Business Capabilities: How to win the digital age with a common language for Business & IT

In the digital age the role of technology shifts from supporting processes of the business strategy to the key factory of strategy execution itself. Information Technology helps that customers receive their shirt ordered online the next day, it helps that they can read their newspaper during their commute on an iPad and that the invoices for these services are processed without friction. As a result, the challenge how to bridge the gap between strategy and execution in IT becomes much more pressing.

This gap is often caused by organizations speaking many languages. They speak of missions, strategies, goals, processes and projects. The CEO speaks of “making mobile first a priority”, Marketing of “increasing the share of wallet with millennials” and IT of “load balancing the Linux server cluster”. Which one is the right language? Business capabilities have the potential to serve as this common language. If properly used they can help save money, decrease risk and enable growth. McKinsey found in as study that redundant IT support of the same capability in organizations bears saving potentials of 15 - 20%. But not only redundancy does cost real money. Capabilities-driven thinking helps executives to understand and mitigate technology risks better.

Business capabilities have the potential to serve as common language between business and IT. Properly defined, they can help to save money, decrease risk and enable growth. Consulting firms have found that the reduction of redundant IT support for capabilities has a savings potential of 15 - 20%. IT risks are estimated to cost companies over $50,000 per incident.

Business capabilities encapsulate what a business is doing right now and what it needs to be doing in order to meet current and future challenges. They make life easier, as they are fairly stable over time, are much more tangible than strategy and have the potential to overcome organizational silos.

Companies can define their business capability model in four steps:
•    understand needs
•    define capabilities
•    assess capabilities
•    create the link to applications.

Best practices show that business capability models of companies with a lean philosophy have around 10 top level capabilities and two levels of depth. The resulting model can be used to support analyses to align IT investments to strategy, to draw technology risk maps and consolidate IT applications.