Last Guide to Business Capabilities – Everything you need to know

Last Guide to Business Capabilities – Everything you need to know

26 January 2023 | Paul Estrach

At a time when the digitization of the business has accelerated, when every business project is an IT project, there’s pressure on IT to enable and support business transformation. By defining what the organization does, business capabilities are a key concept that allows business and IT teams to speak the same language. 

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Business capability definition

A Business capability is defined as a representation of an organization’s needs.

Business capabilities represent an organization’s needs and what it does and can do. They depict the core functions of the business and break down the industry into building blocks laid out in a business capability diagram called business capability maps. If needed, they can be broken down into sub-capabilities. 

Their regular assessment will help enterprise or business architects identify and prioritize the corresponding IT initiatives with business needs.  

Of course, since they depict an organization, business capabilities are not static and evolve; some might even become irrelevant and be replaced or consolidated by another capability. Business capabilities assessment can be based on various parameters, including efficiency, priority, and complexity.

What is a business capability example?  

Take a car rental company, for example; in this case, an excellent example of business capability might be an “online booking” capability. This competence is supported by one or multiple applications, like the car rental mobile app.  

Another example would be a “mortgage loan” capability for a bank supported by an in-house application that computes loans. 

The example below shows the capability map of an airport, including applications. Each application has been assessed using color-coded icons to understand better how applications support business capabilities. 

 

 

Business capability map with applications 

Business capability mapping helps IT leaders shape the IT architecture to business needs. 

Business capabilities are an essential concept that enables enterprise architects to link IT operations to the business.  

Through business capability planning, organizations can figure out how to outline strategic plans with IT investments and prioritize projects.  

Business Capability mapping allows companies to see what is done to reach their objectives. 

To help shape the map of an organization, there is a list of concepts that “business people” connect to: 

Business objectives

From the business side, capabilities connect objectives as defined by the business. By doing so, enterprise architects ensure that the company’s objectives are well supported by capabilities and reciprocally that a business capability is not unreliable to the organization’s needs.

Customer Experience

One can identify the business capabilities necessary to support the desired customer experience. Customer journey maps describe the customer experience, designing the buying cycle (research, evaluate, purchase), and the various channels available to customers, such as a company website, a mobile app, or a store.  

During their journey, customers follow various touchpoints to interact with the organization.  

Each touchpoint is linked to business capabilities providing an outside-in perspective regarding the business capabilities needed to support the customer experience. 

 

 

Map customer experience in customer journey maps

Value Streams

In today’s world, especially in Agile environments, a customer-centric approach is critical to ensure that released products deliver value and match what the customers want.  

By describing the stages needed to deliver value to customers, value streams translate to IT customers’ needs thanks to business capabilities.  

Each stage is enabled by business capabilities so that enterprise architects can identify the required capabilities and the missing ones and plan the related IT projects. 

Value stream with supporting business capabilities

To map an organization, here is a list of concepts that the “IT side” can link to business capabilities: 

Applications   

As we mentioned previously in our examples, business capabilities are supported by one or multiple applications.  

The link between applications and business capabilities enables enterprise architects to understand the business value of applications and whether an application supports a critical capability. 

Projects 

Organizations must build the corresponding strategic projects and link them to business capabilities to transform or create new business capabilities.  

By doing so, enterprise architects understand how projects impact business capabilities and their related applications.

 

Business capabilities, along with projects displayed in a business capability map  

Business Processes

Finally, the organizational view with business process mapping brings the perspective on the different organizational tasks people must perform to support business capabilities.  

 

 

The importance of business capabilities and business capability mapping

The ability of a business to achieve its objectives depends on its capabilities. Business capability mapping is essential to identify the capabilities required to achieve specific business objectives and to track progress over time. This helps businesses focus on the right things, invest in the right areas, and make better resource allocation decisions. 
 

Strategic planning

Business capabilities are the foundation for strategic planning. An organization’s strategic plan provides long-term visibility on a company’s direction and includes action plans and resources to achieve these goals.  

By associating strategy with capabilities, an enterprise architect can view the impact of business projects on their application and the IT landscape. 

 It will help them plan future architecture to support these business capabilities. 
 

 

Strategic roadmap with supporting business capabilities

 

Customer experience in Agile developments.

Agile enterprises are organized around the customer. Even though product owners translate business requirements into user stories and hence software developments, they don’t necessarily have the full picture of the value delivered to the customer or the customer experience. Using value streams, enterprise architects can formalize the delivered value.  

They also use customer journey maps to describe the desired customer experience. Enterprise architects plan the required business capabilities by connecting touchpoints and stages of the value streams to business capabilities. But most importantly, they can link these business capabilities to Epics and user stories so that software developments are directly tied to customer experience! 

 

Application Rationalization

Organizations have often accumulated many applications and other IT assets due to company growth or past mergers and acquisitions.  

Many IT organizations fail to rationalize their application portfolio because they only have a cost perspective.  

Indeed, organizations won’t eliminate a business-critical application simply because it costs too much! 

By linking applications to business capabilities, IT organizations have a clear view of how an application supports the business, whether the application supports a critical business capability or, on the contrary, a minor capability.  

Using business capabilities also helps identify redundant applications, especially in the case of mergers and acquisitions, where the new company gains applications from the acquired company. 

 

Technology Risk Management

In EA repositories, underlying technology components supporting applications, such as databases or software frameworks, are linked to applications that are themselves linked to business capabilities and business objectives.  

By monitoring the end-of-life of these technology components, enterprise architects can easily understand the impact of an obsolete technology component on strategic goals. 

This is also the case for an application that would use a technology that has been prohibited, as set by the company policy.  

Reciprocally, enterprise architects can monitor critical business capabilities and view if they are not being put at risk due to obsolete or prohibited technology. 

 

Benefits of business capabilities

There are many benefits to having well-defined business capabilities. The main advantages are listed below. 

Increased visibility of the business value of an IT asset

Capabilities are a great way to organize IT assets from a business standpoint. CMDBs are a critical component when managing IT assets, but they are often difficult to maintain and do not provide visibility into the business value of IT assets.  

Business capabilities give an immediate understanding of the value for the business by linking IT assets to capabilities.  

They enable IT departments to focus on critical assets. It is also a communication tool that offers a common language between business and IT. 

Reduce IT Costs

By mapping applications to business capabilities, redundancies are easier to analyze to reduce costs. If two applications support the same business capability, strong chances are that these applications provide the same functionalities or functional overlaps exist.  

Adding other information, such as application cost, end-of-life, or technology obsolescence, also helps improve decision-making to remove or modernize an application. 

Greater flexibility 

When managing IT projects, IT departments are often swamped with existing projects or assets. Don’t they have a clear view of how new projects or applications fit into their existing IT systems – What will be the impact of the new project on the IT landscape? Is it redundant with another project or application? Thanks to business capabilities, IT departments increase their ability to embrace new projects by streamlining the IT landscape.  

They can also focus their resources on projects critical to the business and work on what matters the most. 

Improved IT investments 

Business capabilities are key to linking strategy to execution. Business capabilities are indeed planned in time, with strategic objectives forming the strategic roadmap.  

Based on this roadmap, IT leaders determine the related IT projects, the applications, and the impacted architecture.  

By aligning projects with business needs, IT departments ensure that resources are spent on the right projects and that investments are better planned through greater visibility into upcoming projects.  

It is also easier to reprioritize projects as strategic objectives change, especially in agile environments. 

How do you map business capabilities?

Business capabilities link business needs to IT assets so that IT assets truly support the business. Additionally, business-capability planning helps enterprise architects to map strategic plans and ensure that projects are aligned with business objectives.  

To make sure capability maps are named and defined in business terms. Here are our guidelines for doing so: 

1 – Understand your organization’s strategic goals

Understanding where your organization is heading and the strategic goals as defined by the executive team is a key subject.  

To help you in this task, use the business motivation model by defining the mission, vision, strategies, tactics, objectives, and goals.  

Enterprise architects must work in close partnership with the business to get insights into the organization’s strategy and ensure that the business’s capabilities are comprehensive. 

 

Map out business strategy, including tactics, objectives, goals, mission, and vision 

 

2 – Break down the business into building blocks 

Meet with business leaders to understand the relevant level of detail that fits your organization’s needs and then break down capabilities into sub-business capabilities.  

Note that business capability templates are available to speed up this step. They are either generic or industry-specific.  

Standards bodies such as BIAN for the banking sector or the Business Architecture guild provide generic or industry-specific templates. These business capability frameworks help accelerate business capability modeling. 

Review your findings with business leaders and adjust if necessary. Put in place a review process to review business capability mapping regularly. 

 

3 – Link business capabilities to applications and impact analysis 

In this step, enterprise architects will link the business and IT by connecting applications to business capabilities and performing a business capability analysis. 

Since technology components are also tied to applications in the EA repository, you can easily impact analysis from a technology component up to business objectives.  

Applications and business capabilities are viewed in business capability maps. Using indicators on applications and business capabilities, such as application lifecycle and business criticality, you can make better decisions on the evolution of the application portfolio. 

 

Impact analyses on projects, business capabilities, and applications

 

4 – Integrate the customer perspective 

To plan initiatives that focus on customer needs, it is essential to connect business capabilities to the customer’s experience.  

Work with epic owners or business leaders to create value streams that depict the value delivered to customers.  

Work with marketing and product teams on customer journey maps to design optimal customer journeys. Identify the related business capabilities required to fulfill customer needs. 

 

5 – Prioritize and assess business capabilities to plan project  

Assess business capabilities based on priority, complexity, and efficiency to prioritize and plan business capabilities. Identify the related projects to create or transform business capabilities.  

The identified projects are then planned into a strategic roadmap. It’s important to share the strategic roadmap with your organization to review the strategic roadmap. 

 

Assess business capabilities on various criteria

 

Conclusion 

With the help of business capabilities and Business capability maps, enterprise architects can act as strategic advisors to the business by explaining what can or cannot be done from an IT perspective.  

Business capability planning will also help CIOs communicate how IT value will be delivered to the business.