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Business capabilities

A business capability is what an organisation needs to deliver its business strategy and achieve its outcomes. Business capabilities encompass people, processes, information, and technology.

Another term for business capability is organisational capability. Business capabilities help agencies understand and structure what is needed to support their operating model and services.

Collectively, business capabilities are what an organisation needs to deliver its business strategy and achieve its outcomes.

The Business Capabilities Concept and Definition

Business capabilities realise business outcomes.

Detailed description of diagram

A business capbility is what an organisation needs to deliver its business strategy and achieve its outcomes. Business capabilities encompass people (competencies), processes, information, and technology. Another term for business capability is organsiation capability.

Principles for working with business capabilities

Principle 1: Useful

In general, we expect the business capabilities to be defined to a level which is useful to the stakeholders. The set of high level business capabilities for any organisation should clearly align with the purpose of the organisation, and what it needs to be able to fulfil that purpose. It helps to be able to distinguish core supporting capabilities from value producing and strategic capabilities.

Principle 2: Self-contained

It is helpful to think about business capabilities as self-contained pieces of a business that potentially could be sourced from another business unit or agency, or an external provider. Can they be logically separated and shifted? If not, we may be getting too detailed.

Sourcing of capabilities is something that is worth thinking about. Some questions to ask are:

  • Is this something that potentially could be out-sourced from the agency or is it core to the agency?
  • If something could be outsourced why would you do it? Is it because it is a commodity function that could be done more effectively by a specialist provider? Is it something you need to be able to do well but currently don’t have the right skill sets?

Principle 3: What and why

The ‘what?’ and the ‘why?’, not the ‘how?’, ‘who?’ or ‘where’. A business capability is about defining what needs to be delivered and why it needs to be delivered; it does not define how it will be delivered. Capability is conceptual, it is used to simplify.

For example, a small business owner with staff needs a “Pay staff capability”. The how is not part of the capability; the owner could implement it by pulling out their wallet and giving staff money, through to having an accounting and time-keeping software package that direct credits pay into staff accounts.

Principle 4: Categorised

Capabilities should be categorised to allow gaps and overlaps to be readily identified and any duplication avoided, or explained and justified. The government enterprise architecture reference taxonomies can be used for this purpose.

Business capabilities terms

1. Capability gap

A capability gap is the difference between the current capability and what the stakeholders want the capability to be. Once the gap has been agreed and defined, explore options to close the capability gap.

In some cases, the gap may be so big that a new capability is required to replace a current one.

2. Capability heat map

A capability heat map is a simple visual technique tool for highlighting where the focus areas are for an organisation. The capabilities on this should align with the focus areas of the stakeholders, using terms that are well understood. Often the heat map will show the current state on the left and a desired state by a target date on the right. More sophisticated heat maps may show the related capability increments needed to reach the desired state.

3. Capability increments

A capability increment is the result of some action taken to improve a capability. There may be a number of capability increments needed to get from the current capability to the desired capability. These will often be in the form of change programmes and related projects.

4. Capability maturity model/capability maturity assessment

The Capability maturity model (CMM) is an approach for assessing, measuring and tracking the evolution of a capability over time. It provides a framework for organising these evolutionary steps into 5 maturity levels that lay successive foundations for continuous process improvement.

CMM was developed and is promoted by the Software Engineering Institute (SEI) . It was originally developed for software development but over time has come to be used for all aspects of organisations with many industry specific models now available.

CMM's five maturity levels

  1. Initial level – processes are ad hoc. Success is based on individual efforts. It is not considered to be repeatable, as processes are not sufficiently defined and documented.
  2. Repeatable level – basic project management techniques are established, and successes could be repeated. Supporting processes would have been established, defined and documented but are not necessarily followed.
  3. Defined level – an organisation has developed its own standard software process through greater attention to documentation, standardisation and integration.
  4. Managed level – an organisation monitors and controls its own processes through data collection and analysis.
  5. Optimising level – continuous process improvement is enabled by quantitative feedback from the process and from piloting innovative ideas and technologies.

Depending upon the model, the definitions may vary but the concept is the same. Maturity levels are often “1” to “5”. In the generic government capability assessment tool “0” is used as a null value where there is no data.

5. Parent capability/child capability

Capabilities can be organised so that a capability has multiple sub-capabilities. This would normally be done when focus is needed on some aspects of the capability.

Related resources

Government business capability model

The government business capability model provides a candidate set of business capabilities that could be found in a typical government agency as a quick start for agencies wanting to use business capabilities as a tool to link strategy to their resources and assets.

Government Business Capability Model

Generic capability maturity assessment tool

This tool is intended as generic tool for assessing the maturity of unique capabilities for which there may be no readily available maturity assessment tools.

Generic capability maturity assessment tool - ICT.govt.nz Snapshot

Protective Security Requirements Capability Maturity Model

Provides a simple checklist to help your organisation's security leaders to review your organisation’s security capability.

Protective Security Requirements Capability Maturity Model

The Open Group

The Open Group is a global consortium responsible for developing the TOGAF® (The Open Group Architecture Framework) standard, certification, and a range of free guides for enterprise architecture.

A related whitepapers is:

Capability-Based Planning: The Link Between Strategy and Enterprise Architecture

Reference: W16C

This White Paper describes how a Capability-Based Planning (CBP) method is a solution for the alignment between business strategy and Enterprise Architecture. It includes a detailed example using ArchiMate 3.0 notation.

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