In recent years, we have produced numerous blog posts, whitepapers, and webinars on the topic of business capabilities and capability-based planning. With this new blog series, we want to take you through this subject step-by-step and help you understand and apply this somewhat elusive concept of ‘capability’.
We don’t want to start bombarding you with definitions (although we will discuss the definition of this capability concept in a next instalment in this series), but let’s first have a look at some key challenges we see in our customer organizations.
Many organizations struggle to make optimal strategic decisions, because they lack an understanding of the ‘big picture’ of their enterprise. They have challenges like:
As an architect or designer, you will of course know that any good design starts with the why, the purpose and desired effects of what you design. In designing enterprises, this purpose is captured in things like its mission statement and in its business model, in terms of e.g. the customers it serves and the value it offers them.
Next, you look at what your enterprise can or must do to achieve those effects. And only then will you design how you are going to do that. You don’t want to get bogged down in organizational or technical details when trying to understand what an enterprise does for its customers, for instance.
Designing this ‘what’ of enterprises is where the discipline of business architecture comes in. Business architecture has several important contributions to make:
As mentioned, you need to understand and design what an enterprise can and must do to fulfil its mission, before diving into the organization structure, business processes, IT systems, and other implementation aspects. This provides the ‘big picture’ needed to deal with the challenges above: First, get away from organizational politics and technical limitations and look at the essence of what is needed.
This is where the concept of business capability comes in. Business capabilities are used to describe the abilities of an enterprise, i.e., what it is able to do, independent from implementation. Looking for example at a bank, there they do pretty much the same things today as they did 100 years ago. So you could say that the set of business capabilities is pretty much still the same. But how they do it is very differently today, especially the last few decades driven by technological advances.
Moreover, you can use capabilities not only to describe what the enterprise does today, but also to design the abilities it needs to have tomorrow. And you might even discover new capabilities you didn’t even know your enterprise had. Maturing existing, or even building new capabilities is where the concept of capability-based planning comes in, and provides a structured, and balanced approach to support an organizations strategic planning cycle.
This differentiates business capabilities from concepts like ‘business function’ which is more focused on day-to-day operations, on what the enterprise does rather than what the enterprise can do (or can do better); what it can do of course includes what it does today, but it also describes its potential. This is what makes it especially relevant in strategic discussions.
Capabilities are not tied to specific departments, functions, or roles in the organization. Rather, what gives you a capability is the combination of various people, processes, technology, information, and other resources, from across the entire enterprise.
This also makes it a notion that is very much focused on collaboration. Different parts of the organization together provide your enterprise with its capabilities, and possibly this collaboration even stretches beyond the borders of the organization, including partners in its ecosystem.
In the next instalment in this series, we will look more closely at the capability concept, how it can be defined, and how it differs from other concepts in business and enterprise architecture. Stay tuned!
To learn more about business capabilities, download the Whitepaper: From Strategy to Execution with Capability-Based Planning.