Enterprise Analysis Tutorial

5.1 Enterprise Analysis

Hello and welcome to the fifth lesson of Certification of Competency in Business AnalysisTM or CCBA® (read as: C-C-B-A) course offered by Simplilearn. In the previous lesson, we had discussed requirements management and communication. In this lesson, we will discuss enterprise analysis. Enterprise analysis describes how Business Analysts identify a business need, refine and clarify the definition of that need, and define a solution scope that can be feasibly implemented by the business. This knowledge area describes problem definition and analysis, business case development, feasibility studies, and the definition of a solution scope. In other words, enterprise analysis is a central document for the project. It contains core knowledge areas and repository for various other findings that make up the project in its totality. Let us begin by discussing the objectives of this lesson, in the next slide.

5.2 Objectives

After completing this lesson, you will be able to: Understand the enterprise analysis knowledge area Define business needs Perform enterprise capabilities and decision analysis Determine solution scope and approach Define the business case Analyze risks to create the risk analysis Let us look into enterprise analysis in the next slide.

5.3 Introduction to Enterprise Analysis

Following are the tasks associated with the enterprise analysis knowledge area. First, the Business Analyst will begin by fully understanding the business problems and opportunities. Next, the capabilities of the enterprise are assessed to understand the changes that are needed to meet the business needs and strategic goals. The business solution approach is determined. Then the solution scope and the business case for the proposed solution will be defined. Last, the business requirements are defined and documented; this includes business need, required capabilities, solution scope, and business case. In the next slide, we will look at the enterprise analysis diagram.

5.4 Enterprise Analysis Diagram

The inputs required for the enterprise analysis are: Assumptions and Constraints Business Goals and Objectives Enterprise Architecture Organizational Process Assets Stated Requirements Solution Performance Assessment Stakeholder Concerns The outputs obtained by the enterprise analysis are: Business Case Business Need Required Capabilities Solution Approach Solution Scope In the next slide, we will discuss enterprise analysis.

5.5 Enterprise Analysis

Enterprise analysis helps the Business Analyst to identify the business need and define the solution scope that can be implemented by the business. Two processes are used to clarify the business need. First is a road map that shows the logical steps to arrive at solutions successfully. Second is the project justification, which is part of the enterprise analysis document in the summary section. In the next slide, we will understand the define business need diagram.

5.6 Define Business Need Diagram

The inputs required to define business need are as follows: Business Goals and Objectives describe the ends that the organization is seeking to achieve. Requirements [Stated] are from the stakeholders that define their perceived needs. The outputs required to define business need are as follows: Business Need describes the problem that an organization is facing or an opportunity that it has not taken and the desired outcome. The techniques used to define business need are as follows: Benchmarking is a study of strategies used by competing organizations. This allows the organization to remain at a comparable level of service or identify opportunities to increase efficiency. Brainstorming is a team activity that seeks to produce a broad or diverse set of options through the rapid and uncritical generation of ideas. Business Rules Analysis identifies changes in policies that guide the organization towards achieving its goals and objectives. Focus Groups identify and discuss problems. Functional Decomposition subdivides business goals into achievable objectives and measures. Root Cause Analysis is to determine the underlying source of a problem. In the next slide, we will discuss business needs and goals.

5.7 Business Needs, Goals and Objectives

A business need is a perceived weakness or improvement that the client sees as vital for achieving their goals and objectives. New business needs can be generated in the following ways: The top-down approach is applied when there is the need to achieve a strategic goal. The bottom-up approach is applied when there is a problem with the current state of a process, function, or system. Middle-management approach is applied when a manager needs additional information to make sound decisions, or must perform additional functions to meet business objectives. External-drivers approach is driven by customer demand or business competition in the market place. However, in most circumstances, the need for making changes will be moved up the organization, from users to the decision makers, to pass judgment on whether a change is operationally and financially justified. Most companies have a procedure for considering changes and innovations. In today’s digital world, many new- and task-specific software applications are constantly pushing change in an effort to improve productivity. However, almost invariably, the changes or innovations must meet certain goals and criteria. For example, a new investment will require a justification in terms of a measureable Return on Investment. Even good solutions can be too expensive to implement. Business goals and objectives: a business goal is the benefit of achieving a specific objective. Companies are constantly re-inventing themselves to keep up with the real drivers of change, the customer needs, and the competition. Many companies make one of their primary goals to be aggressively seeking to understand the customers’ changing needs, and in some cases, trying to anticipate new needs. However, good ideas are only good, until they move from idea to reality. This is where the enterprise analysis comes into play. The analysis attempts to determine if the current stated company goals are real or imagined. Are the goals being used as performance benchmarks? Business goals and objectives are what the company is trying to achieve over the short and long term. Goals are usually more subjective, and objectives are measureable metrics that support the goal. Revenues, profits, and customer satisfaction are all measureable. Let us discuss business needs in the next slide.

5.8 Business Needs

The Business Analyst should ensure that the business objectives are “SMART”. “SMART” is an acronym used to define the parameters of a solution. Specific: Describing something that has an observable outcome Measureable: For tracking and measuring the outcome of the objective Achievable: Whether the objective is feasible and achievable Relevant: Is the solution in alignment with the organizational vision, mission, and goals? Time-bound: Can the objective be achieved in a timeframe that is consistent with the need? A business need must also present a real opportunity for improving the business. Even though the sponsor may state a need and explain why a solution is needed, other stakeholders who are closer to the problem that is driving the need may have a deeper understanding of the need, ideas for solutions, and requirements. In the next slide, we will understand assess capability gaps diagram.

5.9 Assess Capability Gap Diagram

The inputs required are: Business Need is a type of high-level business requirement that is a statement of a business objective. Enterprise Architecture defines the current capabilities of an organization. Solution Performance Assessment identifies shortcoming, problems, or limitations of an existing solution. The techniques used are: Document Analysis is used to understand the current state of the enterprise, which is documented. SWOT Analysis identifies how current capabilities and limitations (strengths and weaknesses) match up against the influencing factors (opportunities and threats). The outputs obtained are: Required Capabilities is an understanding of the current capabilities of the organization and the new capabilities that may be required to meet the business need. In the next slide, we will understand determine solution approach diagram.

5.10 Determine Solution Approach Diagram

The inputs required for solution approach are: Business Need is a type of high-level business requirement that is a statement of a business objective. Organizational Process Assets are all materials used by groups within an organization to define, tailor, implement, and maintain their processes. Required Capabilities identify the new capabilities that any solution must support. The techniques used for solution approach are: Benchmarking is a comparison of a process or system’s cost, time, quality, or other metrics to those of leading peer organizations to identify opportunities for improvement. Brainstorming is a team activity that seeks to produce a broad or diverse set of options through the rapid and uncritical generation of ideas. Decision Analysis is an approach to decision-making that examines and models the possible consequences of different decisions. Estimation is to develop an initial cost comparison of possible solution approaches. SWOT Analysis is a method of comparing possible approaches. The outputs obtained by solution approach are: Solution Approach is the description of the approach that will be taken to implement a new set of capabilities. In the next slide, we will discuss enterprise capabilities analysis.

5.11 Enterprise Capabilities Analysis

Current capabilities analysis: Does the company have the human and material assets to meet the need requirements? Once there is an idea of what a solution and its requirements may be, it is time to analyze to see if the company has the assets-skills, software, and/or equipment, to meet the requirements of the solution. The first step is to review the current company organizational architecture, policies, and procedures, and fully understand how the company currently goes about its normal daily operations. The Enterprise Capabilities gap analysis: It is the technique used to determine company capabilities. The analysis attempts to identify the requirements that the enterprise may not have successfully implemented or more cost effectively implemented the proposed consensus solution. Some examples would be the need for a new software application, piece of equipment, or contracted expertise. Sometimes a gap may not be obvious until a prototype solution is tried out to see how the current system reacts. It is common to discover unexpected consequences appearing. The company may find that it needs special outside expertise, a specific software solution, or special piece of equipment to resolve the requirements for a problem solution. If it is found that there are requirements that cannot be met by the current Enterprise Capabilities, the next step would be to contract a solution or requirement through outside vendors. When there is need for outsourcing, the cost-benefit needs to be analyzed, as the additional cost might compromise the overall return on investment of the solution. Requirements management: Whenever requirements are changed, they need to be updated in the requirements list and requirements package, for validation by stakeholders. If new requirements are needed to fill the gaps in existing company abilities, the requirement list needs to be updated and verified by stakeholders through the communications plan established by the Business Analyst. SWOT Analysis is the primary tool for analyzing an existing or proposed scenario or solution. In the next slide, we will discuss SWOT (read as “swot”) analysis.

5.12 SWOT Analysis

SWOT analysis is one of the most versatile and useful tools used to define risks and problems. This analysis tool is usually associated with business and marketing plans, but it can be used to help analyze the compartmentalized problems as well. The following is a presentation of how the IIBA views the elements of best practices for the popular tool: A typical technique to use with SWOT analysis is to draw a grid or a matrix; describe the issue, or problem under discussion at the top of the grid; conduct a brainstorming session to complete the each section in the grid. Strengths and weaknesses are factors internal to the organization, organizational unit, or solution, while opportunities and threats are external factors. Strengths: What are the company’s competitive advantages? Is there anything that the assessed group does well? It may include experienced personnel, effective processes, IT systems, customer relationships, or any other internal factor that leads to success. Weaknesses: What are the areas of greatest concern? Are those things the assessed group does poorly or not at all? Weaknesses are also internal. Opportunities: What needs to be done to take advantage of the opportunities? Are external factors the assessed group may be able to take advantage of? It may include new markets, new technology, changes in the competitive marketplace, or other forces. Opportunities exist beyond the scope of control of the assessed group; the choice is whether to take advantage of one when it is identified. Threats: What are the greatest threats for the company’s survival? Can external factors negatively affect the assessed group? They may include factors such as the entrance into the market of a new competitor, economic downturns, or other forces. Threats are also outside the group’s control. Facilitate a discussion to analyze the results. Remember that the group has identified only potential characteristics of the problem. Further analysis is needed to validate the actual characteristics, ideally confirmed with data. Once the characteristics of the issue or problem have been validated, the group brainstorms potential solutions to solve the problem. A standard practice for this is to compare internal strengths and weaknesses against external opportunities and threats and try to define strategies for each cell in the matrix. The SWOT analysis is usually applied to business and marketing plans; however, the SWOT analysis can be used to help in the capabilities analysis. At first, a SWOT is done for the current company or domain situation pre-solution. As a follow on, a SWOT analysis is done for the proposed solution. This technique can be used in the business case, to support the narrative for the solution benefits. However, as the analysis progresses, so can the need, requirement, solution chain. In the next slide, we will cover the enterprise capability analysis diagram.

5.13 Enterprise Capabilities Analysis Diagram

The diagram in the slide describes the inputs and outputs of the enterprise capability analysis. Inputs include the business need analysis, the requirements list, the solution assessment before formalizing the solution scope, and the enterprise architecture. The Business Analyst then observes the company resources, both human and capital equipment, software assets, to see if the required capabilities for the proposed solution are resident in the company. The Business Analyst needs to seek out stakeholder input as to the existing capabilities to supply the requirements. Once the company’s ability to meet the requirements has been confirmed, the best strategy for the implementation of solutions is developed in the solution scope. This process starts with the prioritization of solutions, followed by a round of verification and validation by the domain stakeholders and SMEs. The requirements are checked to make sure they can meet the expectations of the solutions and the solution scope, and requirements package are updated. After this, the new information is communicated via the communication process to other stakeholders and sponsor. We will discuss solution scope diagram in the next slide.

5.14 Define Solution Scope Diagram

The inputs required to define solution scope are: Assumptions and Constraints Business Need is a type of high-level business requirement that is a statement of a business objective. Required Capabilities describe the new capabilities required to meet the business need, which serve as the basis for the solution scope. Solution Approach is the general approach taken to deliver the new capabilities required by the business that will be used when assessing options for the implementation of solution components. The techniques used to define solution scope are: Functional Decomposition subdivides business goals into achievable objectives and measures. Interface Analysis depicts the scope of work required to integrate the new solution into the business and technical environments. Scope Modeling identifies the appropriate boundaries for the solution scope. User Stories describes stakeholders and the goals the system supports and can be used to define the solution scope. Problem or Vision Statement states the business need, identifies key stakeholders, and briefly describes the positive impact that meeting the business need will have on those stakeholders. The output is Solution Scope. Solution Scope defines what must be delivered to meet the business need, and the effect of the proposed change initiative on the business and technology operations and infrastructure. In the next slide, we will discuss solution scope.

5.15 Solution Scope

Solution scope: is the starting point for building the solution scope. The solution scope starts with the business planning and monitoring phase. As the analysis progresses, the solution scope will change throughout a project, based on changes in the business environment, or as the project scope is changed to meet budget, time, quality, or other constraints. Assumptions and constraints: validation of assumptions and constraints is a priority before building solutions and requirements. Before solutions can take shape, the assumptions and constraints that may affect the solution and requirements need to be fully understood and verified. If the assumptions are not fully examined, the resulting solutions and requirements may be faulty. Techniques for defining the assumptions and constraints are aimed at looking at all aspects that can define the needs, the solutions, and the requirements. For example, root cause analysis of needs and SWOT analysis are helpful in examining the assumptions and constraints. Techniques for determining the solution approach: objective measurements are not always the best way to define a solution approach. Some of the techniques used to help define the solution scope are: Functional decomposition—the solution is broken down into smaller work products and deliverables as part of the whole solution. Interface analysis—looks at the points of integration that the solution must be harmonized with the general solution process flow. Scope modeling—identifies the boundaries of the solution scope. In the end, the solution scope must define the deliverable solution to the business need, as well as the effect the deliverable will have on the business and stakeholders. The next slide deals with the solution scope approach.

5.16 Solution Scope Approach Diagram

The solution scope is one of those processes that may undergo a number of iterations as the information is developed. For that reason, the Business Analyst must ensure to number the current iteration properly. The solution scope can also play an important role in providing traceability. The process begins with the development of business needs. The organizational gap analysis is done to fully understand the current operational processes, and if those existing processes and procedures can support the contemplated solutions. A solution approach is developed considering the assumptions and constraints found in elicitation and consensus. This preliminary solution approach is then run through a series of stakeholder and SME brainstorming sessions, to arrive at a consensus approach. This new solution approach is then checked for its economic feasibility and the constraints and goals of the company. Next, a solution scope is defined to go with the solution approach. Once validated in the validate solution scope process, it is documented and passed on to the sponsor for sign off. Let us look into the define business case diagram in the following slide.

5.17 Define Business Case Diagram

The inputs required for business case are: Assumptions and Constraints Business Need is a type of high-level business requirement that is a statement of a business objective. Solution Scope defines what must be delivered to meet the business need, and the effect of the proposed change initiative on the business and technology operations and infrastructure. Stakeholder Concerns The techniques used to obtain business case are: Decision Analysis is an approach to decision-making that examines and models the possible consequences of different decisions. Estimation is to develop an initial cost comparison of possible solution approaches. Metrics and Key Performance Indicators Risk Analysis is used to assess potential risks that may affect the solution and the costs and benefits associated with it. SWOT Analysis is a method of comparing possible approaches. Vendor Assessment is an assessment of the ability of a potential vendor to meet commitments regarding a product or service. The output is Business Case. In the next slide, we will discuss Business Case.

5.18 Business Case

The business case provides the justification for the project. The business case needs to cover the following points: Identify assumptions: Are the assumptions credible, and developed through consensus? Usually, the business case will begin by identifying the assumptions. Some assumptions can be verified, while others may only be estimated. However, there must be a clear correlation between assumptions, problems, solutions, and deliverables. Define measurable evaluation criteria: What are the benchmarks for success? While there is a tendency to speak of the benefits in general terms, there should be measureable ways to determine if the benefits are real and track expectations. These evaluation metrics should be clearly defined. An example of a measureable evaluation criterion is: gross profit margins increase by 5% due to the new purchasing procedures. Business value: what are the net benefits of a solution for the company? The business case should define the value of the solution deliverable, as it is depicted in the solution scope. Business value can be more than financial. It can be a part of the overall brand building and building customer equity. Normally, a business value supports the company goals and mission. Benefit dependencies: What are the risks and other variables that can affect the desired outcome? The benefits of the deliverables should be compared to the opportunity costs of investing in other projects, or not investing at all. In other words, the project is the best use for company equity, or taking on debt to finance the project. Compare the business case to the opportunity costs: What might be a better use of resources other than the project? There are tangible opportunity costs and intangible opportunity costs. A tangible opportunity cost would be the lost profits from investing in buying another company rather than the cost of making changes to the company. An intangible opportunity cost would be the company’s decision to not undergo changes while competitors make the changes. We will look into discounted cash flow in the next slide.

5.19 Decision Analysis Discounted Cash Flow

Estimated future value of a solution investment answers the current investment worth in the future” The future value or FV (read as: F-V) of money represents the amount of money today will be worth in the future. The variables are the rate of return, and the number of periods in consideration, normally years. The formula of future value is equal to the present value of the money in question times one, plus the rate of return times the power of n, which represents the number of periods. In the example, if the estimated current investment for a solution would be $250,000 and the estimated rate of return needs to be at least 6 percent, for a justification of the investment and the time horizon for estimated rate of return to be an acceptable period, the future dollar return at the end of the three-year period should be at least $297,754. If this return were possible over the three-year period and time horizon, then the solution would be considered financially feasible. Therefore, any number over the $297,754 hurdle can be considered for the solution. We will discuss net present value in the next slide.

5.20 Decision Analysis Net Present Value

Estimated present value of an estimated future value of a solution investment answers the amount of current investment that will be needed to yield a future amount. Finding present value is the inverse of future value. For example, it is estimated that a solution may save a company $500,000, 3 years after implementation. Implementation is planned to take six months. The amount of money needed to make the investment, has to be calculated. So, future value (FV) of $500,000 is divided by (1+.06)³·? (pronounce as one plus point zero six to the power of three point five) where .06 is the discount rate and the exponent 3.5 is the time period in years. It works out that the present value today needed to invest to receive the benefits of about $92,245 ($500,000-$407,755). In the next slide, we will look at the average rate of return.

5.21 Decision Analysis Average Rate of Return

What will be the annual percentage return on the investment? Return/Investment x 100= Percent return (Pronounce as return divided by investment multiplied by hundred equals percent return) In the slide, it is seen that after the period has been completed, the solution would bring in an annual average return of 7.5 percent. This annualized return is better than investing in most low-risk investments. However, there is another step to help decide if this is a sound investment. That is time for investment breakeven. It is important to note that if the investment is not liquid then the formula changes. This is typical of a capital investment made by businesses. In this case the formula is: Investment returns-Original Investment ÷ Original Investment (pronounce as investment returns minus original investment divided by original investment) There is no real positive ROI (abbreviate) until the original investment has been paid back. Let us understand risk analysis in the next slide.

5.22 Risk Analysis

Risk tolerance: Risk tolerance attempts to measure the tolerance for uncertainty as the best solution may sometimes carry excessive risk for the company. Risk analysis looks at understanding the positive as well as the negative effects of change. One of the main variables in this undertaking understands the risk tolerance of the company. Risk assessment techniques: There are many ways to assess risk, but stakeholder and SME input is essential to understand the subtleties of risk and risk tolerance of the sponsor. Risk analysis helps an organization to examine the probability of handling the uncalled events. On the other hand, risk analysis may create an overly negative outlook and prevent a company from evolving or being left behind by more aggressive competition. Now, let us go through a few questions to check your understanding of the concepts discussed.

5.24 Summary

In this lesson we have learned that enterprise analysis helps the Business Analyst to identify the business need and define the solution scope that can be implemented by the business. A business need is a perceived weakness or improvement that the client sees as vital for achieving their goals and objectives. The Business Analyst should ensure that the business objectives are “SMART.” SWOT analysis is one of the most versatile and useful tools used to define risks and problems. The business case provides the justification for the project. Risk tolerance attempts to measure the tolerance for uncertainty as the best solution may sometimes carry excessive risk for the company.

5.25 Thank You

We have completed the lesson on enterprise analysis. In the next lesson, we will discuss requirements analysis.

  • Disclaimer
  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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