Monday, August 24, 2020

Various Aspects of Business Capability Development

Organizations should enforce various management disciplines, deliberately make the close alignment among the company’s strategic direction, its most distinctive capabilities, to achieve strategic goals in a step-wise manner.

Today’s business environment has a high degree of unpredictability and uncertainty, digital organizations have to adapt to the continuous changes, they should be reconfigured in a way to increase variety, and build a set of dynamic business capabilities systematically. 

It is important to look at dynamic capability from a quite different perspective, apply a capability map to identify critical patterns, business components, and the following management disciplines for making holistic investment decisions, expediting the capability delivery cycle, and building differentiated company advantage smoothly.

Resource allocation and level of balance in capability management: Organizational capabilities continue being considered the market-relevant bundles of resources with the potential to drive business competitiveness. In practice, resource management is an important aspect to develop business capabilities. Oftentimes, the enterprise capability design and configuration is uniquely challenging because of resource limitations or other business constraints. Resources include technological, financial, reputational, market structure and institutional assets, etc. Business management needs to make an objective assessment of their resource availability and allocation by asking: how many resources will you need and to what extent are these resources available to build desired capabilities, seek to determine whether the deficiency derives from any particular dimension - different resource types, etc. At the program level, executives are sufficiently aware of the "general condition" of the various capabilities to input into a qualitative assessment, allocating resources effectively, and making the level of balance in fine-tuning capability portfolio.

To improve business agility and shorten development cycles, companies focus on shaping dynamic capabilities as the strategic business routines by which firms achieve new resource configurations as markets emerge, collide, split, or evolve, etc. With ever-evolving business dynamics, when you want to make a change to one of those capabilities or build a new capability to execute strategy, then your model/map assists with a high-level impact assessment and delivery approach. Resource management is an important discipline in capability development. The capability is a firm-specific asset that is difficult if not impossible to imitate for achieving a certain mission/purpose. Often, capability cannot be transferred because of the degree of organizational learning, unique culture ingredients, or management expertise that the organization goes with.

Processes Management as a “constructor” to build capability portfolio: Processes underpin capabilities. Capabilities are processes and competencies viewed strategically. Any business practice today is always a combination of people, process, and technology to develop business capabilities. One capability may be implemented by multiple business processes for multiple products and services. High performing businesses depend on their differentiated sets of dynamic capabilities which are underpinned by the well-managed business processes matrix within the organization.

From a business process management perspective, the fundamental difference between capability and process is "What vs. How." Adding inputs and outputs to a capability (a“what”) turns it into a process (“how”) In a nutshell, Process Design is described as the larger activity of leveraging design thinking to create new processes or improving on existing ones for developing LEGO-like digital capabilities. The simplified, end to end processes that enable speed of execution and enable the organization to act in a coherent manner.

Governance is needed to manage risks in capability development: There are gaps existing in capability development because there are no mechanisms to handle risks or uncertain situations, the unrealistic designs that could not be implemented in the organizational system. Thus, for every corporation which should work and be efficient, you need strong GRC disciplines that help executives and management perform a risk analysis, harness connectivity (communication, coordination, and control), raise visibility and awareness for many things that are captured at the different levels of the organization.

Governance is steering. The higher the complexity of the organization and the complexity of the environment in which it operates, the higher the requirement for GRC disciplines to shape differentiated capability, meet performance baselines, and generate value. However, in many organizations, much of GRC is reactive in the sense that there is a lot of rushing around trying to fix problems instead of preventing risks. It’s important to instill GRC discipline in organizational culture, embed the GRC mechanism in the key business processes, and enforce GRC practices at daily business activities. Focus on proactive planning and process optimization for collaboration, accountability, and integration in order to improve the success rate of developing differentiated business competency.

There are many "ingredients" in business capability development such as people, processes, technology, and other intangible and tangible resources, etc. Organizations should enforce various management disciplines, deliberately make the close alignment among the company’s strategic direction, its most distinctive capabilities, to achieve strategic goals in a stepwise manner.