An approach: how to assess Business Capabilities

An approach: how to assess Business Capabilities

Capability-Based Planning activities are structured in a cycle: Map, assess, plan, and control. It shows us where to begin and the next steps to gradually increase the impact on the organization. Read more in our whitepaper: “How Business Architecture contributes to successful strategy execution”.

In the “Map” phase, we define and create the Capability Map, which we can use to analyze the organization, assessing the strategic and architectural alignment of the capability framework. In earlier installments of this blog series, we provided guidance on achieving this.

This blog explores the “Assess” phase, where Capabilities are measured based on their contribution to our business strategy and identifying opportunities to improve maturity. This is visualized on the Capability Map, e.g. using heatmapping techniques.

Capability-Based Planning Approach

Capability Assessment Approach

Our approach to assessing Business Capabilities includes defining three dimensions. To effectively assess Capabilities and execute Capability-Based Planning, we need to combine these three dimensions because there are clear relationships and dependence between them. These three dimensions are:

1. Strategic Importance
   As explained before, Business Capabilities link to the strategic objectives of an enterprise. From this, we can derive their relative strategic importance to the organization. Executives must prioritize and focus investment on the right Capabilities and for managers to understand which Capabilities are critical to success. The key question answered here is: “Which Capabilities are required to successfully deliver a strategy?” For this dimension, we’ve identified three key metrics relevant for an assessment of the Strategic Importance of a Business Capability:
   – Strategy Execution: Is the Capability required in the context of a strategic goal?
   – Business/ Operating Model: Does the Capability provide critical support or resource for a key value proposition?
   – Future Opportunity: Does the Capability provide critical support or resources for future enhanced or new value propositions?

   
   Strategic Importance Dimensions

2. Maturity
   In a Capability Map, we define the set of Capabilities that an organization requires to be successful against its formulated strategy. However, just having the Capability in place isn’t enough because we also need to be very good at it, especially those Capabilities with high strategic importance. For managers, an assessment of Capabilities based on maturity identifies where improvement and development are required. It shows both change leaders and change experts where the key problems lie.

   
   Maturity dimensions

   The key question answered here is: “Which Capabilities are currently performing below expected or required performance levels?”. These are the Capabilities that may require investing in various improvements. You would typically prioritize those dimensions where the highest difference between current and target levels is.

   The maturity of a Business Capability is determined based on its maturity in the common dimensions of People, Processes, Technology, and Information.

3. Adaptability
   Capability-based Planning is not a one-off exercise: an organization needs to align strategic goals with the required Capability, and continuously retain this alignment as strategic goals may shift. As we have argued in the past, adaptability is essential for the modern enterprise. Any organization needs the flexibility to respond to changes in the environment and the ecosystem. An assessment of adaptability gives executives insights into how easy it is to change Capabilities, and for managers on which Capabilities need to be more flexible or resilient.The key question answered here is: “Which Capabilities are problematic to improve?”In our vision, there are three key metrics important to determine the level of adaptability of a Business Capability:
   – Adaptability to the environment: What’s the role of the Capability for the response to external (e.g. law or regulation) and internal (e.g. business interruption) dynamics?
   – Adaptability to the customer: What’s the role of the Capability for the response to changing customer needs?
   – Capacity: Can the Capability respond to changing demand?

   
   Adaptability dimensions

What’s next?

In the next installment in our Blog Series: Business Architecture and Capability-Based Planning, we’ll look at how you can assess Capabilities with BiZZdesign HoriZZon.

You’ll learn how:

• To determine a meaningful score on the key metrics relevant for an assessment of the Strategic Importance of a Business Capability
• The maturity of a Business Capability is determined in relation to people, processes, technology, and information
• BiZZdesign Horizzon supports the assessment of Capabilities