Business Capabilities: a Spotlight for Strategic Decision Making

ARTICLE – Business Capabilities are not a new concept. They have been around for more than 10 years, but they never caught up.

Business Capabilities are not a new concept. They have been around for more than 10 years, but they never caught up. This may be because organizations and consulting firms have approached Business Capabilities either as an extremely detailed, bottom-up exercise or as a “decorative” part of initiatives that didn’t need a Capabilities’ analysis in the first place. An example of the former category is an organization that went through a 6-month, one-million-dollar effort, to map and match technology applications to Business Capabilities, only to realize that all of this effort does not drive decision making in the least. An example of the latter category is a client of ours who had asked a consulting firm to include Business Capabilities in their work for new market entry, only to discover that Business Capabilities were mentioned on a single slide and not linked to anything else mentioned within a 70-page deliverable.

We have found a better way between the top-down and the bottom-up approach. Using this method, we have been able to produce the basic Business Capabilities ground-work in 3-4 weeks and followed up with a set of valuable decision-driving insights within an additional couple of months.

The basic ground-work result is a commonly accepted Capabilities Map across the whole organization. This is done mainly through interviews and workshops with top-management, who identify a short list of Business Capabilities and then an even shorter list of core and differentiating ones. We think that what differentiates our methodology and allows us to add value faster is that we focus on answering a real burning question, as opposed to creating a theoretical construct of what the organization is about. Burning questions may be, for example, “what are our Business Capabilities for introducing a specific new product to the market”, or in a post-merger situation “what are the Business Capabilities of Company A and the Business Capabilities of Company B, and how will the two sets of Business Capabilities be integrated”, or “what are the Business Capabilities that result in our competitive advantage”.

We produce decision-driving insights through a set of perspectives that combine Business Capabilities with another – usually more tactical – plane of an organization. Tactical planes are many, so we mention a few here for clarity: investments and budgeting, operations and processes, technology and systems, project portfolio management, and human resources.

An example from a recent effort we did with a client, was used to create a new product market entry in an industry that offers first mover’s advantages through high customer switching costs. The ground work resulted in a set of 72 capabilities, of which 20 were core, and 8 were differentiating. The insights created, resulted in understanding the sources of competitive advantage, allowing the company to prioritize resources towards the projects that would build the relevant capabilities. This eventually resulted in faster time to market with the exact offering that is important to clients.

After a number of successful Business Capabilities engagements, we believe we can safely assert the following: Super-detailed analysis spread all over all functions doesn’t improve decision making. Valuable insights that drive pinpointed decision making, come from generating enough detail only where it matters the most. We believe that our Business Capabilities approach allows us to start broad and then be selective in drilling down, achieving fast and high-value results, both in terms of content and in terms of stakeholder buy-in.

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