Capability Driven Planning

Tom is the Vice President of technology of a large Financial Services company. It’s the planning season, and he was in his office pondering on emerging technologies and how to make technology architecture more flexible and agile. He was in deep thought, and suddenly his phone rang, and Jane, a seasoned Vice President of technology for a different business unit, was on the phone on the other end. Jane said, “Tom, these emerging technologies, regulations, and empowered consumers are constantly reshaping market dynamics, and I think we need to talk about how to make our entire organization nimble to respond proactively to the changing market condition.” Tom replied, “Jane, great timing. I was thinking the same. However, I am unsure how to proceed as we are running through the big transformation.”

Tom told Jane that last night he went to a technology conference and met one of his colleagues from his alma mater, Ashok, who will help Tom give some pointers about how to make the organization nimble in the digital era. Tom asked Jane if she would like to join their meeting, and Jane was excited to learn and readily accepted the invitation.

Ashok, who was in an adjacent industry that was already disrupted a couple of years ago, now has rich experience in making organizations agile to compete with start-ups and nimble organizations.

The three were at a restaurant that evening. Tom and Jane explained their organization’s traditional planning process and asked Ashok what the best solution was to improve the situation. Ashok said the first thing you need to do is implement capability-driven planning. Both Jane and Tom responded, “what is capability-driven planning, and how will that help us”? Jane added, “we are going through many new changes, and people are busy with competing priorities, and if we ask them to add one more model or tool, that will add burden to already transformation-laden teams.” Ashok said, “Firstly, capability-driven planning is a strategic planning framework; and secondly, contrary to belief, it will not only make your organization strategic, adaptable, and agile, but it will also save you and your team many back-and-forth meetings and redos.”

Ashok said let me first tell you a bit about capability-driven planning. A capability tells you what a business does, not how it does it. A business capability defines the organization’s ability to perform a unique business activity successfully. Capabilities:

• are the building blocks of the business
• represent stable business functions
• are unique and independent from each other
• are abstracted from the organizational model
• capture the business interest

For example, an insurance company has many different capabilities, such as

• Customer Service,
• Distribution,
• Claims Processing,
• Underwriting,
• Billing, etc.

These are your top-level (Level 1) capabilities, and now, the fun part begins. You start breaking down each capability to the next level. Capabilities can be decomposed, typically from levels 1–3 for planning purposes and levels 4–6 for detailed business-technology mapping. Tom and Jane listened as they all started taking bites of their delicious wood-oven pizza.

Ashok continues — Let me explain this by an example. For example, in the insurance industry, “Claim Processing” would be a Level 1 capability and could be broken down into

• Claim Validation,
• Research,
• Approval, and
• Payment.

And, at Level 3, Claim Validation might be broken down into

• Account Validation,
• Claimant Validation, and
• Coverage Validation.

Once you have created a capability model for your business, the respective business unit(s) will own that model. As the organization grows, it adds new capabilities to respond to the changing market situation. And your capability model has to be updated accordingly; therefore, it’s dynamic, not a one-time thing. Similar to business capability, you should create a technology capability model. Once you have completed your business and technology capability model, you are ready to map them for your planning process. And before Ashok could say anything, Jane asked, “what is a capability map?” Ashok replied, “a business capability map is a model that connects the business capabilities, processes, and services needed for success, with the IT resources that support them.”

Jane said, “I think one of our unit’s technology directors has already done the same thing, and that didn’t help us a lot.” Ashok said, “that’s your first problem — capability-driven planning is a top-down process, and it starts with the company’s leadership. To successfully implement it, you need visible leadership support.

Let me summarize this all with an example. Let’s say your organization wants to increase its revenue by 10% by improving customer experience and reducing claim processing time. This aspirational goal is not concrete enough for business and technology leaders to be broken down into informed decisions. But since you have robust capability-driven planning in place, you can identify the business capabilities impacted by this goal and then map it with the technology assets and data that support it. So, now your planning is more strategic, making your organization agile, and since you already know what technology capabilities will be impacted, you will prioritize your initiatives and reallocate scarce resources to strategic projects.

Ashok told them, “this whole capability planning is easier than you think.” Both Tom and Jane were excited that they could rely on a simple planning framework that Ashok explained to them, and they could implement it in the current planning cycle. All three agreed to meet one more time soon to share their experience and progress.

Earlier published on the WordPress platform “From the desk of Ashok Bhatt” (https://bhattashok.wordpress.com/) on September 16, 2008.