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Engineers: Learn Business Taxonomies to Become More Valuable

Be the person that can communicate in digital and analog.

I recently completed an executive leadership course, where I learned the importance of engineers becoming familiar with common business and executive taxonomies to become more effective in their roles. Here are my takeaways and additional research on this topic.

As organizations grow in complexity, engineers who understand and utilize business taxonomies can bridge the gap between technical details and executive-level decision-making, positioning themselves as effective communicators and strategic assets.

Business taxonomies play a crucial role in bridging this gap. These structured systems of classification provide a common language for organizing and categorizing information, enabling engineers to convey complex technical concepts in a clear and understandable manner.

Don’t make the business person an IT person. You, as an IT person have to become the business person.

Engineers who master the use of business taxonomies position themselves as valuable assets within their organizations. Their ability to translate technical details into actionable business insights empowers them to influence strategic decisions, drive innovation, and contribute to the overall success of the company.

By effectively utilizing taxonomies, engineers can:

  • Understand the business perspective
  • Communicate their viewpoint in a way that executives can easily understand
  • Make better decisions together
  • Achieve better outcomes

Common Elements of Executive Communication Taxonomies

Executive communication taxonomies provide a structured framework of terms and concepts that executives can use to clearly and effectively convey complex ideas and make well-informed decisions during meetings and discussions.

Some common elements of executive communication taxonomies include:

TermDescriptionExplain to a 10 Yr. Old
Budget Allocation:The distribution of financial resources to different areas of the business.Think of budget allocation like planning how to spend your allowance. If you get $10, you might decide to spend $5 on toys, $3 on snacks, and $2 on saving for something special. It’s like making a money plan for different things you want.
Competitive Landscape: Analysis of other companies operating in the same industry and how they may impact the organization.Imagine you have a lemonade stand, and there are other kids with lemonade stands too. Looking at the competitive landscape is like checking what they are doing – maybe they have a cool sign or a better recipe. It’s about understanding your lemonade business compared to others.
Key performance indicators (KPIs):The metrics that will be used to measure the organization’s progress towards its goals.KPIs are like the report card for your lemonade stand. How much money did you make? How many cups did you sell? It’s the important stuff that shows if your lemonade stand is doing well.
Market Share:The percentage of the total market that a company or product controls.If there are 10 lemonade stands in your neighborhood, and you sell 5 cups, your market share is 50%. It’s like saying, “I sold half of all the lemonade in our neighborhood.”
Milestones:Significant points or events in a project or timeline.Milestones are like checkpoints in a race. If your lemonade stand is a race, hitting a milestone could be reaching a certain number of cups sold. It’s a way to know you’re on the right track.
Quarterly or Annual Reports:Summaries of a company’s financial performance and strategic updates.Imagine you’re running a lemonade stand. At the end of each day, you count your earnings and subtract the cost of the ingredients. That’s like a quarterly report. At the end of the summer, you add up all your earnings and expenses. That’s like an annual report.
Return on Investment (ROI):A measure of the profitability of an investment, often expressed as a percentage.Let’s say you buy a new bike for $100. You use it to deliver newspapers and earn $50 a week. After two weeks, you’ve made back your $100 investment. That means your ROI is 100%. The higher the ROI, the better the investment.
Resources:The people, money, and other assets that the organization needs to achieve its goals.Imagine you’re building a treehouse. You’ll need wood, nails, a hammer, and a friend to help you. These are your resources. Businesses need resources like people, money, and equipment to achieve their goals.
Stakeholder Engagement:Strategies for communicating and interacting with various stakeholders, including employees, customers, investors, and the community.Let’s say you’re starting a new club at school. You need to talk to your teachers, classmates, and parents to get their support. That’s stakeholder engagement. Businesses need to communicate with their employees, customers, investors, and the community to succeed.
Strategic InitiativesMajor projects or programs that align with the organization’s overall strategy.Imagine you’re planning a big family trip. You need to decide where to go, how to get there, and what to do once you’re there. These are your strategic initiatives. Businesses need major projects or programs to achieve their overall strategy.
Strategic Objectives:High-level goals that the organization aims to achieve over a specific period.Let’s say you want to get good grades in school. You might set objectives like studying for an hour each night and doing all your homework. Strategic objectives are high-level goals that an organization aims to achieve over a specific period.
SWOT Analysis:An evaluation of a company’s Strengths, Weaknesses, Opportunities, and Threats to inform strategic planning.Imagine you’re playing a game of basketball. You need to know your strengths (like being tall and fast) and weaknesses (like not being a good shooter). You also need to know the opportunities (like playing on a good team) and threats (like playing against a tough opponent). That’s a SWOT analysis. Businesses use SWOT analysis to inform their strategic planning.
Tactics:The specific actions that will be taken to implement the strategy.Imagine you’re trying to save up for a new video game. You might save your allowance, do chores for extra money, or sell old toys. These are your tactics. Businesses need specific actions to implement their strategy.
Value Proposition:The unique value that a product or service offers to customers.Let’s say you’re selling homemade cookies. You need to convince people that your cookies are better than the ones at the store. That’s your value proposition. Businesses need to explain why their product or service is unique and valuable to customers.
Vision and mission:The organization’s long-term goals and objectives.Imagine you want to be a doctor when you grow up. That’s your vision. Your mission is to study hard and get into medical school. An organization’s vision is its long-term goals, and its mission is how it plans to achieve those goals.
Common Elements of Executive Communication Taxonomies

Risk Management Taxonomies

A taxonomy of the most common risk-related terms and concepts is essential for dealing with potential problems and unexpected situations:

TermDescriptionExplain to a 10 Yr. Old
Contingency Plan:A set of predetermined actions to be taken when specific risks materialize.Imagine you have a backup plan for your birthday party in case it rains. A contingency plan is like that but for grown-up stuff. It’s a set of plans ready to use if something unexpected or risky happens.
Compliance Risks:Risks associated with failing to comply with relevant laws, regulations, and industry standards.Think of rules in a game. If you don’t follow them, you might get in trouble or lose. In real life, not following laws or important rules can be a big problem, and that’s what compliance risks are about.
Crisis Management:Protocols and strategies for responding to and recovering from a crisis or unexpected event.Remember when the power went out, and your parents had flashlights and candles ready? Crisis management is like having a plan and tools for when something really bad happens, so you can fix it and get back to normal.
Cybersecurity Risks: Potential threats to the security and integrity of digital assets and information.Just like you lock your diary to keep it private, companies need to protect their computer stuff from bad people. Cybersecurity risks are like making sure the computer doesn’t get ‘sick’ or that nobody steals important information.
Enterprise Risk Management (ERM):An integrated and holistic approach to managing all types of risks across an organization.Think of a big puzzle with many pieces. ERM is like looking at the whole puzzle, not just one piece. It’s about making sure everything in a company works together and is safe from risks.
Financial Risks:Risks related to financial markets, currency fluctuations, and other economic factors.Imagine your piggy bank getting lighter because the value of your coins changes. Financial risks are like that, but for grown-ups. It’s about being careful with money because things like prices and money values can change.
Insurance Coverage:Evaluating and maintaining appropriate insurance policies to mitigate certain types of risks.When you play a game, sometimes you have special cards that protect you. Insurance is like those cards for real life. It helps if something bad happens, like if your toy breaks or your house gets a little damaged.
Operational Risks:Risks arising from internal processes, systems, people, or external events that could impact operations.Think about a big robot working in a factory. If something goes wrong with the robot or the people working, it can stop making toys. Operational risks are like making sure everything works smoothly so the toys keep coming.
Reputational Risk:The risk of damage to the organization’s reputation, brand, or image.You know how your friends might not want to play if you break the rules? Reputational risk is like that for companies. If they do something wrong, people might not want to be friends with them (buy their stuff) anymore.
Risk Appetite:The level of risk that an organization is willing to accept in pursuit of its objectives.It’s like saying how much spicy food you can handle. Companies decide how much risk they’re okay with to reach their goals. Some like it a bit risky, and some like it safer.
Risk Assessment:The process of evaluating potential risks, including their likelihood and potential impact on the organization.Imagine making a list of all the things that could go wrong when you plan a big game. That’s a bit like risk assessment – thinking about what might happen and how bad it could be.
Risk Communication:Effectively communicating risks to stakeholders, both internal and external.If you found out the game rules changed, you’d tell your friends, right? Risk communication is like that but for grown-ups. It’s telling everyone involved about the possible problems and how to deal with them.
Risk Governance:The framework, policies, and processes for managing and overseeing risk management activities.Think of it like having a boss who makes sure everyone follows the rules. Risk governance is about having leaders who make sure the company is safe from risks and does things the right way.
Risk Mitigation:Strategies and actions taken to reduce or eliminate the impact of identified risks.Remember playing tag and having a safe zone? That’s a bit like risk mitigation – finding ways to make problems not so bad or stop them from happening.
Risk Register: A comprehensive list of identified risks along with relevant details such as impact, likelihood, and mitigation strategies.It’s like having a list of all the things that could go wrong in your game, along with how to stop them. A risk register is a grown-up list for companies, helping them be ready for possible problems.
Scenario Planning:Anticipating and preparing for different potential future scenarios to enhance resilience.Pretend you’re the captain of a spaceship. Scenario planning is like thinking about what might happen during your space journey and preparing for different things, like meeting aliens or fixing a broken spaceship.
Strategic Risks:Risks associated with the execution of the organization’s strategy, including market changes and competition.Imagine you’re the captain of a soccer team. Strategic risks are like thinking about how the other team plays and planning how to win. It’s about making sure the big plan works well.
Supply Chain Risks:Potential disruptions or issues within the supply chain that could impact production or delivery.Think about all the people who help make your pizza, from the cook to the delivery person. Supply chain risks are like making sure everyone does their job so you get your pizza on time and hot.
Risk Tolerance:The acceptable level of variation relative to achieving business objectives.It’s like saying how many mistakes you’re okay with when playing a game. Companies decide how much variation they can handle while still reaching their goals – how much risk is too much or just enough.

Finance and Budgeting Taxonomies
To organize and manage financial information, businesses often use different sets of categories and structures called taxonomies and frameworks. These frameworks help executives make informed decisions and allocate resources effectively.

What would you add to this list? Share with me @azeemnow

TermDescriptionExplain to a 10 Yr. Old
Capital Expenditures (CapEx) vs. Operational Expenditures (OpEx):CapEx: Investments in long-term assets, such as equipment or facilities.CapEx: Think of buying things that last a really long time, like a computer for your school or a playground for the park.
OpEx: Day-to-day operational expenses, including rent, utilities, and wages.OpEx: This is like everyday spending, such as paying for electricity, water, or someone’s salary to help with daily tasks.
Cost Centers:Administrative Costs: Encompasses general administrative expenses such as salaries, office supplies, and utilities.Administrative Costs: Money used for things like paying your teacher, buying pencils, and keeping the lights on at school.
Production Costs: Includes all costs associated with manufacturing goods or delivering services.Production Costs: Money spent on making things, like buying ingredients to bake cookies or materials to build a treehouse.
Depreciation and Amortization:Depreciation and amortization are expenses that reflect the wear and tear of assets over time.
Depreciation: is used for tangible assets, such as buildings and equipment.
Depreciation is like the cost of using something up. It’s the amount of value that something loses over time. For example, if you buy a bike for $100 and it depreciates by $10 a year, then after 5 years, the bike will only be worth $50.
Amortization: is used for intangible assets, such as patents and copyrights.Amortization: is similar to depreciation, but it is used for intangible assets, which are things that you can’t touch. Examples of intangible assets include patents, copyrights, and trademarks. These assets also lose value over time, but they do so in a different way than tangible assets.
For example, if you buy a patent for a new invention, the patent will only be worth something if it is still useful. If someone else comes up with a better invention, then your patent will lose value.
Expense Categories:Fixed Expenses: Costs that remain constant regardless of production levels or sales, such as rent or salaries.Fixed Expenses: Things you have to pay regularly, like rent for your house or your teacher’s salary.
Variable Expenses: Costs that vary proportionally with production or sales, such as raw materials or commissions.Variable Expenses: These change depending on what you’re doing, like buying more ingredients when baking more cookies.
Geographic Segmentation:Domestic vs. International: Separation of financials based on geographical location.Domestic vs. International: This is like comparing your neighborhood (domestic) to places far away (international).
Regional Breakdowns: Analysis of performance in specific regions or countries.Regional Breakdowns: Understanding how well things are going in specific parts of your neighborhood or faraway places.
Performance Metrics:Key Performance Indicators (KPIs): Quantifiable measures of business performance.Key Performance Indicators (KPIs): Like report cards, showing how well you’re doing in different subjects.
Return on Investment (ROI): Analysis of the profitability of an investment.Return on Investment (ROI): Imagine you lend a friend your toy, and they give you some of their snacks in return. It’s like figuring out if your toy “investment” was a good idea.
Profit and Loss (P&L) Categories:Cost of Goods Sold (COGS): Direct costs associated with producing goods or services.Cost of Goods Sold (COGS): The money you spent on making or buying the cookies.
Gross Profit: Revenue minus COGS.Gross Profit: How much money you made from selling cookies, minus the cost of making them.
Net Profit Before/After Tax: The final profit after all expenses, including taxes.Net Profit Before/After Tax: The money you have left after paying for everything, including taxes (like a cookie tax).
Operating Expenses: All non-production expenses.Operating Expenses: Other costs, like renting the space to sell your cookies.
Revenue: Total income generated by the business.Revenue: How much money you made from selling all your cookies.
Project Budgets:Project Revenue and Costs: Specific budgets for individual projects.Project Revenue and Costs: Planning how much money you’ll make and spend when doing a special task, like organizing a school fair.
Revenue Streams:Product Revenue: Income generated from the sale of goods or services.Product Revenue: Money from selling things like lemonade or toys.
Service Revenue: Income generated from providing services.Service Revenue: Money earned by doing helpful things for others, like babysitting or mowing lawns.
Tax Categories:Income Tax: Amount set aside for income taxes.Income Tax: Like a small part of the money you make that you give to a school fund.
Sales Tax: Collected on sales of goods and services.Sales Tax: Extra money added to the price of things you buy, which goes to the government.
Time Periods:Annual Budgets: Financial plans for a fiscal year.Annual Budgets: Planning how you’ll spend your money for the entire school year.
Quarterly or Monthly Budgets: Short-term budgeting for more immediate planning.Quarterly or Monthly Budgets: Planning how to spend your money for shorter periods, like a few months or weeks.
Finance and Budgeting Taxonomies

What would you add to this list? Tell me @azeemnow

Business Performance and Competition Taxonomies
Various frameworks and classifications are commonly used to examine and evaluate crucial aspects of a company’s operations and competitive environment. These systems help businesses gain insights into their performance and identify areas for improvement. Some of the most widely used taxonomies in this domain include:

TermDescriptionExplain to a 10 Yr. Old
Balanced Scorecard:Financial Perspective: Financial performance indicators.Financial Perspective: Imagine it’s like keeping track of how many cookies you have (money).
Customer Perspective: Customer satisfaction and relationship metrics.Customer Perspective: Making sure your friends are happy with your cookies (satisfaction).
Internal Business Processes: Efficiency and effectiveness of internal operations.Internal Business Processes: Figuring out the best way to bake cookies efficiently.
Learning and Growth Perspective: Employee development and innovation metrics.Learning and Growth Perspective: Learning new cookie recipes and becoming better at baking.
Benchmarking:Comparison: of the company’s performance against industry benchmarks or competitors.Comparison: It’s like checking if your cookie recipe is as good as your friend’s recipe.
Competitor Analysis:Market Positioning: Understanding where the company stands in comparison to competitors.Market Positioning: Knowing if your cookie stand is in a good spot compared to others.
Strengths and Weaknesses: Identifying the competitive advantages and disadvantages.Strengths and Weaknesses: Finding out what makes your cookies special and where you can improve.
Market Share: Assessing the percentage of the market controlled by the company.Market Share: Seeing how many people buy your cookies compared to others.
Financial Ratios:Efficiency Ratios: Assessing the company’s ability to meet short-term obligations.Efficiency Ratios: Checking if you’re using your ingredients (resources) wisely.
Leverage Ratios: Examining the use of debt in the company’s capital structure.Leverage Ratios: Figuring out if you borrowed too much sugar (debt).
Liquidity Ratios: Assessing the company’s ability to meet short-term obligations.Liquidity Ratios: Making sure you have enough flour (money) for urgent cookie orders.
Profitability Ratios: Evaluating the company’s ability to generate profit.Profitability Ratios: Checking if you’re making enough extra cookies to share.
Market Segmentation:Division of the market into specific customer segments for targeted analysis.Division: Grouping your customers based on who likes chocolate chip cookies, who likes oatmeal cookies, etc.
PESTLE Analysis:Economic: Analysis of economic conditions and trends.Economic: Checking if people have enough money to buy cookies.
Environmental: Evaluation of environmental and sustainability factors.Environmental: Making sure your cookie ingredients are good for the environment.
Legal: Consideration of legal and regulatory aspects.Legal: Following the rules for selling cookies.
Political: Evaluation of the impact of political factors on the business.Political: Seeing if new rules from the cookie council will affect your business.
Social: Examination of social and cultural influences.Social: Knowing what cookies are trendy or popular.
Technological: Assessment of technological factors affecting the industry.Technological: Using new gadgets or tools to bake better cookies.
Porter’s Five Forces:Bargaining Power of Buyers: The influence buyers have on prices and terms.Bargaining Power of Buyers: Seeing if your friends can ask for discounts on your cookies.
Bargaining Power of Suppliers: The influence suppliers have on the cost of inputs.Bargaining Power of Suppliers: Checking if your ingredient suppliers can change their prices.
Intensity of Competitive Rivalry: The level of competition within the industry.Intensity of Competitive Rivalry: How many other kids are selling cookies in your neighborhood.
Threat of New Entrants: How easy it is for new competitors to enter the market.Threat of New Entrants: If new kids start selling cookies, will it be hard for you to sell yours?
Threat of Substitute Products or Services: The availability of alternative products or services.Threat of Substitute Products or Services: If your friends start making cupcakes instead of cookies.
Product Life Cycle:Decline: Market saturation and decreasing demand.Decline: People might get tired of your cookies, and fewer want them.
Growth: Period of rapid market acceptance.Growth: Everyone suddenly loves your cookies, and you’re selling a lot.
Introduction: Launch and initial market entry.Introduction: You just started selling your first batch of cookies.
Maturity: Stable market with slower growth.Maturity: Your cookie business is steady, and people like your cookies.
SWOT Analysis:Opportunities: External factors that could benefit the company.Opportunities: Finding new ways to sell more cookies, like at a school event.
Strengths: Internal factors that give the company an advantage.Strengths: Knowing you bake the tastiest cookies in the neighborhood.
Threats: External factors that could pose challenges to the company.Threats: If it rains, fewer people might come to buy your cookies.
Weaknesses: Internal factors that may put the company at a disadvantage.Weaknesses: Your cookie stand might be too small, and you can’t bake enough cookies at once.
Business Performance and Competition Taxonomies

What would you add to this list? Tell me @azeemnow

Startup and Business Investment Taxonomies

These taxonomies help business leaders sort, examine, and make decisions about investments in new companies or existing businesses based on various factors, strategies, and objectives. The specific taxonomy used may vary depending on the industry, company size, and investment objectives.

TermDescriptionExplain to a 10 Yr. Old
Stage of Investment:Seed Stage: Initial capital for product development and market research.Seed Stage: Like planting seeds to grow a garden; it’s the beginning when the idea is just starting.
Early Stage: Funding for product launch and initial market entry.Early Stage: Watering the plants to help them grow a bit more with the first leaves and flowers.
Growth Stage: Capital for expanding market reach and scaling operations.Growth Stage: The garden is getting bigger, and there are more flowers and plants.
Expansion Stage: Investment to enter new markets or diversify products.Expansion Stage: Adding new sections to the garden or growing different types of plants.
Investment Types:Equity Investment: Investors receive ownership shares in the company.Equity Investment: Friends getting a small part of your toy collection in exchange for helping you organize them.
Debt Investment: Capital is provided as a loan with interest and repayment terms.Debt Investment: Lending your friend a toy, and they promise to give it back with an extra toy as a thank-you.
Convertible Notes: A form of debt that can convert into equity.Convertible Notes: Lending your friend a toy, and later they decide to trade it for a share of your toy collection.
Venture Capital: Funding from specialized firms focused on high-growth potential startups.Venture Capital: Getting help from a special friend who gives you extra toys because they believe your collection will be amazing.
Angel Investment: Individual investors providing funding in exchange for equity.Angel Investment: A friend giving you toys because they think your collection is special.
Industry Verticals:Technology Startups: Innovation-focused companies in IT, software, hardware, etc.Technology Startups: Creating new and cool toys with the latest technology.
Biotech and Healthcare Startups: Companies in the medical and health sciences field.Biotech and Healthcare Startups: Making toys that help keep everyone healthy and happy.
Consumer Goods and Services: Products and services for end consumers.Consumer Goods and Services: Toys and things that everyone can use.
Green and Sustainable Startups: Environmentally conscious businesses.Green and Sustainable Startups: Toys that are good for the environment.
Financial Technology (FinTech): Companies innovating in the financial services sector.Financial Technology (FinTech): Toys that help with money and buying/selling toys.
Risk Profiles:High-Risk, High-Reward Investments: Startups with the potential for significant returns but also high risk.High-Risk, High-Reward Investments: Trying something new that might bring lots of joy but also some challenges.
Low-Risk, Stable Returns: Investments in more established businesses with predictable returns.Low-Risk, Stable Returns: Choosing things that are more certain and predictable.
Exit Strategies:Initial Public Offering (IPO): Going public on the stock exchange.Initial Public Offering (IPO): Sharing your toy collection with many friends by having a big toy show.
Acquisition: Being bought by a larger company.Acquisition: A big friend liking your toy collection so much that they want to play with it too.
Merger: Combining with another company to form a new entity.Merger: Combining your toy collection with another friend’s to make an even bigger collection.
Management Buyout (MBO): Current management buys the business from existing owners.Management Buyout (MBO): You and your friends deciding to buy the toy collection from your parents.
Market Positioning:Market Leader: Dominant position in the market.Market Leader: Being the friend everyone looks up to because you have the best toys.
Challenger: Competing aggressively to gain market share.Challenger: Trying hard to have even cooler toys than the popular friend.
Follower: Adapting to changes and following market trends.Follower: Playing with toys that are similar to what the popular friend has.
Revenue Models:Subscription-based: Revenue generated through subscription fees.Subscription-based: Friends paying a small amount regularly to play with your toys.
Transaction-based: Revenue earned per transaction.Transaction-based: Friends giving you a little toy every time they borrow one of yours.
Advertising-based: Generating revenue through advertising.Advertising-based: Getting extra toys from companies that want to show their toys to your friends.
Freemium Model: Offering basic services for free and charging for premium features.Freemium Model: Letting friends play with your basic toys for free but charging for the special ones.
Geographic Presence:Local: Operating in a specific region or locality.Local: Sharing toys with friends in your neighborhood.
National: Expanding operations to cover an entire country.National: Expanding to share toys with friends all over your country.
Global: Conducting business on an international scale.Global: Making friends from different countries and sharing toys with them.
Strategic Alliances:Partnerships: Collaborative agreements with other companies.Partnerships: Playing together with other friends and sharing toys.
Joint Ventures: Joint business initiatives with shared responsibilities and risks.Joint Ventures: Doing a big project with another friend and sharing the toys you both get.
Strategic Investments: Investing in other businesses for mutual benefit.Strategic Investments: Giving toys to a friend’s project because you think it will make your toy collection even better.
Technology Readiness:Emerging Technologies: Focused on cutting-edge innovations.Emerging Technologies: Playing with the newest and coolest toys that just came out.
Adopting Established Technologies: Implementing proven technologies for market entry.Adopting Established Technologies: Choosing toys that are already popular and lots of friends have enjoyed playing with them.

By embracing business taxonomies, engineers can transcend their traditional technical roles and become strategic partners in shaping the direction of their organizations. Their ability to bridge the gap between technical expertise and business acumen makes them invaluable assets in today’s complex and data-driven business environment.

What would you add to this list? Share with me @azeemnow

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