Value Based Management: From Concepts to Reality

Common business language is filled with a plethora of high value terms, regardless of the industry vertical, such as BI (Business Intelligence), Value Based Management, AI for Business, Continuous Improvement, Lean Six Sigma and Big Data Analytics.

Too many executive leaders are quick to declare how much money they have invested on analytics and business process improvement.  Despite that, many are realizing their investments have been wasted, the organization is still inefficient and true value creation reflected in sales growth or improved profitability is not showing up.

My question is this…

Does mastery of terminology and throwing real investment dollars at continuous improvement projects indicate mastery of implementation and use?  The simple answer is NO!

The first hurdle is the executive team often struggles to communicate a concise vision for how to utilize new continuous improvement tools in day to day management and work-related activities.  Making new analytics available to managers doesn’t ensure, in most cases, their proper use in the context of daily work routines.

Most managers are used to getting a standard set of KPIs but lack any ability to freely interrogate the data to quickly answer basic questions…Why did sales in my territory decline?  What caused the decline?  Do I have an out of stock problem?  Do I have too many slow-moving SKUs on the shelf driving out of stock conditions?  Far too often, the “WHY” questions remain unsolved or they take days or weeks to get needed answers.

Continuous improvement, BI or Lean Six Sigma are all built on a fundamental premise.  That premise is that if a manager can be enabled with technology to see all activities of the business with real market precision, that capability will translate into more consistent growth in sales and profitability.  It is often referred to as Precision Performance Management or Value-Based Management.

If you intend to invest and create a performance culture for all levels of management to see the daily activities of your business with more precision, several critical factors must be a clear and distinct capability of any serious software vendor consideration:

  1. If your software vendor of choice is not prepared or capable of collecting and reconciling enormous levels of data and enable managers to freely interrogate the data so they can identify root cause sales and operational problems, then you face a serious adoption risk. Too many vendors are not equipped to handle enormous data sets without bogging down with slow and frustrating results.  If managers are forced to wait for answers, adoption is poor and the investment is in jeopardy.  Speed to answers is critical for all levels of management.
  2. If your analytics tool is primarily set to deliver dressed up, summarized or aggregated results, you may be getting better visual presentation of your KPIs, but you are not enabling every manager at all levels of the organization to independently drill into the data, find root cause problems and make change decisions in real time. Standard KPIs fail to support the real implementation of a continuous improvement culture.

In today’s business environment, technology is moving business management to a new paradigm and that paradigm is real-time continuous improvement by enabling each manager to make precise value management decisions every single day of the year.

And, almost as important as the right technology, a radical transformation of the entire operating culture of the enterprise is critical to long term success.  This transformation is driven by every c-suite manager speaking a coherent message of commitment to a new way of doing business, a new form of decision making and a new way of measuring performance.

Long term growth in a globally competitive environment can only be achieved by seeing across all dimensions of the enterprise including top line sales, bottom line results and enabling access and visibility to all transactions that drive value creation.

Enabling this type of operating efficiency translates into real savings for the enterprise including fewer layers of management, reductions in the number of managers needed to oversee in-field activities and more efficient business processes driving more consistent sales growth.

Out on the street where business services and products are placed in front of prospective buyers, long term value is created when individual businesses do something that their competitors can’t do.  This is called a competitive advantage.

How each enterprise creates and sustains a competitive advantage varies.  But one core element of any competitive advantage goes to those enterprises who can harness the overwhelming data flood that exists in every business, present the data with granular precision to every manager and enable them to ask and get immediate answers to every WHY question they want to ask.

If you can get answers faster than your competitor, you win in the game of business.

Karl Edmunds

About the Author

Karl Edmunds
Vice President, Salient Management Company

is a nationally recognized business leader and author with more than 20 years of experience working with suppliers, distributors, and retailers in the CPG industry. His focus is aligning technical solutions with sales, marketing, and organizational needs to drive long-term profitable growth.

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