Webinar Developing Effective Business Capability

1. WebinarDeveloping Effective Business Capability Gordon Barnett, Principal Analyst March 5, 2013. Call in at 10:55 a.m. Eastern time

2. Business capability mapping Critical success factors Use business language and focus on business outcomes. Work directly with stakeholders to develop and adopt capability definitions and relationships that they understand. Why develop business capability maps? Business capability maps are a simple, powerful, and proven starting point for nearly every business architecture planning activity. They are relatively simple to create, easy to understand, and easy to use.

3. Business capability mapping (cont.) Critical success factors Develop a small number of representations, and use them repeatedly, so they are familiar parts of the ongoing business dialogue. Review regularly to ensure they remain relevant to your current business environment. Why develop business capability maps? They are powerful because they are relatively constant from year to year and can be applied to many different planning and analysis activities. Many clients have demonstrated unambiguous, repeatable, and ongoing benefits using these tools.

4. Agenda • What is a capability map? • Capability map uses and features • Developing capability maps • Common questions and challenges • Summary

5. What is a capability map? *Some organizations will have 20 to 30 capabilities, others will fall in the 50 to 70 range — your organization may fall in either camp depending on the level of detail and specific needs. A representation of your business using 20 to 30 specific capabilities, typically arranged in categories* So, what is a capability? The term business capability comes from the origins of the business architecture frameworks within the many enterprise architecture frameworks. A business capability defines the organization’s capacity to successfully perform a unique business activity to achieve a specific outcome.

6. What is a capability map? (cont.) *Some organizations will have 20 to 30 capabilities, others will fall in the 50 to 70 range — your organization may fall in either camp depending on the level of detail and specific needs. A business capability map describes a business in terms of the capabilities and relationships necessary to support the organization’s mission. Some examples (a mix of industries and forms):

7. Example: retail company

8. Example: police force

9. Example: petroleum development company

10. Agenda • What is a capability map? • Capability map uses and features • Developing capability maps • Common questions and challenges • Summary

11. Potential uses of business capabilities A true business capability is readily recognized by anyone associated with the business: “Yes, that is an important part of what we do.” It is a simple concept, and the complete map can be used to frame discussions and planning in many domains . . . Business capabilities are defined at a high level and in business-friendly terms and tend not to change over time, so they provide a familiar reference. Here is a sample of some of the ways Forrester clients use business capability maps today.

12. Example: retail capability map Example: retail capability map This retail example has 23 capabilities in four categories. For cross-cutting capabilities, it is not uncommon to fall back on terms like “information technology” or “accounting.” This may be an excellent choice for your organization, or it may be that you know these things exist in some form but don’t know how to fit them in. Here are a few ideas on alternate approaches. As always, try a few different approaches before you decide. • Split “information technology” into separate categories: • IT strategy and planning • IT solution delivery • IT operations • If you outsource operations, for example, separating these capabilities may better align to your approach. Separate all corporate functions into “strategy and planning” and “support” categories. The support capabilities will be more easily commoditized, with the strategy and planning capabilities being potential key differentiators. Some cross-cutting capabilities may really fit better as separate components of other capabilities or even a combination. If you are in a heavily regulated industry, there may be both centralized capabilities and specialized capabilities associated, for example, with product launch.

13. Example: police force capability map This example is based on a police force. It has 54 capabilities in three categories and 11 subcategories. Note that in this example, every capability is a member of a subcategory. Subcategories Summary or high-level version In this example, the subcategories alone can be seen as top-level capabilities. They are defined in simple terms and together clearly define the organization’s basic mission and operation. The more detailed capabilities help in managing the details. Categories

14. Example: capability map views To illustrate just one possibility, this capability map has been used as a heat map — possibly identifying capabilities relative maturity or where greater investment is needed.

15. Agenda • What is a capability map? • Capability map uses and features • Developing capability maps • Common questions and challenges • Summary

16. L a y the g r oundw or k. B uild y our capabilit y map. I den tify O r ganiz e I den tify I den tify candida t e and r efi ne major tar get uses. capabilities. capabilities. r ela tionships. R e a d y U nderstand N e e d s “ ” the f u r t h e r F e e l s rig h t language. r e f i n e m e n t C aptur e capabilit y details. U se y our map. C a talog Defi ne D ev elop P ublish and capabilit y capabilities view s. u se aspec ts. in detail. N e e d s S t a k e h o l d e r s f u r t h e r M ain tain c o n f i d e n ce r e f i n e m e n t Capability map development process Defining your capabilities is a process of trying several approaches until the “best” one is clear. In practice, this entire process will involve iteration among the sections. Initially, this is a “repeat steps as needed until it feels right to your stakeholders” activity. Periodic review and revision to accommodate changing business conditions will likewise focus on the steps that make the most sense. Ideally, your maps will be very stable, especially after the first couple of rounds, but a periodic review is still valuable. Make your capability map even more useful by capturing details and constructing views targeted to specific groups of stakeholders or specific needs. Lay the groundwork. Lay the groundwork Build your map. Build your map Capture details. Capture details Use and maintain. Use and maintain

17. Laying the groundwork: Identify target users • Ideally, new uses for capability maps will tend to present themselves over time, and this is an indication that you have done a good job in defining your map(s). • That said, having a few target uses in mind helps to get the ball rolling and especially helps in organizing and refining capabilities into a cohesive and comprehensive map. • Even more valuable, a few target uses help to illustrate the value of the exercise to stakeholders who may be initially skeptical. Lay the groundwork. Build your map Build your map. Capture details Capture details. Use and maintain Use and maintain.

18. Laying the groundwork: Identify target users (cont.) *These are all examples of how individual Forrester clients are using capability maps today. Lay the groundwork. Build your map Build your map. Capture details Capture details. Use and maintain Use and maintain.

19. Laying the groundwork: Understand the language Stakeholders won’t immediately grasp the concept of a business capability from the definition, but most will immediately understand when presented with a few examples in their own language. While you will need stakeholder involvement to develop a fully formed capability map, you can seed the process with two or three clear examples that will apply in your organization. Lay the groundwork. Build your map Build your map. Capture details Capture details. Use and maintain Use and maintain.

20. Laying the groundwork: Understand the language (cont.) One useful trick is to listen to your stakeholders and then “play back” what you hear using capabilities. “We need to get clients, look after their needs, etc.” becomes “customer support management.” “We analyze sales and market trends and decide how we should adjust our product mix” becomes “product strategy and planning.” Lay the groundwork. Build your map Build your map. Capture details Capture details. Use and maintain Use and maintain.

21. Building the map: Identify candidate capabilities • For each business activity, service, or function, “What must our organization do (and do consistently well) to realize the desired outcome?” • Don’t be concerned if you generate a long list at this point. • Do ignore technical capabilities at this stage. Lay the groundwork Lay the groundwork. Build your map. Capture details Capture details. Use and maintain Use and maintain.

22. Building the map: Organize and refine capabilities Try it several ways. See what resonates the best with your audience. Here is one common structure — find one that “clicks” with your stakeholders. Review your list: Are they unique, business-centric, at a consistent level of abstraction? Eliminate obvious duplicates; split capabilities that are overly broad. Organize into categories — you are looking for a manageable map — say 10 to 40 capabilities, in two to five categories. Lay the groundwork Lay the groundwork. Build your map. Capture details Capture details. Use and maintain Use and maintain.

23. Building the map: Organize and refine capabilities (cont.) Try it several ways. See what resonates the best with your audience. Here is one common structure — find one that “clicks” with your stakeholders. Classify or prioritize categories according to their importance to the organization. It is very common to see three levels, as in the example on the right, with categories further subdividing some or all of them. Lay the groundwork Lay the groundwork. Build your map. Capture details Capture details. Use and maintain Use and maintain.

24. Building the map: Identify major relationships Relationships among capabilities are inescapable. They are useful to maintain in the own right, but defining some of the major ones will often provide insight as to the strength or weakness of the capability map as a whole. Too many interdependencies, or almost none, probably means you should take another look. Lay the groundwork Lay the groundwork. Build your map. Capture details Capture details. Use and maintain Use and maintain.

25. Capabilities are related — just a few potential relationships are shown here . . . Capabilities are interrelated Supply chain planning has among its outcomes purchase and production orders that drive procurement and manufacturing. Materials needed by manufacturing are an outcome of procurement, and finished goods for distribution are an outcome of manufacturing. Human resource management’s major outcome is a supply of qualified workers needed to fulfill all of the capabilities. Lay the groundwork Lay the groundwork. Build your map. Capture details Capture details. Use and maintain Use and maintain.

26. Capturing details: catalog capability aspects • What will you capture and maintain as attributes or “aspects” of each capability? • Define a handful, and fill in a “best guess” for the capabilities you have identified. • Significant duplication or gaps will tend to become apparent, suggesting potential improvements. • In each case, how will the information captured help business users make decisions? Only aspects with clear value should be captured and maintained! Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

27. Capturing details: catalog capability aspects (cont.) • A common mistake is to link capabilities too closely to the physical world at this stage. Capabilities are an abstraction and should have links to the logical process architecture, logical information architecture, logical application architecture, and so forth. • Put another way, you don’t want to constrain capabilities by coupling them too tightly to the way business is done now. Rather, capabilities should capture the essence of what is required, independent of who does it or how it gets done. Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

28. Capturing details: Develop views • “Views” are a bit like capability dashboards — they show all or specific capabilities and highlight one or more specific aspects. • Define specific subsets (of capabilities and aspects thereof) of interest to particular stakeholders. • Develop several mockups showing the capabilities and aspects of interest and highlighting meaningful similarities or differences. Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

29. Capturing details: Develop views (cont.) • Consider showing multiple aspects, such as relative investment and strategic differentiation, side-by-side. • Remember, you can always add views as needed down the road! Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

30. Capturing details: Define capabilities in detail • Given a reasonably sound list of capabilities, aspects, and relationships, it is time to define all of these for each of your capabilities. • This is an important step in finalizing your capability map — this effort will almost certainly illuminate areas where capabilities ought to be split or merged or organized differently. Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

31. Capturing details: Define specific usage data Use 2 No.: strategic alignment and performance What strategic goals and objectives does this capability enable or support? Use No. 1: strategic impact What other capabilities are impacted? Use No. 5: delivery and execution prioritization What projects impact this capability? Use No. 4: investment alignment What percentage of investments are being made in this capability? Use No. 6: organizational design and growth planning How might the organization better support and evolve this capability? Use No. 3: architectural alignment and cost reduction What application, process, and technology consolidation are possible, and which are beneficial? Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details. Use and maintain Use and maintain.

32. Publish, use, and (above all) maintain • Conduct formal periodic reviews! • Is each capability still relevant to your business? • Are there new capabilities that should be added? • Is the terminology current? • Are the linkages and road maps up to date? Use your capability maps regularly, making them a part of your culture and ongoing evolution, or risk losing the investment made to create them. Publish them in as many forms and in as many situations as there are beneficial uses. In this case, familiarity breeds strength and value. Lay the groundwork Lay the groundwork. Build your map Build your map. Capture details Capture details. Use and maintain

33. Agenda • What is a capability map? • Capability map uses and features • Developing capability maps • Common questions and challenges • Summary

34. Frequently asked questions

35. Common challenges

36. Agenda • What is a capability map? • Capability map uses and features • Developing capability maps • Common questions and challenges • Summary

37. Key points for developing a capability map

38. Key points for developing a capability map (cont.)

39. Selected Forrester Research May 2, 2012, “Use Business Capabilities To Optimize BT Strategy Choices” July 20, 2011, “Eight Ways CIOs Use Capability Maps To Embed Business In The Management Of IT” April 18, 2011, “Aetna's EA Organization Uses Capability Maps To Connect Business Strategies” May 27, 2010, “Using Business Capability Maps To Guide Application Portfolio Rationalization”

40. Selected Forrester Research (cont.) May 19, 2010, “Case Study: Pfizer Applies Capability Maps To Keep Its Multiyear Transformation Effort On Target” January 14, 2010, “The Anatomy Of A Capability Map”

41. Gordon Barnett +1 617.613.8919 gbarnett@forrester.com