How to classify Business capabilities
It is useful to be able to classify the business capabilities of an organization. This makes it possible to prioritize digital transformation initiatives by focusing on innovative technologies, especially those related to competitive and differentiated capabilities.
(This article enrich the previous article “Business capabilities : A Powerfull tool in your strategic planning“)
One way to classify capabilities is to group them into three categories: core capabilities, competitive capabilities, and differentiated capabilities.
The core capabilities are related to low-value areas. These should be efficiently exploited at the lowest possible cost. They are usually supported by industry standard practices.
Core capabilities help keep the organization afloat by facilitating day-to-day operations, such as accounting or financial management. Without this, the organization would not be able to conduct its daily operations. They do not help differentiate the organization from competition in the market or directly influence the organization’s products and services.
Competitive capabilities: They enable the company to remain competitive in the market and contribute to the long-term success of the company. From the customer’s perspective, their characteristics must be relevant. Performance and value indicators must be identified to ensure desired results and benefits.
Differentiated capabilities must be supported by practices unique to the company. Performance and value indicators must be identified to provide desired results and benefits. They have strategic value and provide a real advantage. Differentiated capabilities are rare, offering a unique advantage. They are inimitable, which means that competitors are not able to copy them. They are not substitutable; competitors cannot simply substitute a different resource for the one that confers an advantage.
The “VRIND” framework is often used to identify differentiation elements:
- V – Value: The capability contributes to costs reduction, revenues increase, innovation creation
- R – Rare: The capability is unique in the market
- I – Inimitable: The capability can not be easily copied
- N – Not-Substituable : Other capabilities can not offer an equivalent functionnality
- D – Durable : The capability can grow and be repeated in time.
For more information on Business capabilities, we recommend watching this 40 minutes webinar from Open Group : https://bit.ly/2NcjSPu