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Date: 2022-05-28 Page is: DBtxt001.php L0700-TVM-FLOW-PROCESS-CHANGEinSTATE
TRUE VALUE METRICS
FLOW / PROCESS / CHANGE in STATE

ACTIVITIES USE RESOURCES AND DELIVER RESULTS
Details of activities are not needed to measure PROGRESS
PROGRESS is the increase in VALUE (of the STATE) from beginning to end of the period
Simply measure the change in the VALUE or everything

PROGRESS IS CHANGE IN STATE
The Relationship Between Original State, Period Activities and New State Determines Progress and Performance
What this means is that PROGRESS can be ascertained by reference to the state at the beginning and the end of a period, with no need to have any knowledge of the activities during the period that results in the change.
When this is at the core of the progress measurement method, it enables a significant simplification of the data collection and analysis process.
This idea has been at the center of double entry accounting for centuries, and is very powerful.
In this case the activities of the period do not change the state ... state at the end of the period (EOP) is the same as at the beginning of the period (BOP)
There is GOOD progress when the activities of the period result in a state at the end of the period that is better than the state at the beginning of the period.
There is BAD progress when the activities of the period result in a state at the end of the period that is worse than the state at the beginning of the period.
The problem with conventional accounting is that while it does a very good job for money based transactions, it ignores all the impact that is not measured with money and included in the core transaction.
Since the beginning of the industrial revolution, the growth of conventional financial wealth has come while human capital has been exploited and natural capital has been depleted. When the global economy was quite small in size, the natural capital depletion did not represent an existential threat, but the scale of the modern industrial activity has now reached a level where natural capital depletion is a significiant risk.


PROCESS
THE MAIN DETERMINANT OF SOCIO-ENVIRO-ECONOMIC EFFICIENCY
PROCESS IS EVERYWHERE ...

NOTE: The PROCESS is equivalent to the NODE in context / entity / relationship diagrams

PROCESS uses inputs (labor, materials, energy, knowhow, natural resources, etc.) and in the process degrades the environment;
PROCESS produces PRODUCTS (goods and services) ... outputs ... that enable good quality of life and living standards.
The EFFICIENCY of the PROCESS determines the IMPACT on PEOPLE and PLANET.
EFFICIENCY is not only the PROFITABILTY of the PROCESS …
… but also how much GOOD IMPACT there is for PEOPLE …
… and how little BAD IMPACT for SOCIETY and the ENVIRONMENT.

PROGRESS IS CHANGE IN STATE
The Relationship Between Original State, Period Activities and New State Determines Progress and Performance
Financial Accounts and related management information are very powerful
HOWEVER ...
Financial accounts describe economic activity in financial or money terms while completely ignoring impact on everything else.



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