political benefit, including:

  • Significant reductions in operating costs
  • Delay in or elimination of new capital expenditures
  • Improved quality of public services
  • Reduction in government’s overall environmental footprint

BCG offers a three-step approach to improving the performance and returns associated with public assets:

  1. Ensure that assets are operating at their maximum capacity and efficiency. Governments must zero in on supply and demand problems that are leading to less than optimal asset performance.
  2. Invest in and maintain assets over their entire life-cycle to minimize total costs. Investments go a long way toward avoiding the high costs of unplanned service disruptions and emergency repairs, and they extend the life of assets.
  3. Generate additional revenue from assets where possible. Opportunities include charging user fees, renting out excess real-estate capacity, and licensing intangible assets.

These steps are complementary and can be applied to all or a portion of a government’s assets; an exhaustive inventory is not a prerequisite. Gains can be achieved rapidly, especially if this approach is applied to expense-heavy assets.

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