Business Capability Modeling: Theory & Practice
Business CapabilityModeling: Theory &PracticeLeonard Greski
Topics Theory Practice Business capabilities definedWhy business capabilities are usefulCharacteristics of business capabilitiesRole of business capabilities in strategy to results processModeling capabilities in four easy stepsUsing the model to make decisionsCommon questionsQ&ADecember 8, 2009Business Capability Modeling: Theory & Practice2
What is a “businesscapability?”An ability or capacity a business has to deliver value to customersand / or icalAssetsA set of related business processes, people, and physical assets thatdeliver value directly to customers, or are needed to run the business.December 8, 2009Business Capability Modeling: Theory & Practice3
Two Types of CapabilitiesCustomer-FacingCapabilities that deliver valuedirectly to external customersOperationalCapabilities that deliver value toshareholders, or are needed tooperate the businessDecember 8, 2009Business Capability Modeling: Theory & Practice4
Characteristics of BusinessCapabilities More detailed than strategy elements; less detailedthan business processesHierarchical: capabilities can be represented atmultiple levels of abstractionIllustrate relationships between people, processes,and physical assetsManaged as assetsBottom Line: Capabilities allow companies to createsustainable competitive advantage throughunique combinations of people, processes,and physical assetsDecember 8, 2009Business Capability Modeling: Theory & Practice5
Uses for Business Capabilities Visualize consequences of strategy Impact to existing capabilities Missing capabilities Capabilities no longer neededManage ongoing operation of a capability Evaluate impact of changes in planning assumptions on costs &benefits Forecast investments in increased capacitySupport merger & acquisition activity Evaluate capabilities of acquisition target(s) Identify integration synergies Identify capabilities to be lost through divestitureManage investments across the portfolio of capabilitiesDecember 8, 2009Business Capability Modeling: Theory & Practice6
Capabilities in Context:Strategy to r 8, 2009Creates needs forMeasured byResultsBusiness Capability Modeling: Theory & PracticeBusinessCapabilitiesGenerate7
Strategy to Future BusinessModelOperatingModelFuture g Scenarios(3 – 5 year horizon)December 8, 2009Business Capability Modeling: Theory & Practice8
Topics Theory Practice Business capabilities definedWhy business capabilities are usefulCharacteristics of business capabilitiesRole of business capabilities in strategy to results processModeling capabilities in four easy stepsUsing the model to make decisionsCommon questionsQ&ADecember 8, 2009Business Capability Modeling: Theory & Practice9
Four “Easy” StepsStepDeliverable(s)1.Develop thecapability hierarchy 2.Identify keyrelationships 3.Develop utilizationmodels 4.Develop financialmodels December 8, 2009Scope statement Capability hierarchyAssociation matricesList of demand sources: whatgenerates utilization? Utilization model over timeSources of benefits Sources of cost Cash flow statementBusiness Capability Modeling: Theory & Practice10
Develop the HierarchyDecember 8, 2009Business Capability Modeling: Theory & Practice11
Hierarchy: tips Engage your business partner(s) toidentify starting scopeFocus on breadth, not depth December 8, 20093 – 5 levels of hierarchy is sufficientA capability should have more thanone supporting processStart with customer-facingcapabilitiesMake sure the team can explain howthe capability generates value /benefitsUse business partners’ language todescribe elements in the hierarchyBusiness Capability Modeling: Theory & Practice12
Identify Relationships Document relationshipsbetween capabilitiesand December 8, 2009Strategy elementsOrganization unitsBusiness processesPhysical assetsPeople (roles)Business Capability Modeling: Theory & Practice13
Relationships: tips Use association matrices tofind inconsistencies in thecapability model December 8, 2009Capabilities not connected tostrategy elementsStrategy elements with nocapabilitiesUse numbers to measurestrength of relationship whereappropriateBusiness Capability Modeling: Theory & Practice14
Create Utilization Model December 8, 2009Identify sources of demandMap demand to businessprocess utilizationMap demand to physicalasset utilizationDevelop forecastingassumptionsForecast utilization into thefutureBusiness Capability Modeling: Theory & Practice15
Utilization Model: tips Use assumptions to discoverstakeholder expectationsabout operation of capabilitiesThe utilization model can alertthe team to parts of acapability that won’t scale withgrowth December 8, 2009Business processesPhysical assetsBusiness Capability Modeling: Theory & Practice16
Create Financial Model December 8, 2009Identify quantifiablesources of benefitsIdentify sources of costCreate statement ofcash flowsBusiness Capability Modeling: Theory & Practice17
Financial Model: tipsDecember 8, 2009 The financial model helps yourstakeholders explain how acapability converts benefitsinto cash Organizations frequently fail toaccount for process / laborcosts to operate a capability,artificially inflating the returnson projectsBusiness Capability Modeling: Theory & Practice18
Defining Success Models help stakeholders see non-obviouspatterns, assess impact of changeModels allow stakeholders to perform “whatif” analysis for different business scenariosUtilization and financial models focusstakeholders attention on: Quantifiable benefitsOngoing operation of capabilitiesDecember 8, 2009Business Capability Modeling: Theory & Practice19
Capabilities & ProcessManagement Capabilities are the “missing link” in thestrategy to results abstraction chainA single process may map to multiplecapabilities, each having unique or conflictingrequirementsDemand and financial models provide topdown ways to evaluate effectiveness &efficiency of processesDecember 8, 2009Business Capability Modeling: Theory & Practice20
Questions & AnswersContact Info: Leonard kiDecember 8, 2009Business Capability Modeling: Theory & Practice21
ReferencesArchitecture & Governance Magazine ArticlesBusiness Capability Modeling: Theory & Practicehttp://bit.ly/mhJA8Business Capability Modeling: Building the Hierarchyhttp://bit.ly/8wtDpQContact InformationLeonard Greskileonard.m@greski.comDecember 8, 2009Business Capability Modeling: Theory & Practice22
December 8, 2009 Business Capability Modeling: Theory & Practice 2 Topics Theory Business capabilities defined Why business capabilities are useful Characteristics of business capabilities Role of business capabilities in strategy to results process Practice Modeling capabilities in four easy steps Usin
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Figure 3: Results of Business Process Modeling Figure 2: Process model for each individual process About bPMn Figure 4: Activity types and markers BPMN (Business Process Modeling Notation) is a graphical notation for business process modeling. The objective of BPMN is to support business process modeling
Modeling Business Processes for SOA 27 Mar. 2006 page 15 Business Process Modeling Notation (BPMN) Graphical notation for process modeling Designed for business users Platform independent Proof of concept mapping to BPEL Implemented in a number of process modeling produ
The capability approach 1 Sen’s notion of freedom 2 Agency 2 Pluralism 2 Social structures, power and the capability approach 3 The use of the capability approach in Australian Indigenous policy 4 Human capability, not human capital 4 Deficit discourse and ‘lacking’ capabilities 4
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