1. Webinar Developing Effective Business Capability
Gordon Barnett, Principal Analyst
March 5, Call in at 10:55 a.m. Eastern time

2. Business capability mapping
Why develop business capability maps?
Business capability maps are a simple, powerful, and proven starting point for nearly every business architecture planning activity.
They are relatively simple to create, easy to understand, and easy to use.
Critical success factors
Use business language and focus on business outcomes.
Work directly with stakeholders to develop and adopt capability definitions and relationships that they understand.

3. Business capability mapping (cont.)
Why develop business capability maps?
They are powerful because they are relatively constant from year to year and can be applied to many different planning and analysis activities.
Many clients have demonstrated unambiguous, repeatable, and ongoing benefits using these tools.
Critical success factors
Develop a small number of representations, and use them repeatedly, so they are familiar parts of the ongoing business dialogue.
Review regularly to ensure they remain relevant to your current business environment.

4. Agenda
What is a capability map?
Capability map uses and features
Developing capability maps
Common questions and challenges
Summary

5. What is a capability map?
A representation of your business using 20 to 30 specific capabilities, typically arranged in categories*
So, what is a capability?
The term business capability comes from the origins of the business architecture frameworks within the many enterprise architecture frameworks.
A business capability defines the organization’s capacity to successfully perform a unique business activity to achieve a specific outcome.
*Some organizations will have 20 to 30 capabilities, others will fall in the 50 to 70 range — your organization may fall in either camp depending on the level of detail and specific needs.

6. What is a capability map? (cont.)
A business capability map describes a business in terms of the capabilities and relationships necessary to support the organization’s mission.
Some examples (a mix of industries and forms):
Customer management
Product management
Supply chain management
Tax management
Distribution management
Compensation and commissions management
*Some organizations will have 20 to 30 capabilities, others will fall in the 50 to 70 range — your organization may fall in either camp depending on the level of detail and specific needs.

7. Example: retail company

8. Example: police force

9. Example: petroleum development company

10. Agenda
What is a capability map?
Capability map uses and features
Developing capability maps
Common questions and challenges
Summary

11. Potential uses of business capabilities
A true business capability is readily recognized by anyone associated with the business: “Yes, that is an important part of what we do.”
It is a simple concept, and the complete map can be used to frame discussions and planning in many domains . . .
Business capabilities are defined at a high level and in business-friendly terms and tend not to change over time, so they provide a familiar reference.
Here is a sample of some of the ways Forrester clients use business capability maps today.

12. Example: retail capability map
This retail example has 23 capabilities in four categories.
For cross-cutting capabilities, it is not uncommon to fall back on terms like “information technology” or “accounting.” This may be an excellent choice for your organization, or it may be that you know these things exist in some form but don’t know how to fit them in. Here are a few ideas on alternate approaches. As always, try a few different approaches before you decide.
Split “information technology” into separate categories:
IT strategy and planning
IT solution delivery
IT operations
If you outsource operations, for example, separating these capabilities may better align to your approach.
Separate all corporate functions into “strategy and planning” and “support” categories. The support capabilities will be more easily commoditized, with the strategy and planning capabilities being potential key differentiators.
Some cross-cutting capabilities may really fit better as separate components of other capabilities or even a combination. If you are in a heavily regulated industry, there may be both centralized capabilities and specialized capabilities associated, for example, with product launch.

13. Example: police force capability map
This example is based on a police force. It has 54 capabilities in three categories and 11 subcategories. Note that in this example, every capability is a member of a subcategory.
Subcategories
Summary or high-level version
In this example, the subcategories alone can be seen as top-level capabilities. They are defined in simple terms and together clearly define the organization’s basic mission and operation. The more detailed capabilities help in managing the details.
Categories

14. Example: capability map views
To illustrate just one possibility, this capability map has been used as a heat map — possibly identifying capabilities relative maturity or where greater investment is needed.

15. Agenda
What is a capability map?
Capability map uses and features
Developing capability maps
Common questions and challenges
Summary

16. Capability map development processU
se y
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Defining your capabilities is a process of trying several approaches until the “best” one is clear.
In practice, this entire process will involve iteration among the sections. Initially, this is a “repeat steps as needed until it feels right to your stakeholders” activity. Periodic review and revision to accommodate changing business conditions will likewise focus on the steps that make the most sense.
Make your capability map even more useful by capturing details and constructing views targeted to specific groups of stakeholders or specific needs.
Ideally, your maps will be very stable, especially after the first couple of rounds, but a periodic review is still valuable.
Lay the groundwork
Build your map
Capture details
Use and maintain
Lay the groundwork.
Build your map.
Capture details.
Use and maintain.

17. Laying the groundwork: Identify target users
Ideally, new uses for capability maps will tend to present themselves over time, and this is an indication that you have done a good job in defining your map(s).
That said, having a few target uses in mind helps to get the ball rolling and especially helps in organizing and refining capabilities into a cohesive and comprehensive map.
Even more valuable, a few target uses help to illustrate the value of the exercise to stakeholders who may be initially skeptical.
Lay the groundwork.
Build your map
Capture details
Use and maintain
Build your map.
Capture details.
Use and maintain.

18. Laying the groundwork: Identify target users (cont.)
Situation*
Challenge
How capability maps help
Multiple business strategies
Strategy silos
Shifts
Enable strategy impact assessment, comparison, and harmonization.
Merger/acquisition assessment and integration
Where to consolidate
Road map development
“Whole enterprise view” is applied to the acquired and acquiring organizations, facilitating decisions.
Priorities clarification
BUs perspectives and priorities
Identify potential business and systems synergies leading to time and resource savings.
IT value and alignment
Organization and application silos
IT-centric thinking
Identify the key hardware, software, and IT services related to the delivery of each capability.
*These are all examples of how individual Forrester clients are using capability maps today.
Lay the groundwork.
Build your map
Capture details
Use and maintain
Build your map.
Capture details.
Use and maintain.

19. Laying the groundwork: Understand the language
Industry
Examples
Insurance
“Underwriting,” “policy management,” and “claims management”
Manufacturing
“Supply chain management” and “product life-cycle management”
Logistics
“Network capacity management”
Retail
“Inventory management” and “customer management”
Investment banking
“Order management,” “trade management,” and “risk management”
Banking
“Credit management”
Stakeholders won’t immediately grasp the concept of a business capability from the definition, but most will immediately understand when presented with a few examples in their own language.
While you will need stakeholder involvement to develop a fully formed capability map, you can seed the process with two or three clear examples that will apply in your organization.
Lay the groundwork.
Build your map
Capture details
Use and maintain
Build your map.
Capture details.
Use and maintain.

20. Laying the groundwork: Understand the language (cont.)
Industry
Examples
Insurance
“Underwriting,” “policy management,” and “claims management”
Manufacturing
“Supply chain management” and “product life-cycle management”
Logistics
“Network capacity management”
Retail
“Inventory management” and “customer management”
Investment banking
“Order management,” “trade management,” and “risk management”
Banking
“Credit management”
One useful trick is to listen to your stakeholders and then “play back” what you hear using capabilities.
“We need to get clients, look after their needs, etc.” becomes “customer support management.”
“We analyze sales and market trends and decide how we should adjust our product mix” becomes “product strategy and planning.”
Lay the groundwork.
Build your map
Capture details
Use and maintain
Build your map.
Capture details.
Use and maintain.

21. Building the map: Identify candidate capabilities
For each business activity, service, or function, “What must our organization do (and do consistently well) to realize the desired outcome?”
Don’t be concerned if you generate a long list at this point.
Do ignore technical capabilities at this stage.
Examples
“Customer acquisition management”
“Customer retention management”
“Risk parameter management”
“Regulatory management”
“Lead management”
“Customer support management”
“License management”
“Customer billing management”
Lay the groundwork
Build your map.
Capture details
Use and maintain
Lay the groundwork.
Capture details.
Use and maintain.

22. Building the map: Organize and refine capabilities
Try it several ways. See what resonates the best with your audience.
Review your list: Are they unique, business-centric, at a consistent level of abstraction?
Eliminate obvious duplicates; split capabilities that are overly broad.
Organize into categories — you are looking for a manageable map — say 10 to 40 capabilities, in two to five categories.
Here is one common structure — find one that “clicks” with your stakeholders.
Lay the groundwork
Build your map.
Capture details
Use and maintain
Lay the groundwork.
Capture details.
Use and maintain.

23. Building the map: Organize and refine capabilities (cont.)
Try it several ways. See what resonates the best with your audience.
Classify or prioritize categories according to their importance to the organization.
It is very common to see three levels, as in the example on the right, with categories further subdividing some or all of them.
Here is one common structure — find one that “clicks” with your stakeholders.
Lay the groundwork
Build your map.
Capture details
Use and maintain
Lay the groundwork.
Capture details.
Use and maintain.

24. Building the map: Identify major relationships
Relationships among capabilities are inescapable.
They are useful to maintain in the own right, but defining some of the major ones will often provide insight as to the strength or weakness of the capability map as a whole.
Too many interdependencies, or almost none, probably means you should take another look.
Example
Description
Information dependencies
Information used to fulfill one capability that is produced by another
Support relationships
For example, when a “human resource management” capability’s outcome is available, resources for use in other capabilities
Close functional relationships
When two or more capabilities represent different aspects of the same area. For example, a “product strategy planning” capability and “product development” will tend to have special relationships.
Others . . .
Lay the groundwork
Build your map.
Capture details
Use and maintain
Lay the groundwork.
Capture details.
Use and maintain.

25. Capabilities are interrelated
Capabilities are related — just a few potential relationships are shown here . . .
Supply chain planning has among its outcomes purchase and production orders that drive procurement and manufacturing.
Materials needed by manufacturing are an outcome of procurement, and finished goods for distribution are an outcome of manufacturing.
Human resource management’s major outcome is a supply of qualified workers needed to fulfill all of the capabilities.
Lay the groundwork
Build your map.
Capture details
Use and maintain
Lay the groundwork.
Capture details.
Use and maintain.

26. Capturing details: catalog capability aspects
What will you capture and maintain as attributes or “aspects” of each capability?
Define a handful, and fill in a “best guess” for the capabilities you have identified.
Significant duplication or gaps will tend to become apparent, suggesting potential improvements.
Aspect
Key business processes used to deliver and support the capability
Information consumed and generated
Outcomes delivered to the business
Maturing of the capability, perhaps in comparison to major competitors
Others . . .
In each case, how will the information captured help business users make decisions? Only aspects with clear value should be captured and maintained!
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

27. Capturing details: catalog capability aspects (cont.)
A common mistake is to link capabilities too closely to the physical world at this stage. Capabilities are an abstraction and should have links to the logical process architecture, logical information architecture, logical application architecture, and so forth.
Put another way, you don’t want to constrain capabilities by coupling them too tightly to the way business is done now. Rather, capabilities should capture the essence of what is required, independent of who does it or how it gets done.
Aspect
Key business processes used to deliver and support the capability
Information consumed and generated
Outcomes delivered to the business
Maturing of the capability, perhaps in comparison to major competitors
Others . . .
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

28. Capturing details: Develop views
“Views” are a bit like capability dashboards — they show all or specific capabilities and highlight one or more specific aspects.
Define specific subsets (of capabilities and aspects thereof) of interest to particular stakeholders.
Develop several mockups showing the capabilities and aspects of interest and highlighting meaningful similarities or differences.
Sample view
Heat map showing relative competitive differentiation of a set of capabilities
Progress against a capability road map
Graph or heat map showing investments by capability
Variations of dashboards showing key metrics for each (or some) capability(-ies)
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

29. Capturing details: Develop views (cont.)
Consider showing multiple aspects, such as relative investment and strategic differentiation, side-by-side.
Remember, you can always add views as needed down the road!
Sample view
Heat map showing relative competitive differentiation of a set of capabilities
Progress against a capability road map
Graph or heat map showing investments by capability
Variations of dashboards showing key metrics for each (or some) capability(-ies)
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

30. Capturing details: Define capabilities in detail
Given a reasonably sound list of capabilities, aspects, and relationships, it is time to define all of these for each of your capabilities.
This is an important step in finalizing your capability map — this effort will almost certainly illuminate areas where capabilities ought to be split or merged or organized differently.
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

31. Capturing details: Define specific usage data
Use 2 No.: strategic alignment and performance
What strategic goals and objectives does this capability enable or support?
Use No. 1: strategic impact
What other capabilities are impacted?
Use No. 5: delivery and execution prioritization
What projects impact this capability?
Use No. 4: investment alignment
What percentage of investments are being made in this capability?
Use No. 6: organizational design and growth planning
How might the organization better support and evolve this capability?
Use No. 3: architectural alignment and cost reduction
What application, process, and technology consolidation are possible, and which are beneficial?
Lay the groundwork
Build your map
Capture details.
Use and maintain
Lay the groundwork.
Build your map.
Use and maintain.

32. Publish, use, and (above all) maintain
Use your capability maps regularly, making them a part of your culture and ongoing evolution, or risk losing the investment made to create them.
Publish them in as many forms and in as many situations as there are beneficial uses. In this case, familiarity breeds strength and value.
Conduct formal periodic reviews!
Is each capability still relevant to your business?
Are there new capabilities that should be added?
Is the terminology current?
Are the linkages and road maps up to date?
Lay the groundwork
Build your map
Capture details
Use and maintain
Lay the groundwork.
Build your map.
Capture details.

33. Agenda
What is a capability map?
Capability map uses and features
Developing capability maps
Common questions and challenges
Summary

34. Frequently asked questions
Discussion
What is the right number of capabilities?
Your specific needs will dictate the answer to this question. Too many and you risk bogging down strategic uses. Too few and the lack of detail makes your plans meaningless.
What about levels and decomposition?
The use of decomposition is one tool that helps straddle multiple uses — strategic planning can happen using 10 to 12 top-level capabilities; detailed planning can leverage the detailed map with 40 to 60 second-level capabilities. Categories accomplish similar aims but typically are less useful on their own.
Should we use an industry model as a starting point?
If you have a starting point available, by all means use it. Don’t be afraid to toss out parts that don’t fit your organization or even to scrap the whole thing. Something your people can work with is the only priority that matters here.
How do we distinguish between a process and a capability?
The distinction is not always clear. Ideally, capabilities will be more permanent that processes, and even significant evolution of processes, can support the same capability. Consider a “distribution” capability. Whether using a horse and wagon two hundred years ago or a vast worldwide shipping network today, the capability is fundamentally the same while the process has completely changed many times.
Should we start with one business unit or the entire enterprise?
You have to decide, but often it is easier to start with a smaller subset of the enterprise, especially if there is a business unit that is more accepting of the concept out of the gate — success in one area will help win over other groups.

35. Common challenges Question Discussion
What about cross-cutting capabilities like collaboration or hiring?
You have to decide if these are real capabilities or just part of everyday business within other capabilities. If you target investment to this area or have considerable IT support dedicated to this area, it may make sense to treat it separately.
This is starting to look just like our organization chart — is that good?
Typically, no, unless you happen to have an organization that is already aligned around business capabilities. More often, this indicates that a lot of stakeholders are thinking in terms of the organization as it stands, rather than as a collection of potentially unique capabilities.
We just can’t seem to get this off the ground. What are we doing wrong?
It is often more effective to develop a straw man and bring it to your stakeholders than to attempt to start from a clean slate with a large audience. Even if your starting point bears little resemblance to your final product, getting the ball rolling is an important accomplishment.

36. Agenda
What is a capability map?
Capability map uses and features
Developing capability maps
Common questions and challenges
Summary

37. Key points for developing a capability map
Determine your intended use and audience.
You can always extend your capability map to meet future needs, but having a clear idea as to who will use it initially, and to what purpose, will provide valuable focus to your efforts. Common uses include strategic decision-making, organizational design, performance improvement, project prioritization, investment allocation, mergers and acquisition planning, and application rationalization planning.
Identify candidate capabilities.
Various sources can be used for inspiration — value chain, value stream, organization chart, industry capability models, and of course subject matter expert knowledge of your business. Involving stakeholders in development promotes early adoption for decision-making, too.
Organize and refine.
Your capability map is just an organized collection of capabilities. Try different organizing approaches to see which resonates best with stakeholders. Uniformity of language (noun-verb like “product management,” or verb-noun like “manage product portfolio”) improves usability.
Capture needed information.
Work with your stakeholders and SMEs to identify relationships between capabilities and to capture details of individual capabilities.

38. Key points for developing a capability map (cont.)
Develop the stakeholder views.
For each stakeholder, develop the appropriate views that will assist them in meeting their challenges. This may be in the form of capability heat maps, capability investment allocations, capability ownership maps, and so on.
Expect to iterate freely among all the steps.
The key to success is to refine what you have, trying different things, and making improvements. In a relatively short time, the basic structure will be clear, and each iteration will focus on a shrinking list of capabilities that don’t quite fit until there is general agreement that you’ve reached a point where further changes are unnecessary.
Publish, use, and maintain.
Use the capability maps wherever you can to facilitate discussions. Make them available so they become part of your “cultural DNA.” And, be sure to conduct a periodic review to identify any areas in need of updating as your business evolves.

39. Selected Forrester Research
May 2, 2012, “Use Business Capabilities To Optimize BT Strategy Choices”
July 20, 2011, “Eight Ways CIOs Use Capability Maps To Embed Business In The Management Of IT”
April 18, 2011, “Aetna's EA Organization Uses Capability Maps To Connect Business Strategies”
May 27, 2010, “Using Business Capability Maps To Guide Application Portfolio Rationalization”

40. Selected Forrester Research (cont.)
May 19, 2010, “Case Study: Pfizer Applies Capability Maps To Keep Its Multiyear Transformation Effort On Target”
January 14, 2010, “The Anatomy Of A Capability Map”

41. Gordon Barnett