Best Practices to Define Business Capability Maps
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See all resourcesBusiness capability is the expression or articulation of the capacity, materials, and expertise an organization needs to perform core functions.
In the digital age the role of technology shifts from supporting processes of the business strategy to the key factory of strategy execution itself.
Information Technology helps customers receive their shirts ordered online the next day, it helps that they can read their newspaper during their commute on an iPad and that the invoices for these services are processed without friction.
As a result, the challenge of how to bridge the gap between strategy and execution in IT becomes much more pressing.
This gap is often caused by organizations speaking many languages. They speak of missions, strategies, goals, processes, and projects. The CEO speaks of “making mobile-first a priority”, Marketing of “increasing the share of wallet with millennials” and IT of “load balancing the Linux server cluster”.
Which one is the right language? Business Capability maps have the potential to serve as this common language.
📚 Related: 2023 Gartner® Magic Quadrant™ for Enterprise Architecture Tools
A business capability is a representation of an organization’s business anchor model independent of the organization’s structure, processes, people, or domains.
As a tool for enterprise architects, business capability maps enable the discussion of strategic investment or divestment. Also, business capabilities can serve as the structuring element to uncover redundancies in IT.
At its essence, business capabilities should lie at the top layer of the business architecture, carry three main characteristics.
If one business capability says “recruit great employees," it involves various people – HR team, the process – attract, screen, interview, hire, and the technology needed – online assessment center, digital personnel file, etc., into one capability of the organization.
Business capabilities form a crucial part of great IT strategies, as they specify the path to winning, and point out the necessary steps of both IT and business along the way.
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.
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The business capability view brings many benefits.
McKinsey reports that business capabilities can help uncover redundancies - saving potentials often range from 15 to 20%. capability-driven thinking helps organizations to understand and mitigate technology risks better, saving upwards of $590K – which is the cost of a single IT incident.
As an essential view for IT leaders, business capability mapping allows companies to see what a business does to reach its objectives. Business needs should shape your IT architecture.
As companies change, innovate, and prepare for digital transformation, processes, needs, and goals change. After complex and numerous changes, the supporting technology should also be revisited.
The next three use cases, explain these the best:
Since business capabilities structure a company according to its activities, capability maps are a crucial tool in setting up highly strategic M&As.
Capability maps provide both groups with the basis to structure a merger beneficially, even if the organizational structures and processes of the two companies are very different from each other.
Capability maps assign applications to user groups and business capabilities. This overarching view of applications together with SaaS discovery and their business value makes it possible to assess redundancies and gaps in IT support in both dimensions - functional and usable.
Imagine a multinational insurance company that has recently acquired a local insurance player.
During the M&A process, both teams sit down and take an assessment of their supporting applications. The teams have to decide which applications can be used in the future, and which should be phased out.
Being familiar with their prospective applications, and affected by their previous organizational structures, how can teams objectively choose the best-fit application for the new company going forward?
Instead of getting lost in uncertainties, “this application worked for us previously, so it should work going forward,” the teams can sit down with a business capability map to structure the entire post-merger integration.
A business capability model helps to discuss the areas of strategic investment or divestment. Business capabilities can serve as the structuring element to uncover redundancies in IT.
LeanIX customer Helvetia was able to reduce redundancies and realize substantial savings in the merger with Swiss Re. In their half-year report, Helvetia reported IT as a significant contributor to these savings. The establishment of transparency was a crucial first step towards doing so. Today, the established LeanIX inventory serves as the single source of truth, on which strategic IT management decisions are based on.
By linking business capabilities to applications, and linking those applications to technology components, CIOs can take a glance at a business capability map and perform a quick strategic risk assessment.
With the right information in place, CIOs can deliver a statement such as: “We cannot accept the risk of an end-of-life server cluster because it provides the infrastructure for our online booking system that is crucial to our Capability to sell directly to customers.
Selling directly to customers has the highest strategic priority due to its financial impact.” Having a clear view of which technology components are dependent upon other technology components is a strong view, especially during times of high-security vulnerability.
Business Capabilities are also a great help in structuring thoughts on how to transform business and IT. In this digital age, companies need to investigate and ponder new ways to innovate, Capability by Capability. A SaaS provider could go down the list, thinking of ways to transform and update their capabilities.
Take a second glance at the “Manage Pricing” capability, and ascertain ways to update it. In the past, the company may have followed a simple standard pricing model sheet. Now, the SaaS company could enable pricing based on updated data.
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A 3-step guide plus best practices on extending Gartner's pace-layering strategy to business capability models.
“Know where your company is heading and how IT can help.”
If the IT department does not know where the business is heading, it is impossible to make supporting decisions. Therefore, it is a good start to review your company’s strategy and goal documents or even better involve people that define the strategy, like the strategy or corporate development department.
“Business Capability syntax: When in doubt, go for breadth rather than depth.”
Think about the major Capabilities that your business needs to operate. On the first level (level 1) there should be only a few critical ones. An analysis of the top 100 LeanIX workspaces shows that companies typically use around 7 - 10 Capabilities on the highest level. You can build them by thinking both from top-down (what does the company want to achieve) and from bottom-up (what organization, processes and people are in place)
📚 Related: Business Capability Examples and Business Capability Maps Library
“Not all Business Capabilities are equal in terms of value for the customer and financial impact.”
Not all Capabilities are of equal importance. Assess Capabilities according to defined criteria as a basis for later analysis and planning.
“The link between Business Capabilities and applications creates a bridge between business and IT.”
In the final, but equally important step, link your Capabilities to your applications. Applications, unlike IT components, are always linkable to a specific business purpose. Business users work with them in order to create value. Therefore, applications are the perfect transit between business architecture and technology architecture.
A great way to get a complete overview is to depict Business Capabilities as nested boxes that contain the assigned applications.
Figure 2: The 4 steps to creating a Business Capability model
Business Capabilities have the potential to serve as a common language between business and IT. Properly defined, Business Capabilities can help to save money, decrease risk and enable growth.
Best practices show that Business Capability models of companies with a lean philosophy have around 10 top-level Capabilities and two levels of depth.
The resulting model can be used to support analyses to align IT investments with strategy, draw technology risk maps, and consolidate IT applications. LeanIX supports these analyses with out-of-the-box best practice reports.
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See how IT and business align with a complete overview of your business capability landscape.
How do you define business capabilities?
Business Capabilities can serve as a structuring element to uncover redundancies in IT.
Business Capabilities provide you with a coherent and comprehensive view of business motivation, skills, processes, data and resources, enabling you to understand relationships, overlaps and synergies.
They are a critical part of great IT strategies, as they set the path to success and show the necessary steps for both IT and the business to take on the way.
What are core business capabilities?
Core capabilities are associated with the existence of the company. This includes the core competence of a company, such as content production, like films and series for Netflix or product management for brands like Coca Cola.
For other companies logistics or manufacturing could be an existential core capability and for others it could be the development of an IT infrastructure. What can be seen is that the core capabilities depend more on IT over time.
What are advantages of business capabilities?
With business capabilities, you can link the execution of your business to the strategy you want to achieve by mapping which capabilities the strategy pillars support.
Based on this, you can align financing with the core capabilities and assign key performance indicators to better measure and monitor performance.
By focusing on the core capabilities, you can give your company a competitive advantage by standardizing the contextual capabilities and outsourcing the product capabilities. Business capabilities provide a common language that offers a framework for business and IT.
Starting with an overview of business capabilities, IT and business managers are able to communicate across the organization's functions without business and technical jargon.
Business capabilities enable more focused architecture definitions, as capabilities help deliver a better business definition that leads to effective and efficient technology solutions.
Once organized, IT assets can be used and reused multiple times, saving costs and reducing the purchase of unnecessary software and hardware. In essence, business capabilities should be at the top level of the business architecture. Business capabilities have three main characteristics.
What is business capability modeling?
Business capability models can be considered as a tool of enterprise architecture and allow discussions and insights on strategic investments or divestitures within the business units.
Business capability modeling is considered independent of the structure, process, people or domains of the organization.
See how IT and business align with a complete overview of your business capability landscape.