University of Tennessee IM341 Fall2014 Analyzing Business Processes Authored by Dr. A. Hollander, adapted from materials written with Dr. O. Cherrington and Dr. E. Denna, all rights reserved 1 WELCOME You find yourself enrolled in a class that you thought has to do with the management of information, and you are surprised to learn that the worst thing you can do is begin your study by thinking about technology. Many of the critical steps of building an information system have little to do with programming a computer or other electronic device. Designing and building information processes and systems that effectively support and potentially enhance businesses actually begins with acquiring a better understanding of the environment you plan to support and/or improve. That is why we will focus first on business analysis before we move on to a discussion of information processing. This reading presents a method for acquiring knowledge about organizations and the processes they perform in an effort to meet their strategic and operational objectives. Our method requires that you set aside any functional area mindset that you bring to the course (such as “I am a marketer,” “I am a logistics person,” “I am an accountant,” “I am a computer programmer and/or systems designer,” etc.). If you want to help organizations define and improve their business processes, you need to consider and incorporate the needs of all aspects of business processes and not limit yourself to the concerns of a particular functional area. Let’s get started. ORGANIZATION BASICS – A QUICK REVIEW Businesses and organizations come in all shapes, sizes and forms. For example, you can separate most organizations into two general categories: For Profit and Not for Profit organizations. For Profit organizations strive to generate a profit (revenue in excess of expenses). These profits can be reinvested into the company or distributed to owners and/or shareholders. For Profit organizations take several legal forms such as unincorporated (sole proprietorships or partnerships), corporations (C Corporations and S Corporations) and limited liability companies (LLC). Not for Profit organizations strive to provide particular services to constituents (e.g., governments, educational, or charitable organizations.) In contrast to For Profit organizations, Not for Profit ‘owners,’ shareholders or trustees are not intended to benefit financially from the organization. There are many types of organizations, and, as a result, we can classify businesses in many ways. One of the most common focuses on the primary profit-generating activities of a business, for example: Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers. Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to governments, other businesses orUniversity of Tennessee IM341 Fall2014 Analyzing Business Processes Authored by Dr. A. Hollander, adapted from materials written with Dr. O. Cherrington and Dr. E. Denna, all rights reserved 2 consumers. Organizations ranging from house decorators, consulting firms, restaurants and entertainers are types of service providers. Retailers and Distributors act as ‘middle-men’ in getting goods produced by manufacturers to the intended end consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers. Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals. Financial businesses include banks and other companies that generate profit through investment and management of capital. Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies. Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered. Real estate businesses generate profit from the selling, renting, and development of properties, homes, and buildings. Transportation and logistics businesses deliver goods and individuals from location to location, generating a profit on the transportation costs. BUSINESS PROCESSES Organizations, whether they are large or small, public or private, are formed to achieve objectives. You can find an organization’s high level objectives listed in its mission statement. To achieve their objectives, most organizations develop their vision and strategies.1 They put a series of business processes in place to implement these strategies. For our study, we will use the following definition of business processes: A business process is a collection of related activities that combine different resources and inputs to create an output that is of value to the organization, its stake holders and/or its customers. These outputs may be products or services. 1If you have not done so already, we recommend that you read M. Porter, "What is Strategy," Harvard Business Review, (November-December 1996).University of Tennessee IM341 Fall2014 Analyzing Business Processes Authored by Dr. A. Hollander, adapted from materials written with Dr. O. Cherrington and Dr. E. Denna, all rights reserved 3 Think of business processes as a cookbook for running a business and reaching business goals defined in an organization's business strategy. Business process groupings used by disciplines vary and examples can include: - acquiring and paying for resources (e.g. financing, human skills, materials and supplies, and plant and equipment), - converting resources acquired into goods and services for customers, - delivering goods and services to customers and collecting payment. Some industries group key management activities and refer to them as business processes, such as - managing the supply chain, - managing the customer relationship, - managing the product lifecycle management, - managing human resources, - managing financial resources. Regardless of the type of organization, every organization has three core business processes that we will study in more depth: acquiring and paying for resources from a vendor (e.g. acquiring and paying for financing, human