Why Capability-Based IT Investments Planning Doesn’t Work for Enterprises Today, and What Are the Options

By Prakash Mazhuvancherry

What is Capability-based Planning?

Capability-based Planning has been around for long in the world of Enterprise Architecture (EA), and often finds a mention in leading EA frameworks. At its core is the concept of “business capability” (or simply “capability”) which represents the “what” that the business does. This is different from the “how” of the business, which is represented by constructs such as business processes, value streams, and value chains. A business capability is a stable concept since the fundamental abilities of any business typically remain stable over time. It is an abstraction that embodies various other elements such as processes, information, systems, and people. Due to its stable nature and due to its direct relation with information and systems, it provides a solid business-driven focal point to link into the technology landscape and to align changes with a sharp focus on business outcomes. These aspects are very well explained in the article The Business Capability Map: The “Rosetta Stone” of Business/IT Alignment by William Ulrich and Michael Rosen (2011). Business Capabilities are also directly impacted by the enterprise’s strategic goals and objectives, and these reflect in terms of enhancing the maturity of existing capabilities, or to acquire new capabilities or even to do away with capabilities. The capability-based planning approach leverages the linkages that exist from strategy to impacted capabilities to the underlying technology landscape, and thereby enables a business-driven method to plan IT investments. This method however is not very favourable for enterprises today due to certain reasons.

What are the practical challenges observed in applying capability-based planning to IT?

Capability-based planning can in general be applied to any area within the enterprise. When specifically used for planning IT initiatives it encounters practical challenges, some of the significant ones are as follows.

  1.  The concept of “Business Capability” is not easily understood due to the complex nature of its abstraction. This is true for most staff who are responsible for designing and enabling change within the enterprise, and especially in the technology organisation. This results in limited buy-in into the concept. The dynamic and faced-paced environment in most organisations today leaves limited space for people to adopt such a concept, especially when there exist simpler and more tangible concepts such as business processes that are far easier to understand and leverage for technology initiatives.
  2. Capability Models are prone to several conceptual errors if not constructed with the right amount of rigour and expertise. This generally happens when the right experts are not involved in designing the model. A common error is to allow business process experts or technologists to design the capability map, which leads to significant issues in the model. Business process experts are oriented heavily towards a sequential/ process-based “how” thinking as opposed to stable “what” based constructs. This leads to the inclusion of process-based constructs into the model, that are not architecturally stable. A low-quality capability model results in incorrect assessments leading to identification of incorrect planning initiatives.
  3. Capability-based IT planning approaches are typically linear and spread over years. They do not consider the real and dynamic nature of the enterprises of today, wherein new themes such as Product Management, Agile enterprise, and AI-led business disruption require continuous introspection and adaptation to evolving industry practices and customer preferences. A fixed multi-year IT roadmap often incorrectly assumes stable parameters in the internal and external environment. There is a need for a flexible and adaptive planning cycle. An enterprise may still have long-term strategic business requirements, but this does not necessarily mean that they must be hard-wired into the technology landscape via long-term IT roadmaps. Strategic requirements are prone to change, but it is difficult for the landscape to pivot due to inertia. Balancing these two dimensions has always been a significant and complex task for Enterprise Architects.

The above do not however mean that the concept of Capability is not relevant. It is still considered as a theoretically sound concept in the areas of business and enterprise architecture. This position is unlikely to change as it represents the most fundamental and conceptual perspective concerning any business. Capability-based approaches are still best-suited for solving certain types of enterprise problems. Some of the significant ones are as follows.

  1. Resolving landscape misalignments: Over time the business-technology landscape shows misalignments, which means that the fundamental patterns of the business architecture are incorrectly (or sub-optimally) reflected into the technology landscape. This generally results from various factors, the key ones being proliferation of new systems resulting from silo perspectives, undertaking initiatives that lack proper linkage to the business architecture, team boundaries resulting in sub-optimal solutions, and insufficient landscape impact analysis for technology solutions. Business Capabilities (and the overall framework of Business Architecture) provide a robust approach to uncover misaligned architectures. Analysing capabilities and their linkages to other concepts such as information, systems, processes, provide valuable insight into landscape misalignments. The challenge then is for Enterprise Architects to communicate these insights to key stakeholders in understandable terms without getting lost in modelling details.
  2. Shaping executive thinking: Through strategic assessments of the landscape, it can be used as a tool to shape executive thinking. The key here is to explain from the perspective of “our abilities as a business” as opposed to “how we execute”. Somehow the term “ability” is simpler and more absorbable than “business capability”. When used correctly this can influence executive thinking in terms of stable abilities as opposed to operational perspectives, and thereby to conceptualise strategic business requirements.
  3. Enabling value-stream based analysis: Capabilities are very powerful when used in conjunction with value streams, which essentially deals with the “how” of value accumulation and exchange. Capabilities enable the stages within a value stream, and a cross-mapping between the two brings deep focus into how the abilities of the enterprise impact the steps in value creation. When applied to value streams for a specific product/ service, such analysis helps to not only uncover gaps in value delivery but also the specific reasons based on the enterprise’s abilities.

So, if not capability-based IT roadmaps, what are the options?

There are two parallel approaches that are more suited for IT investments planning today:

  1. The Product Management based perspective: This evaluates (among various aspects) how the enterprise generates value for its customers, how product/ services are positioned in the marketplace, how the enterprise differentiates from others, and how does it look to the future. All these perspectives have a direct bearing on the technology landscape via the product roadmap. The product roadmap provides prioritised inputs for the landscape to respond to. The good thing here is that such roadmaps typically have clarity up to a few quarters ahead (up to 1- 2 years generally), with the initial quarters being more concrete and stable as opposed to the later quarters. When combined with EA-driven landscape impact analysis, the resulting IT initiatives are much more aligned to the dynamics of the business. Note here that the term “product” refers to the products and services that the business provides to its customers, it is not to be confused with other internal perspectives with the same term.
  2. Cross-cutting landscape improvements: This relates to all other architectural concerns within the landscape that need to be addressed on a common/ cross-cutting basis across all product lines. This is especially applicable to enterprises that offer multiple products/ services, have a geographical spread (which leads to region-specific IT landscapes), and have a large landscape (and hence significant technology spend). Cross-cutting landscape improvements need to be evaluated from the perspective of how they aid the product-line roadmaps and at the same time how they contribute towards landscape simplification.

In conclusion…

Capability-based IT planning has limitations when applied to enterprises today, namely the difficulty with understanding the capability concept and the slow/ long-term nature of the resulting initiatives (which does not align well with the dynamic environment that most enterprises operate in). There are alternate approaches to evaluate the landscape while deciding on investments. Business Capability is still a very useful and robust tool for analysing several types of problems within the enterprise landscape.

Mazhuvancherry is a practicing enterprise architect with over 20 years of experience across multiple industry verticals. He specializes in business-outcome driven EA as applied to large complex landscapes.