A method for advanced condition monitoring of an asset system includes using a plurality of auto-associative neural networks to determine estimates of actual values sensed by at least one sensor in at least one of the plurality of operating regimes; determining a residual between the estimated sensed values and the actual values sensed by the at least one sensor from each of the plurality of auto-associative neural networks; and combining the residuals by using a fuzzy supervisory model blender; performing a fault diagnostic on the combined residuals; and determining a change of the operation of the asset system by analysis of the combined residuals. An alert is provided if necessary. A smart sensor system includes an on-board processing unit for performing the method of the invention.