Whitepaper
Using Business Capabilities to focus IT Improvement
Introduction
“Think like a wise man but communicate in the language of the people.“
- William Butler Yeats
How good it would do IT to heed the words of one of the 20th century’s foremost poets and dramatists. In 1923, he was awarded a Nobel Prize in Literature for what the Nobel Committee described as „inspired poetry, which in a highly artistic form gives expression to the spirit of a whole nation“. (Wikipedia, William Butler Yeats).
Alas, in the existing mode of communication, IT speaks in a vocabulary all its own – a vocabulary which obviously does not give expression to the spirit of the whole business. Otherwise, why would IT still be getting bad grades from business on understanding the business and executing projects that advance the business strategically?
What’s at stake besides IT’s credibility? With a predicted 100 billion US dollars or more going into wrong network technologies and services until 2011 (Gartner), IT needs to progress in its understanding of the business and its ability to talk to business in business’ own language to be able to support it effectively or become obsolete.
Yes – the complexity of business can be daunting. But IT must face the challenge of unravelling that complexity if it is to be able to understand the business and effectively serve the business in ensuring its success. Business Process Modeling made headway in the 1990’s as a way to describe the business. But describing the business in terms of processes is describing the “How” of the business and not the “What”. It may serve as a basis for process optimization for a while but:
“Process optimization is a necessary but not sufficient means for succeeding in today’s networked marketplace. For all its appeal, process optimization still leaves firms with complex, hardwired processes. After initial gains, the law of diminishing returns begins to erode improvements in marginal benefits, while the cost of squeezing out remaining inefficiencies begins to grow. Worse, as processes are optimized internally, the cost of integrating activities across multiple processes can actually rise, a problem especially acute in large, complex organizations. Part of the issue is that traditional, process-based optimization can leave firms with the same activity optimized dissimilarly across many different processes. So as process improvements create interconnections that reach to multiple business units, complexity increases, causing integration costs to rise as the function of a quadratic equation. Thus, as process optimization matures, it can actually end up increasing the complexity of the enterprise. The results: higher costs, less flexibility and slower speed-to-market.” (Component Business Models: Making specialization real, IBM Corporation)
A New View of the Business
New approaches for describing the “What” of the business have appeared in the last few years. These work on the premise that the traditional view of the enterprise as various business units working with their own business processes doesn’t provide the right insight into the business to be able to find the right levers to help the enterprise to differentiate itself – so important in today’s market. Instead, they prescribe a view of the enterprise based on business activities – or “components” or “capabilities” – that are independent of specific business processes and organizational silos - silos according to product, channel, customer, geographical and informational lines as is the case in most organizations today. A business activity view enables the enterprise to identify and focus on activities that are critical to business success and where they can achieve differentiation in delivery - be it cost or value - unfettered by historically given circumstances.
Forrester defines a business capability map as “A model of the firm associating the business capabilities, processes, and functions required for business success with the IT resource that enables them.“ (Capability Maps Anchor Business Complexity, Bobby Cameron, Forrester, November 16, 2007)
Using a business component or business capability vocabulary, IT has the means now to approach business with a language “of the people”. It provides a simple basis for a common view of the enterprise so that a meaningful dialog can be initiated that will move both parties towards a common understanding of what needs to be done to advance the enterprise.
In addition to a vocabulary, another required element of the business capability framework is a common understanding of the business activities landscape – a “business capability map”. Different models exist for mapping capabilities* (*the rest of the paper will discuss “business capabilities” whereby several issues also apply to the component business model as defined by IBM) but common to all is that they dictate a cooperative effort between business and technology. The definition of the capability map is performed in collaborative workshops peopled by representatives of business and IT and – depending on the level of detail of the map – staff representing different hierarchical views. A capability map will typically consist of different levels of detail, beginning at a very high level down to the level where capabilities can be associated with business functions that are supported by IT. It is from here that IT takes its cue on where to initiate architecture activity.
Somewhere around the second or third level of detail, capabilities will often match closely to high-level processes, business application systems and/or organizational departments. Further levels of detail map to business functions and actual ICT objects.
Using this approach, the traditional IT management focus on services/process, ICT architecture and ICT operations is extended to a superordinate “capability layer” that enables two key abilities: First, the capability layer helps to articulate and document business needs in a structured way that is meaningful for the business. Second, the concept of a capability can easily be translated into IT functionality. Business capabilities are the missing link for enabling a businessrelated view onto IT functionality. They promote better understanding between business and IT by enabling the business to formulate their requirements in a non-technical yet functionally precise way.
