Business Capability Model: Introduction and Benefits

SMBs to enterprises, national to global, all companies that want to remain competitive in fast-evolving markets engage in digital transformation. However, implementing transformation initiatives across an organization is a long and intensive process that brings consequences and impact for the entire company. That’s why a clear strategy and a structured approach are crucial for success.

So, how can you balance large-scale changes with structure? And how do you determine your starting point? It all begins with understanding your business capabilities.

This blog post introduces the fundamentals of business capabilities and the benefits of using a business capability model for a successful digital transformation. 

What are business capabilities?

Business capabilities are lasting, cross-domain or function elements that play a role in realizing various business objectives. According to the Open Group’s standard architecture methodology, TOGAF, a capability is “an ability that an organization, person, or system possesses". They are typically general, high-level activities and require a combination of organization, people, processes, and technology.

All businesses, large and small, function with a set of interacting business capabilities. In modern enterprises, capabilities are numerous, complex, and highly interconnected.

Examples of business capabilities include:

• Recruitment 
• Pricing
• Risk management
• Product design.

Why are they called building blocks? 

Business capabilities represent the various activities companies perform to deliver value, whether through products, services, or customer experience. You can, therefore, imagine them as distinct building blocks that make up the entire organizational structure.

They can be split into several groups:

• Hard capabilities (e.g., manufacturing, invoicing),
• Soft capabilities (e.g., innovation, employee training),
• Core capabilities (e.g., software development), or 
• Contextual capabilities (e.g., marketing campaign execution, brand management).
  

Regardless of how you label specific capabilities, defining and mapping them is a crucial first step.

When defining capabilities, you should consider what the organization needs to be able to do to achieve business goals. At this stage, it's not yet important to understand which resources it requires. The capability answers the “what” question and leaves the “how” question for later. 

Business capability guidelines

Use the following questions as guidelines for identifying and differentiating your business capabilities: 

1. Is it a business capability or a process?

Focus on defining what the organization needs to do, not how it does it. A capability states the goal, while a process explains the people, technology, and resources involved. For instance, creating a financial dashboard is a process. However, financial management, which may require the creation of a financial dashboard, is a business capability.

2. Does it have an intended result?

Capabilities should be measurable and have a clear long-term result. For example, communication with a customer is not a business capability because it lacks a clearly defined outcome. However, customer information management (which includes customer communication) would have the intended result of a customer accessing up-to-date account information. We can, therefore, classify it as a capability.

3. Can you clearly define it?

You should call something a capability if you can assign it a clear purpose – but also a clear name. Essentially, everyone should be able to understand what each capability is – from technical experts to business leaders. This will ensure that your business capability model stays useful and relevant over time.

Building a Business Capability Model

Identifying business capabilities alone does not yet give you real insight into the entire functioning of the business. To see the full picture, you should aim to create a Business Capability Model. This will give you a structured view of all capabilities, including their relationships and hierarchy. 

If you're an Enterprise Architect, you know the importance of demonstrating the value of Enterprise Architecture (EA) to stakeholders. The Business Capability Model is key to telling this story in a clear and simple way. You can use it to connect the architecture to strategic capabilities and link transformation projects to strategic objectives.

Let’s consider an analogy to help illustrate the concept. A construction plan outlines the structural elements of a neighborhood or building that will result in its desired shape. Similarly, a Business Capability Model describes how an organization will ideally look and operate to achieve its business strategy.

Business Capability Model example in BlueDolphin

Benefits of a Business Capability Model 

A Business Capability Model provides an overview of what is important to the business. They offer the following benefits: 

1. A shared language

You can use the model to communicate transformation projects in language that all stakeholders understand. It goes beyond individual or team agendas, missing skills, or technical jargon. A Business Capability Model outlines how the company operates and what it needs to transform to achieve strategic goals.

2. Clarity for strategic priorities

Linking capabilities to business goals helps you outline which capabilities carry strategic or critical weight. In turn, this will help you prioritize process and system improvements based on the same criteria. This makes the capability model a powerful visual tool that facilitates decision-making across the board.

3. An accurate assessment of transformation projects

Similarly, mapping transformation objectives to capabilities provides a more accurate picture of the project scope. You can determine which architectural changes to make, which risks to manage, and the associated costs or timelines. This helps the company deliver projects on time and budget.

4. Transformation without disruption

Rather than disrupting existing analyses and projects, the business capability model places these insights in a high-level context. This will help you get stakeholders on board and accelerate transformation across functions.

Of course, this is a high-level overview of the many potential benefits of using a business capability model. But essentially, it should serve as a foundation for numerous digital transformation projects, including Application Portfolio Management, Business Process Management, and Project & Portfolio Architecture.

A business capability framework for transformation

Business capability mapping is more than just a tool – it's the foundation for planning effective digital transformation initiatives. By modeling your organization's capabilities, you can create a shared language to ensure strategic clarity and prioritize transformation efforts without disrupting ongoing projects.

At the same time, you can use it to define the exact scope and specifics of the transformation. Whether your goal is strategic alignment or increased efficiency, the capability model provides the necessary structure for success.

Ready to take the next step in your transformation journey? Download our free ebook, "Business Capability Mapping: Strategies for Transformation Planning", and discover practical frameworks and proven strategies to accelerate your transformation.