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Business Capability Based Planning

Mark Bodman
ServiceNow Employee
ServiceNow Employee

Background:

Capability based planning has been around since the early 2000's as a mechanism to better understand how to map strategic business planning to investment.   The notion of capabilities is much more stable than organizational structures, processes, or other constructs.  They work well to articulate what's is done and what's needed to achieve outcomes.

 The most important thing to know about Capabilities is that they define "what" the company does, not "how" work is done or by whom.   This is a very important distinction because how capabilities are implemented through people, processes, and technologies changes all the time.  Processes change, technologies evolve, and people come and go making it impossible to rely other approaches to plan strategically. 

In some cases, capabilities may be entirely outsourced when they aren't differentiating, but it's still important to measure and plan improvements to satisfy the organizational goals.

There is a lot of information on the market on how to implement a Capability based planning process, from analyst firms such as Gartner, Forrester, and Bain.  These process have been captured in current standards such as DODAF, TOGAF, and Archimate for example.   Capability based planning and related practices of Value Stream Mapping for example, are all powerful mechanisms to reign in the chaos of planning into better structured, top-down approaches that's well understood and well vetted by the executives within an organization.

The most succinct explanation I have seen on why Business Capabilities is so profoundly useful can be fond in the first 20 seconds of this video: https://www.youtube.com/watch?v=YN0bhNDCX-s

In support of evolving ServiceNow into the Enterprise markets, we added a Business Capabilities as CI type, allowing IT and Business organizations to better understand how Business Capabilities are supported by both Applications and Services.  They also help shape investments in the demand process, and have a more intuitive use to demonstrate business impacts for operations teams.   As Business Capabilities and Product Lines becomes more dependent on IT, so do the processes that span both IT and the Business.  Visibility and accountability for technology investments and business outcomes expected is critical.

The Capability Map:

In addition to the established Business Capability structure for planning purposes comes the notion of a Capability Map to provide a consistent view.   This approach defines for the organization one shared easy to read, one pager view of capabilities, a durable view that is typically leveraged across the organization to better understand a many facets of the organization.   In most cases, a capability map is used to plan investments based on multiple dimensions such as such as people, process and technology needs.   I like to think about the Capability Map as being very similar to a map of the earth, showing land mass, seas, and country borders.   Like a Capability Maps, the outlines of the earth don't change much over time, and we often see them used to overlay metrics such as GDP, birth rates, quality of life, average salaries, and economic growth for example.   Capability maps have similar use, being able to show strategic gaps in the people, processes, and technologies required for a capability.  We often see Capabilities used to highlight impacts of risk, associate costs, and many other other key concerns.  Using this durable and well recognized business context help to understand the business context when making many IT decisions.

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Example Capability Map with gap scores and current IT investments and spend.

 

Getting Started

Before you try to create your capabilities from scratch, you may already have a capability model being used within your organization.   Check with your business partners, BRM's, office of the CIO or other business savvy folks in IT who have gone through this exercise.   Sometimes the IT service catalog or Business Service structure may be indicative of a capability model.

In one situation recently, we found a an organization who had created a model to communicate the IT services provided to the organization. There were aspects missing when leveraging this structure for business capabilities, but by leveraging an already familiar structure the team forged ahead very quickly. 

Get started using APQC's PCF:

If you don't know how to define your capabilities, a common starting place is to leverage existing structures such as the Process Classification Framework (PCF) from APQC, which has a number of industry specific structures that will provide plenty of ready-made content that you just need to tweak.   One of the provided industry verticals should come close to your particular market or business situation. Just start off using the cross-industry PCF version and modify as you see fit.   Chances are one of the existing PCF structures will get you 80% along the way in defining your own capability model.

Below are all links to the industry specific PCFs currently provided by APQC as of August 2017.   These are all free   to use within your organization per attribution at the bottom.   Please check for updates on the APQC website as they do change periodically:   Industry-Specific Process Classification Frameworks ®

* You will need to register to download the framework.

* We recommend downloading both the PDF and the Spreadsheet so that you can load them into your ServiceNow instance. 

 

Industry Specific Capability Models:

There are a number of standardized capability models that have been created that may apply, or may more specific to your industry.

 Capability Planning use for IT planning:

The capability model and planning is most often leveraged in strategic business planning, however many IT organizations will lead their businesses towards the practice for a few main reasons, here are a few common ones:

  1. The organization does not have an actionable strategic planning process that can be effectively be used for input in strategic IT planning.
  2. IT investments often spans business units, with no easy mechanism to understand how application and technology needs align with similar business objectives.
  3. Being a shared service, IT organizations struggle to effectively arbitrate between organizationally aligned demands when competing for scarce IT resources.
  4. Capabilities provide a much easier discussion point when planning IT investments with regards to understanding which capabilities are core differentiators, vs. those that are necessary, but may not be differentiating and should largely be commodity, or outsourced entirely.

Recognize IT capabilities like any others:

It's important to note that IT capabilities are just as important to recognize as HR, Finance, Manufacturing, Sales and Service capabilities.  Without IT investments in people, process and tools, IT capabilities may be under-funded and inadequate to meet the IT demands for other Business Capabilities.  With an increased focus on IT used within in digital products and services sold to customers, IT capability investments now are more important than ever. 

In the version 7.x APQC models referenced above IT capabilities are section 8.  There are few differences between IT described in each industry verticals as the IT function in most is largely the same.

An alternative approach to addressing IT capabilities would be by incorporating IT4IT, COBIT, or ITIL.  While there is no single definitive source for IT capabilities, these referenced frameworks are often used to create a unique Business Capability hierarchy based on those frameworks your IT organization follows.

The Danger of Differentiating IT vs. Business Capabilities:

Some IT organizations differentiate IT vs. Business Capabilities to amplify unique needs of IT planning, however in doing so they create a greater separation between IT and Business.  Most now agree that IT and Business is converging into what's known as a "Digital Business" these days, where technology underpins the entire business model.  You should take steps not to increase the IT and Business divide, and instead work towards collapsing your planing activities to focus on how IT will underpin any and all capabilities, to include IT itself.  IT should focus on enhancing their capabilities that deliver on services to "Digitalize" the business.  Reviewing the recommended Capabilities structure from APQCs PCF above, you will note that IT capabilities sit side-by-side with other key capabilities within a business (item 7.0), and aren't fundamentally different.

Conclusion:

As organizations become digital, and the ServiceNow platform expands outside the classic IT domain, our platform is becoming a critical component in delivering many business services, not just IT.   IT needs to be understood in context of every every business decision, and every IT decision needs to take into account business context.   Historically, IT and Business investments   been planned   separately, however as we see the automation of every facet in most businesses, we require more seamless planning processes.   We chose to leverage Capability Based Planning as our first big step in facilitating a comprehensive IT and Business planning processes for our customers.   We hope that you can leverage our products for planning both business and IT service investments in the near future.   We are looking forward to working with you to help us evolve our planning solutions to ensure you meet your strategic business objectives.

 UPDATE for the Kingston release

In our Kinston release of APM,   Capability based Planning gets a big boost.   Here is a quick list of changes you can expect:

  • We now support a capability hierarchy up to 6 deep using the Parent / Child reference.
  • Kingston's APM demo data now contains a large portion of the Cross-Industry PCF as the default Business Capability hierarchy.
  • A new Business Planning Portal was created as the new "home" for Capability Maps ,and BRM's and other business stakeholders across all of ITBM.
  • Capability Risk scores will provide visibility on what capability is at risk from using outdated technologies.
  • New visualization replaces the Jakarta version, allowing you to navigate the entire hierarchy, search the hierarchy, and related applications and capability scores.
  • Applications directly related to a capability, or indirectly though another level in the hierarchy can be seen.

Kingston release notes with full details can be found here: Application Portfolio Management release notes

UPDATE for the London release

In our London release of Capability Maps, we improved the user experience and scalability quite a bit.  Most notably we now automatically number the capability hierarchy based on the position in the hierarchy.  This makes it much easier to track where you are in the hierarchy as some capability maps can become quite large, and associated Business Application portfolios as well.  Here is a quick list of changes for context:

  • Capability maps are now editable in-place, no need to go to the forms or CMDB interface to change them.
  • Total investments in demands and projects visible per capability in the map.
  • Projects and demands now related to impacted Business Capabilities and Business Applications (details section of Demand and Project).
  • Auto-generated Capability hierarchy ID based on position in the hierarchy.
  • Pagination for large numbers of related business applications

London release notes with full details can be found here: Application Portfolio Management release notes

 


 

This APQC Process Classification Framework ® ("PCF") is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. The PCF is intended to facilitate organizational improvement through process management and benchmarking, regardless of industry, size, or geography. To download the full PCF or industry-specific versions of the PCF, as well as associated measures and benchmarking, please visit www.apqc.org/pcf.

8 REPLIES 8

cmjb
Kilo Explorer

Hi Mark,



Thank you for this interesting explanation.
I am wondering if this capability map is available on ServiceNow?


Because, I find others capabilites map versus Business Services for example...


Thanks very much


Céline


Mark Bodman
ServiceNow Employee
ServiceNow Employee

This particular version isn't available , but we are working on providing a similar visualization in our Kingston release at the end 2017 / beginning of 2018.



There are many different varieties of capability maps out there being used, many are created in PowerPoint or Visio as static pictures.   There is a Designer app modeling tool in our app store that provides a capability map example as well which is quite nice.     My hope is to use the community   to continue this discussion, gather ideas, options, and variants that we can productize over time.



We appreciate any feedback and ideas you may have on this topic as I feel it's a critical part of IT planning that is often overlooked, or not well understood how to apply within IT.



**** UPDATE ****


I have updated the capability map example on this main thread to reflect the version that ships with Kingston.


mikewhalley
ServiceNow Employee
ServiceNow Employee

Mark,



Great article.



Based on my prior experience in capability planning, I was always saw a capability as bringing the individual components of value streams, people, technology and data together to achieve desired business outcomes. An example of a value stream is 'order to cash' or 'concept to production' and operational processes are mapped to the value streams. In your article, I don't see any reference the data component and I'd be interested in your perspective.



Also, I have been through the complex process of defining and naming capabilities. My goal was to define them in a way that easily resonated with senior management to avoid having to explain the context of an operational process or a technical diagram. So with this in mind, the APQC PCF may not be for everyone., since it may contain too much detail for strategic IT/business planning.



Cheers,   Mike.


Thanks for these great point Mike, welcome your input to improve the practice.



The value stream is definitely a key aspect of today's business management and planning acumen.   In my past we have sometimes equated a capability to a value stream, or sequenced the capabilities to define a value stream.   I would like to incorporate value-streams into our product in a future release, pivoting off the work that Karen Martin and Mike Osterling wrote about here: http://a.co/eAGKGx2 .   Their approach is very powerful, capturing the value and outcomes I experienced in my own first hand experiences within IT back in 2006.



IT4IT, SAFe and other frameworks also recognise value streams as a critical aspect to measure and improve business outcomes.   I'm am the chair for the IT4IT adoption workgroup for the standard, I find the 4 IT values streams are the most compelling aspect of the standard.   I prefer to start every IT discussion using these standard IT value streams, it sets the context very well.   My recent webinar hits on this topic, you can watch the recording here: How ServiceNow ITBM Supports IT Value Process Best Practices as Defined by IT4IT | ServiceNow



Correct that PCF is not for everyone and it should be a consideration only if you don't have something else to work with.   The PCF is a good starting point for folks who don't know where to start.   I have found many customers staring at the wall blankly without a clue where to start.   My first exposure was an exercise where we hired 2 very large consulting firms and spent many millions to create ours own unique version, which was powerful but not all that unique in the end.   In fact, it looked a lot like the manufacturing vertical PCF referenced above.   The PCF is a seed to start with, but should not be taken verbatim as I have seen as well, which usually doesn't work.