By: Sunil Neelamraju, Managing Principal - Consulting

Enterprises have a need and an opportunity to respond to the accelerating business pace and manage unforeseen crises. The absence of a big-picture understanding of the enterprise not only constrains strategic decision-making but also results in challenges related to:

1. Isolated transformation efforts resulting in a fragmented customer experience. For example, even after successfully digitizing the marketing function, businesses continue to encounter challenges such as decreased conversion rates and rising customer support expenses due to incomplete digitization efforts.
2. Redundancy and overlapping functionality across different businesses within an enterprise. For example, despite the successful integration of acquired companies, enterprises experience challenges cross-selling their products due to fragmented technology estate.
3. Sustenance of initiatives in the longer term. For example, technology transformation initiatives are either delayed or stalled due to inadequate planning and conflicting priorities across the participating businesses.

A shared understanding of what an enterprise can do provides the required visibility and assists decision-makers in answering key questions such as, “Are we prioritizing the right initiatives?”, “How should existing processes/platforms change to support the new products?”, “What processes/platforms are impacted when strategic business requirements change?”. The discipline of business architecture provides much-needed visibility into the underlying capabilities and enhances the business users’ awareness of their processes within a larger context.

The business capability modeling imperative

Today, enterprises must cope with increasingly varying and complex customer demands to stay competitive and grow the business. Every enterprise delivers unique products and experiences to its customers through its organizational, operational, and system capabilities. There is a need to constantly reimagine these capabilities by analyzing customer interactions and changing market conditions. According to the TOGAF standard, “a business capability represents the ability for a business to do something.” The business capability framework is an architecture viewpoint that enables decision-makers to manage change with a clearer understanding of customer touchpoints and problem areas. This requires enterprises to closely examine various components of the business model and their relationship to arrive at the business capability model (as shown in the below diagram).

Components of the business model

To identify the supporting and core business capabilities, enterprises should review standard capabilities across industries, such as financial management, workplace management, and sales and marketing management. Next comes the identification of differentiated business capabilities. This requires a thorough understanding of the products and services offered by the enterprise, including current and future aspirations (as to what will be retained versus acquired). The capability model developed through this approach should be tailored to capture the terminologies commonly used within the enterprise.

 The business capability model should abide by three core principles:

1. The enterprise acquires or develops capabilities, so the model must be stable over time.
2. Capabilities differ from activities performed by individual business functions. Thus, the model should be independent of the organizational structures.
3. Business capabilities showcase an enterprise’s potential and serve as foundational blocks to achieve the desired position. Capabilities should describe what the business needs to do to support its overall mission but should not imply how well something needs to be done.

We have used this model to:

1. Help clients better understand critical capabilities on an architecture level before prioritizing the transformational initiatives.
2. Map technology platforms against capabilities to identify redundancies and gaps.
3. Assess and map the target landing zones for newly acquired businesses.

Model in action

I came across a leading information service provider that undertook several transformation initiatives to support post-pandemic business growth. A fragmented technology landscape, federated organization structures, and sub-optimal ways of working meant a heavy reliance on few individuals to deliver transformation initiatives at scale.

To overcome this, the information service provider baselined its business architecture, founded on the capability reference model, and established a link between business capabilities and technology components in use across the enterprise.

As a result:

• The feasibility analysis of each transformation initiative was completed in a few weeks with minimal business participation, which otherwise would have required several months involving several hundred business stakeholders.
• By connecting capabilities throughout the customer journey stages, the labor-intensive and time-consuming process of surveying and gathering information needs across customer touchpoints was eliminated.
• Further, the baselining of the business capability model gave it a ready-to-deploy framework for post-merger due diligence processes.
• Importantly, rather than depending on implicit knowledge, the service provider developed digital assets, thereby saving thousands of hours of effort for business stakeholders.

Conclusion

As a key takeaway, a lack of comprehensive understanding of the enterprise limits strategic decision-making. It brings about challenges such as isolated transformation efforts, functional redundancies, and sustainability issues in the long run. The business capability framework offers decision-makers a clearer understanding of customer touchpoints and problem areas, aiding in managing and accelerating change effectively. However, achieving this necessitates a clear vision of the end goal, prioritization of the initiative, time dedication, active involvement from both business and IT stakeholders, and a team possessing a consultative mindset.

References

TOGAF® Series Guide to Business Capabilities, The Open Group, Apr 2022 https://pubs.opengroup.org/togaf-standard/business-architecture/business-capabilities.html