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Enterprise Business Capabilities

Enterprise business capabilities are a foundational construct in business architecture and are a decomposition of what a company does and can do. The enterprise business capabilities are an abstraction of the underlying process, function, information, and system, but the capabilities themselves are distinct and different than the underlying elements.  A logical grouping of related capabilities come together to form an enterprise capability map

Why do we need Enterprise Business Capabilities and the abstraction they offer? 

We, at Capstera, believe that the past efforts to capture and communicate the essence of a business have been wrought with redundancy & complexity. 

Organizational Models:

  • Recognizes that people make decisions and empowers them within their realm
  • Decisions are made within BUs or organizational substructures
  • Capabilities are often replicated to give each organizational entity control over how they develop
  • The ambiguity of roles often leads to personal conflicts and turf wars

Process Models:

  • Helpful in explaining how a business does things
  • Typically cuts across management layers, making process-based business management efforts difficult and slow from a governance standpoint
  • Processes change too quickly; often once a complicated process is documented, it has already become obsolete

Project Approach:

  • Projects are often effective at delivering focused change in an organization
  • The big picture is often missing. Therefore, decisions are made at the local level, instead of what might be ideal for the company and its strategy
  • Based on project governance, there are often organizational limitations of what they can do, inheriting the organizational model’s shortcomings

The enterprise business capabilities are an abstraction of the underlying process, function, information, and system, but the capabilities themselves are distinct and different than the underlying elements.

Primary shortcomings of the methods mentioned above for business modeling are as follows:

Redundancy of capabilities, which leads to complexity and rework.

Ambiguity which leads to turf wars hurting focus.

Lack of a big-picture view, especially when using the project approach.

Fluidity makes some aspects obsolete before they can be analyzed.

Different languages/references across businesses and support services (e.g., IT).

Lack of traceability between various elements and entities of the business. 

We firmly believe that the emergent discipline of business architecture and enterprise capability mapping can help.

What is an enterprise capability? 

An enterprise capability or an enterprise business capability is an elemental entity that encapsulates what the business does and can do. 

Enterprise Capabilities Model focuses on describing “What” a business does, rather than the how, who, where, when.  (All the other components are essential for a full contextual picture of the business need, but Capabilities are the foundational building blocks of business architecture.) See here for definitions of business architecture.

An enterprise capability-based view is:

A)Logical and intuitive,

B)Stable, and

C)Non-redundant yet comprehensive

A business capability model provides a better way to: 

  • Organize how we think about a business
  • Instill & track business strategy & performance
  • Communicate across disciplines (e.g., business & IT)
  • Gather requirements & develop evolution roadmaps

What is a Capability or what is Not?

A “Process” is not a capability. It describes a “How” or a flow of how something is done.

A “Value Stream” is not a process, but an end to end flow involving a stakeholder or activity.

A “System” or “Technology” (Oracle) is used to orchestrate a capability but is not a capability

An organizational chart is not a capability model.

Ideally, a company business capabilities map should be derived from the value chain, making it highly intuitive and resonate with corporate leadership as well as business and technology teams. 

Example of Enterprise Capabilities: 

Enterprise Business Capabilities - Sample Representation

Capabilities are then organized hierarchically, breaking each part of the value chain into smaller, standalone, logical elements.

Enterprise Capabilities are Stable, Foundational, and (mostly) Permanent. Capabilities bring permanence by looking at the “What” rather than the “How” of a business. 

Let us look at an example to learn about the concept of stability of a capability versus the volatility of a process. 

Credit Management Capability versus Credit Check Process: 

The credit check process has evolved,  but credit risk management, as a capability, remains essential. 

  • The process used for credit checks changed considerably.
  • What remained constant is the need for the capability “Credit Risk Management.”
  • Focusing on the “Capability” allows firms to respond to market needs, changing technology landscape, and internal policies using a stable context.

Summarizing here are the value prop of What versus How: 

  • Knowing the “What” sets the course for the journey to excellence.
  • The “How” changes due to changes in technology, internal policies, government regulations, consumer behavior.
  • The “Who,” while important, is more about aligning competencies and skills with the “What” and the “How.”
  • When” and “Where” are tactical and flow from the “What.”

An Enterprise Business Capabilities Model is non-redundant and comprehensive and is built on the principles of mutual exclusivity and exhaustiveness. 

Mutually Exclusive: Guarantees lack of redundancy and unnecessary complexity by counting everything once, and only once.

Cumulatively Exhaustive: Ensures that none of the parts are missing, that is, everything a company does is considered.

Collectively a whole: Provides a meaningful “big picture” view of a business, business unit, or other target entity.

Often, Enterprise Capabilities connote that these are the top level corporate capabilities and there are other distinct business unit level capabilities. That is more of a classification issue and not relevant to the actual characteristics of the capabilities. For example, a shared service like Human Resources may be considered a corporate capability or enterprise capability, but the attributes of the capability do not change, while the scope and services may be different based on whether it is corporate level or business unit level. 

Enterprise Capabilities Map and Value to Stakeholders:

A capability model when constructed, managed, and harness correctly can lead to significant value for key stakeholders in an enterprise. 

CEO – Operationalize company strategy using capabilities.

CFO – Use capability analysis to drive capital allocation decisions and  portfolio rationalization.

CIO – Establish the right level of IT granularity and modularity to streamline IT landscape and reduce operational complexity.

CPO (Chief Product Officer) Capabilities are “Lego blocks” that are used to define platforms, hence decreasing replication and promoting reuse.

Program Manager – A capability view helps identify & manage overlaps and define a capability evolution roadmap.

Chief of M&A – Guide post-merger integration strategy, or reduce complexity across highly redundant organizations.

IT Program Manager – Establish a common language, for example, across IT and the business.

Vendor Sourcing – Help inform and develop strategic vendor selection & management.

Capstera offers several pre-built and customizable capabilities models – both functional and industry-specific, as well as a comprehensive enterprise business capabilities map

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