What is the value triangle?

“Every business is the same inside” – Ram Charan

The concept of the value triangle was inspired by Ram Charan’s book, What The CEO Wants You To Know, in which he talks about the “universal language and laws that govern every business”, and how business acumen comes from understanding the fundamental “building blocks of money making.”

The value triangle is a visual metaphor for the three basic building blocks of any business system:

  • A customer who has a need (and the means to pay)
  • A product or service to fulfill that need.
  • A set of assets to perform the value-added or transformation

These three building blocks are universal across a variety of business models ranging from very simple (a lemonade stand) to complex (a multinational enterprise) to extremely complex systems (global economy.) What the value triangle shows is that they all have the same structure because the business system is based on these three fundamental or atomic elements. Continue reading

Advertisements

Reconnecting the virtuous circle

In a recent article titled “Is US business abandoning the middle class?”, Chrystia Freeland of Reuters (and former US managing editor of the Financial Times) sums up the bedrock of American prosperity for the past century:

Twentieth-century American capitalism was built on what you might call the Henry Ford model — generously compensated workers (Ford paid double the existing rate) created a mass middle class that bought the products of the country’s entrepreneurs. That virtuous circle made the United States the world’s economic behemoth, and created a society and a political discourse defined by a proudly acquisitive middle class — the United States’ much admired and much maligned consumer culture.

When the chief of General Motors, Charles Wilson, told a Senate confirmation hearing in 1953 that he believed that what was good for the country was good for G.M. and vice versa, he took some flak for uttering such a self-serving line. But we all remember it because Mr. Wilson captured something axiomatic about the connection between the fortunes of U.S. business and the welfare of the country as a whole.”

Continue reading