Clarifying Business Capabilities: Insights and Perspectives
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Chapter 1: Introduction to Business Capabilities
In my professional role and during my research for various articles, I frequently encounter discussions surrounding Business Capabilities, including the creation of Capability Maps and their application in formulating and executing Strategy. While many aim to simplify the concept of capabilities, this often results in the overuse of certain phrases that, although true, gloss over critical details. Consequently, readers may base their understanding solely on these simplified notions without exploring deeper implications, potentially leading to practices that are either less effective or detrimental.
In this piece, I will examine three prevalent oversimplified statements about business capabilities that I have also utilized in my writings, aiming to provide more comprehensive insights into their true meanings.
Understanding Business Capabilities
Business capabilities involve the integration of personnel, processes, and technologies to deliver value to customers.
Section 1.1: Statement 1 - Capabilities Define WHAT You Do
This statement serves to differentiate between the WHAT, HOW, and WHY of business operations. However, it oversimplifies the matter in two key ways. First, both Capabilities and Business Functions can fall under the category of WHAT, while Processes and Value Streams represent HOW, and Mission and Vision fit into WHY. Second, while it is fundamentally accurate that Capabilities describe WHAT your organization accomplishes, it’s more nuanced. Capabilities reflect not only what you currently do but also what you are capable of doing. This emphasizes an essential aspect: capabilities extend beyond current operations to encompass potential future abilities.
The interesting aspect of "potential" allows organizations to include capabilities they are not yet able to perform in their capability maps. This insight can justify the use of generic capability maps tailored to specific industries, revealing capabilities that may be desirable to develop. By identifying these prospective capabilities, organizations can brainstorm innovative strategies. This concept was referenced in my article “How to know if work is strategic or operations,” where I discussed how strategies can pave the way for new capabilities.
The first video provides a detailed explanation of business capabilities, including their modeling, challenges, and examples, enhancing your understanding of this critical concept.
Section 1.2: Statement 2 - Capabilities as a Combination of People, Processes, and Resources
This assertion can be misleading, particularly regarding the term "combines." To clarify, I’ll draw on two concepts from UML (Universal Modeling Language): composition and aggregation. Composition signifies that an object is an integral part of a larger object, and cannot exist independently. For instance, a car consists of doors, windows, and wheels, which only hold significance when considered as part of the car. Conversely, aggregation refers to the grouping of objects that retain their individual identities. For example, various types of seats—like dining chairs and car seats—can be aggregated based on their function but serve distinct purposes independently.
Relating this back to Capabilities, they function as aggregations, uniting the necessary people, processes, and resources that your organization requires to achieve specific outcomes. This understanding is crucial as it underscores that any of those elements may be shared across different capabilities within the organization. Moreover, two separate departments may possess the same capability but execute it using different teams and processes.
To illustrate, let’s consider a company that manufactures both hardware and software. Each division manages its own "Incident Management" capability, but the teams, processes, and tools differ. Therefore, any analysis of the Incident Management capability must account for the context of each division, as strategies cannot merely state "improve Incident Management" without understanding these distinctions.
The second video explores business capability mapping in digital enterprises, providing insights that can help refine your understanding of capability frameworks.
Chapter 2: Statement 3 - The Uniqueness of Capabilities in a Capability Map
It is often stated that each capability within a capability map should be distinct and non-overlapping. Some authors advocate for the MECE Principle (Mutually Exclusive and Collectively Exhaustive), which demands that capabilities be clearly defined while ensuring that the map encompasses every possible capability that the organization could possess. While the notion of exclusivity is sound, the comprehensiveness aspect becomes challenging when discussing potential capabilities.
I include this statement not due to its oversimplification but because adhering too rigidly to a strict hierarchy may lead to an overly structured mindset, mistaking capabilities as compositions rather than aggregations. This misinterpretation can result in erroneous conclusions regarding the implementation of capabilities throughout the organization.
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