SAP Logo LeanIX is now part of SAP

Pace-Layers for Business Capabilities: Why and How

Posted by Tim R on April 21, 2021


The advent of decentralized services is forcing leadership teams to accommodate change in uniquely agile ways. In the era of self-service IT and cloud computing, IT organizations often face divergent yet equally valid strategies to modernization. This problem multiplies in multi-tiered organizations with contrasting business functions and it is the goal of enterprise architecture (EA) to increase flexibility where possible.

Risk and opportunity exist on a spectrum in such IT-business landscapes. For every business team wanting bleeding-edge technology and data to pursue original ideas for the digital world, there are plenty more who don’t want IT stacks overhauled but depend on substantial maintenance resources. This majority of stakeholders always welcomes improvements, but what's more important is stability and quality — both of which EA methodologies and tools have traditionally been best at modeling.

Pace-layering business capabilities is a straightforward procedure but can profoundly impact how stakeholders perceive architectural change.

Rather than close the door to alternative technologies and configurations for the sake of helpful standardization policies, leading IT organizations implement technologies and governance efforts to business areas based on a dynamic factor: rate of change. This idea is the basis of Gartner’s pace-layering strategy, a way to adjust IT planning (e.g., governance policies, risk assessments, employee training, corporate funding) according to the varying speeds that changes arrive to business areas.

IT Cost Optimization Survey by LeanIX

Gartner’s initial approach focused on pace-layering applications but many EAs use this strategy to pinpoint the fundamentally different characteristics of business capabilities themselves. Of note, LeanIX customers segment business services according to three core categories of pace-layers:

Innovation (5 - 10% of IT portfolios)

  • Experimental, trial-based solutions for emerging business requirements. Governance over these areas is scenario-based and must account for high complexity and low documentation. Changes to these services occur, on average, every two to three months.

Differentiation (20% of IT portfolios) 

  • Industry- and/or company-specific services to enable competitive ideas. This layer is characterized by flexible processes and technologies for sustaining market advantages. Configurable and relatively autonomous, change typically occurs every two years.

Commodity (75% of IT portfolios)

  • Transactional, highly integrated processes for operational efficiency. Architecture for these services is systematic with rigid, enterprise-wide governance. Change is highly predictable and occurs infrequently (2 - 7 years).

Embedding these layers into business capability models is an effective way for IT to illustrate continuous transformation journeys with business teams. Rather than accept change as an unavoidable feature of digitally-minded organizations, EAs can let business teams interpret volatility (or lack thereof) in a governance context, add predictability to their roadmap, and set up safeguards against short-sighted investments. For business areas resistant to change, business capabilities overlaid by pace-layers can also function as a stimulus to ensure legacy systems and processes evolve with future organizational IT landscapes.

3 Steps for Pace-Layering Business Capabilities

Pace-layering business capabilities is a straightforward procedure but can profoundly impact how stakeholders perceive architectural change. Though business capability models are reliable waypoints for IT and business to understand one another’s needs, they’re valuable insofar as they reflect the true nature of a modern digital enterprise. For finance and operations teams, this means making decisions based on explicit understandings of a company's overall capacity for differentiation and innovation. As for EAs who've spent years shaking their Ivory Tower image, it means doing what's necessary to translate the complexity of the digital age to help IT and business teams grow in tandem.

Here’s a quick outline on how to get started:

1. Develop Business Capability Maps

Develop business capability with business and IT stakeholders

  • Establish clear responsibilities with business and IT stakeholders
  • Ensure first level of business capabilities reflect those most critical to operations
  • Go no more than three levels down for each capability
2. Apply Pace-Layers

Segment business capability maps by commodity (common ideas), differentiation (better ideas), and innovation (new ideas)

  • Accommodate variations across business units, global regions, and user groups
  • Use customized tags to categorize business capabilities
  • Align which business capabilities serve as future differentiators and are subject for explorations
3. Scope Investments/Resources

Move discussions on IT investments from applications to business capabilities

  • Distribute costs and governance efforts based on which areas of a business are prone to change; prioritize resources where needed
  • Use business capability maturity scores to further visualize pace-layering
  • Ensure business capabilities evolve in parallel to technology roadmaps

Best Practices for Pace-Layering Business Capabilities

As continuous transformation journeys intensify, enterprises seek better alignment between IT and business teams. Pace-layering is yet another opportunity for EAs to stay ahead of the curve and propel communication from insights gathering through to decision-making stages. 

LeanIX recommends these best practices during this process:

  • Perform frequent impact analysis on systems of innovation
  • Use pace-layered capability maps as a basis for bimodal strategies
  • Promote configurability only in systems of differentiation and innovation
  • Set consistent definitions and evaluation criteria to stakeholders when segmenting capabilities
  • Apply pace-layers only after business capabilities are fully defined
  • Re-assess business capabilities against future-state architectures
  • Gauge IT investments with expertise from across departments to broaden the feedback loop
  • Couple pace-layering models with centralized data on IT costs
Subscribe to the LeanIX Blog and never miss a post again!