If you’re wondering what a line of business means and its real-world applications, stick with us till the end.
This article covers what is meant by a line of business, examples, the role of a LOB manager, and the meaning of LOB applications.
Let’s dive in.
What is a line of business?
Line of business (AKA LOB) is a term that describes a business’s product or service, the resources used, and the process for delivering value to a market segment. It could be the primary or one of the main processes that bring revenue.
For example, manufacturing dry-erase markers is a line of business. Everything that happens from concept, developing the markers, marketing, selling, to fulfillment, and staying competitive makes up the business line. So, a LOB could also describe a product line.
If the ink-making department sells ink to other dry-erase markers manufacturers, that’s another line of business. In this way, LOB could also describe a department within an organization.
The company could have many more LOBs. For example, they may take advantage of an opportunity to sell whiteboards.
For a small business, one LOB leader could manage all the lines of business.
As the company grows, they may custom-build a digital LOB solution to automate some processes, increase transparency, reduce fraud, and increase productivity.
For example, the company could automate employee onboarding.
The organization’s size and the operation’s complexity determine whether to adopt a digital solution. However, an organization may be quick to build a custom LOB solution to enjoy more accurate research and lower production costs.
Digital transformation can also quicken an organizations’ entry to new lines of business.
But before choosing a digital solution, the organization should consider:
- How many people are involved in the line of business and their roles
- The functional requirements of the system
- Usability and security, among other needs.
The LOB leader is in charge of assessing risks in adopting the new technology, projecting profitability, determining how much resources go into the change, and maximizing revenues.
Lines of business definitions
Line of business could also be referred to as branch, department, product line, or domain.
LOB refers to a group of similar products that an enterprise sells to generate most of its revenue. For example, banking.
Similarly, it could describe a major service or product offered by an organization — for example, commercial loans.
It could also be used to label the department within the enterprise that manages the group of products — for example, commercial banking.
What are the examples of Lines of Business?
The primary revenue-generating process of an organization (or individual) is considered its line of business. It could be selling homes or insurance, lawn services, or manufacturing, etc.
Let’s look at some common examples below.
Line of business in retail
Line of business in retailing refers to the products or services offered to consumers and the associated resources and procedures. It could also be termed as a product line or line of merchandise.
Nonetheless, some retailers also sell to businesses.
For example, Home Depot is a home improvement retailer, but they also have the Pro Xtra program that serves contractors.
For such businesses, they’d report the numbers for B2B and B2C sales separately in their financial statements because they are separate lines of business.
Line of business in banking
Banks usually have many lines of business which are essentially products created to serve specific customers’ needs. The bank can define their LOBs based on the clients they serve, i.e., individuals, small & medium businesses, investors, etc.
For example, personal (or retail) banking provides deposit, mortgage, consumer loan, and investment products to individuals.
At the same time, the bank offers small business banking that provides checking accounts, commercial loans, money market products, among others, to small and mid-size enterprises.
Line of business in insurance
Most people are familiar with lines of business in the insurance sector. It refers to a group of similar products defined by the risk covered, the type of coverage, or other factors. For example, life insurance, health insurance, property and casualty insurance, and reinsurance.
An insurance company may have multiple LOBs depending on what they’re authorized to sell.
For example, a property and casualty insurer may have several lines of business, e.g., aviation insurance, marine cargo insurance, etc.
Who is a LOB manager?
The LOB manager is concerned with how the department they oversee delivers value to the customer and remains competitive. Their primary role is to maximize profits. The LOB leader title could also be product manager or account manager. They answer to an executive-level staff.
The LOB manager may have responsibilities like:
- Reducing operations, IT, and administration costs.
- Budgeting and achieving revenue goals.
- Forecasting sales
- Maximizing productivity
- Overseeing day-to-day operations – e.g., staffing, equipment upgrades, training, etc.
- Assessing and minimizing risks.
- Analyzing changes in market demands and their implication
- Implementing changes
- Identifying opportunities that may give the LOB a competitive advantage
While the LOB manager is responsible for how the line of business operates, some disruptive events affecting the LOB may be beyond the manager’s responsibility.
For example, if the manager identifies a need for an acquisition, they’ll have to communicate this to an executive-level staff.
Other disruptive events that may be beyond the LOB manager’s responsibilities are:
- A need to incorporate a new technology that will exceed the threshold for investing in new capabilities.
- A competitive disadvantage that may phase out the business line
- An opportunity for a new line of business
- When the LOB needs to realign business operations substantially in response to market or business needs.
So essentially, a LOB manager is an employee who oversees the operations of their department but reports to an executive-level employee.
What is a line of business software?
A line of business software is an application that is critical to the business’s process for delivering a product or service. It’s built to support the business’s core functions.
In most cases, LOB apps are coded explicitly for a particular line of business or heavily configured to support the business’s critical functions.
For example, a real estate enterprise could use a LOB app to research trends, analyze sales, identify in-demand locations, among other functions.
LOB apps are different from productivity apps like Spreadsheets because LOBs are specifically built to support the organization’s unique requirements.
When the app can be used on mobile devices, then it’s a mobile LOB application.
For example, a sales operation director can get a lead in the field and use their tablet to add the lead’s information to the company’s ERP for fulfillment.
That said, a LOB app has the most value to an organization compared to any other software.Find out why every line of business should invest in digital innovation!