Key Concepts Introduction
Any organization seeks to offer value to their stakeholders with their proposition. To establish this the organization needs a so-called Management Charter, consisting of essential behavior that enables the fulfillment of the strategic goals. These are the essential components of any organization.
Enterprise Architects speak of organization and not of a company or enterprise. Any human organization needs above mentioned 4 essential components. We also speak of a proposition, which is far more complex than products and services alone. All essential marketing issues are contained in the proposition, be they products, services, resources, marketing channels, price lines, discounts & rebates, components of loyalty programs, etc.
In our vision, Enterprise Architecture should start with what Goldrath calls the Goal of the organization (Eliyahu Goldratt, 1984, “The Goal”, North River Press). Contrary to Goldratt Enterprise Architects doesn’t accept that the goal of any organization is to optimize profit, simply because this is not applicable for all organizations. Some organizations are especially set up to develop innovations and sometimes these innovations will fail.
Also, the goal of not-for-profit organizations, non-profit organizations, and governmental organizations cannot be profit. Their public tasks necessitate them to create value for other performance indicators than profitability. They also don't have customers in the commercial context. And value should be created for more parties than only the customers. So we speak of stakeholders instead.
Based on this reasoning, Enterprise Architects developed the Value Creation Approach or VCA. First of all, VCA is not based on money alone: value is more than money and can be expressed in very different dimensions of Value Creation. Based on the view or standpoint management takes, specific dimensions become more relevant than others. So sometimes optimizing revenues and mitigating risks are relevant, other times the creation of profit and quality, while yet another standpoint might focus on waste.
As a result VCA is based on different concepts:
- The Organizational Paradigm
- The Value Proposition
- The Value Creation Model, and
- The Management Charter
Please visit the pages where we discuss these concepts.