Every company has capabilities that allow it to operate, stay in business and ideally win market share. But today's companies may not have the capabilities they need to thrive in a business world reliant on frequent, invasive and disruptive change. In our experience, companies also lack clarity around their capabilities. We have found that few can easily list the capabilities of their business as a whole or by business unit. This means there is little common agreement about what must be done, by whom and why.
To complicate matters, most senior managers believe their companies must transform both business and digital activities to remain competitive. Transformation requires a future business model that describes what the company must be able to do, listing clear capabilities. This model gives the transformation its goals and operating vision and serves as the basis for the transformation roadmap.
The importance of business capabilities
Capabilities exist in a hierarchy that can be accessed at any level to show what services are available. Capabilities are broken into abilities, which are broken into activities.
Understanding capabilities is important for several reasons:
- Capability identification is the foundation for strategy implementation.
- Current and future capability identification and definition is the basis for business transformation.
- Knowing the capabilities that are available and what they do promotes reuse and allows managers to avoid reinventing the proverbial wheel.
- Capabilities in one business area can be part of a different business unit's work and different processes.
Business leaders must identify all the capabilities available within their own department's operation's capabilities and understand if their work is part of a larger capability across the company. They must also map out how any change to these capabilities will affect operations, making certain it is aligned to business and digital transformation goals and can be used into the future.
Adapt business capabilities for transformation
Once a business understands its capabilities and those that can be reused across departments, it can determine which should be part of a transformation effort and which can be improved by technology, especially automation and hyperautomation. Knowing these factors can make a big difference in problem resolution and in streamlining business operation. If you don't have this information, redesigning a business area can cause both upstream and downstream issues in the process and workflow. It can also cause transformation failure as teams keep making changes that break other connected processes.
Transformation should focus on optimizing the capabilities the business needs to excel. That means having the right capabilities in the right places and making certain each operates at an efficient and effective level of performance -- or at least an acceptable level. The sooner that any underperforming capability can be redesigned and rebuilt, the better it will be for the operation as a whole.
Prioritizing and planning for change was once the sole realm of the business architect, but today the role has evolved to encompass a multidisciplinary team of specialists we call the "architects of change."
Build a plan based on capabilities
As practice leads in large international consulting firms, we have experienced multiple transformations and more than 100 improvement projects. We know the traditional methods of process improvement but also know these must be modified to meet the challenges of today's technology and business environments. We recommend an approach in which capability identification is tied to vision as the foundation for large-scale improvement and transformation.
This approach is outlined in our book, Business and Digital Transformation in the Age of Hyperautomation, downloadable from the link below.
Business and Digital Transformation in the Face of Hyperautomation
This free ebook explores the evolution of digital transformation and the skills and tools business and IT leaders must foster to remain successful in today's fast-moving technology landscape.Download Now
Following our approach, capabilities define what a business needs to build to deliver the services of the future business model. Once these are defined and their interrelationships modeled, the work to deliver these capabilities can be determined, along with any needed applications. At that point, work can be grouped into processes and aligned to those that exist today. It will also bring to light the changes that must be made and any new processes that are needed.
About the authors
Dan Morris, CBPL, CBPP, CBA, ABPMP fellow, has more than 30 years of experience in business and IT operation transformation and management. He is the author of five books on business transformation and more than 70 papers and articles.
Keith Leust, MBA, CBA, Six Sigma Black Belt, is a results-driven business leader with more than 30 years of hands-on experience. He co-authored the first business architecture certification exam for the Business Architects Association and helped launch the business architecture practice for Oracle.