In our blog series on Capability-based Planning, we’ve aimed to empower you with enough knowledge to implement Capabilities and Capability-based Planning in your organization. We’ve looked at the concept ‘capability’ and its use in decision-making and planning, how to design Capability Maps and how Capability-based Planning relates to other disciplines. Although you may now be ready to implement Capabilities and Capability-based planning in your organization, we’d like to highlight many obstacles you may experience with the implementation.
Below are some of the main challenges you may encounter and how you could overcome those:
Understanding the concepts
First and foremost, this notion of ‘capability’ is new to many organizations, but it looks suspiciously like things people already know: departments, business processes, functions, etc. This poses an inherent danger because without recognizing and valuing the change in perspective capabilities offer, many people will say: “I don’t see the difference, let’s keep doing it the way we did before.” Some may think, for example, that a Capability is just what some department does. However, capabilities are defined independently from organizational structure and reorganizing the organigram doesn’t change your capabilities.
Moreover, if managers think they recognize a Capability as something done by the department or business unit they’re responsible for, they tend to claim that Capability as ‘theirs’. We’ve literally witnessed this when showing a Capability Map to management stakeholders, who started pointing at it and staking their claims. But Capabilities are often crosscutting the organizational structure.
To overcome this obstacle, educating all stakeholders involved on this new notion of Capabilityis key. To make this rather abstract notion tangible, it’s required to explain what it means in concrete, business-focused terms, using your own organization as an example. Show how Capabilities are implementation-independent and describe what’s possible. This is the key advantage of capability thinking: it focuses on the current and desired abilities of the enterprise, on what it can do, not merely on its day-to-day operations, processes, or departments. Explain to your stakeholders how this lets you focus your attention on those Capabilities that are strategically important because they differentiate your organization from its competitors. Where you’re able to do things others can’t.
Managing the capability definition or assessment process
Often it’s quite difficult to get agreement on capability identification or definitions. Some business architecture methods take a very strict approach to capability identification and naming. However, from our experiences, it’s more important to use relatable terminology to ensure organizational acceptance rather than focusing on methodological purity. Without acceptance, failure is ensured.
A factor in this is team size. On the one hand, getting to an agreement is more difficult. Conversely, too many cooks spoil the soup: large definitions where every team member has contributed some words are not always the best outcome. It’s easier to work with a small group of business experts and someone versed in Business Architecture to help shape the result. Moreover, you can present the resulting Capabilities and definitions as work-in-progress, to be amended if needed, rather than set in stone. Of course, you want to have a largely stable capability structure, but there’s always room for improvement and if someone feels left out, they can still provide their input later. Changes will always occur in a volatile business world.
Ensure rapid time-to-value
It’s important to show value as soon as possible. It’s simply not acceptable to take many months to create a Capability Map or to do an in-depth maturity assessment of every Capability. On top of that, mapping those capabilities to the people, processes, technology and information involved may also take a lot of work. But you don’t always need all those details to show the initial value. You can get a small group of business experts together to forge an approximate picture, use that to confirm the level of detail needed, and reduce the scope of your effort if necessary.
Although some approaches advocate building a complete Capability Map that covers every aspect of your enterprise, we think it’s much more useful to concentrate your efforts on those capabilities that are of strategic importance: the core capabilities that differentiate your enterprise from others or the enabling capabilities that lack investment and therefore can’t adequately support these core capabilities. Of course, these will be supported by any number of enabling and commodity capabilities that are also relevant, but from a strategic perspective, those won’t have as much of an impact. You don’t need to elaborate on lower-level capabilities or detailed definitions if those capabilities aren’t very important for business decision-making.
Ensuring management sponsorship and stakeholder engagement
To improve acceptance and buy-in, having sponsorship from senior management is key. A main goal of Capability-based Planning is to improve decision-making on investments, which is perhaps the most important responsibility of senior management. Hence, their involvement and active promotion of this approach are essential. However, they may not always be involved from the beginning, and convincing them of the value of Capability-based Planning requires a solid argument. Typically, we would build a showcase focused on a limited number of strategic capabilities, small enough to control the effort but large enough to demonstrate how Capability-based Planning helps in decision making.
This also holds true for the engagement of other stakeholders. Different communities in the organization can gain from using Capability-based Planning in various ways, but they need to be shown (rather than told) what these gains could be. Building Capability Heatmaps or Dashboards for a limited scope and a targeted audience helps them to understand what this new way of thinking may bring.
Overcoming resistance to changes in control
Introducing Capability-based Planning as the basis for investment allocation by senior management may invoke resistance from stakeholders lower down in the hierarchy. In many organizations, budgets are distributed to departments in a yearly budget cycle. Department managers who control those budgets have a certain autonomy in discretionary spending. When budgets are tied to specific capability improvements instead, they lose autonomy and may not like that. Conversely, C-level management may use this as a lever to break down middle management’s fiefdoms and improve investment efficiency. In that respect, this is similar to approaches like zero-based budgeting.
This resistance may be especially strong with management with a Profit &Loss responsibility for the department or business unit they manage. Allocating budgets along a different dimension, such as Capabilities, will only succeed with active endorsement by C-level management. The political implications of such changes aren’t something an architecture team can address. This requires active, hands-on senior and executive involvement.
Even then, you may not want to centralize budget allocation fully. Different business units will often have different instances of the same Capability, funded separately. By focusing on how those instances can learn from one another and share best practices, you may achieve an overall capability improvement across the enterprise without needing a major budgeting change.
Making decisions at the right level in the organization
In large organizations, you may need some federated decision-making approach to avoid an overly bureaucratic centralized process for capability assessment, gap analysis, and budget allocation across the entire enterprise. Moreover, those closer to the action are often better able to judge what is needed in the short term and for local improvements. Longer-term, strategic decisions, for instance, on developing entirely new capabilities, divesting or outsourcing others, etc., are best taken higher up in the organization, where management has a better overview of the enterprise-wide impact.
So even though Capabilities are crosscutting organizational structure, you may still want to use that structure to manage some Capabilities lower down in the organization. Simply because centralized, top-down control doesn’t always work.
Conversely, in some cases, you could think of changing the organizational structure to better align with the Capabilities it offers. That won’t work for all Capabilities, but it may improve and align management structures. Not least because if people work together in providing the same Capability, you might want to align how you facilitate that collaboration and how you manage them in terms of their OKRs, KPIs, incentives, etc.
We hope our blog helps you in the implementation process of your Capability-based Planning endeavors. We’d love to hear what you did to ensure success. If you have any feedback, please let us know!