EEM is a universally applicable approach that accommodates any type of company or institution, whether profit or non-profit, public or private. The methodology may be used to develop a total study of the enterprise or just a portion of it (e.g., Marketing, Administration, Manufacturing, etc.). The end result is an Enterprise Information Strategy (EIS) that specifies the priorities of the enterprise, along with a plan to implement them. As new objectives are introduced and others are implemented or deferred, the EIS is updated and maintained on a current basis.  

CONCEPTS & PHILOSOPHIES

If you have observed your information systems over the years, you probably have noticed that they have been constantly changing, sometimes radically, sometimes subtly. For example, the payroll and billing systems you had thirty years ago do not resemble the systems you have today, nor will today's systems look the same thirty years from now. The day a system is installed is the day it begins to undergo change. Therefore, systems are built by evolution, not by revolution. No one has ever built the perfect system the first time, and no one ever will. This is because the company and its information requirements are constantly changing due to economics, competition, market demands, government regulation, politics, technology, etc.

If this is true, the more we know about our enterprise and the influences affecting it, the more effective we will be when developing information systems that will satisfy business needs. It is important, therefore, that before we build information systems, we must first understand the nature of the business they must serve. Developing systems that do not satisfy business needs is counterproductive.

PRODUCTIVITY = EFFECTIVENESS X EFFICIENCY

One of the inherent problems associated with planning is that it is often regarded as unnecessary work. Many see it as an expensive luxury. Some people do not recognize that planning organizes and coordinates all work effort which, in turn, maximizes the productivity of development personnel and reduces costs. It assures that the relevant problems and opportunities of the business are addressed. One of the primary questions that Enterprise Engineering answers is, "Are we doing the right things?" (Effectiveness). This is an essential ingredient if we are to be productive. In contrast, Efficiency questions, "Are we doing things right?" (doing things faster and better). This may be an important issue but we must remember that there is nothing more unproductive than to build something efficiently that should not have been built at all. EEM, therefore, concentrates on the effectiveness issues of the business.

There have been numerous planning techniques developed over the years under a variety of names:

• "Corporate/Business Planning"
• "Strategic Systems Planning"
• "Business Systems Planning"
• "Information Engineering"
• "Strategic Information Planning"
• "Critical Success Factors"

Perhaps the most serious failing is that planning is regarded as a one-time proposition; that it will not change over time. Developing a plan under the assumption that business conditions will not change is an exercise in futility and the plan will quickly become obsolete. Planning is an evolutionary process. As the needs of the enterprise change, so must the plans.  

UNDERSTANDING THE ENTERPRISE

Enterprises take many forms, such as the conventional commercial venture, whether private or public, a government agency, a fraternal organization, even a simple household can be viewed as an enterprise. An enterprise is a defined business entity with a specific mission, whether profitable or non-profitable in intent. It exhibits the following characteristics:

A. An Enterprise has a mission or purpose -

For most companies, it is to make a profit through the sale of products and/or services. For non-profit organizations, such as government institutions, it is to regulate or administer laws and provide public services, e.g., police, transportation, fire fighting, etc.

B. An enterprise depends on other enterprises in order to survive -

Although an organization may be financially independent, it depends on the interaction with other enterprises, whether it be a parent company, customer, vendor, doctor, lawyer, competitor, employer, contractor, accountant, stockholders, government, etc. The identification of these external enterprises is an important consideration for Enterprise Engineering since these external entities represent significant forces influencing the enterprise. By addressing the information requirements of external enterprises, both strategic and tactical systems can be developed which provide a competitive advantage for a company.

C. An enterprise is a self-governing body -

Although it may be influenced by external enterprises, an enterprise usually operates autonomously, making its own decisions and taking its own actions. All enterprises have some form of internal government, regardless of whether it is a private or public institution. It may be governed by some form of president, managing director, or board of directors, whether elected or appointed. In addition, an enterprise is "owned" either privately or publicly, whether by a single owner or partnership, by shareholders, or by a membership. It is common for an enterprise to have a set of bylaws, articles of incorporation, or some other document outlining its legal "ownership" or government.

D. An enterprise is a self-contained unit -

It is able to produce or receive income, administer resources, and produce a product or service. All enterprises produce some form of product or service. Although a product is a tangible commodity that is easily understood, a service is highly intangible and may consist of such things as accounting, legal advice, banking, social work, government regulation, labor, etc. Like a product, a service is a billable or measurable commodity. The sale of products and services implies that an enterprise has clients it serves, whether they are a typical customer, the citizens within a government area, or the membership of a social organization. Some enterprises, such as insurance companies and banks, offer both services and products.

This leads to the idea that there is a simple and universal model for all enterprises:

UNIVERSAL ENTERPRISE MODEL

One area of the enterprise is concerned with producing income, which is typically the goal of a marketing function. Without financial income, all other work will quickly cease.

Another area of an enterprise administers resources, including human, financial, material, equipment and information resources. This includes the areas of accounting, finance, personnel, materials, and information resource management.

The last area of the company is concerned with producing a product and/or service. This represents the outcome of the enterprise and includes such things as manufacturing, consulting, training, or some other form of service, such as legal advice and accounting.

The boundaries of an enterprise can be typically defined by the set of "books" used for accounting purposes. These books, supported by a chart of accounts, describes how money is received and allocated through debits and credits. Ultimately, it defines the scope of the enterprise.

Perhaps the ultimate test for an enterprise is whether it can be spun off and made a separate operating unit. For example, a division within an automotive conglomerate could be considered an enterprise.

E. An enterprise has a structure, both logically and physically -

Each enterprise has a physical structure that reflects the organization in terms of human and machine resources. It also has a logical structure which reflects the organization of the underlying business functions. Functions are used to define the fundamental duties and responsibilities of the enterprise. Positions are used to define the physical positions or jobs implementing the functions. Resources, both human and machine, are used to implement positions. These resources have specific skills and proficiencies which qualify them for the work to be performed.

BASIC BUSINESS RESOURCES

  UNDERSTANDING FUNCTIONS

In order to fulfill the mission of the enterprise, certain functions must be performed. These functions define WHAT work must be performed and WHY. When organized into a hierarchy, functions represent the logical structure of the enterprise. A function, therefore, is defined as a logical grouping of one or more responsibilities for carrying out a specific portion of the mission of the enterprise.

Functions represent bodies of actions and decisions required to perform the duties and responsibilities of such things as marketing, accounting, manufacturing, sales, customer service, shipping, receiving, inventory, finance, product development, etc. Since they are logical constructs, functions are relatively static. They will only change if the mission or nature of the enterprise changes, such as venturing into new business endeavors. Enterprises with common missions will have similar logical structures. For example, all life insurance companies are logically the same, all electric utilities are the same, automotive manufacturing, banking, etc. They will only differ if the products and/or services differ.

Functions exhibit the following characteristics:

A. Functions rely on other functions to form a whole -

An enterprise will consist of several functions which delineate specific areas of responsibility. Each function will rely on the other functions in order for the enterprise to operate effectively. For example, without an income producing function, such as sales, most companies will quickly go out of business regardless of how well the other functions are performing.

B. Functions denote the three basic levels of activity in an enterprise (policy, control and operations) -

Functions are organized into a hierarchy which denotes the types of actions and/or decisions involved. Policy functions refer to executive decisions where policy is made and objectives are formulated. Control functions relate to middle management actions and decisions to monitor day-to-day affairs and assure that executive decisions are met. Operational functions involve the routine activities or work of the enterprise. These three levels can be charted as a hierarchy showing superior/subordinate/lateral functional relationships.

THE LOGICAL ENTERPRISE
Defines the business of the Enterprise

THE LOGICAL STRUCTURE REPRESENTS A STATIC VIEW OF THE ENTERPRISE; IT WILL ONLY CHANGE IF THE BUSINESS MISSION CHANGES

ENTERPRISES WITH COMMON BUSINESS MISSIONS WILL HAVE SIMILAR LOGICAL STRUCTURES

Information corresponds to the three levels. Policy information is used to establish the direction or policy for the enterprise. It includes such things as trend analysis, forecasts, profit and loss, etc. Control information is used to control operational activities and assure that policy decisions are implemented. Typical applications include production control, inventory control, accounts receivables, accounts payable, customer complaint analysis, error notification, progress/status reporting, etc. Operational information is used to perform the normal day-to-day operations of the enterprise, such as shipping, manufacturing, receiving, billing, payroll, processing customer orders/requests, etc.

The benefits from structuring the enterprise using logical functions are that it provides a guideline for establishing a chart of accounts for accounting purposes and can also provide the means to establish "profit centers" in the enterprise.

SAMPLE ENTERPRISE MODEL

C. Functions deal with objects and require information -

Each function has at least one "object" it must deal with or manage. Objects represent facts and events required to operate and manage an enterprise. They may be as tangible as a product, employee or capital, or as intangible as a transaction, such as an order, debit or credit. In order to effectively manage these objects, functions require specific information about these objects in order to fulfill their mission. No single function has a monopoly on an object; they may be shared by many functions.

D. Functions communicate through information systems -

Information flows between functions and is the cement holding the enterprise together. Systems, with their inputs, outputs, files and processes represent the means by which functions interact with each other. They represent the vehicle by which duties and responsibilities are discharged.

E. Functions require certain skills -

The talents required to perform one function may be totally different from those required to perform another. For example, the skills required to perform sales differs considerably with those required in manufacturing. This function/skills relationship becomes the basis for determining suitable positions to fulfill the functions and for recruiting resources with the appropriate skills. It also becomes the basis for determining if existing resources have the appropriate skills required to fulfill the functions.

F. Functions are implemented by positions -

Although enterprises with identical missions will have identical logical functions, they will differ considerably in how they are physically structured. Management will organize the enterprise physically in a manner they believe will be the most productive way to implement the logical functions. Whereas the logical functions represent a relatively static view of the enterprise, the physical positions are dynamic and will change more frequently.

Positions are organized into a hierarchy denoting administrative reporting relationships. Direct (internal positions) and dotted (external positions) are identified, as well as staff and line positions. This organization structure transcends management techniques for the use of resources, such as a matrix organization or project team.

THE PHYSICAL ENTERPRISE
Defines administrative relationships
WHEREAS THE LOGICAL IS SOMEWHAT STATIC,
THE PHYSICAL WILL CHANGE DYNAMICALLY

There is not necessarily a one-to-one relationship between logical functions and physical positions; one function may be implemented by several positions, or several functions can be implemented by a single position. It is up to the discretion of management to determine the positions required to implement the logical functions. Each function must have at least one job to implement it, otherwise it will go unfulfilled.

Although the logical functions are organized into a simple three-level hierarchy, the physical positions can be organized into a complicated, multi-level structure.

One of the by-products of Enterprise Engineering is the identification of functions not being served by a position or functions with a position, but without resources. This means that a function is not being fulfilled and should be highlighted. It is also concerned with identifying excessive overlaps between positions and functions, both horizontally and vertically. This provides management with the ability to flatten the organization and develop an environment more aptly tuned to the needs of the enterprise.

Like functions, positions require information to discharge duties and responsibilities.

When we have defined and cross-referenced the resources, we now know how the enterprise operates, both logically and physically.

THE ORGANIZATION & OPERATION
OF AN ENTERPRISE

From this representation we can see the inner workings of the enterprise, including how it is structured, both logically and physically. We see the external enterprises influencing the enterprise, including their information requirements, objects, and systems required to support them. For the logical functions, we see the skills required to perform the function, its relationship to other functions, the information requirements and objects required to perform the function and the systems affecting the function. The physical positions show the use of human and machine resources with their pertinent skills and proficiencies, along with their relationships to other positions, and the information requirements, objects and systems associated with the position.

There are, of course, simpler ways of expressing these complicated relationships, such as through hierarchy charts and a series of matrices. In any event, by defining and cross-referencing these resources, we essentially know:

• The purpose and structure of the enterprise.
• The external enterprises influencing the enterprise.
• The objects required to manage and operate the enterprise.
• The information required to run the business.
• The systems used in running the business.

CALCULATING THE ENTERPRISE INFORMATION STRATEGY (EIS)

With this intelligence, we are now in a position to formulate an effective Enterprise Information Strategy (EIS), a plan to develop or modify information systems synchronized with business plans. There are basically eight steps required to develop the EIS:

A. Define the business plan, including both strategic and tactical objectives.

The strategies used to run an enterprise can be highly proprietary and sensitive, particularly in business. In some companies, business plans may be known only by a few key executives. A prospectus, precis or annual report typically will offer only a superficial description of corporate direction, usually for public dissemination. They offer more about what the company has done in the past, not necessarily what it plans to do in the future.

In order to formulate an effective information strategy, one that is synchronized with the direction of the enterprise, the business plan must be defined, even if it is to be maintained on a highly confidential basis. An information strategy that is not based on a business plan is unproductive. Development projects will tend to address the wrong problems/opportunities and will waste considerable resources, most notably time and money.

When defining the business plan, both tactical and strategic plans must be defined. Tactical plans are concerned with maintaining order within an enterprise, e.g., improve productivity, reduce costs, etc. Strategic plans are aimed at maintaining a market advantage (staying competitive). For example, entering a new market, introducing a new product or service, diversifications, mergers, acquisitions, etc.

B. Define the structure of the enterprise affected by the plan, both logically and physically.

As discussed, this includes a definition of the external enterprises influencing the enterprise, along with the internal "objects" used to manage and operate the business.

C. Define the information requirements required to run the enterprise.

D. Group information requirements based on commonality into objectives.

This grouping could be random, but this might result in objectives with an inordinate scope and complexity. If properly organized, the objectives will be more compact and easier to evaluate.

There is not necessarily a one-to-one relationship between information requirements and objectives. One objective may satisfy many information requirements, and one requirement may be satisfied by many objectives.

There are basically three considerations for grouping requirements:

1. By the functional area being served by the information (e.g., marketing, manufacturing, administration).

2. By information type (policy, control, and operational). Operational requirements are typically satisfied before control and policy requirements because operations represent the basic activities of the business and ultimately the core systems that collect data.

3. By requirements being implemented by existing systems, versus those that are not.

If the EIS is acceptable as proposed, Information Resource Management is then instructed to implement the strategy accordingly. This includes initiation of Systems Engineering and Data Base Engineering related projects. It also includes the initiation of additional Enterprise Engineering related projects to maintain the evolution of the EIS.  

GRAPHIC SUPPORT

There are fundamentally two types of graphics associated with Enterprise Engineering: hierarchy charts and matrices. The hierarchy charts are used to model the enterprise logically and physically. Matrices are used to describe influential factors affecting an enterprise, such as external enterprises and objects, and to develop the Enterprise Information Strategy. HIERARCHY CHARTS

The purpose of any hierarchy chart is to show the superior, subordinate and lateral relationships between resources. In this way, it resembles a "tree" structure. With a hierarchy, a resource can have no more than one "parent" resource, but many "children." This is unlike a network diagram that allows multiple "parents."

SAMPLE HIERARCHY

In Enterprise Engineering, two hierarchy charts are used: a function chart to model the logical enterprise, and; an organization chart to model the physical enterprise.

A function chart is a simple hierarchy using rectangular boxes to represent logical functions. The hierarchy shows the relationships between functions, for example:

SAMPLE FUNCTION CHART

The organization chart is similar in structure to the function chart. However, unlike the function chart, which shows some simple relationships, the organization chart may be more complicated due to direct/dotted and staff/line relationships. As previously shown, each rectangular box identifies a specific position along with the people who serve that position.

The physical structure of the enterprise is based on how management wishes to organize and operate the enterprise. It represents administrative reporting with levels of authority. Ultimately, it depicts the chain of command for an enterprise. Regardless of whether the enterprise operates with a "matrix" style of management or on a "project team" basis, there is always some form of hierarchical structure showing who works for whom. This is the intent of the organization chart.

MATRICES

The purpose of a matrix is to express elaborate resource relationships in a simple, easy-to-analyze format. It is drawn as a table with horizontal rows and vertical columns. For example:

In the above example, relationships between columns and rows are expressed with an "X" in the coordinate cell.  

METHODOLOGY CONSTRUCTION/NAVIGATION

The Enterprise Engineering Methodology (EEM) consists of an assembly of five phases detailing "Who" is to perform "What" work, "When", "Where" and "Why". Each phase consists of a defined set of activities (a total of 28); each activity consists of a series of operations or tasks to be performed. All phases, activities and tasks produce tangible deliverables that can be reviewed and checked for completeness. These deliverables substantiate adherence to the methodology and permits the measurement of progress. Both formal and informal review points are laced throughout the methodology which provides for an effective dialog between management and the enterprise engineers.

The first phase is essentially used to plan the EEM project; Phase 2 develops the logical model of the enterprise; Phase 3 develops the physical model; Phase 4 develops the Enterprise Information Strategy; and Phase 5 reviews the project.