Much is written about the theory of value chains and various structures have been contrived to lay value chains over the business. No method has ever organized the business to provide natural value chains, until Result-performance Management (R-pM).
R-pM organizes the business to enable natural value chains
A value chain must have links that have value and add to the total value of the final result of the chain. R-pM organizes results as links in the chain. Result relationships link results in sequence and manage the complete chain. Specific capital solutions are utilized to produce each result.
R-pM uses information technology to organize and manage value chains as a part of the normal integrated business structure. Value chains are not exceptional structures laid over the business.
Results are economic outputs that contain the value created
Results are the economic outputs of value produced by the business. R-pM organizes and relates results from supplier input results, through results transformed by the enterprise or enterprise business partners, to final customer results. Customer payment to the enterprise confers final result value. Enterprise payment to the supplier confers input result value. Internal enterprise or business partner customers confer value on internal results added to and transformed in the chain. The total input and internal result value cannot exceed final customer result value.
Result relationships define the links in the chain
Certain end-results must be produced in a chain of results to produce the final set-result. The final set-result of the chain contains and controls the end-results in the chain. Totals added to each end result are accumulated at the final set-result. If the result is not essential or has a cost that exceeds the value, it should not be produced. Results have their own natural relationships. A result must be completed before another result can begin or be completed. Results are related to one or more results in sequence to form the chain. Results are related to the total chain set-result for the final customer result.
Capital solutions utilized add to the cost of results
Capital solutions provide the managed capital needed to produce results. Results are produced by specific human and other solutions deployed to the result. Each solution utilized in performance has a cost in the total cost of the result. Performance costs can cover the development and support for the solution utilized. Several methods provide the costs of solutions against a specific result.
Result value chains manage value, costs, and value-added
The results in the chain are end-results produced from performance. The final result is a set-result that controls all results in the chain. Each end-result has its own value that adds up to the value of the final set-result. Each capital solution utilized incurs performance costs against the value of the result produced. The total performance costs of solutions utilized is the result cost. The result value less the result cost is the value-added to the chain by that link. The value-added of the final set-result from the chain is the total value-added by the results in the chain, or the total value of all results less the total costs to produce all results.
Result value-added is managed to optimize value chains
Result value less total solution costs gives a manageable value-added that contributed to the enterprise profit result. Result value-added is managed to be positive and to meet value-added goals. End-results with a negative value-added are not produced unless costs are reduced or the customer increases the value, in which case the value of another end-result in the chain must be reduced. Result value-added is the most important management metric across an organized and managed business.
The final result value is confirmed by the customer payment for his new input result
The customer pays for the final result as an input result to the customer business structure. The customer may implement the result as a performance solution, in which case the result value is part of the development cost of the solution. The customer may use the result as an input result to his value chain, in which case the result value is the input result value.
Result value-quality chains also manage result quality, volume, risk and goals
The result value chain is called a value-quality chain in R-pM. The chain manages capital measures in performance to produce performance indicators and then to provide result metrics for each result in the chain. The chain manages the amortization of the capital investment in each solution through performance costs to produce the total performance cost for the result. The result value less performance costs provides the result value added which should be positive to increase value-added by the chain to the final set result that goes to the external customer. Solutions must be qualified to be implemented to produce a result. The chain manages capital qualifications utilized in the performance effectiveness of each solution to produce result quality. The chain manages solution capacity to fully utilize the capacity in the lowest-capacity solutions to produce a volume of results and manage over-capacity in other solutions. The chain manages performance uncertainty to provide needed solution backups or contingencies to improve solution reliability or insurance results to manage result risks. The chain manages the potential of each solution against performance expectations to enable reaching result goals.
The managed result value-quality chain produces a final set result to go to the customer with a quality to satisfy the customer that produces the customer willingness to pay a high value for the result as input to his personal or enterprise business.
Result value chains facilitate supplier-customer integration
Enterprise input results are the final results from the supplier value chain. Enterprise final results are input results to the customer value chain. By extending value chains into suppliers and customers, the enterprise sees ways to reduce costs and add value. A supplier result may duplicate a customer result; the supplier could produce a customer result at lower performance cost; etc.
Result value chains enable business collaboration
Enterprises can collaborate with business partners to be the customer for an enterprise result and transform the result through partner performance. The enterprise is the customer for the partner result that is an input result back into the enterprise value chain. Collaborators in a value chain use R-pM to define results consistently and to standardize capital solutions utilized in performance for comparable costs. Collaboration is a matter or re-linking the chain to achieve the highest shared result value-added.
Build result value chains through R-pM
Visit Result-performance-Management.com to download the document “How to Build Result Value-quality Chains”, which describes value chains in detail. At the site you can learn more about organizing your business with R-pM for 21st Century Management, and download the R-pM Toolkit, your 21st Century Management Manual.
