ICT2641 TUT 102 2018-Xen PDF

ICT2641/102/3/2018
Tutorial Letter 102/3/2018

Business Informatics IIA
ICT2641
Semesters 1 and 2
Department of Computing
This tutorial letter contains:
Additional Information Part 1 and 2
ICT2641/102/3/2018
Intentional Blank Page
2
ICT2641/102
PART 1.......................................................................................................................... 8
Preface .......................................................................................................................... 8
Chapter 1 .................................................................................................................... 12
Introduction ................................................................................................................. 12
What is Business Analysis? .................................................................................................................. 13
Why analyse a business area? ............................................................................................................. 14
Management ......................................................................................................................................... 15
The context for IT.................................................................................................................................. 23
Productivity ........................................................................................................................................... 28
Task Clarity ........................................................................................................................................... 31
Breakthrough Projects .......................................................................................................................... 32
The Golden Rule! ............................................................................................................................. 33
Summary of concepts ........................................................................................................................... 34
Conclusion ............................................................................................................................................ 35
Assignment: Field exercise ................................................................................................................... 35
Test your knowledge............................................................................................................................. 38
Answers ................................................................................................................................................ 40
Chapter 2 .................................................................................................................... 41
The magic of measurement......................................................................................... 41
Introduction ........................................................................................................................................... 41
Why measure?...................................................................................................................................... 41
Effectiveness versus Efficiency............................................................................................................. 42
Measuring a business ........................................................................................................................... 44
Model of Measurement ......................................................................................................................... 45
Financial Perspective ....................................................................................................................... 45
Customer perspective ........................................................................................................................... 47
Customer needs ............................................................................................................................... 47
Sensitivity to customers and customer service ..................................................................................... 49
Timeliness............................................................................................................................................. 49
Quality perspective ............................................................................................................................... 49
Innovation and creativity perspective .................................................................................................... 50
Employee perspective........................................................................................................................... 50
Workforce utilisation and productivity ............................................................................................... 50
Performance appraisal ..................................................................................................................... 51
Employee satisfaction and commitment ........................................................................................... 51
A business as a system ........................................................................................................................ 52
Management by the Numbers............................................................................................................... 53
The lesson ............................................................................................................................................ 56
Summary of key concepts..................................................................................................................... 57
Conclusion ............................................................................................................................................ 58
Field exercise........................................................................................................................................ 58
Questions:............................................................................................................................................. 60
Case study ............................................................................................................................................ 61
Answers ................................................................................................................................................ 66
Chapter 3 .................................................................................................................... 67
In the shoes of the “Owner” ......................................................................................... 67
3
Introduction ........................................................................................................................................... 67
Setting up a business............................................................................................................................ 68
Running a business .............................................................................................................................. 71
Financial statements ............................................................................................................................. 73
The Balance Sheet ............................................................................................................................... 73
The income statement .......................................................................................................................... 74
The physical building blocks ................................................................................................................. 76
The Cash Balance Sheet.................................................................................................................. 77
The “Queue for Cash”....................................................................................................................... 79
Summary of key concepts..................................................................................................................... 84
Conclusion ............................................................................................................................................ 84
Exercise ................................................................................................................................................ 85
Practical field exercise .......................................................................................................................... 85
Answers ................................................................................................................................................ 88
Chapter 4 .................................................................................................................... 90
“Asset-Spin” & ROAM ................................................................................................. 90
Introduction ........................................................................................................................................... 90
All Roads lead ROAM or Ruin! ......................................................................................................... 90
Ownership ........................................................................................................................................ 92
The three key Resources In: Results Out (RIROs) ........................................................................... 93
Asset Spin ........................................................................................................................................ 94
Management Mythology........................................................................................................................ 96
Management Research......................................................................................................................... 97
Speed is it!!!!................................................................................................................................... 101
The Competitive “Asset-Spin” Ratio ............................................................................................... 103
The 10 “Asset-Spin’s” ..................................................................................................................... 104
“How many Rands of Sales do we get for this Asset?” ................................................................... 105
How do we improve productivity? ................................................................................................... 106
Checklist for opportunities................................................................................................................... 107
Summary of key concepts................................................................................................................... 107
Conclusion .......................................................................................................................................... 108
Exercise .............................................................................................................................................. 108
Field exercise 1 .............................................................................................................................. 108
Field exercise 2 .............................................................................................................................. 108
Test your knowledge........................................................................................................................... 110
Answers .............................................................................................................................................. 112
Chapter 5 .................................................................................................................. 113
Building Community-for-Productivity ......................................................................... 113
Introduction ......................................................................................................................................... 113
Introduction to community building: Values......................................................................................... 113
How to develop a community.......................................................................................................... 114
Organisation Renewal .................................................................................................................... 117
Conclusion .......................................................................................................................................... 120
Case study .......................................................................................................................................... 121
Answers .............................................................................................................................................. 124
Chapter 6 .................................................................................................................. 125
Information Technology and Systems, a Business Perspective ................................ 125
4
ICT2641/102
Introduction ......................................................................................................................................... 125

Purpose of Information Technology and Systems............................................................................... 125
Value of Information and Business Systems .................................................................................. 126
Impact of Systems on strategy, processes and structures.............................................................. 127
Management decisions dictate the data collected .......................................................................... 128
Decisions managers make.................................................................................................................. 129
Poor information and systems management .................................................................................. 131
Different businesses need different systems....................................................................................... 132
IT&S Strategy ..................................................................................................................................... 133
Change Management ......................................................................................................................... 135
Conclusion .......................................................................................................................................... 138
Practical field exercise ........................................................................................................................ 138
Answers .............................................................................................................................................. 142
Chapter 7 .................................................................................................................. 143
IT&S from a business perspective, Ball Co Activity ................................................... 143
Introduction ......................................................................................................................................... 143
Case study introduction ...................................................................................................................... 143
Background Information ................................................................................................................. 144
Instructions ..................................................................................................................................... 146
Learning Points............................................................................................................................... 147
Conclusion of Part 1............................................................................................................................ 148
Glossary .................................................................................................................... 149
References ................................................................................................................ 156
PART 2...................................................................................................................... 160
CHAPTER 1 .............................................................................................................. 160
BUSINESS ANALYSIS: AN OVERVIEW .................................................................. 160
Introduction ......................................................................................................................................... 160
Changes In Business .......................................................................................................................... 160
Business Analysis In Crisis ................................................................................................................. 165
Emerging Changes In Business Analysis ........................................................................................... 167
Multiple Task Roles............................................................................................................................. 169
New Business Analysis Competencies ............................................................................................... 171
Chapter Summary............................................................................................................................... 173
Next Chapter....................................................................................................................................... 173
Test Your Knowledge.......................................................................................................................... 174
Practical Exercises And Study Tips .................................................................................................... 174
Score Your Knowledge ....................................................................................................................... 175
CHAPTER 2 .............................................................................................................. 176
BUSINESS ANALYST AS CONSULTANT ................................................................ 176
Introduction ......................................................................................................................................... 176
Consulting Defined.............................................................................................................................. 176
Traditional Versus High-Impact Business Analysis ............................................................................. 177
High-Impact Consulting Role .............................................................................................................. 181
5
(1) First conventional analyst role: Personal Assistant ............................................................. 181
(2) Second conventional analyst role: Expert or Technologist .................................................. 182
(3) Third conventional analyst role: Process Consultant or Facilitator ...................................... 183
(4) High-Impact Business Analysis: Business Partnership Role ............................................... 184
Chapter Summary............................................................................................................................... 186
Next Chapter....................................................................................................................................... 186
Answers To Practical Exercises.......................................................................................................... 188
CHAPTER 3 .............................................................................................................. 189
ANALYST AS BUSINESS CONSULTANT ................................................................ 189
Introduction ......................................................................................................................................... 189
Understanding A Business.................................................................................................................. 189
The What Of A Business..................................................................................................................... 190
Business And Technology Strategy .................................................................................................... 192
Types Of Business Models ............................................................................................................. 194
Organisational Level ........................................................................................................................... 197
Business Demographics ................................................................................................................. 200
Critical Success Factors ..................................................................................................................... 202
Definition: Critical Success Factor (CSF). ........................................................................................... 202
Chapter Conclusion ............................................................................................................................ 203
Next Chapter....................................................................................................................................... 204
Answers To Practical Exercises.......................................................................................................... 206
CHAPTER 4 .............................................................................................................. 207
ANALYST CONSULTING PROCESS ....................................................................... 207
Introduction ......................................................................................................................................... 207
Analyst Consulting Process ................................................................................................................ 207
Four Distinct Design Characteristics Of The Process ......................................................................... 211
Process Variations .............................................................................................................................. 212
who is the client .................................................................................................................................. 215
chapter conclusion .............................................................................................................................. 216
Next Chapter....................................................................................................................................... 217
CHAPTER 5 .............................................................................................................. 223
THE BREAKTHROUGH STRATEGY© ..................................................................... 223
Introduction ......................................................................................................................................... 223
The Breakthrough Strategy© .............................................................................................................. 223
A Crisis Reveals Hidden Capacity ...................................................................................................... 225
Different Types Of Breakthrough© Projects.................................................................................... 229
Expansion Of Pilot Projects ................................................................................................................ 233
Next Chapter....................................................................................................................................... 236
6
ICT2641/102

case study answer .............................................................................................................................. 238
CHAPTER 6 .............................................................................................................. 239
PROJECT IMPLEMENTATION MANAGEMENT ...................................................... 239
Introduction ......................................................................................................................................... 239
Implementing Stage ............................................................................................................................ 239
Task One: Project Design ................................................................................................................... 241
Task Two: Project Planning ................................................................................................................ 244
Task Three: Project Execution And Tracking ...................................................................................... 245
Task Four: Project Sustainability And Expansion................................................................................ 247
Next Chapter....................................................................................................................................... 250
Case Study Answer ............................................................................................................................ 253
CHAPTER 7 .............................................................................................................. 254
RESISTANCE AND CHANGE BARRIERS ............................................................... 254
Introduction ......................................................................................................................................... 254
Change Barriers.................................................................................................................................. 254
Types Of Change Barriers .............................................................................................................. 255
Strategies To Overcome Change Barriers .......................................................................................... 260
Flawed Demand Making ................................................................................................................. 264
Effective Demand Making............................................................................................................... 265
Next Chapter....................................................................................................................................... 267
Case Study Answer ............................................................................................................................ 270
CHAPTER 8 .............................................................................................................. 271
ANALYST CONSULTING CASE STUDY.................................................................. 271
Introduction ......................................................................................................................................... 271
TV-Tech Company: Case Study ......................................................................................................... 272
Your Interview Notes ...................................................................................................................... 273
Guidelines For The Report ............................................................................................................. 275
Bibliography ........................................................................................................................................ 277
7
PART 1
Preface
The purpose of this study guide is to help prospective business analysts to make the
shift from simply having an IT focus to having a business focus. How often have we
not seen the following?
• An IT consultant uses technical terms that the client does not understand.
• An IT “solution” only causes other organisational problems.
• A person is placed in a job of business analyst because he did his previous job as
systems analyst well… without any focused training on what the new job requires.
• The business analyst who has to prescribe the “business case” for a new
information system is a technical expert without a feeling for the dynamics of the
specific business.
The aim of this module is to make sure that that doesn’t happen to you. This module
will assist you to make three important shifts, which will only happen if you can make
the shifts in your mind.
Shift 1: From a technological focus to a business focus…

The easiest way to explain this shift is to think of the difference in your approach if you
had to do the job of business analyst in your own business, versus being called in as
an IT expert.
Shift 2: From a technologist to a business partner…

A technologist will use technical jargon that the business manager doesn’t understand,
whereas a business partner will really help clients to participate in creating and
implementing the solution.
8
ICT2641/102
Shift 3: From the “expert” who writes a report with recommendations to an

active participant in each stage of the process…
The expert’s final output is a report with recommendations, and that often frustrates
him/her, because he/she cannot see the result that his/her recommendations produce.
The business partner that is involved throughout the whole process will be able to
adapt his/her proposals as the IT project goes on, and will therefore constantly improve
the recommendations for present and future projects… which is highly satisfying.
You will find that this course is written from a business perspective …with reference to
the field of IT. It is not, like most IT courses written from a technical IT perspective with
some by-the-way reference being made to business. This course, and especially this
module, will help you to understand the business through the eyes of an owner, which,
together with your IT knowledge will make you an extremely valuable partner in every
venture that you get involved in.
This module consists of seven chapters. It starts with an introduction, which gives
you the background against which the rest of the subject is designed. Chapter 2
shows how measurement is important in your role as business analyst. Chapter 3
teaches you in a simple way how to understand financial statements through the eyes
of an owner and chapter 4 then introduces you to a simple yet effective model for
finding where you should impact on the business to add bottom-line value. In chapter
5 the strings are pulled together: We see where people, systems, procedures and
bottom-line results fit together in the organisation. Chapter 6 looks more closely at
where IT fits into the bigger picture and the last chapter is a simulation exercise that
captures all the learning of the whole module.
Important is to note that the chapters follow on each other. If you don’t understand one
chapter it is highly unlikely that you will understand the next. For example, the case
study in chapter 7 uses figures that you have calculated in chapter 4 from information
that was given to you in chapter 3.
In conclusion, this study guide introduces IT analyst consultants (also called business
analysts) to the basic drivers of productivity in any business and how to create
9
sustainable economic value. It equips them to read and use financial statements.
They will also reach a level of understanding that enables them to identify performance
improvement opportunities. Thirdly, they will have a tool to measure and quantify the
value they can add through any information system changes they recommend. It also
introduces the IT analyst consultants to a new client-consultant relationship, and the
behavioural styles essential to manage the relationship effectively.
10
ICT2641/102
Suggestions on how to get maximum benefit from this module:

• The whole module is one unit. Do not try to look at an interesting chapter before
you have properly mastered the previous one.
• Think like someone who owns a business. It makes the material much more
logical to understand.
• Don’t try to learn it off by heart. Make sure that you understand the concepts,
rather than trying to understand the exact wording.
• The material is simplified to such a level that simplifying it further would make it
inaccurate. Don’t look for too much in the material. If there is a choice between a
simple and a difficult answer, first try the simple answer. We tend to
overcomplicate matters.
• The text is crammed with frequently asked questions. When you see a frequently
asked question: FIRST look at the question and try to answer it yourself BEFORE
looking at the answer. That way you will ensure understanding.
• Start every study session with an overview of what you have learned during your
previous session.
• Try to tackle one unit (chapter, paragraph, diagram etc.) at a time and don’t stop
until you have mastered it. If you have only partly mastered it, you will need
exactly the same amount of time to master it than you have just used… and that is
wasting time.
• As far as possible, get rid of distractions (music, little brothers and sisters, phones
ringing, etc.) when you study. If necessary, rearrange your day so that you do it
when everybody else is away or sleeping. (The phone seldom rings at 05:00.)
• When you start a new chapter, first go to the summary at the end of the chapter
and try to understand the context of the chapter. The individual units within the
chapter will make much more sense when seen in context.
• Going through the work once only is seldom enough. The very clever ones
amongst you might remember the work, but only in the short term. This module
will change your life if you really make the concepts your own. Repetition is vital.
11
Chapter 1
Introduction
This chapter gives you some important background on where your job as a business
analyst will fit into the bigger picture of the business. We shall answer the question
“What is Business Analysis?” and why we need to analyse a business area? We shall
also look at the role of management and where it fits into your life as a business
analyst. We shall consider the job of business analyst within the context of the total
business and where it differs from strategic management. Within this context we shall
look at how we can help the company to concentrate on those areas that it can
dominate. A definition of productivity is also given and we will briefly look at how
productivity can be improved using breakthrough projects.
The learning objectives of chapter 1 (Introduction) are:

• An understanding of the concept “business analysis” and its relationship with
management,
• A clear understanding of where the business analyst impacts within the context of
the organisation, and
• A workable definition of productivity
Frequently asked question: Why do I need to know all this if I am studying IT?
Answer: Any successful IT intervention in an organisation needs to make a difference
to the bottom-line of the company. The role of the business analyst is to link the
business need with the correct IT solution. Without a basic understanding of the
business environment it is impossible to create this link.
12
ICT2641/102
Frequently asked question: How well should I understand the organisation to be

able to do this?
Answer: Depending on the scope and the complexity of the IT intervention, the
business analyst just needs to understand the organisation well enough to understand
the need for the IT solution and to be able to recommend which IT solution would be
the best one.
Example: If you have to analyse the business with the aim of installing a total new
ERP (Enterprise Resource Planning) system, you need a deeper understanding of the
processes in the company than someone who works in a team that upgrade the LAN
(local area network) of the site.
What is Business Analysis?

There are two sides to business analysis: business area analysis and financial
analysis.
• Business area analysis is the process of identifying and analysing business
processes, business problems and business data.
• Financial statement analysis is the science of getting valuable information by
looking at the financial statements of the company (as well as some unpublished
information). The value of financial statement analysis depends on how complete
the information is about a firm’s strategies. A number of issues cause managers
not to disclose all information to all parties:
◊ The information that managers need to make the right decisions is usually not
the information that the taxman needs.
◊ A company does not want to disclose its strategy to its competitors through its
financial reports.
◊ The accounting system used by the company influence how financial data is
reported.
◊ Different kinds of businesses will report different things in their financial
statements.
13
To really add value, business area analysis must help translate the (often vague) goal
of a project into clear project requirements. All parties involved must then agree on
these requirements. To achieve this, business analysts must:
• Find out exactly what the needs of the client are.

• Communicate these needs to the information technology experts in a simple way
as an understandable and feasible set of conditions.
• Ensure that the project is aligned with business goals and priorities.
To be able to get the right information, business analysts must cultivate a healthy
relationship with management and with any people who can supply them with the right
information needed for an accurate analysis of the business.
Why analyse a business area?

Why analyse a business area if the business experts already know what they want?
Too many information technology projects start with a solution that “has to” be
implemented: “No matter what the problem, our solution is the answer”. The solution
may or may not be the right decision. Although the easy way out is simply to
implement what the end-user wants, it could not be the best solution. If IT could
properly analyse the thought process behind the decision, they are far more likely to
deliver a system that really works. Without properly understanding the system, IT may
be implementing the wrong solution. Think of the following:
• Can a doctor operate on a patient without understanding how the human body
works?
• Who would go to a doctor that prescribes aspirin, no matter what the disease is?
• A cricket player that can only play one kind of shot will not reach the highest level
in cricket. To really be a star, the player must be able to analyse the environment
(field placing, opponent’s strengths and weaknesses, etc.).
• How can you supply the correct answer to a problem if you don’t understand the
problem?
• Not understanding a system probably means not understanding a problem in the
system.
• Not understanding a problem, rarely leads to the correct solution to the problem.
14
ICT2641/102
• The right answer starts with the right question.
It is therefore vital that the business analyst understands the business that he or she is
analysing. Proper understanding will lead to better problem identification, which in turn
will lead to a better solution… which is after all what the business analyst’s job is
about.
We will discuss these two questions referring to what a business really is and through
within the framework of management of the business. To simplify this, keep the
following in mind:
• An owner runs a business to make a profit for him/her.

• The business makes a profit by generating sales of goods or services.
• The business generates sales through its assets (We shall define assets in more
detail later).
• The ultimate goal of the business is therefore to generate cash.
Management
You can say that management is the art of getting things done through organisational
resources. In the last few centuries “managers” were called “bosses” and they were
required to tell people what do to. They then had to keep an eye on the people to
make sure that they did it. The time of “bosses” is over.
Peter Drucker, well-known management consultant, said that managers give direction
to their organisation, provide leadership and decide how to use organisational
resources to accomplish their goals.
MANAGEMENT …
It is only managers, not nature or laws of economics or governments that make
resources productive.
Peter F Drucker, Managing in Turbulent Times
15
To make resources productive, Peter Drucker lists four essential parts to every
manager’s job:
1. Planning: Setting objectives/goals, developing strategies to reach those

objectives, determining the resources that are needed and selecting the best plans
to achieve the organisation’s objectives.
2. Organising: Allocating resources, assigning tasks and establishing procedures for
achieving the objectives. It also involves creating and designing of an
organisational chart (showing authority), recruiting new employees, selecting,
training and developing employees, and creating conditions and systems that will
ensure that employees work together to accomplish the objectives.
3. Leading: Creating a vision and guiding and motivating employees to work
effectively to achieve the objectives.
4. Control: Determining whether or not the organisation is on track to accomplish
their goals and objectives and to take corrective action if necessary. It also
involves measuring performance and providing feedback to employees.
16
ICT2641/102
Example: A sales manager of a company that sells medicine sets an annual sales
target (planning) for his department, he then divides the target into geographical areas
and passes the work to his sales representatives (organising). As the year progresses
he coaches them to assist them in meeting their individual targets (leading) and make
sure that the monthly sales are such that the department will meet its annual target
(controlling).
From the above it is clear that one of the roles of a business analyst is to help provide
direction to management. We define a change agent as someone who can turn a
problem into an opportunity and create a sustainable solution for the
problem/opportunity. Business analysts can therefore truly be called “change agents”.
Just follow the logic in the following case study:
17
• Ben is a manager who experiences a certain problem.
• He calls in the IT department to help him solve the problem.
• He suggests a solution to the IT people.
• Judy is the business analyst who has to analyse the problem. She first makes
sure that she understands the business and the problem properly.
• Judy helps clarify Ben’s needs for him. This is not at all what Ben initially thought
the problem was.
• She compiles a set of requirements for the IT-solution.
• The solution gets implemented successfully.
Judy was a true change agent, since she helped to create a sustainable solution to a
business problem.
Frequently asked question: If a business analyst points out to a manager what the
real problem is, who is the real change agent: the manager or the business analyst?
Answer: The real change agent is the person who was responsible for the real
change. In the above case both the manager and the business analyst could be called
a change agent: the manager for sensing a need or problem and the business analyst
for finding out what the real problem is. Without the manager the business analyst
would not have had the opportunity to get to the heart of the problem and without the
business analyst the real problem would not have been addressed. Both were needed
for a sustainable solution to the problem.
IT business and system analysts are change agents but rarely see themselves as
change agents. This is due to a few reasons:
• The role takes them out of their comfort zones.
• Being a change agent means that you are in people business. IT consultants
generally don’t see themselves as in the people business.
• It is much easier to supply general “drop-in” solutions to business problems…
whether the solutions are the right ones or not.
A change agent is someone who can turn a problem into an opportunity and create a
sustainable solution for the problem/opportunity.
18
ICT2641/102
What is important to top management? They want the company to perform. This they
are able to do only if their people perform well. Often top management (executive
management) are so preoccupied with economic performance that they forget their
people. Change management is about people management. The truly effective
executive manager will have a balance between his/her economic vision and his/her
people vision.
Make a list of the things that could concern a manager in a business.

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
Your list could include issues such as: bottom-line profit, share price, positioning in the
market, competition, the exchange rate, growth of the business, employment equity in
his company, finding and keeping the right people, repositioning the business and
many more.
Different disciplines in the business will have different things that are important to
them. The production manager in a typical organisation will be far more concerned
about total cost than the HR manager would be, whereas the HR manager would be
more interested in career path development.
On the graph below, plot where you think the following people would be situated:
Managing Director (MD), Finance, Production, Engineering, IT, Human Resources
(HR), Marketing and Sales, Business Analysts.
19
Executive Concerns
Economic
Performance
Hi
Lo People
The x-axis shows your concern for people. The y-axis shows your concern for getting
bottom-line results. The further you are to the right, the more important people are to
you. The higher you are on the graph, the more important economic results are to you.
Obviously the ideal point on the graph would be as far as possible to the right top
corner.
The following graph gives the typical position in many organisations worldwide. To
what extent does these positions correspond with those that you plotted on the graph
above?
20
ICT2641/102
Maybe as follows:
Executive Concerns
Economic
Performance
Hi
V
• Finance Need to move in this direction
• MD
• Production
• Marketing & Sales
• Business Analysts
• HR
• Engineering
• IT People
Lo Hi
The Finance department is high on economic performance as the financial

performance of the business determines if they are successful or not. Their priority is
the financial performance of the business and not the personnel. To the Human
Resource department on the other hand priority is the employees of the business and
therefore they are low on economic performance and high on people. IT is low on
both, economic performance and people as they are only interested in getting the
systems up and running and keeping it up to date. The ideal situation would be to be
highly focussed on both economic performance as well as people.
What does this imply to IT?
• IT is perceived as ignoring the people and as not adding bottom-line value.
• The only people who can change these perceptions are the IT professionals
themselves.
• IT would have to get a better business perspective (see it from the owner’s point of
view) if they want to be more results focused and more people focused.
• The rest of the organisation will not take IT by the hand to make these changes.
They all have their own battles to fight. It is up to IT to do it.
21
An interesting observation is how far IT and the different members of the management
team are apart on this diagram. This diagram explains the following observations:
• The department with whom IT probably communicates best is the engineering

department (they are closest to each other in terms of focus).
• The MD wants results and does not care about systems. IT delivers systems and
doesn’t care about results.
• HR claims that IT loses the people and IT doesn’t understand why HR says so.
• Finance is frustrated about the cost of the information system.
• Production is happy with the system as long as it helps them to focus on their job.
• Business analysts have more or less the same view of the business as Marketing
(This is the ideal: Often the business analysts are sitting in the same corner as IT.)
• Everybody complain that they don’t understand the language of IT.
Example: IT is implementing a new file management system on the LAN. HR is just

concerned that the people will have difficulty to use the system. IT claims that the
system will improve the I/O speed on the individual PCs and will ensure that backups
are made periodically. Finance claims that the system is too expensive, since each
PC has its own memory. IT reports that the RAM of all the PCs will have to be
increased, which will have an adverse effect on the processor speed. The MD is
concerned that the system will generate more paperwork and distract the attention of
the people from making profit. Engineering is happy, as long as the new system can
host graphics and talk to the CAD (Computer-Aided Design) system. IT plans to write
a program that will be installed on all PCs to make all the present systems talk to each
other. Nobody is satisfied with the way the project is going.
The ideal people to overcome the difference in focus are the business analysts. Their
focus is closest to most other functions in the organisation. In order to overcome the
above differences, IT, and more exactly the business analyst must work within the
context described below. The processes of the business analyst must also fall within
this framework. We will discuss this framework under the following headings:
• The context for IT: Where does IT fit within the total enterprise?
• Con-dom (concentrate and dominate): Where should IT concentrate its efforts?
22
ICT2641/102
• Productivity: How could IT help increase productivity in the whole organisation?

• Task clarity: What exactly is our task within this bigger framework?
• Breakthrough projects: How do we tackle productivity issues? (This will be
covered in far more detail in another module).
The context for IT

A master competence for any manager is the ability to initiate, accommodate and
transform all changes from “problem” to “opportunity”. This is especially true of the
role of a business analyst: You, as business analyst can help identify the real
problems in the organisation, which IT can then help turn into opportunities by
implementing the correct system. By doing that, business analysts are truly change
agents.
The organisation operates at different levels. If we broadly classify them into two main
levels, we can distinguish between the enterprise level and task level. The following
diagram shows how these levels are different:
23
MANAGEMENT OF THE ENTERPRISE
Enterprise Level Task Level
Select the Clarify Install

Competitive Expectations Facilities
Arena & & Measure
Information Tools
Design
&
Position Enterprise
Provide
Feedback
Capital &
Technology Incentives
People
At the “Enterprise Level”, these are key questions:

1. Where is a gap in the market to make money and generate cash? What are our
competitors not doing?
2. What will people buy? What will make us different from these other players?
3. How do we design this business to go for the gap we see?
They are all important but especially the third one. It points to a very big and common
error. We spend more than 80% of our time and effort running a business as efficiently
as we can. We take its existing shape and size as a “give”. We miss the “BGO” – the
“blind glimpse of the obvious”:
• At the enterprise level management has to select the competitive arena (decide
which markets to compete in, which product range to carry, where in the market
segment to compete, etc.)
Example: Mercedes Benz and Hyundai operate in different market segments.

Mercedes caters for the luxury end of the market and price their products accordingly.
24
ICT2641/102
Their products are expensive, yet they sell them by the truckload. Hyundai charges
the lowest price in each class that they choose to compete in. These companies have
selected different competitive arenas.
• At the enterprise level management then design and position their enterprise to
suit the competitive arena chosen.
Example: Mercedes Benz prefers to have a dealer in every town. These dealers are
franchises and belong to the owner of the dealerships. Although it adds cost, it fits
their chosen competitive arena. Hyundai prefers to have large dealerships in major
towns and cities. All dealerships belong to the mother company. It allows them to sell
their cars at a lower price.
• At the enterprise level management decides on how to allocate capital (money),

what technology to use and what their people policy would be like.
Example: In the 1980s Mercedes Benz and BMW made two totally different decisions
on technology and people. BMW decided to use hi-tech processes and not to employ
anybody with less than grade 12. Mercedes preferred to use manual labour where
possible and they employed the lowest possible educational level for each post. Since
then Mercedes had constant labour unrest, while BMW did not have a single strike.
Major IT decisions are taken at the enterprise levels. At the enterprise level the role of
IT is typically to assist in market intelligence, warn companies of sudden moves by
competitors and position companies differently.
Example: Pick ’n Pay decided to use scanners for their price tags, while
Shoprite/Checkers prefers to use manual inputs on their tills. Pick ’n Pay installed the
technology to be able to do this, and this has allowed them to reposition themselves as
an instant bank as well: You can draw money at your local Pick ’n Pay till.
At the “Task Level” management need to “spell out” to their employees what is
expected and give them the necessary information. They also need to provide their
employees with sufficient equipment so that they can make the expectations a reality.
Management then need to appraise their employee’s performance and give them
25
sufficient feedback and maybe incentives such as performance bonuses. The
business analyst can make a huge contribution on this level.
Most IT interventions however take place at the task level. At the task level, there are
also a few different activities:
• Clarify expectations and information: In order to carry out a task the first thing to do
is to find out exactly what to do!
Example: In a production environment the foreman must first find out to which
specification the product must be produced and whether it is okay to deviate from this
specification if they could produce more.
Example: A business analyst’s first task is to find out exactly what is expected of
him/her and of the system to be installed.
• At a task level the next task is to install facilities and tools: Once we know what to
achieve, the next step is to install, modify or use what we have to get the job done.
Example: In a production environment the plant must be set up to produce according

to the required specification.
Example: The task of IT is typically to find out whether the present system cannot do
the job (even if slightly modified). This is often the task of the systems analyst.
• At the task level the final task is to measure the results achieved: Quality control
tells the task level manager whether the expectations have been met. This gives
feedback on how well the facilities are performing.
Example: In a production plant the product is analysed to find out whether it conforms
to specifications. If not, adjustments must be made to the plant or the process.
26
ICT2641/102
Example: The business analyst should ideally be part of the whole process and
continuously make sure that the system can deliver what the client needs. If not, the
system specifications must be changed so that it will meet the requirements.
The role of the business analyst is therefore almost exclusively at the task level,
although he/she must look at the enterprise level too when analysing the business
system.
“Con-Dom” the Enterprise

To run a business is to wage war. All the great armies in history had one common
trait. They focused their effort on one point and dominated that point.
Napoleon Bonaparte said

“Every battle is won in a period of ten to twenty minutes. I focus on that ten to twenty
minutes and I win …”
One of the greatest of military thinkers, Prussian General Karl von Clausewitz, wrote in
1832.
“Keep the forces concentrated in an overpowering mass…the fundamental
idea…always to be aimed at…”
Peter F. Drucker clearly agrees with that view when it comes to running a business:
“Concentration is the key to economic results. No other principle of effectiveness is
violated as constantly today as the basic principle of concentration…”
Companies that win constantly

• Concentrate their resources and effort on a very narrow front.
• Dominate their chosen sector of the market.
That’s what “Con-Dom” your business means. Concentrate to dominate and you’ll be
nice and safe on attack or defence – occupying a low risk, high return position on the
battlefield.
27
Frequently Asked Question: What is the role of IT in this “battle”.
Answer: This battle is important for two reasons: Firstly, if the business analyst
understands this battle, he/she will have a better understanding of the needs of the
business. But there is also a second point of importance. Any IT system should help
the business to concentrate on the correct position and dominate it.
Productivity
It is relatively easy to measure workforce productivity as long as employees are
producing tangible products for which their individual input is both identifiable and
controllable. This leaves out almost all managers, most staff positions and research
jobs. Since the rate of efficiency is not individually controlled, it also leaves out most
assembly-line jobs. It even leaves out maintenance jobs and any other jobs that are
not directly linked to production.
“Labour productivity” is measured by dividing total sale or total profits by the number of
employees. If a business can eliminate 5% of its employees and still maintain the
same level of output, it will increase their productivity. It is also true for the opposite, if
a business maintain the same number of employees and they can increase their
output, it will increase their productivity.
Productivity involves more than simply dividing numbers; it involves having the right
people in the right jobs, having motivated, well-trained employees supervised by
effective managers. It also involves having sufficient equipment so that employees
can do their jobs they are assigned effectively.
Higher productivity than your competitors lets you fight on your terms.
A simpler definition of productivity is: Productivity is a measure of how well inputs can
be converted into outputs. It is calculated by dividing outputs by inputs.
Examples are:
• If the rate at which straw hats are produced on the beach is measured in number
of hats per hour, the input is time (hours) and the output is number of hats.
• If a plant turns tons of raw materials into tons of products, the productivity of the
process will be measured by dividing tons of products by tons of raw material.
28
ICT2641/102
• If a car uses litres of petrol to drive a number of kilometres, the “productivity” of the
engine is measured in kilometres per litre. We call it fuel efficiency.
• If a company’s assets are worth R200 million and the assets generate R 300
million in sales, the asset productivity of the company is measured by sales divided
by assets (which is 300 million divided by 200 million, which is 1,50: Every Rand
of assets generates R1,50 of sales.
THE DRIVING VALUE

Resource In: Result Out Ratio (RIRO)
29
RI
(Assets)
Productivity Gain
Ri 1 80
Ri 2 20
RO
(Sales)
20 80
Ro 1 Ro 2
The challenge is to take resources and transform it into as much as possible product or
services. There is only one way to create value and secure your strategic position in
the market place. You concentrate resources to attack on a narrow front and improve
productivity year-on-year. For a manager, input: output ratios are the only measures of
intent and results. We call them RIROs – Resources In: Results Out ratios. They are
the driving value of all management actions.
Our program is about task clarity and RIROs. That’s all. Save and protect resources.
Cut out waste. Take up slack. And what about people? Well, that’s the number one
issue. You need confident, competent, experimental people who talk to each other.
They succeed when there is a crystal, clear common task for them to focus on.
30
ICT2641/102
Frequently asked question: Should IT be concerned with productivity?

Answer: Yes! The job of an information system is to turn raw data into valuable
information. IT should ensure that the information is valuable and that the system
provides that information that improves the productivity of the business.
Frequently asked question: What is the role of the business analyst in achieving
productivity?
Answer: The business analyst needs to establish the connection between the
business goals and IT. One of the critical business goals is to increase productivity.
The business analyst can be extremely valuable if he/she can ensure that the system
is geared to improve productivity.
Task Clarity
The key elements of “Task Clarity” are:
1. Expectations – brains feed on them. Harness brainpower. Paint an exciting
picture of what “could be” in the minds of your people.
2. Information – are the expected standards simple and clear? No confusion? Does
the information guide or do people have to rely on memory?
3. Tools and facilities – do your people have the resources they need to hit the
standards and make expectations a reality? Or, does the workplace hold them
back with bad processes and procedures?
4. Measurement and feedback – is this tied to performance they control? Is it fast
and frequent? Visual? Does it alert them? Can they “trouble-shoot” with it?
5. Incentives – can employees tune into WII-FM – “What’s in it for me?”
Managers are responsible for the working environment (the “What”). Their people
manage the content (the “How”). So, clarify the “Task”. Pump up the volume of WII-
FM. Then, get out of the way!
If you give people automatic self-control, they give full attention to the task-at-hand.
No one has to look over anyone else’s shoulder. You can trust completely those who
act as if they were one level up, even when you aren’t there to check on them. The
critical role of the business analyst is to provide task clarity to IT. He/she does that by
31
ensuring that the task at hand is aligned with the business goals and that the system
will do EXACTLY what the business needs.
For you as business analyst it is important to understand the elements of task clarity.
Your ultimate deliverable is a clear task description for those who have install the
system. Without a clear project definition the probability of a successful system is less
than 50%
Breakthrough Projects
A “100 Day Breakthrough Project” is a nuts-and-bolts way to create task clarity. (We
will get to the detail of a breakthrough project in another subject.) A huge system
implementation (like an ERP implementation) could be made manageable by
subdividing it into breakthrough projects.
What is a breakthrough project?

• A breakthrough project is a project that is loaded for success…
• … by being designed to make a direct bottom-line impact…
• … and by being small enough not to scare those who are involved…
• … yet big enough to make a breakthrough in performance…
• … and that is scoped based on what the people are ready, willing and
able to tackle…
• … in a short period.
Example: If the management of a restaurant chain wants to improve the performance

of all their branches they could decide to “reduce time from order to service in Eastgate
of spare ribs from 17 minutes to 15 minutes and to achieve this within 4 weeks.” This
would be a clear goal for a breakthrough project. Note that this project conforms to all
the points listed above!
32
ICT2641/102
Example: A process control system is first installed in a small part of a chemical plant
before it is expanded to the rest of the business. There it runs for a week to ensure
that people buy into the new system. As soon as it works well in that small part of the
plant, it is expanded to the rest of the plant.
You design it more intelligently. Coordinate it more smoothly and economically with
other tasks. Measure input-output ratios precisely. Feed back the measures in a way
that maximizes learning. Finally, you install a sturdy kaizen loop (Continuous
Improvement) at the task level! It is about tasks – not concepts. A kaizen loop refers
to very short and small projects. You pilot a prototype on a very small project so that
there are almost immediately results.
The Golden Rule!

The “100 Day Breakthrough Project” rule is to stop talking very much about a troubling
problem or opportunity that has resisted all efforts for quite a long time. Instead, apply
the methodology. Less talk. More Action!
We will show you, a change agent, how to get the golden rule applied. In short, what it
means for you as IT business analysts is:
• You will be able to understand the business from an owner’s perspective.
• You will understand the concepts of productivity, concentration and where your
role and that of management are related.
• You will have the tools to identify where there is potential for improving
productivity.
• You will be able to recommend the correct systems solution for the business
problem.
• You will know how to be a partner in the whole system implementation process…
as a consultant.
• You will understand how you can use breakthrough projects to make the change
happen.
• In short… you’ll be a real change agent.
33
Summary of concepts
• Business Analysis: Analysing the business environment so that the goal of the
project can be translated into clear project requirements. To really add value this
requires understanding the business well.
• We analyse a business area to ensure that the systems solution addresses the
real problem.
• Management organises resources to get things done. Traditionally this involves
planning, organising, leading and control. Your job as business analyst is to latch
onto the manager’s way of doing things.
• Different things are important to managers of different parts of the business.
• As a business analyst your relationship with management is an important tool in
understanding the real problem and supplying the right solution.
• A change agent is someone who can turn a problem into an opportunity and create
a sustainable solution for the problem/opportunity. A business analyst should be a
change agent, taking part in the whole system implementation process to ensure
that the system does for the business what it is supposed to do.
• The business analyst works at a task level, although it must sometimes address
problems on enterprise level.
• Strategically it is important to concentrate on one point in the market and dominate
that segment. Business analysis should help in this process.
• Productivity is a measure of how well we can convert inputs in a system to outputs.
Information systems should be aimed at improving the productivity of the business.
Your job as a business analyst includes that you sieve out projects that don’t
improve productivity.
• Task clarity is the ultimate output of a business analyst.
• A breakthrough project is the ideal vehicle to drive implementation projects.
34
ICT2641/102
Conclusion
• In the following chapter we shall look at the business as a system and how
management can have an effect on the system.
• We shall look at variances in the system and how business analysts need to keep
these variances in mind.
• We shall also look at how the different parts of a business can be measured and
how that will impact on IT and the role of the business analyst. Measurement is an
important part of business analysis. Understanding the magic of measuring will
help you to understand the context of business analysis better.
Assignment: Field exercise

• Take the questionnaire on the next page and go to a manager in a reputable
company. (If you don’t know one, go to a bank manager or the manager of a
supermarket).
• Ask the questions on the questionnaire.
• From the questions, write down the manager’s definitions of the following terms:
o Management........................................................................................
o Business analyst..................................................................................
o Change agent ......................................................................................
• Comparing these definitions to the definitions in this chapter, give your own
definitions for
o Management........................................................................................
o Business analyst..................................................................................
o Change agent ......................................................................................
35
Name of manager:……………………………………
Organisation:……………………………………
Position:…………………………………………………………………………………..
If you look at your own job, name one activity that is part of your job that is part of
your role to
• plan………………………………………………………………………………….
• organise……………………………………………………………………………..
• lead…………………………………………………………………………………..
• control……………………………………………………………………………….
What do you think the main task of a business analyst is? (Note, not all managers
have necessarily worked with a business analyst… he/she might not know the
answer.)……………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
Why do you think that it is important that a business analyst understands how a
business operates?………………..………………………………………………………
………………………………………………………………………………………..………
………………………………………………………………………………………………..
If you would hire a business analyst for a specific job, name the three or four most
important attributes that he/she must possess.
• ……………………………………………………………………………………….
• ……………………………………………………………………………………….
• ……………………………………………………………………………………….
• ……………………………………………………………………………………….
Do you think that the IT function in general understands your business
needs?………………………………………………………………………………………
Why do you say so?.............…………………………………………………………….
………………………………………………………………………………………………
………………
Define the term “change agent”. What do you expect from a change agent?
………………………………….……………………………………………………………
…….………..………………………………………………………………………………
………………………………………………………………………………………………
36
ICT2641/102
Do you understand IT's language? Why/why not?..........................................
Commes.............................................................................................
37
Test your knowledge
1. The most important role of a business analyst is to …
a. define the project scope for a systems implementation.
b. translate the goal of a project into clear project requirements.
c. find out what the needs of the client are.
d. ensure that the project is aligned with business goals and priorities.
2. The main task of management is …

a. oversee those working for you.
b. make decisions for the business.
c. getting things done through organisational resources.
d. leading the organisation.
3. A change agent is someone who …

a. changes problems to opportunities…and get a sustainable solution.
b. helps people to reach their full potential.
c. bring about radical change.
d. redesigns an information system.
4. The … manager who has a mixture of concern for productivity and people is the
closest to that of the business analyst.
a. production
b. engineering
c. sales and marketing
d. IT
5. The following is one of the main tasks at enterprise level:

a. Clarify expectations
b. Select the competitive arena
c. Install systems
d. Business analysis
6. Productivity is measured by …
38
ICT2641/102
a. calculating the profit of a business.

b. dividing profit by the number of people in the organisation.
c. dividing the output by the input.
d. calculating the hours to produce one product.
7. The business analyst is responsible for task clarity. That means he does not have
to be concerned about …
a. reports.
b. expectations.
c. information.
d. incentives.
8. A breakthrough project …
a. is a long-term breakthrough.
b. needs to have strategic importance on enterprise level.
c. is about activities.
d. is about action.
9. The responsibility of a business analyst …

a. ends when his report is generated.
b. is to provide an off-the-shelf solution to business.
c. is to be a partner throughout the project.
d. is dictated by IT.
10. Financial analysis is a valuable technique for a business analyst because …

a. he needs to understand the business.
b. he needs to understand accountancy.
c. he needs to get information from the financial department.
d. it is his only source of information on the business.
39
Answers
Test your knowledge
1 (d) Ensure that the project is aligned with business goals and priorities.
2 (c) Getting things done through organisational resources
3 (a) A change agent is someone who changes problems into opportunities and
create sustainable solutions
4 (c) Sales and marketing
5 (b) Selecting the competitive arena
6 (c) Dividing the output by the input
7 (a) Reports
8 (d) Is about action
9 (c) To be a partner throughout the project
10 (a) He needs to understand the business
40
ICT2641/102
Chapter 2
The magic of measurement
Introduction
Analysis is all about measurement. In this chapter we will look at the importance of
measurement and what the results of this measurement actually tell us. The learning
objectives of this chapter are:
• You will understand the difference between effectiveness and efficiency and how
the business analyst can affect both of these.
• You will know the main measures of a business from a financial, customer, quality,
innovation and creativity and employee perspective.
• You will understand that a business is a system and where the business analyst
fits into the system.
• You will be able to use run charts to plot performance.
• You will know the effects of failing to measure the correct things on business
performance.
FAQ: Why is the science of measuring important to a business analyst?

Answer: When analysing a business with the aim to propose a system solution it
involves measuring things. You must understand the significance of measuring the
right things if you want to draw the correct conclusions from the measurements. It is
also vital to understand that, even though you measure the correct things, wrong
interpretation of the measurements will lead to wrong decisions.
Why measure?
Performance measurement gives you a snapshot of the business at a specific point in
time. It tells you what has happened and where you are in relation to your objectives.
It does not tell why something has happened, how you got where you are or what
corrective action, if anything is needed to improve your future performance.
Be aware not to measure too many variables, all of which may be easy to measure
and ignore those variables that would be most helpful simply because they are harder
41
to measure. The purpose of performance measurement is to give feedback that can
be used to identify and build on success and simultaneously to locate and rectify
weakness.
The ideal measurement of performance in the organisation is to measure performance

across boundaries in the organisation. This is called “integrated assessment”.
Choose the combination of variables to be measured and techniques to measure them
that will give you the most accurate picture of the overall effectiveness of decisions
made by the decision makers.
Peter Bernstein (1996) has recognised the difficulty of collecting and using information:
• The information you have is not the information you want.
• The information you want is not the information you need.
• The information you need is not the information you can obtain.
• The information you can obtain costs more than you want to pay.
To be an effective manager, you need to set objectives and goals, you need to
measure progress in reaching those goals and if necessary take corrective action. The
performance measures need to reflect the business’ strategic objectives, but it should
also enable you to assess the business against effectiveness (quality), efficiency (time)
and economy (cost).
A key competence of a business analyst is to make the correct decision on what to

measure. He/she must also be able to collect the right information in the right way,
draw the right conclusions from this information and to help managers to use the
information to make the right decisions regarding IT systems. This should be done
effectively and efficiently.
Effectiveness versus Efficiency
An effective ox wagon is still a very inefficient vehicle.
42
ICT2641/102
Effectiveness and efficiency are important in measuring a business’s performance.

Effectiveness is a measure of degree to which a business achieves its goals, whether
it is financial goals, customer goals, employee performance goals, quality goals or any
other outcome that is critical to the business. In other words a business is effective if it
reaches its goals. Whether the goals are the right goals is not the issue.
Efficiency is a measure of the relationship between inputs and outputs. A business

met its sales goals, but in the process they had to commit an excessive amount of
human and financial resources. In this case the business was effective, because it
reached its goal but it was inefficient because of the excessive amount of resource
needed to reach the goal. If the business reached it sales goals while committing
fewer resources it would be more efficient. By improving efficiency, the business will
save money and resources. Measuring efficiency is important as it gives us an idea on
how well a business is using its resources. An efficient organisation chases the right
goals!
Effectiveness is about doing things right. Efficiency is about doing the right things.
Effectiveness is about navigating through the forest as fast as possible. Efficiency is
about asking whether we should leave the forest. Effectiveness is about implementing
the new ERP system as fast as possible. Efficiency is about asking whether the
business needs a new ERP system at all.
To some point are effectiveness and efficiency related. The more efficient a business
becomes, the more it eliminates waste and therefore the more effective it is, but at
some point, which may differ from business to business, the quest for efficiency may
affect the quest for effectiveness. This may happens when a business
eliminates/reduces resources so much that it has a negative effect on its performance.
Some people may argue that retrenching employees has a negative effect on a
business’ performance. It is true that some companies have a surplus of employees
and therefore can downsize the company, but at some point in time downsizing will
jeopardise the company’s effectiveness.
43
FAQ: Which is the most important, efficiency or effectiveness?
Answer: Both are important. An inefficient organisation will die, because it cannot
convert inputs to outputs. An ineffective organisation will at some stage become
inefficient and die, because the people will not do well what they do. Essentially
effectiveness is subordinate to efficiency.
FAQ: Should IT and especially business analysts be concerned about efficiency or

about effectiveness?
Answer: Both. IT should be effective. Business analysts should provide efficient
solutions.
When you want to remember the difference between the two terms, just remember:
An effective ox wagon is still a very inefficient vehicle.
Measuring a business
Measuring a business must be done keeping the whole business in mind.
This is especially important in IT. If you only measure a sub-system of the business, it
is very likely that you will supply an inferior solution to the problem.
Example: How many companies have wasted millions or even billions or Rands by
allowing each department to install its own systems that don’t “talk” to the rest of the
systems in the organisation? If a business has three divisions and each division uses
a different communication system (one uses MS Outlook, another uses GroupWise
and a third develops its own system, the business will lose important information, will
duplicate a lot of information traffic and will eventually have to convert two systems to
the third one.
When measuring a business you must consider cost measures and non-cost
measures as well as internal and external measurements. Items on which you can
place a Rand value are cost-oriented measures, for example marketing costs and
distribution costs. Non-cost measures are items that are measurable but not in Rand
terms, for example quality of products/service and complaints and returns.
44
ICT2641/102
Internal measures include the number of new products, number of production costs
and quality measurements. External measures include comparing the business
performance with its competition and market shares.
Model of Measurement
A comprehensive model of measurement revolves around the business’ vision and
strategy and consists of measurements in the following areas:
1. Financial perspective
2. Customer perspective
3. Quality perspective
4. Innovation and creativity perspective
5. Employee perspective
Financial Perspective
Financial performance is one of the most important areas of measurement. It is also
one of the most objective measures of a business overall performance. You can
compare accounting-related measures to both the industry and to historical
performance. Accounting-related measures are also more objective as it uses a
common denominator namely the Rand for most measures. There are three important
financial measures namely, net income, cash flow and net worth.
Net income/Profit
Net income is the simplest way of measuring financial performance. At the most basic
level profit is calculated as total revenues minus total expenses. Profit is an absolute
figure and to give a better picture, we need to add a few more variables to the analysis.
One of the measures of financial performance is return on equity (ROE) or profit
divided by investments. In other words the amount of profit a business made for each
Rand the owners invested. Therefore it is useful to also look at the amount that the
owners have invested in the business. Other measures are return on sales and return
on assets. These compare the amount of profits to the business’ actual sales or total
sales.
Income per share is another measure of performance for publicly traded businesses.
You can use it to compare the business with other businesses. Income (or earnings)
45
per share is calculated as profit/income divided by the number of shares of stock
outstanding.
Cash flow
All three measures mentioned in the previous paragraph, net income, return on equity
and income per share, are extremely important from a financial perspective. Another
critical measure is cash flow especially in smaller businesses over a shorter period of
time. Why is cash flow important? Cash flow is the actual cash that is coming into or
going out the business. Many businesses sell products or services on credit and
customers pay for it maybe in 30 to 60 days. This means that the sales are counted
when it is made, but the actual cash is only received at a much later stage and this
means that there is no cash flowing into the business for a while. Smaller businesses
with limited financing are sensitive to cash flow. Some businesses can make profits
and be short on cash at the same time. Most small businesses fail because they run
out of cash.
Seasonal or cyclical nature of a business has also an influence on cash. For example
a clothing business may order winter clothing as early as January. Those clothes may
arrive in March/April, which is a slack time as far as actual sales go. The business
may have borrowed funds now to pay for clothing that is sold much later. If the
customers also buy on credit, then this problem is more complicated as the business
need to pay now for goods that is sold several months from now and then need to wait
several weeks or months before the cash is actual flowing into the business.
Net worth
The final measure of performance from a financial perspective is the net worth or value
of the business. The net worth of a public company is calculated as the stock price
multiplied by the number of shares outstanding. It is much more difficult to calculate
the net worth of a private company. Analysts estimate the net worth of a private
company by subtracting the company’s liabilities (what the business owes to others
such as a loan from the bank) from its assets (resources owned by the business such
as equipment, buildings and land). This calculation will give them the book value of
the company.
Regardless of the form of business ownership, a business is seen as a healthy

business if its net worth continues to increase over time.
46
ICT2641/102
Financial statements
When analysing a business’ financial statements you will be able to compare the
business’ performance with its competitors as well as with its own historical
performance.
There are two important statements, namely the income statement and the balance
sheet. An income statement shows the performance of the business over a specific
period of time and it focuses on revenues (sales) and expenses.
A balance sheet shows the business’ assets (what it owns), its liabilities (what it owes)
and its net worth (owners’ equity) at a specific point in time.
Customer perspective
This area of measuring performance includes meeting customer needs, customer
sensitivity and service and timeliness.
Customer needs
If a business successfully meets its customers’ needs then it will have a healthy
financial performance. Meeting customer needs can make a difference in being a
high-quality growth business or a business that continuously struggle to keep head
above water. It is much easier to assess a business’ financial performance than to
assess a business on meeting customer needs, as there are no calculated figures
measured in a recognised unit such as Rands. It is also impossible or nearly
impossible to compare businesses’ performance in meeting customer needs, as there
are no standardised measures.
Gap analysis can be used to assess a business’ performance in meeting customer

needs. Gap analysis is the study of the customers’ satisfaction with the business’
product or service compared to their expectations and it involves three steps:
1. Determining the gap
47
You need to determine if there is a gap between the expectations and
perceptions of the customers by communicating with the customers. Determine
what the expectations of the customers really are and not what the managers
think what their expectations are.
2. Identifying sources and causes of gaps
This step requires a deeper study to determine the sources and the causes of the
gap. Incorrect expectations, poor design, inadequate performance, or inadequate
follow-up may cause gaps between expectations and perceived performance. It
is important for managers to identify the source, as each one requires a different
kind of corrective action.
SOURCES OF GAPS:
 In some cases gaps are caused by incorrect expectations. The business
could have communicated inappropriate expectations to the customers.
 The design and manufacture of a product or the development of a service
can be a source of gaps. This means that customer expectations are
assessed correctly but the design team develop a totally different product.
 Actual performance in producing a product, providing service or providing
after-sale service is the third source of gaps. Poorly trained employees,
poor internal communications, supplier problems, inappropriate delivery
systems or insufficient coordination between various groups within the
business can cause it.
 Inadequate follow-up is also a source of gaps. Managers should consult
with their customers periodically to assess how well the warranties are
meeting the customer’s needs.
3. Taking corrective action
Managers should be committed to solving problems. Some gaps between
expectations and performance may have developed accidentally and most
customers do accept that businesses can make mistakes occasionally.
Communication is very important in removing gaps. Managers should

communicate everyday with their customers, their employees and their other
stakeholders. Then if a gap do occurs everybody feel comfortable to discuss the
problems and solutions.
Finally, managers should reassess performance and expectations continuously.
48
ICT2641/102
Sensitivity to customers and customer service

Every manager knows that meeting customer needs is the foundation in being financial
sound. Managers need to be in touch with their customers to be able to assess their
needs. A measurement tool for customer service is the gap analysis.
Another concept that needs to be measured is the sensitivity to customers. This

means how the business responds to customer requests and complaints.
Sensitivity to customers involves reacting on the spot to accommodate customers.

Measuring sensitivity builds loyalty in customers. It also gives powerful feedback from
customers, which can be used for competitive purposes.
Timeliness
This applies to virtually all areas of the business. It can be measured with such
indicators as length of time to produce a product and length in time a retail customer
has to wait before being served.
Quality perspective
It is very difficult to measure quality and values. We have mentioned before that you
need to measure financial performance in comparison to the business competitors and
its historical performance. This same principle applies for quality as you will get a very
good idea what the quality of the product or service is if you compare it to others.
Quality indicators involve:
1. overall performance
2. unique features of the product or service
3. reliability
4. durability
5. serviceability
6. response time
7. aesthetics
8. overall reputation.
49
Innovation and creativity perspective
The measures for innovation and creativity involve both objective and subjective
indicators. Objective indicators can include the length of time to develop a new
product, the average time to market for new products, the number of patents held by a
business and the number of new patent applications each year, and new product sales
as a percentage of total sales.
Subjective measures include the ambience of the workplace. The number of

employees that receive bonuses for inventions and the number of new product ideas
submitted could indicate how creative the workforce is.
Employee perspective
A business cannot be successful over time without the commitment of the employees.
Measuring commitment and satisfaction is important for building work environments
where employees feel motivated.
Workforce utilisation and productivity

Labour productivity can be measured by dividing total sales or total profits by the
number of workers. Productivity involves having the right people in the right jobs. It
also involves having motivated, well-trained employees supervised by effective
managers and sufficient equipment so that employees can do their jobs they are
suppose to do.
Observing worker behaviour and comparing it with other departments or companies

can measure utilisation. Overworked employees can also hurt the business. At first it
may seem to be more efficient since they produce more output than others, but
eventually they become unproductive or burn out if they are continuously asked to do
too much. One of the problems with downsizing has been that the remaining
employees work excessively long hours to make up for the loss of their colleagues. It
is easier to measure over utilisation, as it is more visible, employees is stressed out,
their work is defective, they are obviously fatigue, or they are absent.
Another situation that managers face is the fact that the company has the right number
of employees but they are misallocated. It can mean that one department has several
50
ICT2641/102
under utilised workers while the other has to scramble around to keep up with their
demands.
Performance appraisal
Performance appraisals are the process to assess employees’ effectiveness. The
intent is to assess/measure the productivity of individual employees. Communicate the
assessment to the employee so that improvement and corrective action can take
place. Performance appraisals should focus on those activities and outcomes that are
critical for performing the job.
Employee satisfaction and commitment

Employee satisfaction and commitment can be measure in a number of approaches.
You can look at the levels of absenteeism, sick leave and turnover of people.
Absenteeism occurs when the employee do not show up at work when they are
suppose to be there. High levels of absenteeism can mean high employee
dissatisfaction, but be cautioned that some employees are absent from work for
uncontrollable reasons, such as family illness. If employees do not come to work for
no reason at all, it can indicate employee dissatisfaction.
Staff turnover occurs when employees leave the company. Generally high levels of
voluntary turnover indicate that employees are dissatisfied with some aspects of the
job.
Employee surveys, employee focus groups and employee complaint records can also
measure employee satisfaction and commitment.
FAQ: Why should a business analyst be concerned about the above measures?
Answer: Remember the context: A business analyst must supply a solution that is
good for the business: A business is a total system. To supply a solution that is good
for the business means to supply one that is good for the system. For example: If the
people punching orders data into the ordering system are not motivated, they are far
more likely to make errors. If the company cannot afford a new CRM (Customer
Relationship Management) system, why recommend such a system. If the
51
shareholders will stop investing in a system if it overspends on a new ERP system, the
company will not survive to see the ERP system succeed. The business analyst must
understand these factors. The rest of the chapter will put this in perspective.
A business as a system
A business is a system. People carry out many processes to get products and
services to customers. Tasks make up these processes. Each task has activities that
end in outputs that you may, or may not measure. They are show as “Events” in the
model.
INPUT A BUSINESS SYSTEM OUTPUT
PROCESS
SUPPLIER CUSTOMER
ACTIVITY EVENT
Feedback Feedback
Example: Suppose the business system manufactures clothes. Suppliers supply

different fabrics, patterns and yarns (inputs) to the business. The business gives
constant feedback on the quality, colour, trends, delivery time etc. to the suppliers. In
the business there are many activities and events. Making a dress is an activity, fitting
the dress is an event that marks the end of the activity. The business then supplies
the final product to their customers, who give feedback to the business on the quality,
style, etc.
52
ICT2641/102
NOTE that the business is a sub-system of the fashion industry. Both suppliers,
business and customers are all part of this bigger system.
Example: Other examples of systems are ecosystems (bugs eating plants, birds
eating bugs, birds die, rot and fertilises the soil, plants eat the foodstuff in the soil.)
The system generates numbers. We seem to live or die by them. A human body
digests food to get value from it. A company digests raw data, numbers, to get useful
information. The trouble is many of us don’t know how to digest and get the
knowledge that hides in the data. We just “manage by the Numbers”.
Management by the Numbers

You get what you measure, don’t you? Tell someone, “From tomorrow I shall measure
you”. Don’t even say how. His behaviour will change … guaranteed! He may have to
guess what you want. That isn’t very efficient but he will behave differently. It’s all you
have to do. The very thought of measurement will change behaviour. That’s how
powerful it is … and dangerous!
We often don’t use the correct “Numbers” to make decisions or plans. Very often, we
trap ourselves in a sticky web of arbitrary goals, plans, budgets and targets. This
leads to action that can be deadly for company health.
Numbers are very hard to interpret unless you study them in a careful, orderly way.
Worse still, people bias and “doctor” them. Last of all … hold onto your seats … the
Numbers are random! Random variation in the system causes the numbers that rule
out lives at work. Here’s a little case that tells you what can happen if you don’t pay
attention.
The Timber case:

Look at the following case. The next graph shows sales in a timber company over a
period of five years. Can you see the pattern?
53
TIMBER SALES
60
UCL 49.6
50
CU.M. (000s)
40
30 Ave 32.1
20
LCL 14.6
10
0
1 6 11 16 21 26 31 36 41 46 51 56
Months
What
story does the chart tell you? The numbers vary each month but the yearly pattern is
the same. That’s what you’d expect if you sell to the building industry. Builders go on
holiday at the same time every year.
If you were in charge of Sales and had to explain the results at your monthly board
meeting, how would you do it? Probably with lots of fancy slides and creative reasons
to get people off your back for another month. Yet, with these stable, predictable
sales, all you can truthfully say is “Well, some months are better that others and every
year is more or less the same!” Who has the courage to say that?
All we do is compare two numbers at a time. We report results against an arbitrary

plan that has to show growth. We compare this year with last year and last month.
Then come the stories and explanations. The urge to explain is correct but our
approach is wrong. Either it is often a complete waste of time, or can be very
dangerous. Look at the next chart to see what else happened with this company.
54
ICT2641/102
TIMBER INVENTORY
120
100
80
UCL 70.1
Cu. M.(000s)
60 Ave 58.2
LCL 46.3
40
20
0
1 6 11 16 21 26 31 36 41 46 51 56
Months
What
caused this? Why would bright, highly paid people carry on making products month
after month, year in and year out that they could not sell?
It’s because they measured the wrong things and no one took the trouble to get the
bigger picture. Some people in Head Office are like donkeys – keep feeding them
carrots in the form of numbers and they’re happy to gobble them up all day, every day.
If only they would use them to alert, warn or predict! It would be helpful if they used
charts like these wouldn’t it?
Instead, we plan to hit targets that look and sound good. You have to be positive.
There’s nothing wrong with that. However, you know what happens when plans based
no “targets” aren’t met, don’t you? Scapegoats are found, backs are stabbed, people
fired and retrenched, and bad news hidden. This always results in plants and
companies that operate well below potential.
FAQ: Is it really important for IT and especially for a business analyst to understand
and interpret financial numbers? Are we not then merely financial analysts?
Answer: Look at the above case. This is not about a financial calculation. It is about
a correct business decision. If a business analyst were called in to help with a new
inventory system that could take care of the higher inventory, he would need to ask the
55
right question. The right question is: Why does the inventory pileup? The correct
system to install could possibly be a better production planning system or a sales
forecasting system. A proper understanding of the business is critically important if you
really want to add value as a business analyst.
The lesson
Dr. W. Edwards Deming said, “The great men plot data points”. They use numbers to
manage the process and redesign the business – not to chase results.
When people look at the “big picture”, they see how they link to others. They think for
themselves, and ask questions … good ones. “What is happening here?” Not, “what
should … could… used to … will one day be happening?” … “What is going on here?”
is the first question. Others are, “Why do we do it that way?” … “Why do we do it at
all? … “How can we do this much, much better?”
As you test the system, ask, “Do we want to change to a new way; to do this at a
basic, know-how level … or do we wish to refine, smooth out and speed up the existing
way?” Is this breakthrough or continuous improvement?
IT is often called in to help with incremental improvements (continuous improvement).

Business analysts are those people who have to ask the difficult questions. They are
the ones who should ask whether the company doesn’t need a breakthrough in their
thinking. They are the ones that should point to the fact that they have been asked the
wrong question. They are the potential change agents.
Either way you need people to work together across functions and at overlap points in
the chain. The links between people are fragile. You shatter them easily with
measures and goals that encourage,
• Short-term thinking
• Internal competition
• “Fudged” numbers
• Fear
• Blindness to customer concerns
56
ICT2641/102
So what are the lessons? Don’t look in isolation. Look at the big picture. So what?
Your job as a business analyst is not to supply the solution that the client thinks he/she
needs. Your job is to supply the solution that will have the right effect on the business.
Simplicity leads to productivity. Many goals confuse and complicate our lives.
Complexity destroys and corrupts the business.
Example: When Shoprite-Checkers took over OK, they redesigned their business
system to simplify the three businesses. In any of the three you get Shoprite plastic
bags. It doesn’t matter in which of the three you shop, you know that you are shopping
in all three. This simplicity of design allowed them to have one single information
system for the three chains, which leads to improved profit for the business.
Lesson for business analysts: No matter how complex the problem, look for a
simple solution.
If you are serious about revolutionising RIROs, take Dr. Edward Deming’s advise and:
Reduce variation in the system!
It will be good for your company’s health, and yours, so let’s see how to do it …!
Summary of key concepts

• Effectiveness means how well goals are achieved.
• Efficiency is a measure of how well inputs are converted to outputs.
• A business is a system. This must be kept in mind when measuring the business’
performance.
• Financial measures are net income or profit, return on equity (ROE), return on
sales (ROS), return on assets (ROA), income per share or earnings per share
(EPS), or net worth.
• The most important financial statements are the income statement, balance sheet
and cash flow statement.
57
• How well the business fills customer needs can be determined by gap analysis,
where the gap is identified, causes of the gap are suggested and measures are
taken to fill the gap.
• Quality of product or service is necessary for financial performance.
• Innovation and creativity can be measured by hard measures, such as number of
patents and by soft measures, such as ambience in the workplace.
• Employees’ performance could be measured as labour productivity (sales/number
of employees). Employees’ behaviour can be measured by measures such as
labour turnover and absenteeism.
• A business system turns inputs into outputs. How well it does that is called the
productivity of the business.
• Numbers within a system (a business too) are random. Always try to find the
pattern by plotting the data points.
Conclusion
Now that you know how data that is measured can vary within the system, you can
make far better decisions on where the real problems are within the company as a
system and which systems solutions to implement to really solve these problems for
good. In the next chapter we will use this knowledge to look at the business through
the eyes of an owner.
Field exercise
The following table shows the sales and inventory of a certain company over a period
of 36 months. Plot, on the same system of axes sales and inventory (on the vertical
axis) against time in months and then answer the questions that follow.
Month Sales Inventory
1 13000 25666
2 15000 27777
3 14000 28000
4 13333 27777
5 15111 28555
6 14444 26222
7 16111 29555
8 12111 30000
9 14460 26800
10 15093 27000
11 14656 26000
12 13232 28666
13 13535 28000
14 14645 27888
58
ICT2641/102
15 13656 26999
16 13633 29333
17 13400 31333
18 12990 28000
19 14252 27000
20 15343 29888
21 14214 32333
22 13633 33222
23 14744 31333
24 16211 32000
25 13114 35666
26 15334 37333
27 13534 39000
28 15223 37000
29 14242 42444
30 15321 44343
31 13333 43444
32 14000 47444
33 13533 50111
34 13500 53555
35 14344 55555
36 13900 60000
59
Questions:
1. What are the average sales per month?
2. At the beginning of the 36-month period, how many months’ stock did the business
have?
3. At the end of the 36-month period, how many months’ stock did the business
have?
4. During which month did something start going out of control?
5. How, would you predict, would the next year’s sales look.
6. Assuming that the product does not deteriorate over time in the warehouse, how
much would you produce during the next year?
60
ICT2641/102
Case study
Omega is a company that manufactures leather furniture. John Johnson, the

production manager of Omega is really worried. It doesn’t matter what he does, his
actual production volumes never correspond with his budget. What makes it worse,
his production cost seems to be running away and he cannot understand why. When
he calculates the number of chairs produced, it seems like it consumes twice the
amount of leather that it should. John has tried to implement better stock control, but
without success.
Purchases are done through the commercial manager, Rob Roberts. He is

responsible for combining the different managers’ budgets into one company-wide
budget.
What is more, the sales manager, Jack Jackson keeps telling John that they don’t
produce enough products. He claims that the sales budget clearly states how much
they need, but the production people never deliver enough to the warehouse. John
wish he had insight in the sales figures during the month, but the only time that he can
see them is at the end of the month, when sales are compared to production.
The IT department has been called upon to install a system that will help John solve
his problem. They are using the services of William Williams as the business analyst
to suggest a solution to the problem.
William came to you for help, because you know the company so well. Make a list of
at least ten questions that William can ask people in the business to ensure that the
correct system is implemented to solve the problem.
Guidelines: Try to find out where the problem originates. If you ask them bluntly who
causes the problems, they will probably not be willing to answer you. Use typical
measurement questions. If you need to, make your own assumptions about the
company’s financial performance.
61
62
ICT2641/102
Test your knowledge

1. Integrated assessment means measuring …
a. employees together.
b. the company together with its customers and suppliers.
c. performance across boundaries in the organisation.
d. all the variables and then compiling the answers in indices.
2. Efficiency is …
a. how well inputs are converted into outputs.
b. how well goals are met.
c. doing things right.
d. looking at the whole business as a unit.
3. When measuring a business we use …

a. cost measures alone.
b. non-cost measure alone.
c. internal measures alone.
d. a combination of cost measures, non-cost measures, internal measures and
external measures.
4. Return on Equity is calculated by dividing net profit …

a. by total investment.
b. into total investment.
c. by total assets.
d. into total assets.
5. The two most important financial statements are …

a. income statement and cash flow statement.
b. income statement and balance sheet.
c. statement of value added and cash flow statement.
d. balance sheet and cash flow statement.
63
6. In measurement from the customer’s perspective we use gap analysis. This
consists of the following steps:
a. Identifying gaps and filling them.
b. Identifying gaps and looking for causes.
c. Identifying gaps and preventing them.
d. Identifying gaps, looking for causes and corrective action.
7. Labour productivity is calculated by …

a. calculating worker days per section.
b. dividing profit by plant capacity used.
c. dividing profit or sales by number of employees.
d. calculating the number of hours missed during strikes.
8. The best indicators of employee motivation are …

a. attitude surveys.
b. absenteeism and sick leave.
c. absenteeism, labour turnover and sick leave.
d. staff turnover and staff morale.
9. The biggest advantage of plotting numbers is it …

a. shows shareholders how the company is performing.
b. reduces risks of failure.
c. creates awareness of failure modes.
d. shows that variation in the system is random.
64
ICT2641/102
10. A business is a system. That means that …

a. the business can be redesigned.
b. the parts of the business interact with each other and the business interact
with its environment.
c. the system is stable.
d. there is no external influence on the business.
65
Answers
Field exercise
1. 14172 (Calculate the average of the Sales column)
2. 1,97 or “Less than two” (Divide inventory into sales in the first row in the table)
3. 4,31 or “More than four” (Divide inventory into sales in the last row in the table)
4. About day 20: Look where the graph starts moving up
5. The same as the previous year: Average of 14172
6. Just enough to keep the plant running (or just enough to cover fixed costs, or just
enough not to fire people). The principle is: Sell as much as possible out of stock.
Financial exercise
1. R3 196 (Divide 310 000 000 by 96 997)
2. R771 million (Multiply number of shares by share price)
3. 8,40% (Profit divided by sales x 100%)
Test your knowledge

1. (c) Measuring performance across boundaries in the organisation
2. (a) How well inputs are converted into outputs
3. (d) A combination of cost measures, non-cost measures, internal measures and
external measures
4. (a) Dividing net profit by total investment
5. (b) Income statement and balance sheet
6. (d) Identifying gaps, looking for causes and corrective action
7. (c) Dividing profit or sales by number of employees
8. (c) Absenteeism, labour turnover and sick leave
9. (d) It shows that variation in the system is random
10. (b) The parts of the business interact with each other and the business interact
with its environment
66
ICT2641/102
Chapter 3
In the shoes of the “Owner”
Introduction
This chapter is possibly the most valuable one in this module. Up to now we have
learned where the business analyst fits into the bigger picture, that he has to
understand the business to really be able to make the right decisions on system needs
and how important measurement is in his understanding of the business. In this
chapter we will look at the business through the eyes of an owner. If you can do that,
the rest of the work is a piece of cake: You will know intuitively what to do. This
chapter will really give you a business perspective… and it is probably the easiest
chapter of them all.
If we look at IT as a subsystem in the business, we realise that IT cannot function like

a cricket player within a soccer team… totally out of pace with the rest of the
organisation. IT needs to fit into the puzzle like one gear in a well-oiled machine. This
could only be achieved if IT has the same business perspective as the rest of the
organisation. In the case of a business analyst it is even more vital. As an IT
consultant you simply cannot understand a business problem without understanding
the business. If you can look at a business like an owner does … and that is
something that management does not even manages to do most of the time… will give
you an edge and will make you extremely effective as a business analyst.
The main learning objectives of this chapter are:

• You will understand basic balance sheet and income statements
• You will understand basic definitions of the terms cost of sales (COS or COGS),
operating expense (Opex), gross and net profit, economic value added (EVA),
earnings before interest and tax (EBIT), assets, liabilities, debtors, creditors, gross
and net margin.
• You will know how to calculate gross and net profit (EBIT) and EVA.
Looking back to chapter one (page 16), an owner will have a strong economic focus as
well as a strong people focus (because they are important to reach financial goals).
67
You will only be effective if you view the organisation like an owner from both those
viewpoints.
Many businesses falter or even fail because they do not follow good financial
procedures. Financial information is the heart of the competitive business and keeps it
beating. Accounting keeps the heartbeat stable. To run a business successfully you
need to be able to read, understand and analyse accounting reports and financial
statements.
More practical: An owner is concerned with cash. He/she needs cash to get and keep
the business running. An owner is only concerned with IT if IT can help him/her to
generate cash. It is therefore vital that IT understand how they can contribute to
generate cash for the owner… and that implies being financially literate. In this
chapter we shall first look how an owner sets up a business, then how he/she runs a
business once it is set up and lastly, how he/she measures whether the business is
doing well. This will be done in the context of the previous chapter, where we looked
at measurement of the company.
Setting up a business
• When an owner sets up a business, he uses his own money.
• If he needs more (which usually happens) he borrows some (from the bank,
development corporation, family or any other investor that he can find).
• With this money he has to buy the following:
o Land and buildings (if he doesn’t rent from someone else)
o Plant and equipment
o Stock to go into the system and to feed the business until he can receive his
first payment from his customers. This stock are in a few categories:
 Raw material (waiting to go into his plant)
 Work in process (somewhere in his plant)
 Final products (goods that are finished and ready to sell)
 Stock that has been sent to customers, but not been paid for yet. We call
this “debtors”. The customers arranges with him to pay later.
• We call all this that he buys, the “Assets” of the business.
68
ICT2641/102
• He also arranges with his suppliers that he will only pay them later (like his
customers did with him.)
• This information is shown in the Balance Sheet (See later in this chapter).
69
The following table gives a simple example. The left column tells the story. The right
hand column shows how it is given in the balance sheet.
Setting up the business: Joe’s Balance Sheet
think of Joe setting up a cookie Cash in:
factory. First Joe takes all the money
that he can scrape together (R50 Owner R50 000
000). He also borrows from the bank Lenders R30 000
at 15% pa Interest (R30 000).
Together he has R80 000 Total cash in R80 000
(50 000 plus 30 000).
Cash out:
Plant and equipment R40 000
With this he buys equipment (R40
000) to prepare and pack cookies. Stock
He also buys R50 000 worth of raw Raw material R15 000
materials that is turned into dough Work in process R 4 000
(R15 000), half baked cookies (R4 Finished goods R 8 000
000), finished cookies (R8 000) and
cookies being shipped to customers Money owed by customers
(that they still haven’t paid him for). (Debtors)
(R23 000) R23 000
His total assets are therefore R90 000 Total assets: R90 000
(R40 000 + R15 000 + R4 000 + R8
000 + R23 000) Minus Money owed to suppliers
He arranges with his suppliers that he (Creditors)
can pay them later and that he can (R10 000)
owe them R10 000 R80 000
70
ICT2641/102
Running a business
Once the business has been set up, he can start to do business. We shall now look at
any typical year in the life of the business.
• The business gets paid in cash by his customers for the product they have bought
from him.
• With the cash that he receives from his customers, he first pays his suppliers
(because they are most likely to close him down if he doesn’t).
• Then he pays all other expenses, such as labour, maintenance and other
expenses. (Because they are second most likely to close him down if he doesn’t.)
• Then the bank gets its interest for the money he borrowed to start up the business.
• Then the taxman takes his share.
• The owner expects some return on the money that he has put into the business
too.
• The money that stays behind after all of these parties have taken what is due to
them, is the real value that the business has created.
This information is shown in the Income Statement. The table on the next page shows
how Joe (the same one as in the previous table) does business.
71
The queue for cash Joe’s Income statement
Joe sells R100 000 worth of cookies in a Sales 100 000
year. (Let’s assume, to keep it simple
that all transactions take place on the last
day of the year.
He first has to pay his suppliers of raw Minus: Cost of sales (R65 000)
materials R65 000.
What remains is R35 000. Gross profit R35 000
He now pays his workers, maintenance, Minus: Operating expense (R20 000)
training, etc. R20 000. Net profit (EBIT = earnings before
What remains is R15 000. interest and tax) R15 000
The bank manager is next in the queue

for cash for interest (15% of R30 000 = Minus: Interest (R 4 500)
R4 500). Profit before tax R10 500
What remains is R10 500.
The taxman takes his 30% of the 10 500, Minus: Tax (R 3 150)
which is R3 150 Profit after tax R 7 350
Minus: The owner’s expected return

The owner expects 30% on the money (R15 000)
(R50 000) he has put into the business.
Economic value added / (destroyed)
What would remain, if he would take his (R 7 650)
returns out of the business, is called EVA The business needs to make R7 650
(economic value added). EVA gives an more after tax to really be a viable long-
indication of how much value the term business.
business has really added.
72
ICT2641/102
FAQ: Where does the fact that his customers owe money to suppliers fit into this
queue for cash.
Answer: If he owes them R10 000 at the beginning of the year and at the end he still
owes them R10 000, while his sales are R30 000, he takes R30 000 in cash. It works
like this:
Amount owed by customers (beginning) R10 000
Plus Amount purchased by customers R30 000
Amount due to owner R40 000
Minus Amount paid to owner R30 000
Amount owed by customers (end of year) R10 000
You can see that, since the amount owed by customers did not change, the amount
paid by customers to the owner was exactly the same as the amount purchased by
customers.
Financial statements
A financial statement is a summary of all the transactions that have occurred over a
particular period and indicate the business’s financial health. There are two key
financial statements, namely:
• The balance sheet
• The income statement
The Balance Sheet

The balance sheet tells us where the money came from with which the owner bought
assets and which assets were bought. Assets are things that the company can sell.
The balance sheet consists of assets (what was bought), liabilities (money borrowed
by owner) and owner’s equity (money put in the business by the owner himself). It
shows the balance between the company’s assets on the one hand and its liabilities
and owners equity on the other hand.
Assets are economic resources owned by a business and it includes tangible items,
such as equipment, buildings, land, furniture, fixtures and vehicles that helps to
generate income and intangible items such as patents and copyright. On the balance
73
sheet they are listed according to how quickly they can be turned into cash (liquidity).
Currents assets are items that can be turn into cash within a year, such as stock.
Fixed assets are relatively permanent such as property, plant (buildings) and
equipment. Intangible assets have no real form such as patents.
What the business owes to others is called liabilities. Current liabilities are payments
due in a year or less and long-term liabilities are payments that are not due for a year
or longer. Common liabilities that normally appear on a balance sheet are:
• Accounts payable – money that is owed by the business to others for merchandise
and/or services purchased on credit but not yet paid.
• Notes payable – sort or long-term loans for example from banks
• Bonds payable – money lent to the business that must be paid back plus interest.
Equity equals assets minus liabilities. For example if you do not have any liabilities
then the assets that you have (cash and so forth) are equal to what you owe (equity).
However if you borrow some money from a friend or the bank you have incurred a
liability. Your assets are now equal to what you own plus what you owe.
The income statement

The income statement also known as the profit and loss statement shows the
business’ bottom line that is profit after costs, expenses and taxes. It summarizes all
the resources (called revenue) that have come into the business from operating
activities, money resources that were used up, expense incurred in doing business and
what resources were left after all costs and expenses, including taxes were paid. This
statement is the financial statement that actually reveals if a business is making a
profit. The formulas is a follows:
Gross profit = Revenue – Cost of good sold (COGS)

Net income before taxes = Gross profit – Operating expenses (OPEX)
Net income/loss = Net income before taxes – Taxes
74
ICT2641/102
The income statement is arranged according to generally accepted accounting

principles:
Revenue
- Cost of goods sold
Gross profit
- Operating expenses
Net income before
taxes
- Taxes
Net income or loss
Revenue is the value of what is received for goods sold, services rendered and other
financial sources. There is a difference between revenue and sales. Most revenue
(money coming into the business) comes from sales, but it can also come from rents
received, money paid to the business for its patents and interest earned. Revenue
appears on the top of the income statement and net income at the bottom. Net income
can also be referred to as net earnings or net profit.
Cost of goods sold (COGS) is a measure of the cost of merchandise sold or cost of
raw materials and supplies used for producing items for resale. It includes all the costs
of buying and keeping the merchandise for sale, which is the purchase price plus any
freight charges paid to transport goods plus any costs associated with storing the
goods.
Gross profit is how much a business earned by buying (or making) and selling
merchandise. It does not tell you everything you need to know about the financial
performance of the business. Analysing an income statement also includes the net
profit or loss a business experienced, but to get that you need to subtract expenses
from the gross profit.
A business has certain operating expenses (OPEX) such as rent, salaries, supplies,
utilities, insurance and depreciation of equipment, to be able to sell goods or services.
75
After all the expenses have been subtracted you get the net income before taxes.
After allocating taxes, you get the bottom line, which is the net income/loss the
business incurred from operations.
You may feel that all these terms are maybe a bit too much, but in fact you use these
concepts at least every month when you prepare your own budget. If your expenses,
for example rent exceed your revenue (how much you earn), you are in trouble. Now
you need more money (revenue). You can either borrow from your parents or the
bank or you can sell some of your things you own to meet ends (your expenses).
The physical building blocks

To think like an owner, start with the balance sheet of the company. To help construct
it, look at some production and sales numbers first.
Let’s say for example we own a company manufacturing plastic soccer balls called Ball
Company. We produce balls and in a five-day week, we produce 1 500 balls. Only 1
200 can be sold, because in the process there are some waste generated. We call
them “Ready-for-Sale”. That’s because of all the defected balls. We run the plant for
50 weeks a year. That gives us 60 000 (1 200 multiplied by 50) balls to sell per year.
We pay our suppliers a price for raw material that works out at a cost of R10 a ball.
Our customers pay R20 a ball after we’ve added value. They buy all of them. That is
sales of R1 200 000 in a year. This is how the numbers should build up:
76
ICT2641/102
The Ball Company

Annual Production Volume:
1 500 per week x 50 weeks = 75 000
20% Scrap/Reject rate = (15 000)
“Ready-for-Sale” Product = 60 000
Sales Revenue:
Units per year sold = 60 000
X
Selling Price R20 per unit = R1 200 000
Now let’s look at the resources we need to generate these sales volumes. It starts
with cash.
The Cash Balance Sheet

Let’s say we need R500 000 to get the business up and running. We raise R300 000
of our own. That’s not enough so we need to see the bank manager. He likes us, our
product and business plan so backs us with R200 000. The Cash Resource In from
owners (us!) and lenders (the bank manager!) therefore is R500 000.
We use it to buy the physical things that give us capacity to make and sell balls. We
call them assets. They are the land, factory, plant, machines and materials we use.
Once we have made balls, they become “Ready-for-Sale” product, also an asset.
Finally, as we give credit to our customers, our suppliers do the same for us. After
deducting what we owe them, the cash left is what we put into the business with our
banker. Let’s look at the balance sheet now (next page) and fill in a few numbers: (you
fill in the blank spaces next to the assumptions)
77
Cash Balance Sheet
Cash Resources In: R
Owners (Equity) 300 000
Lenders (Loans) 200 000
Total Cash In 500 000
Productivity Capacity (The Engine

Room!):
Land & Factory 150 000 Assumptions:
Raw Material & Work in Process (WIP) 1 month’s sales
Plant & Machines 150 000
Ready-for-Sale Product 1 month’s sales
Transport 75 000
Cash Owed by Customers 1½ month’s sales
Total Cash Value of Assets Managed
Cash Owed to Suppliers ( )
Overdraft (87 500)
Cash used by us and lenders 500 000
Assuming 1 month’s sale we calculate the raw materials and work in process as
follows:
1 500 per week x 50 weeks = 75 000
75 000 x 10 (cost per ball) ÷ 12 (months) = 62 500
Assuming 1 month’s sales we calculate the Ready-for-Sales Products as follows:

60 000 = 5 000
Units sold per month
5 000 x 20 (selling price per unit) = 100 000
78
ICT2641/102
Then the balance sheet will be as follows:

Cash Balance Sheet
Cash Resources In: R
Owners (Equity) 300 000
Lenders (Loans) 200 000
Total Cash In 500 000
Productivity Capacity (The Engine

Room!):
Land & Factory 150 000 Assumptions:
Raw Material & Work in Process 62 500 1 month’s
(WIP) sales
Plant & Machines 150 000
Ready-for-Sale Product 100 000 1 month’s
sales
Transport 75 000
Cash Owed by Customers 150 000 1½ month’s
sales
Total Cash Value of Assets 687 500
Managed
Cash Owed to Suppliers (100 000)
Overdraft (87 500)
Cash used by us and lenders 500 000
What happened is that the owner bought some assets to generate sales for him. In
calculations we therefore must use Total Assets. It doesn’t matter how you pay for
them. Your task is to generate a return from the TOTAL, not the “Net” amount.
Managers make a return on Assets. Owners make return on Investment.
The “Queue for Cash”

The owner started the business to make money. He does that by generating sales.
He bought assets that can generate sales. Our task is to manage the assets as
though we owned them. They are the physical “things” an owner makes us
79
responsible for. Without sales, you can’t make money or generate cash. So, what
happens at the end of the month?
Our output is “Sales”, but remember, a sale isn’t a sale until the customer pays. Sales-
in-Cash Banked is the only thing that interests an owner, or banker for that matter.
We are interested in how much sales the assets can generate: Assets to sales.
Without sales, you can’t make money or generate cash.
Now let’s see where the money goes. Imagine we have a cash payout window that
opens once a year (Actually it happens all the time, but to make it simple, let’s assume
it happens once a year). Outside there’s a crowd of eager people. Some get quite
ugly and aggressive. They are the ones who elbow their way up to the front of the
queue. What we have out there is a “first-come, first-served” Queue-for-Cash!
We lug our moneybag to the window. It holds the cash we collected from our
customers and banked in times for the payout, the Sales-in-Cash Banked. The people
outside are all those who have a claim against us for work they’ve done, or goods and
services they’ve supplied.
There are others. The bank manager wants interest on the money he lent us. The
Taxman expects his cut too. So let’s see how much we made (that’s assuming we
managed to collect enough cash from our customers and that none of them went
bust!).
80
ICT2641/102
The Queue-for-Cash
R Assumptions
Sales-in-Cash Banked 1 200 000 1 year’s sale
The Queue:
1. “Ready-for-Sale” costs (COGS) (780 000) 65% of sales
Gross Profit = 420 000
2. Wages, Salaries & Services (300 000) 25% of sales
(OPEX)
Earnings before interest & tax 120 000
(EBIT) =
3. Lenders (43 125) 15% interest
200 000 (loan) + 87 500 (overdraft) x
15%
Profit before tax (PBT) = 76 875
4. Taxman (26 906.25) 35% tax rate
Profit after tax (PAT) = 49 968.75
The last person in the queue for cash is the owner. He put some money in the
business to make money out of it. He could have done lots of other things with his
money, but he chose to put it in this business. He could have put it in the bank (at
15% interest), he could have bought unit trust (at 24% return) or shares (at 25% return)
They wait patiently cap-in-hand, out of sight, out of mind. Out of mind, out of cash.
Many companies on the Johannesburg Stock Exchange haven’t paid Owners’ cost of
equity in full for years.
Put yourself in their shoes for a moment. They have put up R300 000. They would
like at least 30% return on that money.
Imagine this. Say you are in a big room, ringed with “Doors of Opportunity”, holding a
bag full of your hard-earned cash. Each door has a sign above it: “Saving account”,
“Risk-free Bonds”, “Company Stocks”, “The Racetrack”, “Casino”, “Your Own
Business”.
81
They all carry risk but you decide to go for the last one, the “Ball” opportunity. Once
you’ve gone through it, it closes with thud behind you and dead bolts strike home. All
the other doors slam shut too. With that decision, you sacrificed all the other
opportunities. They are lost to your cash. This is a cost – an Opportunity Cost – to
you and you expect to recover it.
The “Ball” opportunity has to be so good that it easily beats the cost of losing the best
of the other opportunities that you could have picked. Otherwise, why take the risk?
Only you can decide how much you want for the sacrifice. Once you take that
decision, you’ll know whether the Profit after Tax is enough. On R300 000, what %
return are we getting? Is it enough? It’s the owner’s decision in the end, not
management’s.
We want a sustainable business, one that continues to grow and satisfy everyone. It
means there’s no such thing as profit; only costs-of-the-future wisely put aside in cash.
Everything we do is a means to that end. So, how do we know whether we are making
enough money and generating enough cash?
We have to subtract what the owner expects from the profit after tax (PAT) to
determine the real value that the business has added. The owner wants 30% of R300
000. He would like to get at least R90 000 per year out of this venture (remember, he
needs to pay 50% tax on the R90 000). If we subtract R90 000 from the PAT (which is
R28 031,25) we get minus R61 968.75. This business is still far from giving the owner
what he would like to get out of it. The EVA equals -R61 968.75. This company has
destroyed R61 968,75 of value during the year.
Here’s a 5 level Economic Value Test from the “Owner” point-of-view. Look at this
business and ask:
1. Is it Viable? Does it generate enough cash to pay all its bills on time every
month?
2. Can it Carry Debt? Pay back the interest on the money loaned to it?
82
ICT2641/102
3. Can it pay my Cost of Equity? Does it make up for returns I might have got
somewhere else?
4. Can it Grow? Does it make enough money and generate enough cash to hold its
place in the market and grow?
5. Is it Desirable? Does it generate more cash that it needs to pay my equity cost
and the interest on loans?
Any “No” answer means there’s a big productivity opportunity. Let’s see what you
have to do to get “Yes” answers to all of them.
FAQ: Why is it necessary for the business analyst to understand this?

Answer: The business analyst has to translate a need to an IT solution. If you as
business analyst understand the real need of the owner, you will supply a solution that
suits the business - from an owner’s point of view. This way of looking at the business
allows business analysts to identify points where the business can improve. That is
where you should look for opportunities.
Example: In the above company one of the managers has asked for a system to
handle customer requests faster. You have to find out whether a customer request
being processed faster will actually increase sales or reduce costs in the income
statement. If it doesn’t, why spend money on it?
FAQ: Should we use monthly or annual figures in the income statement?

Answer: You can use any of the two. For simplicity sake we used annual figures in
this chapter. As long as you know what the figures tell you: monthly sales or annual
sales. The Balance sheet is usually updated annually.
83
• The balance sheet shows where you get the money from to start a business
(owners, lenders, creditors, overdraft) and what you buy with it (assets).
• The income statement shows where you get your cash (sales) and who is paid
with the cash).
• The order in which they are paid is Suppliers, workers and other expenses,
interest, tax and then the owner.
• EVA is the value that the business creates/(destroys) after everybody, including
the owner gets his or her part of the money.
Conclusion
The business analyst cannot truly understand the business without understanding the
balance sheet and income statement. An understanding of these gives you an insight
into what are important to the owner and what is not. In the next chapter we will look
at a model that we can use to identify levers to improve productivity from these
statements.
84
ICT2641/102
Exercise
The following figures were taken from the statements of a listed company:
Owners’ equity: R50 million
Long term loans: R10 million @ 15 % interest
Current liabilities (creditors plus overdraft): R5 million
Fixed assets (land and buildings, plant and equipment): R35 million
Current assets (stock plus debtors): R30 million
Annual sales: R58 million Cost
of sales: R40 million Operating
expense: R11 million Tax rate:
30%
Owner expects 30% on his investment
Set up the balance sheet and income statement and calculate the following for
the business:
Gross profit
Net profit
Profit before tax
Profit after tax
EVA
Gross margin
Net margin
Practical field exercise

Go to the company where you work, and if you don’t work yet, to a company where
you can get hold of the official financial statements. You could even write to a listed
company or get the statements in the Sunday paper. Use the official statements and
the attached template and compile a simple balance sheet and income statements
along the lines taught in this chapter.
85
BALANCE SHEET
Cash put in:

Owners’ money
Borrowed money
TOTAL CASH IN
Cash used to buy assets:
Land and buildings
Plant and equipment
Stock in the system
Debtors (Money owed by customers)
TOTAL ASSETS
Creditors (Money owed to suppliers)
TOTAL CASH OUT
THE QUEUE FOR CASH:
Sales
Minus cost of sales (raw material)
Gross profit
Minus expenses
EBIT (Earnings before interest and tax)
Minus interest ( % of _)
PBT (Profit before tax)

Minus tax (30%)
PAT (Profit after tax)
Minus owner’s expected return ( % of )
Wealth created/(destroyed
86
ICT2641/102
Test your knowledge

1. If an owner wants to set up a business, the cash that he needs to get it going is
shown in the …
a. income statement.
b. balance sheet.
c. cash flow sheet.
d. statement of value added.
2. The correct order in the queue for cash is ..

a. COS, Opex, Interest, Tax
b. Gross profit, net profit, interest, EBIT
c. Opex, Gross profit, COS, Net profit
d. Owners, lenders, taxman, suppliers
3. A company has sales of R10 million, COS of R6 million and Opex of R2 million.
EBIT is …
a. R8 million.
b. R6 million.
c. R4 million.
d. R2 million.
4. EVA is described as the …

a. profit that the company makes.
b. value that the company creates.
c. loss that the company makes.
d. difference between gross and net profit.
5. Which of the following is NOT an asset?

a. People owing you money.
b. Stock in your warehouse.
c. Half-finished goods.
d. People whom you owe money.
87
6. You can calculate gross profit by …
a. adding Opex to net profit.
b. subtracting COS from net profit.
c. sales minus Opex.
d. sales minus (COS plus Opex).
7. The five level economic viability test does NOT include the question …
a. Is it profitable?
b. Is it viable?
c. Is it desirable?
d. Can it carry debt?
8. A company has COS of R200 000, Opex of R50 000 and net profit of R40 000.
The turnover was …
a. R110 000
b. R200 000
c. R250 000
d. R290 000
9. A company has sales of R365 000. Customers owe the company R61 000. On
average customers pay within …
a. 1 month.
b. 2 months.
c. 3 months.
d. 4 months.
10. An owner who wants to start a business has to put in money that he generated
from …
a. his own money only.
b. the bank’s money only.
c. own money plus money from lenders.
d. equity plus own money.
Answers
Exercise
Gross profit = R18 million
88
ICT2641/102
Net profit = R7 million

Profit before tax = R5,5 million
Profit after tax = R3,85 million
EVA = minus R11,15 million
Gross margin = 31.03%
Net margin = 12.07%
Test your knowledge

1. (b) Balance sheet
2. (a) COS, Opex, Interest, Tax
3. (d) R 2 million
4. (b) The value that the company creates
5. (d) People whom you owe money
6. (a) Adding Opex to net profit (net profit is Gross profit minusOpex)
7. (a) Is it profitable?
8. (d) R290 000
9. (b) 2 months (Sales are R365 000/365 days = R1000 per day. R61 000 means 61
days, which is 2 months)
10. (c) Own money plus money from lenders
89
Chapter 4 “Asset-
Spin” & ROAM
Introduction
Up to now we have seen where the job of the business analyst fits into the business,
what the role of management is, the fact that some things in a business are variable
and how an owner thinks about setting up and running a business. You also have
learned how to set up basic financial statements for a business.
In this chapter we shall look at a simple model that is designed to help us identify
leverage points where we can impact the bottom line of the company. We shall also
be able to show what impact certain IT systems will have on the bottom line. Note that
this is seen from a business perspective, not an IT perspective.

• You will understand the ROAM financial productivity model.
• You will know what levers to pull to optimise asset productivity.
The logic is simple:

• An owner starts a business to make money.
• He makes money by making a profit.
• He makes a profit by generating sales.
• He generates sales through the assets of the business.
We shall look at financial ratios that will show us exactly how this happens. These
ratios are easy to remember and will help you a lot when analysing a business case.
All Roads lead ROAM or Ruin!

The assets of the company are there to generate cash for the company. The ROAM
model will show you how this happens. The model on this page will show you what
ROAM means.
90
ICT2641/102
Return Assets (TBSV*) Percent
ROAM%
On Managed!
Responsibility Authority
Value + Yield + Mix -
*Tangible Balance Sheet Value
To make it simple we just look at the tangible assets that we bought for our “Ball”
company and that we identified in our Balance Sheet. We do not include things like
Goodwill or Trademarks. They are not physical things and the values of Goodwill and
Trademarks are often simply guessed. You can see and touch machines, stock, trucks
and buildings. That’s what we mean by tangible.
Remember from chapter one that the business analyst works at task level. It is not
your job to find where in the market the business should compete. Your job as
business analyst is to analyse the business as you found it and suggest the right
systems solutions to optimise it. We therefore look at Total Assets. Where the
business got the money doesn’t matter to you as business analysts.
91
Ownership
Someone in the business is responsible for each asset. The operating people
(production manager, production foremen, operators and engineers) are responsible
for assets like plant and equipment, raw material stock and work-in-process stock.
The sales and marketing people like the marketing manager, sales representatives
and logistics managers are responsible for assets like final product stock and debtors.
They should act like they own the assets. Therefore the managers
1. are responsible for the value of the Asset base under their control, and for its
yield in terms of Sales, Profit and Cash.
2. have authority to increase, decrease or re-mix the asset base.
3. interface, overlap and negotiate “trade-offs” with other managers.
Just like in any sports team the biggest dangers are when one person passes the ball
to another, it happens in business. The biggest chance for waste and the biggest
opportunities for optimisation lie at the interface between people (“owners”) in the
business. Success or failure therefore is caused at the interface between managers.
How they communicate with each other determined the company’s success. We shall
look at this in more detail later.
How well a business is really doing depends on how well it can use its assets to
generate sales and profit. As the “owner” of certain assets a manager therefore knows
that the assets must be productive to create profit and economic value. Economic
value depends on the productivity of the asset base … not the workforce. Managers
most often miss this point by a mile. They blindly accept the “common sense” of cost
control and plan for “profit” in isolation. If you think like an owner, you won’t make this
basic error.
You’ll know that asset productivity is the true measure of your ability. Costs and profits
only mean something when you compare them to Sales. Even then, they are only half
the story.
92
ICT2641/102
Let’s look at the ROAM model. It brings the “Cash Balance Sheet” and “Queue-for-
Cash” together into a dynamic relationship. Note that the cash balance sheet tells you
what is going on with your assets, while the queue for cash (income statement) shows
you how well you control cost and expense.
They work together to give three key measures. You probably think that all of them
are of equal importance. They aren’t and that’s why this part of the subject will be
news to you … very important news …
The three key Resources In: Results Out (RIROs)

Here is the ROAM model:
ROAM model
ROAM %
X
ATO # ROS %
÷ ÷
Total
Sales EBIT Sales
Assets
Operating Sales R
Assets
+ − x
Marketing Assets COGS + OPEX Units
Asset Margin Revenue

Management Management Management
ROAM – Return On Asset Managed Model EBIT – Earnings Before Interest & Tax
ATO – Asset Turn Over COGS – Cost Of Goods Sold
ROS – Return On Sale OPEX – Operating Expenses
The two most important measures of financial success in the firm are:
1. How well do my assets generate sales? (On the left of the model is the ATO which
tells you how well your assets generate sales).
93
2. How well do we control the COSTS and EXPENSES? (ROS on the right of the
model tells you how well you control costs and expenses).
They are both key indicators. ATO is the first and most important, because to be
profitable the assets must first generate sales.
Asset Spin
We call ATO “ Asset – Spin”, the most critical RIRO of all. It measure is a number
or a ratio, not a percentage – Assets In: Sales Out.
FAQ: How can I remember the formula for ATO?

Answer: ATO stands for Asset Turn-Over. Turnover is another word for Sales
(everything that goes through the till). ATO therefore is the ratio of turnover to assets.
ATO = turnover/assets = sales/assets.
In the “Ball” business, we put in cash and bought physical assets with it. The total
value of assets we manage is R687 500 (Resource In). We generated sales of R1 200
000 in a year (Result Out). For every Rand of input, we generated R1.77 of output (1
200 000 + 687 500). We “turned over” our asset base 1.77 times in the year. The
ideal is that your turnover must be so big that it is many times the value of your assets.
Then your assets are really working hard for you. We don’t just want to “turn” the
assets, we want to turn them so fast that they “spin”. Hence the name “Asset-Spin”.
The second RIRO is: “For every Rand of Sales, how many cents profit do we make?”
The Profit number we looked at in the Queue-for-Cash was the last – Profit After Tax.
That was because we were looking at it from an Owner’s point-of-view. However, for
operating managers, the only one that matters is EBIT. You ask, “Why? Isn’t it
important to worry about interest and tax?”
Well, as we have already pointed out, for an operating manager who is trying to wring
sales and returns out his assets day-to-day, it doesn’t matter who is paying for them or
about the tax. His task is to spin them to generate Sales and then to make money out
94
ICT2641/102
of the sales. If he spins them fast enough and makes good money doing it, then all the
rest of the Profit numbers and expected Returns will follow if the “bean counters” do
their job properly.
FAQ: Why should the business analyst be concerned about EBIT (net profit) and not
profit after tax?
Answer: Remember chapter one. Your job as business analyst is on the task level.
You don’t have to decide in which market the business competes. That is the job of
top management. You just have to analyse the business as you found it and help
implement IT solutions for business issues. You cannot influence how much tax or
interest the business pays. You can influence the EBIT though. That is why we use
EBIT.
This is the RIRO: Sales In: EBIT Out. Then, you multiply by 100 to show the
“percentage” Return-on-Sales (ROS%). In our “Ball” business, it was 10%. Check it
out:
10 000 / 100 000 = 0.1 x 100 = 10%
FAQ: How can I remember the formula for ROS?

Answer: Whenever you see the word “return”, you must think of money that returns to
the business, which is EBIT. ROS means “return on sales”. ROS is a percentage (as
a matter of fact, the moment you see the word “return” it always is a percentage.
Therefore you have to multiply the answer by 100% to get it to percent. The formula
is: ROS = (return / sales) x 100% = (EBIT / sales) x100%. (Read the formula out loud
and you will see how much sense the formula makes). Similarly ROAM means
(return/assets) x 100% = (EBIT/total assets) x 100% and ROE means (return/equity) x
100% = (EBIT/ total equity) x 100%.
Multiply the two, ATO x ROS% and you get the ROAM% (1.77 x 10 = 17.7%). Of all
the measures of operating management, the three most important are ATO, ROS and
ROAM. What you are about to see is that the most important of the 3 is “Asset-Spin
(ATO)”. You will also see why it is the most important ratio for the business analyst.
95
FAQ: Is ROAM a productivity model or a financial model?
Answer: ROAM looks like a financial model, but it is a productivity model, because it
shows us which levers to pull to improve productivity.
FAQ: Are there similar other models, either productivity or financial?

Answer: How many do you want? There are plenty, and new ones are being
developed daily. The most common ones are the Du Pont Model, which is a financial
model that looks very much like the ROAM model and lately also the EVA Model.
Exercise: The 2001 financial results of Pick ’n Pay and Shoprite Holdings
(Shoprite/Checkers) show the following information:
Company Pick ’n Pay Shoprite
Total assets R3 782 million R6 070 million
Sales R15 126 million R19 592 million
EBIT R475 million R345 million
Which of the two companies had the best year? Let us calculate the ATO,
ROS and ROAM and find out for ourselves. (Do the calculations and see how
we calculated these values.)
ATO 4.00 3.23
ROS 3.14% 1.76%
ROAM 12.56% 5.68%
We see that ATO, ROS and ROAM for Pick ’n Pay were higher than that of
Shoprite, although their sales were less than Shoprite’s. That is because they
used fewer assets to generate their profits. Pick ’n Pay had a far better year
than Shoprite.
Management Mythology
This is what all good marketing and business-minded people say:
“Modern technology, employee productivity and customer service are the life-blood of
a business. They improve sales and profit. The more we focus on those things the
better!”
And yet …
• “Modern Technology” often means you have to buy fancy machines then build a
special place to house them.
96
ICT2641/102
• High Labour Productivity often means “laying off” people and buying “state-of-
the-art” IT systems instead.
• Excellent Customer Service usually means you respond fast from a wide range
of products and services from many locations.
What does all that mean? Well, you find you don’t make the cost savings you
expected from the new machines. Then, with fast-changing technology, what you
thought was “state-of-the-art” becomes obsolete very quickly.
Next, because the customer is “King” or “Queen”, you end up with wide distribution
network, huge finished goods stock and lots of warehouses to hold it all. And the
result? A big, heavy, slow-moving Asset Base per R of Sales. Again, what does that
mean? Here comes the research …
Management Research
Let’s look at the relationship between ATO, ROS and ROAM. If you go on your gut
feel, a higher ATO must mean a higher ROS. For example if you carry too much
stock, you need extra warehouses, extra forklifts and shelves and extra people. Also,
there is more stock that can be damaged or stolen. Your cost WILL be higher than
someone who could get by with less stock.
Obviously, you do need some stock! Have you ever gone to a shop without stock? If
they don’t keep what you want, you will not visit them again, not so? But don’t
overstock!
The database for the charts that follow contains thousands of companies from all over
the world. The research went on for many years. From the 1970s through the ’80s, it
showed that, “businesses with (low ATO), are much less profitable than businesses
with (high ATO) …”
This is what it showed in the late ’70s:
97
As you can see, when ATO rises, so does ROAM.
10 years later, in 1991, Professor Robert D. Buzzell (co-author of “The PIMS

Principles” – 1987) confirmed the findings saying:
“No, I have not changed my conclusions … All in all, the evidence shows there is a
powerful, robust, basic, positive relationship between (high ATO) and profitability.”
Some people say, “Ah! Its just arithmetic! Others that “It’s a market share effect!
Even more say, “It’s capacity utilisation!” Let’s see why they’re wrong.
98
ICT2641/102
This shows that a high ATO-low ROS strategy is far better than a high ROS-low ATO
strategy for the same ROAM. (Remember the example about too much stock: If ATO
is higher it means assets are lower, meaning costs are lower, meaning ROS is higher.)
It is the single, most important message for you and your company to think about.
There is constant conflict between “Customer Service” and ATO. It lies at the heart of
what many companies do.
You see “Asset-Spin” is the engine in the engine room (the Asset Base), and
“Customer Service” is the fuel! The truth is that marketing people and consultants
spout a constant stream of drivel about the customer being “King” or “Queen”.
Your relative, competitive, ATO decides the contest. Nothing else.
99
The next diagram shows that a higher ATO (left to right) gives you a higher ROAM (the
figure in the block), whether you have a small market share (bottom row) medium
market share (middle row) or high market share (top row).
If ATO has such a huge effect, then this is the crunch question:
“How do we give better customer service than our competitors but make sure that our
ATO is always faster than theirs? Not perfect service, just better service. Not a hugely
faster ATO, just one that we can sustain. 10% faster will do just fine.”
When you compare your ATO with your competitors, it tells you how well designed
your company is. Are you producing the same amount of product or more, with lower
level of assets than they have? If you aren’t, they are already well down the track
before you’re even out of the starting blocks.
100
ICT2641/102
At the task level, does inventory or product/service run through the system like a fast
flowing river? There are no delays, no rework, no returned goods and no build-up of
slow-moving stock. The right products leave the production line straight onto a truck
and are delivered to a delighted customer. He pays on the button and places another
order at the same time!
Is that how your company works?
Speed is it!!!!
Your job as a business analyst is to supply solutions that will increase productivity.
One beautiful way to do that is to reduce the time that product stands in the plant, on
the shelf or wherever. You should focus to reduce the 95% or more of the time that
value is not being added to the product or service. Look at the following diagram.
In the 1980s, Boston Consulting Group looked at companies that focused on speed.
This is what they found (see next page):
101
Reduce the idle time in the system by ¼ and your productivity will double while costs
will decrease by 20%. That is magic!
The scary thing is how little time we spend adding value. It is also a huge opportunity.
It comes back to the 20:80 law and simplicity. Doing things fast, “right first time” has
massive productivity impacts. You can’t live complex systems and processes.
What bottlenecks and “red tape” get in your way and stop you getting things done
faster, easier and more smoothly?
102
ICT2641/102
The Competitive “Asset-Spin” Ratio

More research was done in the USA on effects of business design on value creation
during the 90s:
The message? A higher Relative “Asset-Spin” gives you a huge advantage. You
can even achieve the same ROAM with a lower ROS% than your competitors when,
103
1. It’s invisible – it won’t provoke your competition.
2. It’s price insensitive.
3. It’s a cash shield if a unilateral price war erupts.
4. It smoothes and eases downturns.
5. It protects you in a very competitive climate.
Exercise: Do the calculations for Nucor, Southwest, Microsoft and Intel. What’s their
relative, competitive ATO? (Compare their ATO with that of their competitors.)
1. Competing firms make big investments to grow and increase capacity. The
shareholders expect managers to get a reasonable EBIT and CASH return on their
money.
2. Each firm tries to justify their investment by chasing volumes – “Keep the plant
full!” is the war cry.
3. They easily assume volume is the key to returns, even when the cash may be
mostly tied up in Stocks and Debtors.
4. Competition becomes a volume-grubbing contest. You get:
• Price cutting
• Marketing campaigns and counter campaigns
“The capacity for companies to bleed each other is awesome!” said an observer of the
chemical industry in the USA.
The 10 “Asset-Spin’s”
If you look at the different kinds of assets, we can calculate different versions of ATO.
You find these 10 ATOs in most companies (see next page):
104
ICT2641/102
THE 10 ATO #s
Sales ÷ Raw Material Stocks

Sales ÷ Components & Sub-assembly
Stocks
Sales ÷ Land & Buildings
Sales ÷ Production Plant & Equipment
Sales ÷ Admin. Plant & Equipment
Sales ÷ Work-in-Process Stock
Sales ÷ Finished Goods Stock
Sales ÷ Distribution Plant & Equipment
Sales ÷ Debtors
Sales ÷ Cash
The Crunch Question:

“Our Asset-Spin (ATO#) …
for each Rand of these assets we own,
how many Rands of Sales
are we generating?”
The key question is:
“How many Rands of Sales do we get for this Asset?”

Do you know what those numbers are in your company? Have you applied the 80:20
Rule to which of your Marketing Assets generate most sales and net profits? Don’t be
misled by “Gross margins” or “Gross Profit”.
Go back to the “Queue-for-Cash” and see where the Gross Profit line is. Apply the
80:20 Rule and you may find that the high Gross Profit items need a lot of other
105
Operating Expenses to get them to the customer. You end up with very little surplus
by the time you’ve finished.
This is the Goal:
THE ATO#
“RULE OF THUMB…”
BEAT 2
AIM FOR 3
STRIVE FOR 4
… OR MORE!
How do we improve productivity?

Looking at the ROAM model, it shows me which levers to pull to improve asset
productivity. These levers are:
• Increase sales
o Increase sales volume or throughput, increase production, reduce waste
o Increase sales price, improve quality, change product mix to sell more higher
value products
• Reduce assets
o Get rid of redundant equipment
o Rent where you can
o Reduce stock
o Reduce debtors (Collect debt sooner)
• Reduce costs and expenses
o Get cheaper raw material
o Reduce waste
o Cut expenses where possible
FAQ: Should I concentrate on COS or on Opex when reducing cost and expenses?
Answer: COS is usually much bigger than Opex. First focus on COS, because it is
likely to have a bigger effect on productivity than expense items.
106
ICT2641/102
FAQ: Why will reducing assets increase ATO?

Answer: A simple grade 8 maths lesson that nobody has taught us: If you have a
fraction, you can increase the value of the fraction by either increasing the numerator
(top) or reducing the denominator (bottom). Follow this logic: 2 = 6÷3 or 2 = 6/3. I can
take the 2 up to a 3 by doing one of two things: I can increase the numerator 6 to a 9
(then 3 = 9 ÷ 3 or 3 = 9/3) or I can reduce the denominator 3 to a 2 (then 3 = 6 ÷ 2 or 3
= 6/2). I increased 2 to 3 by either increasing the numerator or decreasing the
denominator. If I can do both, even better!
Similarly, to increase ATO (ATO = sales / assets) I can either increase sales or reduce
assets or do both.
The same applies to subtraction: EBIT = Sales – (cost and expense). I can increase
EBIT by either increasing sales or decreasing cost and expense.
Checklist for opportunities

• Does it impact on the bottom line?
• Where on the ROAM model will it impact?
• What will the effect on ROAM be?
• What else should we consider?
• Can I turn it into a short-term project?

• The most important productivity measure is ATO = Sales / Total assets. ATO is a
number.
• ATO tells us how hard our assets are working to generate sales.
• The second most important productivity measure is ROS = (EBIT / Sales) x 100%.
• ROS tells us how profitable our sales are and how well we contain costs and
expenses.
• ROAM = ATO x ROS. Also, ROAM = (EBIT / Total assets) x 100%.
107
• Higher ATO leads to higher ROS.
• Increase ATO and ROS by reducing time the product spends in the system.
• Your aim is to have a higher ATO than your competitors.
Conclusion
Everything we do has only one fundamental purpose: Make the assets work harder
and get the costs and expenses as low as possible. The message is simple: Increase
sales, decrease assets and decrease cost and expense. In the next chapter we shall
see how we can use this knowledge to find the points where we will have maximum
impact and how the ROAM model can be used as a people development tool.
Exercise
Take the figures that you have calculated on page 73 for the listed company with sales
of R58 million. Calculate ATO, ROS and ROAM for the company.
Field exercise 1
Look at the financial statements that you have compiled in chapter 3 for your own
company (or a listed company). Calculate ATO, ROS and ROAM. From these
calculations and the financial statements, identify at least 5 opportunities that you can
turn into projects that will improve ROAM for your company.
Field exercise 2
If you really want to become a good business analyst, take the financial statements of
several listed companies from the newspaper or a magazine like Finance Week or
Financial Mail. Calculate ATO, ROS and ROAM. From these calculations and the
financial statements, identify at least 5 opportunities that you can turn into projects that
will improve ROAM for this company.
108
ICT2641/102
109
Test your knowledge
1. In the ROAM model we use …
a. net assets.
b. intangible plus tangible assets.
c. tangible assets.
d. intangible assets.
2. The most important measure in the ROAM model is …

a. ATO.
b. ROS.
c. ROAM.
d. EBIT.
3. Sales for a certain company are R200 million and EBIT is R24 million. ROS is …
a. R24 million.
b. 12%.
c. 24%.
d. R200 million.
4. The same company as in question 3 has R100 million worth of assets, of which
R20 million is goodwill. The ATO of the company is …
a. 2
b. 2.20
c. 2.5
d. 20
5. The ATO of company ABC is 1.15 and the ROS is 10%. ROAM for that company
is …
a. 11.15
b. 11.15%
c. 11.5
d. 11.5%
110
ICT2641/102
6. A certain company has sales of R30 million, assets of R20 million and a return on
sales of 15%. Calculate for that company values for EBIT, ATO and ROAM.
a. R15 million, 1.5, 15%
b. R20 million, 1.15, 1.5%
c. R30 million, 1.5, 22.5%
d. R45 million, 1.5, 22.5%
7. We can improve ROAM by …

a. decreasing sales volume and increasing assets.
b. decreasing assets and increasing sales price.
c. decreasing assets and increasing Opex.
d. increasing assets and decreasing COS.
8. Management research found that if ATO goes up …

a. ROS goes up and ROAM goes down.
b. ROS goes down and ROAM goes up.
c. both ROS and ROAM go up.
d. there is no effect on either ROS or ROAM.
9. If you could manage to reduce the time product spends in the system by 25% cost
will go …
a. down 20% and labour productivity will go down by half.
b. down 20% and asset productivity will double.
c. up 20% and asset and labour productivity will double.
d. up 20% and labour productivity will go down by half.
10. Calculate EBIT for the following company: ROS = 12%, ATO = 1.2 and Assets =
R200 million.
a. R28.8 million
b. R240 million
c. R166.6 million
d. R33.33 million
111
Answers
Exercise (from Chapter 3)
ATO = 0.89
ROS = 12.1%
ROAM = 10.77%
Test your knowledge

1. (c) Tangible assets
2. (a) ATO
3. (b) 12%
4. (c) 2.5
5. (d) 11.5%
6. (c) R30 million, 1.5, 22.5%
7. (b) Decreasing assets and increasing sales price
8. (c) Both ROS and ROAM will go up
9. (b) Cost will go down 20% and asset productivity will double
10. (a) R28.8 million
112
ICT2641/102
Chapter 5
Building Community-for-Productivity
Introduction
Up to here we have reached a point where we, as business analysts can think like an
owner and understand financial statements good enough to make sensible decisions
based on the information in the statements (up to chapter 3). In Chapter 4 we have
seen the ROAM model, which shows us which levers to pull to improve the productivity
of the assets of the business.
In this chapter we will see how we can bring people, numbers and systems together.
This chapter will show you how the ROAM model can be turned into a people
management tool.
The main learning objective for this chapter is:

• You will understand the relationship between people issues, system issues and
results.
The concepts are important for you as business analyst. IT people are often seen as
so pre-occupied with systems that they forget the problem or the solution. In most
cases the solution to a problem does not just lie with the information system. The
majority of system problems in a business are people problems. This chapter will
show how people, systems and numbers interact.
Looking as the organisation as a system (chapter 2) it is clear that any system doesn’t
just consist of the physical system. It also includes the people operating the system.
An organisation is the same. It is a system of people, and other sub-systems, of which
IT is just one, are there to support the people system.
Introduction to community building: Values

After studying General Management in 1946 Drucker thought that companies could,
and should, create “the self-governing community”.
113
A “Community-for-Productivity” is the result of effective relationship based on two core
values. They are:
a) Trust – You can rely and depend on each other. It is not hard to earn if you say
what you think and do as you say. Once you have built up trust, it becomes very
hard to destroy. “Consider it done (CID)”, with a shake of the hand is what you
want.
b) Contribution – Each person brings something special “to the party” – a contribution
that everyone in the team can acknowledge and respect.
People in productive communities share other common values – universal ones:

a) Loyalty. We all have personal goals to achieve but the community’s come first.
b) Process. You can’t spend your life chasing a number. It becomes very costly in
many unexpected ways. In the end, how you get it matters more than the result.
c) Productivity. A sustainable productivity ratio is the measure of growth and strength
of the community. You use the number to keep everyone honest. That’s the
reason why numbers are so important.
d) Personal growth. A primary goal is growth in your competence and ability to
perform.
How to develop a community

How do you build a community? It’s no use talking about it. You do it and it takes
time. The best and fastest way is to pull a group of individuals together to tackle a
common problem - one that has no immediate or apparent answer, one that they are
ready to tackle because it keeps coming back to bite them.
People who are very different from one another make the most effective communities.
There is little overlap between the concerned parties, but each covers a unique piece
of the problem that keenly interests them. Together, they leave very little uncovered:
114
ICT2641/102
Until you convert a gooey, sticky, messy problem into a simple, measurable, team-
driven, time-bound project, you aren’t managing it. You’re a victim of it! Turn a
“Problem” into “Opportunity”, and you create a positive “vision” for the team. This
builds up energy and optimism.
Decide what to do after all points of view are on the table. Explore all differences,
concerns and doubts to reach consensus. That isn’t compromise. Consensus is a
wholehearted acceptance of the way to go … taking 100% responsibility!
Now you “deliver on promise” (CID!). If you fail, always possible, no excuses or alibis
are allowed. As Yoda in “The Empire Strikes Back” urged, “There’s no try… there’s
only do or not do!
A “100 Day Breakthrough Project” captures the essential principle of management:
• Joint performance beats the sum of individual effort.

• Common goals and shared values lead to higher levels of accomplishment.
• Sharing aims leads to inter-dependence and mutual support.
• Performance measures are the best way to trigger personal growth, innovation and
build relationships.
In a nutshell, the One Objective is to build and grow community to create value
through productivity. The change in the number tells you how you are doing. (This
115
brings everything that you have learned up to now in this module together. Watch
carefully:)
This is the formula:
Example: Why are certain sports teams more successful than others, although the
less successful teams could have more talented players. The reason is that the coach
of the successful teams usually focuses on building a community (C) within the team
by focusing them on a result (N). The team then forgets differences between them and
works on the game plan and the different strategies (S(p)). That is true success. The
beauty is that it is far more fun for everybody, the team, the coach, the spectators …
everybody except the opponents!
116
ICT2641/102
Example: A typical example is the implementation of ERP systems like SAP. When a
major system like SAP is implemented, there ALWAYS is resistance to the system. It
NEVER works for the people first time around. The reason is that we only focus on the
S(p) – the systems and procedures. Nobody cares whether we are taking the people
(C) along and whether there is a common focus (N). The focus is the system, and that
is why it never works.
Organisation Renewal
This formula implies organisational renewal: “Change management” and
“transformation” have become buzzwords in South Africa.
117
Every organization follows a universal pattern of growth and development. Called the
“S Curve”, it shows a link between effort to launch and improve a product and service
over time and value created.
Productivity
?
Hi
‘S-Curve’
Experience
Curve
‘Breakthrough’
Lo
TIME
118
ICT2641/102
Two kinds of projects underpin this curve. As the company matures it reaches a
moment of discontinuity. The curve tapers off and you get diminishing returns.
Now is the time to drive for a “Breakthrough”. This is when you tap into the latent
“hidden reserve” as Bob Schaffer calls it. It exists in all organisations. You tackle a
project on say, one product, in one plant, with one customer.
It is an experiment to test a new way of doing things. It puts you on a new “Learning
Curve”. If you are successful, then you standardise the new way. You do this through
training, entrenching new systems and procedures and installing measurement and
feedback for control.
In other words, at the top of the “Learning Curve” you jump onto the “Experience
Curve” in another “Learning Curve”. If you don’t innovate, the “S-curve” tops out and
declines. Every “Breakthrough” puts you at the bottom of a new “Experience Curve”.
This sequence is critical. If you fail to understand this, one of two things can happen:
a) You run a series of “Breakthrough Projects” one after another and drive the
company crazy with constant change.
b) You redouble your effort with “Continuous Improvement” in areas that used to
work.
All you get is diminishing returns. Then the lights go out as your wheels spin ever
deeper in the swamp!
L-C or E-C? That is the question … !
It is vital for the business analyst to be able to determine what stage the company is on
the S-curve. It will have a huge effect on what IT interventions are appropriate, given
the stage of growth.
FAQ: How do I determine the stage in the company’s life?
119
Answer: The easiest way is probably to plot sales against time over a number of
years, especially sales volumes (not Rands). Also, most managers will tell you
whether their company is at the “mature”, “growing” or “declining” stage of its life cycle.
Just ask them.
FAQ: Is community for productivity what change management is all about in IT

projects?
Answer: If the answer was a simple “yes” or “no”, the scale would tip towards the
“yes”. Change management is about capacity to change, and the community for
productivity helps to establish such capacity to change. “Change management” is also
about how to build change capacity and how to turn a problem into an opportunity …
sustainably! In the module about Breakthrough Strategy you will learn more about this.
Community for productivity goes a long way to create readiness to accept new IT
solutions to old problems.
• C + S(p)  N
• Get community for productivity (C) by focusing on a number (N). The community
will change the systems (S) and procedures (p).
• The number is an indication of how well the community works together.
Conclusion
The formula pulls everything together: The business is a system. To make the system
really work well, you have to build a community for productivity. That can only really
be done if you focus on a number, a bottom-line result to be achieved. To find the right
number it is vital to think like an owner. An owner wants a return on his money, so we
identify opportunities using the ROAM model. That is your job as a business analyst.
In the next chapter we will look more closely at a business perspective on IT and
systems.
120
ICT2641/102
Case study
Castings (Pty) Ltd is a company that makes cast iron castings. Rick Nielson heads
Castings’ marketing team. Rick is worried about his company’s sales performance.
Over the last seven years, annual sales (in tons per annum) were: 20 000, 20 320, 20
212, 20 480, 20 545, 21 303 and 23 000. The only market segment that sees real
growth is that of castings that is used in producing fences, and that is probably due to
the fact that people are so scared that they want to put sharp objects on top of their
“prison walls”, as Rick calls the high metal fences that people keep putting around their
properties. Of the last three years’ figures (since they entered the fencing market),
castings for the fencing industry accounted for 400, 600, and 860 tons per annum
respectively.
Originally Castings was not really geared for the fencing industry. Neither did they
want to produce and sell castings to this industry. They were content to sell all other
kinds of ornamental castings for iron furniture, industrial use and other uses. Three
years ago one of their engineers asked whether he could produce one set of castings
for a fence for a relative that is in the building industry. He got permission and the
fencing business took off from there.
You have been called in by Rick to help him find the right computerised performance
management system for Castings (Pty) Ltd. He asked you to do a proper business
analysis based before he decides on a system. You have decided to plot an S-curve
for Castings to find out where they are in their life cycle.
The answer is given after “Test your knowledge”
121
Test your knowledge
1. Which of the following is NOT part of a core value that is necessary for a
community for productivity?
a. Trust.
b. Consider it done.
c. Contribution.
d. Communication.
2. Common values often find in productive communities are …

a. loyalty.
b. honesty.
c. equality.
d. communication.
3. The best way to form a community for productivity is to …

a. clarify roles.
b. appoints a team from outside.
c. get them focusing on a common problem to solve.
d. attend a team building session.
4. The best way to solve a recurring problem is to …

a. install an information system to address the problem.
b. turn it into a project.
c. ignore it. It will go away.
d. get external consultants to supply the solution.
5. Teams usually work best if …

a. people in the team have totally different views.
b. the team members share the same view.
c. they agree to vote on disagreements.
d. the team come from the same discipline in the business.
122
ICT2641/102
6. In the formula C + S(p)  N, the C stands for …

a. communication.
b. commitment.
c. community.
d. contribution.
7. The main reason that a project is designed in terms of a N is to …

a. build the team by focusing on the result.
b. achieve results.
c. make it measurable.
d. prove the value of the team.
8. On the S-curve …
a. breakthroughs occur during the experience curve.
b. continuous improvement corresponds with the learning curve.
c. continuous improvement takes place early in the life cycle.
d. breakthrough projects help us through the learning curve.
9. Organisational renewal is necessary because …

a. without renewal the organisation will decline.
b. the environment asks for it.
c. it helps the company to reposition itself.
d. it doesn’t belong on the S-curve.
10. The best people to change the systems and procedures are the …
a. engineers.
b. community.
c. management.
d. system analysts.
123
Answers
Case study: Castings (Pty) Ltd is on the flat side of the S-curve, right at the top. Most
products are already on the decline. The only product that is still on the learning curve
is fencing castings. If you plot sales against time you will see the curve.
Test your knowledge

1. (d) communication
2. (a) Loyalty
3. (c) To get them focusing on a common problem to solve
4. (b) Turn it into a project
5. (a) If people in the team have totally different views
6. (c) Community
7. (a) To build the team by focusing on the result
8. (d) Breakthrough projects help us through the learning curve
9. (a) Without renewal the organisation will decline
10. (b) Community
124
ICT2641/102
Chapter 6
Information Technology and Systems, a Business
Perspective
Introduction
Up to now we have looked at the business perspective. In this chapter we will see
where IT fits into the business and where the IT strategy fits into the business strategy.
This will put IT in perspective.
Business technology has often changed names and roles. In the 1970s it was known
as data processing. Data processing primary purpose was to improve the flow of
financial information. In the 1980s it was known as information systems and its role
was changing from supporting the business to doing the business. In the late 1980s
business technology was just an addition to the existing way of doing business.
Keeping-up-to-date was a matter of using new technology on old methods. In the
1990s things started to change, businesses shifted to using new technology on new
methods. Business technology became known as information technology and its role
became to change the business.

• You will understand the difference between strategic and operational information.
• You will be able to determine what information will increase ROAM and what
information doesn’t.
• You will understand that strategy determines systems and where information
systems selection fits into strategy selection.
• You will know why it is vital for the systems to be designed to fit the business.
• You will understand the need for change management in systems implementation.
Purpose of Information Technology and Systems

A business information system, with its subsystems, has different functions and aims.
For example:
125
• To collect, store and turn data into useful information.
• To alert operating managers and employees with information that helps them
perform their tasks.
• To give strategic information that helps management position the business. For
example, enable a bank to analyse the growth of e-banking in different customer
segments.
• To run the business smoothly from end to end of the value chain and link it with
suppliers, partners and customers.
Many companies do not make best use of their IT systems. This is true whether for
day-to-day operations or strategy. Let’s see why:
Value of Information and Business Systems

The main aim of a business is to maximise its value for the owners. Fundamentally
that comes from productivity – the cash productivity of its asset base.
To survive long term, it has to deliver what customers want with fewer assets and
lower costs per unit of product, or service, than its competitors. Any decision or activity
stems from this primary aim. In previous chapters we have seen that less assets and
lower costs lead to a higher ROAM, and the aim is to have a higher ATO and ROAM
than your competitors.
Storing lots of data without giving valuable information is a waste of time and money.
Investment in an IT system must generate measurable results.
126
ICT2641/102
Example: IT can contribute to a decrease in debtors days, improved stock turn,

decline in quality rejects and rework, shortened production or service cycles, faster
delivery and increased sales.
All these will result in a higher ATO and lower costs than competitors. This is turn
drives and strengthens the company’s strategic position in the market place.
Impact of Systems on strategy, processes and structures

Business should dictate to the technology, not the other way round. In the past IT
systems played a passive role. Behind the scenes, they generated data, facilitated
work processes and provided information in standard ways.
Today, people see information as a strategic weapon and technology gives it big
firepower. Managers formulate business strategy around it. The IT systems can even
govern the processes, design and structure of a business. After determining business
strategy, it may come second in this decision chain.
CHOOSE SELECT ALTER PROCESS

STRATEGY MEANS AND STRUCTURE
INCLUDING IT
Sometimes the changes caused by the system are very small. Installing an accounting
system for a small business may affect only one person and cause minor changes to
the process.
A big change caused by an IT system like SAP, affects a company from top to bottom.
It calls for the re-skilling and redevelopment of people. It may even cause many
people at all levels to leave.
Manage IT&S interventions with the “big picture” in mind. IT managers and analyst
consultants need to integrate strategy, technology, systems, processes, structures,
policies and people. In chapter 2 we saw that a business is a total system
127
Example: Recently a large academic institution implemented an administration
system. A group of consultants designed it for them. The implementation took a full
year. During the planning and design stages they did not pay enough attention to work
processes at grass roots task level.
The main concerns of the implementation team were “state-of-the-art” technology,

technical requirements, information flow and the best way to perform admin activities.
After eight months of analysis and design the system went live.
In the first month of operation a drastic increase in logistical and admin errors
occurred. This caused major tension between lecturers, students and admin staff.
After evaluating the problem they discovered that work processes of lecturers and
admin staff conflicted with the new system. The consultants had to introduce changes
to work processes and perform a system redesign at their own cost.
Management decisions dictate the data collected

Top management often do not have the keyboard skills, or the time, to collect relevant
data and build their own reports. It is vital to give them the right information when they
need it.
The decision to be made determine what information has to be provided. The

information dictates what data has to be collected. The sequence of the steps is
important. Do them in reverse and you have a recipe for disaster.
128
ICT2641/102
Example: A chemical company signed onto a database of chemical information

available on the Internet and made the information available to all its managers.
Included in the website was a reply address through which people could order online.
All of a sudden the amount of raw materials purchased went up by 30%. The reason
was found to be that the information prompted the managers to buy what they did not
need. (Don’t we all love to buy something that we don’t need just because it is being
advertised on a flier as a “special”?). The company had to cancel its subscription from
the database.
Decisions managers make

Managers can make many different types of decisions which can be divided into the
following categories:
• Strategic decisions
• Operational decisions
• Problem solving decisions
The different decisions require different types of information, at different times and in
different formats.
Strategic decisions influence the direction and strategy of the business. These
decisions are often carefully considered and may involve millions of Rand of
investment:
• Whether to acquire or merge with a competitor
• Whether to enter a new local or global market
• Whether to diversify products or services
• Whether to de-centralise the business
Strategic decisions has the following characteristics:

• Have long range impact
• Require careful analysis of the business and its environment
• Are often the result of a strategic planning process
• May involve millions of Rand
• Are designed to capture opportunities or offset competitive weaknesses
129
• Involve top management, including board of directors
Although others in the business may have input, the magnitude of decisions dictates
that the managers at the highest level will be involved. Strategic decisions considers
as much information as possibly can be gained. After a careful study, these decisions
are made slowly.
Operational decisions, in contrast, are shorter-term, and relate to the planning, co-
ordinating, monitoring and control of day-to-day activities of a business:
• How many units to make today, tomorrow, next week
• The number of customers orders to process today
• Sales target for the month
• What to do about outstanding debtors over 60 days
Operational decisions have the following characteristics:

• May or may not involve large amounts of capital
• Deal with specific situations within the business
• Are made by experienced managers in the area effected by the decision
• Often have standard operating procedure available to guide decisions
• Require less analysis than strategic decisions do
Problem solving decisions are aimed at correcting adverse situations that has
developed – fix something that is wrong.
Problem solving decisions have the following characteristic:

• Situations is a deviation from normal operations
• May be minor or of crisis proportions
• Often need quick decisions to find solutions acceptable to all involved
• There may be no easy solution
130
ICT2641/102
Poor information and systems management

Too often managers realise a problem exists with the flow of information and/or work
processes. They decide to solve it with a “state-of-the-art” computerised business
system.
After installing it, to their amazement, they find the problem is still there. The “Magic
Box” solves nothing. They start with complex mess and end up with a “sophisticated”
complex mess.
If information flows or processes are illogical, or poor then the most advanced system
in the world will not solve the underlying problem. Good systems are simple. The
Japanese kanban system of using cards or coloured balls to impart information is
exactly that. It does not break down.
If some systems do need to be technically complex and advanced, they must still be
simple and reliable to use. If they are not, they lack the support of employees and
management. And are not used properly.
There are a number of examples in South Africa where the implementation of SAP/R3,
and other first-world systems, failed for this reason, amongst others.
Example: Two years after the full-blown implementation of SAP/R3 in an operating

company of a large group the old system was still fully operational. This is because
people rejected SAP because of its perceived complexity even after huge investment
in so called change management and user training.
There are other examples where modern systems have been put in place. However,
because they have been badly designed or redesigned, they do not manage workflow
and information effectively.
In many cases people have to be forced to do electronic filing of documents, because

they keep their hand system running side-by-side with the computer system. The
same applies to electronic scheduling of meetings on an intranet. If some people keep
131
their hand system running parallel to MS Outlook, it is a recipe for double booking and
people not attending meetings.
Example: A large bank wanted to install an on-line banking service. It had to do it

quickly, as its competitors already provided this service. They failed to meet their
target deadlines.
The reason was that information was unavailable even though all the data needed was
in the system. The system was badly planned and inflexible. Information that had not
been specified at the start could not be extracted. A massive redesign at huge cost
was required.
The above examples show that it is vital for the systems to be designed to fit the
business. Every business is unique, with unique problems and opportunities calling for
unique solutions.
Different businesses need different systems

There is no such thing as a perfect business system. To use a well-known quote from
Carl Jung: “The shoe that fits one person pinches another; there is no recipe for living
that suits all cases.”
You cannot develop a system to suit all businesses. A company cannot squeeze itself
into someone else’s system just as the ugly sisters found that they could not squeeze
their feet into Cinderella’s shoes.
To take the metaphor further, few at forty expect to fit into clothes they wore a
teenagers. Similarly, as a business grows and changes so must its systems if it is to
remain “a good fit”.
Therefore, a business system has to be as flexible as possible to meet changing

needs. It should be able to cope with the maturing of the business and any other
changes brought about by mergers, acquisitions, or strategic repositioning.
The factors governing the style of system to use are:
132
ICT2641/102
• Type of business or industry

• Growth stage of the business or industry
• Size of the business
• Geographical spread
• Nature of markets
• Current state of technology
• Business processes and organisation structures
• Organisation culture and management style
• Political and economic influences
IT&S Strategy
There are three different aspects to information technology and systems strategy:
• Strategic business planning: considers how new technology will impact on the
business
• Strategic IT&S planning: considers how the information and systems
infrastructure will evolve and develop
• Strategic data planning: creating stable data models that are independent of
changes in technology
This breakdown emphasises how important it is to separate the two activities of

planning and to maintain good data models despite the chaos created by constantly
changing technology.
Information needs of managers may change rapidly. The data to meet them do not
usually change and remain fairly stable over time. However, as businesses group and
regroup with alliances and mergers, the data models must be maintained and
improved.
IT managers and analyst consultants need the skill to determine whether a system is
of critical importance to the business. That is why it is critically important to
understand the ROAM model and financial statements (Chapter 4).
133
One systematic approach for doing this is to use a model, based to some extent on the
well-known Boston Matrix.
Strategically Future
High Important Potential
FUTURE 45% 10%
IMPACT
Crucial For granted
Low Today
30% 15%
Input required (%)
Use the four categories to determine the importance of systems:
• Future potential. What applications or systems will, or may be, of importance in

the future? Develop and test these systems on a small scale before possible
major investment in future years. The matrix suggests that 10% energy and
money should be invested in this area over the short to medium-term.
• Strategically important. What applications or systems require a major
investment of money (45%) now because you believe them to be critical for
achieving the business strategy?
• Crucial today. What applications and systems does the business depend on
today for success? Past investment in these systems should be generating major
financial benefits. A call centre is an example and may require a 30% investment
to maintain and develop further over the short-term.
• Taken for granted. Which systems are in place that are part of the fabric of the
business? You hardly notice them and take them for granted. For instance a
billing system may fall into this category. You do not notice them until they go
wrong. Development and improvement of these systems are usually possible and
should not be overlooked. An improved old system might even be crucial for the
business. Roughly a 15% investment is normally required to maintain these
systems.
134
ICT2641/102
Change Management
Most people are frightened of the unknown, and one of the major unknowns in the
workplace is new technology. Change upsets a steady routine and some employees
resist it. Resistance to change refers to the strong tendency in businesses (and
people) to maintain the present state to keep things the way they are. The following is
the key reasons why many employees resist change:
a) They are not convinced of the need for change. The change does not make sense
to them and in many cases they are not aware of it since they are not involved in
the process of change.
b) They do not want to lose something of value. It may include their current job
status, known work or even security.
c) They do not really understand the change and its implications, so they assume that
they will be much more badly off as a result of the change. This happens when
they are not given enough relevant information to understand what is really going
on.
d) Many people fear failure. They may be afraid that they will not be able to develop
the skills and behaviours that are required by the change.
e) Some people have low tolerance for change. They strive on consistency, order
and structure and find flexibility and uncertainty discomforting.
The planning and implementation stages are critical to the success of a new system.
Involve as many people as possible at the planning stage. This gives individuals and
groups time to get used to the idea.
It gives them knowledge of the implications. Done well, it can even build up
enthusiasm. Involving employees in the planning stage gives them the chance to
include their ideas. It also helps management to produce the best possible system by
drawing on a spectrum of views.
During implementation, keep all employees fully informed and particularly those who
are directly affected. This means telling them about timetable schedules, what events
will happen and why.
135
Employees should also be given the opportunity to react and comment on progress.
This allows them to explain their fears, lack of understanding, or ideas for
improvement.
In conclusion, management has to emphasise the importance of learning during the

planning and implementation stages of a new system. Training, coaching and
mentoring on-the-job are critical for developing people and overcoming resistance to
change.
FAQ: Is it the job of the business analyst to consider change management issues?
Answer: If the solution that the business analyst recommends does not work, the
finger will be pointed to him/her. If change management can help to prevent system
failure, it is the job of the whole team, including the business analyst to ensure buy-in.
If the business analyst regards himself as a real change agent, which he should, it is
his job.
Management will often not see it as part of his job and might think that he is interfering
where he shouldn’t, but afterwards they will appreciate the effort.
136
ICT2641/102

• Business use information technology for operational and strategic purposes and to
link them with customers and suppliers.
• Information that doesn’t contribute to the bottom line is costly and decreases the
ATO.
• Strategy determines systems, although information systems selection is part of
strategy selection.
• The information needed dictates which data is to be collected.
• Different types of information are needed for strategic, operational and problem
solving decisions.
• Good systems are simple. State-of-the-art IT does not correct poor information
flow.
• It is vital for the systems to be designed to fit the business.
• IT and systems planning involves strategic business planning, strategic IT&S
planning and strategic data planning.
• The Boston Matrix is an approach to help decide whether a system is strategically
important for a business.
• Change management: Involve as many people as possible at the planning stage to
create buy-in.
137
Conclusion
The most important message in this chapter is that the business system determines
the information system. IT has to fit into the bigger picture and not be a little kingdom
within the business. In the last chapter we will look at a case study (we have
encountered Ball Co in chapters 3 and 4 already) to consolidate everything that we
have learned in this module.
Practical field exercise

• Go to the company where you work or any company that is big enough to have a
sizeable information system.
• Arrange an interview with the IT manager or manager in charge of information
systems.
• Identify, together with the IT manager two system implementation projects: one
that was regarded as successful and one that was seen as unsuccessful.
• Determine what made them good or bad. Use the following questions as a
guideline. NOTE! These are not the only questions you should ask. Remember
what you have learned in this chapter: The information required determines the
data collected!
Typical questions to use for each of the projects are:

• Did you make use of a business analyst in the project?
• Describe the business analyst’s approach to the project? (and if there was no
business analyst, the person who translated the requirements)
• Do you think that the business analyst (BA) really understood the business?
• How well and how often did the BA communicate with management?
• Was the BA involved throughout the whole implementation process, or did he
submit a report and moved on?
• Did the project contribute to bottom-line results?
• Draw a diagram of your business as a system. Show external influences using
arrows. Where in this system did the project feature?
• Where on the income statement or balance sheet did the project impact? (assets,
COS, Opex, Sales?)
• Did the project contribute to customer satisfaction?
• Did the project improve the asset productivity of the business?
138
ICT2641/102
• What were ATO, ROS and ROAM before the project?

• What are ATO, ROS and ROAM after the project?
• Did the project contribute to improve ATO, ROS or ROAM?
• Where on the ROAM model did this project impact?
• Did the project manage to reduce the time products or information spends in the
system?
• How did the project manage to reduce the time products or information spends in
the system?
• Did you use a project team?
• How well did the team work together as a community?
• Who were represented on the team?
• Was change management issues and buy-in for the solution addressed during the
project?
• How was change management issues and buy-in for the solution addressed during
the project?
• Who made the decision to do the project?
• Was the project strategic or operational in nature?
• How did you decide which data the BA should collect?
• How did the BA collect the data?
• Would you regard the solution/system as simple?
• Does the solution/system fit the organisation as a system?
• Where on the Boston matrix would you plot the importance of this project?
139
Test your knowledge
1. Which one of the following is NOT one of the main uses of information technology?
a. Strategic purposes.
b. Operational purposes.
c. Data collection.
d. To link the business with customers and suppliers.
2. The best information to obtain, is …

a. complete information.
b. information that contributes to the ROAM of the company.
c. information that can be electronically stored.
d. information that the company can get for free.
3. Which is the correct order of events?

a. Select strategy, choose systems strategy, and alter structure.
b. Select strategy, alter structure, and choose strategy including systems.
c. Choose strategy including systems, alter structure, and select strategy.
d. Alter structure, select strategy, and choose strategy.
4. Strategic decisions have the following characteristics …

a. may or may not involve large amounts of capital.
b. deal with specific situations within the business.
c. are made by experienced managers in the area effected by the decision.
d. have long range impact.
5. Projects with future potential require … input.

a. 10%
b. 15%
c. 30%
d. 45%
6. Which statement is wrong? People resist change, because …

a. many people fear failure.
b. they want to sabotage the business.
c. they do not really understand the change and its implications.
140
ICT2641/102
d. some people have low tolerance for change.
7. Strategic IT & S planning …

a. considers how new technology will impact on the business.
b. considers how the information and systems infrastructure will evolve.
c. means creating stable data models.
d. considers the costs involved for an ERP system.
8. The factors governing the style of system to use are NOT …

a. what top management wants.
b. growth stage of the business or industry.
c. geographical spread.
d. current state of technology.
9. A information system that fits the business can be obtained by …

a. upgrading to the latest technology available.
b. reducing IT-related costs to an affordable level.
c. first looking at the kind of business before choosing a system.
d. renting, because it doesn’t affect ATO.
10. Which of the following is correct?

a. The information for management depends on what is available.
b. Define the information requirement first, and then collect the data.
c. The data available determine the decision to be made.
d. Collect the data first, then define the information requirement.
141
Answers
Test your knowledge
1. (c) Data collection
2. (b) Information that contributes to the ROAM of the company
3. (a) Select strategy, choose systems strategy, alter structure
4. (d) Strategic decisions have long-range impact
5. (a) 10% input
6. (b) They want to sabotage the business
7. (b) considers how the information and systems infrastructure will evolve.
8. (a) What top management wants
9. (c) First looking at the kind of business before choosing a system
10. (b) Define the information requirement first, then collect the data
142
ICT2641/102
Chapter 7
IT&S from a business perspective, Ball Co Activity
Introduction
The aim now is to analyse the IT and systems needs of BALL Co from a business point
of view. You have encountered Ball Co in chapters 3 and 4. We will use the financial
statements and the values that you have calculated in those chapters. If you
understand this chapter, you understand the whole module. If you understand the
whole module and apply the knowledge, you can be a brilliant business analyst.

• You will be able to apply the knowledge of this module in a case study.
• You will have used the knowledge to make a bottom-line difference to a fictitious
company.
Case study introduction

You have a balance sheet and income statement for BALL Co. This information, with
a high-level map of the BALL Co value-chain, will help you do this exercise.
143
Background Information
BALL Co is a start-up company that makes balls for the local toy market. These are
some issues that affect it:
• It has to improve productivity fast. The owners want to see a good return on their
investment before they think of putting in more cash.
• Its customers are medium to large businesses. They sell balls direct to the public.
• The demand is greater than BALL Co can supply and signs are that it will grow.
• It dominates its market but expects international competition soon.
• Its long-term strategy is to expand in South Africa and to penetrate carefully
selected Southern African market segments.
• It has one plant in Gauteng that supplies customers countrywide. Road transport
contractors deliver the products to customers.
• No IT business system is in place. People push paper from one end of the value
chain to the other. This works today but as the business grows, it will lead to many
problems.
144
ICT2641/102
Here is BALL Co’s value chain:
CUSTOMER
SALES
BUYING
SUPPLIER
WAREHOUSE
PRODUCTION
DISTRIBUTION
CUSTOMER
FINANCE
• It is quite straightforward. Sales representatives work in their national regions. A

successful sales call on a Customer results in an order for balls. The sales
representative sends the order to Buying who instruct the Supplier to deliver raw
material. This is delivered to the Warehouse and it triggers a Production schedule.
Production transforms the raw material into ball and Distribution starts. Finished
goods stock goes to the warehouse and a transport contractor is notified. The
finished goods are loaded onto a truck and delivered to the Customer with an
invoice. The Customer signs a receipt and the transport contractor faxes it to
Finance. The customer is now a debtor until payment.
145
Instructions
Assume you are a business analyst employed by BALL Co. Prepare a report that
illustrates your analysis of the company, assumptions about the future of the business,
and recommendations from an IT&S perspective. Consider the following questions in
your analysis:
• What potential problems and threats do you see for the business?
• What strategic and operational information is critical for BALL Co to achieve its
short and long-term strategies?
• How could you utilise IT&S to streamline and optimise the value chain (high-level)?
• How would your IT&S recommendations make an impact on ROAM?
Tips: The following guidelines would help to structure your thoughts and test your answers:
• Potential problems: What do you assume are the internal weaknesses of the business, for example
the current state of IT? Consider different assumptions and scenarios. See management of the
enterprise.
• Threats: What external to the company, for example competition or dissatisfied customers, could
lead to a decline in both sales revenue and ROS? Feel free to assume. Read ‘Competitive Asset
Spin’.
• To what extent will the information requirements of BALL Co be influenced by its growth stage?
Study the S-curve and information needs of a company on pages. W hat does the information in the
study guide means in terms of the company’s value chain?
• In terms of the value chain, how could IT&S help for example to eliminate re-work, to improve cycle-
time, to reduce duplication, to improve quality, and to increase output? Study RIROs and the
measurement of effectiveness and efficiency. Also consider the potential strategic value of IT&S.
Apart from IT&S, what people issues do you assume might surface during an optimisation project –
see chapter 5.
• With regard to your recommendations, study your BALL Co calculations in chapters 3 and 4
carefully, as well as the ROAM research in chapter 4. Ask yourself questions such as: “If production
could be reduced with the help of an operational system, how would it impact on cost-of-sales, ROS
and ROAM?” and “If a inventory management system would help to reduce stock, how would it
impact on assets, ATO and ROAM?”
146
ICT2641/102
Learning Points
Jot down some of the learning points that struck you during the exercise.
147
Conclusion of Part 1
• The organisation is a system.
• Management organises resources in the system.
• The business analyst operates on task level.
• IT and business analysts must understand the business, the business needs and
the information needs before recommending a system.
• There is random variation in the system.
• You should think like an owner to really supply the right solution.
• The balance sheet shows where the money has come from to start a business and
which assets have been purchased with this money.
• The income statement shows how cash is generated and how it is used while the
business is in operation.
• The most important measures in the balance sheet and income statement are total
assets, sales and EBIT.
• The ROAM model shows which levers to pull to optimise productivity.
• ATO = sales ÷ assets is the most important measure.
• ROS = (EBIT ÷ Sales) x 100% measures profitability.
• ROAM = ATO x ROS.
• Improve ROAM by decreasing assets, costs and expenses and increasing sales.
• The ROAM model shows which projects will contribute to productivity.
• The issue of the project is to create a community for productivity by focusing the
team on a number to be achieved. The number shows how well the community
operates.
• The community will redesign the systems and procedures.
• The business strategy should dictate the information system required.
• An information system can give strategic, operational and problem solving
information.
• Guard against information overload.
• Information and IS should be geared to improve ROAM for the business.
148
ICT2641/102
Glossary
A
Absenteeism. A situation where an employee does not show up at work when
scheduled to be there.
Accounting. The recording, classifying, summarising and interpreting of financial
events and transactions to provide management and other interested parties the
information they need to make good decisions.
Assets. Economic resources such as equipment, buildings, land and vehicles owned
by a business.
B
Balance sheet. The financial statement that shows a company’s assets (what it
owns), liabilities (what it owes) and net worth at a specific point in time.
Benchmarking. A technique for comparing your own performance with that of the
others operating similar processes. This might occur internally or by comparing
yourself with competitors or by comparing
Bond. A corporate certificate indicating that a person has lent money to a business.
Bottom line. The last line of the income statement, or net profit after taxes; thus the
bottom line is the final result. This is considered as business slang or jargon.
Budget. A plan for the controlled use of financial resources.
Business. Any organisation that strives for profit by providing goods and/or services
that meet customer needs.
Business plan. A detailed written statement that describes the nature of the
business, the target market, the advantages the business will have in relation to
competition and the resources and qualifications of the owner(s).
149
COGS. Cost of goods sold
COS. Cost of sales
CRM. Customer Relationship Management
Cash flow. The difference between cash coming in and cash going out of a business.
Competitive benchmarking. Rating an organisation’s practices, processes and
products against the world’s best.
Computer-Aided design (CAD). Design method that uses software to aid in product
and structure design.
Controlling. A management function that involves determining whether or not an
organisation is progressing towards its goals and objectives, and taking corrective
action if it is not.
Copyright. Exclusive rights to materials such as books, articles, photos and cartoons.
Current assets. Items that can be converted into cash within one year.
Customer sensitivity. Business actions taken to meet customer needs and
preferences.
D
Data analysis. The study of information to help a manager reach a conclusion about
some aspects of the company.
Debt capital. Funds raised through various forms of borrowing that must be repaid.
Decision making. Choosing among two or more alternatives.
Delegating. Assigning authority and accountability to others while retaining
responsibility for results.
Depreciation. The systematic write-off of the cost of a tangible asset for example a
motor vehicle over its estimated useful life.
Dividends. Part of a business’ profits that may be distributed to stockholders as either
cash payments or additional shares of stock.
Downsizing. Reducing the number of employees in a business.
E
150
ICT2641/102
EBIT. Earnings before interest and tax.

ERP. Enterprise Resource Planning.
EVA. Economic value added.
Earnings per share. A company’s earnings divided by the number of shares of stock
outstanding.
Effectiveness. A measure of the degree to which a business achieves its goals.
Efficiency. A measure of the relationship between inputs and outputs.
Equity capital. Money raised from within the business or through the sale of
ownership in the business.
Expenses. Money a business must pay out in order to make its products and provide
its services, such as rent, utilities and salaries.
F
FAQ. Frequently asked questions.
Feedback. Communications from customers that tell a company how it is doing or
communications from managers that tell the employee how they are doing.
Finance. The function in a business that acquires funds for the firm and manages
funds within the firm.
Financial management. The job of managing a firm’s resources so it can meet its
goals and objectives.
Financial statement. A summary of all the transactions that have occurred over a
particular period.
Fixed assets. Assets that are relatively permanent, such as land, buildings and
equipment.
G
Gap analysis. The study of customers’ satisfaction with a firm’s product or service
compared with their expectations.
151
Goals. The broad, long-term accomplishments an organisation wishes to attain.
Goods. Tangible products such as houses, food and clothing.
Gross profit. How much a firm earned by buying (or making) and selling
merchandise.
I
I/O. Input/output.
Income statement. The financial statement that shows a firm’s profit after costs,
expenses and taxes; it summarises all of the resources that have come into the firm
(revenue), all the resources that have left the firm, and the resulting net income of loss.
Information systems (IS). Technology that helps companies do business; includes
such tools as automated teller machines (ATMs) and voice mail.
Information technology (IT). The use of electronic devices to collect, analyse, store
and transmit information. Technology that helps companies change business by
allowing them to use new methods.
Intangible assets. Items of value such as patents and copyrights that have no real
physical form.
Interest. The payment the issuer of the bond makes to the bondholders for the use of
borrowed money. The price that individuals or businesses pay to borrow money.
K
Knowledge technology (KT). Technology that adds a layer of intelligence to filter
appropriate information and deliver it when it is needed.
L
Leading. A management function that involves creating a vision for the organisation
and guiding, training, coaching and motivating others to work effectively to achieve the
organisation’s goals and objectives.
Liabilities. What the business owes to others.
152
ICT2641/102
Liquidity. How fast an asset can be converted into cash.

Local area network (LAN). A communications network that covers a limited
geographical area; consists of communications channel connecting a series of
computer terminals connected to a central computer, or connects a group of personal
computers to one another.
Loss. When a business’s costs and expenses are more than its revenues.
M
Management. The process used to accomplish organisational goals through planning,
organising, leading and controlling people and other organisational resources.
Market. People with unsatisfied wants and needs who have both the resources and
the willingness to buy.
Money. Anything that people generally accepts as payment for goods and services.
N
Net income or net profit. Revenue minus expenses.
O
OPEX. Operating Expenses.
Objectives. Specific, short-term statements detailing how to achieve the goals.
Organising. A management function that involves designing the organisational
structure, attracting people to the organisation (staffing) and creating conditions and
systems that ensure that everyone and everything work together to achieve the
objectives of the organisation.
153
Outsourcing. Assigning various functions, such as accounting and legal work to
outside organisations. Purchasing a product or component of a product (or labour)
from another company.
Owner’s equity. Assets minus liabilities.
P
PAT. Profit after tax.
PBT. Profit before tax.
Patent. A government-protected legal monopoly on a product or product design.
Performance appraisal. An evaluation in which the performance level of employees
is measured against established standards to make decisions about promotions,
compensation, additional training or firing.
Planning. A management function that involves anticipating trends and determining
the best strategies and tactics to achieve organisational objectives.
Product. Any physical good, service or idea that satisfies a want or need.
Profit. Earnings above and beyond what a business spends for salaries, expenses
and other costs. The amount of money left over after the business record all its
revenues and subtracts all its expenses. (Total revenues minus total expenses).
Q
Quality. The ability of a product or service to consistently meet or exceed customers’
expectations.
R
RIRO. Resources in Results out.
ROAM. Return on assets managed.
Random access memory (RAM). Contained in the processor unit of the computer;
temporarily stores data and program instructions when they are being processed.
154
ICT2641/102
Resistance to change. The strong tendency in businesses (and people) to maintain

the present state, to keep things the way they are now.
Return on equity (ROE). The amount of profit a firm makes for each Rand it invests.
Revenue. The value of what is received for goods sold, services rendered and other
sources. The amount customers pay for goods and services they purchased.
S
Service. Intangible products such as education, health care and insurance.
Stakeholders. Those people who stand to gain or lose by the policies and activities of
an organisation. A person or group that has some claim or expectation of how a
business should operate.
Stock. Shares of ownership in companies that are sold to individuals or financial
institutions.
Stockholder. Any person who owns at least one share of stock in a corporation.
T
TBSV. Tangible balance sheet value.
Taxes. How the government raises money.
Training and development. All attempts to improve productivity by increasing an
employee’s ability to perform.
Turnover. The rate at which employees leave a company.
V
Value chain. The sequence of linked activities that must be performed by various
organisations to move goods from the sources of raw materials to ultimate consumers.
155
References
1. Gerard van Hoek & Associates. IT Analyst Consultant.
2. Breakthrough Consulting (Pty) Ltd. Playing the Game of Business
3. David Irwin. 2000. On Target - Achieving Best Business Performance.
Thomson Learning.
4. Fry, Fred L., Stoner, Charles R., Hattwick, Richard E. 2000. Business An
Integrative Approach. 2nd edition. McGraw-Hill.
5. Nickels, William G., McHugh James M., McHugh Susan M. 1999. Understanding
Business. 5th edition. McGraw-Hill.
156
ICT2641/102
PART 2
PREFACE
The role of business analysts in the field of information

technology has become one of the most challenging tasks in our
fast changing ‘modern’ world. In the past, business analysis was
limited to technical matters such as research of technological
infrastructure, architecture and design, and systems integration
across workflow processes. In practical terms, the job of a
business analyst on for example a systems project was to study
the current functionality of a system, to develop future user
requirements, to define the gap between the current and the
future, and to recommend a systems redesign or modification.
For this reason many senior managers posed the question why
the analyst is called a business analyst and not merely a
systems analyst. This caused confusion in many organisations
as positions were created for both business and systems
analysts. Why then was the position ‘business analyst’ invented
in the first place? The answer is an obvious one – to bridge the
major gap between business and technology.
In the new global economy, the business analyst is challenged to be a

business minded consultant who also understands the subtleties of
technology. The new task of the analyst is to ensure that the business
drives technology and not vice versa. This workbook is designed to
enable business analysts to fulfil a business consulting purpose with
proficiency. The guide is therefore not written from a technological
perspective. It outlines the new and exciting roles of analysts in business
and consulting.
The workbook consists of eight chapters:
• Chapter 1: An overview is provided on the changes in business

and the new task roles of business analysts. This chapter
provides the context for the rest of the guide.
• Chapter 2: The consulting role of the business analyst is defined

and explained.
157
• Chapter 3: The consulting role of the business analyst is
expanded by adding the business dimension to the role. A
framework is given for understanding a business.
• Chapter 4: The step-by-step consulting process of the business

analyst is outlined, from the first meeting with a client to project
completion. The consulting process is described within the
context of the new consulting role of the business analyst
(chapters 2 and 3).
• Chapter 5: The Breakthrough Strategy© is explained as a

methodology to drive technology projects from a business point of
view.
• Chapter 6: The nuts and bolts of project implementation

management are addressed within the context of the
Breakthrough Strategy© (chapter 5).
• Chapter 7: A new perspective is offered on why organisations,

groups and individuals resist technological change across the
stages of the consulting process (chapter 4). Strategies are also
discussed to manage resistance effectively.
• Chapter 8: The study guide is concluded with a comprehensive

business analysis consulting case study.
Note that the terms business analysis (referring to the field of study)
and business analyst or consultant (meaning the job or title or person)
are used interchangeably in the text. The concepts business and
organisation are also used as synonyms.
This is how each chapter is structured:
(1) The chapter is introduced and learning goals are explained.

(2) The topics relevant to the title of the chapter are discussed.
(3) Frequently asked questions are addressed and practical
examples are provided in the body of the text.
(4) The chapter is concluded with a summary and with brief
reference to the next chapter.
(5) The chapter is ended off with a multiple-choice questionnaire to
test your knowledge and with practical field exercises.
158
ICT2641/102
A few guidelines to ensure that learning is optimal and enjoyable:
• The study guide is based on two books:

- High-Impact Consulting: How clients and consultants can
leverage rapid results into long-term gains. Robert H. Schaffer.
- The Breakthrough Strategy: Using short-term successes to
build the high performance organisation. Robert H. Schaffer.
It is recommended that you familiarise yourself with the contents of
these books before studying this guide, starting with High-Impact
Consulting.
• Study the chapters of the workbook sequentially. Each

chapter in the guide is a build on the previous – except
for chapter 1 that provides context.
• Do the practical exercises in your own organisation or approach

any organisation of choice to grant you permission to perform
low-risk experiments. Apply, apply, and apply…
• Review Part 1 especially on the Return On Assets Managed

(ROAM) model as a framework to show economic value.
Reference will be made to ROAM in this workbook.
• Sleep on a chapter and look for real-life examples before you

tackle the next.
159
PART 2
CHAPTER 1
BUSINESS ANALYSIS: AN OVERVIEW
Introduction
This chapter provides a strategic context. The changing role of business

analysis is explained within the context of changes in the business world.
At the end of this chapter the learner will fully understand how the task of
a business analyst is changing and why. To achieve this learning goal the
following topics will be covered:
• Changes in the business arena

• Traditional business analysis in crisis
• Emerging changes in business analysis
• New task roles of the business analyst
• Multiple business analysis competencies
Changes In Business
The role of the business analyst is directly influenced by changes in the

business environment. Therefore, let’s firstly examine the most significant
changes that are taking place in the business world:
• Businesses are going global. Small firms, medium-sized private

companies and large corporates are going truly global. Internet-
based technologies are making all of this possible. This means
that a small South African firm can market and sell African arts
on-line anywhere in the world in real-time. A large American
corporate can buy red wine supplies electronically from a South
African supplier, re-sell it electronically in Europe and arrange
shipping electronically with almost any distribution company.
Suppliers of goods, service providers, competitors, customers,
clients and all business stakeholders are linked like never before.
This shift requires new business models and different technology
strategies.
• Boundaryless businesses. Twenty-first century businesses are

becoming boundaryless as a result of technological advances as
well as through the increasing rate of mergers and acquisitions.
Ron Askenas (et al, 2002) distinguishes between four boundary
types:
160
ICT2641/102
- Vertical boundaries: referring to the hierarchy or levels of

management and supervision.
- Horizontal boundaries: meaning business units, divisions,
functions, departments, sections and work teams.
- External boundaries: referring to interaction between
suppliers, customers and stakeholders in a certain
geographical area.
- Geographical boundaries: implying interaction between
business across borders and time zones.
A new economy business cannot allow boundaries to interfere

with its operations. Speed and flexibility are required to survive in
the new world. New age information systems across boundaries
are necessary to enable businesses to respond quickly and
flexibly. Consider in the following example what the impact would
be on a business when boundaries interfere.
Example: Boundaryless behaviour.
A European motor manufacturer based in Germany receives an

order for a 1000 4x4 vehicles to be delivered to a company in
Australia within 60 days. The manufacturing of the 4x4 takes
place in three countries over the world. Some of the parts are
manufactured in the U.S.A., other parts are manufactured in
South Africa, and the vehicle is assembled in India and shipped.
Imagine the chaos if management politics and rank interfere
(vertical boundary), or if turf becomes a barrier between
business units (horizontal boundary), or if the communication
between the South African factory and a local steel supplier is
poor (external boundary), or if the technological coordination
and integration between the global units, their suppliers and the
Australian customer fail (geographical boundary).
• From internal to external integration. In the 80’s and 90’s many

organisations focused on the creation and integration of internal
business and operating systems – hence the Enterprise
Resource Planning [ERP] (e.g. SAP/R3) revolution.
Boundarylesness is forcing businesses to focus external and to
create links with global business units, suppliers and customers
across boundaries i.e. electronic commerce. Pick and Pay’s
virtual shops serve as an example. Massive external integration
161
will be required in the future. Major shifts 1n IT strategy are
therefore inevitable.
162
ICT2641/102
Example: From internal to external integration.
A South African consumer goods producer started in the late 80’s

to develop computerised systems for each area of its operations.
Applications were developed for sales, production, warehousing,
distribution and finance. As the business grew in the 90’s a need
developed to standardise the various internal operating systems.
Specified applications of SAP/R3 were implemented to
accomplish internal integration. In the late 90’s competition
became fierce and more emphasis was placed on effectiveness
and efficiency. Electronic links with local suppliers and customers
were established through Internet portals and the existing supply
chain system was modified to ensure external integration. On the
agenda now is to expand the portal concept to reach overseas
markets.
• Information as the competitive advantage. Many theorists

have predicted the information age more than three decades ago.
The actual impact of IT in real-life is much more evident today.
Businesses rely on information to make strategic and operational
business decisions. Businesses should be able to manage stock
just-in-time; should be able to predict consumer trends accurately
in advance; should be able to capture and spread knowledge in
the organisation (in a secure way) in order to facilitate continuous
and rapid performance improvement; and should be able to utilise
the information with speed and ease across boundaries.
Management information systems and data warehouses are
entering a boundaryless era.
• From service or product sales to value creation. In the 21st

century products and services are merely seen by customers or
clients as commodities. Increasingly, customers and clients are
demanding that products and services should improve business
results significantly and measurably – and that the improvement
should be sustained over a long time. Customers and clients are
asking suppliers or providers three questions: (1) ‘How will your
product or service help me to save money?’ (2) ‘How will your
product or service help me to make more money?’ (3) ‘How will
your product help me to add more value to my customers and
clients?’ These questions are transforming the business world.
Companies are gearing for mass customisation i.e. products are
made to customer specification at lightning speed. An example is
163
where an individual could order a motor vehicle from the factory
floor that is uniquely individualised. Moreover, the service industry
is growing where intellectual ‘products’ are sold to bring more
value to clients.
• From change as a crisis to change as ongoing. Not too long

ago many businesses responded to change in the environment
as a crisis. This is changing – in some cases faster than in others.
Top business managers realise today that competitive advantage
means the ability to anticipate change, the capability to respond
quickly and proactively, and the willingness to reinvent the
business continuously. One of the major change drivers is
technology. It is of vital importance in the new economy that
technology analysts proactively anticipate the technology needs
of business and strategise accordingly.
Frequently asked question:
‘Do these strategic changes have any relevance for me as a business analyst?’
It is critical. The world of business is changing as well as the role of technology in

business. What business expects of a business analyst has also changed radically –
the good news is that the role of business analysis will continue changing.
Next, how these strategic changes influence business analysis.
164
ICT2641/102
Business Analysis In Crisis
Strategic changes are forcing companies to redesign themselves

utilising technology as an enabler. The success of a business
redesign is measured against the improvement of critical
business results. Business analysts can and should influence IT
projects to deliver economic value to the business. In fact,
clients, internal and external, are demanding economic value
from IT. The primary job of a business analyst is to ensure
that IT enables the business to achieve its goals. Business
analysis has otherwise no reason to exist.
How does business analyst perform on this score? Business

analysis is in crisis!
There is substantial evidence in the business arena that only a

few IT projects deliver the expected business improvements.
Success in this instance means firstly that the new systems
improve business results significantly, and secondly that people
and work groups utilise it fully over a long time. Leaders in
business research are all confirming this dilemma – technology
in general is not delivering the results. The underlying cause of
this poor success rate is clearly not to be found in the technology
or the technical expertise of business analysts and project
implementation teams. Who is responsible? The business
analyst has a major responsibility – if not the most important role.
165
Example: IT project gone bad.
A manufacturing concern bought a R50 million integrated IT system to

solve supply chain problems. A team of business analysts, systems
analysts and designers, and programmers took 12 months to implement
the system. The contract was clear: ‘Solve the operational problems.’ At
the end of the project the system worked to technical perfection but the
supply chain problems remained, for example duplication, re-work and
long cycles. The frustrated client, who expected results, retained another
IT firm to sort out the computerised mess.
The job of the business analyst is to assure that IT delivers business

results. What did the business analysts then do in the above-mentioned
case? Let’s look at research.
Comprehensive field research and the work of Robert H. Schaffer

over more than 40 years show without a shadow of a doubt the
factors that underpin the problem:
• Business analysts are mainly technically inclined and lack the

necessary business focus. Many business analysts come from a
technical background in for example programming, systems
analysis or systems design. Project results are therefore
measured in technological terms and not business terms.
• Methodologies are flawed as they focus on a host of analytical

activities and not results. The business analyst assumes that the
results would follow when all the ‘right’ things are done. The
dangerous and false assumption is therefore that when the
system is implemented correctly business results would
automatically improve – like in the case example above.
• Change management and client readiness are treated as

annoying and uncomfortable side issues. A big bang all-or-
nothing project is scoped, like in the above case where a total
supply-chain system was implemented over a 12-month period.
The client’s capability and capacity to deal with the big change is
not fully appreciated by analysts.
• Business analysts do not involve business clients as partners in

the analytical process and beyond. The consultants do the job
and the clients receive progress reports. The client is not learning
166
ICT2641/102
with the business analyst, nor is the client taking ownership of the
solution.
It is clear from research and many practical cases that business analysts
should focus less on technical subject matter.
What should the focus of a business analyst be?
Emerging Changes In Business Analysis
One of the most prominent emerging changes in business analysis is that

the field is moving closer towards what it was initially intended to be: a
field where business is analysed. Why is the business analysed? The
business is analysed for four reasons:
(1) To uncover real business needs and performance improvement

opportunities.
(2) To develop a business case or motivation for technological

change.
(3) To find or design a technology solution that would improve

results.
(4) To implement technology solutions in a results-driven way.
Note that the point of departure above is what the business really needs.
Technological requirements only follow the business case. However, in
traditional business analysis only technological requirements were
considered and it was assumed that the results would follow.
The business analyst of the future will be a fully-fledged IT business

consultant or technology business consultant. Is there any proof of this
statement in practice? Consider the example below.
167
Example: Business analyst as business consultant.
In a large banking corporation of South Africa, business analysts are

removed from the IT function. The analysts form part of the business
operations and report to a business manager. When a need for
improvement arises the business analyst takes over and studies the
business case for improvement. The analyst also involves experts from IT
to assist with technology assessments. When the solution is ready for
implementation a project manager from IT is appointed who reports to the
business analyst for the course of the project. The role of the business
analyst during implementation is to ensure that the project stays aligned
with what the business needs.
The above case clearly illustrates the transition from technology expert to
business consultant. To make this transition successfully business
analysts need to make three fundamental shifts in thinking and behaviour:
· Shift 1: From a narrow IT focus, to a holistic inclination where

business strategy, finance, business processes, organisational
structures, culture, and change readiness issues are fully
understood and considered.
· Shift 2: From a technologist or doctor role (whose ‘prescriptions’ are

hardly ever understood by business managers) to a business
partner consultant that ensures the full collaboration of business
clients from end-to-end.
· Shift 3: From an activity-centred to a results-driven project approach

where the focus is on the vital few things that makes a huge
difference for the client.
168
ICT2641/102
Frequently asked question.
‘Does it mean that I shouldn’t have any IT background in order to be an

effective business analyst?’
No. The ideal is to understand both business and technology. The three
shifts do however imply that you don’t have to be a technology expert. The
shifts are also suggesting that business analysts should play new roles
and develop new competencies. The next two sections of this chapter
address the roles and competencies.
Multiple Task Roles
Given the three shifts outlined above, a modern business analyst has two
major or primary task roles, namely a business role and a technology role.
The next model provides perspective on the two roles.
Task Roles
BUSINESS
TECHNOLOGY
First an explanation of the two roles:
• Business role: the business analyst participates with

managers in strategy formulation, business research and
diagnosis, opportunity identification and economic justification
of projects.
• Technology role: the business analyst collaborates with IT

experts and project managers in technology assessments,
user requirement definitions, technology scoping and
implementation.
169
The model suggests, by means of the vertical dotted line, that a balance is
required between the two roles. The balance is determined by the
situation. The business analyst may for instance put on a business hat
when an economic justification proposal is developed for a project (left-
hand side of the model), or put on a technology hat when the
functionality of a current operating system is assessed (right-hand side of
the model). The business analyst plays a combination of the two roles
from the time a business need arises to the point where a project is
completed and signed off. Remember, in the past business analysts
focused mainly on the right of the model – the technology side – causing
an imbalance in performance.
‘How do I know when to choose what role?’
It all depends on where you are in the consulting process. This will be
thoroughly explained in chapter 4.
The primary task roles, i.e. business and technology, consist of the
following six consulting activities:
• Research: analysis of financial statements, analysis of work

processes, assessment of systems and business case
development.
• Expert advice: business and technological proposals,

suggestions and recommendations.
• Facilitation: facilitation of meetings and workshop to clarify

business needs, define user requirements and review project
progress.
• Education: training and coaching of project stakeholders in

analytical techniques for example process mapping.
• Strategising: development of business and technology

strategies.
• Evaluation: evaluation of all IT projects against business

strategy and goals.
170
ICT2641/102
The two task roles and six consulting activities define the job of a business
analyst. This newly defined job means that business analysts need to
develop new competencies.
New Business Analysis Competencies
In the past business analysts relied mainly on their technical competence,

for example in systems engineering or networks. In modern times multiple
competencies are required. Why?
• Clients’ problems and needs are more complex.
• Many projects require a multi-disciplinary approach, for example

the implementation of a new IT business system could include
business analysis, systems analysis, process redesign,
restructuring, change management, training, and project
management.
• The consulting industry is much more competitive. Clients can

choose between a variety of internal and external consultants or a
combination thereof.
• To help a client to improve results means that we have to

understand the client’s situation beyond our technical expertise.
We need to understand the client’s business.
In order for business analysts to fulfill their task roles successfully, the
following multiple competencies and skills need to be developed.
171
Business Analysis: Multiple Competencies & Skills
Competency & Skills

Consulting Process:
Business need clarification;
negotiation & contracting;
analysis & research; feedback
& presentation.
Influencing: Wide-range of
behaviours.
Facilitation: Process
techniques; structural &
analytical tools.
Technical: Systems; software;
hardware; e-commerce;
networks.
Business: Financial
statements interpretation;
productivity analysis;
opportunity identification;
business case development.
Project management:
Designing; planning;
execution; measurement &
tracking.
Marketing and Selling:
Advertising; promotion.
172
ICT2641/102
Frequently asked questions.
‘Why do I need project management as a business analyst?
The trend is that business analysts become principal project managers in

addition to their analytical roles. In the case of an international airline, the
business analyst is responsible for the whole process from opportunity
identification to project completion.
‘Do I really need marketing and selling skills?’
Definitely. In today’s work environment people in a consulting capacity

have to market and sell their services constantly – even to their own
business colleagues.
Chapter Summary
• The business world is changing continuously at a rapid speed.

Technology is a main driver in this change.
• The business analyst has a major role to play in the change

process. Traditional business analysis will not suffice. Modern
business analysis has a strong business focus as apposed to a
narrow technological focus.
• The job of a modern business analyst is to ensure that technology

is utilised to improve business results.
• A results-driven business analyst needs multiple competencies to

be successful at the job.
Next Chapter
In chapter two the consulting role of the business analyst is examined in

detail.
173
Test Your Knowledge
A multiple-choice questionnaire follows. Choose the correct answers and

score yourself at the end of the chapter.
1. Which factor is not a driver of business change?
a. Globalisation
b. E-commerce
c. Value creation
d. Industrialisation
2. Which qualifies as a business boundary?
a. Geographical
b. Resources
c. Shareholders
d. Employees
3. Businesses are shifting focus from internal to external integration.
a. True
b. False
4. Modern business analysis is becoming more business oriented.
a. True
b. False
5. Traditional business analysis is activity-focused.
a. True
b. False
6. Business analysts have two main task roles:
a. Technology and research

b. Technology and analysis
c. Business and technology
d. Business and strategy
Practical Exercises And Study Tips
174
ICT2641/102
1. Interview business managers on the strategic changes taking

place in the business environment. Use the following as sample
questions:
- What are the main drivers of change in your business at the

present moment?
- What changes do you anticipate will take place in the future?
- How will these changes affect your technology requirements?
- What do you expect of business analysts in your organisation?
2. Rate yourself on the competencies listed in the chapter. Identify

the competencies that are sufficiently developed and those that
are under developed.
Rate yourself on the multiple competencies below. Make a tick ([) in the appropriate column. OK =
sufficient; ? = Uncertain; Not OK = Development area.
Competencies OK ? Not OK
Consulting Process: Needs clarification;
negotiation & contracting; analysis;
feedback & presentation
Influencing: Strategies; tactics;
behaviours
Facilitation: Process techniques;
structural & analytical tools
Technical: IT related
Business: Financial statements
interpretation; productivity analysis;
opportunity identification
Project management: Designing;
planning; execution; measurement &
tracking
Marketing and Selling: Strategies; tactics;
behaviours
Score Your Knowledge
1. d
2. a
3. a
4. a
5. a
6. c
175
CHAPTER 2
BUSINESS ANALYST AS CONSULTANT
Introduction
In chapter one context was given for this chapter. Changes in the
business environment as well as in the field of business analysis were
discussed. This chapter builds on the context by examining the consulting
role of the business analyst in more depth (refer to the two main task roles
and six consulting activities on pages of chapter one). The topics covered
in this chapter are:
• Consulting defined.
• Business analyst as traditional consultant.
• Business analyst as high-impact consultant.
• High-Impact consulting role.
Consulting Defined
A consultant is anyone who collaborates with a client to solve problems,

overcome barriers or capitalise on opportunities. The consultant works in a
support or advisory capacity. Given the role description of the business
analyst in chapter 1, the business analyst is nothing but a consultant who
collaborates with business managers and technology experts to improve
business results. If a business analyst is a consultant, what does it mean
in specific terms?
• A business analyst is not a manager.
• A business analyst is not the owner of an organisation’s

problems, needs or opportunities.
• A business analyst has no positional power to decide what needs

to be changed and how it should be done.
176
ICT2641/102
• A business analyst can and should influence the direction of

decision-making.
• A business analyst is an advisor in a staff role like any other

consultant in finance or human resources.
• A business analyst has special expertise in business and

technology.
Who is the business analyst’ client?
• The client is normally a business manager.
• The manager or client owns the problem, need or opportunity.
• The client has positional power and formal authority to make

project related decisions.
• The client always has the final decision.
The client makes the final decision and owns the decision. The business
analyst collaborates in the decision making process and offers focused
input or expertise.
‘Where does IT fit in the picture?’
IT specialists, for example programmers and developers, are utilised by

business analysts on technology projects as expert resources. Business
managers are therefore also IT’ clients.
The definition does not however clearly distinguish between traditional and high-impact
business analysis.
Traditional Versus High-Impact Business Analysis
To clearly distinguish between traditional and high-impact business

analysis, let’s firstly see how an IT projects normally runs:
1. The client sees an IT related problem or opportunity.
177
2. S/he decides to contact an IT consultant.
3. The consultant is contracted.

4. The consultant conducts a comprehensive analysis.
5. The consultant prepares a business analysis report and proposal.
6. The report is presented to the client.
7. The client makes a decision (or postpones the decision

indefinitely).
8. Then nothing happens or the project is terminated before

completion or the project is completed with no results or the
project is completed with good results but the improvement last
only a short while or the consultants install the new system but
the client doesn’t take ownership of it.
The process described above is called traditional or conventional

consulting. Let’s examine why. Robert H Schaffer lists five fatal flaws of
conventional consulting – that applies to the above-mentioned example:
• IT projects are defined in technological terms, not in specific

results to be achieved.
• Projects are based on logic or the technical ideal, not what the
client is ready to implement.
• One-big-solution is designed, not incremental successes.
• Client and consultant work hands-off back and forth, not in a

partnership mode.
• A big consulting team is employed, not the leveraged use of

consulting input.
‘Should an IT project have all five flaws to be conventional?’
No. Conventional IT projects could have a few or all of the flaws. For
example a project might be results-driven (unconventional) but the scope
178
ICT2641/102
might also be too big for the client to handle (conventional). One of the
above-mentioned fatal flaws could ruin a project.
Instead of building the five fatal flaws into IT projects, rather build high-
impact features into it (Robert H Schaffer):
• Define IT projects in terms of measurable results, not technology.
• Base the IT project on what the client is ready to implement, not

the technical ideal.
• Divide IT projects into rapid cycle steps, instead of the ‘big bang’
all-or-nothing approach.
• Design the IT project so that the client and business analyst can
work and learn together, not the hands-off approach.
• Make the client ultimately accountable for the results, whilst the
business analyst provides unique and focused input.
179
Examples: Conventional versus high-impact business analysis:
differences in project definitions.
Conventional Project Definitions High-Impact Project Definitions

Develop a point-of-sale software Grow local sales by R2 million in
application. 100 days.
Design and develop a safety Reduce head injuries amongst

incident tracking system. maintenance personnel to zero in
90 days.
Implement a production-line Increase the throughput on line 42

control (PLC) system at line 42. from 31 tons per run to 51 tons
per run in 60 days.
Install a new passport Reduce the backlog of passports

processing system in the from 100 000 to 30 000 in 12
embassy. weeks.
.
Redesign the billing system. Reduce debtors days from 120
days per cycle to 60 days per
cycle in 100 days.
So what does this all mean for the business analyst? The business
analysis consulting process starts with a definition of a business client’
need. Everything can go wrong at this starting point. The job of a business
analyst, as stated in chapter one, is to collaborate with business clients
and IT experts to improve business results. Therefore, the business
analyst should assist clients and IT experts to define needs and projects in
business terms - and not in technological terms. For example, a business
client experiences a problem with the billing system. The system produces
30 billing errors per day resulting in delayed payments by customers. A
technologist would define the need as follows: ‘Modify the billing system to
reduce errors.’ A high-impact business analyst would define the project as:
‘Reduce billing errors from 30 to zero per day within 14 weeks.’
Remember, the conventional approach is flawed because it assumes that
the ‘results’ will follow when the ‘right’ things are done. The point of
departure is technology, not a result. In the high-impact approach the
project is defined in terms of a measurable success. Only then are the
appropriate intervention and/or technological solution determined.
180
ICT2641/102
‘Would business managers regard a business analyst as a valued

resource when projects are defined in terms of results?’
Yes – and little bit more… You will be a highly valued resource when:
• You help clients to improve results.

• You help clients to sustain the improvement over a long period.
• You offer a fresh, innovative approach.
The question is how to achieve the things mentioned above and become
a valued resource. It is all about the role the business analyst plays.
High-Impact Consulting Role
Business analysts could play four distinctly different consulting roles.

Three of the roles are played mostly by analysts leading to endless
consulting problems. These consulting roles are designed to implement
projects in a conventional way. On the other hand, one role is high-impact
consulting, called the business partnership role. The following explains
the conventional roles as well as the partnership role.
(1) First conventional analyst role: Personal Assistant
This role is characterised by:
• The client analyses the problem and causes.
• The client selects the appropriate actions.
• The client instructs the business analyst on what needs to be

done.
• The business analyst is responsible for the doing.
• The client evaluates the performance of the business analyst.
Advantages and Disadvantages
Positives Negatives
Action is taken quickly Client’s diagnosis may be incorrect.
181
Collaboration between client and
business analyst is limited.
Client is passive during

implementation.
Business analyst is blamed when the

project fails.
Example: Personal assistant in action.
Client to business analyst: “Our inventory management is out of control.

We don’t have a proper system. I need you to design and implement a
system according to my list of requirements and specifications. It is
important that you complete the project by the end of this month. Please
keep me posted”.
The assistant role is common in practice. The negative effect of this role is
that a partnership is never formed with the client.
(2) Second conventional analyst role: Expert or Technologist
The characteristics of this role:
• The client has a problem that is not clearly defined.

• The business analyst conducts a study and analyses the
problem.
• The analyst submits a report to the client.
• The client reviews the recommendations and makes a decision.
• The business analyst implements the solutions.
Positives Negatives
Business analyst is in Client doesn’t own the process.
control.
Business analyst learns in Client’s learning is limited.

the process.
Collaboration between client and

182
ICT2641/102
analyst is limited.
Client doesn’t use the analyst’s

solutions fully.
Analyst is blamed when the project

fails.
Example: Technologist in action.
Doctor (analyst) to client: “I need to form a clearer picture of your problem.

I propose a survey of your situation after which I will provide you with my
insights. The survey will highlight what we need to do. My team and I can
then implement the technology solution.”
The expert or technologist role is most common in IT. The business

analyst is like a medical specialist and the client a patient. The analyst
diagnosis the illness and provides the client with a technology prescription.
The main problem with this role is that the client does not take ownership
of the solutions. The projects are owned by IT. This role on its own is
disadvantageous.
(3) Third conventional analyst role: Process Consultant or

Facilitator
Some characteristics are:
• The client has a problem to be solved or a need to be addressed.
• A workshop is arranged to do problem solving.
• The facilitator or business analyst conducts the workshop

applying facilitation techniques.
• The client group provides the content to be discussed.
183
Positives Negatives
Facilitation is objective and Facilitation normally encourages
neutral. talking not doing.
Client feels in control of the It is time consuming.

content.
Client owns the outcome. The facilitator provides no expert

input.
People participate in the Facilitator doesn’t necessarily

process. understand the multitude of the
client’s problem – that is the
content.
Facilitation works towards No actual implementation support is

consensus. provided.
Example: Facilitator in action.
Client to facilitator: “We need to talk to my sales team about the idea of a
new customer database. I’d like you to facilitate the meeting. I want the
group to clearly state their expectations and requirements. What technique
can we use to structure the meeting?”
The role of process consultant or facilitator could be used with great effect
by business analyst to involve users in a project. However, the role on its
own, like the expert role, is not high-impact. Let’s see why.
(4) High-Impact Business Analysis: Business Partnership Role
This role is characterised by:
• The client has a business need.
• The client and business analyst co-explore the issue.
• The client and analyst formulates the way forward jointly.

184
ICT2641/102
• The client and analyst work and learn in full collaboration to

implement the solutions.
• The analyst acts as facilitator and provides specialist input as the

situation demands.
Positives Negatives
Both client and analyst are It takes time and energy to build a
learning. partnership.
Client and analyst share Not all clients want to collaborate.

accountability.
Consulting input is focused

and leveraged.
Client owns
implementation.
Sustainability is properly
addressed.
Long-term client-consultant
relationship is established.
‘What do I do if a client is not willing to collaborate as a partner?’
It is an indication that the relationship with the client needs to be

developed further. The only way to develop the relationship is to spend
time with the client.
Example: Business Partner in action.
Client: “Our market share is shrinking because of increased competition.”
185
Analyst: “Why are customers buying from the competition?”
Client: “We are not price competitive. Our cost-of-sales is too high,
especially on the production side.”
Analyst: “I’d really like to work with you on this. Would it have any value to
you if we get a team together to identify opportunities for improvement and
actions we can take now?”
Client: “Sounds good to me…”
Analyst: “We might also in our collaboration discover how technology can
help us to reduce costs.”
Client: “It is about time that we streamline our production processes.
Technology might be the answer. Let’s see what the team thinks.”
This role enables both client and business analyst to collaborate like
partners in a small business. In a partnership mode, they identify
improvement opportunities, formulate goals from a business perspective
and jointly implement solutions. Take note that the business partnership
role requires flexibility from the business analyst. Flexibility means that
the business analyst facilitates and provides expert input as the
situation demands. Flexibility implies furthermore that the business
analyst needs multiple competencies as discussed in chapter one.
Chapter Summary
• A business analyst is a management consultant.
• A management consultant is someone who provides business

clients with focused input and advice.
• Traditional business analysis defines client needs and project

goals in technology terms.
• High-Impact business analysis defines technology projects in

business terms.
• A high-impact business analyst establishes a partnership

relationship with clients.
Next Chapter
In the first chapter a clear distinction was made between the technology
and business focus of a business analyst. Chapter three is about the
understanding of a business.
186
ICT2641/102
Test Your Knowledge

1. A business analyst as consultant need not collaborate with IT

specialists. The business analyst is only concerned with the
client.
a. True
b. False
2. High-Impact consulting means that projects are scoped to

implement the ideal technology solution.
a. True
b. False
3. Which characterises conventional consulting?
a. Results
b. Client readiness
c. Activities
d. Incremental steps
4. A business analyst who diagnosis problems and recommend

solutions is…
a. An assistant
b. An Expert
c. A facilitator
d. A business partner
5. A business partner is an analyst who…
a. Implements client instructions

b. Facilitates workshop
c. Designs solutions
d. Provides expert input and facilitates
187
1. Study the interaction between client and business analyst below. Classify the
role of the business analyst as either Personal Assistant or Expert or Facilitator
or Business Partner. See the answer on the next page.
Client: “Our customers are complaining about our service levels. We are
not responding quickly enough to their requests.”
Analyst: “A call centre will solve the problem for us. Customers can call in
and the operator will log a request. The system will then track response
time.”
Client: “I don’t know much about the technology. Why don’t you take it
further?”
Analyst: “I’ll conduct a problem analysis and suggest alternative

solutions. I will also prepare a cost-analysis for each solution.”
2. Is the project goal below high-impact or conventional and why?

See next page for answer.
‘Reduce systems down-time from 4 hours per week to 1 hour per

week in 20 days.’
1. b
2. b
3. c
4. b
5. d
Answers To Practical Exercises
1. Expert. The business analyst is clearly in a role where an expert

diagnosis will be made.
2. High-Impact. The goal is results-driven. The opposite is: ‘Modify the

operating system.’
188
ICT2641/102
CHAPTER 3
ANALYST AS BUSINESS CONSULTANT
Introduction
In chapter two the high-impact consulting mode was explained in the

context of business analysis. In this chapter, the business analyst is
prepared to make a business impact. The topics discussed are:
• Why it so important that a business analyst understands

business.
• What about a business should be understood.
• Importance of business and technology strategy.
• Different business models and types.
• Organisational level of the client.
• How demographics make each business unique.
• What a business analyst should look for in a business in order to

add real value.
Understanding A Business
(It might be useful to review chapter one at this stage)
A key to achieving results for clients is that the business analyst must
know what kind of result clients want and need. These two are not always
the same i.e. needs and wants. To be able to really assess client needs
accurately, and distinguish between actual needs and wants, the analyst
must truly understand the client’s business. Clients are under increasing
pressure to achieve results. At the same time there is increasing pressure
on them to do some things that don’t necessarily add bottom-line value to
the business. The result is that people at all levels and in all sections of
the business are often caught in the “activity trap” (conventional mode of
doing – chapter two). People are often busy doing things that don’t add
value to the business. The job of the business analyst is to help them to
189
achieve better results utilising technology, processes and people more
effectively.
The key to understanding the client’s business is to think about it like an

owner. A business owner doesn’t think like an employee. A business
owner asks different questions about a business. It is vital that business
analysts examine a business from an owner’s perspective. This is
why:
• The client is in a business that has to achieve results.
• The result differs from business to business. In a commercial

business, like for example a bank, this result is usually directly
linked to a bottom-line figure (financial number).
• In other organisations the result is often not financial in nature, for

example a government department or non-profit organisation. In
such organisations financial success is still an important
measure.
• The result that the business needs to achieve is linked to those

few things that make the business “tick”. These are the key
success factors of the business.
• A business analyst, thinking like an owner, has to help the

business implement initiatives that impact directly on its key
success factors.
• Understanding the business, its key success factors and goals

are vital to help the business improve results.
• Understanding the business gives the business analyst the power

base of an owner - that is needed to get things done.
The above states why it is important that business analysts understand

business. The next section highlights what should be understood about a
business.
The What Of A Business
The following are the most critical elements of a business that should be
understood by business analysts:
• Where the business is going (vision).

190
ICT2641/102
• What kind of business it is.
• What kind of product or service the business supplies.
• The critical success factors (CSFs) of the business.
• The strategy of the business.
• The main processes and support technology in the business.
These vital elements are in the example below translated to questions

business analysts can ask their clients.
Example: Questions business analyst can ask business clients.
• In one sentence, how would you describe the business’s core purpose?
• What is your main line of business?
• Is this a profit-driven business, a break-even organisation or a non-profit institution?
• From your viewpoint, is the business closer to success than five years ago or not?
• Where is the business heading?
• Could I see a copy of your vision, mission, values and strategic goals?
• If everybody in the business would be required to do just one thing and still achieve
success, what would that one thing be?
• How big is the business (turnover, profit, number of people, total asset base)?
• Could you draw the basic organisational chart to me?
• What are the main processes in your business and how do they operate?
• How are your core processes supported by technology and systems?
• How satisfied are you with the performance of these systems?
• What is your future technology strategy?
191
‘Where do I start as a business analyst to analyse a business?’
The starting point is with the business and technology strategy. It tells you
most of what you need to know about the past, present and future of the
business.
Business And Technology Strategy
The simplest definition of the word strategy is a plan. Strategy is about the
future of the business and goals to get there. The business strategy
reflects business goals and the technology strategy technological goals
to support the business. Business analysts are concerned with both
strategies (see chapter one for the business and technological focus of
analysts).
In most businesses the strategy traditionally consists of the following:
• Vision: Where do we want to go and what do we want the

business to be in the future?
• Mission: What is our reason for being (for existing)?
• Core values: How do we expect people to behave?
• Strategic priorities and goals: What are the main strategic
objectives and targets we need to achieve?
The following example illustrates specific questions business analysts can

ask clients to determine the strategic focus of the business.
Example: Questions to determine strategy.
• Tell me about your vision, mission and core values?

• Where do you see the business/section/department in five years’ time?
• What are the main strategic priorities of the business/section?
• What is the business better at than most of its competitors?
• What goals do you want to achieve in the next two to five years?
• Is that likely to materialise?
• What are the main initiatives that you are presently involved in?
• To what degree does your business manage to get this strategy implemented?
• Could I see your financial statements for the last five years?
• What does the trends on your income statement show you about the success of
your strategy over the last five years?
192
ICT2641/102
‘Who are the right people to ask information about the strategy?’
• The most important person to ask is the manager in charge of the

business.
• Interview people responsible for setting the strategy.
• Meet with the people who are responsible for executing the strategy.
It is important that business analysts interpret strategy in the right context.

The correct context is the design of the business or the business model.
193
Types Of Business Models
Not all businesses are driving profit goals. The model below
shows four different business types as a context for interpreting
strategy.
Four Business Types
Private
Sector
Non-profit Profit
Private Private
Public
Non-profit Profit
Sector Public Public
Degree to which the business is driven by profit motive
The above model shows the following:
• Most private sector businesses are profit-driven, for example an

IT service provider like Dimension Data (top right hand side of the
model).
• Most public sector organisations are not profit-driven, e.g.

government (bottom left of the model).
• There are some private organisations that don’t make a profit and
don’t want to. These are mainly private organisations like political
parties or the SPCA (top left of model).
• There are some public businesses that are profit-driven. In many

cases these are organisations that compete with private
194
ICT2641/102
companies and that are often due to privatisation, such as

transport or telecommunications companies (bottom right of
model).
It is essential that business analysts understand the business model first

in order to interpret strategy correctly: is it profit or non-profit, private or
public. Moreover, business analysts need to understand that different
models could exist within one business. These models are referred to in
practice as different financial centres. The definitions below distinguish
between centre types in one business.
Definitions of centre types:
• Profit centres are measured on the bottom-line profit that they produce
for the company: Profit = Income minus costs and expenses. Their
clients or customers purchase their product or service at cost price plus
a profit margin. Common examples are the manufacturing outfit of a
chemical plant and the retailing section of a bank.
• Cost centres generate revenue (income) without profit. The goal of a
cost centre is to break even (not to make a loss or profit): Revenue
minus total costs = zero. An example is an internal plant maintenance
group that invoices the plant for services rendered. These cost centre
groups are ‘forced’ to apply business principles.
• Overhead centres are allocated an expense budget annually. Their
responsibility is to manage within the budget. Common examples are
financial departments and head offices of large companies. Most
government organisations work according to this model.
Any business or organisation is divided into parts or departments
or sub-sections. Each section has a specific financial centre
responsibility, for example:
Example: Sub-sections and their financial centres.
• Line functions in a profit-driven business are generally profit-centres

for example production or operations.
• In some cases, usually when their main client or customer is
downstream in the same business, some line functions could be a
cost centre, for example a bakery plant where Milling supplies flour
at cost to the Bread-manufacturing group.
• Staff functions, like for example IT and human resources, in a profit-
driven business are generally cost centres or overheads.
195
• There are examples of mixed status. A training centre that supplies
services at cost to internal clients (within the business) and at a
profit to external clients (outside the business).
The most important distinction for business analysts to make in terms of

sub-sections is between line and staff functions. The line function at
Unisa, i.e. the lecturers, is responsible for the education of students (the
lecturers produce the goods and generate the sales) and the staff function
is responsible for general administration (they work according to a budget
and should support the lecturers).
Summary: Business models.
To interpret business and technology strategy as a business analyst, four

things need to be clarified:
• Is the business profit-driven or not?
• How is the business structured in terms of line and staff functions?
• What is the financial model of each function: profit-centre, cost-

centre, overhead-centre, or a combination?
• Why is the business structured the way it is?
196
ICT2641/102
“How does a business model influence my job as a business analyst?”
In understanding the business properly we have to know what is driving

the business to do what it does. For example:
• If you are consulting to a pharmaceutical group, it is far more likely that

they want to see a profit resulting from your consulting than when you
are consulting to the SPCA or a government department.
• The pharmaceutical business is profit-driven, whereas the SPCA just

wants to recover their cost and the government department has to stay
within their budget.
• The pharmaceutical client will ask questions such as: “How will this
system help us to reduce operating costs?” A government department
will ask a different question: “How will this system help us to make
service delivery quicker?” The project solution should therefore fit the
business model. The job of a business analyst is to find that fit.
Now that you have established the business model and strategy of the
client, the immediate next step is to position the client in the bigger picture
of the business. This is called the organisational level of the client.
Organisational Level
After understanding what drives the business, it is important to be clear on where in
the business you are – referred to as organisational level. As a business analyst, you
could be dealing with any of the following kinds of organisational levels:
• Corporate, holding company. Usually a listed company whose

main reason for being is that is owns and controls a number of
companies, called subsidiaries. Usually a small head office with
little operational facilities.
• Corporate, subsidiary company. Owned by a holding company.

Apart from (sometimes) being owned by a holding company, this
is usually the highest level where decisions are made. Note: Not
all companies have holding companies owning them. Often the
197
highest level is simply “corporate” head office steered by a
managing director.
• Business unit. Usually the highest operating unit. Most corporate

offices have a couple of business units reporting to them, each
with its own bottom-line responsibility. The person heading a
business unit is usually called the General Manager, but if the
business unit is big enough, s/he could be called managing
director.
• Department or divisions. Within a business unit there are

different departments. Examples are the financial department,
production department or engineering division. Usually headed by
a divisional manager.
• Section. A department consists of various sections, work teams

or shifts, for example a logistical department may consist of road,
shipping, rail, airfreight and pipeline sections. The work teams
may also work three shifts namely morning, noon and night.
Often these “levels” will usually be mirrored in the structure of the

organisation also called the organogram.
Remember:
These names, i.e. the different levels, are often replaced by other names
that are company-specific or with buzzwords that sound good. You might
hear the words centre of excellence, task group, work group, area, region
or many other ones. Make sure for yourself what level this refers to. For
example an “area manager” in a fast-moving consumer goods (FMCG)
company could refer to someone responsible for the Gauteng region (with
some divisional managers reporting to her) and in a chemical plant “area
manager” could refer to the manager of one small area in a plant,
reporting to the divisional manager.
“Why is it important that business analysts distinguish between various organisational

levels?”
For one main reason: Business and technology needs differ from level to
level. Corporate head office might need a company-wide management
198
ICT2641/102
information system whereas a business unit might only need a system to

control stock.
The following diagram shows an example of organisational levels:
Example of organisational "level"
Holding company
Corporate head office
Usually small
Often listed company
Subsidiary 1 Subsidiary 2
Corporate head office Corporate head office
BU1 BU2 BU3
Department 1 Department 2 Department 3
Section1 Section2
Shift 1 Shift 2 Shift 3 Shift 4
199
Business analysts could ask clients the following questions to
determine organisational level.
Example: Questions to determine organisational level.
• Could you show me the main organisational structure or

chart?
• Where does your unit fit in?
• What is the business form? Is it a one-man show, partnership,

close corporation, private company, public company, state
department, division of a corporation, etc.?
• Whose approval, apart from your own, would we need to get a

project going?
Understanding strategy, business model and organisational level will

enable the business analyst to marry business goals and technology
projects. However, the picture is still incomplete. One more vital factor
should be considered by analysts, called business demographics.
Business Demographics
One vital aspect of understanding the client’s business is the “business

demographics”. By this is meant important factors that determine how the
business operates or functions. It also describes the ‘personality’ of the
business. Typical demographical factors are:
• Size of the business. Number of employees, annual sales

turnover, number of business units, amount invested in plant and
equipment.
• Age of the business. The history and age of the organisation will
tell you a lot about its ability to weather storms, its culture and its
ways of doing things.
• Market life cycle. Businesses, same as products have a life

cycle that flows from pioneering days to maturity and in some
cases decline.
200
ICT2641/102
• Products and services. What products do the business make

and/or what services are rendered to clients?
• Customers/clients. Who are the customers/clients? What do

they buy and where are they based?
• Geographic location. Does the business have more than one
office in different locations? Has it moved in the past? If so, why?
Why is it situated where it is? What are the advantages and
disadvantages of the location?
• Technology. Is the business capital or labour intensive? Do they

develop their own technology? Is their technology a competitive
advantage? Why have they chosen the level of technology they
have?
• Labour situation. Education level of the workforce, level of union

activity.
• Culture. Culture is described as the glue that keeps a company

together and is usually determined by the style of the founders
and top management of the business: How are things done in the
business – the rules? Is there a common language?
• Ownership. Who owns the business? What is important to the

owners?
201
“What do I do with this information as a business analyst?”
Demographical information indicates the business and technological

priorities of a client. A large corporate bank might want to invest in
electronic banking functionality whilst a small and new micro-lending
business might want invest in an online loans approval application as a
business strategy. Demographics will lead the way.
Now you have a complete picture of the business, including business and
technology strategy, business model, organisational level and business
demographics. The million-dollar question at this stage is how a business
analyst is to use the information to ensure that technology projects are
aligned with business goals. It is about one thing, and one thing only:
Critical Success Factors of the business.
Critical Success Factors
In order to improve business results and prioritise technology projects,

business analyst should answer one question utilising the above
information: “What are the critical success factors of the business as
indicated by strategy, business model, organisational level and
demographics?”
Most people and many businesses have the ability to focus much energy
and effort at what is NOT important. They get trapped in activities. There
are a few things that can make or break any business - and these are
different for each business. These few things are called critical success
factors. Let’s look at a definition.
Definition: Critical Success Factor (CSF).
A CSF is that one thing that a business has to do well to survive… the one thing that, if it is
not there, will cause the business to die.
202
ICT2641/102
Example: CSF.
• Training centre: Number of students

• Petrol manufacturer: Production throughput
• Supermarket: Location
• Local authority: Service delivery
• Transport company: Accurate estimation of delivery time
• Political party: Visibility
• Church: Sticking to doctrine
• Charity organisation: Credibility
• Car dealer: Feet through showroom
• Research and development department: Number of new inventions
A true case follows on how a business analyst linked an IT project to one

CSF of a pharmaceutical company.
Example: A business analyst, a CSF and a satisfied client.
A business analyst was contracted by a pharmaceutical company to investigate their

existing IT status. After studying all the relevant strategic information, the analyst
discovered one CSF: the time it takes to develop new critical medicines. It was also
learned that existing systems did not support that CSF. Subsequently, a project was
contracted to improve medicine development cycle-time by 20% in 16 weeks. One
aspect of the project was the development of a project-based system by the internal IT
department. After 16 weeks the project delivered a 25% improvement. A sustainability
plan was put in place immediately. The business analyst had a client for life.
What made the difference in the above case? The business analyst
understood the client’s business.
Chapter Conclusion
A business analyst takes the following steps to analyse a business from a

business perspective:
• Step 1: Examine business and technology strategy.
• Step 2: Study the business model.
• Step 3: Determine the organisational level.
• Step 4: Analyse business demographics.
203
• Step 5: Define critical success factors for the business.
• Step 6: Prioritise IT projects accordingly.
Next Chapter
The consulting process of business analysis is discussed in the next

chapter.
Test Your Knowledge

1. It is important to analyse a business from the perspective of…
a. The IT department.
b. The business manager.
c. The owner.
d. The customer.
2. Strategy is…
a. A financial statement.
b. A plan about the future.
c. A statement about business values.
d. A project work plan.
3. A government department operates as…
a. Profit-centre.
b. Overhead-centre.
c. Cost-centre.
4. Organisational level refers to…
a. The organisational structure.

b. The organisational processes.
c. The organisational systems.
d. The organisational policies.
5. Business culture is known as…
204
ICT2641/102
a. A soft issue.
b. An ethnic factor.
c. A demographical factor.
d. A management factor.
6. IT projects are prioritised by…
a. Determining management levels.

b. Determining geographical location.
c. Determining organisational climate.
d. Determining critical success factors.
1. Select any small business such as a fast food outlet or a

hardware store. Interview the store manager about critical
success factors by asking the following question:
“What is the one thing that determines the success of this

business?”
2. See if you can spot the critical success factor.
a. ‘To keep our shop clean and tidy.’

b. ‘To have fresh chicken in stock during peak times.’
(See answer on next page.)
1. c
2. b
3. b
4. a
5. c
6. d
205
Answers To Practical Exercises
A= No. It is a service standard. Some untidy shops do good business.
B =Yes. How can you sell chicken if you don't have any in stock?
206
ICT2641/102
CHAPTER 4
ANALYST CONSULTING PROCESS
Introduction
In the first chapter the changes in the business environment and its impact
on business analysis were explained. In the second the high-impact role of
the business analyst was described. Chapter three examined the business
focus of analysts in detail. This chapter discusses the work process of a
business analyst as a high-impact consultant. All the previous chapters
are consolidated into a step-by-step consulting process. The following
topics are addressed:
• Analyst consulting process in action.
• Stages in the consulting process.
• Design features of the process.
• Process variations.
• Clients and role-players in the process.
Analyst Consulting Process
What is a consulting process? A consulting process guides the business

analyst in facilitating the client relationship from the initiation of a project
through to its completion. It serves as a compass and roadmap, assisting
the client and analyst on their journey. A consulting process is
therefore a practical step-by-step work procedure that guides the
analyst from the first meeting with a client where the business need
is discussed right through to the final project review meeting. It is
similar to the logical work procedure a mechanic follows when servicing a
car.
A consulting process shouldn’t be applied rigidly. It should be flexible and

situational. Similarly, why should a mechanic change the wiper blades on
a car when it is in perfect working condition? Only because the servicing
book says change the blades after 40 000 kilometres? Business analysts
have to read the situation and then decide what the next best step in
207
consulting process should be. The consulting process is thus a
guideline and not a rigid rulebook.
The following depicts the flow of the analyst consulting process:
Analyst Consulting Process
Stage 1 Stage 2 Stage 3

CONTRACTING ANALYSING IMPLEMENTING
- Clarifying the -Assessing - Designing &

need. readiness planning of a
- Reaching an project.
agreement. - Executing a
project.
- Tracking
progress.
- Expanding the
effort.
• Contracting stage: The purpose of this stage is to define the

client’s need and to contract a solution and implementation
approach.
• Analysing stage: The aim of this stage is to test whether the

client is ready, willing and able to implement the contracted
solution. It’s furthermore an opportunity to assess whether there
are any blind spots that you’ve missed in initial meetings.
• Implementing stage: The objective of this stage is to help the

client to take action, to experiment, and to learn what is required
to sustain and expand the improvement.
Next, the critical tasks of each stage will be explained.
Contracting stage. This stage consists of two steps, firstly to clarify the
client’s need and secondly to close a consulting agreement. The steps are
explained:
• Step 1: Clarification of the need. In this step the following

critical tasks are to be executed by the business analyst:
- Meet with the client and all the decision makers.
208
ICT2641/102
- Explore and define the client’s need in measurable terms.

- Identify the people directly or indirectly affected by the
problem.
- Test alternative solutions and potential value of each.
The discussions with the client and decision makers at this point are not in
technical detail, for example it is not about the nuts and bolts of systems
design. Need clarification meetings are normally at a strategic level. The
business analyst inquires about business and technology strategy as
explained in the previous chapter. These discussions should therefore
highlight the business need of a client. The below is an example of such a
business need.
Example: Business need.
Client to analyst: “To grow the business is a priority and sales

forecasting is therefore critical. The problem however is that our existing
systems provide insufficient and inaccurate sales information. This means
that sales forecasts are done manually every month. And even those
forecasts are inaccurate. We don’t know whether we are performing good
or bad. We need an integrated forecasting system. In fact I believe that we
can grow sales by at least 20% when we have the right information.”
• Step 2: Closing of a consulting agreement. The following

critical tasks apply:
- Ensure that all key decision-makers are involved in the

meeting(s).
- Define the project’s scope and outcomes.
- Define the roles of client, analyst and IT.
- Contract the implementation approach.
- Agree on deadlines.
This step is about the client and business analyst coming to a working
arrangement. This ‘contract’ sets the stage for the rest of the process. An
example of a contract between client and analyst follows.
209
Example: Consulting contract.
Business analyst to client: “We have agreed on the following:
1. To build a proper sales database and to refine forecasting

processes starting with the Cape Town Branch. (scope)
2. To increase sales in Cape Town by 20% in 4 months.

(outcome/result)
3. You, as client, will act as project sponsor, I will lead the project as
business analyst, IT will perform the technical work and three
sales representatives will serve on the project. (roles)
4. Cape Town serves as a pilot site after which the project will be
expanded to all branches. Proper project management principles
will be applied. We will have weekly project review meetings and
also measure sales results daily. I will submit the project plan to
you a week from today. (implementation approach)
5. The pilot project will be completed by November.” (deadline)
Analysing stage. This stage consists of one primary step namely to

assess client readiness for change. The step is outlined:
• Step 1: Assessing client readiness. The following critical tasks

are to be performed:
- Identify specific performance improvement opportunities and

points of leverage.
- Test what the client is willing and able to improve.
- Re-contract the project outcome and scope (if necessary) with

key decision-makers.
A detailed analysis is performed at this stage. The business analyst

involves all the relevant people to participate in the analysis from IT to the
business clients. The analysis is concluded by the business analyst
providing feedback to the client, and by confirming or by changing the
original contract. The example shows what could be included in an
analysis.
210
ICT2641/102
Example: Scope of a typical analysis.
• Design, configuration and output of current systems.
• Existing data models.
• Work processes and procedures.
• User functionality and integration requirements.
• Hardware and software requirements.
Implementing stage. This stage consists of four major steps. The steps
are:
• Step 1: Designing and planning of the implementation
• Step 2: Execution of the project work plan
• Step 3: Tracking of progress
• Step 4: Expanding the process
A much more elaborate explanation is provided on this stage in chapters

five and six. The primary objectives of this stage are to design the required
solution, to plan its implementation, to execute the plan, to test and
evaluate the implemented solution, to train users, to hand over to the
client, to develop a maintenance support plan and to expand the project to
a next site.
In order to implement the three consulting stages successfully, the

business analyst has to be aware of the design characteristics of the
process each step of the way.
Four Distinct Design Characteristics Of The Process
The four most distinctive qualities of the analyst consultation process are:
• It is results-driven. The consultation process focuses on

outcomes and not events or activities. The process is therefore
designed to support clients to achieve significant improvements in
211
business results or to benefit from tangible contributions thereto.
(See chapters one and two.)
• It is action-oriented. The process is geared to use client

readiness as a springboard for implementation. Every task in the
process works towards action. (See chapter two.)
• It is flexible. The process is build upon a situational model and

therefore operates on the premise that very client situation is
unique. The flow of the process and solution depend on the
requirements of each client situation – a truly client-focused
model.
• It is practical. Keeping it simple is key. The process focuses on

the vital few things that would add 80 percent or more of the
value. The trivial many is ignored.
“What happens when a business analyst doesn’t maintain the four

qualities of the process?”
* If the process is not results-driven, therefore activity-based, the client

questions the value of the project as well as the value of business
analysis.
* If the process is not action-oriented, the business analysis process will
end up in a negative spiral of ongoing investigations.
* The business analyst will consequently be perceived by clients as a
researcher and not an implementer.
* An inflexible process will frustrate a business client. A frustrated client
aborts any process.
* A complicated process creates confusion and uncertainty – leading to a
dead end.
The flexibility of the business analyst is critical in the client-consultant

relationship – as previously stated. To be flexible, the business analyst
has to understand that the flow of the consulting process can vary.
Process Variations
The following offers a practical explanation on how the consultation

process could vary in practice.
212
ICT2641/102
Example 1: Complete application of the process. (This example

illustrates how a business analyst implements all three stages of the
consulting process.)
Contracting Stage:
A sales manager approached a business analyst with a typical

performance improvement issue. The client explained to the analyst in a
first meeting that a new competitor entered the market and took 30%
market share in four months. It was tentatively concluded, after some
exploration by the analyst, that neither the product nor the price thereof
was responsible for poor competitive performance. The client maintained
that the senior sales representatives were not doing their jobs properly.
The client labelled it as a skills issue. After skilful questioning the business
analyst identified the general manager as the key decision-maker. The
sales manager agreed to arrange a meeting with the GM.
In the meeting with the GM the analyst worked towards defining the need
of the client in more specific terms. The GM asserted that there was a lot
of potential for sales volumes to increase in a short period of time. It was
however still not clear what caused the poor performance. At the close of
the meeting the GM requested a proposal from the analyst.
The business analyst met with the GM and sales manager to discuss the
proposal. It was agreed in principle that the project should aim at
improving sales revenue as a physical measure. It was furthermore
agreed to analyse the situation in more depth in order to structure an
appropriate project people were ready for. It was decided that the GM
would act as sponsor and that the sales manager would champion the
project. The analyst’s role was to assist with the design, planning and
implementation of the project.
Analysing Stage:
The analyst interviewed key people in the Sales department and

established that the sales process was long-winded and the operating
support system archaic. The senior reps proposed the redesign of their
sales process from prospecting to closing, systems modification and
training for junior reps in selling skills.
The analyst arranged a half-day meeting with all key interested parties to
decide on a course of action. After feedback from the analyst all
stakeholders agreed to experiment with a new sales approach. The
213
project goal was to increase sales revenue by R2 million within 90 days.
One product and two key customer accounts were selected for the
experiment. It was agreed to structure the project in such a way that
people experiment with new approaches and develop skills critical to the
business. The champion nominated a project team at the close of the
meeting.
Implementing Stage:
The analyst met with the champion and project team the day after the
project goal was selected. On the agenda was to design and plan the
project and to develop a chart to plot progress. The project…
Example 2: Short-circuit application of the process. (This example

shows how the process flows when an in-depth analysis is not required.)
Contracting stage:
A business analyst met with a managing director and his financial director
to discuss the implementation of a new business initiative. The clients
were very clear on what they wanted – to reduce debtors days from 90 to
60 days within 3 months. The clients have also already decided to target
only two major customers accounting for 70% of revenues, and one of
their business units as an experiment. The analyst was contracted for five
days to give specialist project management input and to provide a
facilitation service. The way forward was mapped in the meeting and it
was finally decided for the financial director to champion the initiative with
the assistance of a cross-functional project team.
Implementing stage:
The project team met with the business analyst and MD at an off-site
venue. The MD’s expectation was very clear and the whole team
committed to make it happen. The project was designed and planned. A
chart was designed to plot physical progress and one person was
appointed to update it daily.
The first implementation task was to establish why the two major
customers were not paying. It was fairly quickly learned that one cause
created 90% of the problem – incorrect invoicing. It was furthermore
learned that incorrect invoicing was mainly caused by human error
because of unreasonable workloads. A simple invoicing system was
designed by the IT department, which relieved the workload and
214
ICT2641/102
streamlined the process. The system was implemented and users were
trained within a week. Easy to apply control procedures were put in place.
The project team met once a week to evaluate progress and to redesign
the project where required. The goal was achieved after 80 days.
At the end of the project the team decided to expand the initiative to two
other business units in the group with the assistance of the business
analyst.
The client’s problem in the first example was initially unclear and vague.
The business analyst was flexible enough to realise that an analysing
stage would be required. In the second case, the client was very specific
and certain about the result. The business analyst immediately proposed
action.
It is also clear in the above two cases that the business analyst knew who
to talk to and who to involve. The analyst had the answer to this question:
‘Who is the client?’
who is the client
The concept client is an all-inclusive term. Who the business analyst’s

client is depends on the nature of the problem or project and the
organisational level (see chapter three). It is however critical for the
analyst to distinguish between the following types of clients in a consulting
process:
• Ultimate client. The ultimate client(s) is the stakeholder(s) whose

interest should always be protected even if s/he is not in direct
contact with the business analyst. The ultimate client(s), also
referred to as the power client, is the ultimate decision-maker(s).
Ultimate clients are typically managing directors, chairmen,
boards, shareholders, owners, and executive committees.
• Primary client. The primary client is the person who is
accountable to the ultimate client for solving a problem or
implementing projects. The primary client is a person with
authority who owns a problem. This client would contract a
consultant, set project objectives, approve any action to be taken,
and evaluate the results. Primary clients are typically senior
managers, general managers in charge of business units, or
heads of departments/functions. Your primary client and ultimate
215
client could be the same person or group of people depending on
the level of the project in the business.
• Users. Users are those people who are closest to the problem or
working with it each and every day. Users are the people who
often know what the root cause of a problem is and the best
solution for it. The users are furthermore those who will be most
directly affected by an intended change. Amongst the users are
opinion leaders and informal influencers. The support of informal
leaders is vital in order to win the masses.
• Other key interested parties. Some projects impact directly or

indirectly across functions or wider than a business’s immediate
boundaries. A change in one area might create a need for change
in another area. A project to reduce quality defects, for example,
might impact directly on suppliers. These people, in other areas,
are referred to as other key interested parties.
• Specialist advisors. Internal specialists with proven experience

are valuable resources for projects. A specialist would serve a
clearly defined purpose on a project, for example a systems
engineer would perform design work and a developer would build
software applications.
“Whom do I contract with?”
Your primary client is the owner of the problem and has the authority to
make decisions and implement changes. Your contract is with the primary
client.
chapter conclusion
This chapter discussed the following:
• A consulting process is the business analyst’s work procedure.
• The analyst process consists of three sequential stages:
1. Contracting stage.
216
ICT2641/102
2. Analysing stage.
3. Implementing stage.
• Any consulting process should be results-driven, action-oriented,

flexible and simple.
• A flow of a consulting process can vary depending on the

situation.
Next Chapter
In chapter five the Breakthrough Strategy©, as an implementation

philosophy and procedure, is studied.
Test Your Knowledge

1. The analyst consulting process is…
a. A practical work procedure.

b. A tool to analyse workflow.
c. A procedure to analyse systems.
d. A method to interpret strategy.
2. Clarifying a client’s need is part of which consulting stage?
a. Implementing stage.
b. Analysing stage.
c. Contracting stage.
3. Reaching a work agreement includes…
a. Change readiness analysis.

b. Project scoping.
c. Project planning.
d. Project designing.
4. The analysing stage determines the client’s…
217
a. Position in the business.
b. Business need.
c. Project role.
d. Change readiness.
5. A high-impact consulting process is…
a. Activity-based.
b. Complicated.
c. Results-driven.
d. Non-negotiable.
218
ICT2641/102
1. Develop your own questionnaire to clarify a client’s business

need. Test and refine the questionnaire after a few client
meetings. Below is a sample questionnaire that could be used as
a guideline.
NEED CLARIFICATION FORM
1. What is currently concerning the client?
2. What is the history of the problem or need?
3. What has the client done about the problem until now? What
has worked? What has failed to work?
4. Why did the client decide to approach you?
219
5. What are some other major challenges in the client area not
directly related to your field?
6. How will the client area respond to specific alternative

solutions? Are certain solutions taboo or unacceptable and
why?
SOLUTION OPTIONS PROBABLE SUCCESS

A.
B.
C.
D.
E.
7. What specific results would the client like to improve? How will
the client measure success?
220
ICT2641/102
8. Who should be directly or indirectly involved in the project to

assure its success?
9. What are the perceptions of consultants in general in the client

area?
10. What is the client’s view on how s/he and you should work
together on the project?
11. Is the client ready to move towards contracting? If not, why not?
What should be done to stimulate the client’s readiness?
221
1. a
2. c
3. b
4. d
5. c
222
ICT2641/102
CHAPTER 5
THE BREAKTHROUGH STRATEGY©
Introduction
The consulting process of the business analyst was dealt with in the
previous chapter. The consultation process, as discussed, consists of
three stages namely Contracting, Analysing and Implementing. The
Breakthrough Strategy© is a results-driven implementation method. This
chapter will therefore examine the implementing stage from a
Breakthrough Strategy© perspective. Chapter five serves as context for
chapter six that deals with the nuts and bolts of project implementation.
The following topics are covered in this chapter:
• A definition and the characteristics of the Breakthrough Strategy©

as an implementation approach.
• Hidden productive capacity in any business as revealed by a

crisis and what it implies for IT projects.
• Different types of Breakthrough© projects and how it relates to IT

projects.
• How to expand IT projects in a business applying Breakthrough©

principles.
You can also study the book The Breakthrough Strategy by Robert H.
Schaffer at this stage should you which to obtain more information about
the Breakthrough Strategy. The book provides detail and a variety of case
examples.
The Breakthrough Strategy©
The Breakthrough Strategy© is an implementation approach that business

analysts could apply to help clients to improve business results.
Breakthrough© is a project method that reveals no matter how busy
people look, no matter how desperate the need for more people or more
money or new technology, that clients can achieve improved results
immediately with what they have. By ‘results’ is meant a measurable
success with business impact – see the example below.
223
Example: A project definition the Breakthrough© way.
A Breakthrough© project is defined in high-impact terms (see chapter

two), for example: “Reduce inventory in the system by 15%.” Conventional
IT projects (also chapter two) are however defined in technical terms:
“Redesign the raw materials inventory system.” Breakthrough© defines a
project in terms of a desired end-result rather than a means to an end.
The redesign of a system is a means to what end - to reduce inventory in
the system. So define the project accordingly.
A vital Breakthrough© principle is that business clients can achieve better

results with the technology they have. A tendency in IT, and especially
amongst business analysts, is to overload clients with proposals for new
technology. The problem is that the average life expectancy of technology
is close to 3 months after which it changes. This means that clients are
constantly bombarded to spend large amounts of capital on the latest
whistles and bells. Breakthrough© suggest that business analysts should
help clients to consolidate and optimise the technology they have before
further investments are considered.
What is a Breakthrough© project? It is a planned project that uses the

zest factors present in a crisis situation (explained in the next section of
this chapter) to achieve tangible, bottom-line results in a short period
of time – and that is carried out in ways that generate the new
management confidence and new management skills essential for
further progress. This suggests a ‘start small-win big’ approach. It
consists of locating and starting at once with the gains that can be
achieved quickly (in less than three months), and then using those first
successes as stepping-stones for more ambitious projects.
“Is it technically feasible to achieve results in 3 months with for example a

large systems project that normally takes 12 months or more to
implement?”
Yes. Think in business terms not in technical terms. Instead of launching a

big systems project in a business, select one section of the business and
pilot the system or an application there. For example, start with one sales
branch of the business reducing sales processing errors by 30% in 12
weeks. Such a pilot project serves as a learning experience and could be
expanded to all national or international sales branches.
224
ICT2641/102
Business analysts can use the following five Breakthrough© guidelines to

select and design projects that are loaded for success:
(1) Begin with an urgent and compelling goal. The focus should be
on improvements that everybody will clearly and instantly recognise
as vital, and necessary now. Not what IT thinks is the smart and
right thing to do. This was referred to as critical success factors in
chapter three.
(2) Keep to short time lines. It is important that people be able to

anticipate a first success in a matter of weeks, not months or years.
So a short-term, first-step sub goal should be extracted from a large
urgent goal, for example a large-scale systems implementation
could be broken into smaller sub-projects. The next chapter will
show you how.
(3) The goal should be discrete and focus on a measurable,

bottom-line result. “Reduce systems downtime” or “reduce billing
errors” or “improve systems processing time” by some measurable
amount are examples of tangible goals. General goals such as
“design a network infrastructure” or “reconfigure the billing system”
do not comply.
(4) The project should exploit what people are ready, willing and
able to do. The project should not be based on the hope of
convincing the client what ought to be done. For example, the client
might be ready to implement SAP in one area of the business whilst
IT might be of the conviction that a business-wide roll out is
necessary for the technology to have the required effect. Focus on
what the client is ready to tackle.
(5) First improve what the client has. Optimise the existing
technology in the business before investments in more advanced
technology is proposed. For example, improve on the existing billing
system before a new one is considered.
A Crisis Reveals Hidden Capacity
Most businesses utilise only 60% or less of productive capacity. The

balance is wasted or untapped potential. This hidden potential is revealed
during a crisis – study the example below.
225
226
ICT2641/102
Example: Crisis reveals hidden potential.
The South African branch of a global networks company considered the

instalment of a new state-of-the-art operating business system in the place
of their existing one. The management of the company was advised by an
international IT firm that the cycle-time of their operating processes would
only improve if the old system is totally replaced. Then a new competitor in
the field of networks arrived on the scene, a crisis was created and the
advice of the IT firm was proved wrong.
The new competitor took 25% of the market in less than 3 months as they
could deliver services much quicker. The global networks company had to
respond and they decided to improve the speed of operating processes by
40% with the technology they had available. A cross-functional team
refined processes and procedures and modified the operating system
slightly. Within 90 days the global company improved cycle-time by almost
60% without extra resources or better technology.
The above case clearly indicates what a crisis reveals. There is lots of
hidden productive capacity in any business. The job of the business
analyst is to help clients to challenge assumptions about what is possible
and to unlock the hidden potential. The golden rule is this: optimise the
technologies you have before you invest in new ones.
How is hidden potential unlocked? Business analysts can use what we

see in a crisis to design IT projects differently. Present in a crisis situation
are zest factors. These factors act as energizers and they are:
• Success is near and clear: process cycle-time has to be

improved by 40% in 12 weeks.
• It is a challenge: the goal is simple to understand but not simple

to achieve.
• There is a sense of urgency: it is a ‘must-do’ situation.
• It is exiting: it is game like and spirits are high.
• Stakes are high: the risk of not achieving the goal is the
existence of the business.
How do people operate when these zest factors are present? This is how:
227
• People start working as a team in a very spontaneous way.
• People ignore unnecessary red tape, rules, regulations and

procedures.
• People question assumptions about what is possible and not

possible.
• People start working across departments and functions with ease.
Compare most IT projects with the zest factors above. This is what
business analyst will find too often:
• The projects are long winded and clients loose interest along the
way.
• The measure of success is unclear as projects are defined in IT

terms. Consequently, clients do not regard IT projects as a great
priority.
• The only people challenged by the projects are the IT consultants

who are responsible for doing the job. Clients observe from an
arms length and leave the doing to the technocrats.
• Clients experience the long IT projects as boring time wasters.
• The risks are high for the IT consultants who are responsible for
the work. The client doesn’t share risk – IT is therefore blamed if
the project fails.
How can business analysts use the zest factors to increase the success
probability of IT projects? This is how:
Breakthrough© design specifications of IT projects
Zest factors Design specifications

Success is near and clear Short timeframe; measurable result
Challenge Stretch goal: innovation required
Sense of urgency Critical success factor of business
Exciting Reward experimentation
High risk Leadership strength: demand results
228
ICT2641/102
These design specifications are critical ingredients without which the

recipe will flop. The practical application of the design specifications is
addressed in the next chapter.
Different Types Of Breakthrough© Projects
It is first and foremost important that business analysts understand how to

start a Breakthrough© initiative and then secondly to distinguish between
different project options.
The first challenge in designing a Breakthrough© project is the ability to

carve smaller projects from large-scale ones. The business analyst can
follow these guidelines in doing that:
• If there are many dimensions that must be changed, start with

only one or a few of them. For example, a billing system consists
of various dimensions including account registration, account
tracking, invoice preparation, invoice submission, payment
tracking and account closing. Tackle one dimension for example
to reduce account registration errors by 100% in 8 weeks.
• If there are many sections or businesses to improve, start with the

most critical section or business.
• If there are many systems to improve, start with the system that is
most critical to the business.
• Get the present system or technology to produce better results

instead of waiting years to revolutionise or replace it.
• When the client is focused to implement a comprehensive

business system across all processes, select one process or
even sub-process as a starting point.
• When the client is ready to launch a large-scale management

information system across several departments or business units,
choose one department or business unit where success
probability is the highest as a first step.
“How do I know that the correct first step has been selected?”
229
This is where your collaboration with the client comes in. When you work
in a partnership mode with a client (refer to chapter two), you jointly
identify the best first step. There is one question to ask a client (see
chapter three – critical success factors): “What is most critical for the
business at this stage?” The answer to this question will direct the way
forward.
Example: A data-warehouse starting small.
An international retailer of luxury goods decided to build and implement a

data-warehouse to manage the merchandise of all international stores and
to improve sales forecasting (large-scale project). After a few meetings
with a business analyst the client pin pointed a first step. They decided to
target the duty-free shops at airports in one country and to build a small
data-warehouse for one product line namely leather goods. The following
project goal was selected: “100% availability of leather merchandise at
duty-free shops at airports X, Y and Z.”
There are six different types of Breakthrough© projects. The selection of

the appropriate type depends on the client’s need and readiness.
• Model Week Project. A small-scale project, where people are

challenged to maintain a certain level of performance for seven
days or less. Learning points are consolidated at the end of the
week and improvement decisions are made. For example, a
logistics group of a large manufacturing company was challenged
by senior management to deliver 100% of customer orders on
time for seven days – from an average of 65% on time deliveries.
The goal was achieved and the logistics group learned that
electronic links to customer procurement systems would enable
them to deliver 98% of orders on time, all the time. The internal IT
unit was then instructed to assist their client to achieve the 98%.
• Pilot Experiment. Also a small-scale project where an

improvement initiative is taken in one area of a business and
expanded thereafter. A large bank had a problem with the
frequent unavailability of Automatic Teller Machines (ATM). A
pilot project was structured to reduce the ATM downtime of one
branch from 7 hours a day to 1 hour a day. The project team
discovered very early in the project that a small programming
error caused the downtime. It was fixed and downtime for the pilot
site was reduced by 96%. The solution was then expanded
nationally and had the same result in a matter of weeks.
230
ICT2641/102
• Performance Improvement Project. This type focuses on an

on-the-job performance issue to be improved in 12 weeks or less.
A plant maintenance group was challenged by their production
client to reduce manufacturing downtime on two lines by 50% in 8
weeks. The downtime was caused by the poor performance of
the maintenance group. After a preventative maintenance
approach, a proactive communication procedure and an
electronic measurement system were put in place, downtime was
reduced by almost 80%. An enormous step-up in on-the-job
performance.
• Process Improvement Project. This project aims at improving

process effectiveness and efficiency in a short period of time. A
networks company successfully reduced the time it took to install
100 active network points by 60% in 90 days. The company
analysed each step in the installation process and removed non-
value-adding tasks. They quickly learned that the long cycle-time
of the process was caused by an ineffective procurement system.
The system was redesigned and an application was developed to
enable electronic commerce with their main supplier.
• Strategic Experiments. Big strategic ideas are tested on a

small-scale before its comprehensive implementation. A strategic
priority of a retail bank was to penetrate a new geographical
market segment with a brand new financial product. They
targeted one town in the geographical area with the aim to
achieve R1 million in sales within 12 weeks. A new marketing and
sales approach was innovated and customer database was
developed. They achieved the target and also gained new
insights on how to penetrate the market. The next step was to
duplicate the effort in twenty towns.
• Multiple Projects. A series of projects are launched in parallel in

one business – in some cases 10 to 15 projects involving a 150 to
200 people. An example is where a telecom company launched
12 Breakthrough© projects, one in each department. The projects
ranged from model week challenges to the implementation of
strategic ideas. The project teams had to question policies, work
processes and procedure, systems and support technology, and
basic management discipline. Some of the projects worked
across departments and also involved suppliers and clients.
231
232
ICT2641/102
Example: Implementation of an Enterprise Resource Planning (ERP -

for example SAP) system utilising Breakthrough© principles.
An American manufacturer of domestic chemical products (such as

detergents) decided to implement an ERP system to manage the supply
chains of 10 different plants each in a different geographical area. One
plant was selected as a pilot site for the implementation as well as three
major customers and one main supplier. Prior to any ERP work, multiple
Breakthrough© projects were launched over a period of 8 weeks to
improve on-the-job performance and to streamline work processes.
Significant gains were made in that period and the client and consultants
also learned a great deal about how the ERP system should be
customised for the business. The system was then broken up into
segments or modules. The modules were implemented piece-by-piece in
12-week intervals each with a clear measure of success. After 9 months
the total system was in place supported by improved on-the-job
performance and streamlined processes. The plant achieved a 30%
improvement in its cash-to-cash cycle (from the time a customer places an
order to the point where the customers pays for the delivered goods). The
project was subsequently expanded to three other plants.
The question now is how a business analyst can help a client to expand a
pilot project.
Expansion Of Pilot Projects
The biggest challenge for a business analyst after a pilot project is to help
a client to multiply or expand the effort. There are six ‘multiplication routes’
to move from a first success to a next and then a next.
• Extend the scope of the original project. In the case of the

ATM downtime project an extended scope was to expand the
project to all branches and to reduce downtime to zero during
peak hours. The project therefore grew significantly in size.
• Organise a series of new, related projects. New, related

projects were designed around the original ATM project focusing
on reducing calculation errors and eliminating incorrect client
information on statements. The project grew from one
improvement to another.
233
• Move up and down the line. As successes are achieved at one
level of the organisation (see chapter three), they can be spread
upward and downward in the organisational structure. The ATM
project started at shop floor level and expanded to management
level where the performance improvement opportunity was
reaction time to client complaints.
• Cross-functional projects. Some projects involve several

sections and departments. The first ATM project involved
operations, IT production, IT development and client care
management. However, most first Breakthrough© project focus
only on one area where it is easier to mobilise the resources
necessary to have a success.
• Migration to new sites. When successes have been achieved in

one major unit of a business, it is natural for senior management
to start the process in other locations. In the ERP example
management decided to start with one plant. After a successful
implementation management expanded the effort to three other
plants.
• Moving beyond external boundaries. The experimental, low-

risk nature of the Breakthrough Strategy© encourages
businesses to reach out and engage customers, suppliers and
distributors in joint projects. In the ERP case three customers and
one supplier were involved in the first project.
It is best that business analysts meet with clients after initial pilot projects
and jointly map the expansion route. The expansion route will reflect the
client’s change readiness.
234
ICT2641/102
Chapter Conclusion
• A Breakthrough© project is a planned project that exploits the

zest factors present in a crisis situation to achieve a tangible
result in a short timeframe with available resources.
• A crisis reveals that most businesses have lots of hidden capacity

that is not utilised.
• The zest factors present in a crisis are utilised to design

Breakthrough© projects.
• There are six different types of Breakthrough© projects:
- Model week projects
- Pilot experiments
- Performance improvement projects
- Process improvement projects
- Testing of strategic ideas
- Multiple projects
• Six main options are available to expand a first project:
- Extend the scope
- Organise a series of new, related projects
- Move up and down the line
- Move across functions
- Migrate to new sites
- Move beyond external boundaries
235
Next Chapter
The next chapter focuses on how to structure and manage a project

applying Breakthrough© principles.
Test Your Knowledge

1. A Breakthrough© project is implemented over an extended period

of time.
a. True
b. False
2. A crisis shows that many businesses are almost fully optimised.
a. True
b. False
3. Which is not a zest factor:
a. Panic
b. Excitement
c. Urgency
d. High risk
4. A pilot project is per definition a project that consists of multiple sub-

projects that are implemented in parallel.
a. True
b. False
5. Which expansion option involves customers and suppliers?
a. Move up and down the line

b. Cross functional boundaries
c. Migrate to new sites
d. Move beyond external boundaries
236
ICT2641/102

1. Interview an experienced business analyst about a recent IT project. Test whether
Breakthrough© principles were applied. These are sample questions to ask:
• What was the goal of the project?
• Over what time period was the project implemented?
• How would you describe the motivation of the people regarding

the project?
• What results were achieved?
2. Evaluate the following case. Determine whether it is a Breakthrough©
or a conventional project.
A clothing manufacturer launched an e-commerce project. The aim of the

project was to link all plants with suppliers and customers. A project
steering committee was formed at head office and project teams were
established on each plant. The project took 16 months after which the
company was able to buy and sell electronically with some technical
difficulties.
(See answer at end of chapter)
237
1. b
2. b
3. a
4. b
5. d
case study answer
It is a conventional project. It is clearly not results-focused. Moreover, the

project started with a very broad scope. The question to ask the company
is whether the project enabled them to buy and sell more effectively and
quicker.
238
ICT2641/102
CHAPTER 6
PROJECT IMPLEMENTATION MANAGEMENT
Introduction
The previous chapter was about the Breakthrough Strategy© as a results-

driven implementation approach. This chapter studies the nuts and bolts
of project structuring and management applying Breakthrough© principles.
This chapter is thus an extension of chapter four (analyst consulting
process) and the previous one. The following themes are covered:
• Implementing stage of the analyst consulting process.
• Project design activities.
• Project planning tasks.
• Project execution and tracking steps.
• Project sustainability and expansion activities.
Note that the style of this chapter is less theoretical than the previous
chapters due to the practical nature of project implementation. More
guidelines and checklist are provided than long descriptions and
definitions. See chapter six of ‘The Breakthrough Strategy’ for detail.
Implementing Stage
As outlined in chapter four, the analyst consulting process consists of

three stages, namely Contracting, Analysing and Implementing. You have
reached the implementation stage in the analyst consultation process
when the client is ready to tackle a specific performance improvement
opportunity. The four most critical consulting tasks during implementation
are:
239
• Task One: Project design:
- Build the implementation approach
- Define the goal
- Identify the implementation teams
• Task Two: Project planning:

- Detailed action steps
- Project deliverables
- Milestones
- Accountability
- Resources
• Task Three: Project execution and tracking:

- Implementation of action steps
- Daily measurement
- Review meetings
- Progress communication
• Task Four: Project sustainability and expansion:

- Project completion
- Final evaluation
- Sustainability planning
- Designing of next project
“Should a business analyst understand the details of project

management?”
Yes. The trend is that business analysts become responsible for the
complete consulting process from start to finish. Even in the case where a
specialist project manager is appointed, the business analyst still need to
fully understand project management in order to exercise some form of
control as a business representative. (Also see chapter one for the
changing role of business analysts and new business analysis
competencies.)
Next what each implementation task entails.
240
ICT2641/102
Task One: Project Design

1. Build the implementation approach.
“What does ‘build the implementation approach’ mean from a business

analysis perspective?”
Implementation approach refers to the high-level execution strategy,

meaning the kind of Breakthrough© project you are implementing and the
expansion strategy (see chapter 5) – are you doing a pilot project or a
strategic one; are you going to implement the pilot in one region and then
expand to others. You might for example adopt the following high-level
execution strategy for an IT project:
- 1st Develop the IT solution

- 2nd Pilot the project in one region (type of Breakthrough©)
- 3rd Evaluate the results of the pilot
- 4th Refine the project
- 5th Do another pilot with broader scope in the same region
(expansion strategy)
- 6th Evaluate the results
- 7th Package the solution
- 8th Implement in every region (expansion strategy)
2. Define the goal.
Carve a results-driven goal from the change or improvement opportunity.
Example 1:
From Opportunity: Grow market share by 35% in 3 years.
To Goal: Increase electronic sales of accounting applications in the

corporate sector by R10 million within 12 weeks.
241
Example 2:
From Opportunity: Improve customer satisfaction.
To Goal: Improve call centre reaction time by 50% in 60 days.
“What guidelines should be followed to formulate a results-driven project goal?”
Avoid the following pitfalls when formulating a goal:
• Don’t define the goal in terms of an activity e.g. conduct a

systems analysis or install a market intelligence database –
WHAT IS THE END-RESULT?
• Don’t omit a measure from your goal e.g. grow sales in the small
business portfolio – BY WHAT MARGIN?
• Don’t define a goal without a specific timeline e.g. increase

systems availability by 10% - BY WHEN?
• Don’t state what should be changed in vague terms e.g. improve

systems reliability VERSUS reduce systems downtime by 2 hours
per day.
• Don’t start with a goal that is too ambitious e.g. increase sales
by 40% in all regions in 100-days VERSUS increase sales by
20% in one region in 100-days.
3. Identify the people to make it happen.
Use this checklist to identify a small project team and a larger execution
group to drive the implementation process:
* Who is the person with ultimate power in the business, region or

department who should act as project sponsor?
242
ICT2641/102
* Who is a leader in the business with formal and informal

credibility that should be the project champion?
* Who are the few formal and informal influencers in the area
targeted for change that should become members of the core
implementation team?
* Which specialist advisors should serve on the core team?
* Who are the people who will be mostly affected by the change
who should participate in the execution of the project?
* Are there any other stakeholders that should be involved?
“Who plays what role during implementation?”
The business analyst provides project management expertise, business

focus, analytical techniques and facilitation methods in a consulting
capacity. The sponsor is normally the managing director or head of a
business unit that gives strategic direction to the project. The champion
acts as project manager – which could either be a business manager, a
business analyst or a specialist IT project manager. Members of the core
team are responsible for problem-solving and allocated deliverables. The
cote team is also called the project team. Affected staff members
execute project actions. These staff members may work in a number of
small teams, each with a specific mission to accomplish – depending on
the size of the project. Other stakeholders, for example customers or
suppliers, are asked for input by the project team where required.
Specialist advisors, for example systems designers, have very focused
expert roles.
As business analyst in collaboration with the business client, you have at

this stage of the implementation decided on the implementation approach,
formulated the project goal and you have identified all the people who will
be part of the project.
243
Task Two: Project Planning
The implementation is now at a stage where the business analyst involves

the business client and the project team to finalise an implementation
plan. The plan should include detailed action steps, clear project
deliverables, deadlines, responsibility for execution and finances needed
to implement each step.
Follow this process to reach a good plan:

• Start the planning process with an explanation of the project
opportunity and goal. Allow people to ask questions. Also make
provision for extra time so that data could be collected for the
planning session.
• List all the issues that have to be addressed (in any order, as they
come to mind) to achieve the goal.
• Categorise all the issues, for example work processes; billing

system; financial system; and technology supplier.
• Now take each category separately and list all the actions that fall
under each specific issue. Define the deliverables of each action
step, for example ‘a systems analysis report is submitted’.
• Determine the sequence of the action steps, for example what

happens first, second and third. Also identify the action steps that
could be implemented in parallel.
• Allocate a specific deadline when each action step should be

completed.
• Determine with the project team and client the finances required
to implement the action steps.
• For each action step, write down which team member is

accountable for its completion.
• Formulate ground rules for the project team. Examples are:
- The goal is non-negotiable
- Experimentation is allowed
244
ICT2641/102
- When uncertain ask for help
- Deadlines will not be missed
- We disagree openly
• Develop a plan to communicate the project to all relevant parties.
“Is the plan cast in cement?”
The goal is cast in cement. You can be versatile about the schedule and
plan, but the goal cannot be lowered. A flexible plan encourages
innovation and experimentation.
Below is an example of a sheet used by project teams for planning.
Example: Sample Planning Sheet
Action Deliverable Deadline Owner & Helpers Finances Status

Steps Report
The project team is ready to execute the implementation plan at this point
of the process.
Task Three: Project Execution And Tracking
The primary focus at this stage is to implement the project plan. The job of
the business analyst is to see to it that all parties keep to their
commitments as agreed and that the focus is maintained to deliver
business results.
The business analyst could use the following questions to test the success
of the implementation and to track results.
245
• Do we have regular and productive project review meetings? Are
the meetings well structured? Does everyone attend?
• Do we as project team members communicate often, apart from

our formal meetings? Should we revise our communication
approach?
• Is the project proceeding according to plan? Are we delivering

what we intended, on time and within budget?
• Is anything turning up that should cause us to consider changing

the assumptions around which the project was designed? Are
there any blind spots that we missed prior to implementation with
regard to technical matters or change readiness issues?
• How do we feel about how we are working together as a project

team? What is working well? What is working less well? Should
we test some different ways of working together?
• Looking forward, do we still hold to the timetable and goal(s)

initially set? Are we still confident of achieving the results we said
we would? Could we achieve the results quicker or achieve more
in the same timeframe?
• Are there people who need to be brought up-to-speed on the

project? Are there any who need to be consulted on how to
proceed?
• Are we successful in involving the people mostly affected by the

change?
• How could we protect and assure the success of the next phase
of the project? (The template below could be used by the project
team to answer this question fully.)
246
ICT2641/102
Pro-active Project Management Matrix
What is How and What will

Project likely to when will we do When will How will
Element go we about it? we do it? we do it?
wrong? know?
Quality
Cost
Timetable
Project
Staff
Client Area
Readiness
Results
Other
It is important that the business analyst review the progress of the

implementation on a weekly basis to ensure its success.
Task Four: Project Sustainability And Expansion
The final task in project management includes the following four steps:
• Check whether the project is fully completed.
• Evaluate the final results.
247
• Plan for sustainability.
• Decide on an expansion strategy.
“What is meant by sustainability?”
Sustainability means how you as a business analyst will ensure that the
improvement in business results achieved is maintained and that no fall
back occurs.
The four steps outlined above are normally addressed in a final project
review meeting, also called a project consolidation meeting. Business
analysts could use the following questions during a final meeting:
• Are all the project stakeholders present in the final review

meeting?
• What is the final result we achieved? Why?
• What have we learned during the course of implementation with

regard to technical matters and change readiness?
• Would we handle the same or a similar project differently in the

future? Why and how?
• Have we stumbled over other improvement opportunities?
• What do we need to do to sustain the improvement we achieved?
• What sustainability measures do we need to put in place?
• Who would take ownership of the measures?
• How would the sustainability measurement data be

communicated, to whom and how regularly?
• What would we do if/when the sustainability data calls for

corrective action?
• What are the most potentially useful projects for the next step?
Why? (See chapter 5 regarding expansion options.)
248
ICT2641/102
• What steps do we need to take to launch the next project?
• How can we communicate the success to all interested parties?
• What would be the most appropriate way to celebrate the

success and to reward the people that made it happen?
The project is completed, sustainability measures are selected and the

expansion project has been identified. A next implementation cycle starts.
249
Chapter Conclusion
• The client and business analyst work in full partnership mode

from the start to the completion of the project.
• Collaboration of people at all levels in the business is a critical

success factor of implementation management.
• A project goal is defined in terms of an end result and not an

activity or in technological terms.
• A project plan consists of key action steps to achieve the goal.
• A project plan shows clearly what should be done, by whom, by

when and with what resources.
• Weekly project review meetings are the most important progress

tracking mechanism for business analysts.
• A project concludes with a sustainability and expansion plan.
Next Chapter
Chapter seven deals with resistance to change during an implementation

as well as strategies to manage change barriers.
250
ICT2641/102
Test Your Knowledge

1. Which of the following is not a step in project design:
a. Define the goal.

b. Select team members.
c. Plan the implementation.
d. Build the implementation approach.
2. One of the following forms part of a project plan:
a. Action steps.
b. Sustainability measures.
c. Expansion options.
d. Learning points.
3. The most important tracking mechanism for a business analyst is:
a. Project charts.
b. Project plan.
c. Weekly review meetings.
d. Monthly communication sessions.
4. Sustainability means:
a. Results are maintained.

b. Results are communicated.
c. Results are rewarded.
d. Results are celebrated.
251
1. Identify the implementation stage in the example below.
Business analyst to project team: “People, our next steps are to identify
major actions to be taken, to allocate deadlines and accountability, and
to calculate the money we are going to need to implement this project.”
(See answer at end of chapter.)
2. Do a ‘Model Week’ project (chapter five) at home and apply the

four critical project management tasks. These are sample goals
that you may select:
• Loose 2 kilograms in body weight within 7 days.
• Smoke 10 (or less) cigarettes per day for 7 days instead of the
normal 20 per day.
• Save R200 within a week.
• Reduce cell phone calls by 50% in 7 days.
• Attend 100% of meetings on time for 7 days.
(Have fun!!!!!)
252
ICT2641/102
1. c
2. a
3. c
4. a
Case Study Answer
Task two: Project planning.
253
CHAPTER 7
RESISTANCE AND CHANGE BARRIERS
Introduction
In the previous two chapters the main theme discussed was

implementation management. The easiest part of any project for a
business analyst is to oversee the mechanics of implementation. By
mechanics is meant the formulation of a goal and the development of a
plan. The tricky part is the dynamic during the execution of the plan.
Dynamic refers to resistance and change barriers that could sink any
project irrespective of how well it is structured. It is the task of the
business analyst during implementation to assist the project team to
overcome these barriers. This chapter deals with resistance to change as
follows:
• The change barriers that business analysts encounter on virtually

every project.
• The keys to manage change barriers effectively:
- Match the project with what the client is ready to do.
- Support the business client to demand better results from the

implementation teams.
- Build the zest factors into the project.
Both High-Impact Consulting and The Breakthrough Strategy are very

helpful guides in this regard.
Change Barriers
A business is made up of human beings. A business is not about

structures or technology. People in a business give definition to systems
and processes. IT projects are therefore not about installing a fantastic
new system - contrary to popular belief. It is about the art of getting people
(the so called users) to take full ownership of the change. Full ownership
implies that people will use the new technology effectively and efficiently
to produce better results. The opposite of ownership is full-blown
resistance, expressed either aggressively or passively. An aggressive
reaction is where people publicly announce their non-support and rejection
254
ICT2641/102
of the change. A passive response is where people sabotage the change

subtlely and behind the scenes. In either case, the resistance is often not
logical or rational. It is for example an expression of feelings of insecurity,
uncertainty and also confusion. These feelings could hardly be explained
in factual terms. The net-effects of resistance on IT project are:
• New technology is not being used (not because the users haven’t
been trained properly).
• Results are not improved or initial improvements are not

sustained.
• A negative change pattern is set for future projects.
“Whose job is it to take care of these soft issues?”
There is normally a change management consultant on the project team.

This consultant has to advise the team on how to deal with change issues.
However, the business analyst represents the business. The primary job
of a business analyst is to ensure that IT projects deliver business results.
The business analyst is therefore responsible for the change process and
not the change management consultant.
Lets have a closer look at the different types of change barriers during an
implementation.
Types Of Change Barriers
There are 5 main change barriers that surface during a project:
• Psychological barriers.
• Wasteful work patterns and misuse of time.
• Weak performance expectations.
• Poor work management disciplines.
• Organisational culture.
255
Next, a detailed discussion of each barrier.
1. Psychological barriers. The tendency to view the world in ways

that are psychologically comfortable, and personally reassuring.
Psychological barriers take on different forms:
- Give me more. People would say that change is only possible

if they have more resources like money, employees and time.
Their effectiveness and efficiency is conveniently overlooked.
- Denial. People defend themselves by denying the reality.

Problems are ignored or even rationalised that it is not that
serious or that problems do not exist.
- Faith in time. People procrastinate the implementation of

important actions by rationalising that time will fix the problem.
A person would say: “Just be patient. Things will be better a
year from now.”
- It is impossible. People offer many reasons why it is

impossible to improve a result. For example: “We have tried
many times before to improve the situation. We’ve learned that
it is impossible!”
2. Wasteful work patterns and misuse of time. The tendency to

shape one’s activities so as to stay busy with familiar routines and
avoid anxiety-provoking challenges.
- Follow old patterns. Old and familiar work processes and

procedures are followed daily even though evidence might
indicate that a change is required.
- Busy work. People are very busy doing things that keep them
from focusing on critical goals. Busy work is often an excuse to
avoid difficult tasks.
- Impulsive actions. People try one new thing, then another

without completing any initiative with satisfaction.
- Meetings. Too many as well as inefficient meetings are

robbing people from value time. It is often the case that
managers cling to meetings as a form of control. Others have
many meetings because it is the way things are done – and
256
ICT2641/102
never challenged directly by anyone. There is consequently no

time to work on a project.
- Ignore input. People play politics and ignore valuable work

related input from others. Some people assert that the only to
get a job done is to do it your self and not involve others.
3. Weak performance expectations. Avoiding risk by asking

subordinates for less than is really possible, or permitting them to
escape from real commitments and consequences.
- Ask for too little. Managers don’t ask for more. They either
accept that people are already burdened enough or they feel
uncomfortable to expect more. Just imagine the negative
impact of this management behaviour on any project.
- Leave escape hatches. Managers do not clearly assign

accountability. Consequently, subordinates pass responsibility
to and throw and managers cannot pinpoint who is
responsible.
- Sacrifice one goal for another. Managers allow subordinates

to leave tasks uncompleted – believing excuses that one goal
has suddenly become more important than another.
- Accept explanations. Managers compromise too often,

accepting explanations why a project could not be completed
instead of demanding results.
- Allow escalation. Managers let subordinates delegate tasks

back up. Subordinates offer many creative excuses why they
cannot solve a problem and managers accept them. Once
accepted, it becomes a norm.
- No consequences. Managers feel comfortable to discuss the

rewards of good performance with employees but not negative
consequences of non-conformances. Employees start to belief
that they can get away with poor results.
4. Poor work management disciplines. The tendency to be

causal, careless, or cynical about work planning, measurement,
and tracking procedures.
257
- Too many goals. Teams have endless lists of goals and
actions. No clear-cut priorities exist. People are running
around like headless chickens.
- Immeasurable goals. Managers set goals for individuals and

teams that are fussy generalisations. For example: “I would
like you to become more aggressive in your sales approach.”
No one knows exactly what is expected nor can anyone
measure the outcome.
- No planning. Goals are formulated and people are geared to

do the job without proper work plans. It is like travelling for the
first time from Johannesburg to Cape Town by car without a
map.
- Few to no progress reviews. Too often are performance

review meetings ineffective or just not hold. Poor performance
can therefore not be adjusted along the way.
5. Organisational culture. The unwritten rules in organisations that

are reinforced by management.
- Change as crisis. It is not okay to change things in the

business. Change is seen and experienced as a crisis and not
routine. The unwritten rule is to discourage change.
- The way we do things. This rule suggests very clearly to

youngsters in the business that work is done in a certain way –
and no other way. For example: “This is the way we’ve worked
in the business for 20 years. Don’t change something that
works.”
- By the book. The rule is that policies, regulations, procedures

and structures should never be challenged notwithstanding the
red tape involved. Do it by the book.
- Rank. Never challenge or question a ‘superior’. It is not

tolerated. I am the boss.
- Confused decision making. It is unclear who makes what

decisions. The result is in many cases that decisions are not
made leading to in-action.
258
ICT2641/102
- Privileged information. Information is not freely shared. Only

certain managers have access to so called confidential
business matters. Rumours flourish as a result.
- Low performance expectations. It is seen as inhumane,

militaristic, unfriendly or unnecessary in a mature work
environment to ask people to perform better. Performance
issues are therefore hardly ever openly discussed or
confronted.
- Add more. New businesses, products, functions, technology,

processes are added without dropping any. The business
eventually becomes like an overcrowded storeroom.
The following are examples on how each barrier can influence the
success of any IT project.
Examples: Effects of change barriers on IT projects.
1. Psychological barriers. People refuse to participate in the

project because the new technology is seen as a threat. A lack of
participation leads to a lack of ownership.
2. Wasteful work patterns and time misuse. People don’t deliver

on project commitments because of the apparent time shortage.
Non-delivery means no results.
3. Weak expectations. People don’t take the project seriously

because they belief that management is not serious about it.
People don’t cooperate fully as a result.
4. Poor work discipline. Implementation teams work without

proper plans, and they don’t measure or review progress. Actual
progress is therefore unclear.
5. Culture. People resist the project as it is experienced as a crisis.

They resist by not sharing vital information or by sabotaging the
process.
The next section is about how a business analyst can proactively deal with
change barriers.
259
Strategies To Overcome Change Barriers
Business analyst could exercise a combination of three strategies to

overcome change barriers:
• Match the project with what the client is ready, willing and able to
do – and not the technical ideal.
• Coach the business client to demand results from all people

involved in the project.
• Build zest into the project.
1. Client readiness. Readiness is defined as what the client is able

and willing to handle at a given point in time. One client might for
example be ready to implement multiple projects and another
only a small pilot experiment. Use the readiness level of the client
as a stepping-stone for more ambitious projects in the future. It is
fatal when a business analyst tries to convince a business client
to move beyond existing readiness. Why? Change barriers kick
in!
Business analysts can use the diagnostic checklist below to

determine a client’s readiness:
Change Readiness Checklist

(see next page)
High Readiness:
• Client area displays absolute readiness for change

• People are exceptionally mature in terms of ability and
willingness to manage change
• The client area has extensive experience in technology projects
• The client area has implemented many similar IT projects with
great success in the past
• All required resources are readily available
• The business analyst is fully trusted and respected by the client
• All the required support systems are in place in the client area
• The culture of the client area actively encourages change
260
ICT2641/102
• The client area is highly excited to proceed with the project

• The sponsor and champion are exceptional leaders
Medium Readiness:
• The client area needs some assistance to stimulate readiness for

change
• Some immaturity exists within the client area in terms of ability
and willingness to manage change
• The client area has moderate experience in IT projects
• The client area has implemented a few similar IT projects in the
past with varying degrees of success
• Project resources are fairly limited
• The business analyst in the process of building a relationship
with the client
• Support systems are in a process of being established
• The culture of the client area supports change partly
• A moderate amount of energy is displayed to proceed with the
project
• The sponsor and champion are somewhat uncertain on how to
lead the process
261
Low Readiness:
• Readiness for change in the client area needs to be built for anew
• People need to be developed to manage change
• The client area has limited to no experience in IT projects
• The client area has a poor implementation record
• Project resources are scarce
• People are sceptic and cynical about the involvement of the
business analyst
• No support systems exist
• The culture of the client area opposes change
• Limited to no enthusiasm is displayed to proceed with the project
• The sponsor and champion feel very insecure and vulnerable
262
ICT2641/102
“How do I use this checklist to match the project with client readiness?”
Follow these guidelines:
• Identify the category, high, medium or low, that is most

descriptive of the client’s readiness.
• High Readiness: Select a goal that is ambitious and stretching, for

example to launch a business-wide project.
• Medium Readiness: Select one or two areas of the business,

where success probability is high compared to the other areas, as
project target.
• Low Readiness: Select a modest, low-risk experiment in a corner

of the business as a point of departure.
2. Demand results. It is of vital importance that business analysts

coach business clients to make performance demands in the right
way and to the right people. IT projects are otherwise not taken
seriously. The following illustrates how demands are typically
made for IT projects:
263
Flawed Demand Making
General
Manager
IT Director
Business
Analyst
IT
Department
Production
department
This demand making process is flawed. Let’s look at what happens. The
general manager states an expectation to the IT director to reduce the
downtime on production systems. The IT director then instructs the
business analyst to reduce downtime by using the IT department. The
business analyst in turn tasks the IT department to meet with the
production department. IT meets with production and asserts that
downtime should be reduced on their systems. What are the
consequences?
• The production manager doesn’t take it seriously because the

demand is from the IT department.
• The production people feel offended because who is the IT

department to interfere in their operations.
• The production manager instructs IT to do the job. Production

doesn’t take ownership.
The business analyst should coach the business client, in this case the
general manager, to follow a different process:
264
ICT2641/102
Effective Demand Making
General
Manager
IT Director Business
Analyst
Production
Manager
The general manager demands an improvement in systems downtime

directly from production and states that the IT department and the
business analyst are available to assist - but production is accountable for
the result. The general manager also instructs IT and the business analyst
to support production. What is the effect now?
• The production manager takes the demand seriously as it is

directly from the general manager.
• Production owns the improvement project.
• Production, IT and the business analyst collaborate as a team to

solve the problem.
Several of the change barriers are neutralised proactively when demand

making is effective.
3. Zest factors. A project loaded with zest, as discussed in chapter

five, is loaded for success. Lets summarise the zest factors:
• Make success near and clear.
• Make the project goal challenging.
265
• Ensure that people fully understand the importance and urgency
of the project.
• Encourage people to experiment with different ideas by rewarding

them.
• Make a strong demand that the project must be done.
These factors address most of the change barriers.
266
ICT2641/102
Chapter Conclusion
• Change barriers can derail any IT project and create a negative

pattern for future projects. The five change barriers are:
- Psychological barriers.
- Wasteful work patterns and time misuse.
- Weak performance expectations.
- Poor work management disciplines.
- Organisational culture.
• The business analyst is responsible for the change process. In

dealing with change barriers the business analyst has three
strategies:
- Match the project with client readiness.
- Make demands correctly.
- Create zest.
Next Chapter
The last chapter of the study guide provides business analysts with a
comprehensive consulting case study in order to consolidate all previous
chapters.
267
Test Your Knowledge

1. Resistance to change is a purely factual matter.
a. True.
b. False.
2. People either respond passively to change or they don’t respond

at all.
a. True.
b. False.
3. Which is not a change barrier:
a. Psychological.
b. Time misuse.
c. Old work patterns.
d. Existing technology.
4. Change readiness refers to the ability and willingness of

employees to use new systems.
a. True.
b. False.
5. Demand making is flawed when:
a. IT makes the demand.

b. The managing director makes the demand.
268
ICT2641/102
1. Interview any experienced business analyst and project manager.

Ask them to tell you about a successful and unsuccessful IT
project. Identify the change barriers that impacted negatively on
the unsuccessful project. Ask them how they handled the
successful project differently.
2. Which two zest factors are missing in the following case?
Project report of a business analyst to IT manager: “We are in the

first week of the project. Our goal is to reduce downtime on the credits
system by 30% in 8 weeks. We have learned during this week that it is
not going to be easy to achieve the target but it is possible. We are all
enjoying the process. It is fun and also somewhat unpredictable. The
availability of people is a concern as other priorities interfere constantly.
You might want to talk to the project team in this regard.”
(See the answer at the end of the chapter.)
269
1. b
2. b
3. d
4. b
5. a
Case Study Answer
1. Sense of urgency. Team members do not understand that the

project is an absolute priority. That is why other priorities are
interfering.
2. Demand making. The demand either came from the IT manager

and not taken seriously, or it came from the head of the business
it which case it was not strong enough. A symptom of poor
demand making in this case is that people allow other things to
interfere with their project commitments.
270
ICT2641/102
CHAPTER 8
ANALYST CONSULTING CASE STUDY
Introduction
The purpose of this chapter is to consolidate all previous chapters by

means of a practical case study. It is essential that students approach the
case study as a real-life situation and actually do the exercise. Reading
the case study and thinking about it are not sufficient. This case study
requires doing.
Lets firstly summarise the study guide.
Chapter 1: Business Analysis: An overview. Changes in the world of

business such as globalisation and boundaryless structures, are ‘forcing’
business analysts into a new role. This new role is called ‘high-impact
consulting’ where the business analyst has a business and a technology
focus.
Chapter 2: Business Analyst as Consultant. High-impact consulting

means that a business analyst should work in partnership with business
clients to improve results. Business analysis moves away from
technology-centred projects to business-centred projects.
Chapter 3: Analyst as Business Consultant. A business analyst should

be able to identify the results levers in a business. Results levers are
derived from the critical success factors of the business. Technology
projects are prioritised accordingly.
Chapter 4: Analyst Consulting Process. A consulting process guides a

business analyst and client from a first meeting through to after a project is
completed. The analyst process consists of three stages namely
Contracting, Analysing and Implementing.
Chapter 5: The Breakthrough Strategy©. Breakthrough© is a results-

driven project method that enables businesses to improve rapidly, in a
short period of time and with existing resources. The core of this method is
the zest factors present in a crisis. High-impact business analysts apply
these factors in the design of technology projects.
Chapter 6: Project Implementation Management. Business analysts, in

the modern world of work, are responsible for the whole consulting
271
process. Analysts are therefore also involved in project management
responsibilities. Implementation management consists of four major tasks
namely Project Design, Project Planning, Project Execution and Tracking,
and Project sustainability and Expansion.
Chapter 7: Resistance and Change Barriers. The difficult part of any

implementation is to overcome change barriers. The barriers are caused
by human behaviour. Business analyst can influence human behaviour by
applying a combination of three strategies: (1) match the project with client
readiness; (2) coach clients to demand results; and (3) build the zest
factors into the project.
It is advisable to review the main points of each chapter as well the two
prescribed text books in preparation to answer the case study.
TV-Tech Company: Case Study
1. You have been contracted as a business analyst by the General

Manager of TV-TECH to assist with the company’s performance
problems and to recommend solutions.
2. You have interviewed key people in the business to establish

what their main challenges are and to identify specific
performance improvement opportunities. Your interview notes are
attached.
3. The general manager requested a business analysis report

from you, addressing the following questions:
- What factors are critical to the survival of TV-TECH?
- What are the main problems in the business restricting

progress?
- Where and how could TV-TECH take a first step to improve

results?
- What could a results-driven goal be for the business as a first

step?
- What role can technology play in such a project?
- How would you structure such a project?
272
ICT2641/102
- How would you deal with the possible resistance of the

management team?
- What role can you as a business analyst play in the process?
Your Interview Notes
Background
TV-TECH is a local manufacturer of TV sets (organisational structure

attached). TV-TECH has been the leader in the local market for many
years but the position has recently changed. Other manufacturers,
especially from overseas, are producing more advanced TV sets at much
lower cost than TV-TECH. A recent market survey has shown that the
average price of a TV-TECH TV set is at least 15% higher than the
nearest competitor. To top it all, TV-TECH takes double the time to
develop and manufacture a new-model TV set compared to the
turnaround-times of the competition. Sales revenue is dropping, costs of
production is climbing, profit is plummeting, stock is piling in the
warehouse and not turning, cash is coming in slow, overdraft cost is
increasing, and customer orders are becoming less. As I am writing these
notes, the shareholders are yelling at management for insignificant returns
on their investments. A pale picture – almost as colourful as a black and
white TV.
What is cooking in TV-TECH?
I observed the process of designing a new-model TV set in TV-TECH. The

engineering department is, of course, the one most directly concerned,
and it consists of five sections. Electrical determines in theoretical terms
how the set will be made (technically: what the overall "system" will be).
Mechanical tries to fit the components together; it often finds that
Electrical' theoretical plans are impractical or even that one electrical
engineer's theoretical suggestions are incompatible with those of another.
Chassis designs the cabinet; close coordination is required if the
components are to fit the cabinet. This is not as easy as it sounds,
because Electrical and Mechanical are constantly designing
improvements that give better reception, but that in conflict with the
company's overall goal of producing an ever-thinner, lighter set. Another
problem in this regard is that Chassis has endless problems with a few
suppliers that deliver cabinet components off specification.
273
Automation designs the machinery that makes the printed circuits and
attaches the tubes to it; in contrast to Electrical, which wants an ever-more
"sophisticated" set, Automation wants one that is simple enough to be
reduced to printed circuitry and put together mechanically. Industrial
Engineering determines the techniques by which the set will be
manufactured (other than the operations that are 100 percent automated).
Like Automation, it seeks to eliminate what it feels to be unnecessary frills.
Further complicating overall coordination are the pressures brought by

outside departments: Sales wants an attractive product that will sell easily,
and Manufacturing wants a set that is easy to put together - and in some
instances a design flaw is only picked-up half-way through production.
And management as a whole is interested in keeping costs low, profits
high.
Note that in this case no one section can make modifications without
affecting all the others. A change in a cabinet, for instance, may require
adjustments by every other section, yet each adjustment may in turn
require further compensating adjustments elsewhere. Each section has its
own vested interest. Electrical, with its goal of technical perfection,
conflicts, for example, with Industrial Engineering's goal of manufacturing
ease. In this process a lot of costly rework is required. This is perpetuated
by a total lack of a computerised system in any form across the total
process. No one could therefore track where a TV set is in the process
leading to unnecessary work duplication.
Because a new model must be designed each year, inter-group conflicts

tend to reach a crescendo as the time for a final decision approaches.
During the early part of the year there is little pressure to resolve
agreements, and each section is free to work on its own pet projects. As
the deadline draws near, an increasing number of compromises and
adjustments must be made, tempers flare, and human-relations problems
begin to complicate the technical ones. Each engineer likes to feel that he
or she has completed that end of the job and hates to reconsider a
position just to please another section. No engineer likes to sacrifice his or
her own brainchild. Complicating all these problems is the changing status
of relationships between departments. When TV was new, the major
problem was to design a workable set, and Electrical was the highest-
status section. Today the emphasis is on sales appeal and manufacturing
ease. Electrical still thinks its function is the most important one, but
management seems to favour other sections when it makes critical
decisions and hands out promotions.
In summary, it usually takes 70 days for TV-TECH from the design of a

new-model TV set to a ready-for-sale product. TV-TECH’ biggest
274
ICT2641/102
competitor does the same in 45 days. Two out of every fifteen new TV
sets produced by TV-TECH are defective and need to be reproduced.
The challenge
The General Manager is of the view that market share could be easily
retained. His assertion is that the new product development cycle could be
reduced by half, that rework could be eliminated totally, and that selling
prices could become much more competitive without sacrificing margins.
The General Manager therefore decided to involve me to assist the
management team to decide on an appropriate course of action. My first
deliverable is a business analysis report.
TV-TECH ORGANISATIONAL STRUCTURE
General Manager
Manager: Manager: Manager:

Manufacturing Engineering Sales
Electric Mechanical Chassis Automation Industrial
Guidelines For The Report
• Critical factors of TV-TECH. Ask yourself this question: ‘What is

the one thing that TV-TECH has to do to get back into the
market?’ Also consult chapter three.
• Main problems. List all the problems listed in the notes.

Categorise the problems, for example Technology or Work
Processes. Answer this question: ‘What problem categories do I
think impact the most on that one critical success factor?’ Refer to
chapter three.
275
• A first step. Consider the different Breakthrough© options
(chapter five) and an appropriate implementation approach
(chapter six).
• Results-driven goal. Carve a results-driven goal from the one

critical success factor. See chapter six for guidelines.
• Role of technology. Consider a variety of options. Refer to

chapter one where it is described who technology enables
business change. Be creative and play around with your own
ideas.
• Project structure. How would you apply the four critical

implementation tasks (chapter six)?
• Resistance. Remember readiness, zest and demand making in

chapter seven.
• Your role. Chapter one, two, three and four reveal the answer.
276
ICT2641/102
Bibliography
1. Ashkenas, R; Ulrich, D; Jick, T & Kerr, S. “The

Boundaryless Organisation: Breaking the chains of
organisational structure.” JOSSEY-BASS. 2002.
2. Schaffer, R.H. “High-Impact Consulting: How clients and

consultants can leverage rapid results into long-term
gains.” JOSSEY-BASS. 1997.
3. Schaffer, R.H. “The Breakthrough Strategy: Using short-

terms successes to build the high performance
organisation.” Ballinger Publishing Company. 1988.
4. Gerard van Hoek & Associates. “IT Analyst Consulting

Skills.” 2002.
277

ICT2641 TUT 102 2018-Xen PDF

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

ICT2641 TUT 102 2018-Xen PDF

Încărcat de

Drepturi de autor:

Formate disponibile

ICT2641/102/3/2018

Tutorial Letter 102/3/2018

Intentional Blank Page

Introduction ......................................................................................................................................... 125

Practical Exercises And Study Tips .................................................................................................... 237

Shift 1: From a technological focus to a business focus…

Shift 2: From a technologist to a business partner…

Shift 3: From the “expert” who writes a report with recommendations to an

Suggestions on how to get maximum benefit from this module:

The learning objectives of chapter 1 (Introduction) are:

Frequently asked question: How well should I understand the organisation to be

What is Business Analysis?

• Find out exactly what the needs of the client are.

Why analyse a business area?

• The right answer starts with the right question.

• An owner runs a business to make a profit for him/her.

Peter F Drucker, Managing in Turbulent Times

1. Planning: Setting objectives/goals, developing strategies to reach those

Make a list of the things that could concern a manager in a business.

The Finance department is high on economic performance as the financial

• The department with whom IT probably communicates best is the engineering

Example: IT is implementing a new file management system on the LAN. HR is just

• Productivity: How could IT help increase productivity in the whole organisation?

The context for IT

Enterprise Level Task Level

Select the Clarify Install

At the “Enterprise Level”, these are key questions:

Example: Mercedes Benz and Hyundai operate in different market segments.

• At the enterprise level management decides on how to allocate capital (money),

Example: In a production environment the plant must be set up to produce according

“Con-Dom” the Enterprise

Napoleon Bonaparte said

Companies that win constantly

THE DRIVING VALUE

Frequently asked question: Should IT be concerned with productivity?

What is a breakthrough project?

Example: If the management of a restaurant chain wants to improve the performance

The Golden Rule!

Assignment: Field exercise

• Ask the questions on the questionnaire.

Do you understand IT's language? Why/why not?..........................................

2. The main task of management is …

3. A change agent is someone who …

5. The following is one of the main tasks at enterprise level:

a. calculating the profit of a business.

9. The responsibility of a business analyst …

10. Financial analysis is a valuable technique for a business analyst because …

FAQ: Why is the science of measuring important to a business analyst?

The ideal measurement of performance in the organisation is to measure performance

A key competence of a business analyst is to make the correct decision on what to

Effectiveness versus Efficiency

An effective ox wagon is still a very inefficient vehicle.

Effectiveness and efficiency are important in measuring a business’s performance.

Efficiency is a measure of the relationship between inputs and outputs. A business

FAQ: Should IT and especially business analysts be concerned about efficiency or

Regardless of the form of business ownership, a business is seen as a healthy

Gap analysis can be used to assess a business’ performance in meeting customer

1. Determining the gap

Communication is very important in removing gaps. Managers should

Finally, managers should reassess performance and expectations continuously.

Sensitivity to customers and customer service

Another concept that needs to be measured is the sensitivity to customers. This

Sensitivity to customers involves reacting on the spot to accommodate customers.