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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.

To receive analytical tools and insights, please contact astinson@iservicex.com