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Looking at the business enterprises in new ways helps executives
and managers identify opportunities to improve business performance.
By defining the business enterprise as a pipe responsible for
delivering economic value to shareholders, managers can identify
which flows are leaking value and develop ways to improve those
flows. We see 5 main flows in a business value pipe:
- The Product/Service Flow
- The Cash or Capital Flow
- Information and knowledge Flow
- Human Capital Flow
- Work Process Flow
Great organizations avoid loss. In a manufacturing environment,
loss can occur in the product flow through excessive waste, quality
control problems, and equipment downtime. Excessive inventories,
increasing collection periods, poor budgeting and control can
create leaks in the capital flow. Poor market data, communications
infrastructure, etc. result in loss in the information flow.
Poorly aligned performance management systems, employee turnover,
etc. will cause loss in the human capital flow. Collections processes,
manufacturing process, recruiting processes, etc. are all part
of the work process flow and present opportunities for loss.
The pipe diagram above illustrates the flow for a health insurance
company. Members, brokers, employer groups, and providers enter
the insurance companies value creation pipe and are immediately
affected by the various flow losses. Value is lost in poorly
constructed or executed customer acquisition processes. Broker
efficiency is affected by poor incentives and channel management
processes. Cumbersome claims processing leads to provider dissatisfaction
and value leakage. Poor information results in ill-conceived
benefit plans that do not provide member value. Inefficient membership,
enrollment, and customer service processes create member dissatisfaction
and loss of marketshare.
Evaluating an organization based on core flows will help identify
leaks and develop plans to repair or replace broken pipes to
ensure that customer value, shareholder value, and overall business
performance are optimized.
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