Business Capability Model Explained with Examples

Editorial Team

Business Capability Model Explained with Examples

Businesses may see how they achieve their objectives using business capability modeling. A crucial understanding for IT managers is business capability modeling. Business needs must shape your IT infrastructure. Processes, needs, and goals alter due to organizational change, innovation, and preparation for digital transformation. It is essential to re-evaluate the underlying technology after extensive and complicated changes.

One of the significant issues in planning service operations is connecting the planning to the organization’s strategy and business model and ensuring that it is strategically aligned. Applying the “resource-based perspective of the company (RBV)” and a related strategy termed “business competency modeling” is one attractive way to accomplish this.

The basic premise is that organizations must be able to do specific things to execute their business model and strategy. To do this, they need a set of “business capabilities” created by having access to various tangible and intangible “resources,” including people, places, processes, technologies, and people.
Business skills are concerned with “what,” not “how.” They do not focus on how to do things or how to do them but rather on their capacity.

These skills are “conventional competencies” required to manage the business. Others, either separately or together, help an organization achieve organizational performance, which is essential to its success. “Core Competency” (also known as “Core Strengths” or “Strategic Capabilities”) is used.

Business capabilities are used to build the operating model by determining the resources required to accomplish each feature. The strategic architecture uses business capabilities to develop business competencies and core abilities.

Essential Features Of A Business Capability

Business capabilities have certain essential features:

Stability: The company’s needs for business capabilities are constant and won’t alter unless the business model undergoes a significant change. This is because a business must be capable of doing specific tasks as frequently as they change. For instance, checking in for a flight could only be done in person. You can now register online or at a self-service kiosk in the airport. Although it is still possible to check in for a flight, the process has changed dramatically.

Uniqueness: Businesses have specific and clearly defined skills. It does not repeat in the model or combine with another feature. One feature in the model might only mention “Case Management” once, but it is probably a property of several other features. But because these features established a dependency relationship on the model, they are only called once and linked to other properties.

Decomposition: Lower-level capabilities are separated into business capabilities; these detail the more specific characteristics necessary for the higher-level skill. For instance, “customer management” is highly abstract, and people will have different interpretations. High-level concepts must break it down into lower-tier characteristics that demonstrate the essential capabilities to eliminate this.

Building Your Business Capability Model:

A business capability model requires both science and art to build. Since it is neither a start-up nor a small company, its development requires a gradual and iterative strategy based on corporate priorities.

Identifying current capabilities is the initial stage in the case of an existing organization. It’s easier to develop a basic structure and develop it from the bottom up by speaking with the organization about the skills they need in a specific area. This is sometimes treated as a top-down activity.

If a new business model is created, business capabilities should be outlined as part of the business model and strategy. If you use business model design, switch the business model view to “Key Functions” and “Key Resources” to emphasize the crucial components of the company on which the business model depends.

A definition and a name are the two components of a business capability. A precise, unambiguous, and thorough definition is necessary. It must always be expressed as “the capacity to do x.” This takes time; for instance, “brand management” may be a well-known concept, but it may be difficult to define it in the context of your organization.

The business capability entry must be related to the definition. A noun, a compound noun, or a noun should be used, such as “creativity,” “strategic planning,” or “customer management.”

Determine each business’ capacity before building a model of that capability. These should then be grouped to form a logical framework. Then, further, dissect each business capability to find specific features that are distinct, clearly defined, and demanding in and of themselves. Noting that understanding lower-level competencies can help you better grasp higher-level competencies frequently aids in ultimately defining a high-level business capability.

“Normalization” comes after the basic model has been created. By doing this, all redundant business pieces are eliminated from the model. Typically, a business capability model’s initial draft contains a few dispersed examples of the business capability (especially if it was developed from the bottom up). The normalization process entails locating them, grouping them under an individual business capability, and establishing connections within the model. Keep in mind that overlap might happen on several levels and at any tier of the model.

They have included a straightforward, functional example below centered on finance, a dull but crucial business component that every company requires.

The following phase is to determine the organization’s core competencies, or those people or groups of business skills that, currently or in the future, will be essential to the company’s success. The title and definition of the core competency are once again present. As part of the process of strategic planning, this must be done.

The last stage of establishing connections with your operating model is determining the resources connected to each business capability. Below, we go into more depth about this phase.

In reality, it is doubtful that you will create a flawless business capability model the first time. An original high-level version or a version that concentrates on particular business sectors are the versions you are most likely to generate. Remember to keep this in mind when developing the model, mainly if you use it to construct relationships with other design aspects — unless you are up for a lot of rework! You will likely need to report on the framework as you expand it further.

Your business capacity model must include your key partners and the extended organization. Once more, procurement is about “how” rather than “what.” Don’t fall into the trap of believing that simply because you’ve outsourced something, your company strategy no longer requires talent. Honestly, you can have a different perspective while creating a model on what to externalize and what to retain inside.

You should consider this when creating a business competency model if your business model depends on teamwork.

Identification of the resources needed for each business capability—or, more precisely, the connections between the capabilities and the operational model, such as processes, people, location, and IT planning areas—represents the last phase in the construction of the business capability model. Business capabilities have a unique and compelling advantage in the IT sphere, which requires special attention.

Business Capabilities Enabled By Technology

From the perspective of IT design, the business capability model has a vital component since it lends itself well to logical IT design, especially in IT Services Oriented Architecture (SOA). For this purpose, the business capability model—which primarily provides a direct link between business planning and IT—is frequently referred to as the “Rosetta Stone” of organizational design.

The strategy is to break down a business capability into a level that identifies a clearly defined capability offered by a single technological resource, commonly referred to as an “IT capability.” The components are divided into “logical application components” or “logical IT services” and then grouped (in the case of SOA).

By describing IT capabilities, you efficiently specify high-level; IT needs that may be utilized to influence the delivery of simple, reusable IT services directly. Remember that IT features are permanent, just like all other features. The exact IT requirements need only be defined once to avoid the issue that most businesses face. They must define the exact IT requirements across numerous instances, and generations of the same enabled IT.

Putting Business Capability Model Into Practice

The Business Capability Model has a variety of applications beyond just aiding in creating an operating model and purchasing decisions.

Investing Choices: The organization has already created business skills in several areas if the business capability model is established within an existing operation. A business capability model is most frequently used to assess how these current capabilities (the current state) compare to the necessary strategic capabilities (the future situation) and to choose investment priorities. A heat map is created that shows the areas of the business that still require improvement and pinpoints work programs and projects that will build the necessary capabilities and offer new or modified business services.

Management Of The Lifecycle (Or Portfolio) Of IT Assets: For managing the lifecycle of IT assets, including IT services as well as the underlying technologies and infrastructure, the Business Capability Model offers a solid foundation. You may understand better how the lifecycle of these assets affects your business, such as the level of risk if they are approaching the end of their lives and where investors should invest. Suppose you know the relationship between these assets and your business capabilities. Relationship mapping can also be used to spot technology duplication or the availability of multiple solutions for a given business capability. It is also usual to see numerous case administration platforms and solutions used in various regions of the organization if you use a frequently required business capability, such as “Case management.”

Strategic Mindset A business capability model can be used to assess the impact of existing flight operations or new projects that are not directly related to the application of the business capability model, that is, the business capabilities that the project enhances. To make sure the project is aligned correctly, apply this assessment. In the course of such an exercise, it is not unusual to suspend an ongoing project.

Acquisitions And Mergers: When two organizations strategically merge, they can use the Business Capability Model to compare each organization’s business capabilities and how BMC might utilize them within the new, merged organization.

Implementation Of Industry Reference Models

It is easy to believe that all businesses in a particular industry need the same services, such as insurance, financial services, and logistics. Because of this, much effort has been put into developing industry-specific standard BMC reference models.

In good faith, they do not advise using these models. Your BCM must align with your business strategy rather than a less innovative, industry-standard version. It must be stated in ways that represent your character and strategic goals. When it makes sense, such as when you can concentrate on describing your key competencies rather than the more broad capabilities you need, they strongly advise creating an independent definition and utilizing these templates sparingly.

Methods And Techniques Based On Additional “Capability”

In addition to the RBV methodology described here, the word “ability” is employed in other settings and with different methodologies and techniques. A quick word about one of these because it mainly generates misunderstanding in the IT industry.

The terms “competence management” and “competence planning” should not be confused with business capability modeling based on RBV. This has to do with “operational skills,” typically characterized as “things a firm needs to accomplish to execute its business plan.”

Ability refers to the direct physical embodiment of an ability, action, or function because the emphasis in this context is on doing rather than just being able to. The pooling of assets to provide a defense capability is an often-mentioned example; capability planning is heavily utilized in the defense industry.

Although ArchiMate, an EA modeling language belonging to the same source, is much more compatible with the RBV-based approach described here, capacity planning is utilized in the TOGAF Enterprise Architecture framework.

Purchasing choices and introducing “specialization,” such as with the “business modeling component,” are other examples of how competency planning is used.

It is impossible to directly relate a business capability to a function or function in RBV-based business capability modeling. It is not about actually doing something; it is merely about being capable of doing something. An author can write a best-selling book, but that does not mean it will sell well.

It can be challenging for some individuals to comprehend this distinction because it is somewhat abstract, yet it is essential to execute business possibilities in enterprise architectural design successfully. Resource planning has a problem since it is fundamentally functional fragmentation, which leads to the development or strengthening of functional silos and the fragmentation of processes and responsibilities.

Using Business Capability Models With The Togaf Standard

The 10th edition of the TOGAF standard’s key components are business capabilities and functional mapping (see reference documents). We anticipate their introduction soon as part of identifying and building an organization and enterprise architecture team (see TOGAF Standard: Architecture Development Methodology) and outlining current business capabilities and enterprise. A crossbeam for TOGAF standard coordination has been identified as “business capability management,” which identifies which business capabilities are required to produce business value.

Phase A (Architectural Vision) is when the architect determines the organization’s business capabilities to achieve its strategic aims (see TOGAF Standard: Architecture Development Methodology). The Business Capability Map’s needs are then utilized to produce a high-level perspective of the foundation and target designs.

A thorough analysis of any potential business gaps is required for step B (Business Architecture). Heat mapping is performed to find and examine these gaps in this situation. The business’s effectiveness, maturity, productivity, and cost or value of each component are suggested heat map considerations.

Strategic plans, information systems, value streams, and organizational units are used to trace back business capabilities inside the Enterprise Architecture project according to the TOGAF Standard, Architecture Development Method (Implementing Business Capabilities). This relationship mapping provides a better understanding of the aims and management of each sector.


The creation and improvement of a company or enterprise architecture are based on business capabilities. Business context is given for the underlying people, information, resources, and process that collectively provide added value in the form of goods and services for the company’s stakeholders by connecting business capabilities to their underlying components.

Business capability maps give designers and stakeholders a thorough understanding of the business, independent of the organizational structure. The model outlines what the business currently does or anticipates doing in the future. Business managers can better control the full complexity of their organization using this abstraction.

Finally, corporate executives can improve decision-making by mapping business capabilities and observing various perspectives.