Strategy Analysis

Strategy defines the most effective way to apply the capabilities of an enterprise in order to reach a desired set of goals and objectives. Strategies may exist for the entire enterprise, for a division, department or region, and for a product, project, or iteration.
The Strategy Analysis knowledge area describes the business analysis work that must be performed to collaborate with stakeholders in order to identify a need of strategic or tactical importance (the business need), enable the enterprise to address that need, and align the resulting strategy for the change with higher- and lower-level strategies.
Strategy analysis focuses on defining the future and transition states needed to address the business need, and the work required is defined both by that need and the scope of the solution space. It covers strategic thinking in business analysis, as well as the discovery or imagining of possible solutions that will enable the enterprise to create greater value for stakeholders, and/or capture more value for itself.
Strategy analysis provides context to requirements analysis and design definition for a given change. Strategy analysis should be performed as a business need is identified. This allows stakeholders to make the determination of whether to address that need or not. Strategy analysis is an ongoing activity that assesses any changes in that need, in its context, or any new information that may indicate that an adjustment to the change strategy may be required.
The following image illustrates the spectrum of value as business analysis activities progress from delivering potential value to actual value.

Figure 6.0.1: Business Analysis Value Spectrum

Strategy Analysis

Potential

When performing strategy analysis, business analysts must consider the context in which they are working, and how predictable the range of possible outcomes is. When a change will have a predictable outcome, the future state and possible transition states can typically be clearly defined, and a clear strategy can be planned out. If the outcome of a change is difficult to predict, the strategy may need to focus more on mitigating risk, testing assumptions, and changing course until a strategy that will succeed in reaching the business goals can be identified or until the initiative has ended. These tasks may be performed in any order, though they are often performed concurrently, as strategy must be shaped by what is actually achievable.
A strategy may be captured in a strategic plan, product vision, business case, product roadmap, or other artifacts.
The Strategy Analysis knowledge area includes the following tasks:
• Analyze Current State: understands the business need and how it relates to the way the enterprise functions today. Sets a baseline and context for change.
• Define Future State: defines goals and objectives that will demonstrate that the business need has been satisfied and defines what parts of the enterprise need to change in order to meet those goals and objectives.
• Assess Risks: understands the uncertainties around the change, considers the effect those uncertainties may have on the ability to deliver value through a change, and recommends actions to address risks where appropriate.
• Define Change Strategy: performs a gap analysis between current and future state, assesses options for achieving the future state, and recommends the highest value approach for reaching the future state including any transition states that may be required along the way.

Strategy Analysis
The Core Concept Model in Strategy Analysis
The Business Analysis Core Concept Model™ (BACCM™) describes the relationships among the six core concepts. The following table describes the usage and application of each of the core concepts within the context of Strategy Analysis.

Table 6.0.1: The Core Concept Model in Strategy Analysis

Figure 6.0.1: Strategy Analysis Input/Output Diagram

6.1 Analyze Current State
6.1.1 Purpose
The purpose of Analyze Current State is to understand the reasons why an enterprise needs to change some aspect of how it operates and what would be directly or indirectly affected by the change.

6.1.2 Description
The starting point for any change is an understanding of _why _the change is needed. Potential change is triggered by problems or opportunities that cannot be addressed without altering the current state. Business analysts work to help stakeholders enable change by exploring and articulating the business needs that drive the desire to change. Without clearly understood business needs, it is impossible to develop a coherent strategy, and the resulting change initiative is almost certain to be driven by a mix of conflicting stakeholder demands.
Change always occurs in a context of existing stakeholders, processes, technology, and policies which constitute the current state of the enterprise. Business analysts examine the current state in the context of the business need to understand what may influence proposed changes, and what will be affected by them. The current state is explored in just enough detail to validate the need for a change and/or the change strategy. Understanding the current state of the enterprise prior to the change is necessary to identify what will need to change to achieve a desired future state and how the effect of the change will be assessed.
The scope of the current state describes the important existing characteristics of the environment. The boundaries of the current state scope are determined by the components of the enterprise and its environment as they relate to the needs. The current state can be described on different levels, ranging from the entire enterprise to small components of a solution. Creating a model of the current state might require collaboration throughout or outside the enterprise. For small efforts, the scope might be only a small component of an enterprise.
The current state of an enterprise is rarely static while a change is being developed and implemented. Internal and external influencers, as well as other organizational changes, can affect the current state in ways that force alterations in the desired future state, change strategy, or requirements and designs.

6.1.3 Inputs

• Elicitation Results: used to define and understand the current state.
• Needs: the problem or opportunity faced by an enterprise or organization often launches business analysis work to better understand these needs.

Figure 6.1.1: Analyze Current State Input/Output Diagram

Output

6.1.4 Elements

.1 Business Needs

Business needs are the problems and opportunities of strategic importance faced by the enterprise. An issue encountered in the organization, such as a customer complaint, a loss of revenue, or a new market opportunity, usually triggers the evaluation of a business need.

A business need may be identified at many different levels of the enterprise:
• From the top-down: a strategic goal that needs to be achieved.
• From the bottom-up: a problem with the current state of a process, function or system.
• From middle management: a manager needs additional information to make sound decisions or must perform additional functions to meet business objectives.
• From external drivers: customer demand or business competition in the marketplace.
The definition of business needs is frequently the most critical step in any business analysis effort. A solution must satisfy the business needs to be considered successful. The way the need is defined determines which alternative solutions will be considered, which stakeholders will be consulted, and which solution approaches will be evaluated. Business needs are always expressed from the perspective of the enterprise, and not that of any particular stakeholder.
Business needs are often identified or expressed along with a presumed solution. The business analyst should question the assumptions and constraints that are generally buried in the statement of the issue to ensure that the correct problem is being solved and the widest possible range of alternative solutions are considered.
A solution to a set of business needs must have the potential to generate benefits for the enterprise or its stakeholders, or avoid losses that would otherwise occur. Factors the business analyst may consider include:
• adverse impacts the problem is causing within the organization and quantify those impacts (for example, potential lost revenue, inefficiencies, dissatisfied customers, low employee morale),
• expected benefits from any potential solution (for example, increased revenue, reduced costs, increased market share),
• how quickly the problem could potentially be resolved or the opportunity could be taken, and the cost of doing nothing, and
• the underlying source of the problem.
Business needs will drive the overall analysis of the current state. Although it isn’t necessary to fully detail all aspects of the current state before further developing the change strategy, this exploration will often uncover deeper underlying causes of the problem or the opportunity that triggered the investigation (which then become additional business needs).

.2 Organizational Structure and Culture

Organizational structure defines the formal relationships between people working in the enterprise. While communication channels and relationships are not limited to that structure, they are heavily influenced by it, and the reporting structure may aid or limit a potential change.

Analyze Current State Strategy Analysis

Organizational culture is the beliefs, values, and norms shared by the members of an organization. These beliefs drive the actions taken by an organization.
Business analysts perform a cultural assessment to:
• identify if cultural changes are required to better achieve the goals,
• identify whether stakeholders understand the rationale for the current state of the enterprise and the value delivered by it, and
• ascertain whether the stakeholders view the current state as satisfactory or if change is needed.

.3 Capabilities and Processes

Capabilities and processes describe the activities an enterprise performs. They also include the knowledge the enterprise has, the products and services it provides, the functions it supports, and the methods it uses to make decisions. Core capabilities or processes describe the essential functions of the enterprise that differentiate it from others. They are measured by performance indicators that can be used to assess the benefits of a change.
Business analysts may use:
• A capability-centric view of the enterprise when looking for innovative solutions that combine existing capabilities to produce a new outcome. A capability-based view is useful in this situation because capabilities are generally organized in a functional hierarchy with relationships to other capabilities, making it easier to identify any gaps.
• A process-centric view of the enterprise when looking for ways to improve the performance of current activities. A process-based view is useful in this situation because processes are organized in an end-to-end fashion across the enterprise to deliver value to its customers, making it easier to ensure that a change does in fact increase performance.

.4 Technology and Infrastructure

Information systems used by the enterprise support people in executing processes, making decisions, and in interactions with suppliers and customers. The infrastructure describes the enterprise’s environment with respect to physical components and capabilities. The infrastructure can include components such as computer hardware, physical plants, and logistics, as well as their operation and upkeep.

.5 Policies

Policies define the scope of decision making at different levels of an enterprise. They generally address routine operations rather than strategic change. They ensure that decisions are made correctly, provide guidance to staff on permitted and appropriate behaviour and actions, support governance, and determine when and how new resources can be acquired. Identification of relevant policies may shape the scope of the solution space and may be a constraint on the types

of action that can be pursued.

.6 Business Architecture

No part of the current state should be assessed in complete isolation from the rest. Business analysts must understand how all of these elements of the current state fit together and support one another in order to recommend changes that will be effective. The existing business architecture typically meets an assortment of business and stakeholder needs. If those needs are not recognized or do not continue to be met by a proposed transition or future state, changes are likely to result in a loss of value.

.7 Internal Assets

Business analysts identify enterprise assets used in the current state. Resources can be tangible or intangible, such as financial resources, patents, reputation, and brand names.

.8 External Influencers

There are external influences on the enterprise that do not participate in a change but might present constraints, dependencies, or drivers on the current state.
Sources of external influence include:
• Industry Structure: individual industries have distinct ways in which value is created within that industry. This is a particularly important influencer if a proposed change involves entering a new industry.
• Competitors: the nature and intensity of competitors between enterprises within an industry can be significant. The entry of a new competitor may also change the nature of the industry or increase competition.
• Customers: the size and nature of existing and potential customer segments can provide influences such as negotiating power and a degree of price sensitivity. Alternatively, the emergence of new alternative ways that customers can meet their needs may drive the enterprise to deliver greater value.
• Suppliers: the variety and diversity of suppliers might be an influencer, as can the power that suppliers have over their customers.
• Political and Regulatory Environment: there is often influence from the current and potential impact of laws and regulations upon the industry.
• Technology: the productivity enhancing potential of recent and expected technological innovations might influence the need.
• Macroeconomic Factors: the constraints and opportunities that exist within the existing and expected macroeconomic environment (for example, trade, unemployment, or inflation) might influence the need.
Some of these sources might use different terminology, based on whether the enterprise is a for-profit corporation, a non-profit enterprise, or a government agency. For example, a country does not have customers; it has citizens.

6.1.5 Guidelines and Tools

• Business Analysis Approach: guides how the business analyst undertakes an analysis of the current state.
• Enterprise Limitation: used to understand the challenges that exist within the enterprise.
• Organizational Strategy: an organization will have a set of goals and objectives which guides operations, establishes direction, and provides a vision for the future state. This can be implicitly or explicitly stated.
• Solution Limitation: used to understand the current state and the challenges of existing solutions.
• Solution Performance Goals: measure the current performance of an enterprise or solution, and serve as a baseline for setting future state goals and measuring improvement.
• Solution Performance Measures: describe the actual performance of existing solutions.
• Stakeholder Analysis Results: stakeholders from across the organization will contribute to an understanding and analysis of the current state.

6.1.6 Techniques

• Benchmarking and Market Analysis: provides an understanding of where there are opportunities for improvement in the current state. Specific frameworks that may be useful include 5 Forces analysis, PEST, STEEP, CATWOE, and others.
• Business Capability Analysis: identifies gaps and prioritizes them in relation to value and risk.
• Business Model Canvas: provides an understanding of the value proposition that the enterprise satisfies for its customers, the critical factors in delivering that value, and the resulting cost and revenue streams. Helpful for understanding the context for any change and identifying the problems and opportunities that may have the most significant impact.
• Business Cases: used to capture information regarding the business need and opportunity.
• Concept Modelling: used to capture key terms and concepts in the business domain and define the relationships between them.
• Data Mining: used to obtain information on the performance of the enterprise.
• Document Analysis: analyzes any existing documentation about the current state, including (but not limited to) documents created during the implementation of a solution, training manuals, issue reports, competitor information, supplier agreements, published industry benchmarks, published technology trends, and performance metrics.

• Financial Analysis: used to understand the profitability of the current state and the financial capability to deliver change.
• Focus Groups: solicits feedback from customers or end users about the current state.
• Functional Decomposition: breaks down complex systems or relationships in the current state.
• Interviews: facilitate dialogue with stakeholders to understand the current state and any needs evolving from the current state.
• ItemTracking: tracks and manages issues discovered about the current state.
• Lessons Learned: enables the assessment of failures and opportunities for improvement in past initiatives, which may drive a business need for process improvement.
• MetricsandKeyPerformanceIndicators(KPIs): assesses performance of the current state of an enterprise.
• Mind Mapping: used to explore relevant aspects of the current state and better understand relevant factors affecting the business need.
• Observation: may provide opportunities for insights into needs within the current state that have not been identified previously by a stakeholder.
• Organizational Modelling: describes the roles, responsibilities, and reporting structures that exist within the current state organization.
• Process Analysis: identifies opportunities to improve the current state.
• ProcessModelling: describes how work occurs within the current solution.
• Risk Analysis and Management: identifies risks to the current state.
• Root Cause Analysis: provides an understanding of the underlying causes of any problems in the current state in order to further clarify a need.
• Scope Modelling: helps define the boundaries on the current state description.
• Survey or Questionnaire: helps to gain an understanding of the current state from a large, varied, or disparate group of stakeholders.
• SWOT Analysis: evaluates the strengths, weaknesses, opportunities, and threats to the current state enterprise.
• VendorAssessment: determines whether any vendors that are part of the current state are adequately meeting commitments, or if any changes are needed.
• Workshops: engage stakeholders to collaboratively describe the current state and their needs.

6.1.7 Stakeholders

• Customer: makes use of the existing solution and might have input about issues with a current solution.
• Domain Subject Matter Expert: has expertise in some aspect of the current state.
• End User: directly uses a solution and might have input about issues with a current solution.
• Implementation Subject Matter Expert: has expertise in some aspect of the current state.
• Operational Support: directly involved in supporting the operations of the organization and provides information on their ability to support the operation of an existing solution, as well as any known issues.
• Project Manager: may use information on current state as input to planning.
• Regulator: can inform interpretations of relevant regulations that apply to the current state in the form of business policies, business rules, procedures, or role responsibilities. The regulator might have unique input to the operational assessment, as there might be new laws and regulations with which to comply.
• Sponsor: might have context for performance of existing solutions.
• Supplier: might be an external influencer of the current state.
• Tester: able to provide information about issues with any existing solutions.

6.1.8 Outputs

• Current State Description: the context of the enterprise’s scope, capabilities, resources, performance, culture, dependencies, infrastructure, external influences, and significant relationships between these elements.
• Business Requirements: the problem, opportunity, or constraint which is defined based on an understanding of the current state.

6.2 Define Future State

6.2.1 Purpose

The purpose of Define Future State is to determine the set of necessary conditions to meet the business need.

6.2.2 Description

All purposeful change must include a definition of success. Business analysts work to ensure that the future state of the enterprise is well defined, that it is achievable with the resources available, and that key stakeholders have a shared

consensus vision of the outcome. As with current state analysis, the purpose of future state analysis is not to create a comprehensive description of the outcome at a level of detail that will directly support implementation. The future state will be defined at a level of detail that:
• allows for competing strategies to achieve the future state to be identified and assessed,
• provides a clear definition of the outcomes that will satisfy the business needs,
• details the scope of the solution space,
• allows for value associated with the future state to be assessed, and
• enables consensus to be achieved among key stakeholders.
The future state description can include any context about the proposed future state. It describes the new, removed, and modified components of the enterprise. It can include changes to the boundaries of the organization itself, such as entering a new market or performing a merger or acquisition. The future state can also be simple changes to existing components of an organization, such as changing a step in a process or removing a feature from an existing application. Change may be needed to any component of the enterprise, including (but not limited to):

• business processes,
• functions,
• lines of business,
• organization structures,
• staff competencies,
• knowledge and skills,
• training,
• facilities,
• desktop tools,
• organization locations,
• data and information,
• application systems, and/or
• technology infrastructure.

Descriptions may include visual models and text to clearly show the scope boundaries and details. Relevant relationships between entities are identified and described. The effort required to describe the future state varies depending on the nature of the change. The expected outcomes from a change might include specific metrics or loosely defined results. Describing the future state allows stakeholders to understand the potential value that can be realized from a solution, which can be used as part of the decision-making process regarding the change strategy. In environments where changes result in predictable outcomes and predictable delivery of value, and where there are a large number of possible changes that can increase value, the purpose of future state analysis is to gather sufficient information to make the best possible choices among potential options. In cases where it is difficult to predict the value realized by a change, the future state may be defined by identification of appropriate performance measures (to produce an agreed-upon set of measures for business value), and the change strategy will support exploration of multiple options.

6.2.3 Inputs

• Business Requirements: the problems, opportunities, or constraints that the future state will address.

Figure 6.2.1: Define Future State Input/Output Diagram

Guidelines and Tools Input

Business Requirements

**

Organizational Strategy
6.2
Define Future State
**

Output

**

Business Objectives
6.2
Future State Description
Potential Value
**

**

Tasks Using This Output
Tasks Using This Output
Tasks Using This Output
**

4.1
Prepare for Elicitation

6.3
Assess Risks
4.5
Manage Stakeholder Collaboration

7.3
Validate Requirements
4.5
Manage Stakeholder Collaboration

6.4
Define Change Strategy
6.3
Assess Risks

7.3
Validate Requirements
4.1
Prepare for Elicitation

6.3
Assess Risks
**

**

7.6
Analyze Potential Value and Recommend Solution

8.4
Assess Enterprise Limitations
8.1
Measure Solution Performance

8.5
Recommend Actions to Increase Solution Value
7.5
Define Design Options

8.1
Measure Solution Performance

8.4
7.6
Analyze Potential Value and Recommend Solution
8.2
Analyze Performance Measures
7.3
Validate Requirements

7.6
Analyze Potential Value and Recommend Solution
8.2
**

Assess Enterprise Limitations
Analyze Performance Measures

6.2.4 Elements

.1 Business Goals and Objectives

A future state can be described in terms of business objectives or goals in order to guide the development of the change strategy and identify potential value.
Business goals and objectives describe the ends that the organization is seeking to achieve. Goals and objectives can relate to changes that the organization wants to accomplish, or current conditions that it wants to maintain.
Goals are longer term, ongoing, and qualitative statements of a state or condition that the organization is seeking to establish and maintain. Examples of business goals include:
• Create a new capability such as a new product or service, address a competitive disadvantage, or create a new competitive advantage.
• Improve revenue by increasing sales or reducing cost.
• Increase customer satisfaction.
• Increase employee satisfaction.
• Comply with new regulations.
• Improve safety.
• Reduce time to deliver a product or service.
High-level goals can be decomposed to break down the general strategy into areas that may lead to desired results, such as increased customer satisfaction, operational excellence, and/or business growth. For example, a goal may be to “increase number of high-revenue customers” and then be further refined into a goal to “increase number of high revenue customers in the 30-45 age bracket by 30% within 6 months”.
As goals are analyzed they are converted into more descriptive, granular and specific objectives, and linked to measures that make it possible to objectively assess if the objective has been achieved. Objectives that are measurable enable teams to know if needs were addressed and whether a change was effective.
Defining measurable objectives is often critical to justify completing the change and might be a key component to a business case for the change. A common test for assessing objectives is to ensure that they are SMART:
• Specific: describing something that has an observable outcome,
• Measurable: tracking and measuring the outcome,
• Achievable: testing the feasibility of the effort,
• Relevant: aligning with the enterprise’s vision, mission, and goals, and
• Time-bounded: defining a time frame that is consistent with the need.

.2 Scope of Solution Space

Decisions must be made about the range of solutions that will be considered to meet the business goals and objectives. The scope of the solution space defines which kinds of options will be considered when investigating possible solutions, including changes to the organizational structure or culture, capabilities and processes, technology and infrastructure, policies, products, or services, or even creating or changing relationships with organizations currently outside the scope of the extended enterprise. Solutions in each of these areas generally require specific expertise from both the business analysis and the delivery team. The analysis for this might happen on different levels in the enterprise, and the scope of the solution space is not necessarily related to the size of the change. Even a small change might require looking at the enterprise-level business objectives to ensure alignment.
If multiple future states can meet the business needs, goals and objectives, it will be necessary to determine which ones will be considered. This decision is typically based on the value to be delivered to stakeholders and requires an understanding of possible change strategies. The critical considerations for the decision are dependent on the overall objectives of the enterprise, but will involve an understanding of the quantitative and qualitative value of each option, the time needed to achieve each future state, and the opportunity cost to the enterprise.

.3 Constraints

Constraints describe aspects of the current state, aspects of the planned future state that may not be changed by the solution, or mandatory elements of the design. They must be carefully examined to ensure that they are accurate and justified.
Constraints may reflect any of the following:
• budgetary restrictions,
• time restrictions,
• technology,
• infrastructure,
• policies,
• limits on the number of resources available,
• restrictions based on the skills of the team and stakeholders,
• a requirement that certain stakeholders not be affected by the implementation of the solution,
• compliance with regulations, and
• any other restriction.

.4 Organizational Structure and Culture

The formal and informal working relationships that exist within the enterprise may need to change to facilitate the desired future state. Changes to reporting lines can encourage teams to work more closely together and facilitate alignment of goals and objectives. Elements of the organizational structure and culture may need to change to support the future state. Describing the components of the future state provides insight into potential conflicts, impact, and limits.

.5 Capabilities and Processes

Identify new kinds of activities or changes in the way activities will be performed to realize the future state. New or changed capabilities and processes will be needed to deliver new products or services, to comply with new regulations, or to improve the performance of the enterprise.

.6 Technology and Infrastructure

If current technology and infrastructure are insufficient to meet the business need, the business analyst identifies the changes necessary for the desired future state.
The existing technology may impose technical constraints on the design of the solution. These may include development languages, hardware and software platforms, and application software that must be used. Technical constraints may also describe restrictions such as resource utilization, message size and timing, software size, maximum number of and size of files, records, and data elements. Technical constraints include any IT architecture standards that must be followed.

.7 Policies

If current polices are insufficient to meet the business need, the business analyst identifies the changes necessary for the desired future state.
Policies are a common source of constraints on a solution or on the solution space. Business policies may mandate what solutions can be implemented given certain levels of approval, the process for obtaining approval, and the necessary criteria a proposed solution must meet in order to receive funding. In some instances, a change to an existing policy may open up alternative solutions that would not otherwise be considered.

.8 Business Architecture

The elements of any future state must effectively support one another and all contribute to meeting the business goals and objectives. In addition, they should be integrated into the overall desired future state of the enterprise as a whole, and support _that _future state.

.9 Internal Assets

The analysis of resources might indicate that existing resources need to be increased or require increased capabilities, or that new resources need to be developed. When analyzing resources, business analysts examine the resources needed to maintain the current state and implement the change strategy, and determine what resources can be used as part of a desired future state. The assessment of existing and needed resources is considered when performing a feasibility analysis on possible solution approaches for the change strategy.

.10 Identify Assumptions

Most strategies are predicated on a set of assumptions that will determine whether or not the strategy can succeed, particularly when operating in a highly uncertain environment. It will often be difficult or impossible to prove that the delivery of a new capability will meet a business need, even in cases where it appears reasonable to assume that the new capability will have the desired effect. These assumptions must be identified and clearly understood, so that appropriate decisions can be made if the assumption later proves invalid. Change strategies in uncertain environments can be structured in order to test these assumptions as early as possible to support a redirection or termination of the initiative.

.11 Potential Value

Meeting the business objectives alone does not justify the transition to a future state; the potential value must be evaluated to see if it is sufficient to justify a change.
When defining the future state, business analysts identify the potential value of the solution. The potential value of the future state is the net benefit of the solution after operating costs are accounted for. A change must result in greater value for the enterprise than would be achieved if no action was taken. However, it is possible that the future state will represent a decrease in value from the current state for some stakeholders or even for the enterprise as a whole. New regulations or increased competition, for example, might need to be addressed for the enterprise to remain operating but could still decrease the overall value captured.
While determining the future state, business analysts consider increased or decreased potential value from:
• external opportunities revealed in assessing external influences,
• unknown strengths of new partners,
• new technologies or knowledge,
• potential loss of a competitor in the market, and
• mandated adoption of a change component.
Business analysts identify the specific opportunities for potential alterations in value, as well as the probability of those increases for the individual components

of the proposed change. Business analysts estimate a total potential value by aggregating across all opportunities.
The potential value, including the details of the expected benefit and costs and the likely result if no change is made, is a key component to making a business case for the change. Relating descriptions of potential value to measures of actual value currently being achieved enables stakeholders to understand the expected change in value. In most cases, the future state will not address all of the opportunities for improvement. Any unaddressed opportunities might remain valid after the solution is implemented and should be noted for future analysis in other changes.
In addition to the potential value of the future state, this analysis should consider the acceptable level of investment to reach the future state. While the actual investment will depend on the change strategy, this information guides the selection of possible strategies.

6.2.5 Guidelines and Tools

• Current State Description: provides the context within which the work needs to be completed. It is often used as a starting point for the future state.
• Metrics and Key Performance Indicators (KPIs): the key performance indicators and metrics which will be used to determine whether the desired future state has been achieved.
• Organizational Strategy: describes the path, method, or approach an enterprise or organization will take to achieve its desired future state. This can be implicitly or explicitly stated.

6.2.6 Techniques

• Acceptance and Evaluation Criteria: used to identify what may make the future state acceptable and/or how options may be evaluated.
• BalancedScorecard: used to set targets for measuring the future state.
• Benchmarking and Market Analysis: used to make decisions about future state business objectives.
• Brainstorming: used to collaboratively come up with ideas for the future state.
• Business Capability Analysis: used to prioritize capability gaps in relation to value and risk.
• BusinessCases: used to capture the desired outcomes of the change initiative.
• Business Model Canvas: used to plan strategy for the enterprise by mapping out the needed infrastructure, target customer base, financial cost structure, and revenue streams required to fulfill the value proposition to customers in the desired future state.
• Decision Analysis: used to compare the different future state options and understand which is the best choice.

Define Future State Strategy Analysis

• Decision Modelling: used to model complex decisions regarding future state options.
• Financial Analysis: used to estimate the potential financial returns to be delivered by a proposed future state.
• Functional Decomposition: used to break down complex systems within the future state for better understanding.
• Interviews: used to talk to stakeholders to understand their desired future state, which needs they want to address, and what desired business objectives they want to meet.
• LessonsLearned: used to determine which opportunities for improvement will be addressed and how the current state can be improved upon.
• Metrics and Key Performance Indicators (KPIs): used to determine when the organization has succeeded in achieving the business objectives.
• Mind Mapping: used to develop ideas for the future state and understand relationships between them.
• Organizational Modelling: used to describe the roles, responsibilities, and reporting structures that would exist within the future state organization.
• Process Modelling: used to describe how work would occur in the future state.
• Prototyping: used to model future state options and could also help determine potential value.
• Scope Modelling: used to define the boundaries of the enterprise in the future state.
• Survey or Questionnaire: used to understand stakeholders’ desired future state, which needs they want to address, and what desired business objectives they want to meet.
• SWOT Analysis: used to evaluate the strengths, weaknesses, opportunities, and threats that may be exploited or mitigated by the future state.
• VendorAssessment: used to assess potential value provided by vendor solution options.
• Workshops: used to work with stakeholders to collaboratively describe the future state.

6.2.7 Stakeholders

• Customer: might be targeted purchasers or consumers in a future state who might or might not be ready or able to consume a new state.
• Domain Subject Matter Expert: provides insight into current state and potential future states.
• End User: expected to use, or be a component of, a solution that implements the future state.

• Implementation Subject Matter Expert: provides information regarding the feasibility of achieving the future state.
• Operational Support: directly involved in supporting the operations of the enterprise and provides information on their ability to support the operation of a proposed future state.
• Project Manager: might have input on what is a reasonable and manageable desired future state.
• Regulator: ensures that laws, regulations, or rules are adhered to in the desired future state. Interpretations of relevant regulations must be included in the future state description in the form of business policies, business rules, procedures, or role responsibilities.
• Sponsor: helps determine which business needs to address and sets the business objectives that a future state will achieve. Authorizes and ensures funding to support moving towards the future state.
• Supplier: might help define the future state if they are supporting delivery of the change or deliver any part of the future state operation.
• Tester: responsible for ensuring an envisioned future state can be sufficiently tested and can help set an appropriate level of quality to target.

6.2.8 Outputs

• Business Objectives: the desired direction that the business wishes to pursue in order to achieve the future state.
• Future State Description: the future state description includes boundaries of the proposed new, removed, and modified components of the enterprise and the potential value expected from the future state. The description might include the desired future capabilities, policies, resources, dependencies, infrastructure, external influences, and relationships between each element.
• Potential Value: the value that may be realized by implementing the proposed future state.

6.3 Assess Risks

6.3.1 Purpose

The purpose of Assess Risks is to understand the undesirable consequences of internal and external forces on the enterprise during a transition to, or once in, the future state. An understanding of the potential impact of those forces can be used to make a recommendation about a course of action.

6.3.2 Description

Assessing risks includes analyzing and managing them. Risks might be related to the current state, a desired future state, a change itself, a change strategy, or any tasks being performed by the enterprise.
The risks are analyzed for the:
• possible consequences if the risk occurs,
• impact of those consequences,
• likelihood of the risk, and
• potential time frame when the risk might occur.
The collection of risks is used as an input for selecting or coordinating a change strategy. A risk assessment can include choosing to accept a risk if either the effort required to modify the risk or the level of risk outweighs the probable loss. If the risks are understood and the change proceeds, then the risks can be managed to minimize their overall impact to value.
Important A number of methods include ‘positive risk’ as a way of managing opportunities. Although the formal definition of risk in the BABOK® _Guide _doesn’t preclude this usage, ‘opportunities’ are captured as needs (and managed accordingly), and risk is used for uncertain events that can produce negative outcomes.

6.3.3 Inputs

• Business Objectives: describing the desired direction needed to achieve the future state can be used to identify and discuss potential risks.
• Elicitation Results (confirmed): an understanding of what the various stakeholders perceive as risks to the realization of the desired future state.
• Influences: factors inside of the enterprise (internal) and factors outside of the enterprise (external) which will impact the realization of the desired future state.
• Potential Value: describing the value to be realized by implementing the proposed future state provides a benchmark against which risks can be assessed.
• Requirements (prioritized): depending on their priority, requirements will influence the risks to be defined and understood as part of solution realization.

Figure 6.3.1: Assess Risks Input/Output Diagram

Output

6.3.4 Elements

.1 Unknowns

When assessing a risk, there will be uncertainty in the likelihood of it occurring, and the impact if it does occur. Business analysts collaborate with stakeholders to assess risks based on current understanding. Even when it is not possible to know all that will occur as a result of a particular change strategy, it is still possible to estimate the impact of unknown or uncertain events or conditions occurring.
Business analysts consider other historical contexts from similar situations to assess risks. The lessons learned from past changes and expert judgment from

stakeholders assist business analysts in guiding the team in deciding the impact and likelihood of risks for the current change.

.2 Constraints, Assumptions, and Dependencies

Constraints, assumptions, and dependencies can be analyzed for risks and sometimes should be managed as risks themselves. If the constraint, assumption, or dependency is related to an aspect of a change, it can be restated as a risk by identifying the event or condition and consequences that could occur because of the constraint, assumption, or dependency.

.3 Negative Impact to Value

Risks are expressed as conditions that increase the likelihood or severity of a negative impact to value. Business analysts clearly identify and express each risk and estimate its likelihood and impact to determine the level of risk. Business analysts estimate a total risk level from the aggregated set of risks, indicating the overall potential impact for the risks being assessed. In some cases overall risk level can be quantified in financial terms, or in an amount of time, effort, or other measures.

.4 Risk Tolerance

How much uncertainty a stakeholder or an enterprise is willing to take on in exchange for potential value is referred to as risk tolerance.
In general, there are three broad ways of describing attitude toward risk:
• Risk-aversion: An unwillingness to accept much uncertainty; there may be a preference to either avoid a course of action which carries too high a level of risk, or to invest more (and therefore accept a lower potential value) to reduce the risks.
• Neutrality: some level of risk is acceptable, provided the course of action does not result in a loss even if the risks occur.
• Risk-seeking: A willingness to accept or even take on more risk in return for a higher potential value.
An individual or organization may exhibit different risk tolerances at different times. If there is low tolerance for risk, there may be more effort on avoidance, transfer or mitigation strategies. If the tolerance for risk is high, more risks are likely to be accepted. Typically, the highest level risks are dealt with no matter what the risk tolerance level.

.5 Recommendation

Based on the analysis of risks, business analysts recommend a course of action. Business analysts work with stakeholders to understand the overall risk level and their tolerance for risk.
The recommendation usually falls into one of the following categories:
• pursue the benefits of a change regardless of the risk,

Strategy Analysis Assess Risks

• pursue the benefits of a change while investing in reducing risk (likelihood and/or impact),
• seek out ways to increase the benefits of a change to outweigh the risk,
• identify ways to manage and optimize opportunities, and
• do not pursue the benefits of a change.
If the change proceeds with risks, stakeholders should be identified to monitor the risks and consequences if the risk event occurs. The risk may alter the current state of the enterprise and require revision of the change strategy. A plan of action in this case may be developed before the risk materializes.

6.3.5 Guidelines and Tools

• Business Analysis Approach: guides how the business analyst analyzes risks.
• Business Policies: define the limits within which decisions must be made. These may mandate or govern aspects of risk management.
• Change Strategy: provides the plan to transition from the current state to the future state and achieve the desired business outcomes. This approach must be assessed to understand risks associated with the change.
• Current State Description: provides the context within which the work needs to be completed. It can be used to determine risks associated with the current state.
• Future State Description: determines risks associated with the future state.
• Identified Risks: can be used as a starting point for more thorough risk assessment. These can come from Risk Analysis Results, from elicitation activities, from previous business analysis experience, or based on expert opinion.
• Stakeholder Engagement Approach: understanding stakeholders and stakeholder groups helps identify and assess the potential impact of internal and external forces.

6.3.6 Techniques

• Brainstorming: used to collaboratively identify potential risks for assessment.
• Business Cases: used to capture risks associated with alternative change strategies.
• Decision Analysis: used to assess problems.
• Document Analysis: used to analyze existing documents for potential risks, constraints, assumptions, and dependencies.
• Financial Analysis: used to understand the potential effect of risks on the financial value of the solution.
• Interviews: used to understand what stakeholders think might be risks and the various factors of those risks.
• LessonsLearned: used as a foundation of past issues that might be risks.

• Mind Mapping: used to identify and categorize potential risks and understand their relationships.
• Risk Analysis and Management: used to identify and manage risks.
• Root Cause Analysis: used to identify and address the underlying problem creating a risk.
• Survey or Questionnaire: used to understand what stakeholders think might be risks and the various factors of those risks.
• Workshops: used to understand what stakeholders think might be risks and the various factors of those risks.

6.3.7 Stakeholders

• Domain Subject Matter Expert: provides input to the risk assessment based on their knowledge of preparation required in their area of expertise.
• Implementation Subject Matter Expert: provides input to the risk assessment based on their knowledge of preparation required in their area of expertise.
• Operational Support: supports the operations of the enterprise and can identify likely risks and their impact.
• Project Manager: helps to assess risk and is primarily responsible for managing and mitigating risk to the project.
• Regulator: identifies any risks associated with adherence to laws, regulations, or rules.
• Sponsor: needs to understand risks as part of authorizing and funding change.
• Supplier: there might be risk associated with using a supplier.
• Tester: identifies risks in the change strategy, from a validation or verification perspective.

6.3.8 Outputs

Risk Analysis Results: an understanding of the risks associated with achieving the future state, and the mitigation strategies which will be used to prevent those risks, reduce the impact of the risk, or reduce the likelihood of the risk occurring.

6.4 Define Change Strategy

6.4.1 Purpose

The purpose of Define Change Strategy is to develop and assess alternative approaches to the change, and then select the recommended approach.

6.4.2 Description

Developing a change strategy is simpler when the current state and the future state are already defined because they provide some context for the change.
The change strategy clearly describes the nature of the change in terms of:
• context of the change,
• identified alternative change strategies,
• justification for why a particular change strategy is the best approach,
• investment and resources required to work toward the future state,
• how the enterprise will realize value after the solution is delivered,
• key stakeholders in the change, and
• transition states along the way.
The appropriate representation of a change strategy depends on the perspective of the change team and their stakeholders. The change strategy might be presented as part of a business case, Statement of Work (SOW), an enterprise’s strategic plan, or in other formats.
Defining a change strategy usually involves identifying several strategies and ultimately selecting the strategy that is most appropriate for the situation.
Change strategies can entail attaining only parts of a future state initially, and therefore include only some components of a complete solution. For each transition state along the path to reaching the future state, the change strategy should clarify which parts of the solution are completed and which are not, as well as which parts of the value can be realized and which cannot.

6.4.3 Inputs

• Current State Description: provides context about the current state, and includes assessments of internal and external influences to the enterprise under consideration.
• Future State Description: provides context about the desired future state.
• Risk Analysis Results: describe identified risks and exposure of each risk.
• Stakeholder Engagement Approach: understanding stakeholders’ communication and collaboration needs can help identify change-related activities that need to be included as part of the change strategy.

Figure 6.4.1: Define Change Strategy Input/Output Diagram

Output
**

6.4.4 Elements

.1 Solution Scope

The solution is the outcome of a change that allows an enterprise to satisfy a need. Multiple solution options might be evaluated and, as part of a change strategy, the best solution approach is justified and selected. The solution scope defines the boundaries of the solution, and is described in enough detail to enable stakeholders to understand which new capabilities the change will deliver. It also describes how the proposed solution enables the future state’s goals. The solution scope might evolve throughout an initiative as more information is discovered.
The solution scope might be described in different ways, including the use of:

• capabilities,
• technology,
• business rules,
• business decisions,
• data,
• processes,
• resources,
• knowledge and skills,
• models and descriptions of markets,
• functions,
• locations,
• networks,
• organizational structures,
• workflows,
• events,
• sequence,
• motivations, or
• business logic.

The solution scope can also include descriptions of out-of-scope solution components to provide clarity.

.2 Gap Analysis

A gap analysis identifies the difference between current state and future state capabilities. To perform gap analysis, both current state and future state should be defined. Using the same techniques to describe both current and future states assists in gap analysis, as it simplifies the comparison.
Gap analysis can help identify the gaps that prevent the enterprise from meeting needs and achieving goals. It can be used to determine if the enterprise can meet its needs using its existing structure, resources, capabilities, and technology. If the enterprise can meet the need with the current state capabilities, then the change will likely be relatively small, or there may be no change at all. In any other case, a change strategy is needed to create the missing capabilities or improve the existing ones. The capabilities analyzed in a gap analysis can include:

• processes,
• functions,
• lines of business,
• organizational structures,
• staff competencies,
• knowledge and skills,
• training,
• facilities,

• locations,
• data and information,
• application systems, and
• technology infrastructure.

The gaps will need to be addressed in the transition and future states.

.3 Enterprise Readiness Assessment

Business analysts analyze the enterprise to assess its capacity to make the change and to sustain the change in the future state. The readiness assessment considers the enterprise’s capacity not only to make the change, but to use and sustain the solution, and realize value from the solution. The assessment also factors in the cultural readiness of the stakeholders and operational readiness in making the change, the timeline from when the change is implemented to when value can be realized, and the resources available to support the change effort.

.4 Change Strategy

A change strategy is a high-level plan of key activities and events that will be used to transform the enterprise from the current state to the future state. Change strategies may be a singular initiative composed of smaller changes which might be structured as a set or sequence of projects, or as various continuous improvement efforts. Each element of change might not completely address the need, so multiple changes might be necessary.
During the course of the development of a change strategy, several options are identified, explored, and described in enough detail to determine which options are feasible. Alternatives can be identified through brainstorming and consulting subject matter experts (SMEs). Sources of ideas can include historical ideas, historical changes, other markets’ strategies, and competitors’ approaches.
A preferred change strategy is selected from this set of options and developed in more detail. The preferred change strategy should be selected considering:
• organizational readiness to make the change,
• major costs and investments needed to make the change,
• timelines to make the change,
• alignment to the business objectives,
• timelines for value realization, and
• opportunity costs of the change strategy.
Business analysts may develop a business case for each potential change strategy to support decision making. The opportunity cost of each change strategy also needs to be considered. Opportunity cost refers to the benefits that could have been achieved by selecting an alternative change strategy. The options considered and rejected are an important component of the final strategy, providing stakeholders with an understanding of the pros and cons of various approaches to making the change.
When defining the change strategy, the investment to make the change to the future state is also considered. The net benefits of a future state may be very high,

but if the investment is unbearable (“they just can’t afford the change”) the enterprise may pass on the opportunity, and invest in something else.
The potential value, including the details of the expected benefit and costs, are key components to making a business case for the change. Relating descriptions of potential value to measures of actual value currently being achieved enables stakeholders to understand the expected change in value. While every change facilitated by business analysts is intended to increase value, some changes decrease value in parts of an enterprise while increasing it in others.

.5 Transition States and Release Planning

In many cases, the future state will need to be achieved over time rather than through a single change, meaning that the enterprise will have to operate in one or more transition states. Release planning is concerned with determining which requirements to include in each release, phase, or iteration of the change.
Business analysts help facilitate release planning discussions to help stakeholders reach decisions. There are many factors that guide these decisions, such as the overall budget, deadlines or time constraints, resource constraints, training schedules, and the ability of the business to absorb changes within a defined time frame. There may be organizational restraints or policies that must be adhered to in any implementation. Business analysts assist in planning the timing of the implementation in order to cause minimal disruption to business activities, and to ensure all parties understand the impact to the organization.

6.4.5 Guidelines and Tools

• Business Analysis Approach: guides how the business analyst defines a change strategy.
• Design Options: describe various ways to satisfy the business needs. Each option will come with its own set of change challenges and the change strategy will be impacted by the option selected as well as the specific change approach that will be used.
• Solution Recommendations: identifying the possible solutions which can be pursued in order to achieve the future state, which includes the recommendations of various subject matter experts (SMEs), helps the business analyst determine the types of changes to the organization.

6.4.6 Techniques

• Balanced Scorecard: used to define the metrics that will be used to evaluate the effectiveness of the change strategy.
• Benchmarking and Market Analysis: used to make decisions about which change strategy is appropriate.
• Brainstorming: used to collaboratively come up with ideas for change strategies.
• Business Capability Analysis: used to prioritize capability gaps in relation to value and risk.

Define Change Strategy Strategy Analysis

• Business Cases: used to capture information about the recommended change strategy and other potential strategies that were assessed but not recommended.
• Business Model Canvas: used to define the changes needed in the current infrastructure, customer base, and financial structure of the organization in order to achieve the potential value.
• Decision Analysis: used to compare different change strategies and choose which is most appropriate.
• Estimation: used to determine timelines for activities within the change strategy.
• Financial Analysis: used to understand the potential value associated with a change strategy, and evaluate strategies against targets set for return on investments.
• Focus Groups: used to bring customers or end users together to solicit their input on the solution and change strategy.
• Functional Decomposition: used to break down the components of the solution into parts when developing a change strategy.
• Interviews: used to talk to stakeholders in order to fully describe the solution scope and change scope, and to understand their suggestions for a change strategy.
• Lessons Learned: used to understand what went wrong in past changes in order to improve this change strategy.
• MindMapping: used to develop and explore ideas for change strategies.
• Organizational Modelling: used to describe the roles, responsibilities, and reporting structures that are necessary during the change and are part of the solution scope.
• Process Modelling: used to describe how work would occur in the solution scope or during the change.
• Scope Modelling: used to define the boundaries on the solution scope and change scope descriptions.
• SWOT Analysis: used to make decisions about which change strategy is appropriate.
• VendorAssessment: used to determine whether any vendors are part of the change strategy, either to implement the change or to be part of the solution.
• Workshops: used in work with stakeholders to collaboratively develop change strategies.

6.4.7 Stakeholders

• Customer: might be purchasing or consuming the solution that results from the change. Customers can also be involved in a change as testers or focus

Strategy Analysis Define Change Strategy

group members, whose input is considered in the enterprise readiness assessment.
• Domain Subject Matter Expert: have expertise in some aspect of the change.
• End User: uses a solution, is a component of the solution, or is a user temporarily during the change. End users could be customers or people who work within the enterprise experiencing a change. Users might be involved in a change as testers or focus group members, whose input is considered in the enterprise readiness assessment.
• Implementation Subject Matter Expert: have expertise in some aspect of the change.
• Operational Support: directly involved in supporting the operations of the enterprise, and provide information on their ability to support the operation of a solution during and after a change.
• Project Manager: responsible for managing change and planning the detailed activities to complete a change. In a project, the project manager is responsible for the project scope, which covers all the work to be performed by the project team.
• Regulator: ensures adherence to laws, regulations, or rules during and at the completion of the change. The regulator might have unique input to the enterprise readiness assessment, as there might be laws and regulations that must be complied with prior to or as a result of a planned or completed change.
• Sponsor: authorizes and ensures funding for solution delivery, and champions the change.
• Supplier: might help implement the change or be part of the solution once the change is completed.
• Tester: responsible for ensuring that the change will function within acceptable parameters, accomplish the desired result, and deliver solutions that meet an appropriate level of quality. The tester is often involved in validation of components of a solution for which the results will be included in an enterprise readiness assessment.

6.4.8 Outputs

• Change Strategy: the approach that the organization will follow to guide change.
• Solution Scope: the solution scope that will be achieved through execution of the change strategy.

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