In the prior post, “Driving Business Transformation through Business Capabilities (Trends and Insights),” we discussed using business capabilities to support strategic business transformation. Here we’ll present more information about identifying and clarifying strategic objectives, and organizing clusters of capabilities within a strategic technology portfolio that also addresses infrastructure, team, data, and processes.

This article is based on the observations and experiences of Atul Totre, a Microsoft Enterprise Architect who has helped many organizations define strategy, assess business capabilities, and improve their strategic technology portfolios.

Strategy Indicates Necessary Capabilities

From the perspective of a business capability model, the driving force behind investment is to transform business capabilities.

But first a business must focus on strategic objectives and understanding how value is achieved through those objectives, before choosing capabilities to transform, and then doing so in ways that produce demonstrable strategic value.

Assessing capability requirements and maturity is very difficult if strategy issues are not resolved first to provide objectives and context. Early collaboration with business leaders about strategy helps ensure an organization realizes strategic business value when transforming business capabilities.

Questions to ask regarding strategy and the current state of the business include:

What is our desired strategic state?
What’s the value of our strategy?
What services do we deliver to achieve our strategic objectives?
What capabilities, data, technology, and team deliver our services?
How do we measure success?
How are we doing?

Once these questions are explored, additional information is identified for planning purposes, such as:

What are the desired outcomes of the transformation?
Which services are impacted?
What is the desired state of each service (collection of capabilities)?
Within a service, which capabilities contribute?
What is the current health of the capabilities?
What initiatives need to be carried out?

Microsoft Enterprise Architects have been increasingly involved with COOs and defining business strategy, as well as with CIOs and the IT organization. Enterprise Architects also become involved during strategy planning when IT organizations have difficulty mapping IT investments to the balance sheet, and have difficulty identifying return on business strategy and innovation.

When Enterprise Architects are involved further upstream, they are able to provide strategy planning services in many areas, having deep knowledge, broad industry experience, and active networks of expertise to draw on.

For example, one company having difficulty meeting supply chain KPIs began investing in more warehouses, without first identifying a more effective and valuable strategic solution of adding better analysis and distribution methods. After involving an Enterprise Architect, the company was able to translate business strategy to improved operations based on analytics and identify significant KPIs and the value contributions of improving the supply chain.

Defining Strategic Technology Portfolios

Each strategic objective may involve many capabilities, clustered into services, and dependent on data, infrastructure, people, and processes. The view of how capabilities will be matured, rather than how technology is deployed, better represents the value of long term investments.

When planning a technology portfolio to fulfill strategic business objectives, a team will ask:

What changes are needed to achieve strategic business objectives (services, capabilities, data, technology, team)?
Are the relationships between business functions clear?
What is the sequencing and pacing of the desired changes?
What investments are needed to make the changes?

More specifically, important portfolio considerations:

Do we have the right items in the portfolio?

Are we delivering the service changes required to enable our strategy?
Are we appropriately addressing data, technology, or team “health” issues?

Do we understand dependencies, risks, and assumptions?

Does each initiative properly take account of any existing health issues?
Are all involved capability enabling teams aligned?
Are we clear where major process or organizational change is needed?
Are we likely to deploy complex or unproven technology?

What constraints should we consider in our portfolio?

Is funding realistically available?
Do we have resource constraints?

When delivery is in progress, question include:

Are our initiatives on track to deliver expected value?
Are any adjustments to the initiatives necessary?
Are we ready to operate?

An organization often finds it easier to tie meaningful KPI’s to a portfolio of projects, rather than to single initiatives. For example, when attempting to improve metrics for a supply chain, a business might have a portfolio of projects comprised of productivity software, analytical tools, and inventory management applications – all together producing improved KPIs related to the supply chain.

Clearly associating a portfolio of projects with the value it will produce makes it easier to obtain funding for business transformation. Rather than attempting to fund new IT components in isolation, business leaders have more success funding, for example, improvements in warehouse management capabilities. Such improvements will involve broad investment in process changes, software, infrastructure, and integration -- but the value of the investment is clearly visible and aligned with business strategy.