How to put Value in Value Chains and Value Management

Some months back, we posted an article Business Value — What is the Value of all this Value?, which has been published on other websites. We have had visitors who want to know more about the value of business value.

The answer has just been launched in Result-performance Management (R-pM), which builds and manages result value-quality chains. Full descriptions of value chains and value management to organize the business for flexibility and collaboration, are explained in the R-pM community download “How to Build Result Value-quality Chains”.

The referenced article described why we need Result Value-quality Chains

The article discusses the various contrived definitions of value that we have in business today. Each definition gives a different value for value.

The article points out that we need to come up with a new breakthrough that makes value a manageable part of the enterprise. The breakthrough must enable us to do things we cannot do now:

1. We need to organize the business in our enterprises to be able to identify how and where value is created and measure the creation of value
2. We need to structure the capital consumed in creating value for professional management and costing against the value created
3. We need to develop strategies for producing things of value that add up to value created
4. We need to manage strategic development to add value to the value being created
5. We need reporting systems that measure and report value and value added and track strategic value creation
6. We need to relate our value to the value perceived by our customers and the value we perceive in our suppliers and contractors
7. We need to relate the capabilities of managers and staff to the creation of value and help them develop more valuable capabilities

The key to understanding value in the business is to manage results; the outputs from performance. We manage a few results as separate entities, such as material received, product produced, product sold, revenue received. These entities give us some indications of value. Our willingness to pay for material received infers a value on our material received results. Our customers’ willingness to pay infers value on our products sold results. So we have a starting point in point 6 above.

We can manage the value chain from customers back to inside suppliers’ chains to know value

But, what about the results that produce what the customer pays for to impart value? Lets go back to point one. We need to organize the enterprise business through the results we must produce to be successful. Each result has a customer, who wants it produced. If no one wants it produced, why are we producing it? The customer must be willing to pay more than it costs to produce the result. This infers value on results in between. Our willingness to pay suppliers infers value on supplier results, we receive. But, the total value of results received and results in between cannot exceed the value of the “revenue received for product sold” result.

We can standardize capital to manage to costs of producing result value

Understanding the value of results is no good, if we do not understand what it costs to produce the result. This brings us to point 2. We need to standardize our capital to understand the cost of producing a result, both within our enterprise and within our business partner enterprises.

We can plan to build up strategic result value by time period in the execution of the strategy

Once we know the value we are creating in results, we can plan to create future value through strategic results. Not just a value that might be there at the end of a strategy; but value that is built up period by period and can be managed in the execution of the strategy. This covers point 3.

Strategic development can develop the value in results, as well as the cost in performance

Point 4 indicates that we have strategic development in order to develop the performance needed to produce new strategic results. We need to develop results as well as performance in order to plan and manage the value added to results through the cost of the performance development to provide the return on investment.

We can measure and report value, cost, and value-added across the chain

Once we organize our business through the results we must produce to be successful, we have one integrated method for organizing, planning, and managing the enterprise. We can then measure and report value, costs, and value-added to track the actual creation of strategic value to cover point 5.

We can integrate the value-quality chain with suppliers, partners, and customers for business collaboration

This brings us back to point 6. Once we begin to manage results, the material we receive is not an expenditure but an output result from the supplier that is a valuable input result for the enterprise to add more value in results produced. The results provided to a customer are not a product or service, but a valuable input result that the customer will add value to. Once we think like this and have standardized our capital, as in point 2, we have the basis for value chains and real business collaboration.

Result Value-quality Chains make everyone in the enterprise stakeholders, who know their contribution to result value

Point 7 may be the most important. We want to make everybody in the enterprise stakeholders, who understand the value contributions of their capabilities and the opportunities to improve their capabilities to create more value for the enterprise.

When we do all this, we will add value to value to make value really valuable.

Result-performance Management (R-pM) provides the means to build and manage Result Value-quality Chains

The answer is Result-performance Management (R-pM) which organizes the business to provide the means to build and manages result value-quality chains, as outlined in this article. Current conventional value-chains and value management methods use contrived formulas to calculate a number labeled as value. R-pM is the only method to build real value chains within the business and across collaborating businesses.

21^st Century Management eliminates 20^th century problems

Result-performance Management (R-pM) eliminates value management problems and other costly 20^th century problems. Slash costs, simplify business management, and boost competitive advantage through R-pM, the conventional method for 21^st Century Management.

Download your 21^st Century Management Manual today

Your 21^st Century Management Manual, The R-pM Toolkit, is available today and is under continual development to expand and refine 21^st Century Management. The R-pM Toolkit is offered at a nominal price to encourage wide use of R-pM. Get your R-pM Toolkit, and future updates, at result-performance-management.com.

This entry was posted on Friday, June 16th, 2006 at 01:12 and is filed under:
Forums: Capital Development Plans and Projects, Corporate Investment and Governance, Organization and Management, Strategy and Performance Management
Topics: Collaboration Methods, Cost Management, Investment Management, Organization Methods, Performance Management, Result Management, Value Management, Value-chain Management
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