Hello, I'm Master Tang~
Today we talk about analyzing business capabilities for SaaS business architecture.
Overview of operational capabilities
Simply put, business capability is the "ability to do something".
Business capabilities describe the ability of an organization to meet current and future challenges, i.e., what the organization can do or needs to do. The key to business capability modeling is that it defines what the enterprise does, not how it does it (described by business processes).
Take Talent Acquisition for example, most companies need the business capability of "Recruiting Talent". Recruiting Talent" defines what is to be done, but does not detail how it is to be executed. This could be recruiting HR attracting candidates through job boards or outsourcing the task to headhunters.
Business capabilities are independent of an organization's people, processes, information, and resources. To be precise, these business elements exist to support the business capability. Similarly, in the case of "recruiting talent", for example, the business elements included in "recruiting talent" may be:
- People: Human resources team.
- Business process: attract, screen, interview, hire.
- Information: job descriptions, hiring needs, candidate resumes, interview evaluation forms, and onboarding documents.
- Resources: Recruitment system, personnel system.
Precisely defined business competencies are usually highly stable. The core business competency of "recruiting talent" has remained constant over the past few decades, despite radical changes in recruiting processes, technologies and models.
It is due to these characteristics of business capabilities that it provides crucial assistance in building IT system architecture. IT systems built around business capabilities not only have a more stable structure, they are also easier to scale.
When a new product or service needs to be launched, rational reuse of existing capabilities is the most efficient solution.
Difference between business processes and business capabilities
- Business Capabilities: Focuses on the capabilities and results of an organization's core business and does not involve specific process breakdowns.
- Business Process: Focusing on the process itself, oriented to specific scenarios and solving specific problems through a combination of activities, it is the key action in the daily operation of the enterprise.
| operational capacity | business process | |
|---|---|---|
| focus | What to do | How |
| Business objectives | Functional specialization | Smooth collaboration |
| form of expression | Abstract, modular | Specific, end-to-end |
| common interest | Support for processes | Demand for capacity |
Different parts of a business process need to be supported by corresponding business capabilities, which can be reused by multiple business processes. The more times a business capability is reused, the more the enterprise gains in business capability building.
As shown in the figure, in the business process of order processing, the link of receiving orders, dispatching orders, and sending them to stores relies on the order fulfillment management capability, and the link of pre-possessed inventory relies on the central inventory management capability.
How are business capabilities identified?
Enterprises can use a variety of methods to effectively identify business capabilities. Each method has its own characteristics, and enterprises should choose flexibly according to their actual situation and needs. Below we will introduce several common and effective identification methods.
1. Identification around business objects.
This method is the most basic and recommended way of combing in business capability identification. Business objects, as the basic elements of business operations, not only effectively help organizations identify key business capabilities, but also ensure that these capabilities are comprehensive and systematic.
For example, through in-depth analysis of "customers", "goods", "inventory", "channels" and other core business objects, enterprises can accordingly identify "customer service", "merchandising management", "inventory management", "channel operations" and other key business capabilities.
2. Identify business capabilities based on functional processes
For companies that have already established a good process foundation, analyzing the business processes of each function allows them to quickly identify the corresponding business competencies. This ensures that the business competencies are closely linked to the actual operations of the organization and helps to identify key competencies that may have been overlooked.
3. Reference to industry maturity model
Industry maturity models can be an important reference and starting point for organizations to identify and define their business capabilities. However, these models need to be adapted and customized to the specific situation of the enterprise.
- APQC (American Productivity and Quality Center) Process Classification Framework: provides standardized business process and competency classification across industries.
- IBM Industry Models: Provides detailed business capability models for specific industries, covering a wide range of areas such as banking, insurance, and telecommunications.
- SAP Retail Business Capability Framework: A business capability framework specifically for the retail industry, covering everything from purchasing to sales.
4、Refer to the mature B-side software to identify the
Mature B-side software can be an important source of reference when identifying business capabilities. These software are usually developed based on industry best practices and broad market needs, and therefore reflect the business capabilities that are commonly needed in a given domain.
For example, ERP systems usually contain modules for financial management, supply chain management, human resource management, etc., which can directly correspond to the relevant business capabilities.
Similarly, the sales management, customer service, and marketing functions of a CRM (Customer Relationship Management) system can help organizations identify key business capabilities in these areas.
By analyzing the functional modules and features of these software, companies can gain a comprehensive understanding of industry standards and best practices, so they can more accurately define and refine their own business capability systems.
Example: Business capabilities of a retailer
As shown in the figure, we demonstrate in detail the business capability system of a typical retail enterprise, covering both L1 and L2 tiers. This hierarchical division helps us to understand the overall capability structure of the enterprise more clearly.
Core operational capabilities are directly oriented to end customers, including procurement management, supply chain management and merchandising management. These capabilities have a direct impact on market performance and customer satisfaction, and are the core expression of an enterprise's competitiveness.
The second is the enterprise operation support capability. Although this part of the ability is not directly customer-oriented, but provides important support for the daily operation of the enterprise. This includes financial management, IT deployment and management, and employee management. These capabilities ensure the efficiency and stability of an organization's internal operations.
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