One of the core views of enterprise architecture is a business capability matrix. Business capability modeling is a technique for the representation of an organization’s business anchor model, independent of the organization’s structure, process, team members, or domain.
What can you achieve with business capability mapping?
- Encapsulate what a business is doing right now and what needs to be done to meet current and future challenges.
- Define “what” a business does, rather than “how” it does it
- Provide a common basis for discussion and planning
- A clear link from strategy to execution
- Involve the appropriate stakeholders that define the strategy
- Carry out highly organized mergers & acquisitions
- Accurately define roles within the business
- Manage mergers, assess risk, and prepare for innovative endeavors
Since business capabilities structure a company according to its activities, capability maps are a crucial tool in setting up highly strategic M&As. Capability maps provide both groups with the basis to structure a merger a beneficial way, even if the organizational structures and processes of the two companies are very different from each other. Capability maps assign applications to user groups and business capabilities. This overarching view of applications and their business value makes it possible to assess redundancies and gaps in IT support in both dimensions - functional and usable.
Imagine a multinational insurance company has recently acquired a local insurance player. During the M&A process, both teams sit down and take an assessment of their supporting applications. The teams have to decide which applications can be used in the future, and which should be phased out. Being familiar with their prospective applications, and affected by their previous organizational structures, how can teams objectively choose the best fit application for the new company going forward? Instead of getting lost in uncertainties, “this application worked for us previously, so it should work going forward,” the teams can sit down with a business capability map to structure the entire merger.
A business capability model helps to discuss the areas of strategic invest or divest. Business capabilities can serve as the structuring element to uncover redundancies in IT. McKinsey estimates the saving potential from uncovering IT redundancies to be 15 - 20%.
LeanIX Customer Helvetia was able to reduce redundancies and realize substantial savings in the merger with Swiss Re. In their half-year report, Helvetia reported IT as a significant contributor to these savings. Establishment of transparency was a crucial first step towards doing so. Today, the established LeanIX inventory serves as the single source of truth that strategic IT management decisions are based on.
IT Risk ManagementBy linking business capabilities to applications, and linking those applications to technology components, CIOs can take a glance at a business capability map and perform a quick strategic risk assessment. With the right information in place, CIOs can deliver a statement such as: “We cannot accept the risk of an end-of-life server cluster because it provides the infrastructure for our online booking system that is crucial to our capability to sell directly to customers. Selling direct to customers has highest strategic priority due to its financial impact.” Having a clear view of which technology components are dependent upon other technology components is a strong view, especially during the times of high-security vulnerability.
Business capabilities are also a great help in structuring thoughts on how to transform business and IT. In this digital age, companies need to investigate and ponder new ways to innovate, capability by capability. A SaaS provider could go down the list, thinking of ways to transform and update their capability. Taking a second glance at the “Manage Pricing” capability, and ascertaining ways to update it. In the past, the company may have followed a simple standard pricing model sheet. Now, the SaaS company could enable pricing based on updated data.
Business capabilities are helpful in many ways. Download our best practices to define your business capability map!