Business capability models provide a framework for capturing key characteristics of a firm’s business model and core functions, which can then be used to assess business needs, understand IT costs, and align investments with strategic priorities. Enterprise architects (EAs) who embark on developing and using a capability model frequently have questions as to where to start and what to include in this mapping.
Business Capability modelling is a technique for the representation of an organisation’s business anchor model independent of the organisation’s structure, processes, people or domains.
Business capabilities describe what a business does and needs to do in response to the defined strategy. They help to close the gap between strategy and execution by combining the following areas:
- A business process defines the work we do for those who interact with us in order to deliver value externally. This is a very close definition to that of a value stream. A business process gets executed in the business operating model and may be performed many times per day. The business process needs appropriate technological and human resources suitable to get things done and is therefore the place that capabilities come to life. Poor capabilities will no doubt lead to poorly performing processes and substandard measurements. A process will typically require multiple capabilities. Also, a capability, if well-scoped and structured ideally, will be used by more than one process.
- Some business architects use the concept of value stream rather than a business process. Historically that is because many process architectures were not constructed with a cross-functional value creation point of view. If your process architecture is value-centric I feel that you do not need both maps but you may have them if you wish. It is used as the basis for the elimination of non-value-added work (waste) for the benefit of the customer and thereby the business. It is a key approach to framing process improvement.
- Capability in a business architecture sense has come to mean what is required to enable or contribute to the creation of value, directly or indirectly, to meet the intent of the organisation or value chain stakeholders who receive our goods and services. The capabilities are used by business processes to enable the work to be done in an automated or manual way. No process usage means no need for a capability.
Within the stream there are logical value creation points that a process practitioner may call an activity but a business architect may call a ‘value stage’. A value-oriented conceptual process architecture, as we advocate and described in an earlier article would look very similar to a set of value streams so it is easy to understand the potential confusion. For the remainder of the article I will use the value-oriented Process Architecture as a proxy for the value streams since our approach to establish both is virtually identical.
Business capability maps generally describe the capability using the items below. Similar to most other strategic methods, capabilities are described in terms of strategy, process, people, and technology.
- Purpose: The purpose of why the capability is needed is described.
- Business Goals and Objectives: (Strategy) Expected outcomes resulting from the capability are expressed as strategies, objectives, and metrics. Business goals are easier to work with when business management defines specific target outcomes for each capability, such as reducing the cost per mile for a transportation capability. But outcomes do inevitably cross multiple capabilities — like the goal of speeding idea-to-product time, which spans market research, product development, and manufacturing capabilities.
- Processes and Functions: (Process) Capabilities consist of business processes and the siloed functions that flow within and across them. For example, the process order-to-ship spans multiple capabilities, such as sales, order processing, warehouse management, and shipping. The process also spans multiple business units.
- Skills: (People) To provide a capability generally requires skilled people. Skills, defined in a capability model generally drive what is needed to establish a talent management system, which has become a hot topic with Human Capital Management executives.
- Technologies: (Technology) A business capability is enabled and supported by technologies, such as application software, hardware, software, and other IT services.
- Future-State Capabilities: Capability maps can be the basis for comparing the “as is” and a “to be” state, yielding a picture of capability, process, technologies and a list of gaps between the two states. And because the model maps capabilities to business goals, organizations, processes, and information, the future-state capabilities can form the basis for both IT and business planning.