How to Build Business Capabilities

In our previous blog we defined how business capabilities could be structured by providing an emerging business capability meta-model.

In this article we will describe one way to populate business capabilities…

You may recall we had previously explained that a business capability could be either customer-driven or internally-driven (see previous article for a quick refresher).

When it comes to critical success factors, the rule of thumb is that an organization should have 7 – plus or minus 2. So the question begs – how many business capabilities should a company have?

At Confiance we have noticed that some organizations have hundreds.

Other pundits take enterprise value chains (such as Order to Cash) and rename these (such as Order Processing) and then call these capabilities – hence an almost one-to-one relationship between processes and capabilities.

We don’t think that is the way to go. We believe that a company would have no more than 10 – 20 high level business capabilities – and these would not be under cover enterprise business processes.

Remember, business capabilities should describe the services an organization provides or wants to provide.

Let’s take an organization’s supply chain as an example. Brain storm what services would we want to provide around our supply chain. Ideas such as supply chain agility and improved customer satisfaction might be forthcoming.

Then taking each valid idea break these down further – so for improved customer satisfaction – ask, “What do we need to do to so as to improve customer satisfaction?” Naturally we should be asking actual customers what services they would like us to provide.

Candidate ideas might be:

  • Speedy delivery of product.
  • Use emerging technology, such as tablets and smart phones.
  • Enhance customer experience when dealing with the company.
  • Again each of these need to be defined in more detail. What delivery time would impress your customers – if your current delivery time is 2 weeks and you are able to cut the delivery time by one day, will that be seen as an improvement, or is your customer expecting same day delivery?

    As you can see, over time a network hierarchy will start to be formed. With high level business capabilities at the top, moving all the way down to lower level business capabilities and, in some cases, ending up with IT capabilities.

    Next we need to define the capability outcome for each capability – be it at the lowest or highest level in the network hierarchy. Keep in mind that it might be possible to have multiple capabilities associated with an outcome. It is here that we want to define what value this will bring to the organization when this outcome is satisfied or met. Naturally we can later discard low value outcomes and their associated business capabilities.

    In our next blog we will discuss how you can take your outcomes and use these to create a roadmap that will guide you to the top 5 projects your organization should be embarking on next.

    We call this the Capability Outcome Power of Five…