The previous article in this blog series covered how a Capability-Based Planning approach informs the Strategic Roadmap. We covered the Plan and Assess phases of Capability-Based Planning. In this blog, we’ll link the Plan and Assess phases to the Control phase of this process.
To measure the effectiveness of change investments, you need a way to control the processes (Map, Assess, Plan, Control) by continuously monitoring the effectiveness of the changes proposed by a Future State Design. For this, we need to know how this Future State Design contributes to the required improvements of key Business Capabilities, which have been identified as priorities for investment in an earlier stage of the process.
Caption: Capability-Based Planning Process
1. ‘SMART-ify’ capability gaps using a Driver Tree approach
In the previous blog post and the whitepaper: ‘From Strategy to Execution with Capability-Based Planning’, we discussed a ‘bottom-up’ approach for Capability Gap Analysis where we assess the current and required performance scores of (strategically important) business capabilities. We call the difference between these scores Capability Gaps. We consider these gaps when prioritizing investment and subsequently when designing a Target Operating Model.
To determine if we realize the required performance, we need a more specific definition of the capability gap and make gaps measurable in terms of their contribution to capability improvement. In other words, we need to ‘SMART-ify’ capability gaps.
The first step is combining the bottom-up approach with a top-down approach using a ‘driver tree’ view. We break down high-level strategic drivers into more specific business challenges in the driver tree view. These business challenges are modeled as (ArchiMate) assessments. We can do this in one or more steps to get to a level where we can define the challenges as concrete business problems that need to be solved. These business problems are a more specific version of a capability gap, and in turn, link into business capabilities. Closing these capability gaps will improve the performance of the capability.
This approach gives us a direct line of sight between strategic goals and drivers and the capability gaps. We can use this to provide additional input for gap prioritization since we can now analyze the relative strategic importance of closing a capability gap. This can be further enhanced by putting ‘weights’ on the leaves of the driver tree. See an example of a driver tree view below.
Caption: Driver tree view for strategic driver: Market Share
2. Linking KPIs to strategic drivers and goals
With capability gaps linked to strategic drivers and goals, as well as to business capabilities, we can look at the realization of improvements not only in terms of the capability aspects (e.g. people, process, technology, etc. but also in terms of their contributions to strategic goals.
To measure and monitor these contributions, we need to define Key Performance Indicators (KPIs) and link them to our strategic goals and drivers. C-level executives typically determine these KPIs. Using Bizzdesign Horizzon, architects can add these KPIs to the model repository and link them to strategic goals and drivers modeled in the same repository. In the example below, we see how the driver, Market Share, is supported by KPIs including ‘Revenue from Digital Services (%)’ modeled as a metric object.
Caption: Strategic KPIs for ‘Market Share’
3. Enhanced ‘Initiative Formulation’
In our previous blog post, we discussed how work packages can be created and structured to align with one or more business capabilities and how this could subsequently be visualized in a (multi-level) Capability Roadmap.
We take an additional step here to allow a model-driven approach for monitoring the effectiveness of change initiatives represented by the work packages. In the real world, the components supporting a business capability will undergo the actual change. These components include business processes, application components or IT platforms, and are represented in the Target Operating Model, also shown in the article mentioned before.
In this step, specific results of initiatives to close capability gaps are identified and linked to components in the scope of the Target Operating Model. The figure below shows how Initiatives (work packages) and their results (implementation events) are linked to capability gaps.
Initiatives (and desired end states) to fill capability gaps
This way, in addition to the capability roadmaps, we can now generate roadmaps at the component level using Bizzdesign Horizzon. This visualizes how, for example, a business process will be improved over time. In the figure below, we see an example of a process roadmap for improving the Payment Execution business process, which is in the scope of the Target Operating Model of the Payment Execution business capability.
Caption: Process Roadmap for ‘Execute Payment’
4. Baseline, Target, Expected KPI values
The last step of the Control phase in the Capability-Based Planning process is to quantify and analyze the improvement. We do that by setting a target (leading) value for the Strategic KPIs we captured earlier in the process. C-level executives typically determine these targets. Next, architects can work with business teams to identify a baseline (lagging) value for the same strategic KPIs.
The improvements represented by the implementation events on the Process Roadmap are responsible for getting from our baseline to our target in terms of KPI scores. For example, the percentage of Process digitization will go considerably up once the new payment system is operational. At the same time, the percentage of revenue from digital services will improve as well.
Using this approach, architects work with several stakeholders, including business managers, process experts, project management officers and the likes to estimate the contribution of each improvement (implementation event) against the relevant KPIs. The result of this is shown in the table below.
The table shows the relevant KPIs (rows in the table), the baseline value and subsequent improvements, and their expected contribution to KPI improvement. If we add all contributions within this scope’s time frame, we get to an expected KPI value (see the After column).
This answers whether currently planned improvements on the roadmap will bring us the KPI performance we envision.
Caption: KPI table for business process: ‘Execute Payment
The same data can also be presented as a line chart where the progression of KPI improvement is visualized in alignment with the Process Roadmap. The blue line in the chart represents the Expected KPI value, and we see an increase at each point where we expect to deliver an improvement (implementation event). The green line represents the envisioned target KPI value.
Caption: Roadmap for process Payment Execution, with KPI progression charts
In our example based on the ‘Payment Execution’ process, we clearly see both in the table view, and the chart views that the current Roadmap overachieves for the Process digitization (%) KPI, but we fall slightly short for Revenue from digital services (%). These results may be used to reconsider priorities in the next iteration of the Capability-Based Planning process.
In this article, we proposed an enhancement to the Capability-based Planning process to support its Control phase and bring a more quantitative view of the Strategic Roadmap(s). By doing this, architects can prove the effectiveness of a Future State Design.
This also provides a very important input into managing the work packages that should implement the Future State Design. In the real world, the management of these work packages is covered by Project Portfolio Management (PPM) processes. Prioritizing and balancing a portfolio of projects becomes much better informed using the input from the Capability-Based Planning process.
The Control phase is the last step in this process. But of course, this isn’t the end since, in the meantime, many things may have changed inside or outside the organization. This requires us to adapt the Strategic Roadmap(s) by going into another iteration of the Capability-Based Planning process, which aligns well with the yearly strategic planning cycle we see in many organizations.
For more information on Capability-Based Planning, please contact us.