Value Realization Methodology: Putting Dollars to Operational Excellence

Businesses either struggle their way forward or plan and execute successfully according to valid goals and objectives.  But even when doing the right things, businesses frequently find it difficult to take empirical measure of progress and favorable influence to the bottom line.  The shifting sands of streaming challenges, adjustments, and planned progressions can be quite challenging when attempting assessments.

Here is where Value Realization Methodology (VRM) makes its solid contribution.  Value realization:  Realization both in a business arrival sense, in reaching the destination of true value achieved, and realization in terms of an ability to recognize that which produced and delivered true value.  In other words, ultimately, what was the dollar cost of any transformational change, and what dollar benefit was delivered to the bottom line?

VRM provides the tools and methods for any business to take stock of its condition and opportunities.  It provides direct information on top and bottom line metrics such as:  profitable sales growth, operating income, cash flow, cost of goods sold (COGS), productivity and efficiency, indirect and overhead cost, working capital, inventory and carrying costs, accounts receivable, earnings per share (EPS), and other metrics unique to specific companies.

How does VRM achieve this?  In part, through a balance of diagnosis (much as a doctor would need to diagnose a patient before ever attempting treatment) and a unique mapping of the organization’s business and allied processes to goals, projects, deliverables, actual results, and more.

Three primary maps, the Physical, Virtual, and Financial maps, comprise a set of “current state” maps – showing the company’s present health:  A business may be “sick” – losing money, market share, or customers.  There will be average businesses, moving along but not making the most of their opportunities and not knowing how.  Other businesses will be “best in class,” but who will have the burden of continued prudent progressions in an accelerative climate of change.

For both of these business states, and all those in between, the VRM maps yield useful views of the business as a whole and its allied processes, such as the Financial Map’s exposure of cost build ups through an organization.  This helps to project future expenses and benefits.  Closely allied with this map is the Benefits Map, which shows direct financial benefits from process improvements.  Further mapping provides a robust, whole view that helps the organization tweak and tune its way to optimal performance and progressions.

VRM can be employed as a stand-alone, but it is also compatible with Lean, Six Sigma, TQM, and other approaches to organizational efficiency.  But beyond that, VRM also sponsors buy-in for transformation from the senior executive class and the whole of the organization, as it exposes where the dollars go and what the dollars actually benefit.  With this level of transparency and the ability to set matching practices for optimal results, it is possible to set proper expectations for known and agreed upon returns.

About the AuthorKendall Scheer is an accomplished Supply Chain, Lean and Information Technology professional. He was the 2004-2006 President of the Greater Detroit Chapter of APICS. Kendall’s functionally diverse background is three dimensional: as client, vendor and consultant. This provides him a unique perspective to accurately spot realizable and justifiable transformation opportunities spanning multiple functions and varied technologies.

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