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Business Functions vs. Business Capabilities- how is your company handling these?

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Business Functions vs. Business Capabilities- how is your company handling these?

We are migrating from System Architect to Hopex and adding the new use of Business Capabilities to Hopex.  However, some of the Business Units maintain that Business Functions (BF) are parents of Business Capabilities (BC) and others hold the opposite view, that BCs are Parents of BFs. As you may imagine, this does not allow for rationalization across the enterprise nor does it allow for easy data sharing and re-use.

My question to all of you is, how have you either resolved a similar situation or how are you handling BFs and BCs?  Do you make the distinction between a BC and a BF or are they all captured as one or the other, a Function or a Capability?

Thanks in advance for your thoughts.

5 Replies

Re: Business Functions vs. Business Capabilities- how is your company handling these?

Hi, business functions and business capabilities dont mean the same thing. A function is what you organization-wise have or should have in place, like marketing, sales etc, which then is "Instantiated" by one or many org-units. A business capability describes what your company must be able to do for current or future business. That's a more strategic element, and it has to be instantiated of course - sometimes by a process, sometimes by an org-unit, then you'll need maybe specific skills etc. A good example is M&A, if your strategy is to grow. M&A is not a single process, not only one org-unit will be involved etc. 

Does that make sense?

Contributor

Re: Business Functions vs. Business Capabilities- how is your company handling these?

My view is that a Business Capability is the higher, stable, abstract concept of what a business does (e.g. Marketing, Sales, etc.) - independent of the organization's structure, processes, people, or domains.

 

The Business Functions are the implementation decomposition/breakdown of the Bussiness Capabilites into processes/activities/roles in how a Business Capability is delivered. 

 

A great article: Rethinking the Function of Business Functions

https://hbr.org/2013/02/strength-focus-and-corporate-c

  • "Business units come and go, but finance, HR, IT, marketing, legal, and R&D are forever. Nonetheless, many CEOs and top executives struggle with their functional organizations, and some question whether the established functional model is still relevant. In their view, functional priorities are all too often in conflict with — or not fully supportive of — the strategic needs of the business."
  • "The challenge for the functional model today is that companies don’t need to build generic functional strengths. They need to build more specific, bespoke capabilities that are part of the inherent identity of the company, and hard for anyone else to duplicate."
  • "The most distinctive, differentiating capabilities are almost always cross-functional"

 

Another great article: Leveraging business capabilities for strategic planning

https://www.cio.com/article/3250677/it-strategy/leveraging-business-capabilities-for-strategic-plann...

  • "Business capabilities are an integrated set of processes, technologies, and deep expertise that are manifested as a functional capacity to capture or deliver value to the organization. They outline “what” a business does, as opposed to “how” a business does it. They are the definition of your organizational skills, best represented in a landscape map that allows you to evaluate the full spectrum of capabilities against each other."
  • "Business capability maps are not just about technology; these tools are designed to improve an organization's holistic ability to improve a business outcome, and in many cases, it is not the technology that is the constraint, but rather a process, skill, or policy issue."
  • "...often challenging in an organization that thinks and acts in functional silos, but a capability-driven approach will bridge that gap."

 

Gartner is often engagd to help businesses define their Business Capabilities (L0, L1, L2 - for example) 

https://www.gartner.com/webinar/2680616

  • "This webinar provides practical advice for midmarket IT leaders on using business capability modeling to bring clarity and insight to their IT strategy"

https://www.gartner.com/webinar/3680517

  • "Business capability modeling is used to represent how enterprises deliver strategic value to customers. These models represent the future-state capabilities of the business and illustrate how current capabilities need to change to support strategic opportunities and threats"

https://www.gartner.com/doc/3534851/best-practices-creating-highimpact-business

  • "Focus on Future-State Business Capabilities First and Foremost"
  • "Build Your Business Capability Model Based on Your Business Strategy, Not Generic Reference Models or Templates"
  • "Don't Confuse a Business Capability Model With a Business Process or Other Type of Model"
  • "Label Each Capability With a "Verb-Noun" Combination to Emphasize Action"
  • "Limit Business Capabilities to Eight to 10 Capabilities at Each Level"
  • "Use Capability Labels to Convey the Value Delivered to External Stakeholders"

 

https://www.gartner.com/it-glossary/business-capability-modeling

  • "Business capability modeling is a technique for the representation of an organization’s business anchor model, independent of the organization’s structure, processes, people or domains. "

https://eam-initiative.org/pages/yg7qjgxv78f5/Business-Capability-Business-Capability-Map

  • "A business capability is an abstraction of a business function, answering the question what a company needs to be able to do to be successful."

 

TOGAF 9.2

  • "Capability: An ability that an organization, person, or system possesses. For example, Enterprise Architecture, marketing, customer contact, or outbound telemarketing.:"
  • "Business FuncitonDelivers business capabilities closely aligned to an organization, but not necessarily explicitly governed by the organization."

 

ArchiMate 3.0.1
http://pubs.opengroup.org/architecture/archimate3-doc/chap08.html

  • "A business function offers functionality that may be useful for one or more business processes. It groups behavior based on, for example, required skills, resources, (application) support, etc. Typically, the business processes of an organization are defined based on the products and services that the organization offers, while the business functions are the basis for, for example, the assignment of resources to tasks and the application support."
  • "A business function is a collection of business behavior based on a chosen set of criteria (typically required business resources and/or competencies), closely aligned to an organization, but not necessarily explicitly governed by the organization."
  • "Just like a business process, a business function also describes internal behavior performed by a business role. However, while a business process groups behavior based on a sequence or flow of activities that is needed to realize a product or service, a business function typically groups behavior based on required business resources, skills, competencies, knowledge, etc."

 

https://en.wikipedia.org/wiki/Capability_management_in_business

  • "Capability management is the approach to the management of an organization, typically a business organization or firm, based on the "theory of the firm" as a collection of capabilities that may be exercised to earn revenues in the marketplace and compete with other firms in the industry. "Capability Management" seeks to manage the stock of capabilities within the firm to ensure its position in the industry and its ongoing profitability and survival."
  • "A process is how the capability is executed."
  • "Dave Ulrich makes a distinction between capabilities and competencies: individuals have [Functional] competencies while organizations have [business] capabilities."

 

https://en.wikipedia.org/wiki/Business_architecture

  • "The Business Capabilities view describes the primary business functions of an enterprise and the pieces of the organization that perform those functions"

 

https://cio-wiki.org/home/loc/home?page=business-capability

  • "Business capability is the expression or the articulation of the capacity, materials and expertise an organization needs in order to perform core functions."
  • "Capability is an attribute of a system - so it is used largely as an abstraction of a system. The capability is used in the context of assessment - capacity to realize an outcome, existing or intended, or potential - which is in stark contrast to the use of the process. With the capability view, being more abstract, no detail is provided as to the means by which the transformation occurs, nevertheless, the system has external interfaces which deal with inputs and outputs. With the process view, being more logic and detailed, the process shows the receiving processes, the distributing processes, and the transforming processes."
  • "What vs. How: Capabilities are WHAT abilities/ competencies an organization has/needs. Processes are HOW an organization does something."

https://www.architectureandgovernance.com/strategy-planning/business-capability-models-might-missing...

  • "The business capabilities are the top layer of the business architecture. They belong to a business domain and are governed by the business principles and outcomes of the organization. The capabilities are realized by a combination of business process, people, and technology and are, therefore, at a higher level than a business process and sits in the conceptual layer."
  • "Capability represents what the organization can do."
  • "Function represents what the organization is doing with that capability."
  • "Process identifies how the organization is performing the function."
  • "Organization Unit identifies the department responsible for performing the process."

https://searchmicroservices.techtarget.com/definition/business-capability

  • "Business capabilities are sometimes confused with other concepts in business process management such as business processes and business functions. Business processes describe the methods an organization employs in order to provide and leverage business capabilities. Business functions describes the roles that individuals and units within the business play in regards to meeting business objectives."
  • "While functions and roles tend to change rapidly as new employees enter the business, business capabilities remain relatively stable. High-level business capabilities include concepts such as sales and supply chain management that can be met by a number of various business processes, which in turn can incorporate a variety of business roles. Business capabilities can also be broken down into more granular levels. Supply chain management, for example, could be split into product flow, information flow, and finances flow."

 

Capability Attributes

https://www.omg.org/news/member-news/OMG-Putting-Cap-To-Work.pdf

  • "Each capability is unique. A capability is a fundamental element of the organization and as such is clearly different from other capabilities. A capability might be applied throughout the organization and can be applied in different ways to affect different outcomes but it is still a single capability."
  • "Capabilities are stable. Well-defined capabilities rarely change. They provide a much more stable view of organizations than do projects, processes, applications, or even strategies. Capabilities only change when there is a significant shift in the underlying business model or mission which might occur through a business transformation initiative or in conjunction with a new merger or acquisition. This stability is a major part of their appeal."
  • "Capabilities are abstracted from the organizational model. Capability models are not just a simple restatement of the enterprise’s organizational model. They are organizationally neutral which means that changes in the organizational structure don’t require a change in the capability model. In simple organizations, the capability model may indeed look similar to the corporate organizational structure; however, in more-complex organizations capabilities both common to and unique to organizational units are found."

 

 

A few additional definitions from various Google searches: 

 

  • "Business capability is the expression or the articulation of the capacity, materials and expertise an organization needs in order to perform core functions. ... Businessfunctions describes the roles that individuals and units within the business play in regards to meeting business objectives."

 

  • "Business capability mapping focuses on what a business does and provides a crisper view of an organizations objectives by eliminating the inherent complexity of discussing the how or the who."

 

  • "Defining Business Capability. A business capability is what a company needs to be able to do to execute its business strategy. Another way to think about capabilities is as a collection of people, process, and technology gathered for a specific purpose."

 

  • "A Capability is a higher-level solution behavior that typically spans multiple Agile Release Trains (ARTs). They are sized and split into multiple features so that they can be implemented in a single PI. SAFe describes a hierarchy of artifacts that define functional system behavior:"

 

  • "A business function is defined as any set of activities performed by the department that is initiated by an event, transform information, materials or business commitments, and procedures an output (e.g. order fulfillment, invoicing, cash management, manufactured batch, customer response tracking, regulatory "

 

  • "Business Capability modeling is a technique for the representation of an organization's business anchor model independent of the organization's structure, processes, people or domains. ... Business Capability mapping allows companies to clearly see what a business does to reach its objectives."

 

  • "Note that business functions are distinct from capabilities. Capabilities represent the current or desired abilities of an organization, realized by its people, processes, information, and technology. They are focused on specific business outcomes, and are used for strategic planning purposes. In contrast, business functions describe the work actually done by the organization; they are often explicitly managed, and are more closely aligned to the organization structure. Each capability occurs only once in a capability map, whereas in a functional decomposition of the enterprise the same sub-function can occur multiple times."

 

 

Enterprise Architect, World Traveler, Intrepid Sailor
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New Contributor

Re: Business Functions vs. Business Capabilities- how is your company handling these?

Thanks for your reply and yes, it makes perfect sense. I only wish I could get the rest of the folks at the company to understand and agree with this.  They insist that functions are at the top of the stack and capabilities are subordinate.

New Contributor

Re: Business Functions vs. Business Capabilities- how is your company handling these?

Kevin, thanks for the very complete reply! I agree and just wish I could convince the rest of the folks that the internal "we've always done it this way" answer is not in alignment with the rest of the world.  The company uses functions as the top while capabilities are subordinate.

Contributor

Re: Business Functions vs. Business Capabilities- how is your company handling these?

Now that is what I call a complete answer! Thank you so much Kevin for this answer and the references.

 

I've been cross-referencing Business Capabilities / Business Functions / Business Services / Business Processes for a while and trying to reconcile the subtle variations, particularly with regards to Business Capabilities vs. Business Services (e.g. ArchiMate / TOGAF / ITIL / etc.). I'd love to hear your insight on this aspect as well.

 

Regards,

 

Andrew Greff