How to Deliver Customer Value and Quality
The generally accepted definition of a company business is "the activity of providing goods and services." The business utilizes invested capital in business activity to provide economic output in the form of customer goods and services. Today's executives -- products of the 20th century -- organize and manage the company, not the business, by laying rigid organization, process, system, costing, performance, account, administration, and other structures over the business. Inflexible structures restrict business results and hamper business change. The company cannot manage the cost and effectiveness of business activity and the value and quality of customer goods and services.
Result-performance Management (R-pM) organizes the company business for 21st-century management. The business is defined by two related entities:
- Results: Economic outputs produced by the business that provide goods and services to customers.
- Performance solutions: Invested capital utilized in business performance activity to produce results.
R-pM manages all performance utilized to produce results along a chain of input and output results leading to customer goods and services. The customer order-fulfillment process is a chain of results that can be counted and measured, such as customer qualified, order booked, goods or services delivered, invoice produced, customer payment cleared, etc. Each result is produced by utilizing capital, organized as specific performance solutions in business organization and processes, human personnel and capabilities, facility equipment and supply, and management strategy and tactics, plus information capital in data, knowledge, records, and intelligence. Structures laid over the business today are incorporated in the business, as needed. Remaining structures and costs are removed.
- utilizes business processes and information systems within result value-quality chains to manage the performance producing each result -- result by result;
- manages result value and performance costs to manage the value-added by each result along the chain;
- manages the effectiveness of performance solutions utilized to infuse quality into each result to deliver quality to the customer;
- manages company and customer performance uncertainty to reduce the risk from results not produced as planned; and
- manages result value-added to produce company contribution and profit results.
Twentieth-century business processes mix results with performance and manage performance quality, such as order fulfillment. Costs, value, effectiveness, and quality are not managed within the process. R-pM defines quality as an attribute of the result, not of performance. Quality is in goods-and-service results that are inputs into the customer value-quality chain. R-pM defines the specific results of value that must be produced to provide the goods or services; uses information technology to manage performance solutions utilized to produce one or more results in the chain; and captures business data on the capacity, costs, and effectiveness of solutions utilized to produce specific results, as well as the volume, value, and quality of each result produced.
Supplier results provided to the company have value in the company's willingness to pay. Supplier results, such as computer equipment or services, contracted personnel, market information, and office supplies, are implemented as performance solutions with the result value becoming capital worth. Results, such as material and components, are input results to the value-quality chain, and are transformed along the internal result chain. The value of each result is determined by the willingness-to-pay exhibited by the internal customer, who uses the result. Goods-and-service results have a value in the customer willingness to pay.
The total value of input and internal results cannot exceed the value of the customer result. The performance cost of each solution utilized totals to the result cost. The result value
less the result cost
is the result value-added
. If the value-added is negative, the result should not be produced. If the result is essential, then either the performance costs must be reduced, or the result value must be increased and the value of other results in the chain decreased.
Each performance solution utilized to produce a result must be effective to produce the planned result quality. If a result does not meet quality standards, it is either due to a defective input result or to an ineffective solution utilized. The chain is traced back to identify the defective result. Performance solutions producing the result are managed, so that ineffective solutions can be identified, and then either corrected or replaced. Quality is managed for each result in the chain to assure quality in customer results.
About the Author
Harry Greene is a career management consultant in business processes and systems, who now develops and supports R-pM through result-performance-management.com.
- Manage result chains to maximize customer value and quality and company value-added.
- Standardize result values and performance costs for business collaboration, to integrate partner results into the company chain, and to integrate supplier and customer chains.
- Quickly change results and performance to stay ahead of market and customer needs.
- Focus performance on producing results.
- Eliminate the massive costs of overlaid structures.
- Gain competitive advantage over companies hampered by 20th-century management.
- Organize your company business with Result-performance Management (R-pM) to deliver customer value and quality through 21st-century management.