Business as a Transformation Process

All organisations are involved in some form of transformation process. They take inputs such as land, labour, capital and entrepreneurship and turn them into outputs such as physical goods and intangible services. In many cases the output of a business is a combination of goods and services; for example in a restaurant you are buying a meal but also the environment and the service. The aim of all organisations is to add value i.e. to create outputs that are worth more than the inputs. In many cases the value of inputs is measured in financial terms in which case we say that organisations aim to make a profit. A profit occurs when the revenue generated by sales exceeds the costs of providing the product. In the case of non profit organisations such as schools and hospitals, other indicators are used to measure the value added. League tables of schools' performances, for example, might measure exam results and compare the grades achieved by students with their levels of achievement when they joined the school to measure the progress.

The nature of the transformation process obviously differs enormously from business to business. For example, it may involve manufacturing or providing services, it may be capital or labour intensive or be based on a single site or multi site. However whatever the nature of the business managers are constantly looking for new ways of adding value either by providing benefits and products that customers are willing to pay more for or by combining resources more efficiently to reduce costs.

To increase efficiency managers are always seeking ways of producing more with the same level of inputs or producing the same amount with less inputs. This can be achieved in a variety of ways: changing working practices, investing in new technology, motivating and inspiring staff more effectively and changing the way items are produced. For example, an important development in manufacturing in the last twenty years is known as lean production.