2 months ago

Directing Strategic Change With Capability-Based Planning

Link: https://bizzdesign.com/blog/directing-strategic-change-with-capability-based-planning/

A topic attracting increasing attention from architects and executives alike is: How to use Capabilities to inform strategic planning.

The previous blog articles in our series on Business Capability Design and Management focused on “How to assess Business Capabilities” and “How to Measure Business Capability Aspects”. These articles describe the overall four-stage Capability-based planning process of Map, Assess, Plan and Control. This article focuses on the final Plan and Assess stages and gives you information on the planning process to deliver Capability-based change.

Capability-based planning process 

Figure 1. Capability-based planning process 

 

The planning process for Capability-based change

Planning process for Capability-based change 

Figure 2: Planning process for Capability-based change 

 

By driving the future state design (see figure 2), architects are involved and inform all of the other five stages.  Sometimes, it may even be that the above process requires iterations. For example, closing the gaps may require too expensive an investment requiring a revision of which gaps are in scope. Even the final stage of creating a roadmap may reveal that the timeline is unacceptable.

1. Gap analysis

Executing your organization’s strategy requires a wide set of business-as-usual processes to be working sufficiently to deliver the strategic goals. Where those processes are insufficient, there is a gap – i.e. something needs to be done to raise performance.

Business capabilities are a great language for describing gaps since they’re stable over time, have definitions, and are enterprise-wide. Most importantly, they can map upwards to strategy and map downwards to people, process, technology and data and their maturity can be evaluated by assessing these dimensions. We explain this in detail in ‘An approach: how to assess Business Capabilities’, and in the ‘Map’ phase in the whitepaper ‘From Strategy To Execution With Capability-Based Planning’.

Tip! To determine which capabilities are insufficient, you can ask the senior stakeholders or subject matter experts where the problems lie, and use assessments as described in earlier posts such as ‘How to Measure Business Capability Aspects’.

Figure 3: Capability gaps identified 

 

2. Gap prioritization

Having obtained a list of underperforming capabilities, the challenge is to decide which capabilities most need improvement. A scientific/objective approach is needed to quantify each capability so they can be ranked. We recommend the following:

  • You need to consider both the current and the future state, with the future state being derived from your enterprise’s goals.
  • Strategic Importance and Maturity are common dimensions stakeholders use to decide which capabilities to invest in.
  • To put figures against a capability, measure it in terms of its people, process, technology and data components.

 Below is a capability landscape that has been heatmapped against As-Is Maturity, with a label showing its Strategic Importance.

Figure 4: Capability maturity and strategic importance

 

Tip! See An approach: how to assess Business Capabilities and How to Measure Business Capability Aspects for more details on capability assessment.

3. Investment allocation

With a set of capabilities quantified against your chosen dimensions, you now need to decide where to allocate budget and people. Break this complicated decision into two stages:
Filter your capabilities to consider only the ones worth investing in – which you can do by only considering ‘strategically important’ capabilities that have a maturity below a certain threshold. However, don’t ignore that you’ll need enabling capabilities that aren’t strategic but are nonetheless critical for supporting your strategic capabilities.
Generate a metric for ranking the capabilities. The interactive dashboard below shows how you can create a score based on multiplying individual scores for the complexity, cost and impact of the capability improvement.

Invest by design

Figure 5: Invest by design

 

4. Future state modeling

The result of the Investment Allocation step is a list of the capabilities which receive investment. The aim is to determine what changes will be made to improve these capabilities. This means that two aspects need to be considered:
Mapping the capabilities to their people, process, technology and data components to show the tangible impacts.
Creating different scenarios of the changes; e.g. one option could see people changing work practices significantly but keeping the technology the same.

Decision-makers can then review these To-Be options and decide which is best for the organization. The significant advantage of using capabilities is that changes to related parts of the organization can be considered together and aren’t viewed in isolation.

Below is an example of a target operating model where a capability is broken down into process, applications and data.  In this case, the people dimension is left out because it is quite simple: a single team performs all the payment processes. In other cases, this may be more complicated involving different roles and the requisite skills, et cetera.

Target Operating Model 

Figure 6: Target Operating Model 

 

5. Initiative formulation

Once the future state models have been decided, it’s easy to create a work package to implement each To-Be model. However, the risk is that a complicated network of dependencies is created and that a large number of overlapping work packages compete for the same resources (e.g. subject matter experts, IT operations staff). This increases the complexity and risk of your deliveries and raises costs and time-to-market.

To mitigate this, you can re-structure your work packages to align with one or more business capabilities – allowing you to focus on changing only specific parts of the organization and minimizing the impacts on key resources. It also doesn’t matter if you’re using agile or waterfall methodologies because alignment to business capabilities improves the efficiency and effectiveness of your transformation.

6. Roadmap generation

The initiatives provide the means for delivering the capability improvements, and these two dimensions can be laid out against time on a roadmap. The roadmap below shows how the capabilities identified in the Gap Analysis and selected in Investment Allocation are then improved over time by work packages implementing capability increments. Please see “Modeling Capability Increments and Capability Instances to Support Roadmapping” for more information.

 

Capability-Based planning timeline 

 

Figure 7: Capability-Based planning timeline 

 

Conclusion

Using capabilities to do planning may seem daunting at first, but it gives you a common language across your organization – a language that remains the same year after year. You can use this language with all your stakeholders, from executives to implementers, and describe the end-to-end process from strategy to execution. Moreover, this analysis is already happening to some degree in every enterprise, and so it’s a case of introducing capabilities as a means to simplify the process and make it more effective.

Try the process we’ve described in this blog and let us know if you need any help. Good luck with getting tighter control over your transformation!