iForce Consulting developed a framework called the "Golden Triangle of Value Generation" which identifies three universal areas of corporate value generation: 1) Customer Management, 2) Cost Management, and 3) Cashflow Management. The paper argues that successful companies must link their market strategies to their cost base and cashflow in order to ensure long-term growth and competitive advantage. It provides examples of how different companies can manage strategies related to customers, costs, and cashflow depending on whether their business involves products or services and whether cashflow is stable or unstable. The framework is intended to help companies identify key performance indicators and initiatives to focus on the primary drivers of value.

1. iForce Consulting
The Golden Triangle of Value Generation
Whitepaper (May, 2002)
Paul Lim

2. 1
The New Economy started not with the Internet, but with the railroads. Business is still adjusting to that
transition, the one that started 160 years ago; until we understand its imperatives, we won’t succeed in any
economy.
Alfred D. Chandler
A PERSPECTIVE ON VALUE
iForce Consulting (“iForce”) has developed this paper to highlight to key executives the importance of key
value categories and provides a case on which to start focussing on the correct organisational initiatives and
performance implementation.
To examine current business realities companies need to start clarifying where their zones of value reside.
This must start with framework focussing on the primary value drivers of the firm. This paper is written
concerning the question, “What are the essential components of value every business must have in place to
survive and prosper?” We discovered through many interactions and dialogues that companies need to
focus on three universal areas of corporate value generation:
1. Customer management;
2. Cost management;
3. Cashflow management.
Each and every senior executive’s priorities will fall in one or more of these categories. For a company as a
whole, real challenge is prioritise at any given moment the initiatives to excel and innovate in all the three
categories. Most enterprises will have unique approaches and weigh different priorities to these depending
on business expectations, competition, and other realities. The model we are proposing has one simple
premise: That successful companies must link market strategies to their cost base and cashflow to optimally
ensure long term growth and competitive advantage.
CUSTOMER MANAGEMENT
Customer acquisition and retention strategies are a function of the value proposition to a selected customer
base(s). The link between the organisation and its customers is the point of wealth transfer and justifies
organisational existence, planning, resources and investment. Therefore, customer management should be
a comprehensive and pervasive strategy rather than a particular solution to a sales objective. The customer
value proposition must be the initial justification for:
 Organisational Design
 Core Capabilities
 Competitive Advantage
iForce has a distinct process for uncovering the corporate assumptions held about the unique value
proposition. The value proposition is a key driver of corporate design and it must justify all functional roles,
processes and technology adopted.

3. 2
Value Generation Drivers
External Drivers Internal Drivers
Customer
Requirements
Value
Proposition
Organisational
Design, Strategy
& Systems
Competitive
Advantage
Creates
Establishes
Core
Capabilities
Supports
DeterminesFit
Segment 1
Segment N
Segment 2
Source: iForce Consulting
Competitive
Advantage
Core
Capabilities
Organisational
Design, Strategy
& Systems
Value
Proposition
Competition and substitutes
Maintains
Fit
EstablishesMaintains
Determines
Creates
Supports
Companies often find widening segment gaps between their product (or service) and actual customer needs.
The lesson here is that customer segments do (and should be expected to) change for a variety of reasons.
From examining the diagram, a number of implications can be drawn:
 Customer requirements (establishing the value proposition) should be a key driver of organisational
design;
 Companies must constantly ensure they are finetuning their value proposition to their customer
segments and thus how they prioritise their work processes.
 Certain service dimensions may require significant investments to develop core capabilities and
competitive advantage (for example an internet data-centre promising 99.9% high availability of
bandwidth).
COST MANAGEMENT
Superior cost management is a driving competency for firms in highly mature product or service markets.
Cost structure and allocation need to be linked back to the organisational value proposition and be justified
by corporate and functional objectives.
Costs should be allocated to the final deliverable and processes and should be segmented further into:
 Fixed (long term investments)
 Variable (as related to cost of goods)
 Ongoing (ongoing supportive costs)
Once a company understands its cost structure it then gains strategic benefits by being able to manage it
profits better. It is now is a better position to compete with competitors and adopt new pricing strategies.
The environment and business confidence will have a strong bearing on the total allocation of these costs
and will be reflected in how much is kept in-house or is outsourced as highlighted in the flowing diagram:

4. 3
External Drivers Internal Drivers
Customer
Requirements
Value
Proposition
Organisational
Design, Strategy
& Systems
Competitive
Advantage
Creates
Establishes
Core
Capabilities
Supports
Maintains
DeterminesFit
Segment 1
Segment N
Segment 2
Source: iForce Consulting
Investment/Cost Management
(degree of inhouse versus
outsourced or fixed/ongoing
versus variable)
Value Generation Drivers
CASHFLOW MANAGEMENT
Many successful companies (e.g. General Electric, Dell) have realised and proven that cashflow
management is often a stronger influence of corporate strategy than anything else. Cashflow is often linked
to the optimal management ongoing internal costs, external payments and receivable from customers. The
ideal sate for a business is to have positive cash to cash cycles. In today’s competitive environments, linking
cashflow management to corporate strategy is of vital importance.
For example, costs categories can be defined as internal or external (suppliers or partners) and the
management of these will vary significantly. The below diagram highlights these two categories and the
different colours represent the internal and external nature of incoming and outgoing cashflow.
External
payments
Company Customers
Ongoing
internal costs
positivenegative
Copyright: iForce Consulting, 2002
A key benefit of outsourcing non-core processes is that cashflow payments can more easily be timed with
receivables (credit terms can be structured with the outsourcing partner). Cashflow management now
becomes a comprehensive strategy that seeks to optimise both payments flexibility and profit margin. Two
dimensions that will affect corporate strategy are cashflow variability and the value offering (product or
service) of the firm as highlighted in the Cashflow Management Strategy Matrix:

5. 4
(Invest)
Optimise costs
Build production
capability
(Outsource)
Collaborative
strategies
Demand management
(Extend)
Extend & build
complementary
services
(Associate)
Multiple revenue
sharing partnerships
Cashflow
Value Offering
Product
Service
stable unstable
Cashflow Management Strategy Matrix
Copyright: iForce Consulting, 2002
Stable Cashflow Strategies
Service firms experiencing relatively stable cashflow use strategies to extend their service offerings to
include new yet complementary services. Traditional auditing firms are an example, having established
longstanding auditing relationships many have successfully extended their services into management
consulting, information technology, executive search practices, etc.
In situations where a company is producing a tangible product and there are no surprises in future cashflow
expectations (stable state cashflow) a company should invest in optimising costs and focus on building
production capability to incrementally scale up. These are often products in mature markets with relatively
well established supply chains. Process manufacturing is an associated model.
Unstable Cashflow Strategies
Service firms with unstable states of cashflow develop strong associations with key partners that may be
initiated wen deals arise. This is similar to generating multiple options and only gets exercised at will
(options increase in value the more volatility they experience). Project based industries often can fall in this
category – often relying on multiple relationships to complete an assignment. The more affiliations a
company has established (with vendors, partners and industry affiliations) the higher a strong possibility that
these firms that are project dependent. Customer relationships with these firms often only extend for the
duration of their assignments.
For product firms this means joint strategies with key partners to develop market and to manage consumer
demand variability. Collaborative vendor practices fit in this category. Long term investments into production
capacity could be risky and outsourcing relationships sprout up to minimise risk. Discrete (batch) processes
are also often associated with this model.

6. 5
DESIGNING APPLICATIONS AND PERFORMANCE INTO THE GOLDEN TRIANGLE
Looking at the three categories from systems perspective it becomes clear that strategic applications can be
reviewed around these value categories. The integration of these categories with each other ensures
applications work effectively and cross-functionally as a whole.
Cost
Management
Customer
Management
Cash
Management
Channel management
Financial monitoring & reporting
Inventory management
Sales and distribution planning
Collaborative supply systems
Enterprise application integration
Logistics management
Workflow optimisation
Customer profiling
Product life cycle analysis
Revenue optimisation
Sales force automation
Segmentational profiling
integration
integration
integration
Golden Triangle of Business Value Categories
Copyright: iForce Consulting, 2001
The framework can be used for initiating corporate wide performance systems and each category can be
considered a possible perspective in which to place key success factors and key performance indicators.
The Golden Triangle focuses on core value categories and commonalities identified in multiple business
environments, all with the same underlying principles and challenges. Once there is an understanding of
these drivers, innovation will happen through the creation of more effective processes, the delivery of better
products and services and the optimal use of technology. The first step, and possibly the most challenging,
is to start looking at the true value drivers that have brought a business to where it is today and consequently
create the competitive staying power needed for the future.