Business Capability Modelling: What, why how?

What are Business Capabilities?

TOGAF definition: A particular ability that a business may possess or exchange to achieve a specific purpose.

Generally accepted definition: A Business Capability encapsulates all that describes what a business does including:  People, Processes, Tools and Materials (or Technology & Information)

For our purposes: A Business Capability describes what a business does to deliver a business outcome using the components of:  Roles, Processes, Applications and Data

We use roles instead of people because that reduces the politics as is a bit abstract, this allows you to create a role that doesn’t exist (yet) but suggest it is needed and perhaps currently not being done well by a person (e.g. Change Manager). So this role has low maturity and you are not saying the person is doing a bad job (explicitly).

We use data instead of information because its more tangible. In fact, all of the above is quite tangible and therefore can be catalogued, assessed and improved.

It’s a conceptual thing that describes what what the business does – not who ( that’s people), not how (process), not where (application or location), not why (strategy).

It is similar to a Business Function, but it’s different. A function describes the function of course – so it is also ‘what’ the business does as an activity, but a function may not include all these four aspects.

Let’s try and use an example – Sales:

Name Object Description
Sales Function A Business Function The activities that support a customer in making a purchase.
Sales Department An Organisational Unit The team that provides the function and delivers the Sales Services
Order Placement A Business Service One of the Sales Services that is delivered to the customer (there are many others)
Sales Management A Business Capability All the components that deliver the outcome of a sale to a customer. It may include people not in the Sales Department, deliver a number of services and utilise a range of applications and include processes that are not directly associated with the function. E.G. Rostering the Sales staff

So, the names may be the same or very similar, but we need to be distinct about what it is we are modelling because they are very different things.

Another example of the confusion that is created is Accounts Payable – it’s a process, it’s a team, it’s a function but as a capability it includes delegated managers all around organisation who have to approve an invoice for payment.

Why would you use Capability Modelling?

  • It allows us to have a conversation with business people about what they do and keep away from the politics of organisational hierarchies, system names (which often reflect the function – e.g. CRM, and can often have emotional ties).
  • It is abstract so we can rise above reality, but still link into the real things that people know: incorporating Roles, Processes, Applications and Data
  • We can be a bit creative with the capabilities to get our message across or get an understanding without putting people off.
  • We can create different levels of capabilities allowing us to stay at a high level when we need to. E.g. Sales Management might be broken down into a number of sub-capabilities like: Promotion Management, Product Management, Order Processing. Or Order Processing may be seen as a back end capability not in the Sales Management area.
  • We can bring in generic capabilities to get people thinking about their business and help standardize.

At the end of the day we are just trying to create a model – it doesn’t have to be exact. We are not creating an engineering blueprint, its just an approximation to the real work.

Why use a model? Well like any model it’s so you can see the real thing in different ways not normally possible, in order to learn and understand where the weaknesses and strengths, opportunities and threats are, and overall, to improve them. It can also provide us use a common “language” to describe our business.

Business capabilities are a canvas on top of which we can visualise the real things and show how it all hangs together.

How to create a Business Capability Model?

The best way is to have a workshop with business stakeholders, and include the projects teams when you can, as we can all learn from each other. The suggestion is to only work on the areas of interest (i.e. the projects that are on the go) and do NOT try and define everything in detail in the whole Enterprise – it will take too long. We can use a very high level model to cover everything based on the org chart, but drill into the real world with the people who care about it.

I can provide, on request, a library of generic Business Capability Models for different business types and different departments/functional unit, that can be used as a starting ground. Just go to the website (intron.com.au) and use the contact form or email mvea@intron.com.au.

You can also use the APQC process model as a guide too – usually a level 3 business Capability model is equivalent to a Level 1 APQC Process – roughly.

This means you deliver something soon, the project will pay because you are delivering something back to them and you develop an example in one or two areas that can be used to persuade the next project to do the same. Your executives will be pleased too because you are delivering in the areas they are spending in and you are showing that you understand their business and have created a model they can understand. If you tell people something they want to hear (sometimes) its good because it’s validation.

Linking Applications to Business Capabilities

One of the first things we can do now is to link the applications we identified in the MVEA. We already have them linked to organisational units, so it’s just another step on the way to link them to business capabilities. Initially just doing it at a high level is good enough. It will show immediately any capabilities that are not serviced by an application (What! No application for Sales Strategy & Planning?). I’ll bet you could find a bunch of excel spreadsheets you didn’t know about supporting that capability. Sometimes even these Excel Spreadsheets may be important enough to classify as “applications” – capture them all. You also might start seeing some duplications – another worthwhile insight. If you have identified earlier the applications that are changing because of project investment  – then you can show the capabilities that are being impacted which might mean you can show a greater impact than you first thought.

How do you do this ? Simply by taking your Business Capability model diagram and overlaying  the applications on top of the capabilities they are linked with (colour coded as per the MVEA organizational model). Miraculously, you have shown the gaps which could be vulnerabilities (or not) of the business.

Here is an example from the MVEA made-up company :

Once again – like the MVEA, the shapes shown above a directly linked to a Sharepoint list. Drawing insights from a BCM with an overlay depends on what appears. That’s the point of a model. It may not show anything more than you already know, or it may teach you something new.

In the above example some insights jump out – clearly ones eye is drawn by the red highlight applications that are being retired.