Business Collaboration in a True Chain Using R-pM
Author: Posted: 10/17/2006 Word Count: 854 words Read 1007 Rating: 
(5.0)
1 Votes
Collaboration involves massive investments in systems, redefined processes, and data reconciliation. Collaborate by linking with your partner's value-quality chain for the best value-added.By: Harry Greene We hear a lot these days about problems with business collaboration. Many think that the solution is in IT to have systems to produce reconciled numbers. I see contrived methods for data aggregation and reconciliation, transaction costing, information sharing, etc. Others talk about a common process and system, where, in order to collaborate, enterprises invest in re-engineering a common process and employing a common information system. Now there is talk of a business chain to create shared value. I see contrived methods to link raw materials to a finished product that are called value chains, but they are chains with no value links. None of these contrived methods addresses the fundamental problem in understanding precisely where we create value and how we incur costs across a chain.I have never seen a working example of successful business collaboration across a defined value chain. I have never even seen a real value chain established within the confines of a company. Does any company have a value chain linking all they do across the company that manages value, cost, and value-added at each link in the chain to come up with their own shared value at the end? If we cannot create a value-chain within one company, how can we hope to create a value-chain across companies? Conventional methods do not provide a way to define the 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.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.To create shared-value, we need to understand value across a value chain. To understand value across the chain, we need to understand the links in the chain and how costs are incurred and value is created. We must understand the relative value of the links to the total value of the chain. Conventional methods prevent us from doing this, by managing contrived entities rather than the components of a value chain. Result-performance Management (R-pM), enables value chains by defining and managing the components of a chain. R-pM creates value chains by defining results as links in the value chain and the relationships between results as the interlocking of links into a chain.To understand where value is added we need to understand costs for each link and across the chain. The costs must be defined for all tangible and intangible 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 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.Each company in a potential business chain must first set up a true result-performance value chain, within the company: - Structure the company by defining results, including results links in the value chain, and results that manage or depend on the chain - 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 - Define ways to understand the relative value of results in the chain to the total value of the chain - Structure company capital by capital category so that capital can be managed, costs can be standardized, and utilization of capital to create value can be understood for each link in the chain - Develop company strategies to create value by managing and building result value across the company value chain - Install a reporting system to 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 valueOnce 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. Once we have value chains established in each of the companies that must collaborate, it is straight forward to re-link the value chain across the companies to determine what chain provides the greatest shared value for the lowest shared cost. Then business partners finally can collaborate in a true value chain, by using R-pM.
Author/Poster Website:
http://www.result-performance-management.com
Other Management Articles
Featured Articles In Business and Finance
Post a Review/Comment
Ex-designz does not allow anonymous comments. Registered members can login to participate. Registration is free and takes only a few seconds.
Article Menu
Featured Articles
