Get a Free Deliverable

Business Capability Analysis: How to analyze capabilities

Business Capability AnalysisBusiness Capability Analysis is different and distinct than business analysis.  Business Capability Analysis is about evaluating the capabilities – A Capabilities is “What a business does and can do” – in the strategic and operational contexts. Business Analysis, on the other hand, is about understanding and analyzing the business context as a part of process re-engineering or IT enablement project.  While business capabilities analysis and business analysis are two separate disciplines, there is synergy and commonality in some of the steps and the desired outcomes. 

Capstera defines business capability analysis as the assessment of individual business capabilities as well as an integrated set of enterprise business capabilities model to evaluate their strategic importance, business process maturity, resource adequacy, level of IT support, and cost factors. 

As for the definition of Business Analysis, the BABOK defines it as follows:

Business Analysis is the practice of enabling change in an organizational context, by defining needs and recommending solutions that deliver value to stakeholders. The set of tasks and techniques that are used to perform business analysis are defined in A Guide to the Business Analysis Body of Knowledge®(BABOK®Guide).

Now, before we examine how to analyze business capabilities, let us get a few things out of the way.

Review the definition of business architecture and definition of business capabilities.  Furthermore, you may also wish to learn how to build a business capability map. 

Business Capability Analysis Techniques:

The Level at which to Analyze the Business Capabilities:  Business capability analysis can occur at various levels.  One can analyze the capabilities within the context of an initiative or a transformation program.  For example, overall a capability such as “Customer Relationship Management” may work well in a B2B (Business to Business) context but in the consumer division (B2C), the same capability may not be mature.  And assuming a capability is a part of three different business units, how does one summarize the overall rating of the capability at an enterprise level.  

Incorporating Multiple Perspectives:  There are multiple stakeholders for a capability.  The consumers of the capability within the organization as a part of a product, service or a platform.  And the providers of the capability. The business stakeholders and the technology stakeholders who leverage the capability context to IT enable software and solutions.  One can assess the capabilities at each level and summarize at an enterprise level or keep the individual scores at a business unit level and then separately at an enterprise level. 

A company may follow a consensus approach to assessments and score or develop a method of averaging individual scores based on a weighted average. 

Underlying Components or the Abstraction:  For example, to evaluate a capability one can review the underlying process, supporting technology, the flow of information objects, and the importance with regards to the strategy.   This multidimensional approach is in addition to the levels at which to analyze a capability.  Or one can examine the capability at the holistic abstraction. 

The Classic 2*2 Analysis:  In addition to the separate and individual parameters, the standard 2*2 matrix analysis is an extremely valuable tool. For example, plotting level of strategic importance on one axis and the total cost on the other axis provides insights into whether the spend is correlated to the importance.  Another example is the criticality of the capability and the current operational maturity.  These views and viewpoints are a powerful technique. 

Business Capability Analysis Parameters:  

There are several parameters one can use to evaluate capabilities.  Here are a few of our favorites.  In addition to the ideas in the table below, a company may use parameters such as “Business Value” “Customer Satisfaction”. 

Assessment Categories and ParametersDefinitions Business Capability Analysis - Assessment Parameters
ImportanceHow important is a capability to your enterprise? This should be based on the future direction of the firm, not necessarily the present state.
CoreCapabilities which are strategic differentiators and define the essence of your firm.
 EnablingThe capabilities which keep the machine humming and are important for operational excellence.
 CommodityAll the capabilities which can be standardized, outsourced and where competitive differentiation is difficult to achieve. (Unless, of course, there is an innovative leap forward)
Process MaturityHow mature are the underlying business processes that orchestrate the capabilities?
InitialProcesses are usually ad hoc and chaotic. Success in these organizations depends on the competence and heroics of the people in the organization and not on the use of proven processes.
RepeatableThe process discipline reflected by maturity Repeatable helps to ensure that existing practices and workflows are retained during times of stress. With these practices and principles, tasks are performed and managed according to their documented plans.
ManagedQuantitative objectives for quality and process performance are established for processes at this maturity level. Quantitative objectives are based on the needs of the customer, end users, organization, and process implementers. Quality and process performance are understood in statistical terms and are managed throughout the life of the processes.
OptimizedProcesses are continually improved based on a quantitative understanding of the common causes of variation inherent in processes. Quantitative process-improvement objectives for the organization are established, continually revised to reflect changing business objectives, and used as criteria in managing process improvement.
Technology EnablementThe footprint and effectiveness of technology which powers capabilities.
ExcellentThe technology that underpins the capabilities is comprehensive and robust and is compatible with modern architecture.
GoodThe technologies are in place but there are gaps in level of technology enablement as well as the sophistication.
FairThe technology is sufficient to keep the lights on, but not necessarily supportive of cutting edge business performance.
LowThere are distinct shortcomings in level of technology enablement and the IT projects have issues some of the key performance pillars - speed, cost, quality and footprint.
ResourcingHow well is the capability staffed and the resourced to achieve the set objectives and goals?
AbundantThe resourcing needs are fully met with right skills and competencies.
AdequateThe resourcing suffices in terms of the quantity and quality and meets basic needs.
InadequateThe resources are not up to par in terms of capacity and/or competence.

Current State, Transition State, and Future State: 

The capability assessment or analysis is not static and hence the business architecture team may conduct an assessment of the current state and plot a desired a future state based on corporate strategy considerations.  And of course, there can be interim transition stages for capabilities to evolve from the current state to the desired future state. 

Related Items:

Sign up for Newsletter