Wednesday, June 14, 2017

The New Book “Digital Capability” Chapter 2 Introduction: Digital Capability Dots Connection

Hyper-connectivity is the key characteristic of the digital organization.

Due to the fast paced changes and overwhelming growth of information, it makes a very strong case that command-and-control organizations are inherently incapable of handling, processing, and managing the sheer volume of information we are faced with. The crucial digital shift is to build a hyper-connected, high-capable, widely collaborative and smart organization. Digital capabilities directly decide the overall organization’s competency, how well they can make the digital transformation, deliver the value to the customers, and build a long-term winning position. Organization capability building is not an isolated business activity, but an interdependent and multidisciplinary management effort, which goes hand-in-hand with strategy management, process management, information management, change management, people management, and performance management, etc. Therefore, connecting the dots, both across and within organizational boundaries, is the great practice to understand, map, and develop the unique set of business capabilities into the organizational competency.

The alignment of business strategy and capability: The strategy is underpinned by business capabilities. And the capability-based business strategy has much higher success rate. Thus, it is always important to connect the dots between business capabilities and strategy and make a proper mapping to ensure the successful strategy execution. Leveraging capabilities allows you to focus on “what” the business needs and not “how” the business runs. Capabilities are built by people, process, information, and technology, etc. It is also useful to have traditional “5W+1H” questionnaires to navigate: WHO are you as an organization, and your brand; WHAT can you do or accomplish (the capabilities), WHEN should you deliver the products/services/solutions (the timeline setting), HOW to get things done (the know-how processes), WHERE -the organizational structure by which the business processes are organized into manageable elements, and WHY - the customer is willing to buy, etc. The capability management is not just the one time effort, but a continuous journey to keep tuning, optimizing, innovating, recombining, etc, into the differentiated business competency.

Business capability vs process: Generally speaking, a business capability is the ability needed by an organization in order to deliver business result. The process is the realization of a capability. Capability can contain many services, processes, and functionality. Process management is the way you manage the processes to build business capabilities, and achieve operational excellence. Broadly there are two different perspectives/views of business capabilities. (1) Capabilities are processes and competencies viewed strategically. (2) Capabilities are the resources required for a certain mission/purpose. So, capability and process are two viewpoints of an organization. An organization has the capability to deliver outcomes, an organization executes processes to deliver an output. The fundamental difference between capability and process is “What vs. How.” Both capability view and process view are useful in managing digital transformation, which to use depends on the purpose you have in mind: Strategic re-think of “what,” vs. executable knowing “how,” high performance and high mature businesses depend on their differentiated set of dynamic capabilities which are underpinned by well-managed business processes matrix and portfolio within the organization.

IT capability vs. business capability: Business capabilities are a hierarchical decomposition of “what” the enterprise does. While at the age of information, IT is the linchpin to build business capabilities, and all key business processes are enabled and glued by enterprise IT capabilities. Therefore, it is also important to map IT capabilities to business capabilities, and ultimately to the business strategy implementation. Such IT-business capability mapping is trying to assess and define how interconnected the IT organization is to the business and trying to determine the return on investment (ROI) for their technical deliveries that are mapped to business capabilities. Estimate the capability leverage, preferably in dollars, provided or potentially. The approach is to expose all the business capabilities beneath functions and highlight activities and identify overlaps or gaps, then calculate the cost in strategic disciplines, operational management or governance. So, the business capability map gives additional views that are seldom available in processes, etc, the capability components that are common and reusable across the enterprise to keep building dynamic business capabilities, with the goal to improve organizational effectiveness, efficiency, performance, and competency.

Being digital-ready goes beyond applying the latest technologies. It is an overarching approach via building a set of “digital flavored” culture, connecting the wider dots, developing the differentiated set of business capabilities, and taking a series of systematic step-wise practices, with the goal to achieve high-performance business results.


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