What is the definition of an “Enterprise Business”?

Is 20^th century business organization and management really business organization and management?

We either went to business school, read books, and attended training to learn about business organization and management. We learned many theories and methods for organizing and managing the business. But, in any of this, has anyone ever defined the business and described what the “business” is that we are organizing and managing.

No one ever has! None of the 20^th century management books and teachings on business administration, management, and organization actually show us how to administer, manage, or organize the actual business!

There are many definitions of “Business”, but none define the “Business” that we must organize and manage

There are many kinds of business enterprises both for profit, like corporations and companies, and not-for-profit, like institutions, associations, and government agencies. All of these business enterprises operate a business. But what is the enterprise business? Does your enterprise organize and manage its business? What is the definition of the “business” that is organized and managed? If the business changes, does the business organization change as well?

If you look in dictionaries, there are many definitions of business, and even the business enterprise. There has never been a specific definition of enterprise business to be used for business organization and management. The most widely-accepted definition of business for an enterprise seems to be the “activity of providing goods and services“. But, do 20^th century business organization structures organize “the activity of providing goods and services”? Do 20^th century business management structures manage “the activity of providing goods and services”? 20^th century organization and management structures do not organize and manage the business, but, instead, are laid over the business. Overlaid structures conflict with the actual business causing unsolvable problems with reorganizations, change management, business and information complexity, unknown costs and value, alignment with the business, and on and on.

The business is generally defined as “the activity of providing goods and services”

What does “the activity of providing goods and services” mean? If we study this definition, we see that the business actually has two components:

One component is “the activity of providing”. Business activity is the actions of performance in carrying out the business. But, how do we carry out the business? We all know that in order to establish, develop, and operate a business we need capital. Capital is in the money and other supplies, humans and their capabilities, infrastructure and equipment, the business organization and processes, the strategies and plans, the competitive tactics, and information that are utilized in the business. We carry out the business through the utilization of human and other capital, such as equipment, system processes, and records. So, one component of the business is the utilization of capital in performance. Utilization of capital is the cost of doing business.

The other component of the business is “the goods and services provided”. Goods and services are the economic output results produced by the business to achieve business objectives, meet the needs of business customers, and produce business revenue results. Business results are the outputs produced from performance that can be counted and measured. Business outputs or results are produced throughout the business, whether it be a maintained machine, a completed report, material put in inventory, a finished product component, a sales order booked, human capital trained, project completed, etc. A final result that goes to the customer is produced by a chain of results, such service planned, service sold, service results produced, results accepted by customer, customer payment received, etc. Results contain the value created by the business.

21^st Century definition of a business, “the utilization of capital in performance solutions to produce value in results”

When we analyze the business, we can see that the enterprise business is “the utilization of capital in performance solutions to produce value in results”. Now we have a definition of “business” that we can use to organize and manage the business.

In order to manage the enterprise business, we must organize enterprise business results and performance

So in order to organize and manage the business, we must organize and manage the two components of the business. One, the capital invested in the business that is utilized in business performance, and two, the economic output results produced by business performance.

Each result produced by the business is produced by utilizing specific capital. This capital must be identified, described, and organized as performance solutions, the specific capital items utilized to produce a result. Capital must be managed in both development, to develop new performance solutions needed, and in operation, to support the performance solutions being utilized. The main criterion for organizing capital for development and support is the human capabilities and expertise needed. Capital requiring the same professional capabilities is organized together in a category for management and support. The second criterion for organizing capital, within each category, is the way the capital is utilized by the business in three capital classes; to provide capital for an organization unit to be ready to produce a set of results, to provide the capital consumed in producing each specific result, and to provide the information capital needed to produce and document results. When we organize and manage capital, defined as specific performance solutions, by capital category and class, we have a performance structure. Then, we can manage performance as one component of the business and manage the cost of doing business.

The economic output results produced by the business must be organized to manage business production and the value created by the business. Results must be defined as some level to count and measure specific outputs from the business. A high-level result, like fulfilled order, may require a chain of lower-level results like, customer contacted, order entered, order filled, invoice produced, order delivered, etc. Results that require the same capital, particularly human or specific equipment capital, are organized together. Organization unit is an attribute of each result. Organization units are defined by the results they are responsible to produce. Each result also must have a manager, human capital responsible for producing the result. When we organize and manage results defined at various levels in the business, we have a result structure. Then, we can manage results as the other component of the business and manage the value created by the business.

The enterprise business is organized by deploying specific capital in performance solutions to produce business outputs in results

Once capital is organized as specific performance solutions and business economic outputs are organized as specific results, the business can be organized. The business is organized by deploying specific performance solutions from the performance structure to produce specific results in the result structure. The combination of the result structure and the performance structure is the enterprise business structure. The structure defines the business in the utilization of capital in performance solutions to produce value in results. An organization unit business structure shows the results assigned to the unit and the capital deployed to produce the results.

After we organize the business, we can then manage the business to manage the full cost of performance, the value created in results, the result value-added across the business, performance capacity producing a volume of results, performance effectiveness to produce high-quality results, and performance uncertainty to reduce result risk. We can optimize the specific performance producing specific results, and gain many other breakthrough advantages, because, finally, the business is organized and managed.

Once the business is organized the capital items utilized in processes and information systems and other overlaid structures are organized as a part of the business. Then all 20^th century organization and management structures can be removed with all of the unsolvable 20^th century management problems.

We must define what a business is first, and then rethink our teachings and methods of business organization and management

Today, the enterprise is hampered by many unsolvable 20^th century management problems, because the enterprise business is not organized and managed. So, we must think again when we are educating students, writing books, or devising methods of business organization and management to make sure that the “business” that we are organizing and managing is actually the “business”.

The only way to organize and manage to business is to organize and manage “the utilization of capital in performance solutions to produce value in results” through Result-performance Management (R-pM). Visit result-performance-management.com to learn how to use R-pM to organize the business for 21^st Century Management.