Core Business Fundamentals

The fundamental core of any business is a transformation process. That transformation is embodied in manufacturing as a physical change to a product. In a transportation or logistics business it can take the form of movement of items or people from one location to another. In a service industry it can be more difficult to discern. Education, for example, is the transfer of knowledge to the student. A lawyer, as another example, uses specialized knowledge to replace that of the client to represent the clients interest.

What makes the transformation process important is that someone else, a customer, is willing to pay for that process. In the eyes of the customer the process adds value. Business is based on this value to the customer. It sets the market price for the output of the process. It can also indicate, when the business listens to the voice of its customers, what they want or for what they are willing to pay. Applying some advanced business tools will allow a business to focus on the parts of the overall process that add value in the eyes of the customer and eliminate those that do not.



The object is to perform the process at the lowest cost and yet fulfill all the customer’s desires. The difference between what the customer is willing to pay and the processing cost is the profit that keeps the business in operation. Business systems such as ERP (Enterprise Resource Planning), the disciplines of Lean and six sigma, and the root cause analysis or Theory of Constraints are tools to use in improving the cost versus price ratio. That improvement means improved profit or lower total cost.