DEFINING THE ENTERPRISE

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DEFINING THE ENTERPRISE

In this chapter we use the term enterprise in its classical sense: an undertaking, especially one of some scope, complication, and risk. Thus, an enterprise could be a business corporation or partnership, a government agency, or a not-for-profit organization. The business modeling concepts described herein can be applied to any kind of enterprise.

The Enterprise as a Complex, Living System

Defining any given enterprise is a difficult endeavor because the enterprise is perceived differently by each individual or group that views it. Furthermore, each enterprise is a complex, living system that is continually changing, so today’s view may be very different from yesterday’s.

Often people attempt to define an enterprise by its organizational structure and the executives who occupy key positions. But this is only a small part of the picture. The enterprise actually operates as a complex system, with many parts that interact to function as a whole. In addition to organizational structure, an enterprise’s system includes its economic and social environment; the customers it serves; other enterprises with which it cooperates to achieve its objectives; and the internal processes that are designed to set strategic direction, identify and satisfy the customers, and acquire and provide the resources necessary to keep the enterprise running. Thus, to define an enterprise properly one must define the system within which it operates. Ultimately, the success of an enterprise depends on the strength of its intra- and interconnections—the couplings among the organization’s internal pro- cesses and between the organization and its external economic agents.

The Impact of the Global Business Environment

In recent years, technological advances in communications have paved the way for enterprises to operate effectively in a global, rather than just a local, environment. The foundation for this global- ization was set by the technological advances in transportation experienced during the twentieth century. As a result, global expansion—often through mergers, acquisitions, and alliances—is now commonplace. Indeed, in some industries globalization has become a requisite for survival.

But globalization brings a whole new level of complexity to the enterprise. When an enterprise seeks to operate in a new environment, markets, competition, regulations, economies, and human resources can be very different from what an enterprise has experienced. Accommodating such dif- ferences requires understanding them and how they will affect the strategies and processes of the enterprise.

Increasing and Changing Business Risks

Another aspect of globalization is that it significantly increases the enterprise’s business risks—that is, risks that threaten achievement of the enterprise’s objectives. Traditionally, management of risks has been focused on the local external environment, including such areas as the nature and size of direct competition, the labor market, the cost of capital, customer and supplier relationships, and competitor innovations.

But in a global operation the business risks become greater and are not always well defined. For example, regulatory environments in foreign countries may favor local enterprises; vying for limited resources—both natural and human—may be problematic; and the foreign work ethic may not be conducive to productive operation and delivery of quality products and services. The business risks in a foreign environment need to be identified, defined, and managed if the enterprise is to be successful.

Even the business risks of local enterprises are affected by globalization. For example, new market entrants from foreign countries can provide unexpected, lower-priced competition, or product inno- vations originating in another country can become direct product substitutes. As a result, even local enterprises must anticipate new business risks brought on by the strategies of global organizations.

The Business Model and Its Purpose

An enterprise business model is designed to compile, integrate, and convey information about an enterprise’s business and industry. Ideally, it depicts the entire system within which the enterprise operates—both internal and external to the organization. Not only does the construction of a model help enterprise management better understand the structure, nature, and direction of their business, but it provides the basis for communicating such information to employees and other interested stakeholders. The model can be the catalyst for developing a shared understanding of what the business is today and what needs to be done to move the enterprise to some desired future state.

A business model can be as detailed as the users deem necessary to fit their needs. Other factors regarding level of detail include the availability of information and the capabilities and availability of the business analysts who will ‘‘build’’ the model.

The Business Model as the IE’s Context

The business model is a tool that helps the industrial engineer develop an understanding of the effectiveness of the design and management of the enterprise’s business, as well as the critical per- formance-related issues it faces, to evaluate opportunities and manage risk better.

One of the industrial engineer’s key roles is to improve the productivity of enterprise business processes. Often he or she is assigned to analyze a particular process or subprocess and make recommendations for changes that will enhance product / service quality, increase throughput, and / or reduce cycle time and cost. But in today’s environment, a given process is not a stand-alone operation; rather, it is an integral part of an entire enterprise system. Changes made to one process may very well affect the performance of other processes in the system—sometimes adversely.

A comprehensive business model can provide the enterprise context within which the engineer conducts his or her process analysis. Specifically, the model displays how and where the process fits into the enterprise system, what other processes are affected by it, and what business and information systems must support it. This context helps the engineer make sure that proposed process changes will not degrade the performance of other processes and systems.

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