Updated: Jan 6
Every plan, business, or endeavor happens in the presence of uncertainty. That is why your value chain needs to operate between the lines of productivity (to increase margin) and compliance (to reduce risk). Together, they afford an organization resilience against disruption and progress towards achieving mission objectives.
The value chain is responsible for creating value in the eyes of the stakeholders and it does so in the presence of uncertainty.
Productivity programs serve the value chain by improving margins through operational excellence. Margins are necessary to mitigate the effects of aleatory (i.e. irreducible) uncertainty. It also affords an organization a degree of resilience against disruption.
Compliance programs also serve the value chain by mitigating the effects of epistemic (i.e. reducible) uncertainty. It does this by buying down risk through effective quality, safety, security, environmental, and regulatory systems and processes.
To succeed in the presence of uncertainty a balanced scorecard should include objectives and measures that let's you know how well you are doing across productivity, value, and compliance streams.