The document discusses an engineer's role in developing an understanding of an enterprise's business model using five principles: strategic analysis, business process analysis, business performance management, risk assessment, and continuous improvement. It provides details on each principle, including analyzing external forces, markets, core processes, products/services, customers, and key performance indicators. It also discusses assessing and managing risks. The overall aim is for the engineer to construct an integrated business model that identifies the enterprise's value proposition and opportunities to enhance performance and mitigate threats.

1. The
BUSINESS MODEL & CONTENT
HENRY JOHN N. NUEVA,
Management Engineering

2. • A tool that helps engineers develop an understanding of the effectiveness
of the design and management of the enterprise business as well as
the critical performance related issues.
It identifies the inter-linking activities carried out within a bu
Describes the external forces that bear upon the entity.
Describes the business relationship with persons and othe
e entity.

3. 1. Strategic Analysis
2. Business Process Analysis
3. Business Measurement
4. Risk Management
5. Continuous Improvement

4. Fig. 1 Business Improvement Principles ( from Bell et al.1997 )

5. I. EXTERNAL FORCES & AGENTS
II. MARKETS
III. BUSINESS PROCESS
IV. ALLIANCES AND RELATIONSHIPS
V. CORE PRODUCTS AND SERVICES
VI. CUSTOMERS

6. 1. EXTERNAL FORCES AND AGENTS
These are factors that shape the enterprise’s competitive marketplace and
Provide new opportunities as well as areas of risk to be managed.
This element is often called “Environment”
Analysis of external forces and agents includes an assessment of both the
General environment and the Competitive Environment.

7. GENERAL ENVIRONMENT:
consists of factors external to the industry that may have a significant
impact on the enterprise’s strategies
factors often overlap and developments in one area may influence
those in another.
usually holds both opportunities & threats to expansion.
COMPETITIVE ENVIRONMENT:
commonly referred to as “ Industry Environment”
these are combination of forces that are particularly relevant to an
enterprise’s strategy including competitors, customers & suppliers.

8. Important !
BASIC THEORY OF STRATEGIC MANAGEMENT PRIOR TO
EXTERNAL FORCES:
A)Managers or top management adjust their strategies to reflect the environment
in which their business operate.
B) For a successful business , one must first consider the environment in which the
enterprise operates and the alignment of its strategy with that environment.

9. Fig. 2 Dimensions in General Environment Assessment ( from Risk Mgmt., Inc.)

10. Fig. 3 The Five (5) Forces Model of Competition (Adapted from Michael Porter 1985)

11. 2. MARKETS
Generally, Markets are not Static
MARKET
since they:
It is generally where
enterprise’s competes. 1. EMERGE
FOCUS
2. GROW
3. MATURE
It is the extent to which an 4. DECLINE
enterprise concentrates on
a narrowly define niche or
segment of the market.

12. Important !
Market life cycle provides useful framework for studying markets and their
Impact on the enterprise’s value prospective.
Market segmentation allows an organization to pursue the acquisition
of those customers that are most attractive to its value proposition.
Segmenting markets also provides the basis for tailoring products more
specifically to the customers’ needs.
The engineer should understand the
relevant advantages and disadvantages of
CHALLENGE
a particular levels of focus in terms of their
impact on competitive advantage.

13. 3. BUSINESS PROCESSES
A Process is a set of activities designed to produce a specified output
for a particular customer or market.
It entails a strong emphasis on HOW work is done rather
than WHAT is done.
In general term, a Process is a structured set of work activities which
clearly defines inputs and outputs.

14. Useful terms:
Business Process
a logical, related, sequential-connected-set of activities that takes an input
from a supplier, adds value to it, and produces an output to a customer.
Key Business Process
a process that usually involves more than one function within the
organizational structure, and its operation has a significant impact on the
way the organization functions.
Subprocess
a portion of a major process that accomplishes a specific objective in
support of that major process.
Activities
work elements that go on within process or subprocess performed by a person or team
Tasks
these are individual elements and/or subsets of an activity. Task relate to how an
individual performs a specific assignment.

15. Categories of Business Process
A)STRATEGIC MANAGEMENT PROCESS
these are processes that develop the value proposition of the
enterprise
and define the business objectives.
B)CORE BUSINESS PROCESS
processes that develop, produce, sell and distribute products and
services
(i.e. Value Chain)
C)RESOURCE MANAGEMENT PROCESS
processes that support and provide appropriate resources to the
value
creating processes of the enterprise.

16. Fig. 4 Process Definitions (Adapted from Risk Management Partners Inc.)

17. Fig. 5 Illustrative Strategic Management Process
(From Risk Management Partners Inc.)

18. STRATEGIC MANAGEMENT PROCESS
Change is the central concern and focus of strategic management:
1.Change in the environment,
2.Change inside the enterprise, and
3.Change in how the enterprise links strategy and structure.
Strategic management
the process of identifying opportunities to achieve tangible and
sustainable success in the marketplace and understanding the risks that
threaten achievement of that success.

19. CORE BUSINESS PROCESS
The management of core business processes is about execution of
the enterprise’s value proposition. Significant changes are taking place in
the New Economy that will have profound impacts on core business processes
and the way they are managed in the future.
Information Technology is driving the transformation of core business
processes by creating a new competitive dynamic that rewards institutional
agility.
CHALLENGE
The evolution of extranets and content standards alters the bases of
competitive advantage by increasing the quality of information and its access.

20. RESOURCE MANAGEMENT PROCESS
Resource management processes are the processes by which
organizations allocate resources and monitor their use.
They provide appropriate resources to support the other business
processes. Resource management processes can be placed into three basic
categories:
1.Information
2.People
3.Capital
Without appropriate resources—information, people, and capital—the core
processes cannot offer the value customers need and will cease to provide an
effective source of competitive advantage.

21. PROCESS ANALYSIS AND OBJECTIVES
Processes are established to serve specific customer needs. The customers
may be internal, such as another process, or external to the enterprise.
The process objectives define what value will be supplied to the customer.
Process objectives need to be
S.M.A.R.T.
specific, measurable, attainable, and realistic and to have a sense of time.

22. Fig. 6 Process Analysis Framework (Adapted from Bell et al.1997)

23. Important !
Understanding the structural elements of the process is key to understanding
workflow, measuring process performance and recommending process
improvements.

24. . ALLIANCES AND BUSINESS RELATIONSHIPS
Due to business financial pressure and time constraints, acquisitions were
introduce. However, it was proven so much to cause high expenditure and
brought not only the capabilities needed but also many were not satisfied.
As a result, numbers of global enterprises recognized Alliances.

25. BENEFITS OF ALLIANCES AND BUSINESS RELATIONSHIPS
A)It provides a way for organizations to leverage resources.
B) Provides growth at a fraction of any other cost.
C) Can support other goals such as quality and productivity improvement.

26. Top three (3) Common Types of Alliances
A)Transactional Alliances
B) Strategic Sourcing
C) Strategic Alliances

27. Transactional Alliances
These are alliances established for a specific purpose, typically
to improve each participant’s ability to conduct its business.
EXAMPLE
1. Cross-licensing in the pharmaceutical industry
2. Open-ended purchase orders for specific
products would be another.

28. Strategic Sourcing
It involves a longer-term commitment. It is a partnership between
buyer and seller that can reduce the cost and friction between supplier
and buyer by
A. Sharing products
B. Allocating Development plans
C. Jointly programming production
D. Sharing confidential information
Wal-Mart and Home Depot are examples of companies with substantial
capabilities in strategic sourcing.

29. Strategic Alliances
It involve two enterprises pulling together to
1. Share resources
2. Funding
3. Even equity in a new enterprise on a long-term basis
EXAMPLE
Motorola, Apple, and IBM pooled research programs and made financial
commitments to develop a new-generation engine for
personal computers—the Power PC.

30. 5. CORE PRODUCTS AND SERVICES
BUSINESS
CORE
PRODUCTS SERVICES

31. Important !
Superior and differentiated products are those that deliver
Unique benefits and superior value to customer

32. THE BENEFITS & IMPORTANCE OF MEASURING NEW
PRODUCTS SUCCESS & FAILURES
A)Facilitates organizational learning and process improvements.
B)Fulfills the need for consensus on new product outcomes and
determinants.
C)Leads to observable benefits such as improved cycle times,
improved new product success rates and an enhanced ability to assess
changes to the new product development process.

33. Measurements of Product Performance should
exist along 4 Diemension
DIMENSION GUIDE
Market Performance How does the marketplace
view the companys
prodcuts?
Process Performance How well does the product
development process work?
Resource Performance How well do cross+functional
teams perform?
Financial Performance How profitable are the
products and service?

34. Fig. 7 Core Products / Services Measurement Framework
(from Risk Management Partners, Inc.)

35. 6. CUSTOMERS (an intangible asset)
Three (3) Factors to consider in understanding the power of
Enterprise’s customers in developing a knowledge-based business model
1.Customer Needs
2.Customers Satisfaction
3.Customers Manner towards the Business

36. Important !
In a knowledge economy, information is more valuable
than ever. Generally speaking, customers have more
knowledge than the enterprise.

38. An Enterprise Business Model (EBM) as a complex system should be planned
And managed like any complex business project.
The following are the steps in a model-building
project plan:
1.Obtain a committed sponsor at the appropriate level of enterprise.
2.Set out the purpose and scope of the model.
3.Gather and Orient the Model-Building Team.
4.Determine requirements for each element of the model.
5.Construct the Business Model.
6.Build consensus for the Model.

39. Ways on how an Engineer apply an
Enterprise Business Model
1.Communication of the nature of the business.
2.Strategic Analysis
3.Business Process Analysis
4.Business Performance Management
5.Risk Assessment

40. 1. Communication of the nature of the business.
Accuracy Used as a basis for
communicating the nature
Completeness And structure of the business
Potential and
New Perspective
To Employees To other interested
Stakeholders

41. 2
Industry Information Industry structure
I
Significant Industry Risks
N
T
Industry Segmentation
Update On: E
•Organization’s History R
SUB PROCESS
SUPPORTING
STRATEGIES
•Management’s Business N
BUSINESS
E
X Strategy & Objectives A
T •Business Risks L
E •Management Planned
R Responses
N •Business Process
A
L Critical Business Dynamics among
Issues Organizations

42. At the Conclusion of strategic analysis, the engineer will have
Learned DIRECTIONAL COURSE as follows:
1.The relationship between the broad economic environment and the industry segment(s)
in which the enterprise competes.
2.The enterprise’s position and role within its perspective industry segment(s).
3.Threats to maintaining or improving the current position.
4.The needs and wants of the enterprise’s chosen market segment(s).
5.The total productive capacity of the enterprise and its competitors for each niche.
6.Management’s vision of how to satisfy the market needs better than its rivals.
7.Management’s specific strategies and plans for achieving that vision.
The strategic analysis will provide the engineer with in-depth
knowledge of the enterprise’s value proposition and insight into
opportunities to improve business performance and mitigate the risks
that threaten achievement of the established objectives.

43. 3. Business Process Analysis
Business process analysis is designed to provide the engineer with an in-
depth understanding of the key business processes during strategic
analysis.
Through this analysis, the engineer learns how the organization
creates value.
Specifically, each core business process is studied in depth to distinguish:
1.Significant process objectives
2.The business risks related to these objectives
3.The controls established to mitigate the risks
4.The financial implications of the risks and controls

44. Business process analysis adopts a ‘‘Value Chain’’
Important ! approach to analyzing the interconnected activities in the
business, both domestically and globally.
During business process analysis, the engineer recognizes
the cross-functional nature of activities in the enterprise’s
business, that not all activities within and across
processes are sequential, and that important linkages
exist between processes.
Business process analysis depicts the (4) four core business
processes of a hypothetical retail company such as :
1.Brand and image delivery
2.Product / service delivery
3.Customer service delivery
4.Customer sales

45. Seven (7) Components that guides an Engineer in the
Collection and Integration of Information
about Business Processes
1.Process Objectives
2.Inputs
3.Activities
4.Outputs
5.Systems
6.Risks that threaten objectives
7.Management controls linked to risks

46. In a retail company, the engineer would
address each of the following objectives,
which are typical in business process
analysis:

47. 4. Business Performance Management
Information-age enterprises succeed by investing in and managing their
intellectual assets as well as integrating functional specialization into
customer-based business processes.
Measurement and Management in the information age requires
enterprises to become much more competent at identifying and
monitoring measures that drive their business performance.

48. To develop a credible business model, the engineer
must gain an understanding of how the enterprise
Important !
measures and monitors business performance.
Performance drivers are key indicators of an enterprise’s
future financial performance. Understanding the cause-
and-effect relationships between resource, process,
market, and financial performances is essential to
understanding the enterprise’s strengths and
weaknesses.
Key Performance Indicators (KPIs)
These are quantitative measurements, both financial and nonfinancial,
collected by an entity or by the engineer, either continuously or periodically,
and used by management and the engineer to evaluate performance in
terms of the entity’s defined business objectives.

49. Fig. 8 Financial and Nonfinancial Performance Relationships
(from Risk Management Partners, Inc.)

50. Fig. 9 Sample Financial and Nonfinancial Measures – Consulting Firm
(from Risk Management Partners, Inc.)

51. Engineer and the Management might Monitor and
Control process performance using one or more of the
following type of KPIs:
1.Waste, rework, and other indicators of process inefficiency
2.Backlog of work in process
3.Customer response time
4.Number of times work is recycled between subprocess & departments
5.Number of document errors
6.Customer Satisfaction Ratings
7.Number of routing errors
8.Value-adding processing time
9.Information processing errors

52. 5. Risk Assessment
At this point, the engineer will have developed a business risk
profile of the organization.
In the business risk profile, residual business risks are classified
as:
1.Strategic Risks
2.Process Risks.
Interactions among risks are identified, and the risk classifications
and identified interactions are cross matched with related business
performance attributes

53. A risk event is a discrete random occurrence that (if occurring)
affects the project. Risk events are identified based on the difficulty to
achieve the required project outcome (the characteristics of the
product or service), constraints on schedules and budgets, and the
availability of resources.
Risk Assessment and Management
Four (4) processes
1.Risk Identification
2.Risk Quantification
3.Risk Response Development
4.Risk Response Control

54. Top Four (4) Risk Response commonly used in a
Project / Product Management
1. Risk Elimination
In some projects it is possible to eliminate some risks altogether
by using a different technology, a different supplier, etc.
2.Risk Reduction
Risk reduction may be used by reducing the probability of a risk
event or its impact or both. A typical example is redundancy in R&D
projects when two mutually exclusive technologies are developed in
parallel to reduce the risk that a failure in development will harm the
project. Although only one of the alternative technologies will be used,
the redundancy reduces the probability of a failure.

55. Top Four (4) Risk Response commonly used in a
Project / Product Management
3. Risk Sharing
It is possible in some projects to share risks (and benefits) with
some stakeholders such as suppliers, subcontractors, partners, or even
the client. Another form of risk sharing is with an insurance company.
4. Risk Absorption
If a decision is made to absorb the risk, buffers in the form of
management reserve or extra time in the schedule can be used. In
addition, contingency plans may be appropriate tools to help in coping
with the consequences of risk events.

56. At the conclusion of the business model design and development effort, the
engineer will have constructed a fully integrated business model containing all
of the information he or she has collected and integrated through the
application of the five business principles : strategic analysis, business
process analysis, risk assessment, business measurement, and
continuous improvement. The engineer will use the completed model as the
basis for final review of the recommendations for improving business
performance. But it must be remembered that the business model is a living
document that must be updated and maintained on a continuous basis to
reflect changing market conditions, new or improved value propositions,
changes in organization structures, and the like. Continuous improvement
applies just as much to the business model as it does to the business itself.

57. END