I always thought that the answer to this question was very obvious! A big YES! But a recent discussion on IIBA group on LinkedIn generated mixed responses. In fact a large number of respondents felt that business analysis method and tools were more important than the domain knowledge.
In my opinion, Business Domain knowledge alone may not guarantee success to a business analyst but lack of it would certainly make his / her job difficult. And the same argument holds good for Business Analysis method. And this is because Business Analysis is as much an individual skill as it is a science.
While there seems to be no debate on the need to know Business Analysis method, I thought I should elaborate my points in favour of domain knowledge. For that I would like to start with the definition of Business Analyst (BA) role is.
Primary role of the BA is to provide business solutions (with or without involving technology) to business issues, by assessing buisness problems, and identifying root causes. The success of the BA role lies in the benefit that the solution provides to the business either in terms of savings in costs, improvement in productivity, increase in revenues and so on. BA should also be able to provide measurement framework so that effectiveness of solutions can be monitored and further improved upon.
Most of the time BA role is misunderstood as Project Managers, System Analysts (IT System designers, etc., in which cases domain knowledge may not be as important as the method.
Now some of the reasons why Domain knowledge is important:
#1 - Domain knowledge makes easier for BA to connect with Business Users
In order to understand business problems, BA is expected to interact with business users to map business processes, gather business data, discuss their analysis and findings, etc. A number of bsuiness users get extemely frustrated if business analysts ask basic questions about the business as to what (rahter than how and why) the business happens. For example, in an assignment to improve New Business Process cycle time in life insurance, Business Analyst cannot be expected to ask questions such as What is term insurance, What is ULIP, What is underwriting, Whether a pension plan requires underwriting. Such basic questions would lead to loss of credibility of the BA with the users and hence the solution that is being proposed.
#2 - Lack of Domain knowledge may lead to delays in providing the solution
BA may spend most of his / her time understanding the basics of business rather than spending time in carrying out the actual business analysis work of mapping business processes, collecting & analysing business data, and so on.
#3 - Domain knowledge makes understanding and analysing business issues a lot easier
Domain knowledge may help BAs to quickly identify the real business issues and real root causes rather than getting bogged down by peripheral issues and root cuases. This may help the BA to offer better and quality solutions to business users.
In summary, domain knowledge is not a replacement to Business Analysis method. Method may be a necessary condition but certainly not a sufficient condition to be a good Business Analyst.