Enterprise ontology theory and methodology

Enterprise Ontology
Jan L.G. Dietz
Enterprise Ontology
Theory and Methodology
With 99 Figures and 9 Tables
123
Author
Jan L.G. Dietz
Department of Software Technology
Faculty of Electrical Engineering, Mathematics,
and Computer Science
Delft University of Technology
Mekelweg 4
2628 CD Delft, The Netherlands

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To my CIAO! friends
Prologue
There is nothing more practical than a good theory
When you study the course of affairs in an arbitrary enterprise as a naïve
observer, you notice that the persons in the enterprise seem busy like ants
in executing a lot of different a ctivities, thereby using a variety of ma-
chines and equipment. These persons appear to produce and shuffle around
a lot of reports and other documents, while at the sa m e time co m municat-
ing quite a lot too, eith er face-to-face or by telephone or by some other
means. Your first impression therefore invariably is one of huge diversity
and complexity, and of an apparent lack of structure and logic. Moreover,
if you revi sit the enterprise after some time, it could very well be the case
that you hardly recognize it, while from the outside it is still the same, i.e.,
the enterprise is still in the same business. You may see new persons and
you may see kno wn persons doing other things, you may notice that other
machines and/or equi pment are being used, and that the flows o f docu-
ments and forms have changed. The only constant factors seem to be the
huge diversity and complexity, and the difficulty in seeing a structure or
logic in it. You may wonder how this enterprise managed to change. What
was the red esign plan, and what was the reengineer ing plan, and why
would they be right? How did one proceed to bring about the intended

changes? How were they justified and ev aluated?
Everyone who directed or carried out a substantial organizational
change would call these questions highly relevant, and, probably, also
rather academic. He or she knows that substantial changes get acco m-
plished generally only with a lot of cheer luck, meaning that they rely on
unprecedented, sometimes magical achievements of the people who actu-
ally do t he work. This current practice of many unsuccessful project s, of
lucky chances instead of controlled execution of well-designed plans, con-
stitutes the motivation for the work that is described in this book, work that
has been both theoretical and practical, and certainly not academic in the
colloquial sense of the word.
VIII Prologue
If one thing catches the eye in almost all literature ab out and ap-
proaches to the (re)designing and (re)engineering of enterprises, including
such subareas as business process design and engineering, and information
systems design and engineering, it is the lack of a well-founded theory
about the operation of enterprises. Often even the most basic notions, like
action and actor an d process, are not clearly and precisely defined. Obvi-
ously, one cannot expect much real help of such approaches.
The gro wing interest in the practical application of the notion of ontol-
ogy provides a chance to make a fresh start, to bring approaches to the
(re)designing and (re)engineering of enterprises to a higher level of qual-
ity. In order to achieve this, one has to find a way to separate the stable on-
tological essence of an enterprise from the variable way in which it is real-
ized and implemented. That is the only hope for mastering the diversity
and complexity in contemporary ente rprises. What we need is a theory in
which the concepts of essence and realizatio n and implementation and all
other relevant concepts have a well-defined place. Such a theory and a
matching methodology, which has proven to be effective in num erous
practical proje cts, constitute the contents of this book.

I am fully awar e that I have profited from the feedback I received in the
past fifteen years from a large number of people, which continually caused
me to reconsider my thoughts
1
. Instead of listing the names I have in mind,
which would do injustice to the ones I forget, I confine myself to mention-
ing that they belong, in a stimulating mixture, to three groups. The first
consists of the MSc and PhD students, formerly at the University of Maas-
tricht, and currently at Delft University of Technology. The second is con-
stituted by the colleagues and assistants, in both universities, I have col-
laborated with or still collaborate with. The third group consists of
practitioners, in all lines of business. I a m particularly happy to notice that
nearly all current Ph D students belong also to this group. They know fro m
their own experience the problems in enterprises, an d they have d iscovered
that there is only one way out: improving your way of thinking.
I could have waited for another couple of years before having this book
published, while continually adding and improving things. Instead I de-
cided to do it now, for several reasons, of which the most important one is
that I wanted to finish something. In this volume, I focus on describing the
theory and the methodology of enterprise ontology, leaving untouched
probably the most interesting part for pr actitioners: the over whelming
amount of practical experien ce in applying the methodology, which has r e-
cently been surveyed [24]. I can only promise that this will be taken care
1
I refer here to a quote that is attributed to Richard Feynmann: “If you think you
understand something, you have not thought about it enough”.
Prologue IX
of; there will appear a second volume containing a se lection of the enor-
mous variety of practical applications. For now, I wish you a joyful learn-
ing experience in studying this first volume on enterprise ontology.

Delft, January 2006,
Jan L.G. Dietz
Contents
Part A: Introduction
1 Outline of the Book 3
2 What is Enterprise Ontology? 7
3 An Explanatory Case 15
3.1 The Analysis of the Case Volley 16
3.2 The Ontological Model of the Case Volley 24
Part B: Foundations
4 Factual Knowledge 3 5
4.1 The Ontological Parallelogram 35
4.2 The Ontology of a World 41
5 A World Ontology Specification Languag e 45
5.1 The Declaration of Statum Types 46
5.2 The Specification of Existence Laws 49
5.3 The Derivation of Statum Types 51
5.4 Factum T ypes and Occurrence Laws 55
6 The N otion of System 57
6.1 The Distinct System Notions 57
6.2 Formal Definition Ontological System 6 0
7 The N otion of Model 63
7.1 Definition of Model 6 3
7.2 The White-Box Model 65
7.3 The Black-Box Model 67
8 The Role of Ontology in Enterprise Engineering 71
8.1 Design and E ngineering 71
8.2 The System Development Process 75
XII Contents
Part C: The Theory

9 The O peration Axiom 81
9.1 Coordination Acts 83
9.2 Production Acts 85
9.3 Actors 87
10 The Transaction Axiom 89
10.1 The Basic Transaction Pattern 90
10.2 The Standard Transaction Pattern 93
10.3 The Cancellation Patterns 95
11 The Composition Axiom 99
12 The D istinction Axiom 105
12.1 Communication 106
12.2 Coordination 109
12.3 Production 113
13 The Organization Theorem 115
13.1 The Realization of an Organization 117
13.2 The Implementation of an Organization 120
14 The CRISP Model 127
14.1 Transaction Time Aspects 127
14.2 Formal Definition of the C RISP Model 130
14.3 The Crispienet 133
Part D: The Methodology
15 The Modeling Method 139
15.1 The Distinct Aspect Models 139
15.2 The Perfoma-Informa-Forma Analysis 144
15.3 The Coordination-Actors-Production Analysis 149
15.4 The Transaction Pattern Synthesis 154
15.5 The Result Structure Analysis 157
15.6 The Construction Synthesis 158
15.7 The Organization Synthesis 158
16 The Interaction Model 1 59

16.1 The IAM of the Library 160
Contents XIII
16.2 The IAM of the Pizzeria 166
16.3 Practical Relevance of the Interaction Model 170
17 The Process Model 173
17.1 The PM of the Library 174
17.2 The PM of the Pizzeria 180
17.3 Practical Relevance of the Process Mode l 183
18 The Action Model 185
18.1 The AM of the Library 186
18.2 The AM of the Pizzeria 191
18.3 Practical Relevance of the Action Model 195
19 The State Model 197
19.1 The SM of the Library 200
19.2 The SM of the Pizzeria 203
19.3 Practical Relevance of the State Model 204
20 The Interstriction Model 205
20.1 The ISM of the Library 206
20.2 The ISM of the Pizzeria 209
20.3 Practical Relevance of the Interstriction Model 213
Epilogue 215
Appendix: The Example Cases 217
Bibliography 225
Glossary 229
Index 241
Part A: Introduction
1 Outline of the Book
Part A contains introductory material for the core of the book. After the
outline, in Chap. 1, the notion of enterprise ontology, in the context of on-
tology in general and of the obse rved societal needs for enterprise ontol-

ogy, is discussed in Chap. 2. It turns out that the notion of enterprise ontol-
ogy could be beneficial not only for managers and designers of
organizations and information systems, but also for the employees and the
clients of an enterprise, b e it a commercial company or a government
agency. In Chap. 3 this notion is exemplified, taking the operational activi-
ties of becoming a member of a tennis club as the l eadi ng example. De-
spite the small size of this enterprise, you will acquire a basic knowledge
of enterprise ontology that is appropriate and sufficient to study the re-
mainder of the book.
Foundation
Before we present the theory that underlies our notion of enterprise ontol-
ogy in Part C, it is ne cessary to lay in Part B a soun d foundation for it.
First, in Chap. 4, we investigate meticulously what it means to have
knowledge of some world, and in particular what ontological knowledge
is. A number of basic notions are precisely defined and discussed, among
which are state, transition and event. The investigation leads to the relevant
distinction between two kinds of facts, which we will call facta and stata.
Chapter 5 contains the grammar of a first order logical language that is
fully appropriate for describing the ontology of a world. For a thorough
understanding of our notion of enterprise ontology, in fact, for understand-
ing any system ontology, we need to discuss the two kinds of system no-
tions th at appear to be in use, particularly wit h respect to enterprises: the
function- and beh avior-oriented syste m notion and the construction- and
operation-oriented system notion. As will become clear, they are not really
two distinct system notions but actually two distinct kinds of models of
only one system notion. The t wo kinds of mod els are the black-box model
and the white-box model. A thorough pr esentation and discussion of the
notion of system is contained in Chap. 6. The notion of model is presented
and discussed in Chap. 7. Part B is completed by a study of the role of on-
tology in t he development of systems in Chap. 8, in particular, of enter-

4 1 Outline of the Book
prises and their supporting information systems. As in Chap. 4 , a number
of well-known notions are precisely defined, making use of the new notion
of ontology. Also, the need for developing the new discipline of enterprise
engineering is discussed.
Theory
Part C contains the presentation of the theory that underlies our notion of
enterprise ontology, called the  -theory
2
. An enterprise will be defined as
a (heterogeneous) system in the category of social systems. Being a social
system means that the elements are social individuals, i.e. subjects. The  -
theory consis ts of four axioms an d one t heorem. The firs t axiom, the o p-
erati on axiom, is discussed in Chap. 9. We abstract from the subjects in
order to concentrate on the different actor roles they fulfill. An actor is a
subject fulfilling an actor role. Actors perform two kinds of acts: produc-
tion acts and coordination acts. By performing production acts they con-
tribute to achieving the purpose or the mission of the enterprise. By per-
forming coordination acts they enter into and comply with mutual
commitments about production acts. The second axiom is the transaction
axiom. It states that production and coordination acts occur i n generic so-
cionomic patterns, called transactions. These are discussed in Chap.10.
The third axiom is the composition axiom; it is pres ented and discussed in
Chap. 11. It states that every t ransaction is either enclos ed in s ome other
transaction or it is a cus tomer transaction or i t is a self-activating transac-
tion. The fourth axiom is the distinction axiom, discussed in Chap. 12. It is
about the integrating role that human beings play in constituting an enter-
prise. Three human abilities are distinguished, called performa, informa,
and forma . The forma ability concerns the being able to handle data and
documents, so e.g . to copy, transport and store documents. The informa

ability regards the intellectual capacity of human beings, the ability to rea-
son, to compute or derive new facts from existing ones. The p erforma abil-
ity concerns the ability of human beings to produce original new things,
i.e. f acts that cannot be derived from existing facts. Examples of those
facts are de cisions and judgments. Only human beings can create original
new facts, to the exclusion of artifacts like ICT-systems. In Chap. 13, the
so-called organization theorem is presen ted that builds on the four axioms.
It states that an enterprise is a layered nesting of three homogeneous aspect
systems: the B-organization (from Business), the I-organization (from In-
tel lect) an d the D-organization (from Documents). In Chap. 14 the so-
called
CRISP meta model is developed. It is the formalization and opera-
2
The Greek letter  is pronounced as PSI, which is taken as an acronym for
Performance in Social Interaction, th e basic paradigm of the theory.
1 Outline of the Book 5
tionalization of the  -theory, necessary for any m ethodology for enterprise
ontology that has a sound theoretical foundation.
Besides the foundations of the  -theory that are discussed in Part B, we
need to mention a scientific source that may be called the most influential
and important. It is the Language-Action Persp ective (
LAP). LAP is the
name of a scientific field as well as a scientific community that had its
tenth annual conference in 2005. The root of
LAP is constituted of a num-
ber of philosophical works, of which the most referen ced ones are [4, 32,
55]. One could say that the exploration of the scientific field of
LAP
started with [26, 27, 66]. Some later publications in the field of LAP that
are worth mentioning are [14, 15, 16, 50, 53, 61, 62, 64]. All these publica-

tions provide relevant background information for stu dying Part C of this
book.
Methodology
In Part D, a methodology is presented that has proven to be effective in
numerous projects in practice. First, in Chap. 15, a method is presented for
producing an ontological model on the basis of a description of the current
operations in an enterprise. Students are advised to app ly this methodology
meticulously; it will be valuable to hold on to. Professionals do not like to
follow rigid step-by-step procedures and rightly so! Being a professional
means first of all knowing what to do, i.e., what results to achieve. The
best way to it is always contingent on the circumstances, one of them be-
ing the expediency of the model er.
A complete enterprise ontology consists of four related aspect models:
the construction model, the process model, the action model, and the state
model. The construction model is very unlike usual organization models.
Usually, an organization model is understood to be a hierarchical structure
of organizational units, like divisions, business units, and departments,
and/or organizational functions, like managers, sal esmen, and accountants.
However, in the  -theory, these units and functions belong to the realm of
implementation. The essen tial unit of authority and responsibility is the
(elementary) actor role. Moreove r, the notion of organization is first of all
considered to be about the interaction of t he actor roles. Th erefore, an in-
teraction model shows the ontological construction or composition of an
enterprise: t he elements (actor rol es) and their mutual influences. In Chap.
16 only the first part of the construction model, called the interaction
model, is p resented.
In Chap. 17, the ontological process model is presented. It sh ows how
the distinct transactions are interrelated. There are t wo kinds of links be-
tween transaction steps: causal links and conditional links. A causal link
6 1 Outline of the Book

from a transact ion T1 to a transacti on T2 means that T2 is initiated from
within T1. A conditional link from a transaction T1 to a transaction T2
means that T2 has to wait for the compl etion of T1 before it can proceed.
Although actors act autonomously, they follow guidelines or procedures
in order to a ct responsibly. These guidelines or procedures are called ac-
tion rules. The action rules that pertain exclusively to the enterprise ontol-
ogy are collectively called the ontological action model.Itispresentedin
Chap. 18. In order to specify an action model as precisely as possible, we
will make use of a pseudo-algorithmic languag e.
In Chap. 19, the ontological state model is presented. It specifies the
state space (i.e., the set of allowable states) of both the production world
and the coordination world of the enterprise. Stated differently, it contains
the conceptual model of all facts that are produced a nd all facts that are
used. State models are expressed in
WOSL, the language we introduced in
Chap. 5.
In Chap. 20, the second part of the construction model, called the inter-
striction mod el, is presented. What it adds to the interaction model are all
passive mutual influences between actor roles. They are called i nterstric-
tions, as opposed interactions, which are the active influences. Interstric-
tions are repres e nted as access links from an actor role to an information
bank, expressing that the actor role is allowed to know the contents of the
bank. For all five aspect models, their practical relev ance is discussed at
the end of every chapter.
2 What is Enterprise Ontology?
Enterprise ontology is a novel subject, and writing a book on this novel
subject puts the author under the obligation to provide at least two kinds of
explanation. One explanation regards the justification of presenting yet an-
other point of view on enterprises. Why and how would enterprise ontol-
ogy assist in coping with the current and future problems related to enter-

prises? The other explanation concerns the particular approach to wards
enterprise ontology that the author takes. Why woul d this approach be
more appropriate and more effective than som e other one? These are seri-
ous questions indeed, and anyone who takes the pain to study this book de-
serves satisfying answers. You will get the ans wers; however, not straight
away. A first attempt is in this introductory chapter. Definite and fully sat-
isfying answers can only emerge from a dedicated and thorough study of
the book. The lasting reward of such a study is a novel and powerful in-
sight into the essence of the operation of enterprises; by this we mean i n-
sight that is fully independent of the (current) realization and implementa-
tion.
Let us start by noting that managing an enterprise, but also getting serv-
ices from it as a client or collaborating with it as partner in a network, is
nowadays far more complicated than it was in the past. Be assured, we will
not elaborate on it, you probably have heard that tune in all pitches and
keys. And in case you have not, glance over an arbitrar y management book
from the past five ye ars and you are informed. The pro blems in current en-
terprises, of any kind, are well investigated and well d ocumented. More
than well, in fact, because far less e ffort is put in thinking about how to
cope with them. Anyhow, the common denominator of these problems is
complexity, and complexity can only be mastered if two conditions are ful-
filled. One condition is that one dispose of a comprehensive theory about
the kind of things whose complexity one wants to master. The other condi-
tion is that one dispose of appropriate analysis methods and techniques,
based on that theory.
The knowledge that one acquires at management or business schools
does not suffice anymore. Actually, it never did; mana gers were just lucky
that the shop floor workers ultimat ely always managed to really solve
problems and implement desired changes. Even the gifted entrepreneur can
8 2 What is Enterprise Ontology?

nowadays not succeed without a basic, systematic, and integral under-
standing of how enterprises work. In order to really cope with the current
and the future challenges, a conceptual model of the enterprise is needed
that is coheren t, comprehensive, consistent, and concis e, and that o nly
shows the essence of the operation of an enterprise mo del. By coher ent we
mean that the distinguis hed aspect models constitute a logical and truly in-
tegral whole. By comprehensive we mean that all relevant issues are cov-
ered, that the whole is complete. By consistent we mean that the aspect
models are free from contradictions or irregularities. By concise we mean
that no superfluous matters are contained in it, that the whole is compact
and succinct. The most important property, however, is that this conceptual
model is essential, that it shows only the essence of the enterprise, its deep
structure. In particular, we mean th at the model abstracts from all realiza-
tion and implementation issues.
We shall call such a conceptual model an ontological model. Th e origi-
nal Greek word from which the English word “ontology” stems, means
study or knowledge of what is or exists, and the philosophical branch with
the same name has taken up the term as referring to the reality around us,
regardless our own view on it. In other words, ontology requires us to
make a strict distinction between the observing subject and the observed
object. This r equirement puts the author under another obligation, that of
clarifying the philosophical stance taken with respect to this subject-object
dichotomy. We will do it only briefly, without much elaboration. The in-
terested reader is referred to [25] and [56]. There are three philosophical
positions that are relevant fo r our discussion: the objectivist, the subjectiv-
ist and the constructivist position. Objectivists believe that the world they
live in exists in itself, fully independent of them. In other words, they be-
lieve in a true objective reality. Subjectivists take the opposite position.
They believe that there is no re ality outside the subject (human being) and,
in the extreme, that every subject has its own image of reality. Somewhere

in between is the position of the constructivists. They agree with the sub-
jectivists that there is no absolute objective reality (as the objectivists be-
lieve), but they believe that there is instead a kind of semiobjective reality
that they call an intersubjective reality. It is built and continuously adapted
through negotiating and achieving social consensus among subjects. Our
position is this constructivist one. We consider the ontology of a particular
part of reality as the basis for sensible communication about that part of
reality. At the same time, we recognize that this ontology is built, rebuilt,
and adapted in co mmunication; it cannot be otherwise.
We like to add to this tripartite philosophical stance two sociological
paradigms regarding the study of systems, namely the functionalist para-
2 What is Enterprise Ontology? 9
digm and the interpretive paradigm [37]. The functionalist paradigm takes
its name from the fact that it wants to ensure that everything in the system
is operating well so as to promote efficiency, adaptation, and survival. An
understanding can be gained of how systems work by using scientific
methods and techniques to probe the nature of parts of the system, the in-
terrelationships between them, and the r elationship between the system
and its environment. The expertise it provides should put managers more
in control of their operations and organizations, and e nable them to eli mi-
nate in efficiency and disorder. The interpretive paradigm takes its name
from the fact that it b elieves social systems, s uch as organizations, result
from the purposes people have and that these, in turn, stem from the inter-
pretations they make of the situations in which they find themselves. Peo-
ple act and interact in organizat ions as a result of their interpretations. This
paradigm wants to understand the different meanings to collaborative ac-
tivity and to discover where these meanings overlap, and so give birth to
shared, purposeful activity. Manag ers can be guided to seek an appropriate
level of corporate culture in their organizations. They can take decisions,
on the basis of participative involvement, that gain the commitment of

stakeholders. Some argue that these paradigms are incommensurable. In
our opinion, this is not necessarily the case. The notion of enterprise ontol-
ogy, as conveyed in this book, is primarily functionalist in nature. How-
ever, various aspects (e.g., considering an enterp rise as a social entity, the
focus on social individuals, Habermas’ theory of communicative action,
the autonomy that is basically allowed to actor roles) also reflect an inter-
pretive perspective. One might argue that a really compreh ensive approach
to enterprise engineering should be able to address an enterprise from dif-
ferent angles, thus integrating important views from different paradigms.
This is what we try to do, as will b ecome clear in Part C. Let thi s be our fi-
nal brushstroke in painting the philosophical background for the key no-
tion of enterprise ontology.
In its modern use, ontology has preserved its original meaning, but it has
also a definite practical goal. It serves to provide a basis for t he common
understanding of some area of interest among a community of people who
may not kno w e ach other at all, and who may have v e ry different cultural
backgrounds. If you hav e ever h eard about ontology before, it is most
probable that it was in the context of the World-Wide Web, particularly in
the context of the Semantic Web [6]. There are various defin itions of the
modern notion of ontology getting around. Our main source is the ontol-
ogy of Mario Bunge [10, 11], but, as long as there is no conflict, we will
also refer to other sources. A widely adopted definition of ontology is the
one in [29]: an ontology is a formal, explicit specification of a shared con-
10 2 What is Enterprise Ontology?
ceptualization. It states the core properties that our notion of ontology also
will have. First, it regards the conceptualization of (a part of) the world, so
it is something in our mind. Because of our constructivist stance, we con-
sider these mental pictures be checked and adapted in communication.
Second, this conceptualization is supposed to be shared, which is the prac-
tical goal of ontologies. This takes also place in communication. Third, it

is explicit; an ontology must be explicit and clear, the re should be no room
for misunderstandings. Fourth, it is specified in a form al way. Natural lan-
guage is inappropriate for this task, because of it s inherent ambiguity and
impreciseness .
The notion of ontology as applied in [29], but also in [28], [30], and
[58], is what we will call in Chap. 4 a world ontology. Common examples
of such an ontology are the world of traveling or the world of cooking and
dining. The focus is on defining the core elements in such a world and
their interrelationships in a most clear and extensive way . The notion of
ontology as applied in this book is the notion of system ontology. Our goal
is to understand the essence of the construction and operation of complete
systems; more specifically, of enterprises. As will become clear, this no-
tion of system ontology includes the notion of world ontology. Next, al-
though we fully recognize the need for ontologies for the purpose of
world wide flawless communication among agents over the Internet, our
motivation for this book is wider. In our opinion, the world we live in is,
and will remain, in the first place, a world of people, of human beings, de-
spite all the technical dev ices that (can) make our lives much more pleas-
ant. This is a philosophical stance of course; it is a choice. We strongly
oppose, for example, the quite common idea that artifi cial agents are, or at
some future tim e will be, equivalent fellow play ers in human social life.
This idea can only be justified by a severe inflation of such notions as
authority and responsibility. Throughout the history of mankind, people
have used anthropomorphic metaphors for the purpose of understanding
and explaining the operation of natural things as well as artifacts. The
only, but at the same time serious, danger is that one forgets that they were
metap hors, that one takes the met aphorical reasoning for real. So, for ex-
ample, if you think that your computer does not understand you, you are
twofold right. First, it is quite okay to use anthropomorphic metaphors in
the interaction with your computer. You probably d o it sometimes also

while driving your car or trying to let your video recorder do what you
want it to do. Second, in the most true sense, your computer does not un-
derstand you, be cause understanding in the way human beings have inter-
nalized the notion and apply it is applicable only to them. We do not be-
lieve in a general notion of understanding that human beings would share
2 What is Enterprise Ontology? 11
with artificial intelligent systems. There is no evidence for such a belief,
excep t for ap parent similar extern al behavio r in some cases. To conclude
from these cases that these behaviors are brought about in the same way is
merely speculation.
A major motivation for this book and for our work in ontology in gen-
eral stems from the conviction that the world is in great need for transpar-
ency about the ope ration of all the syste ms we d aily work with, ranging
from the domestic appliances to the big societal institutions. We are in
great need already, and t his need can only increase if one imagines a future
life in a cyber culture [5]. Our concern is the current la ck of an appropriate
philosophical counterbalance to the dominant te chn ocratic and bureau-
cratic thinking. Let us give some examples to clarify the point. First, re-
garding technical devices, if you read the user manual of a video recorder
or a co mputer or a computer program, you become overloaded with irrele-
vant details. You mo stly end up with a headache instead of any relevant
understanding. And in case you persevere, there is a high chance that you
will discover so many errors and omissions in the description that reading
has become solving a puzzle. As a concrete example, the implement ation
of an
ERP (Enterprise Resource Planning) package in an enterprise, even
of only a few modules, may easily take several years and cost the enter-
prise a huge amount of money. This money is partly spent in having the
supplier of the package (or some i ntermediary company) explain how to
use it, and partly to have the enterprise adapt its current way of working

such that it fits the straitjacket of the
ERP package. Is this societal pro-
gress? Do we really need to suffer this? As another example, have you ever
phoned the help desk of a company or a government ag ency in order to get
the service they claim y ou will get in thei r advertisement s? Mostly you end
up not by having what you were looking for, but by being frustrated,
maybe to th e extent that you think of giving up. Why? Because the opera-
tion of these institutions is completely opaque to you. You do not know
what to believe and wh at not to believe; you are literally lost in cyber-
space. And, in case you have s ucceeded in penetrating to the right place,
there is a chance that the responsible person does not take on his or her re-
sponsibility and concludes your case by blaming the co mputer or any other
thing that he or she uses as an aid. Most probably, he or she acts in this
way not to ha mper or frustrate you , but because th e institution is also
opaque to him or her.
This situation should stop b ecause it is in no one’s interest that it co n-
tinue, as it has been in no one’s interest to have come this far. To the best
of our knowledge, ther e has never anywhere been a pl an to organize mod-
ern society in such a way that nobody is able to unde r stand how it works.
12 2 What is Enterprise Ontology?
Likewise, in no manufacturing company has there ever been a plan to de-
sign domestic appliances or p rofessional equipment such that it takes the
current incommensurable amount of effort to get to know how to use them.
Things have just gone that way. But, as was said, there is no reason to let it
continue. Instead, there is abundant ground for stopping it. Imagine that it
is possible for you to acquire the right amount of the right kind of knowl-
edge about the operation of the equipment you are working with. Imagine
that you are not bothered by incomprehensible and irrelevant things but
that you get the insight you need in a way that you immediately under-
stand, because it is about what you want to do with the equipment, not how

it is designed and assembled. In a similar manner, imagine that it is possi-
ble for you to acquire the right amount of the right kind of knowledge of
the operation of the company from which you bought something you want
to complain about, or of the government ag ency from which you are trying
to get a license but have not succeeded yet . In summary, imagine t hat the
business processes of these enterprises have become transparent to you.
Would that not be great? So , this is our goal: to offer a ne w understanding
of systems of any kind, and of enterp rises in particul ar, su ch that one is
able to look through the distracting and confusing appearance of an enter-
prise right into its deep kernel, like an X-ray machine can let you look
through the skin and the tissues of the body right into the skeleton. As a
user of systems, this understanding lets you become master again of your
activities. As a designer, it lets you design systems in such a way that the
resulting design, in particular, the user dialogue and interface, reflects the
essence of the system. We will try to achieve this goal through a notion of
ontology that includes the dynamic aspects of a system, and that at the
same time does justice to the nature of enterprises. Th is nature is that en-
terprises are social systems, o f which the ope rating principle consists of
the ability of human beings to enter into and comply with commitments.
So, that will be our notion of enterprise ontology; and, as a quality crite-
rion for evaluating enterprise ontologies, we will apply the five properties
that were discus sed earlier: coherenc e, comprehensiveness, consistency,
conciseness, and essence, collectively abbrev iated as C
4
E. The particular
methodology that we will present lets you develop the ontology of an en-
terprise in a systematic way. But we do no t require you to become a pro-
fessional developer of ontologies. The explanation of the methodology and
the demo nstration of the example cases serve only to have you internalize
these kinds of ontologies, such that, after having studied the book, you are

able to understand them and take full advantage of them. Of course, we
recognize that real great ben efit can only b e achieved if many people get
used to these ontologies, ideally, everybody. Howev er, be assured that
2 What is Enterprise Ontology? 13
even if you will be the only one in your working environment who pos-
sesses this new unde rstanding of enterprises , you will be re warded for
studying the book and learning the methodology. We can assert this on the
basis of over 15 years p ractical experience in applyi ng the
DEMO
3
meth-
odology, which this book elaborates, to all kinds of enterprises and for all
kinds of purposes. Even those who only participated in
DEMO projects for
one or two days (mostly managers), invariably mentioned that they never
before had seen such a coherent, compreh ensive, consistent, and concise
picture of what they agreed was the essence of the operation of their enter-
prise. Concluding, you will learn ho w to have more control over your pro-
fessional life, how to take the lead again, both as a user and as a designer
of enterprises, such that with your help the ide al situation as sketched
above may be accomplished at some future time. The only thing you need
to do in return is to put aside your current way of thinking about enter-
prises and to open your mind for ne w ideas; in short, to be willing to learn .
3
DEMO is an acronym that has had sever al long forms in the course of time, start-
ing with “Dynamic Essential MOdelling”. The current one is “Design and Engi-
neering Methodology for Organisations”. Visit www.demo.nl for more informa-
tion.
3 An Explanatory Case
In the previous chapter, we defined enterprise ontology as the realization

and implementat ion independent essence of an en terprise, in short, as the
deep structure beh ind its observable surface structure. In this chapter, we
will demonstrate the notion of enterprise ontology that will be developed
meticulously in the remainder of this book. The intention now is to offer a
global introduction, from which the core essence of enterprise ontology
will become clear. We will explain the relevant notions on the basis of a
small example enterprise, na mely the activities within a tennis club regard-
ing the registration of new members. The following ex position applies:
One can become memb er of the Volley tennis club by sending a letter to
the club by postal mail. In that letter one has to mention surname and first
name, birth date, sex, telephone number, and postal address (street, house
number, zip code, and residence). Charles, the ad ministrator of Volley,
empties daily the mailbox and checks whether the information provided is
complete. If not, he makes a telephone call to the send er in order to co m-
plete the data. If a letter is completed, Charles adds an incoming mail
number and the date, records the letter in the letter book, and archives it.
Every Wednesday e vening, Charles takes the collected letters to
Miranda, the Secr etary of Volley. He also takes the member register with
him. If Miranda decides that an applicant will become member of Volley,
she stamps ‘new member’ on the letter and writes the date below it. This
date is the commen cement date of the membership. Sh e then hands the let-
ter to Charles in order to add the ne w memb er to the member register.
This is a book with nu mbered lines. Each new member is entered on a n ew
line. The line number is the member number, by which the new member is
referenced in the ad ministration.
Next, Miranda calculates the membership fee that the new member has
to pay for the remaining part of the calendar year. S he finds the amount
due for annual fees, as de cided at the g eneral meeting, on a piece of paper
in the drawer of her desk. Then, she asks Charles to write down the
amount in the member register.

If Miranda does not allow an applicant to beco me a member (e.g., b e-
cause he or she is too young or because the maximum number of members
16 3 An Explanatory Case
has been reached), Charles will send a letter in which he explains why the
applicant cannot (yet) become a member of Volley.
If all applications are processed, Charles takes the letters and the mem-
ber register home and prepares an invoice to all new members for the pay-
ment of the first fee. He sends these invoices by postal mail. Payments have
to be performed by bank transfers.
As soon as a payment is received, Charles prints a membership card on
which are mentioned the me mbership number, the commen cement date, the
name, the birth date, and the postal address. The card is sent to the new
memb er by postal mail.
3.1 The Analysis of the Case Volley
As the first step in revealing the deep structure that lies hidden in this de-
scription, we produce a set of flow charts that show the described proc-
esses. So, we start with taking the process view. This is very common in
practice, and ve ry appropriate in this case too. The Flow Chart is an ade-
quate technique for our purpose, although one may us e the Petri Net [39]
or the EPC [41] as well. What all these techniques basically show is the
sequence of actions that are performed, the information that is used as in-
put,andtheinformationthatisproducedasoutput.Fig.3.2,3.3,and3.4
exhibit the flow charts of Volley. Figure 3.1 contains the legend of the
Flow Chart technique. The sausage-like shape in the fl ow charts presented
is just a connector from one part o f the flo w chart to another.
choice of paths
information set
action
flow direction
Fig. 3.1 Legend of the F low Chart

3.1 The Analysis of the Case Volley 17
check info
in letter
[administrator]
Is the info
complete?
add IM nr.
and date
record application
in letter book
No
Yes
ask for
additional info
LETTER BOOK
archive
letter
archived
application
letter
begin
additional
info
[administrator]
[administrator]
[administrator]
[administrator]
receiving
application letter
[administrator]

Fig. 3.2 Flow Ch art 1 of Volley
The distinction axiom that will be presented and discussed in Chap. 12,
tells us that the actions in the flow charts can be classified as either data-
logical, infological, or ontological. The notions datalogical and infological
are the same as proposed originally by Langefors [4 2]. Furthermore, we
have to anticipate the distinguishing of production acts and coordination
acts, as stated by the operation axiom (Chap. 9).
A datalogical production act is an act in which one manipulates the
form of information, co mmonly referred to as data, so without being con-
cerned about its content.