Specific Problems with Organization and Management Methods

Business Collaboration prevention through Contrived Structures

Collaboration involves massive investments in systems, redefined processes, and data reconciliation. Collaborate by linking with your R-pM partner's value-quality chain for the best value-added.

By: Harry Greene

We hear a lot these days about problems with business collaboration and business value chains. Many think that the solution is in information technology to reconciled numbers from divergent information systems and business processes. Some contrive structures for data aggregation and reconciliation, transaction costing, information sharing, etc to create an information value chain. Others enterprises invest in re-engineering a common process and employing a common information system to overlay a value chain model. There are contrived structures to link raw materials to a finished product that are called value chains, but they are chains with no value links. Contrived structures laid over the business do not define precisely how we create value and incur costs across a chain within the business itself.

The only solution is to organize and manage the business itself to be a value chain, where value is created and costs are incurred at each link in the chain. This is the power of Result-performance Management (R-pM), which manages results and links results across the enterprise to reach final results that go the customer. The R-pM Community download "How to Build Result Value-quality Chains", in the R-pM Toolkit, explains how you and your business partners can finally collaborate in result value-quality chains.

Conventional structures prevent value chains from being built into the business

Conventional structures attempt to define the value chain as another overlay on the business. Conventional structures cannot define the business as a chain with precise links in the chain. Collecting costs is difficult even within one company since the high-worth capital is “intangible” and capital is rarely managed as capital that incurs costs to create value. Costing is even more difficult across companies, since partners structure the capital consumed differently, and charge costs to different wrong things, instead of the value being created.

This lack of a fundamental method to define and manage a value chain makes all collaboration risky and difficult. Even internal collaboration among divisions or within a division suffers. We concoct numbers to justify collaboration, rather than systematically managing collaboration.

R-pM defines results to provide the links in a value chain

Result-performance Management (R-pM) organizes the business to manage each economic output as a result and each item of capital utilized as a performance solution. R-pM creates value chains by defining results as links in the value chain and defines the relationships between results to interlock links into a chain.

R-pM manages value-added at each link and across the value chain

To understand where value is added we need to understand all performance costs for each result link and across the chain. The costs must be defined for all tangible and intangible assets as specific performance solutions utilized at each link of the chain and must add up to the total cost for a link. The total costs of each link must add up to the total costs of the chain. R-pM meets this need through Result-performance Costing by identifying all the specific performance solutions utilized to produce each result and the rules for utilizing the solution. This allows the cost of each solution utilized to be charged to the result and added to the cost of each result link. The value-added is then known for each link and can be totaled across the chain.

Business collaborators define the results that create value and performance solutions that incur costs to build their value chain

Each company in a potential business chain must first organize their business with R-pM to set up a true result-performance value chain, within the company:

  • Develop company result strategies to create value by managing and building result value across the company value chain
  • Structure the company business by defining results, including results links in the value chain, and results that manage or depend on the chain
  • Record and value input results from the supplier supply chain that gain value from the enterprise willingness to pay and costs to land the result
  • Record and value results that transform input results to customer final results and the internal customers willingness to pay
  • Record and value final results that gain value from customer willingness to pay for his input results
  • Define relationships between results that link results into a chain
  • Define a chain control result that controls all results in the chain and is responsible for the final result
  • Refine the relative value of each result in the chain to equal the total value of the chain
  • Structure capital utilized by capital category, so that capital can be managed and costs can be standardized, and by capital class, so that capital utilization can be managed to create value at each link in the chain
  • Revise the entities in the reporting system to manage results and performance solutions and report value, costs, and value-added at each result link in the chain and to track progress toward strategic value
  • Develop a management capability to optimize the value-added for each result in the chain by managing value against the costs incurred to create the value

Once companies establish result-performance value chains within the company and have gained management experience with the value chain, they can think of extending their value chains to customers, suppliers, and business partners.

They can also extend result value chains to result value-quality chains to manage result quality, risk, and volumes against performance effectiveness, uncertainty, and capacity at each link in the chain and across the total result value-quality chain.

Once each business has defined its value-quality chain it is possible to re-link chains for business collaboration

Once we have value-quality chains established in each of the companies that must collaborate, it is straight forward to re-link the value-quality chain across the companies to determine what chain provides the greatest shared value and quality for the lowest shared cost. Then business partners finally can collaborate in true value-quality chains, by using R-pM. The guidance and procedures are in the R-pM Toolkit.