Archive for August 8th, 2008

Your business consists of capital investments, performance utilizing capital, and results produced

Your business is defined properly as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Your business consists of three components that must be organized in one business structure for effective business management:

1. Results: Economic outputs of volume, value, and quality essential for business success
2. Capital: Investments in solutions of worth to be utilized by the business
3. Performance: Utilization of solutions for costs and effectiveness to produce specific results

The business structure for any part of your business looks like a spreadsheet with results required organized in columns across the top and capital utilized organized as solutions down the rows. A cell is a performance domain where a solution is deployed with cost and effectiveness exceptions to produce a result. Solution rows utilized down one result column total the cost, value-added, and quality for the result volume. Result columns that utilize a solution across one row total the cost and effectiveness of solution performance.

The enterprise organization structure is the fatal error of 20^th century management

Instead of organizing your business structure, a fixed enterprise organization structure is laid over your business, so your business cannot be managed. Management structures like corporate plans, processes, budgets, functions, accounts, cost activities, systems, etc define the enterprise differently causing business and information complexity. Rectifying structures for data reconciliation, scorecards, IT architectures, etc just compound business organization and management problems and increase IT overheads.

20^th century management structures prevent business management

You make significant investments in capital, but cannot plan return on investment, manage development of specific solutions needed by the business, determine worth of solutions to the business, measure solution return, or capture costs incurred in utilizing the solution. You must produce results from supplier input results, along a value-quality chain to produce final results that satisfy a customer willing to pay. [more...].