From Vision to Action: Implementing a Capability-Based IT Strategy

In the first post in this series, we discussed the importance of shifting from a traditional, tool-based IT strategy to a capability-based approach that prioritizes business outcomes. As you may remember, business capabilities are like core muscles, and just like a good coach, your IT executives should help the company focus on building the right muscles (capabilities) at the right time. A capability-based approach to IT strategy increases strategic alignment, enables better prioritization and resource allocation, reduces duplication, and improves collaboration and agility. But most importantly, it ensures your IT strategy remains relevant and connected to your business strategy.

The allure of a capability-based IT strategy is undeniable, but translating vision into reality requires a roadmap. In this article, we’ll delve into the practicalities of implementation, equipping you with the tools and frameworks you’ll need to navigate this transformative journey.

1. Defining Your Core Muscles: The first step is identifying the organization’s core capabilities. These are not simply generic functions like "marketing management" or "finance management.” Core capabilities represent specific, value-delivering actions that differentiate your organization from others. Try asking yourself: "What are the unique ways we create customer experiences?" or "How do we leverage data to drive operational efficiencies?" The answers to these questions, and others like them, will highlight your critical muscles.

Several frameworks can guide this process. The Value Chain Model, for instance, helps you analyze the flow of value creation through your organization. It identifies critical activities in each stage of the process. Similarly, the Business Capability Model maps these activities to specific capabilities, providing a visual representation of your organizational anatomy. We typically use both when helping companies draft their initial set of core capabilities.

2. Mapping Your Technology Landscape: Once your core muscles are defined, it's time to assess how your existing IT landscape supports them. This involves a comprehensive inventory of technology assets, including hardware, software, SaaS services, and data. You also want to look at your delivery methods (how people work together to enable the capability) and your resources (staffing that supports the capability). Tools like Capability-Technology Matrices or Issue Heatmap Overlays can help you map each technology to the specific capability(ies) it enables or hinders. We often overlay additional information on these artifacts to highlight how well the technology supports the capability or to showcase the health of the technology.

Through this mapping exercise, you'll likely discover gaps and redundancies. You may notice silos where similar capabilities are supported by different technologies, each with their own support personnel, which leads to redundancies and waste. Conversely, some critical capabilities may lack adequate technology or resource support, hindering potential and reducing the delivered value.

3. Prioritization and Investment: With this new knowledge, you can prioritize IT initiatives based on their impact on core muscles. An Initiative One-Pager is helpful for summarizing information and highlighting the objectives, costs, timelines, and resources. Be sure to include communication, change management, training, and other non-technology-related costs in the budget to ensure you have a holistic cost.

A Prioritization Matrix is another valuable tool that enables initiatives to be stack-ranked based on established scoring criteria. The scoring criteria will be specific to your organization and should be holistic, covering the level of change, delivery effort, time horizon, total cost, and value realized. While this may feel more like an academic exercise, this is often the most crucial aspect of removing bias from decision-making. Since your capabilities align with your overall business goals, you can emphasize initiatives supporting deficient or nascent capabilities critical for success by weighing the criteria more than others. This is similar to how coaches guide their athletes to focus on the skills that will significantly impact their performance overall for the sport they are engaging in.

4. Collaboration and Change Management: Transforming IT into a capability-driven engine requires collaboration across the organization. Start with breaking down silos by creating cross-functional teams dedicated to specific capabilities. These teams, composed of representatives from various departments, can champion capability-driven initiatives and ensure alignment with broader business goals. This is where employees see the biggest benefits as they feel more engaged, empowered, and connected to the organization, as they can now see how their work directly impacts the business.

Change management plays a critical role in this process. Open communication, training programs, and the clear articulation of the benefits of this new approach can help mitigate resistance and foster employee buy-in.

5. The Power of Continuous Improvement: The beauty of a capability-based approach lies in its continuous feedback loop. By measuring the impact of IT investments on your core muscles and business outcomes, you can continually and iteratively refine your strategy.

Create and monitor key performance indicators (KPIs) or metrics aligned with your capabilities. Create feedback mechanisms to gather stakeholder feedback. And continuously adapt your initiatives based on all this data.

Remember, capability mapping is not a one-time exercise. It’s an ongoing, iterative process that ensures your IT strategy remains relevant and aligned with your organization's ever-changing strategy. It enables you to build and strengthen the right muscles at the right time, just like a coach does — figuring out your biggest limiters and focusing on improving the ones with the highest return on your time spent training so that your overall performance improves.

Embracing a capability-based approach will propel your organization toward a future where technology is no longer just a cost but a strategic asset that drives sustainable value. Unfortunately, this is not a one-size-fits-all journey. The specific tools and frameworks you need will depend on your organization’s context and unique challenges. That said, the core principles remain constant: focus on capabilities, prioritize based on impact, foster collaboration, and embrace continuous improvement. By following these guiding principles, you can unlock the transformative power of a capability-based IT strategy and build the muscles that will accelerate your organization toward a thriving future.