Chapter Two Business Processes in the TwentyFirst Century
Chapter Two Business Processes in the Twenty-First Century
Learning Objectives • Identify forces affecting business. • Define the elements of the customer value imperative. • Explain the value chain and its components. • Explain the importance of evaluating company performance. Copyright © Houghton Mifflin Company. All rights reserved. 2
Forces Affecting Business Today • The Information Age – Economies worldwide have shifted from industrial manufacturing to service-based, technology-focused companies (from physical capital to human capital dependence). Example: IBM in 2000 vs. IBM in 1950 Copyright © Houghton Mifflin Company. All rights reserved. 3
Structural Forces • Three structural forces drive much of the change in today’s business: – Technological innovation – Globalization – Customer value imperative Copyright © Houghton Mifflin Company. All rights reserved. 4
The Information Value Chain • Managers must satisfy the interests of company stakeholders by developing and applying insight about business operations, stakeholder operations, and other market forces • The Information Value Chain highlights the difference between data and information. Copyright © Houghton Mifflin Company. All rights reserved. 5
The Information Value Chain Copyright © Houghton Mifflin Company. All rights reserved. 6
New Accounting Equation • Old Equation – Assets = Liability + Equity • New Equation – Data + Insight = Information • The new accounting equation forces managers to use their analytical abilities and insights to assess value. Without insight, “untransformed” data is likely to be of significantly less use and of substantially less value in today’s market. Business professionals are therefore forced to reconsider the work they do and the value they create. Copyright © Houghton Mifflin Company. All rights reserved. 7
Creating Value for the Customer • The customer value imperative requires a company to create value for its customers by delivering a product or service that meets three main consumer expectations: cost, customization, and service. • As a result, companies have refocused their attention on the strategies and business processes that deliver customer satisfaction. Copyright © Houghton Mifflin Company. All rights reserved. 8
The Business Value Chain • The chain of operations used to meet customer needs is the fundamental success factor for any firm. • The business value chain is a set of interrelated tasks or processes that companies execute to achieve their business strategy. The value chain can be described in terms of five core business processes: Copyright © Houghton Mifflin Company. All rights reserved. 9
Value Chain Trade-offs • Managers routinely make trade-offs between effectiveness and efficiency while managing the value chain. – Effectiveness can be described as “doing the right things” to satisfy customers, whereas efficiency means “doing things right” to ensure the company’s profitability. Copyright © Houghton Mifflin Company. All rights reserved. 10
Managing the Value Chain • Managers face seven primary questions when developing a business plan: 1. What products or services do customers need? 2. What processes are necessary to support customer requirements? 3. What sales and marketing strategy is needed to promote the product? 4. How will the inputs be procured? 5. What production processes are central to creating the product or service? 6. How will the product or services be delivered to customers? 7. What follow-up support do customers need? Copyright © Houghton Mifflin Company. All rights reserved. 11
The Balanced Scorecard as a Performance Evaluation Tool • The balanced scorecard is particularly powerful as an evaluation tool because it relies on both financial and nonfinancial measures to communicate to managers how specific business processes drive results. Using both kinds of measures can give a company a more complete picture of its progress toward meeting its strategies and goals. Copyright © Houghton Mifflin Company. All rights reserved. 12
Simple Balanced Scorecard Measures Copyright © Houghton Mifflin Company. All rights reserved. 13
Evaluating Financial Performance • Three standards company managers frequently use to evaluate financial performance: 1. The previous actual performance of their company 2. The company’s budget 3. The performance of the company’s peer group Copyright © Houghton Mifflin Company. All rights reserved. 14
Evaluating Nonfinancial Performance • Five dimensions of the non-financial performance measurement system: 1. Input information (e. g. , resource utilization reports, product cost reports) 2. Information on the process that creates customer value (e. g. , customer turnover, employee training, processing costs) 3. Efficiency or productivity information (e. g. , customer account processing times) 4. Output or results information (e. g. , customer sales, production reports) 5. Product or service quality assessment information (e. g. , closed account reports, market share data) Copyright © Houghton Mifflin Company. All rights reserved. 15
- Slides: 15