Archive for the 'Strategy Development' topic

20^th century enterprise management problems are caused by rigid structures laid over the business

The generally accepted “business enterprise” definition is the activity of providing goods and services. The failure of 20^th century management to organize and manage the business enterprise in the activity of providing goods and services creates unsolvable management, business, and performance problems.

The fatal error of 20^th century management, employed by all companies, corporations, and other enterprises today, is laying a rigid enterprise organization structure over the business, rather than organizing the business. Since the business is not organized, the business cannot be managed. Therefore, rigid enterprise management structures for planning, processes, systems, financial and cost accounts, quality, administration, performance, reporting, etc must be contrived and laid over the business. Structures laid over the business conflict with the actual business, restrict business flexibility, move out of “alignment” as the business changes, prevent direct business data capture and management, and do not provide the direct management information needed to manage the business.

20^th century enterprise management improvements can never solve unsolvable problems

We continue to teach 20^th century enterprise management, contrive new 20^th century structures and “business solutions” to lay over the business, and write more 20^th century management books, but we have never solved the top ten problems of 20^th century enterprise management.

1. Reorganization: The business changes while the organization structure remains rigid, causing upheavals to lay a new rigid organization structure over the business and repeat the cycle
2. Accounting and Financial Management: Historic legacies focus on cash control and prevent professional records management and modern capital management of the actual business increasing financial risk and preventing accurate business management information
3. Investment Analysis and Development Project Management: Investments and projects are managed separate from the business, rather than itemizing, planning, and managing the costs, benefits, and return of capital development investments, as part of the business
4. Administration: Performing functions, while leaving tangible and intangible capital utilization and improvement unmanaged
5. Performance Management: “Performance” definitions mix actions executed with the result accomplished, so business processes, performance management, and KPIs mix results and performance and manage “performance quality”
6. Business Complexity: Each organization, plan, processes, system, administration, or other structure is defined separately with different definitions creating business and information complexity and preventing business collaboration and common solutions applicable to any business
7. Information Technology: Business systems, data, information solutions, networks, and architectures are designed to process overlaid structures and managed as technology, not capital, creating costly IT infrastructures and continuing capital management problems
8. Change Management: Change management addresses the conflicts between structures laid over the business and the actual business to change structures, while the business remains undefined and unmanaged
9. Corporate Governance: Problems are addressed from the governance side to restrict and control management, rather than organizing the business to be governed by management on the corporate side
10. Alignment: Rigid overlaid structures go out of alignment as the business changes requiring continual changes to the structures to align closer to the business

These and other unsolvable 20^th century enterprise management problems are discussed, in detail, here at the Business Change Forum.

Solutions to he top 10 management, business, and performance problems of 20^th century enterprise management are described in a referenced article.

The top 10 problems are eliminated by 21^st century business management

20^th century enterprise management problems are unsolvable, because they can never be solved by laying new or improved structures over the business. [more...].

20^th century enterprise management used today lays various plans over the business

20^th century enterprise management cannot plan the business directly because the business is not organized. The enterprise is planned through various structures laid over the business. These overlaid planning structures include:

• Strategic plans using such structures as maps and corporate plans
• Financial plan and budget structures
• Information technology plans and enterprise architectures
• Capital development plans and investment analysis structures
• Human resource hiring and development plans
• Other operational plan structures

Each of these planning structures uses its own set of entities to describe the enterprise, uses different information systems, and requires its own support staff. Each plan must be maintained and updated with actual progress against the planned entities, and reported. The plans plan the enterprise in various ways depending on the particular structures implemented.

None of the overlaid plans plan the actual business

Since the business is not organized, the business cannot be planned. The results produced by the business cannot be planned as an interrelated set. Some results may be planned in isolation as separate entities such as product sold and revenue received. The plans are usually created from estimates rather than a period by period build up from the existing business. Since the business is not planned actual business data is not planned for actual measurement; such as performance costs, performance effectiveness, result value, result quality, capital worth, investment returns, etc.< [more...].

20^th century enterprise management plans the future enterprise and does not plan the business

20^th century enterprise management used today develops strategies and plans using maps, corporate plans, budgets, etc that are laid over the business. Corporate plans plan the corporation and are unable plan the strategic value to be created by the business and the capital development needed to create strategic value. The business is not planned and strategies and plans become invalid as the business changes. New plans try to bring the enterprise plans in closer alignment with the current and future business.

The business strategy plans the actual future business needed for success

Business management defines the enterprise business as “the utilization of capital of worth in performance to incur costs to produce value in results”. This definition includes the current business that must be conducted every day to utilize capital the enterprise invests in to produce results needed for business success. The definition also includes the future business that must be the objective or the business strategy to produce strategic results utilizing capital that must be available when needed?

The management strategy plans the business at the strategic horizon

The strategic business is “the utilization of capital of worth in performance to incur costs to produce value in results at the strategic horizon”. The strategic business is described as management strategy capital. The business strategy, strategic business structure, and business plans to execute the strategy are management strategy solutions.< [more...].

Rule No. 6 of the Ten Rules for 21^st century business management states: Plan and govern the transition from today’s value to approved strategic value. This rule requires the development of management capital in strategy to plan the strategic business, in tactics to evaluate and assess progress of the current to strategic business, and in intelligence to anticipate opportunities, threats, and new developments. The rule must be followed to ensure good corporate governance.

20^th century strategies are planned and described by laying structures over the business

Strategies are planned today by laying structures over the business such as corporate plans, maps, investment analyses, budgets, etc. Separate and unrelated plans are often prepared for operations, finances, information technology, capital development, human resources, and other areas. The strategic business is not defined and strategies do not relate to the actual business. Goals and value creation are estimates and projections rather than the planned transition from the existing business. The rigid structures laid over the business conflict with the actual changing business and do not provide a foundation for good corporate governance.

Corporations govern by enforcing rules, because they cannot govern the business

Corporate governance is an unsolvable 20^th century management problem that arises because corporations do not organize and manage the business. [more...]

All capital development should develop capital, plus business results for return on investment

Every business enterprise must produce output results that lead to goods and service results to create value. An expanding enterprise must produce new results of increasing value. The enterprise needs additional capital in order to produce new results as part of the business. The capital must be acquired or developed, implemented as specific capital solutions, and then utilized to produce improved or new results of increased value. The value added to new business results must justify the capital expenditure to acquire or develop needed solutions and provide the return on investment.

All capital development is really result and capital development to develop capital as solutions to be utilized to create additional value in output results produced by the business. The additional value of output results provides the return on the capital development investment. If the capital solutions utilized and the results produced by business performance are not managed, result and capital development cannot be managed properly and the return on investment cannot be measured. Even physical capital development, like a new building, produces capital solutions to produce results, be it the enterprise office facility solution or a facility solution to produce lease or rental income results.

20^th century enterprise management does not organize or manage results or capital as sets

20^th century management used today does not manage the enterprise business, defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. [more...].

What is management capital? Management capital is not the capability of our managers. That is part of our human capital. Management capital is the capital provided by management so that the enterprise can develop and execute a successful strategy.

You hear of management strategies, management tactics, and management intelligence; but do think of it as management capital? You likely do not, because 20^th century management does not organize and manage management capital as the capital that is utilized to plan, and direct the enterprise business. 20^th century management has functions like corporate planning, internal audit, public relations, legal, marketing, etc. that may administer some management capital, but few, if any, really manage management capital. Many enterprises have problems due to inadequate management capital.

Logically all capital must be defined as performance solutions to be deployed and utilized to produce a specific result. [more...]

Corporate Directors have a responsibility for best business management

Corporate Directors and other business governors need to ensure that a viable business strategy is in place to create planned future value, that capital investments provide itemized returns by creating strategic value, that the business is managed to create strategic value, that accurate financial and non-financial records are kept on the business, and that progress in executing the approved business strategy is maintained.

20^th century management prevents corporations and their directors from doing any of this. The actual business is not organized or managed, so most business data is not captured. Strategies are contrived overlays on the business, not actual business strategies. Corporate investments are based on guesses and estimates, not actual business measures. A contrived chart of accounts keeps partial financial records and does not record the actual business. Management information solutions provide enormous quantities of information on contrived structures laid over the business, but only incidental information to manage the actual business.

Result-performance Management (R-pM) organizes the business for 21^st Century Management to provide good corporate governance, as explained in the earlier post “Corporate Governance is a Small Part of the Big Corporate Management Problem”.

R-pM provides transparent business organization and management

As a Director, you approve the business and financial results in the economic outputs to be produced by the business. You approve capital investments and financial expenditures needed to provide the capital to produce results. [more...].

Corporate Planning Managers are important capital managers

Are you a Corporate Planning manager, responsible for strategic planning, alignment of corporate and lower-level plans, and reporting against the plan. Corporate planning is defined and organized differently from enterprise to enterprise. You likely provide top management support such as planning research, intelligence analysis, option analysis, and other functions. How do you approach your work? As a routine function? As a responsibility for corporate or enterprise strategy development, and to ensure that corporate strategy is coordinated and executed properly?

If your answer is closer to the latter, you will clearly benefit from R-pM.

20^th century management does not provide a framework for Corporate Planning

20^th century management manages the enterprise by laying organization and management structures over the business. One of the structures laid over the business is the corporate plan. 20^th century management does not provide a framework or a capability to plan the actual corporate business. [more...].

In an article on 1 March 2006, we discussed “Evaluating strategies that create future value“, to investigate what value is being created. Value tended to appear at the end of the strategy, and not defined in detail from the start and added to throughout the execution of the strategy.

Value is not just a contrived or calculated number. Value must be planned and managed day by day by organizing the business and managing results. Strategic value is not an estimate or hype. Strategic value is planned by improving current results and developing future results. This is explained in the R-pM community download “Organize your Business with R-pM“.

Many corporations have a mission to create strategic value or customer value

It is difficult to develop a strategy that creates future value, if the enterprise cannot manage the value that it has on hand today. Where is the value in your enterprise today? [more...]

Value management, value chains, value propositions, and strategic value creation are not produced from managed value

Value is an impressive word. People talk about value creation, value propositions, customer value, value chains, enterprise value, shareholder value, value management, etc. It sounds like they know more than the rest of us. But, what is the value of all this value?

Value has many definitions for many contrived methods purporting to manage value. Why don’t we just have one method with one definition of value, as specific management metric, so that we can understand and manage value across all of our enterprises? This problem is discussed in the article “Business value - what is the value of all this value?”.

Result-performance Management (R-pM) manages value as a management metric

The answer to real value is Result-performance Management (R-pM) to organize and manage enterprise results that contain value. To learn more about R-pM visit [more...]>