Efficiency & Cost Reduction via Business Capability Planning

Efficiency & Cost Reduction via Business Capability Planning

We’ve come a long way from Enterprise Architecture’s (EA) beginnings. The Enterprise Architecture domain has grown rapidly, serving to deliver strategic guidance on IT activities and planning.

Several core components of EA are by now, widely used in IT. Components such as revealing the relation between layers of applications and technology, or between processes, functions and applications, as well as data management.

In recent years, there has been increasing interest to involve top management and the lines of business, in EA. This is where business capabilities come in.

“The Business Capability is an effective way for the enterprise architect and the CIO to reveal the value of EA to the rest of top management and the business side.”

The meaning behind ‘business capability’, doesn’t stray too far from its literal interpretation. Crudely put, business capabilities are what a business is capable of doing.

Introducing Business Capabilities as part of the EA setup in an organization, has often proven to be a two-edged sword. On the one hand, it is a great way to get the right people engaged – on the other hand, if it is done wrong, EA can end up being perceived as academic and too complex. Introducing Business Capabilities is yet another example of the ‘just enough’ Enterprise Architecture mantra being of benefit, ensuring a pragmatic and ‘lean’ approach.

How will Business Capabilities help?

When introducing business capabilities, it is very helpful to communicate to the business and top management what value it brings, along with basic examples from your organization. Do this by identifying current goals in your organization, and show how using capabilities will help in addressing this goal.

Imagine you’re the CIO of a university that’s integrating with a local college, hosting some of their more advanced classes. There will undoubtedly be differences in how the university and college operate and maintain data, among other things. These differences will have to be considered to meet your goal of successfully integrating the two establishments and keep down overall IT-cost.

Therefore, a goal here will be “Eliminate added IT cost associated with integration or merger”.

In this case, either using an existing business capability model, or drafting your own, the focus should be around the relevant capabilities to meet this end – with everything else being excluded.

Associating your existing EA with the added business capabilities will highlight these differences, as the relevant processes, applications, systems, and other assets of both institutions can be mapped to the relevant capabilities.

From here, decision makers can see what applications, systems and assets will need to be kept – e.g. can we keep both IT enrollment systems since the University will only be taking on a small number of classes? Or should one be phased out?

Business Capability mapping will also highlight assets that could be better utilized. For example, since the University will now be hosting Music Technology classes, business capability mapping will indicate that there’s a set of computing equipment that is now essentially redundant. From here decision makers can decide whether it’s better to sell the assets, or repurpose them.

Trimming the fat, or phasing out these redundancies have now directly addressed management’s goal, using Business Capabilities – in a focused, simple exercise.

The Benefits of Business Capabilities

Business capabilities play a vital role in facilitating IT and Business alignment, maintaining a solid level of understanding between IT and the wider business, and keeping everyone on the same page.

More importantly, business capabilities provide a reliable, stable platform for planning. Business goals will not change quickly – they usually only change in response to significant business transformation – providing a dependable basis on which a business can consider future states.

Alex Cullen, a research director at Forrester Research has discussed the topic in the past.

He said that business capabilities “can be used for discussions on what is important.”

In turn, this focus essentially leads to a better time to market and more efficient operations. “Projects go into operations more smoothly because IT and the business plan their parts of the project using the same frameworks,” continued Cullen.

A simple Capability heatmap like below, can be used to reveal important business decisions and potential avenues.

The example is a snapshot of a media companies Business Capabilities. Individual cards are color coded automatically, uncovering underlying data. Green shows what the business has determined are the top 3 capabilities to differentiate the media company from competition the next 3 years –  while orange shows IT’s current top 3 investment areas.

In this case, we can see one instance of overlap, identifying an area to be addressed. Perhaps by readjusting the priority of IT-investments moving forward.Business_Capability.png

How should I implement business capability modeling?

Several organizations have chosen a pragmatic, top down approach. This approach is not for all – you will lose the completeness and ability to query across all business units on any capability – but you will gain fast adoption and buy-in. Here are the 4 key steps involved:

Identify a few current key goals of your company

The first point of call for any business implementing a business capability model, is understanding where the business is right now. This provides a good indication of where the business can, and should be going. Input from those involved in strategy, and an overview of the company’s current goals is helpful here also.

Select a source for your Business Capabilities framework

Either using existing definitions in use already in your organization, or select one from free online repositories to get started.

Implement the minimum viable set

Select only the subset of business capabilities that will directly add value to the key goals identified – leave out the rest, and keep it simple. Associate your EA data with the select capabilities.

Once the capabilities are recognized, it’s important to add weight and priority to them. Two typical metrics for this are value and cost, data permitting.

Show the value!

Now, with above 3 steps targeting a few current goals, you are able to show the value of the exercise and quickly, to the different lines of business and top management. You can do this by:

  • Visualizing the capability heatmap of cost vs value to reveal. Are there any surprises in the cost of driving certain capabilities? Are these capabilities a competitive differentiator to our business or commoditized in our industry?
  • Using a pivot table to uncover the total spend on operations vs development – per business line. Where are we over and under performing?

Such goal driven, focused introduction of business capabilities is key to unleashing the value of enterprise architecture quickly. From here, the roll-out to more areas will be driven by addressing new business goals – with the backing of management.

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