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Business Processes are the Foundation of an Information Enterprise

  • June 01 2004, 1:00am EDT

The activities of every organization define what, when and how it operates, and the association of similar activities is a business process. Thomas Davenport and James Short define a business process as "a set of logically related tasks performed to achieve a defined business outcome." While the definition of a business process is elementary, the practice of designing, implementing, utilizing and refining business processes can be extremely challenging. Davenport further defines a process as "a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization." Understanding and enabling business processes is critical to providing relevant, timely and accurate information to individuals. As a component of an information enterprise, business processes must be understood in order to create a meaningful information environment.

Infrastructure and Core Business Processes

While there are numerous business processes that are performed every day within an organization, they can be grouped into two categories for descriptive purposes: infrastructure and core. The infrastructure business processes are those activities such as purchasing or payroll that are conducted in the same manner from one organization to another and from industry to industry. Although there may be variations in the purchasing business process, it typically begins with a need or requisition. If the requisition is approved, a purchase order is then created, and potential vendors are notified. Vendor quotes or responses are reviewed, and a vendor is selected. The vendor provides either goods that are inspected by the receiving department or services that are approved by the requesting individual. The vendor then invoices for the goods or services. The accounts payable group matches the requisition, purchase order, bill of lading or approval of completed services to the invoice(s) to determine its validity and then pays the amount that is owed. These tasks follow a logical order and define the purchasing business process. This is an example of an infrastructure business process that is standard and generally very similar across enterprises. Infrastructure business processes are so well defined that they can be outsourced without impairing the ability of the organization to function effectively.

On the other hand, core business processes are those activities that make one industry different from another, apart from product or service offerings. For example, the core business processes associated with manufacturing are radically different from those that support retail merchandising. Within an industry, core business processes also uniquely differentiate one organization from another. For example, Dell Computers' business model and processes for sales and manufacturing are different than IBM's. Dell's core business processes have been designed for build-to-order sales and manufacturing. In this case, a customer contacts Dell online or calls a customer service representative. The customer then selects the configuration of his or her desired personal computer and pays for it at the time of order. Next, a bill of materials is generated, and the personal computer is assembled based upon the customer's specifications. When it is ready, it is then shipped to the customer. IBM's personal computers are assembled based upon standard configurations and sales estimates. Customers can then purchase IBM's personal computers from distributors or retail chains. While both companies' personal computers are comparable, their business models and core business processes make them unique.

Analyzing Business Processes

Understanding and integrating core and infrastructure business processes helps to define the information enterprise. In a high-tech company, for example, sales and manufacturing tasks are core business processes, while payroll and purchasing are infrastructure business processes. Numerous tasks associated with both sets of business processes relate to one another and in certain cases are interdependent. By understanding the detailed tasks that constitute these business processes, an organization can define business terminology, meta data and rules for creating metrics, alerts and key performance indicators (KPIs). When analyzing a business process, the entire process should be examined first, followed by each individual task, in order to determine the business questions that would emanate from each of the following potential outcomes: completed, partially completed, stalled, cancelled or not completed. With each potential outcome, there should be another series of questions that helps to narrow the cause or contributing factors. This approach to analyzing business processes aids in designing the logical flow of alerts, KPIs and metrics. By designing a logical flow of analysis for monitoring and decision-making purposes, managers within an organization will be provided with the necessary insight into the operations and key activities at each significant step of a business process.

The Foundation for the Information Enterprise

Business processes provide the logical flow and context in which data is generated, processed and analyzed. The foundation for all information enterprises is effective, well-documented and understood business processes. In an information enterprise, individuals make decisions based upon the information that they have available. Because good business decisions are based upon information and information is data with context, well-defined and understood business processes are required.

Bibliography and suggested additional reading:

  1. Davenport, T.H. & Short, J.E. The New Industrial Engineering: Information Technology and Business Process Redesign. MIT Sloan Management Review, Volume 31, Number 4. Summer 1990. pp. 11-27.
  2. Davenport, T.H. Process Innovation: Reengineer Work through Information Technology. Harvard Business School Press. 1993.
  3. Malhotra, Yogesh. Business Process Redesign: An Overview. IEEE Engineering Management Review, Volume 26, Number 3. Fall 1998.
  4. Hammer, M. & Champy, J.A. Reengineering the Corporation: A Manifesto for Business Revolution . HarperCollins. 1993.

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