What Is Business Engineering?

Anna Pinaeva

Consultant of "Umalogic”

No matter if you are happy with the way how your company functions now or not, change is part of any company’s life. Each company constantly changes. The reasons of why it happens or should happen, vary from the requirements received unexpectedly from the Government to the desire of the new Chief Executive to impress the customer.

Business Engineering is an activity aimed at creating a new business or improving an existing one. The result of this activity is a new successful business. What business is considered to be successful? To answer this question, we need to ask the stakeholders who are interested in this business. Thus, our first step on the way of creating a business, is to define the list of stakeholders. Most consultants would agree that the main interest usually have the owners. What are their needs? As a rule, they want to increase the income or capitalization. Though sometimes their needs can be quite unexpected and contain psychological aspects like “I want to become the most famous candy manufacturer in our city and I don’t care about the profit”.

Another stakeholder is the customer, because we need to develop a business that will produce or provide some value that is essential for our customers.

There is one more stakeholder whose needs we cannot ignore. And this is the Government or some Regulators, that require compliance with the standards like IATF 16949.

And of course, we should consider the needs of our future employees. Some of them need the friendly atmosphere and an “Open Office”, some care about ecology and responsible attitude to the environment, etc.

The list of needs can be huge, moreover, it can contain needs that are inconsistent. For example, some owners of our business may want to start receiving profit as soon as possible, while others prefer to focus on capturing the market share paying less attention to the income in general. And we need to find the compromise, the ideal balance and to agree the final needs with all our stakeholders or their representatives.

All these needs should be carefully gathered, listed and then transformed into requirements. The need to increase income should become a precise requirement: we should define the amount of income per year, per each month and the starting point in time when we plan to get the first increased income. Also, we should not forget about defining the production volumes and the costs. If the stakeholder’s need is psychological, then it should still be presented as a measurable requirement like, for example, capturing a certain market share. As a result of this activity the requirements tree can be presented in the form of the strategy map that contains the list of strategic objectives and measures.

Thus, we have just pointed out the first 2 stages of engineering a business:

   1)   Define stakeholders’ needs;
   2)   Develop requirements to business.

The other stages include the following:

   3)   Develop business concept;
   4)   Develop business architecture;
   5)   Produce the business;
   6)   Monitor and improve the business.

Let’s have a precise look at each of the other stages.

Based on the requirements, we develop the business concept. A business concept is a bird’s-eye view on how our business should work. I guess it’s a good idea to use the Osterwalder canvas as one of the instruments here. It contains the list of the upper-level concepts like Customers, Partners, Values and others that we should define and describe to get a precise idea of the future business. At this stage we define and model capabilities that our business should possess (define what our business does). So, we need to find answers to the following questions: What we do? Who is our customer? What values we bring to the customer in the form of products and services? What are our distribution channels? What are the key activities of our business? What are the key resources? I want to mention that this stage is extremely important, since mistakes made here, can be very expensive in the future. Moreover, there are even cases when they cannot be corrected while implementing the following stages. Note that even the best and very effective business architecture will not be able to cover the miscalculations in a product concept, for example.

The business model can be regarded as a concept of the future business architecture. And we use it to perform the next stage, where we actually make a blueprint of the organization, i. e. design business architecture. We design the tree of the business functions and business processes (define how our business will work), organizational structure, structure of information systems that we are going to use to perform our activities, the list of equipment that we need to buy and the blueprints of infrastructure objects that we need to build or rent. We can use different reference models at this stage and the experience of other successful companies.

Then follows the implementation stage. We build the buildings according to the blueprints, we buy the equipment, hire and educate people, implement IT systems, etc.

Next, our business starts to work in the so-called testing mode. We need to monitor our business to make sure that it functions in general and does it in accordance with all the requirements. And if it doesn’t, we need to return back and redesign some parts of our business or in the worst case — the whole business.

Further, when the business goes to the “utilization stage”, we continue monitoring it to make the final validation. If the stakeholders tell us that we fulfil their needs, we think we have built “the right business”.

There is one question we haven’t answered yet. We have stated in the very beginning that any company should change. But how often? I think nowadays it is vitally important for any company to change constantly. I am not talking about every day change, and of course, I’m not saying that the entire company should constantly change. Well, it might have been a good idea but that won’t make our employees happy, people like stability. I guess all the new requirements that we define, should be accumulated, divided into batches and then implemented. Some batches will have the “global” status and it’ll take a lot of time to implement them, and some will be just operational. Examples of global changes include developing new products, changing ways of product manufacturing or finding new distribution channels. And if we modify some parts of the activity model or add some new features to the product, then the changes are operational. These changes can be implemented relatively easy, especially in case we have a structured and well-defined business architecture.

October 2022


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