Thursday, July 14, 2016

"Digital Master" Book Tuning #134 Three Insight of Dynamic Digital Capability

The business capability coherence is the decisive factor for the success of strategy implementation.

The corporate capability is the collective ability to implement strategy, innovation and make changes. It is underpinned by business processes, integrated by IT and enabled by talented employees. A business capability is an acquired and organized "ability" within a company and takes hard work to put in place; it can therefore not be transferred because of the degree of organizational learning. At the dawn of the digital era with hyperconnectivity and fierce competitions, organizations have to build a set of differentiated capabilities which will directly decide the overall organization’s competency. And business competency is a set of organizational capabilities with a focus. In order to gain insight and enhance your organizational digital capabilities, the IT and business leaders must ask: What are the characteristics of digital capabilities? What things are in place that will inhibit or endanger the capability building? Are the right skills in place? Are costs in line with the long-term path and short term goals?

Digital capability coherence: Digital strategy execution is a dynamic continuum. How effective the strategy execution is directly dependent on how coherence of business capabilities is.The organization’s competency is based on the set of differentiated and cohesive capabilities and how fast and effective they can be built upon. Organization’s capabilities can be categorized into both competitive necessity and competitive uniqueness.The company need to take the following steps to truly understand its capabilities and build blocks, and continually refine them for improving its agility and maturity. (a) first, identify its core capabilities, and hone them into organization-wide competency. (b) Compare itself with competitors to ensure that it is developing differentiated capabilities to gain unique competency. © Have an in-depth understanding of what capabilities are important to achieve customer-centricity (customers truly value them), etc. (d) Create an organizational strategy-capability mapping and make a roadmap that sets goals for competence building. (e) Encourage communication and involvement in core capability development across the organization. (f) Divest non-core capabilities to free up resources that can be used to deepen core capabilities.

Digital Capability Integration: Digital capability is dynamic, and the dynamic capabilities' are defined as the firm's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. The core business capabilities are often built via cross-functional process management and talent management, and applying IT as “superglue.” There are some of the issues where must be aware of integration of a single functional capability into a holistic portfolio of digital capabilities across all enterprises, arising from cross-silo or cross-divisional collaboration is crucial to making seamless integration and building dynamic digital capabilities in order to adapt to changes with increasing speed and overwhelming digital disruptions.

Digital capability maturity: Every organization has some capabilities, the capability maturity will decide which companies are digital leaders, and which one are digital laggards. Which attributes should be measured to assess digital capability maturity? Since a capability is made up of people, processes, and technology, you can use overall process maturity as one part. To improving digital maturity, the processes have to be fine-tuned to adapt to change and capabilities need to be optimized to achieve efficiency. Nevertheless, the digital capability is not just about “doing more with less,” but about “doing more with innovation,” with continuous renewal for digital transformation. With a maturity attribute like "adoption,", “agility,” “flexibility,” "value," ”measurability,” you can assess the percentage of business units engaging the capability on a year by year basis. As it increases, the maturity rises. One way to measure "value" is by assessing the capability's effectiveness in achieving the desired outcome. This can be accomplished by measuring (a) the technology impact on capability effectiveness. and (b) the process impact on capability effectiveness (# of orders delivered, order cycle time), etc. In other words, capability maturity can be measured against achievement of desired business or customer outcomes. The maturity of a business capability would be based on the ability to deliver on customer needs or to achieve the desired capability outcome. Other criteria may include the importance of each capability to the enterprise; different weighting may be applied to the capabilities.

The business capability coherence is the decisive factor for the success of strategy implementation. The right set of unique Dynamic Capabilities directly decides the overall organization’s competency, and how well they can make the digital transformation, deliver the value to the customers and build the long term winning position.

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