There are two paradigm shifts in how the traditional budget is developed and the OB is developed.  These paradigm shifts allow the OB to address  many of the traditional budget’s widely recognized shortcomings.

1. First paradigm shift: Line items in the budget:
   1. Traditional budgeted line items are departmental budgets; how the company is organized
   2. OB is developed from what those departments do that adds value to the firm; the departments’ activities. This shift allows models to built.
2.  Second paradigm shift: Which is developed first
   1. Traditional budget is developed and then the income statement See Figure, below
   2. OB develops the income statement and then the budget

• master Budget Flow-chart-May-22
  

For more details on OB’s benefits, see Operational Budget’s Benefits and its  Development