Not only in business, but in society as a whole, a gap in language causes rifts. These rifts can cause confusion in daily life, or end up costing organizations countless hours of productivity. By nature, organizations speak many different languages. They speak of mission, strategies, goals, processes, and projects. The CEO may say, “let's make mobile first a priority!” Marketing chats about “increasing the reach to profitable millennials.” IT department could be chatting about, “load balancing the Linux server cluster.”
Which one is the right language?
Establishing a common language for businesses is imperative. Business capabilities have the potential to serve as this universal language. If correctly used, they can help save money, decrease risk, and enable growth. Capabilities-driven thinking allows executives to understand and mitigate technology risks better.
What are business capabilities?
Business capabilities encapsulate what a business is doing right now, and what needs to be done to meet current and future challenges. They define what a business does, rather than how it does it. For example, one business capability says “recruit great employees.” This straightforward capability shows you what should be done, but not how to do it. Under the business capability of “recruit great employees” comprises the 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 includes the necessary steps of both IT and business along the way.
Figure 1: Business capabilities comprise people, processes, and technology.
How business capabilities make life easier
The ultimate goal of business capability driven IT strategy is to deliver tangible results.
Imagine a major insurance company has recently acquired a local insurance company. They set up a massive project team to integrate both companies. During a discussion, they realize that they face challenges integrating and consolidating applications. The team has to decide which applications from each company can be used in the future, and which ones should be phased out. This can prove to be difficult because of the differing organization structures and processes between both companies.
Instead of getting lost in the details and processes and uncertainties, a target business capability model helps to structure the whole merger from beginning to end. By mapping the applications of both organizations to the new capability model, it can be decided which applications are kept and integrated, and which ones are discontinued.
Business capabilities can serve as the structuring element to uncover redundancies in IT.
IT Risk Management
With major breeches being reported almost daily, CIOs are faced with questioning the security of their IT landscapes. Specific questions must be asked:
- Which applications support critical business activities?
- What does it mean if a particular application fails?
- Do my applications meet the regulatory standards?
By clearly linking business capabilities to applications and technology components, a quick strategic risk assessment can be conducted. With the right information in place, it will be quick to localize the source of a data breach. It also gives CIOs a clear overview of the cause and effect of certain business situation. For example, from viewing an updated business capability map, CIOs can realize that risking an end-of-life server cluster would be risky, because it provides the infrastructure for their online booking system. This online booking system is innately crucial to the capability to sell directly to customers. Selling directly to customers has a high strategic priority due to its financial impact.
Figure 2: Example of a risk dependency map: Tracing of failure of an IT component to the affected business capabilities and indicating potential financial damage.
Main Characteristics of Business Capabilities:
1. Business capabilities are the stable reference for planning organizations.
Once they are chosen, they should remain the same – only changing in times of major transformations. Unless there is a shift in business model, or if there is a merger – the curated business capability map should stay the same. As strategy statements are often abstract, use business capabilities to clearly outline what the goals are and which people, processes, and technology are needed to achieve this goal.
2. Business capabilities make the strategy much more tangible.
Their common language resonates well with executives, and are understood by employees in IT. Terms “Pricing and Yield Management,” Booking Platform Management,” are much more concrete, direct, and easy to understand than understanding exactly which people, processes, and technology a CEO are referring to when they say, “We should better utilize our existing capacities.”
3. If properly defined, business capabilities can help to overcome organizational silos.
In larger companies, for example, the same capability might be needed in multiple places. While it can make perfect sense that three business units take care of their own recruiting, it could pay off to think about the best possible technology that could support the Recruit Great Employees capability.
In the next installment, we will teach you the four steps to creating your own business capability map.