Business and IT alignment remains a top priority for CIOs and their peers. While many CIOs have made significant progress in gaining a seat at the strategy table, a gap remains in organizing and illuminating executive business thinking in a way that drives consistent understanding throughout the organization. Business capability models are providing many organizations with a new approach to deepen the strategic dialogue between business and IT leaders and increase strategic alignment. These models create a “Rosetta stone” that provides the translation between business and IT concerns.
IT executives have increased their interactions with business leaders over the years, but the results have been disjointed and often difficult to translate into cohesive action. Most IT/business conversations are centered on projects, processes, and applications leading to IT centric discussions that don’t align well with business concerns. Processes are too detailed to capture business executive’s interests. Application discussions are too technical. Projects resonate well but are too short term focused to drive much strategic value. For many companies, strategies are also too short term focused, changing year to year. Capabilities close the gap between business interests and IT concerns providing the right level of detail and consistency to facilitate an ongoing dialogue between business and IT leaders.
Capability Models Provide a Focal Point For Strategic Dialogue
Capabilities are the fundamental elements that provide an organization’s capacity to achieve a desired outcome. They can be thought of as describing the organization’s potential. Taken together they form a model representing all the functional abilities a business needs to execute its business model and fulfill its mission. From an IT perspective, capability models provide a stable overarching view of what is important to business leaders that can link business and IT initiatives together. These relatively simple views of the business provide the foundation for complex discussions on strategy and resource allocation. Capability models don’t reduce business complexity, but they do illuminate the complexity in ways that provide higher levels of insight and perspective.
Effective capability models adhere to three basic principles:
- First and foremost, they capture the business interest. The primary value in defining capabilities lies in their ability to create new insight and perspective for business leaders. To accomplish this, they must be defined in a way that resonates with business executives’ thought processes. Creating meaning is the goal.
- Capabilities provide a stable view of the business. Well-defined capabilities rarely change. They provide a much more stable view of the business than do projects, processes, applications, and even strategies. Capabilities only change when there is a significant shift in the underlying business model, which might occur through a business transformation initiative or with a new acquisition.
- Capabilities must easily link to both the resources that support them and the activities they in turn support. It is this linking ability that places capability maps in the center of the strategic dialogue. As the foundation for strategic discussions, capabilities provide the connective tissue among strategy, processes, and resources.
Companies Are Using Capability Maps To Create Value Today
Business architects that build capability maps are finding multiple ways to apply them to focus strategic decisions, align investments with business goals, and deepen the business IT dialogue. Once capability models have been integrated into business thinking, they quickly become the jumping off point for many strategic business discussions. Here are some of the ways capability maps are creating value today:
Focus business investments where they have the greatest impact. Using capability heat maps to show strengths and weaknesses of different business capabilities helps focus investments where they have the most overall business impact and prevents over-investing in areas that can produce little benefit.
Illuminate where the organization needs to focus to implement its strategies. Mapping capabilities onto strategic road maps creates a clear picture of what current assets can be leveraged and what needs to be created. Implementation can then be described as a series of capability enhancements. Linking capabilities to strategies also quickly points out scale, complexity, and risks associated with initiative implementation.
Identify opportunities for outsourcing non-core functions. Capabilities that do not provide strategic differentiation and have weak underlying support structures are strong candidates for outsourcing. Overlaying investment and strategic differentiators’ heat maps readily identifies areas where outsourcing will add the most value with the least business risk.
Focus process improvement efforts for maximum value. Processes operationalize capabilities, turning potential into results. Mapping process improvement efforts to capabilities provides value in two ways. For processes that are encapsulated in a single capability, it helps prioritize process improvement efforts by linking them to capabilities that need the most improvement. For processes that span capabilities, it creates a more complete picture of organizational impact from process change initiatives.
Start Building Your Business Capability Models Sooner Rather Than Later
The creation and application of capability maps have the potential to help IT and business break through the “we-they” cloud that keeps IT-business alignment at the top of CIOs’ challenges. Capability models help IT understand the business and the business understand IT. They provide a visual model that shows where the IT budget goes and how IT investments and operational expenses support business strategies and initiatives. The amount of resource it takes to build an enterprise capability model is relatively small, but the elapsed time can be rather long due to the amount of socialization needed to create a model with wide appeal. Enterprise architects should start building their capability models sooner rather than later. Here are some key points to keep in mind.
Create your own model. At this stage of development, most capability models are unique even within industries. This is indicative of the relative newness of the tool. There are few reference models in the public domain so this uniqueness will continue for quite some time. This means you will have to either roll your own or synthesize multiple approaches to create one that works for you.
Don’t worry about ownership. Successful capability modeling initiatives will be those where the business feels it owns the model. Make building capability models a team effort. A variety of perspectives is needed to produce a model that works broadly across the entire organization. Start with leveraging IT resources that have a good business perspective. This might include relationship managers, demand managers, business analysts, and members of the PMO. The key word here is collaborate.
Don’t be a perfectionist. Unlike technical reference architectures and frameworks, a highly coherent model is not necessarily the goal. Successful capability models will be those that broadly resonate with business leaders, not the ones that are the most technically elegant.
Keep it simple. Overly complex capability models will not resonate well with business leaders. Find the right level of detail for your organization through iterative and collaborative design processes.Don’t be afraid to throw everything out and start over if the visualization you create becomes too complex. Keep in mind that the capability model is just one piece of the business architecture puzzle.
Learn as you go. Building capability maps is not a simple descriptive process. What is really going on is uncovering and enhancing the organization’s “tribal knowledge” about how it works. Gaps and inconsistencies will emerge as you start clarifying the story. Illuminating and resolving these is half the value.
Capability models provide a much needed link between business strategy and IT action. They are rapidly becoming the core component of the overall business architecture framework. Correctly defined, capabilities provide a view of the business that business leaders find useful as the foundation for their strategic discussions. IT architects and planners can take these same capabilities as the starting point for discussions about IT investments. For companies that do this well, capability models will provide the Rosetta stone through which business needs can be translated into business aligned IT action.
by Jeff Scott, a senior analyst at Forrester Research, where he serves enterprise architecture professionals. To obtain free, related research from Forrester, visit www.forrester.com/AG109.