I am borrowing a few words about Input, Throughput, Output, Outcomes from Derrick Mains, aka the Process Fixer.
Mains also uses a phrase: “How the Sausage is Made” to describe the often hidden and complex processes behind decisions and outcomes, particularly in business and policy, emphasizing the importance of understanding the inner workings to improve efficiency and effectiveness.
He basically says most business owners are flying blind. They are selling sausages, yet have no clue how they are made or what goes in the grinder. They focus on the end product and ignore the messy mechanics of how it is made, which is why their operations end up as, well…a total grind.
At the heart of Deming: To improve Quality is to improve the process.
I love what Derrick Mains says about Input, Throughput, Output, Outcomes:
Inputs are money coming in.
Outputs are products/services going out.
Outcomes are the satisfaction/value customers get from your outputs.
Throughput is where value is created and margins are determined.
Most companies can name their metrics around input down to the fraction (customer acquisition costs, number of leads, conversions).
Nearly all of them can tell you about their outputs (units shipped, customers served, square feet built, how much profit they are left with).
Some of them can even tell you about outcomes (customer satisfaction, NPS, churn rates, renewals).
Yet very, very few can tell you anything of meaning about throughputs (process capabilities, run rates, constraints, dependencies, fluctuations, deviations, asymmetries).
Odd how the thing that creates value,
The only thing that guarantees profit,
The only reason that customers buy from you (value),
Is the thing business owners know the least about.
I am going to change that.
Just in case you didn’t get that: This is a lengthy regurgitation:
Understanding Input, Throughput, Output, and Outcomes in Business:
Every business is essentially a system, and like any system, it operates based on the flow of resources and processes that transform raw materials into valuable results. A structured way to analyze this process is through the framework of Input, Throughput, Output, and Outcomes. Understanding these four stages can help business owners, managers, and strategists optimize operations, improve efficiency, and drive better results.
1. Input: The Raw Materials of Success
Inputs are the foundational resources that initiate any business process. These can include:
- Human resources (employees, contractors, consultants)
- Physical materials (raw materials, components, inventory)
- Financial resources (capital, investment, credit)
- Technology (software, machinery, tools)
- Data and information (market research, customer insights, trends)
Optimizing inputs means ensuring that the right resources are acquired and utilized effectively to avoid waste and inefficiencies.
2. Throughput: The Engine of Value Creation
Throughput refers to the internal processes and transformations that take place within a system to convert inputs into outputs. This is where businesses create value through:
- Production and Manufacturing – Turning raw materials into finished products efficiently while minimizing waste.
- Workflow and Operations Management – Streamlining processes to reduce bottlenecks, improve coordination, and enhance productivity.
- Innovation and Problem-Solving – Developing new products, refining services, and improving internal methods to stay competitive.
- Quality Control and Process Improvement – Ensuring that each stage of production or service delivery meets high standards through methodologies such as lean management, Six Sigma, and continuous improvement (Kaizen).
- Employee Training and Development – Enhancing the skills and knowledge of employees to ensure they perform at their highest potential, leading to better efficiency and innovation.
Adding Value in Throughput:
This involves making processes faster, cheaper, and better without compromising quality. Businesses can achieve this by:
- Eliminating Waste – Identifying inefficiencies in production, reducing downtime, and optimizing resource use.
- Automating Processes – Using technology to speed up repetitive tasks, allowing employees to focus on high-value activities.
- Enhancing Customer Experience – Designing processes that prioritize customer needs, ensuring that products and services exceed expectations.
- Leveraging Data and Analytics – Using insights to improve decision-making and anticipate customer demands.
- Encouraging Innovation – Continually refining products, services, and internal processes to maintain a competitive edge.
3. Output: Delivering Results
Outputs are the tangible and measurable results of the throughput process. These could be:
- Products or services delivered to customers
- Completed projects or reports
- Sales transactions and revenue generation
- Customer service interactions
While outputs are crucial indicators of operational efficiency, they should not be confused with final success. Producing a large number of goods does not necessarily mean success if customers do not find value in them.
4. Outcomes: The True Measure of Success
Outcomes refer to the broader impact and effectiveness of the business activities. They reflect long-term success and customer satisfaction. Examples include:
- Customer satisfaction and loyalty
- Brand reputation and market influence
- Revenue growth and profitability
- Social and environmental impact
- Competitive advantage and market positioning
A business can generate high outputs but still fail if the outcomes do not align with strategic goals. Measuring outcomes requires a focus on key performance indicators (KPIs), feedback mechanisms, and long-term vision.
Bringing It All Together
For sustainable success, businesses must balance and optimize all four stages:
- Strong Inputs ensure that resources are available and of high quality.
- Efficient Throughput ensures that processes create maximum value with minimal waste.
- High-Quality Outputs ensure that the business delivers what it promises.
- Meaningful Outcomes ensure that efforts translate into real success and long-term impact.
By understanding and applying this framework, businesses can drive continual improvement and position themselves for sustained growth in a competitive market.
Are you applying this framework in your business? What challenges do you face in optimizing these four areas?
If you want to hear a great speaker describe Deming, here it is: