Mark McDonald

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Mark P. McDonald
GVP EXP
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

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Capability is more powerful than process

by Mark P. McDonald  |  July 2, 2009  |  13 Comments

Mention the word capability and people ask you to define it.  Define it and people ask you to tell them how it is different from a process.  When you mention that many capabilities are named after processes they say “aha” so there is no difference.  But, they miss the boat.   So here goes.

A process is defined in Wikipedia as: (http://en.wikipedia.org/wiki/Business_process )

  • Beginning with a customer’s need and ends with a customer’s need fulfillment, designed to add value for the customer and should not include unnecessary activities,
  • Used as a tool to break down the barriers of structural departments and try to avoid functional silos, decomposed into several sub-processes, which have their own attributes, but also contribute to achieving the goal of the super-process, typically analyzed by the mapping of processes and sub-processes down to activity level.

The outcome of a well-designed business process is increased effectiveness (value for the customer) and increased efficiency (less costs for the company).

There is no Wikipedia definition for business capability.   However, they do define capability in general as the ability to perform actions. 

The ability to perform actions requires more than knowing process steps and actions, particularly in business.  Performing actions requires thinking about different ‘resource sets’ an enterprise uses to perform the actions needed to achieve its strategy.  The term resource sets sounds academic, but it’s essential in power behind the notion of a capability vs. process thinking.

A capability is the resources an enterprise uses to create outcomes.

Business process is one of those resources, but not the only one.  Given that both processes and capabilities focus on outcomes, they may be defined in similar language.  The figure below illustrates that while processes are important, even the most important part of a capability, they are still part of it.

A capability view uses processes in conjunction with other resources to achieve the outcome.  This is in contrast to business process practices that tend to focus on making the process work, making process activities more efficient, and eliminating non-value tasks rather than realizing the outcome in the most effective and efficient way.  Information is valued based on how it advances execution of the process; technologies are employed to perform tasks defined in the process.  The assumption in process-based thinking is if I define the activities, control them, the results must follow – it is mathematic.

Process mathematics is well suited to environments where volatility and uncertainty are low.  In these situations, process execution can create value because there results are less likely to be overwhelmed by changes in customer, economic or environment context.  However, once those changes occur, process mathematics is back to the drawing board redesigning and re implementing new processes.

Thinking exclusively about processes creates rigidity leaving the enterprise vulnerable to competitors who think beyond “what has to be done” and toward “what are the different combinations of resources to create the outcome.”

This happened in the music industry.  Where recording companies were perfecting their supply chain processes to meet the requirements for lower prices demanding by mass retailers like Wal-Mart only to be upset by a new configuration of resources known as Napster and eventually iTunes.  The process focus contributed to a limited vision and execution. 

iTunes illustrates capability thinking.  First off, iTunes is build from a collection or resources: the Internet, digital rights management software, the store, the delivery vehicle (iPod) and a set of relationships with artists and record companies.  Sure there is a process in there, but the process of how you sell digital media is not the focus, the outcome is the focus that lead to assembling a range of resources – most of which Apple did not own or exclusively control.

Process advocates and devotees will say that I am mincing my words, but look at the relative value of the physical supply chain the music industry invested so much in and the business value flowing through the alternative capability.  There is an advantage in thinking broader and beyond processes.

The good news is that process thinking is an integral part of thinking about capabilities.  It is just that capability thinking opens the door to new combinations required to create outcomes, rather than to support process steps.

So in my opinion a capability is more powerful than a process because a capability contains more than just processes and applying a capability way of thinking opens the door to creator innovation and performance enhancement opportunities.

Future blog entries will discuss how capability thinking helps enterprise achieve new combinations of performance, flexibility, integration and consistency that create core opportunities rather than core rigidities.
The purpose of this blog entry was to start the conversation and introduce the topic of business capability.  Let the discussion begin.

13 Comments »

Category: Innovation Leadership Strategy Tools     Tags: , , ,

13 responses so far ↓

  • 1 Vijay Narayanan   July 4, 2009 at 3:29 pm

    Mark – i agree with your statement that “a capability is more powerful than a process because a capability contains more than just processes and applying a capability way of thinking opens the door to creator innovation and performance enhancement opportunities.”

    I think there are ample opportunities for composite capabilities as well as capabilities that can be varied based on service level agreements, sales/distribution channel, or based on agreements with value-added partners.

    In my view recognizing capabilities – from a business sense – and tying them to your enterprise’s technical state is a starting point for exploiting the full potential of capabilities. Service-orientation is a way to model, realize, and enhance these business capabilities using a combination of in-house and rightsourced technology assets.
    I am looking forward to follow up posts on this interesting thread!

  • 2 Tom Graves   July 5, 2009 at 7:56 am

    Mark – I’ll pick up on Vijay’s point about service-orientation and extend the theme a slightly different way.

    In my architecture work (see, for example, PDF of an extended-Zachman at http://http://tetradianbooks.com/2008/12/silos-frame-ref/ ), I draw explicit distinctions between function, capability, service and process:

    – function: a point at which assets/resources may be accessed and optionally changed (i.e. function in the mathematical sense, as a=func(x,y) )
    – capability: an ability to act on and, optionally, change something (i.e. closely aligned with competence, skill, etc), often clustered into defined ‘roles’
    – service: a point at which a function and a capability are brought together
    – process: a choreographed path through a sequence of services, creating a sequence of changes to a set of assets/resources, usually intended to add value

    A function is closely aligned with a service, but cannot do anything without a matching capability; interchanging capabilities for functions provides alternate implementations of functions (eg. manual vs machine-based vs IT-based sub-process). In this context, a capability on its own literally has no function, but is a key determinant in the organisation’s ability to deliver value.

    Service-orientation allows us to identify items within interfaces, SLAs, performance-metrics etc which should be common for the ‘function’ part of the service (i.e. common to all capabilities) and the specific parameter-values that would be appropriate for different implementations (i.e. via different capabilities).

  • 3 Mark McDonald   July 7, 2009 at 1:22 pm

    Vijay

    Thanks for your comments and there is a connection between the idea of capability and service oriented approaches. I can see where there is a connection between the idea of service level and composite capabilities.

    I can see value in having a capability be able to adjust its performance level, but I think the idea of composite capabilites (nested according to service level) is an unecessary complication as it would call for basically replicating resources to have them perform at different levels. I think that this is what you are getting at from your post. If I am wrong then please let me know.

    One of the other things that I may be reading into your comments is that there is distinction between a company’s capability model and its technical state.

    If that means that there is an enterprise technical model that sits alongside the business capability model, then I disagree quite strongly as having separate models enables the enterprise to justify and build complexity into their operations. One of the points about a capability is that it can be thought of whole and all inclusive as a unit in the enterprise to the extent that you could define a capability, then outsource it and not disturb the other capabilities in the enterprise. Having parallel models for the business and technology will not enable this to happen.

    Happy to continue the discussion. Thanks Mark

  • 4 Mark McDonald   July 7, 2009 at 1:37 pm

    Tom

    Thanks for your comments, I am on vacation this week so I have been a little late in reading comments and posting responses. Its great to get off the grid for a few days.

    Thanks for pointing me at your extensions to Zachman, I tried to follow the link but did not make the connection. I will take a look when I get back from vacation next week.

    From reading your comments I think that we are talking about different things using the same words. I am looking at capability as a higher level and unifying force for the way the company works, rather than a lower level – technology independent framework — which is what I am taking away from your comments.

    I take it from your post that there are potentially 100’s if not 1000’s of capabilities. that is not what I am advocating. In contrast I think that I can define any business in about 24 – 30 capabilities at their most complex and under 12 for many. That is part of the reason why the post talks about capability as being more powerful than process as a capability can contain many processes.

    The idea is to find a way to manage the business from as few – meaningful points of control as possible. We already have the alternative of 100’s of services that is producing mixed results.

    Look forward to your response and I will follow the link when I am back from vacation.

    Thanks, Mark

  • 5 Andrew Meyer   July 8, 2009 at 10:28 am

    Mark,

    thanks for your last two posts. Taking the two ideas from your previous posts along with an idea from Marketing 101, do we not get a more accurate picture?

    1. From your “Activities vs Results” post. Companies don’t pay for activities, they pay for results.
    2. From this post, capabilities are more powerful than processes, it’s the capability people want.
    3. From Marketing 101, people don’t buy drills, they buy holes in walls. It’s the hole in the wall that people want, not the drill.

    Combining these three ideas, when companies pay to execute a project, it’s not the project they want, it’s the result. They want more revenue generating customer relationships, not processes around a CRM system or even the capability to look up customer names. What they want, is the result.

    Results can be defined in six ways:
    1. Financial – How much did it cost us, what was our return on investment? (Possibly the most terrifying question you could ask of most IT projects…)

    2. Capabilities – What can we do today that we could not do before? (The corollary to this is “How does this help us?”)

    3. Customer Value – How does this enrich our customers experience with us enough that they want to do more business with us?

    4. Productivity Improvement – How does this decrease the amount of work our employees have to do and can we translate that into employees doing additional productive work? (I believe Peter Drucker had a maxim that if productivity improvement didn’t make people 10x more productive, it wasn’t worth the effort. I now understand this in a way I didn’t before.)

    5. Engagement – How does this empower or enrich our employee’s experience enough that they embrace rather than reject the change? And is there enough benefit to overcome the cost of the resisters being forced to change or leave the company?

    6. Visibility – Does it give decision makers accurate visibility into what is really happening in the company?

    7. Controls – Does it give decision makers controls to influence what happens in the company?

  • 6 An alternative way to define IT project results   July 15, 2009 at 7:55 am

    [...] Second, those results come from changing capabilities which are a more powerful definition of the business. So it’s the capability people want. 
http://blogs.gartner.com/mark_mcdonald/2009/07/02/capability-is-more-powerful-than-process/ [...]

  • 7 Gary   July 27, 2010 at 9:59 am

    My personal thoughts on Business Capabilities (and no, I’m not selling anything / spamming). It’s just easier to point here than to retype / cut & paste.

  • 8 Gary   July 27, 2010 at 10:00 am

    My personal thoughts on Business Capabilities (and no, I’m not selling anything / spamming). It’s just easier to point here than to retype / cut & paste.

    http://gsadvisory.wordpress.com/

  • 9 The structures required for supporting the next generation enterprise and CIO.   August 22, 2010 at 1:46 pm

    [...] So what is in an enterprise capability organization?  The resources required to define, build and sustain how the enterprise works defined by its capabilities.  A capability is the resources an enterprise uses to create outcomes and it embodies the combination of process, human capital, technology, information and culture.  The following post highlights the aspects of a capability LINK. [...]

  • 10 Jon   December 16, 2011 at 9:20 am

    This is a great article, but what happened to the graphic?

  • 11 Paul Cuypers   July 1, 2012 at 2:53 am

    Hei Mark;
    Some input from the project management world on the subject of capability thinking.

    Capability thinking is a corner stone in Pocket Project Management and used to define, develop and control the scope of a project. Capability thinking starts with the notion that ‘A unique product or service’ is the outcome of a project in the narrow sense. In a wider sense, organizations don’t start projects because they want a product, they want a capability. Let’s say that you have a tendency to get lost in the woods and therefore you buy a GPS. You are not interested in the box itself, what you want is the capability to navigate.

    A capability can be described by a model consisting of 4 layers. The first layer, the static perspective, defines the basic building blocks of a capability: The Business Domain, Functionality, Features and Skills. Take the GPS example again. In order to create the capability to navigate, you must have some understanding about the domain, i.e. the user needs a certain level of knowledge about concepts such as Present position, a Waypoint, bearing & range, and so on.

    Secondly you need functionality, e.g. functionality to determine your position, chart display functionality, entering a waypoint etc. Also you will need features. Although often use interchangeably (especially in IT), features are not functionality. Features create functionality and are the result of design decisions. In a car, an automatic gear and a manual transmission perform the same function, but have different features. Whether you implement the one or the other, is a design choice based on effectiveness and efficiency differences. And finally skills: You must practice using this GPS, having a basic understanding of navigation and a box is not going to provide you navigation capability if you can’t figure out the on/off switch on that particular model.

    The second layer describes the dynamic perspective and the third the integration layer. Creating a business capability itself is not enough, you have to integrate and embed the capability and its dynamics into the workings of the organization. Meaning: Capability thinking is a holistic approach; you design the (software) solution in relation to the changes required in the organization in order to make maximum use of a new or improved business capability. The fourth layer is the customer or external perspective. The ‘raison d’etre’ for a business is that it provides products or services that the society has a need and is willing to pay for, using business capabilities.

    The related artifact to capability thinking is a Capability Breakdown Structure or CBS. Like a Work Breakdown Structure the basic principle behind a CBS is decomposition and it is used to translate the customers (or software user’s) drivers, needs, ideas and expectations into capabilities, requirements and acceptance criteria for a service or product.
    When developing software using SCRUM the CBS is used as an advanced form of Product Backlog by mapping user stories to software capabilities. Just like the best fisherman in the world cannot catch fish in waters where there is none, even the best SCRUM team cannot deliver software creating business value without some sensible starting requirements. Capability thinking will do just that for you.

    Finally a philosophical note: The question ‘What is more important’ is a form of opposing thinking. You are trying to define something by comparing its value with something else you do know. It is pretty much like asking: What is more important, a hammer or a saw. The answer is: I couldn’t care about the question. When I need a hammer I will use a hammer, when I need a saw, I will use a saw……

    Trying to define capability thinking by comparing it with a process approach will only spark of controversy and misunderstanding especially from those people who earn their money from process thinking, i.e. people who do research, write books and sell process based software for organization improvement.

    You are trying to define the concept of capability thinking by comparing its use with another concept which many people have equally many different opinions about. This will only cloud matters. Thanks for putting capability thinking on the agenda. Hope this post will help to do so.

  • 12 Ales   July 27, 2012 at 3:56 pm

    Hi Paul, Andrew and Mark,

    Guys, have you ever heard about IIBA (www.iiba.org) ?
    What you have been written is very connected with BABOK.

  • 13 Historia de Vida | Annotary   January 17, 2013 at 10:21 am

    [...] from Idro Avila: Graphic Design Rules Competencies Miscellaneous Sort Share blogs.gartner.com       3 months [...]