Information on Cost and Value
We cannot achieve results until we have information on cost and value.
Basic structural information is focused upon the value that is created for customers and the resources used to do so. The concepts and tools of accounting are now in the throes of its most fundamental change. The new accounting tools are not just different views of recording transactions but represent different concepts of what business is and what results are. So even the executive far removed from any work in accounting, such as a research manager in a development laboratory, needs to understand the basic theory and concepts represented by these changes in accounting. These new concepts and tools include: activity-based costing, price led costing, economic-chain costing, economic value added, and bench-marking.
Activity-based costing reports all the costs of a product or service until the customer actually buys the product, and provides the foundation for integrating cost and value into one analysis.
ACTION PONT: Pick up a book on Activity-Based Costing and become proficient with the strategic, conceptual, and procedural issues of this accounting concept.
The problem is not with technology. It is with mentality.
Traditionally, Western companies have started with costs, put a desired profit margin on top, and arrived at a price. This is cost-led pricing. In price-led costing, the price the customer is willing to pay determines allowable costs, beginning with design costs and ending with service costs. Marketing provides information on the price the customer is willing to pay for the value the product or service provides.
A cross-functional team starts its analysis of costs by taking this price as a given. The team then subtracts the profit required to compensate the enterprise for capital investment and risk, and arrives at an allowable cost for a product or service. Then it proceeds to make the tradeoffs between the utility provided by a product and allowable cost. Under price-led costing, the entire economic framework focuses upon creating value for the customer and meeting cost targets while earning the necessary rate of return on investment.
ACTION POINT: Examine the cost-and-pricing procedures used in your organization. Are they cost-led pricing or price-led costing? Focus of creating value for your customer and implement price-led costing.
“Hope Smiles from the threshold of the year to come, Whispering ‘it will be happier’…”
“For last year’s words belong to last year’s language
And next year’s words await another voice.”
T.S. Eliot, Four Quartets
“I hope that in this year to come, you make mistakes.
Because if you are making mistakes, then you are making new things, trying new things, learning, living, pushing yourself, changing yourself, changing your world. You’re doing things you’ve never done before, and more importantly, you’re Doing Something.
So that’s my wish for you, and all of us, and my wish for myself. Make New Mistakes. Make glorious, amazing mistakes. Make mistakes nobody’s ever made before. Don’t freeze, don’t stop, don’t worry that it isn’t good enough, or it isn’t perfect, whatever it is: art, or love, or work or family or life.
Whatever it is you’re scared of doing, Do it.
Make your mistakes, next year and forever.”
“Tomorrow, is the first blank page of a 365 page book. Write a good one.”
“Cheers to a new year and another chance for us to get it right.”
“For last year’s words belong to last year’s language
And next year’s words await another voice.
And to make an end is to make a beginning.”
“May Light always surround you;
Hope kindle and rebound you.
May your Hurts turn to Healing;
Your Heart embrace Feeling.
May Wounds become Wisdom;
Every Kindness a Prism.
May Laughter infect you;
Your Passion resurrect you.
May Goodness inspire
your Deepest Desires.
Through all that you Reach For,
May your arms Never Tire.”
“We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year’s Day.”
Edith Lovejoy Pierce
“May the New Year bring you courage to break your resolutions early! My own plan is to swear off every kind of virtue, so that I triumph even when I fall!”
“A bridge of silver wings stretches from the dead ashes of an unforgiving nightmare to the jeweled vision of a life started anew.”
“I would say happy new year but it’s not happy; it’s exactly the same as last year except colder.”
“The object of a New Year is not that we should have a new year. It is that we should have a new soul and a new nose; new feet, a new backbone, new ears, and new eyes. Unless a particular man made New Year resolutions, he would make no resolutions. Unless a man starts afresh about things, he will certainly do nothing effective.”
“We spend January 1st walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives…not looking for flaws, but for potential.”
“This is the new year the new you. You can pass through another year, coasting on cruise control. Or you can step out of your comfort zone, trying things you have never done before, & make 2012 as the year that you elevate from where you are & soar high. Make it happen!”
“Each age has deemed the new-born year
The fittest time for festal cheer.”
“Each New Year, we have before us a brand new book containing 365 blank pages. Let us fill them with all the forgotten things from last year—the words we forgot to say, the love we forgot to show, and the charity we forgot to offer.”
Peggy Toney Horton