How to Define and Develop Business Capabilities in Business Architecture

Every business, whether a small local shop or a large corporation, needs a clear structure to operate effectively and reach its goals. In the world of Business Architecture, one of the most important components is Business Capabilities. These are the key functions a company must perform to achieve its objectives.

But how do you define and develop these capabilities? In this article, we'll walk through the steps in simple terms, using examples that make it easy for anyone to understand.

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What Are Business Capabilities?

In simple terms, Business Capabilities describe what a business can do. They represent the core functions a company needs to perform well, such as managing customer relationships, producing goods, or handling finances. Business capabilities are not about the people or processes involved; they focus on the end results. For example, a business capability might be “Deliver Quality Baked Goods,” which means the company has the ability to provide quality baked items to desiring customer.? How that happens (whether through a brick-and-mortar store counter or online app order form) is the process, but the capability is simply the ability to provide the quality baked goods.

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Why Are Business Capabilities Important?

Business capabilities are essential because they:

• Provide clarity by giving a clear picture of what the company needs to focus on.
• Help with strategic planning as they guide decision-making on where to invest time, money, and resources.
• Identify gaps by defining capabilities, a company can see where it needs to improve or add new abilities to stay competitive.
• Enable growth by understanding current capabilities helps businesses develop new skills and adapt to changes in the market.

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Step 1: Start with the Business Goals

The first step in defining business capabilities is understanding the company’s goals. What is the business trying to achieve? The goals will shape the capabilities needed.

Imagine a small bakery that wants to expand its business by offering online orders and home delivery. ? The bakery’s goals might include:

• Increase revenue by selling more products.
• Improve customer convenience by offering delivery services.
• Expand its market reach through an online store.

These goals will help the bakery figure out what new capabilities it needs to develop.

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Step 2: Identify Core Activities

Once the goals are clear, the next step is to identify the core activities that the business performs or needs to perform. These are the things the business must do to meet its goals.

A Bakery’s core activities might include:

• Baking quality products by ensuring that they can produce fresh bread, cakes, and pastries daily.
• Managing inventory by keeping track of ingredients and supplies
• Taking orders both in-store and online.
• Finally delivering those orders by getting the products to customers.

(A product is a product until is it delivered and accepted by the customer.)

Each of these activities represents something important that the bakery must be able to do well to succeed.

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Step 3: Group Similar Activities into Capabilities

Now, group these activities into broader capabilities. Capabilities are higher-level categories that represent what the business needs to be able to do.

Using the bakery example again, the capabilities might look like this:

1. Product Creation thought the ability to bake high-quality products.
2. Customer Order Management with the ability to handle orders from customers, whether in-person or online.
3. Logistics and Delivery thought the ability to deliver products to customers’ homes.
4. Inventory Management by tracking ingredients and supplies.
5. Marketing and Sales to promote products and handle sales through the website or in-store.

These capabilities are the building blocks of the business. Each one shows "what" the bakery needs to be able to do, without focusing on specific details like software or processes.

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Step 4: Assess Current Capabilities

Once you’ve defined the business capabilities, it’s important to assess how well the business currently performs in each area. This step helps identify strengths and weaknesses.

The bakery might discover the following:

• Product Creation: (Strong). The bakery already makes high-quality products that customers love.
• Customer Order Management: (Needs improvement). The bakery takes in-person orders but doesn’t have an efficient system for online orders.
• Logistics and Delivery: (Weak). The bakery currently doesn’t offer delivery services, so this is a gap that needs to be filled.
• Inventory Management: (Strong). The bakery tracks supplies well and rarely runs out of ingredients.
• Marketing and Sales: (Weak). The bakery has little online presence and doesn’t do much marketing.

By assessing its current capabilities, the bakery can see which areas need development, especially if it wants to grow through online sales and delivery.

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Step 5: Develop New Capabilities

Once gaps are identified, the next step is to develop new capabilities or improve existing ones. This can involve investing in technology, training employees, or partnering with other companies.

To improve its online sales and delivery services, the bakery might:

• Invest in an online ordering system that allows customers to place orders from their phones or computers.
• Partner with a delivery service to get products to customers’ homes.
• Train staff on handling online orders and managing deliveries.
• Create a social media strategy to promote the new services and attract more customers.

By developing these new capabilities, the bakery will be able to meet its goals of expanding its market and increasing sales.

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Step 6: Align Capabilities with Business Strategy

It’s important to make sure that all business capabilities are aligned with the overall business strategy. This means that every capability should support the company’s long-term-goals and mission.? The bakery’s strategy is to become the go-to bakery in the local area, known for fresh quality baked goods. To support this, the bakery’s capabilities should focus on providing excellent products, promote them thought marketing campaigns and making it easy for customers to buy them, whether in-store or online. By ensuring that its capabilities align with its strategy, the bakery can make sure it is always working towards a bigger and brighter vision.?

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Conclusion: Building a Strong Business Through Capabilities

Defining and developing business capabilities is essential for any company that wants to grow and succeed. Whether it’s a small bakery or a large corporation, understanding the core abilities needed to meet business goals is the foundation of success. By following the steps outline above (identifying goals, defining core activities, grouping them into capabilities, assessing strengths and weaknesses, and developing new capabilities) any business can set itself up for long-term growth. Business capabilities help clarify what the company must focus on, where to invest, and how to stay competitive in an ever-changing market.