Rodney has taught university accounting classes and has a doctorate in accounting.
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.
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.
Identify Differences: Any differences between what the stakeholders require and what the current business process can provide represent unsatisfied stakeholder needs. These are the issues that must be resolved. In our example, the current system for keeping track of our inventory items isn't working. We can't operate efficiently and keep our customers happy until we find and correct the problems.
Identify Potential Solutions: In our store, we could begin by reviewing how we order and receive inventory items. For example, how and when do we add new items to our inventory system? Do the sales personnel always remember to document and record a sale, and how is the item removed from the inventory system? We would also look at the physical security of the inventory. Is inventory theft a real possibility?
Perhaps something as simple as assigning one person to record all sales tickets and inventory receipts might be an adequate solution. Maybe a partial solution would be to move the riding gear displays further from the exits in order to make shoplifting more difficult. As shown in the business analysis process diagram, any potential solutions should be reviewed and commented upon by both the stakeholders and the people involved in the current business process.
Implement Changes: Let's assume that we changed several procedures, such as recording sales invoices and recording merchandise receipts. We also improved the physical security of the more expensive inventory items. We think we fixed the problem. We can track our success by doing customer satisfaction surveys, recording completion times on jobs, and recording any unexpected out-of-stock instances. We should also count our inventories periodically and record any differences with the inventory system. In short, we shouldn't just assume that we fixed the problem.
A business analysis is the practice of identifying and clarifying problems or issues within a company and providing efficient solutions that satisfy the requirements of all stakeholders. The process includes identifying stakeholder requirements, identifying current business processes and capabilities, identifying solutions, and implementing changes. Both information gathering techniques and communications with the various stakeholders are critical parts of the overall process.
Business Analysis Sequence of Events
- Starting Point
- Designate Business Analysis Team
- Identify Current Business Process
- Identify Stakeholders
- Identify Requirements
- Identify Current Business Process and Capabilities
- Identify Differences
- Identify Potential Solutions
- Implement Changes
As you come to the end of the video, you should be able to:
- Define business analysis
- Explain the steps to perform a business analysis
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