In today’s competitive world, the role of a business analyst has become one of the key elements for any business entity. In order to understand the role of a business analyst it is imperative to, first of all, understand what a business is and about the complexities involved in operating a business entity. The definition of a business analyst as described in the BABOK® can be decoded as follows.
What is a business?
Let’s start with the fundamentals. What exactly is a business and why do business entities exist?
A business organization is any entity that takes in inputs (financial or non-financial resources) and converts them into outputs through various business processes. Inputs can be human resources, capital, raw materials, WIP products, knowledge and any other form of resources.
A process is a set of interrelated activities that are carried out by a business in an organized manner in order to convert the inputs to outputs. Processes within an organization may include functions such as HR, Finance, marketing, sales, operations, IT etc. where each function will have their own set of processes.
Outputs can be products, services or results. Products are intangible and have a set of characteristics, features, and behaviours that satisfy certain needs of stakeholders. Services are intangible but they too have features or characteristics that add value to customer expectations. A result may be a change in a condition or a capability. For example, it can be a change in a process within an organization to make the process more efficient, a change in a working environment, a change in an organization culture / structure etc., the addition of new business units, improvement through the addition of new technology / systems etc.
The expected outcomes are more strategic and long-term. These are defined as goals and objectives, which the functional units of organizations work towards. A goal is long-term and is defined for one year or more. Several objectives may make up one goal and are more short-term in nature and can be assigned as responsibilities of different business units. For example, the organization can have a goal of increasing market share by 20% within a 1 year time period. In order to do that, the HR department can have an objective of increasing sales headcount by 10 and ensuring everyone has undergone proper sales training within a 6 month time period.
The business Context
This environment within the organization (different business units, functional units, and the employees) is known as the ‘MICRO’ or Internal Environment. MESSO environment consists of immediate inbound and outbound logistics service providers in the supply chain (which includes suppliers, supplier’s suppliers, customers (wholesalers, retailers etc.) and their customers). ‘MACRO’ a.k.a external environment consists of the external stakeholders including government, regulatory bodies, technology service providers, competitors, partners, vendors, etc.
It is important to analyze these environments to understand how they influence a business. These entities in the business context (business environment) are all known as stakeholders (individuals or groups that influence (impacts) or have an interest in the organization. The influences they make are known as constraints or limitations posed by the organization.
Why businesses exist?
Businesses operate with the motive of improving on its current state. No organization intends to operate at the same level all the time. Organizations strive to make sure that the improvement on the current state is always positive and not a loss. The positive change can be financial (in terms of increasing profitability, shareholder value) or non-financial (increase in market share, customer satisfaction, increase in company size, etc.). In order to enable this growth, the organization must undergo change. This change is to do with addressing business needs (business problems or opportunities).
Problems & Opportunities
A business problem is some limitation within the organization or from the environment that is hindering the progress of an organization. For example the lack of human resources, lack of knowledge and skills, unavailability of modern equipment or technology, inefficient processes etc. can be problems that organizations face. An opportunity is some area which the business has not still ventured into, but one that can have a positive influence on the organization’s fortunes. For example investing in new technology, R&D for new products etc can be such opportunities.
Finally, What is Business Analysis?
The BABOK® version 3.0 defines Business Analysis as follows.
Business Analysis is the practice of enabling change in an organizational context, by defining needs & recommending solutions that deliver value to stakeholders.
So, we see that a business analyst is someone who studies the business and its operations along with the environment which it operates in as mentioned above and generates solution options to needs and wants of stakeholders to enable the expected positive change in the organization. Hence, we can see that it is imperative to understand the business in its operational context before analyzing the same and giving solutions.