white paper business capabilities: a common language
TRANSCRIPT
WHITE PAPERBUSINESS CAPABILITIES: A COMMON LANGUAGE
2811 McKinney AveSuite 220, LB 126Dallas, TX 75204
T. 214.777.4600F. 214.855.1246
A Framework for Achieving Strategic and Organizational Alignment | 01© PARIVEDA SOLUTIONS
BUSINESS CAPABILITIES MAP
BUDGET / INVESTMENT PLANNING COST SAVINGS / CONSOLIDATION RISK
SYSTEMS VS CAPABILITIES PROJECT PORTFOLIO MANAGEMENT PEOPLE
Page 3 FOUNDATIONCreate a businesscapabilities map as astrong foundation for a range of businessanalyses and communications
Page 8 BUDGET/INVESTMENTPLANNINGFocus budget and investment where it counts most
Page 14SYSTEMS VS. CAPABILITIESEnsure capabilities coverage by systems
Page 10 COST SAVINGS/CONSOLIDATIONIdentify high impactopportunities toincrease efficiency across the organization
Page 16PROJECT PORTFOLIOMANAGEMENTSustain continuousimprovement by aligningprojects to business capabilities
STRATEGIC INITIATIVES Page 4 STRATEGIC INITIATIVESTarget your strategicinitiatives towardsdifferentiating capabilities
COMP. ADVANTAGE/ DIFFERENTIATION Page 6 COMP. ADVANTAGE/DIFFERENTIATIONTransform your shared services into a catalyst for competitive advantage
Page 18PEOPLEFocus a lens on the future of your staffingneeds
Page 13RISKQuantify the magnitude and impact of risks
A FRAMEWORK FOR ACHIEVING STRATEGIC AND ORGANIZATIONAL ALIGNMENT
EXECUTIVE SUMMARY
Executive Summary | 02© PARIVEDA SOLUTIONS
Pariveda Solutions engages with clients to help them improve strategic and organizational alignment. We frame these engagements around Business Capabilities. Business Capabilities can be used as a “bridge” to link Strategy, Initiatives, Costs, etc. in a way that promotes better and more consistent understanding within an organization. The value of Business Capabilities framework stems from three main characteristics:
Common Language: Business Capabilities provide a common language so that different business functions can communicate more uniformly. This has some value in and of itself and may be the end goal in some cases. However, much greater value can be realized when business capabilities are used as the common ground for a number of analyses in additional areas, such as competitiveadvantage/differentiation, cost savings, and budget/investment planning.
Wide scope: Business Capabilities can be used in the context of a department, a business unit or an enterprise.
Level of detail: Business Capabilities can be expanded upon at virtually any level of detail to suit a broad range of purposes. The goal is to facilitate decisions in a timely and informed way. This white paper presents a set of tools to drive alignment and actions to achieve desired business objectives.
SAMPLE BUSINESS CAPABILITIES MAPA Business Capabilities map provides a model of what a business does to reach its objectives.
For common reference purposes, a sample Capability Map is shown on the right.
Maximum strategic focus is achieved when an organization uses the map to identify its core and differentiating capabilities, as shown on the right.
In the following sections, we describe the use of Business Capabilities as a basis for analyses and improved communications.
Foundation | 03© PARIVEDA SOLUTIONS
Procurement Strategies
And Initiatives
Business Concept & Long-term Vision
Design Products & Services
ScheduleProduction
Sales Strategy
Plan Deliveryto Customer
Customer Care/Service Strategy
Marketing Strategy
Manage Compliance
Manage FinancialResources
Manage HumanCapital
NegotiateContracts
Develop BusinessStrategy
Develop Products & Services
Produce Product/Service
Sales Planning
OutboundTransportation
Customer ServiceOperations
Marketing Planning
Government &Industry
Relationships
Manage TreasuryOperations
Manage BusinessProcesses
Manage Suppliers
Strategic Planning
Manage Product& Services Portfolio
Quality Testing
ManageSalesforce
Returns/Reverse Logistics
Evaluate Customer Service Operations
CollectIntelligence
Manage Risk
Investor &Stakeholder
Relationships
Manage Program/Project
DetermineDemand
Strategic Initiatives
R & D
Maintenance
Manage Sales Partners &Alliances
Assess Performance
Online ProductCatalog
Manage Legal
Manage Assets
Manage Change
Manage Inventory
Manage Customer Sales
Manage Provider Network
Build FinancialRelationships
Manage Quality
Manage Outsourcing
Manage Orders
Manage Claims
Manage Taxes
ManageGovernance
Deliver Professional
Services
Manage Knowledge
Manage InformationTechnology
Manage International
Presence
CORE VALUE CHAIN CAPABILITIES
SUPPORT VALUE CHAIN CAPABILITIES
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS& SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE & DELIVER
CUSTOMER SERVICE
FINANCE
Create a business capabilities map as a strong foundation for a range of business analyses and communications.
STRATEGICINITIATIVES
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATION
FOUNDATION
Core capability
Differentiating capability
Create a business capabilities map as a strong foundation for a range of business analyses and communications
STRATEGIC INITIATIVES
DRIVE OPERATIONAL EXCELLENCE
FOSTER & MAINTAIN A HIGH
PERFORMANCE CULTURE
PARTNER WITH CUSTOMERS
TO DRIVE MUTUAL VALUE
EXPAND INTO ADJACENT MARKETS
TO IMPROVE VALUE PROPOSITION
INNOVATE TO SOLVE UNMET
INDUSTRY NEEDS, LEVERAGING
OUR REACH AND KNOWLEDGE
1
2
3
4
5
Supplier spend reduction
Warehouse optimization: process re-engineering, logistics system
Talent acquisition: employment process and quality of hire
Rewards & recognition: compensation benefits and rewards
Key account management pilot and roll-out
Pricing, business intelligence
Global logistics expansion for launching new markets
Shipping channels: complete pilot, research organic/inorganic growth
Salesforce design and roll-out
1a
1b
2a
2b
4a
4b
3c
3a
3b
STRATEGIC GOALS CURRENT YEAR STRATEGIC INITIATIVESThere is a widely understood path that starts with corporate strategy and ends at strategic initiatives. An example of this is shown on the right, where five strategic goals are “translated” to ten strategic initiatives. Note that strategic initiatives may have to be further broken down into a number of programs/ projects spanning several organizational units.
Target your strategic initiatives towards differentiating capabilities
Strategic Initiatives | 04© PARIVEDA SOLUTIONS
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
5Science-led product development to support customers: design, test5a
Procurement Strategies & Initiatives
Business Concept & Long-term Vision
Design Products & Services
ScheduleProduction
Sales Strategy
Plan Deliveryto Customer
Customer Care/Service Strategy
Marketing Strategy
Manage Compliance
Manage FinancialResources
NegotiateContracts
Develop BusinessStrategy
Develop Products & Services
Produce Product/Service
Sales Planning
OutboundTransportation
Customer ServiceOperations
Marketing Planning
Government &Industry
Relationships
Manage TreasuryOperations
Manage BusinessProcesses
Manage Suppliers
Strategic Planning
Manage Product& Services Portfolio
Quality Testing
ManageSalesforce
Returns/Reverse Logistics
Evaluate Customer Service Operations
CollectIntelligence
Manage Risk
Investor &Stakeholder
Relationships
Manage Program/Project
DetermineDemand
Strategic Initiatives
R & D
Maintenance
Manage Sales Partners And Alliances
Assess Performance
Online ProductCatalog
Manage Legal
Manage Assets
Manage Change
Manage Inventory
Manage Customer Sales
Manage Provider Network
Build FinancialRelationships
Manage Quality
Manage Outsourcing
Manage Orders
Manage Claims
Manage Taxes
ManageGovernance
Deliver Professional
Services
Manage Knowledge
Manage InformationTechnology
Manage International
Presence
CORE VALUE CHAIN CAPABILITIES
SUPPORT VALUE CHAIN CAPABILITIES
Each strategic initiative is in turn impacted by and/or impacts one or more capabilities, as shown on the right. Here are some preliminary hypotheses and discussion themes that can be extracted from this simple view:
Out of the ten strategic initiatives, only five (1a, 1b, 3a, 3c, 4b) address core capabilities and only four (1a, 1b, 3a, 3c) address differentiating capabilities, i.e., capabilities that result in competitive advantage for the organization.
There are eleven core capabilities, five of which are differentiating, that have no strategic initiatives associated with them.
Therefore, strategic initiatives may need to be realigned to promote or harness a higher percentage of core and preferably differentiating capabilities.
Manage HumanCapital
Strategic Initiatives | 05© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS& SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE
& DELIVER
CUSTOMER SERVICE
FINANCE
Core capability
Differentiating capability
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATION
Supplier spend reduction
Key account management pilot and roll-out
Pricing, business intelligence
Global logistics expansion forlaunching new markets
Shipping channels: completepilot, research organic/inorganic growth
Salesforce design and roll-out
1a
1b
2a
2b
4a
4b
3c
5a
3a
3b
Warehouse optimization: process re-engineering, logistics system
Talent acquisition: employment process and quality of hire
Rewards & recognition:compensation benefits and rewards
Science-led product development to support customers: design, test
STRATEGICINITIATIVES
COMPETITIVE ADVANTAGE/DIFFERENTIATION
What is the degree of coverage of capabilities by IT Systems?
What is the degree of satisfaction with IT Systems mapped on the organization’s capabilities?
The view on the right may stimulate discussions along the following observations:
The differentiating capability “Manage Salesforce” is lightly covered by IT Systems. Nevertheless, the satisfaction from the existing coverage is high. This means that the organization should consider whether there is value from further automating this capability.
The core capabilities across the row “Distribute & Deliver” enjoy high coverage by IT Systems, but low satisfaction. Therefore, the IT function may consider discussing with the relevant business partners how satisfaction–and associated organizational value–can be improved.
Comp. Advantage/Differentiation | 06© PARIVEDA SOLUTIONS
Procurement Strategies & Initiatives
Business Concept & Long-term Vision
Design Products & Services
ScheduleProduction
Sales Strategy
Plan DeliveryTo Customer
Customer Care/Service Strategy
Marketing Strategy
Manage Compliance
Manage FinancialResources
Manage HumanCapital
NegotiateContracts
Develop BusinessStrategy
Develop Products & Services
Produce Product/Service
Sales Planning
OutboundTransportation
Customer ServiceOperations
Marketing Planning
Government &Industry
Relationships
Manage TreasuryOperations
Manage BusinessProcesses
Manage Suppliers
Strategic Planning
Manage Product& Services Portfolio
Quality Testing
ManageSalesforce
Returns/Reverse Logistics
Evaluate Customer Service Operations
CollectIntelligence
Manage Risk
Investor & Stakeholder
Relationships
Manage Program/Project
DetermineDemand
Strategic Initiatives
R&D
Maintenance
Manage Sales Partners And Alliances
Assess Performance
Online ProductCatalog
Manage Legal
Manage Assets
Manage Change
Manage Inventory
Manage Customer Sales
Manage the Providers’ Network
Build FinancialRelationships
Manage Quality
Manage Outsourcing
Manage Orders
Manage Claims
Manage Taxes
ManageGovernance
Deliver Professional
Services
Manage Knowledge
Manage InformationTechnology
Manage International
Presence
CORE VALUE CHAIN CAPABILITIES
SUPPORT VALUE CHAIN CAPABILITIES
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS& SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE & DELIVER
CUSTOMER SERVICE
FINANCE
High Satisfaction
Med. Satisfaction
Low Satisfaction
Inhibitor
No systems
Capability not applicable
Degree of system coverage (excluding business-led IT)
Core capability
Differentiating capability
Transform your shared services into a catalyst for competitive advantage
A top executive may want to assess how IT (an example of a shared service) enables competitive advantage/differentiation. This can be achieved through linking IT Systems to Business Capabilities:
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT PEOPLEFOUNDATION
System Satisfaction & Coverage
STRATEGICINITIATIVES
Comp. Advantage/Differentiation | 07
Marketing and Finance have poor systems coverage and low satisfaction (graphic on prior page). This may have been done purposefully, however, these functions may develop their own business-led IT or use third parties to achieve a higher level of satisfaction.
Finally, one third of Capabilities have no coverage by IT systems. This may be the result of a conscious decision not to invest in certain capabilities or an ad hoc set of efforts. From the view on the prior page, one can hypothesize that IT did strive to provide coverage to the core capabilities – probably as requested by the business – but this happened at the expense of the needs of the rest of the organization, which has now been left without any IT coverage. Perhaps, this is a good time for IT and other business functions to have a discussion on a holistic IT Strategy that will result in good coverage for the whole organization.
© PARIVEDA SOLUTIONS
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
BUDGET/INVESTMENTPLANNING
The premise behind capabilities-based budgeting and/or investment planning is that investments should aim to improve competitive advantage through better ability to deliver on capabilities. Investments may be directly related to none, one or many capabilities. The purpose of aligning investments to capabilities is to ensure that core/ differentiating capabilities improve continuously by having sufficient investments associated with them. An example of a view that associates investments to capabilities is shown on the right.
A strategic question answered by this view is: Does the organization invest sufficiently in its core and differentiating capabilities? It is widely understood that competitive advantage stems from disproportionately high investments in a few differentiating capabilities, as opposed to “blanket” investing across a high number of capabilities. Of course, investment magnitude alone is not a sufficient indicator of future competitive advantage, because, for example,
On the positive side: Investment in a differentiating capability may be low, not because the capability is being ignored, but because there has been high investment in the past; this past investment provided the foreseen competitive advantage, and only incremental future investment is needed. Also, investment on a differentiating capability may be low if the capability is new and options are being tried.In this case, higher investments may follow when a specific option is selected.
Budget/Investment Planning | 08© PARIVEDA SOLUTIONS
Manage Compliance
Manage FinancialResources
Manage HumanCapital
Government &Industry Relationships
Manage TreasuryOperations
Manage BusinessProcesses
Manage Risk
Investor & Stakeholder Relationships
Manage Program/Project
Manage Legal
Manage Assets
Manage Change
Build FinancialRelationships
Manage Quality
Manage Taxes
ManageGovernance
Sales Strategy
Plan Deliveryto Customer
Customer Care/Service Strategy
Marketing Strategy
Sales Planning
OutboundTransportation
Customer ServiceOperations
Marketing Planning
ManageSalesforce
Returns/Reverse Logistics
Evaluate Customer Service Operations
CollectIntelligence
Manage Sales Partners & Alliances
Assess Performance
Online ProductCatalog
Manage Customer Sales
Manage Provider Network
Procurement Strategies& Initiatives
Business Concept & Long-term Vision
Design Products & Services
ScheduleProduction
NegotiateContracts
Develop BusinessStrategy
Develop Products & Services
Produce Product/Service
Manage Suppliers
Strategic Planning
Manage Product& Services Portfolio
Quality Testing
DetermineDemand
Strategic Initiatives
R & D
Maintenance
Manage Inventory
Manage Outsourcing
Manage Orders
Manage ClaimsDeliver
ProfessionalServices
Manage Knowledge
Manage InformationTechnology
Manage International
Presence
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS& SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE
& DELIVER
CUSTOMER SERVICE
FINANCE
CORE VALUE CHAIN CAPABILITIES
SUPPORT VALUE CHAIN CAPABILITIES
$3-6M
$2-3M
$1-2M
Under $1M
Core capability
Differentiating capability
3 YR Investment
Focus budget and investment where it counts most
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
Economies of scale, through low duplication of effort and high reusability of the investment outcome across business units;
Economies of scope, in maximizing the number of capabilities that can be concurrently improved within a given time horizon (e.g., 1-2 years);
Knowledge / Best practices transfer, in the sense that knowledge silos will be broken due to the common investment (and project) undertakings.
Additional benefits of this view can be realized when planning across multiple business units and each business unit produces one view like the one on the prior page. Different business units will likely have some common capabilities performed locally that result in their individual competitive advantage. In several organizations, investment planning is done at the business unit level, without harnessing the power of the organization as a whole, other than to request funding. The above view provides a good opportunity for business units to “synchronize” their investments, so they achieve:
Budget/Investment Planning | 09
On the negative side: Investment may be high, but some required human capital skills may be missing. In other words, the infrastructure needed for the competitive advantage may be built, but the necessary people competencies to realize the competitive advantage may be missing.
© PARIVEDA SOLUTIONS
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
COST SAVINGS/CONSOLIDATION
Cost Savings/Consolidation | 10© PARIVEDA SOLUTIONS
Capabilities “locality” across Business Units
The darkest blue capabilities are delivered locally by 13-16 (out of 20) business units.
The lighter blue capabilities are delivered locally by 9-12 (out of 20) business units.
Capabilities “popularity” across Business Units
The dark green capabilities are needed by 16-20 (out of 20) business units.
The light green capabilities are needed by 11-15 (out of 20) business units.
Manage Provider Network
Business Capabilities are a great tool to identify cost savings opportunities across an organization with multiple business units. This tool can be particularly useful for companies that have grown through acquisition and are looking at rationalizing across many dimensions.
We use an example of an organization consisting of 20 business units, which display a high degree of commonality across their Level-0 and Level-1 capabilities, as shown on the top exhibit. At the same time, several of these common capabilities are delivered locally by a large proportion of the business units, as shown on the bottom exhibit.
The discussion points/hypotheses that arise from combining these two views are: Given that the same capability is provided locally by different business units:
Cost: Is there an opportunity to consolidate costs while achieving the same level of service?
Complexity: Is there an opportunity to reduce complexity by centralizing the capability’scoverage?
Identify high impact opportunities to increase efficiency across the organization
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT PEOPLEFOUNDATION
STRATEGICINITIATIVES
This view shows the capabilities covered both by business units locally and by a centralized function (in yellow highlight). Capabilities highlighted in yellow are already provided by the central function to at least one business unit. Based on this view, capabilities that are dark blue (i.e., covered locally by many business units) and are also highlighted in yellow (i.e., they are already provided by central function to at least one business unit) are primary candidates for centralization.
For example, a primary candidate for centralization is the capability “Customer Service Operations” onthe “Customer Service” row of the exhibit to the right, because:
This capability is needed by all business units (see top exhibit on the previous page); and
This capability is covered locally by more than 14 business units (see exhibit on this page); and
This capability is also provided by a centralized function to at least one business unit (see exhibit on this page).
© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS& SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE & DELIVER
CUSTOMER SERVICE
FINANCE
Manage Compliance
Manage FinancialResources
Manage HumanCapital
Government &Industry Relationships
Manage TreasuryOperations
Manage BusinessProcesses
Manage Risk
Investor & Stakeholder Relationships
Manage Program/Project
Manage Legal
Manage Assets
Manage Change
Build FinancialRelationships
Manage Quality
Manage Taxes
ManageGovernance
Sales Strategy
Plan Deliveryto Customer
Customer Care/Service Strategy
Marketing Strategy
Sales Planning
OutboundTransportation
Customer ServiceOperations
Marketing Planning
ManageSalesforce
Returns/reverse Logistics
Evaluate Customer Service Operations
CollectIntelligence
Manage Sales Partners & Alliances
Assess Performance
Online ProductCatalog
Manage Customer Sales
ManageProvider Network
Procurement Strategies& Initiatives
Business Concept & Long-term Vision
Design Products & Services
ScheduleProduction
NegotiateContracts
Develop BusinessStrategy
Develop Products & Services
Produce Product/Service
Manage Suppliers
Strategic Planning
Manage Product& Services Portfolio
Quality Testing
DetermineDemand
Strategic Initiatives
R&D
Maintenance
Manage Inventory
Manage Outsourcing
Manage Orders
Manage ClaimsDeliver
ProfessionalServices
Manage knowledge
Manage InformationTechnology
Manage International
Presence
13-16
9-12
5-8
# of BUs (out of the 20) indicating capability is 100%local
1-4
Centralized functionalso provides capability
Cost Savings/Consolidation | 11
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE PRODUCE DEVELOP PRODUCTS
& SERVICES
SELL MARKET REGULATORY/COMPLIANCE/RISK
ENABLINGCAPABILITIES
DISTRIBUTE
& DELIVER
CUSTOMER SERVICE
FINANCE
100
80
60
40
20
0
High economies of scale potential(wide and most capabilities are Local)
Low economies of scale potential(narrow and/or many capabilities already provided by Corporate)
Local Shared Corporate
Cost Savings/Consolidation | 12
Prioritization of Consolidation Efforts: An IT example
The usual justification given by business units for local IT coverage of a needed capability is that theyhave special needs which cannot be covered by central IT. It may be truly the case that for some business units and for some very specialized capabilities IT needs are so unique that they cannot be “trusted” to central IT. However, this is the exception rather than the rule. In the majority of cases, the IT needed to cover a capability is not extraordinarily specialized and the locality of IT coverage has happened more due to historical reasons (e.g., differing maturity of business units).
A cost savings/consolidation discussion may be prioritized on (a) quick wins, as described above, and/or (b) the high impact potential, as shown on the right. The view on the right indicates potential for economies of scale. The x-axis indicates the cost of Level-0 capabilities to the organization. The y-axis indicates (in green) the percentage of capabilities covered locally by business units. The highest savings potential is where there is high cost (i.e., wide on the x-axis) and high degree of locality (i.e., lots of green within a bar). These include the Level-0 capabilities “Sell”, “Customer Service”, and “Enabling Capabilities”.
% of capabilitiescovered
COST
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
RISK
Organizations have different ways of viewing risks. Within Operational Risk, a common approach is to assess the magnitude of a failure’s impact on three dimensions: confidentiality, integrity and availability. Systems are assessed on a scale of 1 = low impact (best) to 3 = high impact (worst). Having assigned systems to capabilities, organizations can perform an analysis on the systems-driven risk on capabilities, as per the exhibit on the right.
Observations from this view include:Among Level-0 capabilities (within the black rectangles), core capability “Distribute andDeliver” has the highest combined risk. Given this capability’s importance to the organization, a CISO should consider reducing the risk related to systems that cover it.
There are 13 Level-1 capabilities with a combined risk score of 6 or above. The systems coveringthese capabilities should be an immediate priority regarding reduction of risk.
Besides assigning a risk score to systems, organizations should also estimate the monetary impact of each risk. Efficient prioritization of risk-mitigating initiatives stems from the combination of three factors:
Identification of systems with a high risk score;
Identification of systems that affect many capabilities, i.e., fix -one, improve-many;
Identification of risks that have a high monetary impact.
Risk | 13© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS & SERVICES
DISTRIBUTE & DELIVER
SELL
Business Concept & Long-term Vision
Develop Business Strategy
Strategic Planning
Strategic Initiatives
Procurement Strategies & Initiatives
Negotiate Contracts
Manage Suppliers
Determine Demand
Manage Inventory
Manage Outsourcing
Schedule Production
Produce Product/Service
Quality Testing
Maintenance
Design Products & Services
Develop Products & Services
Manage Product & Service Portfolio
R&D
Plan Delivery to Customer
Outbound Transportation
Returns/Reverse Logistics
Assess Performance
Manage the Providers’ Network
Manage Claims
Deliver Professional Services
Sales Strategy
Sales Planning
Manage Salesforce
Manage Sales Partners & Alliances
Manage Customer Sales
Manage Orders
MARKET
CUSTOMER SERVICE
FINANCE
REGULATORY / COMPLIANCE / RISK
ENABLING CAPABILITIES
Marketing Strategy
Marketing Planning
Collect Intelligence
Online Product Catalog
Customer Care/Service Strategy
Customer Service Operations
Evaluate Customer Service Operations
Manage Financial Resources
Manage Treasury Operations
Investor & Stakeholder Relationships
Manage Assets
Build Financial Relationships
Manage Taxes
Manage Compliance
Government & Industry Relationships
Manage Risk
Manage Legal
Manage Quality
Manage Governance
Manage Knowledge
Manage Information Technology
Manage International Presence
Manage Human Capital
Manage Business Processes
Manage Program/Project
Manage Change
1 2 3 4 5 6 7 8 90 1 2 3 4 5 6 7 8 90
Weighted Confidentiality
Weighted Integrity
Weighted Availability
Quantify the magnitude and impact of risks
Combined Risk Score Combined Risk Score
Note: The exhibit on the right depicts a systems risk example, however the framework applies equally to financial, market and operational risks.
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISK SYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
Systems are mapped to capabilities to address the following questions:
How many systems are required to cover a single capability?
What systems support a high number of capabilities?
Which systems support core/differentiating capabilities?
Which capabilities are not coveredby any systems?
The Systems vs Capabilities map on the right triggers the following discussions/hypotheses:
Core capabilities are covered by a high number of systems. While this is positive in terms ofcoverage, it may be an indicator of increased complexity.
System 1 (column 2) supports a high number of capabilities, which means it is of high importance to the company. System owners should always make sure it is always available and closely manage its life-cycle (e.g., a carelessly executed change program may result in business disruptions).
The Systems vs Capabilities map may just be a yes/no exercise, i.e., a “Yes” in a cell indicates a system supports a capability, whereas an empty cell indicates a system does not support a capability. This produces a map similar to the one shown on this page.
Systems vs. Capabilities | 14© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE
PRODUCE
DEVELOP PRODUCTS & SERVICES
SELL
MARKET
REGULATORY/COMPLIANCE/RISK
ENABLING CAPABILITIES
CUSTOMER SERVICE
FINANCE
DISTRIBUTE & DELIVER
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
SYSTEM:
Differentiating CapabilityCore Capability# of Level-1 capabilities covered by the system
SYSTEMS VS.CAPABILITIES
Ensure capabilities coverage by systems
CAPABILITIES:
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
3
3
3 3
116 4
6 4 2 2 2 1 1 2 1 1 1 1 1 1 4 5 1
1 1 1 13 3 1 1 1 1 3 3
1111
1 1 13 1 1 1 1 1 1 11 1 3 1 1
1
1 1 111
1
1
3 31 2 3 3 31 1
Systems vs. Capabilities | 15© PARIVEDA SOLUTIONS
However, the Systems vs Capabilities map may also contain a number of additional dimensions, such asdegree of coverage, satisfaction, cost, risk, etc. It can also be “deeper” by including Level-1, or even Level-2 capabilities. The exhibit on the right shows an analytical view which coversLevel-1 capabilities and contains information on coverage and satisfaction.
Insights/hypotheses stemming from this view include:
The core Level-0 capability “Customer Service” is deconstructed into three applicable Level-1 capabilities. Out of these three capabilities, twoenjoy high coverage by systems (indicated by only 5% and 10% under column “other”), whereas one capability is poorly covered by systems (indicated by 65% under column “other”).
The whole Level-0 capability, as well as its Level-1 components have low satisfaction scores, probably stemming from the high number of systems needed for the job to be done. A high number of systems may point to high complexity.
Nevertheless, half of the systems (8 out of 16) have a high satisfaction score.
Combining the aforementioned observations, systems owners and their business partners may decide to prioritize on improving System 1 and System 19 which are necessary for all three Customer Service Level-1 capabilities but have a low satisfaction score.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
MARKET
Marketing Strategy
Marketing Planning
Collect Intelligence
Online Product Catalog
CUSTOMER SERVICE
Customer Care/Service Strategy
Customer Service Operations
Evaluate Customer Service Operations
Build Financial Relationships
Manage Financial Resources
Manage Treasury Operations
Investor & Stakeholder Relationships
Manage Assets
Manage Taxes
FINANCE
SYSTEM:
OTHE
R
Weighted SatisfactionCAPABILITIES:
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
3 1 1 1 1 1 1 1 1 1 1 1 1 3 1 1
1 1 1 12.1
2.3
2.0
2.3
2.3
2.4
2.2
1.3
1.3 10%
1
60%
30%
20%
30%
5% 5% 5% 5% 5%
20%
5% 5% 5% 5% 5% 5% 5%5%
5%
10%
10%
20%20%
20%
20%
4
100%
100%
30%
80%
65%
5%
10%
3
4
70%
100%
100%
100%
% Coverage of the Level-1 capability by each system (row total = 100%)High Satisfaction Medium Satisfaction Low Satisfaction Inhibitor %
PROJECT PORTFOLIOMANAGEMENT
The premise behind capabilities-based project management is that projects should aim to improve capabilities. It should be pointed out that projects may be directly related to one or more capabilities. The purpose of aligning projects to capabilities is to make sure that all important capabilities have planned improvements, which will produce competitive advantage. An example of a capabilities vs projects mapping is provided in the exhibit on the next page.
INITIATIVES MAPPED TO BUSINESS CAPABILITIES
1.31 External Relations - continue to drive efficiencies in the processing of annual requests from global regulatory and enforcement agencies
1.32 Discovery Process - demonstrate adherence to records policies, automate collection of data, cull data down outside counsel costs
1.33- Operational Excellence - scale processes and minimize 1. 36 headcount growth:
Manage outside counsel spendCoordinate Board of Directors Meetings in multiple countriesPatient licensing and processingGlobal stock for M&As, support global differences in tax and payroll
1.37 Contract Management - improve compliance with terms of contracts and reduce life-cycle time
1.38 Record Management - policies and tools that enable employees to easily store data while allowing the company to effectively retrieve it
PROJECTS
Data automation, PCI zones, multi-language external portal request system Enhanced reporting, improved portal experience, automate more data sources
Automate Holds & Notices, Hard Drive retention for employee exits Accurately track all collections and retention, index patent data sources
Automate checks for fee arrangementsMove to hosted board member solutionSelf service transactions and document retrieval
Upgrade and standardize all employee facing sitesMigrate Stock Team
Contract Management – eSignatures, contract request form improvements Enterprise Contracts – Clause Mgmt, Integrate with Oracle and Salesforce.com
Policies. Governance, and Email Archiving Enterprise Content Management
Project Portfolio Management | 16© PARIVEDA SOLUTIONS
Sustain continuous improvement by aligning projects to business capabilities
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
One important benefit of this view is realized when the scope of the analysis spans more than one business unit of an organization. In this case, each business unit produces a map like the one shown on the right. The following discussion themes may emerge:
More than one business unit plans to initiate projects to improve the same capability. This may be an opportunity to consolidate projects, thus avoiding duplication of effort.
One business unit plans to initiate a project to improve a capability that had been improved earlier by another. This may be an opportunity to examine whether the improvement may be reused.
One or more business units plan to initiate projects to improve a locally provided capability also provided by a central function to other business units, which are satisfied with the service received. This may be an opportunity for the former business units to receive the needed capability by a central function, rather than developing it locally.
© PARIVEDA SOLUTIONS Project Portfolio Management | 17
CAPABILITY PROJECT PRIORITY YEAR 1 YEAR 2 YEAR 3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Enterprise KnowledgeManagement
OE Backlog
Employee Exits & Mac Support
Automated PatentData Sources
Automated EnterpriseCollections
eBilling
Legal Intranet
Business Intelligence
Stock Plan
eSignatures & OE
Enterprise Contract Life-cycle Mgmt.
Policy, Team, & Training
Email Archiving
ERP Automation H
H
H
H
H
H
H
H
H
H
H
H
H
H
1.32 DISCOVERY PROCESS
1.33- OPERATIONAL 1.35 EXCELLENCE
1.36 STOCK ADMIN
1.37 CONTRACT MGMT.
1.38 RECORD MGMT.
1.13 EXTERNAL RELATIONS
Benchmark estimates Project timeline Deployment timeline Milestones Functional Projects
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATION
BUSINESS UNIT 1
BUSINESS UNIT 2
BUSINESS UNIT 3
STRATEGICINITIATIVES
PEOPLE
Staffing is a ubiquitous issue in organizations, and it is especially prevalent in shared services functions. To address staffing, capabilities are usually deconstructed to a lower level of detail, as Level-0 and Level-1 do not provide enough granularity. For this example, we use a three-level-deep capabilities decomposition. Based on the view on the right, one can easily observe the following:
The Level-1 capability “Manage Products & Services Portfolio” is understaffed as a whole. For the Product Development department, this may result in hiring requests. Another solution could be a discussion with technology on the possibility of the benefits of additional automation that might lessen the hiring needs.
All Level-2 capabilities are also understaffed. The most severely impacted are the capabilities closely linked to the rest of the business, namely “ManageProduct/Service Life-cycle” and “Confirm Alignment of Product/Service Concepts with Business.” This may support the hypothesis that the Product Development department may be developingnew products in a somewhat “autonomous” manner, rather than aligning the product strategywith the business strategy. Perhaps the Product Development department should consider ways to improve its alignment with the business and investigate communication and collaboration tools to achieve this.
People | 18© PARIVEDA SOLUTIONS
VISION & STRATEGY
SOURCE PRODUCEDEVELOP
PRODUCTS& SERVICES
SELL MARKETREGULATORY/COMPLIANCE/
RISK
ENABLINGCAPABILITIES
DISTRIBUTE & DELIVER
CUSTOMER SERVICE
FINANCE
Core value chain capabilities Support value chain capabilities
Design Products & Services Develop Products & Services Manage Product & Services Portfolio R&D
Evaluate Performance of Existing Products / Services Against Market
Define Product/ Service Development
Perform Discovery Research Confirm Alignment of Product / Service Concepts with Business
Manage Product / Service Life-cycle
Basic Competent Expert
Basic Competent Expert Basic Competent Expert Basic Competent Expert Basic Competent Expert Basic Competent Expert
Needed AvailableInternal
AvailableExternal
15
8
2
3
2
.5
3
1.5
3
1
3
2
.5
3
2
.5
8
3
22 1
.511
2
1
1
11
1
2
.51
3
Focus a lens on the future of your staffing needs
LEVEL 0
LEVEL 1
LEVEL 2
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
People | 19
In addition to sizing (i.e., the number of people necessary to perform a job), staffing has two additional dimensions:
Quality of available and needed skills: This is indicated in the view on the previous page by the designations “basic”, “competent” and “expert”. These do not necessarily correspond to hierarchical levels. Although within a single capability, a person demonstrating expertise would probably be more senior than a colleague who demonstrates basic-level of competence, this is not necessarily true when planning across capabilities.
Timing: The chart on the previous page should be prepared both for the present and future, based on business strategy. When planning is done well, business strategy changes the total height of the bar (i.e., skills needed) and the business unit can plan for the solid-filled bars (i.e., skills available) to match business strategy needs. Poor planning results in the business unit suddenly discovering that the skills needed must change, and may not have time to react within a given time horizon. Business strategy may also dictate a completely new set of capabilities that need to be built, which need to be staffed by an affected department.
© PARIVEDA SOLUTIONS
COMP. ADVANTAGE/DIFFERENTIATION
BUDGET/INVESTMENTPLANNING
COST SAVINGS/CONSOLIDATION
RISKSYSTEMS VS. CAPABILITIES
PROJECT PORTFOLIOMANAGEMENT
PEOPLEFOUNDATIONSTRATEGICINITIATIVES
Conclusion | 20
CONCLUSION
At Pariveda Solutions we have used the Business Capabilities framework extensively, across business units and functions. We believe it is a flexible framework that can add significant value in a variety of client situations.
While there are many approaches to Business Capabilities, it seems that a high degree of complexity has been added by organizations and consultants alike, who tend to prefer detail to value, or believe that value is directly proportional to detail. Although maximum detail may be beneficial in theory, we would like to remind the reader of the law of diminishing returns: after a certain degree of analysis, a significant incremental effort will provide only marginal–if any–improvements in terms of thinking and decision making.
At Pariveda Solutions, we believe that a framework’s true value comes from, among other factors, its flexibility. In client engagements, our focus is on creating value, without requiring a major undertaking on the side of the client in terms of cost and effort. In doing this, the client is able to make decisions fast, holistically, and efficiently, while keeping the option open to build greater detail into the framework if and when needed.
© PARIVEDA SOLUTIONS
Ms. Susan Paul works with senior executives to collaboratively develop technology organization strategy, governance and process solutions that can be acted on quickly and pragmatically. With more than 20 years of experience in IT strategy and operational management, she brings a unique mix of skills building and managing organizations and developing successful business partnerships. Spanning multiple organizations, she has successfully built national alliance relationships that produced significant revenue and increased shareholder value upon acquisition. Bringing together her wealth of skills in relationship management and operational experience, she has authored the Fusion framework for aligning technology goals across multiple business functions within an organization. Fusion, a combination of survey assessments and workshops, has been successfully implemented in numerous Fortune 500 organizations enabling better business value from technology investments.
Contact | 21
CONTACT
Mr. Dimitrios Vilaetis has over 15 years of experience in Corporate Strategy and IT Strategy, both in Management Consulting and in industry. He focuses on creating/unlocking corporate value stemming from either the revenue or the cost side of business. As a Management Consultant, in addition to Corporate and IT Strategy, Dimitrios has worked on organizational, process, and change management projects. As an executive in both banking and technology companies, he led cross-functional teams to convert strategy into execution and results. Revenue-driving examples include the identification, quantification, and realization of growth opportunities for new products/services, new geographies, and new sectors/customers. Cost-containment examples include the design and execution of several efficiency-related initiatives combining people, processes, and technology.
Susan Paul VICE PRESIDENT
Dimitrios VilaetisVICE PRESIDENT
This White paper was developed by Pariveda Solutions’ Strategy Practice. For further information, please contact:
EMAIL: [email protected]
© PARIVEDA SOLUTIONS