In this blog, we aim to give you a high-level overview of Capability-based Planning in the context of Enterprise or Business Architecture.
Enterprise architecture is a key instrument in improving the business capabilities of your organization. Enterprise architecture has a broad scope, looking at enterprise-wide coherence between your strategy, business operations, IT, and other technology that supports this. It gives direction to the evolution of your enterprise by focusing on where you want to go with your enterprise and what you need to do to get there. Business architecture is integral to ‘true’ enterprise architecture – Enterprise Architecture is enterprise-wide IT architecture.
Now one of the key notions in business and enterprise architecture is Capability-based Planning. Business capabilities describe what the business does or is able to do. It doesn’t describe how, where or when the business does this, so they are independent from implementation details. That makes them relatively stable. For instance, an insurance company a century ago would have had many of the same capabilities as today, ranging from product development to insurance policy management and from processing insurance claims to asset management.
Business capabilities are realized by the people, processes and technology (IT-based and otherwise) of the enterprise. They are owned and defined by ‘the business’ in business terms.
A business capability map is the typical way of depicting capabilities. Since capabilities are easily recognized by the business and relatively stable, such a map often becomes a shared language and common backdrop for all kinds of analyses. Think, for instance, of heatmaps showing the strategic importance of capabilities or the business continuity risk posed by obsolete technology that supports certain capabilities.
Such a risk analysis is one example of using the relationships in your enterprise architecture between capabilities, their strategic importance, how they are realized by people, processes, and systems, and additional information like lifecycle data about those systems.
There are common reference models for many industries with a capability model at heart. For instance in finance, you have the BIAN model for banking, and there are similar models for government and higher education. Rather than defining your capabilities from scratch, you can use such a reference model as a starting point. Moreover, you can also use this to compare and benchmark your capabilities and plan improvements.
This is where the ‘planning’ part of Capability-based Planning kicks in. Of course, you will want to improve those capabilities where a) there is a strategic interest and b) they need an uplift because they are below par.
First, it is common to classify your capabilities along dimensions such as supporting, core, and strategic/direction-setting, business-critical or not, or commodity vs. differentiating. Capabilities that are core and differentiating are strategically most important, whereas commodity, non-core capabilities could perhaps be outsourced if they underperform.
Moreover, the position of capabilities in the enterprise’s value streams is essential in investment decision-making. For instance, core capabilities involved in customer-facing, value-creating activities that do not perform as expected by those customers are prime candidates for improvement.
The enterprise architecture that sits ‘behind’ those capabilities helps you analyze where those improvements can and should be made and what dependencies you have to take into account.
Ideally, your capabilities are relatively independent, so you can evolve and improve them independently. Your architecture practice should support minimizing dependencies, like IT applications shared by many capabilities. Of course, there are other considerations like efficiency. Still, all too often, I see architectures designed in the resource-constrained days of yore, with lots of dependencies because every capability depends on some central department or uses a single central system. That leads to problems when such a shared system needs to be changed or replaced to better support one capability, but because that would impact many areas, change cannot be made.
One-size-fits-all may not be the best option. Sometimes, it’s better to support different capabilities with their resources. That comes with its architecture challenges, like a need to replicate and synchronize data between different systems, but in today’s fast-changing environment, the higher speed of change you get from this may be more important than the cost savings from a centralized solution. This requires a well-considered trade-off between, in this case, efficiency and flexibility in your planning efforts. Making those trade-offs is, of course, a key job of architects.
In summary, enterprise architecture provides a coherent view of how underlying resources and processes realize your business capabilities. It links these capabilities to your business goals, strategic direction, and the organization’s business model. It lets you pinpoint where investments in capability improvement should be made based on their importance to your business.
Finally, it helps realize these capabilities so that you can support and improve change in the enterprise both in the short and long term. Together, this gives you a clear line of sight between your strategy, business model, operating model, and implementation and lets you evolve and improve your enterprise smartly.
If you need help with Capability-based Planning, please schedule time with one of our experts.
Managing Consultant & Chief Technology Evangelist at Bizzdesign
Marc contributes to Bizzdesign’s vision, market development, consulting, and coaching on digital business design and enterprise architecture. He also spread the word about the Open Group’s ArchiMate® standard for enterprise architecture modeling, which he has been managing the development of. His expertise and interests range from enterprise and IT architecture to business process management.
