What Is Business Analysis? - Process, Methods & Example

Lesson Transcript
Instructor: Rodney Michael

Rodney has taught university accounting classes and has a doctorate in accounting.

Business analysis is the process of conducting research and gathering information needed to help organizations determine ways to solve problems and improve operations. Learn about the process and steps followed to perform a business analysis, review methods of business analysis, and gain understanding by exploring examples. Updated: 09/21/2021

Business Analysis Overview

The basic idea of business analysis is quite simple. It is the practice of identifying and clarifying a problem or issue within a company, then working with the various stakeholders to define and implement an acceptable solution. However, actually conducting a business analysis can be quite complex and time-consuming. Let's look at a typical sequence of events within a business analysis.

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Business Analysis Process
Business Analysis Process

Steps to Perform a Business Analysis

Starting Point: The first step in the process is to identify a problem, an issue, or some other business need. Let's say that you are the owner of a small motorcycle dealership. In addition to selling bikes, your store does repairs and maintenance, sells riding gear, and custom orders parts for your customers. You have received numerous complaints from the staff and customers about the accuracy of your inventory system. The usual problem is for the system to show parts and merchandise as being in stock, when none are actually available. This often means that a repair job is not finished on schedule, which really irritates your customers.

Designate Business Analysis Team: The next step is to assign an individual or a team to perform the business analysis. Usually the business analysis team is the go-between and provides organization, strategic guidance, documentation, clarification, and assistance with political issues. The objective of the business analysis is to efficiently resolve the problem or issue to the satisfaction of all parties. Perhaps the most important factor in this process is full and open communication between all parties. For our example, you assign the task of solving the inventory system problems to your business manager and her assistant.

Identify Current Business Process: In the business analysis process diagram, the column on the right represents the existing business process and the people currently responsible for the area containing the problem. In our example, the business process would be the inventory system and the people would be the shop manager, the sales manager, and the accountant.

Identify Stakeholders: The left-hand column on the diagram represents all of the other stakeholders. These will vary from project to project. For example, stakeholders can include customers, suppliers, regulatory officials, financial reporting experts, and external auditors. In our example, the owner and the customers are certainly stakeholders. The sales personnel are also stakeholders because they have to deal with angry customers.

Identify Requirements: Initially, it is crucial that the stakeholder requirements are clearly identified and defined. If we don't do this, it will be impossible to successfully resolve the problem. Examples of techniques that can be used to help define what the stakeholders need include:

  • Spontaneous group discussions, or brainstorming
  • Review and analysis of pertinent documentation
  • Small discussion groups of key individuals, or focus groups
  • Individual interviews
  • Surveys and questionnaires
  • System analysis, including flow charts, narratives, diagrams, wireframes
  • Observation and research

In our example, your customers want their work done on time and they want the parts they ordered to be available as promised. As the owner, you want to keep the customers happy. You also need accurate inventory records so that your shop area can work efficiently and the sales staff can concentrate on selling merchandise.

Identify Current Business Process and Capabilities: Many of the same techniques that we use to identify stakeholder requirements can also be used to define the current business process and capabilities. We would rely heavily upon systems analysis techniques, modeling, research, and the review of documentation. In our example, the current business process is the existing inventory system. This would also include receiving inventory shipments and placing the items on the shelves, ordering inventory, and recording sales.

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