A COMPREHENSIVE BUSINESS MODEL FRAMEWORK

A COMPREHENSIVE BUSINESS MODEL FRAMEWORK

Looking at the Entire Enterprise System

The comprehensive business model paints a picture of the entire enterprise system. It depicts not only the internal operations of the enterprise, but the external forces that act upon it. Strategies, business objectives, business risks, and management controls are reflected, as well. Because of its comprehensiveness, the model helps management address key questions about the enterprise:

• Do the enterprise’s strategy and the business relationships it has formed address the external forces in the industry?

• Does the design of the business processes established by the enterprise support its strategic objectives?

• Has management gained a complete perception of the business risks that could affect achieve- ment of the strategic and business process objectives?

• Does the design of the management control framework adequately address the business risks?

• Does management monitor and measure those factors that are critical to the achievement of its significant business objectives?

An industrial engineer who is responsible for answering and resolving such questions within an enterprise clearly is in a very strategic position.

Overview of Business Model Elements and Structure

Figure 1 shows the basic framework for the comprehensive enterprise business model. Six components comprise the model:

• External forces: political, economic, social, and technological factors, pressures, and forces from outside the entity that threaten the attainment of the entity’s business objectives

• Markets: the domains in which the enterprise may choose to operate

• Business processes, including:

• Strategic management processes: the processes by which

• the enterprise’s mission is developed

• business objectives are defined

• business risks that threaten attainment of the business objectives are identified

• business risk management processes are established

• progress toward meeting business objectives is monitored

• Core business processes: the processes that develop, produce, market, and distribute the en- terprise’s products and services.

• Resource management processes: the processes by which resources are acquired, developed, and allocated to the core business activities

• Alliances: the relationships established by the enterprise to attain business objectives, expand business opportunities, and / or reduce or transfer business risk

• Core products and services: The value that the enterprise brings to the market

• Customers: the individuals and organizations who purchase the enterprise’s output Each of these components is discussed more fully later in this chapter.

The IE’s Use of the Business Model

The business model can be used by the industrial engineer in a number of ways, depending on his or her placement and role in the enterprise. Following are several important potential uses. A more detailed discussion of how the industrial engineer might apply the business model is provided later in the chapter.

Gaining an Understanding of the Whole Business

Regardless of a person’s placement and role, a good understanding of the whole business will help the individual see how he or she fits in, both operationally and strategically. This should help the person ensure that his or her objectives are consistent with and supportive of those of the enterprise, improving the potential for advancement within the organization.

Facilitating a Common Understanding of the Business by Others

Each person in an enterprise has an individual view of the business, and this view is often limited in scope and parochial in nature. Variations among viewpoints can cause considerable misunderstand- ing among individuals and groups about the purposes and direction of the enterprise. A well- documented, comprehensive business model can facilitate a common understanding of the business, both internally and externally.

Identifying Opportunities for Process Improvements

As noted earlier, process improvement is at the heart of the industrial engineer’s purpose, regardless of where and at what level he or she is placed in the enterprise. The business model provides the framework for assessing process performance and interrelationships with other processes. Such as- sessment can lead directly to the identification and design of process changes that will improve the performance of the process as well as the enterprise as a whole.

Identifying and Mitigating Business Risks

Critical to the success of any enterprise is effective management of business risk. The business modeling process provides the basis for identifying the most significant risks, both internal and external, and developing means for mitigating those risks.

Developing the Basis for Process Performance Measurement

Performance measurement is fundamental to continuous improvement. Development of a compre- hensive business model includes the identification or establishment of specific performance objectives for each business process. The performance objectives then provide the basis for an ongoing process performance measurement program.

Facilitating the Development of the Enterprise’s Directional Course

The comprehensive business model can provide the basis for painting a future picture of the enterprise and determining the course of action to get there. This is done by developing a vision of what leadership wants the enterprise to be at some future point—for example, in three years. This vision is translated into a model of what the enterprise needs to look like to support the vision (the ‘‘to be’’ model). The ‘‘to be’’ model then is compared with today’s ‘‘as is’’ model, and a migration plan is developed to transform the business to the new vision. This use of the model is for the industrial engineer who is placed at the highest levels of the enterprise.