What you Need to Know About Business Capabilities (in a Nutshell)

Most organizations used to take process descriptions to describe their organization and their IT. Nowadays, organizations consider business capabilities to be more adequate for such purposes. In short, business capabilities describe what a company does, while processes describe, how a company does it. Also, business capabilities are a more stable and easier-to-understand framework than a traditional process landscape is. This enables a couple of fundamental use cases.

What are the major objectives of using business capabilities?

In most cases, business capabilities are used to enable an alignment between different parties to provide transparency, enable efficiencies, or enhance collaboration. The top three cases in which business capabilities can be beneficial include:

  1. Business-IT alignment: IT wants to better serve business requirements and optimize the demand management. Business requires understanding about which applications, data, or components enable which part of the business.

  2. Strategy-Operations alignment: Oftentimes, strategy is not well broken-down to the operational level and employees do not know what the implications of a new strategy are for their daily work. The multi-level concept of business capabilities aims at solving this by having high-level strategic capabilities on level one and operational, detailed capabilities on lower levels, all relating to the high-level capabilities in a one-to-many mapping relationship.

  3. Inter-company alignment: Especially in mergers, two different companies with different backgrounds, cultures, and processes have to align their organizations. The generic nature of business capabilities and the fact that they are not dependent on particular processes, technologies, or departments can help to provide an objective, common ground for merger discussions.

What are the components of business capabilities?

A Business Capability is the sum of several components that enable a company to deliver an ability. Typically, a business capability has an application, a process, and a people component. In addition to these components, a capability can also be described with its data / information, the context / interdependencies, or the investment / maturity of it.

To illustrate what the components of a business capability are, take the example of the capability of a café to “Produce a Cappuccino”:

- Technology: Coffee machine with pumps, water valves, filter etc.

- Process: Fill the water tank, add beans, press the button, wait

- People: Coffeemaker employee

- Investment / maturity: Good coffee machine brand, automated coffee making without manual work

- Context / interdependencies: Electricity, a location to place the machine

- Data / Information: Coffee machine handbook, list of frequent issues etc.

All components together enable the café to offer a cappuccino to its customers.

What are business capability maps and what characteristics do they have?

The objective of a capability map is to bundle all capabilities that a company has. Therefore, it is the sum of many different, often similar (e.g. specific to an industry), capabilities. As capabilities can be described on different levels of detail, a capability map typically has several levels, where the higher level has fewer and more high-level capabilities. One level below each of these capabilities, there are more detailed capabilities. While the higher level is of a more generic nature, the lower levels are often more specific to the company. As example, take the capability “Marketing”. On a level below, there would be capabilities such as “Market Research”, “Content Production”, or “Campaign Management”. Below “Market Research” again, there would be capabilities such as “Market Identification” or “Consumer Segmentation”. A typical capability map has not more than 3 levels of detail, but the number of levels depends on the particular use case.