Business capability classification: a strategic lever for guiding digital transformation
Classifying an organization’s business capabilities is more than just a theoretical exercise: it is a decision-making tool that enables CIOs and executives to prioritize digital investments with a direct impact on performance and differentiation.
In a context of accelerating technology, companies must prioritize their internal capabilities to invest where it matters most. By structuring capabilities into three categories—core, competitive, and differentiated—organizations can align their digital strategy with their unique value proposition.
Why classify business capabilities?
Classifying capabilities allows you to:
- Map key functions and identify those that truly support the strategy.
- Prioritize technology projects with high strategic returns.
- Avoid digital homogenization by investing in non-differentiating capabilities.
- Align IT and business by making the value of capabilities to be digitized or transformed visible.
🎯 For a CIO, this means transforming differentiated capabilities into digital assets before the competition does.
The three types of business capabilities
1. Basic capabilities: essential but not strategic
These capabilities ensure the day-to-day functioning of the organization. Their objective is operational efficiency.
Features:
- Standardized, often outsourced.
- Supported by proven processes (e.g., ERP, HR tools).
- Not very visible to the end customer.
Examples :
- Payroll management
- Bookkeeping
- Expense tracking
- Facilities management
CIO tip: Automate or outsource these capabilities as much as possible to free up resources.
2. Competitive capabilities: drivers of performance
These capabilities enable the delivery of products or services at the level expected by the market. They influence customer satisfaction, costs, and lead times.
Features :
- Adaptable to market expectations
- Requiring well-defined performance indicators (KPIs)
- Often representing a temporary advantage
Examples :
- 24-hour delivery
Multichannel service center - Automated order taking
- Ability to meet rigorous quality standards
3. Differentiated capabilities: the core of strategic positioning
These capabilities create a unique advantage that is difficult to imitate. They embody what the company does better or differently than its competitors.
Features:
- Inherent to the company’s identity
- Non-standardizable and non-substitutable
- Associated with a strong strategic return Characteristics:
Examples:
- Exclusive recommendation engine
- Ability to personalize the customer experience at scale
- Unmatched customer data intelligence
- Culture of integrated technological innovation
CIO advice: Protect and amplify these capabilities through targeted investments (IP, technology, talent, strategic partnerships).
How to evaluate differentiation with the VRIND model
The VRIND model allows the strategic potential of a capability to be assessed according to five key criteria:
Applied example:
A manufacturing SME developing a digital twin for its production equipment could transform this differentiated capability into a sustainable competitive advantage.
→For more information, see our article on the strategic value of business capabilities.
Summary
Business capabilities fall into three categories. Only differentiated capabilities offer a sustainable strategic advantage. Use the VRIND framework to identify them and prioritize your digital investments.
Want to prioritize your digital investments based on the most critical capabilities?
Schedule an exploratory meeting with an Eficio expert.
FAQ
How can you tell if a skill is differentiated?
It is rare, inimitable, non-substitutable, and durable. Apply the VRIND model to validate it.
Can competitive capacity be transformed into differentiated capacity?
Yes, by reinforcing it with technological innovations or a proprietary approach.
What is the link between capacity and digital transformation?
Digital transformation must amplify differentiated capabilities and automate basic capabilities.
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