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Blueprint for Change: How a Capability Reference Architecture Can Help Map the Road to Organizational Transformation (Part 1 of 2)

Ed Page, Managing Director Technology Strategy, Financial Services
Sandip Shah, Associate Director Technology Strategy

Most organizations today are facing a change of some kind – most often in the form of an enterprise digitalization imperative intended to help the organization maintain or achieve a leading position in the marketplace, respond to customers’ demands or improve performance. Although expediency is always a requirement when it comes to such strategic projects, they should not be undertaken without a clear understanding of the enterprise’s existing and target-state capabilities architecture and a road map related to how technology, processes and people can be leveraged, enhanced and supplemented to achieve the desired goals. Thus, a capability reference architecture is one of the first and most useful tools an organization can deploy before mapping its path to transformation.

Definition of Key Terms

  • A capability is an ability that is necessary for an organization to perform its functions. It is abstracted away from both technology and organizational structure to create logical independence from existing systems. It is typically most closely aligned to the durable business process of an organization.
  • A capability reference architecture is a map of the organization’s capabilities. The architecture is meant to depict all organizational capabilities, at a granularity that is meaningful and necessary for the organization to function.

For example, a manufacturing company may break down the Purchasing function into multiple capabilities (Direct Purchasing, Indirect Purchasing, Contract Management, etc.) and leave IT Operations Management as a single capability, inherently depicting the relevance and importance of the individual capabilities to the organization. A different company – one that provides software as a service (SaaS), for example –  may leave Purchasing as a single capability while breaking down IT Operations Management into multiple capabilities (Site Reliability Management, Cloud Infrastructure Management, Storage Management, etc.). The most important takeaway from this example is that each organization can recognize itself – its focus and structure – by looking at its capability reference architecture.

Why Design a Capability Reference Architecture?

A capability reference architecture, in and of itself, is a powerful tool to align everyone’s understanding of how the company functions. But, that isn’t the only benefit. The value becomes apparent when an organization performs an assessment on each of its identified capabilities to evaluate how well they fit the needs – and in the case of a transformation initiative, the future needs – of the organization. This might include adding or enhancing mobile capabilities or adding new analytics capabilities that might not presently exist in the organization.

Creating a capability map enables an organization to evaluate its capabilities for strategic alignment, as well as assess the relative maturity of each capability in an effort to achieve a clearer current-state view and identify the gaps that might exist relative to a target state. When combined, the steps, described below, can be used to outline an architectural road map for the organization to follow to its desired capabilities state.

  • Capability-to-strategy alignment: This is a process by which the organization evaluates each of its capabilities relative to the organization’s strategy and objectives. Not all capabilities are equal in importance. Some are basic building blocks to operations. Others are strategic differentiators. This assessment helps inform where and how to focus investment and whether to partner, buy or build a solution to support that capability. This process can also be informed by the organization’s IT operating model and helps define governing principles to incorporate into that operating model, as well.
  • Capability maturity assessment: This process articulates the maturity of individual capabilities within the target-state architecture for the organization. For example, if an organization wants to build a world-class application development capability, but currently only has ad-hoc development processes and no tools for support, the maturity of that capability would be considered “low.” The maturity assessment can be revealing to both the IT function and the organization, and as an organization completes this process, it should consider inputs from both business and technology groups.

Once an organization has a capability reference architecture that both business and IT agree represents the company accurately, and has completed both the fit and maturity assessments, as described above, it will be in a position to use this reference to define a clear road map of where to invest in order to achieve its target architecture and organizational goals. This road map of projects extends beyond technology to include processes and people. All projects and programs that the business is implementing across these three domains should be included in the road map and should be visible to the organization through the same pipeline.

From Architecture to Solutions – Keeping the Big Picture in Mind

After completing its capability reference architecture and map, the organization will most likely begin building out specific solutions to take it from its current state to its target state. It is important for enterprise architects to work with the solution teams to ensure that any underlying solutions and domain-specific architectures are built in the context of the greater organization. It is the enterprise architect’s responsibility to ensure that those solutions not only operate seamlessly within the IT landscape, but also are “future-proof” – built as modular pieces in a continuously changing business and IT landscape.

The capability reference architecture is a foundational element in the digital maturing of the organization, and as such it should be flexible to scale and evolve as the organization reacts to its own ecosystem and industry change. In practical terms, it should serve as the key tool for aligning strategy to execution and evaluating decisions and tradeoffs related to the planning, design and development of solutions.

There are several digital architecture considerations enterprise architects are advised to keep in mind when implementing growth solutions – we will address them in a subsequent blog post. Subscribe to the technology topics on this blog to keep up with the discussion.

Michael Roberts, a Manager with Protiviti’s Technology Strategy practice, contributed to this content.

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