Enterprise Analysis

When an organisation needs a specialist skill, product or service, it may be more effective to look outside of its organisational boundaries. Perhaps a company needs a special IT application, a training course, or perhaps it is looking to outsource an ancillary function. In these situations, it is common practice to “go out to tender” issuing a tender document such as an Invitation to Tender (ITT), Request for Information (RFI) or Request for Proposal (RFP). These documents typically provide an outline of the organisation’s requirements, a list of structured questions, and provide instructions on how the supplier should respond. Responses might be invited from vendors, Managed Service Providers (MSPs) or other types of specialist provider.

These tender processes enable an organisation to compare and contrast a short-list of suppliers, and enable them to assess which is most likely to suit their needs. Often a formal scoring process is used to weigh up the pros and cons of each supplier (for more information on a weighting and scoring approach you can download a white paper I wrote on the subject). The RFI/RFP will be followed by meetings and product demonstrations where the scoring can be tweaked and finalised. This is a very sensible approach, and helps to remove any unintentional biases that may emerge. It can be very easy to inadvertently favour the product that has the salesperson with whom you have warmed to the most, or with whom you’ve built best rapport — and a more formal process reduces the likelihood of this happening.

Whilst these formal processes are extremely useful, there is a common pitfall waiting. Fundamentally, this type of structured tender process assumes that the client knows enough about their requirements — and the likely solutions — to ask the right questions. In many cases, the client will be extremely well informed, particularly if the RFI and RFP have been prepared by a professional business analyst. To borrow an expression from Donald Rumsfeld, but what if there is an “unknown unknown”, a piece of information that the client needs, that they don’t yet know they need?

This probably sounds cryptic, so let me give you an example. A few years ago, I wanted to replace my car. I have never particularly enjoyed driving, and I’ve always driven boring (but economical) cars. I was looking on a used car website, and I found one that I wanted to look at. I started to formulate a list of questions I should ask and things I should look for when I took it for a test drive. I was discussing this list with a friend, who gave me a piece of advice:

In many business contexts, the word ‘value’ is an important mantra. When running a business, it’s important that we create a product that the customer values. If we’re a publically listed company, we may need to ensure that the business creates sufficient shareholder value. If we’re running a business change project, it’s important that we consider the business and customer value that our implemented project will bring. The word value has become widely used – in fact it has become so widely used that there is a real danger that different stakeholders might have different interpretations over what ‘value’ really means. In reality, value isn’t always a straightforward metric to measure, and there are often several competing dynamics.

Let’s take an example: Imagine we’re running a project that will involve changes to our organisational processes and also the implementation of a new IT system. For the IT implementation, there may be several options—firstly there is the decision to build a solution in-house or buy a solution off-the-shelf. Then there is the decision over whether to host the solution on premise or in the cloud, whether to maintain the solution ourselves or outsource to a managed service provider (MSP) and so forth. We might even have the option of subscribing to a software-as-a-service or existing cloud based solution. Throw in a short list of three or four vendors into the mix and there are a baffling range of options.

Conventional business theory would encourage us to choose the option that creates most value for our business and customers. This is undoubtedly good advice, yet to adhere to it we need to analyse what value we are aiming to obtain. Saying “let’s go for the option that generates highest value” is easy. But how do we know what that means?

Value isn’t just about finances

Oscar Wilde famously wrote:

“[Nowadays people] know the price of everything and the value of nothing”

I want to let you in on a secret. One that I haven’t (up until now) told many people. Although I travel a lot with my work, I have never liked flying. Until a few years ago, I had an irrational fear of flying—to the point where I had a rather embarrassing ‘panic attack’ at an airport around 12 years ago—it really was quite spectacular for any onlookers! Although I’m now less scared of flying, I still absolutely hate turbulence.  (And, incidentally, isn’t it ironic that the turbulence always seems to kick-in when the coffee is being served?)

I was travelling on a long-haul flight very recently, and was passing the time by doing what I like to call the ‘economy shuffle’.  Perhaps you’ve done it yourself—it’s where you try to balance a laptop on the tray table, whilst sipping a coffee and eating a bagel—all without spilling anything, without nudging another passenger and trying to maintain some level of professional dignity in the process.  It should be an Olympic sport—and it’s one that I would fail at spectacularly!

As I bit down into my breakfast bagel, I noticed a gentle beep of the fasten-seatbelt-sign coming on. The Captain came over the speakers:

“Just a quick update on our flight today. We’re making great progress, with a strong tailwind—however, we’re scheduled to hit some bumpy air very soon.  We’re expecting it’ll be pretty rough, and we’re hitting it right where we expected to, so you’ll notice we’ve illuminated the ‘fasten seatbelts’ sign. We should be through it within 30 to 45 minutes, but we’ll keep you posted. Please return to your seats, and fasten your seatbelts with your tray tables folded and the armrests down.”

As ever in these situations, the Captain sounded calm—and the Cabin Crew went about their business checking that everything was in order. I shuffled my laptop back into my hand luggage, chugged down the remnants of my coffee and tried to relax. And boy was it a choppy flight — probably amongst the worst turbulence I’ve ever encountered — but I took some comfort in knowing it would only last for 45 minutes.

The plane landed safely a few hours later, and in the airport it dawned on me that I wasn’t scared, worried or panicked during the turbulence at all, which was great. I started to pull this idea apart and analyse it (well, I am a business analyst after all…). Why didn’t the turbulence bother me on this flight? Was it the whisky I’d had at the airport to calm my nerves? Whilst that might have been a contributing factor, on reflection I concluded that it all seemed more bearable because the Captain had warned us in advance and had given us the likely duration of the discomfort. I also presume he’d steered a course to minimise the turbulence, within the constraints of his flight path. The Captain had read the external environment well from his instruments, prepared his stakeholders (including passengers), and we’d all had a much better ride as a result.

As I wandered around the destination airport in a tired and jet-lagged state, it struck me how this pattern applies to business too. A crisis can be averted if it is predicted and carefully communicated and the right corrective manoeuvres are adopted. This relies on regular monitoring of the external business environment. Strategic environment analysis is a critical part of business analysis and should be considered an activity that is ‘business as usual’. External techniques like PESTLE or Porter’s 5-forces can be useful techniques. As businesses get more and more sophisticated and collect and collate more data and information, asking the question “How can we generate potential insight and testable hypotheses from our organisational data” becomes extremely important.  Let’s face it, lack of data is rarely the problem, lack of analysis and actionable insight can be.

What this means for business and business analysis