How to Analyze a Business

There are two great times to analyze a business, when you are just starting-up and when you are an established organization. However, you’ll see as we get into the benefits of analysis, having an analysis result will help at all stages of an organizations growth.

When you are starting-up or are a small business you can do things right from the beginning and learn from all the mistakes of other businesses that have gone before you. If you are in a large organization you can recognize significant improvements by removing/replacing the old way of doing things and the old system structures.
Unfortunately, the vast majority of today's organizations run with a disjointed collection of human procedures and computer systems based on left over concepts from the industrial-age. As organizations evolve they fall into the trap of applying the latest technology to “whatever is in place today”. This of course is more severe in large organization but is even true in small ones.

Customer in-friendly practices are present in almost all organizations. As customers we all encounter organizations with procedures that frustrate us and leave us asking “Why do they make it difficult to do business with them?” What we do not know is the organizational history of why a particular procedure was put in place. Usually it was because of some historical (read hysterical) process that was passed on through time based on old reasons and system designs or it was an accepted way of implementing a new business.

Even when a manual process is computerized, software vendors and programmers will offer a computer system that perpetuates old designs and out-dated business practices. The major reason for this, of course, is that the software vendors and even internal Information Systems people are typically “selling” or developing a system for the head of a department who is already oriented to satisfying their own department’s needs. These packaged applications are, of course, also sold to new businesses.

Businesses evolve; for example, in the formative years of an organization just keeping the business alive is a major issue. Typically, they don’t have the capital to invent a new design for the business, so it’s most likely they will model their systems on the same type of structure that everyone else is using. They’ll form similar departments, jobs and tasks that every other organization has (e.g., Warehousing, Marketing, Accounting departments with a hierarchical boss/subordinate people structure). Also, they are likely to purchase off-the-shelf computer software to support these departments (e.g., Stock Control, Sales/Marketing, Accounting packages).

Many large organizations have spent incredible amounts of money cascading through various business fads with little (if any) payback. I’d like to say here that I truly believe structuring an organization based on the concepts in this book is the ultimate structure that cannot be beat and is not another improvement fad.

The process of analyzing and restructuring an organization recommended in this book gives us a chance to apply what I like to call true business engineering. It involves, first of all, looking at the organization’s essential business processes and ignoring any past human and computer implementations.