Chaining Actions to Value

What has been preserved of the Great Chain at Trophy Point at West Point, NY. (In the Public Domain, sourced from Wikipedia)
What has been preserved of the Great Chain at Trophy Point at West Point, NY. (In the Public Domain, sourced from Wikipedia)

One thing that often is missed by organisations is an understanding of how their complex operations contribute toward the satisfaction of the end user.

There are problems with this misunderstanding, most obviously:

  • Low job satisfaction & lack of purpose for employees
  • Disjointed and inefficient processes (not to mention isolating silos of work)
  • Misplaced investment and focus, and
  • Unhappy customers.

Losing focus on the customer will usually be the undoing of any private business; and is likely to be for a non-profit organisation too as it is likely to result in the drying up of funding. It is less clear cut for government departments though as they will go on existing in some form or another due to statutory or political requirements (or perceived requirements, anyway). However, without the motivation of profit or income, it can take an awfully long time for problems in policy and program delivery, and the supporting functions behind the scenes, to be recognised and rectified. It is often during the downturn of an economic cycle, when government is forced to make cuts, that such problems start to be addressed.

At the end of the day though, for complex organisations to be successful – ie to achieve their business goals and do so efficiently, cost-effectively and appropriately – it seems obvious that someone (or ideally everyone) has to have an understanding of how the operational chunks fit together in delivering the aims of the organisation.

I would like to skip back to my last post and the topic of business goals for a moment. We have stayed high level so far when we’ve talked about strategy, with very few concrete examples. (We’ll corkscrew into the details as the weeks go by.) However while in private enterprise the success of an organisation depends on customer satisfaction which generally translates into a dollar value goal, this is not the same for government.

I would suggest that a key role of a government department is to administer the will of the government (which is appointed to represent the population) in the most efficient, cost-effective and appropriate way for the constituency. There is no ultimate dollar goal as an easy measure at the end of this in the way that it is impossible to assign a dollar value to the enjoyment derived from a family holiday to the seaside. Therefore in setting up business goals for a government agency, it may be more pertinent to define a business goal in relation to the level of customer (end user) service provision or satisfaction.

Which leads me back to the purpose of the value chain – to visually demonstrate (in a relatively prescribed form) the way in which the operational chunks of the business add value to a raw product to eventually meet business goals.

Value chaining has been around since at least 1985 when Michael Porter publicised it in his bestselling management book about achieving competitive advantage (see ‘Value Chain’ in Wikipidia) and value chains are now an established tool for driving organisational success in private enterprise.The theory is that the high-level value-adding process of an organisation and the respective business units that own each part of the process can be best represented as/ understood as a chain.

It is worth noting (as Andrew Fearne does so clearly in his 2009 report to PIRSA; see http://www.pir.sa.gov.au/__data/assets/pdf_file/0017/120419/Fearne_Final_Report.pdf ) that this is different to traditional supply chain thinking. It is not about merely illustrating the steps that a product goes through before being hoisted on to a consumer. It is about illustrating the value that is added so as to produce a product desired by the market.

In short, three key points about value chains spring to my mind. Value chains are:

1. A way of representing how business units connect to each other – they link processes and business units together.
2. A way of focussing on the customer – everything is geared toward producing something that is valued by the people who should be valuing it’ rather than producing something that will not be used or appreciated (ie a waste of resources).
3. A way of seeing at what points value can be added – whether that be efficiency gains, greater cost effectiveness or a better end product. Conversely, by their omission it becomes apparent which points are superfluous).

So it should now be obvious why I see value chains as an important part of implementing strategy and achieving business goals in any organisation. They are like the ropes tying the sail to a ship’s mast – enabling the crew and its ship to not just be guided but be propelled to their desired destination once the excess baggage has been jettisoned. I acknowledge that simile needs a bit of work(!), but the point is that even business goals do not show how actors in complex value chains contribute value (or make it apparent where actors do not). Value chains provide a constant reminder.

What do you think?

Should value chains get more exposure at all levels of government? And do you have any good analogies for how they help generally?

What do you think?