The Business Excellence Trigon starts from a simple premise: business performance cannot be optimised one dimension at a time.
Companies have spent decades professionalizing how they sell and how they operate. Commercial Excellence and Operational Excellence are established management disciplines, supported by dedicated functions, methodologies, performance measures and improvement programs.
Yet far fewer companies apply the same discipline to the operating capital those activities consume.
For example, operating working capital is closely monitored in most businesses, but it is often treated primarily as a financial outcome. This is often measured through inventory, receivables, payables and cash conversion – rather than as a management dimension in its own right.
This creates an important blind spot.
The amount of operating working capital a company requires is largely determined by the same commercial and operational decisions being optimized elsewhere in the business.
These decisions are deeply interconnected. A decision that improves performance in one area can create unintended consequences elsewhere. Higher production utilization may reduce unit cost while creating excess inventory. Lower inventory may release cash while reducing product availability. More generous customer terms may increase receivables while enabling profitable growth.
The challenge is therefore not to maximize Commercial, Operational or Capital Excellence independently, but to optimize their combined impact on the performance of the business as a whole.
This interconnectedness lies at the heart of what we call the Business Excellence Trigon.
Developed by Working Capital Hub, the framework brings Commercial Excellence, Operational Excellence and Capital Excellence together as three equal and interconnected dimensions of business performance. It provides a way of understanding the synergies and trade-offs between them – and how their interaction ultimately determines a company’s ability to generate growth, profitability and cash flow simultaneously and sustainably.
The Business Excellence Trigon brings together three dimensions of business performance: Commercial Excellence, Operational Excellence and Capital Excellence.
Rather than treating them as separate objectives, the framework considers them as parts of one interconnected system. Each plays a distinct role in determining how successfully a business can capture demand, fulfil that demand and deploy the capital required to do so.
| Dimension | Description |
|---|---|
| Commercial Excellence | Commercial Excellence is about identifying and capturing the right revenue and growth opportunities. It encompasses customer and market selection, product and service strategy, pricing, contracting, sales and demand planning. Growth alone, however, does not constitute Commercial Excellence. The demand a company chooses to pursue must create sufficient economic value and be compatible with the company's operational capabilities and the resources required to serve it. Commercial Excellence is therefore not simply about selling more, but about capturing relevant and valuable demand. |
| Operational Excellence | Operational Excellence is about delivering the company's commercial proposition efficiently and reliably. It involves optimizing processes, reducing waste and making productive use of people, assets and capacity to deliver products and services at the required cost, quality and service level. But maximizing local productivity does not necessarily maximize business performance. Decisions designed to improve utilization, reduce unit cost or increase output can consume unnecessary resources and capital or reduce the flexibility needed to respond to customer demand. Operational Excellence is therefore not simply about producing more efficiently, but about delivering efficient supply. |
| Capital Excellence | Capital Excellence is about deploying the right amount of capital, in the right places, to support the company's commercial and operational objectives while generating an appropriate return on that capital. It encompasses both fixed and operating capital - from investments in assets, capacity and capabilities to the working capital tied up in inventory, receivables and payables. Excellence does not mean simply minimizing capital employed. Too much capital can represent waste, inefficiency and underutilised resources; too little can constrain operations, damage customer service and restrict growth. Capital Excellence therefore requires understanding where capital is structurally required, how much is needed, and where its deployment creates the greatest value. |
Capital Excellence encompasses both fixed and operating capital. Given the focus of Working Capital Hub, the remainder of this article explores the framework primarily through the lens of operating working capital – the capital tied up in inventory, receivables and payables. The underlying principles, however, extend beyond working capital to the broader deployment of capital across the business.
New to operating working capital? Explore how inventory, receivables and payables combine to determine the capital tied up in day-to-day operations → What Is Operating Working Capital? Definition, Formula & Business Application
Maintaining a cross-functional and holistic focus is difficult. This is because business functions often operate in silos, competing for resources and working towards different priorities. Targets, performance measures and incentives are frequently tied to functional rather than overall business performance.
As a result, Commercial, Operational and Capital Excellence can each be optimized independently, with insufficient consideration of how decisions in one area affect the others. What appears rational from the perspective of one function can create bias, inefficiency or lost value elsewhere in the business.
The Business Excellence Trigon provides a framework for making these interdependencies visible. Rather than maximizing each dimension independently, the objective is to optimize the performance across the interconnected system.
Importantly, this does not necessarily mean compromise. Better alignment can often improve all three dimensions simultaneously – supporting growth, improving profitability and releasing cash.
Why do businesses consistently carry more working capital than they need?
Working Capital Bias explores how incentives, risk perceptions and local decision-making can systematically push inventory, receivables and payables away from their economically appropriate levels.
→ Explore Working Capital Bias
The real value of the Business Excellence Trigon becomes apparent when we look beyond its three individual dimensions and examine where they intersect.
Commercial, Operational and Capital Excellence each contain their own disciplines, processes and performance measures. But business outcomes are rarely created within one function or dimension alone. They emerge from the interaction between them.
The three intersections reveal three fundamental characteristics of business performance: Margin, Efficiency and Effectiveness.
| Intersection | Description |
|---|---|
| Margin | Margin considers whether the business generates sufficient economic value from the demand it captures and fulfils. |
| Efficiency | Efficiency considers whether the business generates the greatest possible value from the resources and capital it employs. |
| Effectiveness | Effectiveness considers whether those resources and capital are deployed where they create the greatest commercial value. |
Importantly, these are not three independent objectives or categories of decisions. They are three different lenses through which the same business decision can be evaluated. A single decision can improve performance through one lens while weakening it through another.
The purpose of the Trigon is therefore not to assign decisions to individual intersections, but to understand their combined impact on the performance of the business as a whole.
The question: Are we generating sufficient value from what we sell relative to what it costs us to deliver?
The relationship between the two is fundamental. Commercial decisions determine what customers and markets the business serves, what it sells, at what price and under what conditions. These choices, in turn, place demands on the operational setup. Product variety, customer-specific requirements, order patterns, service expectations and delivery commitments all influence the cost and complexity of fulfilling that demand.
Likewise, operational capabilities and constraints influence what the business can profitably offer its customers. Pursuing revenue without sufficient consideration of these realities can result in complexity, overtime, expedited shipments, inefficient production schedules and other costs that erode the value of additional sales.
Creating alignment between Commercial and Operational Excellence is therefore critical. Integrated planning processes, such as Sales & Operations Planning, help establish a shared view of demand and supply and align commercial ambitions with operational capabilities. This allows the business to pursue relevant demand while making effective use of its available capacity and resources.
Importantly, the objective is not simply to maximize revenue or minimize operating cost independently. A sale that generates significant revenue but requires disproportionate cost or complexity to fulfil may create little economic value. Conversely, an operational model designed purely for maximum productivity may constrain the flexibility, product offering or service levels required to capture attractive market opportunities.
Margin therefore represents the intersection between Commercial and Operational Excellence: the company’s ability to convert its commercial proposition into profitable operational output.
The question: Are we using our operational resources and capital productively?
Margin, however, tells only part of the story. A business can generate attractive margins while still consuming more resources and capital than necessary to generate them. To understand whether the underlying operating model is truly efficient, we therefore also need to consider the relationship between Operational Excellence and Capital Excellence.
In the context of the Business Excellence Trigon, efficiency is not simply about maximizing productivity or minimizing unit cost. It considers the relationship between the output a business generates, and the total resources required to generate it, including the operating capital tied up along the way.
This distinction is important because traditional measures of operational efficiency can encourage decisions that appear beneficial when viewed locally but become inefficient when viewed across the business as a whole.
The apparent improvement in local efficiency has therefore come at the expense of efficiency elsewhere in the system. Fewer changeovers and lower unit costs have been achieved by consuming more working capital, warehouse space and other resources than could be better deployed somewhere else.
An activity cannot be considered truly efficient simply because it lowers its own unit cost or improves utilization. Efficiency must be assessed against the total resources consumed in generating the output the business requires.
This principle is closely aligned with the original philosophy of Lean Manufacturing. Taiichi Ohno’s seven wastes include both overproduction – producing more than is needed or producing too soon – and inventory -holding excess materials and products that are not being processed or sold in a timely manner.
Ohno recognized that large-volume purchases and increased production batches may appear to increase productivity or reduce cost on paper, while in reality creating idle assets. Without corresponding demand, materials, production capacity and cash have been consumed without generating additional value.
Capital Excellence therefore provides an important additional lens through which operational performance should be assessed. It asks not only how much output is generated from operational resources, but also how much capital is required to generate that output.
Measures such as the cash conversion cycle and return on operating working capital can help quantify this relationship, but the principle extends beyond any individual financial metric. True efficiency is about minimizing unnecessary consumption of resources across the operating system – not merely maximizing the productivity of one part of it.
Efficiency therefore represents the intersection between Operational and Capital Excellence. It measures whether the business is generating strong operational output without unnecessarily consuming cash, materials, capacity or other resources.
The question: Are we deploying capital where it actually supports customers, revenue and growth?
Efficiency still tells only part of the story. A company can use its resources efficiently and generate attractive margins, yet still deploy those resources against the wrong products, customers or demand.
This brings us to the third intersection of the Trigon: Effectiveness.
Peter Drucker’s well-known distinction provides a useful shorthand: efficiency is concerned with doing things right, while effectiveness is about doing the right things. Within the Business Excellence Trigon, this means looking beyond how efficiently resources and capital are used and asking whether they are being deployed where they support the company’s commercial objectives.
The factory may therefore report high utilization and attractive production costs while the business simultaneously holds excess inventory of one product and suffers shortages of another. Customers wait for products they want while cash is tied up in products they do not currently need.
The company may be doing things efficiently, but it is not necessarily doing the right things.
This distinction is central to Capital Excellence. Working capital should not simply be minimized; it should be deployed where it creates value:
The objective is therefore not simply to use less capital, but to deploy the right amount of capital, in the right places, against the right opportunities.
This also explains why more working capital does not automatically create greater effectiveness. Building inventory as a precaution against uncertainty may improve aggregate stock availability. However, it does not necessarily mean the business has the products customers actually want, where and when they want them.
Effectiveness therefore introduces the commercial test to capital deployment: are the resources and capital employed by the business supporting what customers actually want and what the company is trying to achieve?
Effectiveness represents the intersection between Commercial and Capital Excellence: the company’s ability to deploy operating working capital where it supports customer needs, protects revenue and enables profitable growth.
Margin, Efficiency and Effectiveness should not be viewed as three independent objectives. They are three different tests that can – and should – be applied to the same business decisions.
The production example illustrates this particularly well.
The same decision can therefore improve performance through one lens while destroying value through another.
This is precisely why Commercial, Operational and Capital Excellence cannot be optimized independently. The objective is not to maximize margin, maximize utilization or minimize working capital, but to understand how decisions affect the interconnected system.
The three intersections provide a simple way of testing that impact:
Excellence requires all three. Strong Margin without Efficiency can leave a profitable business consuming excessive resources and capital. Margin and Efficiency without Effectiveness can leave it performing well against the wrong opportunities. And Efficiency and Effectiveness without sufficient Margin ultimately fail to generate the economic return required to sustain the business.
When all three reinforce one another, the business is better positioned to generate growth, profitability and cash flow simultaneously and sustainably.
At the heart of the Business Excellence Trigon lies value creation.
A successful business must ultimately be capable of generating growth, profitability and cash flow simultaneously and sustainably. None of these outcomes alone is sufficient.
The objective is therefore not to maximize any one outcome independently, but to create a business capable of growing profitably while converting that performance into cash.
Profitability and cash generation are closely related, but they are not the same.
Revenue may be recognized before a customer pays. Materials and production costs may be incurred long before finished products are sold. Inventory can remain on the balance sheet long after cash has left the business. Operating working capital sits directly within this conversion process.
Working capital therefore plays an important role in determining how effectively operating performance is converted into cash.
But cash generation should not be pursued in isolation either. A company can temporarily release cash by stopping purchases, reducing inventories indiscriminately, delaying supplier payments or restricting customer terms.
If those actions constrain production, damage supplier relationships, reduce customer service or limit profitable growth, the apparent improvement in cash comes at the expense of value elsewhere.
This brings us back to the central principle of the Trigon: no single measure should be optimized at the expense of the interconnected system.
Value Creation lies in the simultaneous and sustainable generation of Growth, Profitability and Cash Flow.
This is also why working capital should never be treated as an isolated finance initiative.
Working capital performance is therefore not simply the responsibility of Finance. It is the accumulated financial consequence of thousands of commercial and operational decisions made across the organization every day.
Working capital is, in many ways, the financial expression of how a company chooses to sell, operate and serve its customers.
The Business Excellence Trigon makes these connections visible. It reminds us that Commercial, Operational and Capital Excellence cannot be optimized independently, and that decisions should instead be evaluated through their combined impact on Margin, Efficiency and Effectiveness.
When these dimensions reinforce rather than compete with one another, working capital ceases to be viewed simply as cash trapped on the balance sheet. It becomes part of a broader system for creating profitable growth, strong cash generation and sustainable business value.
How much working capital should your business actually require? The Operating Working Capital Setpoint defines the level of working capital a business should structurally require given its commercial and operational conditions → Explore the OWC Setpoint: Finding the Sweet Spot between Cash, Growth & Resilience
Alexander Flach is a working capital and supply chain practitioner with more than 20 years of topic-related experience, spanning management consulting, operational leadership and independent advisory. His work focuses on connecting finance, supply chain and operations to improve cash flow, profitability and growth. He holds a full-time MBA from the Stockholm School of Economics and is a certified Lean and Six Sigma practitioner.
Editorial note
AI tools are used to support the editorial process – challenging arguments, improving structure and refining language. The ideas, frameworks, analysis and conclusions remain those of the author.
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