Configuring the transformation roadmap using the capability model

Contributors: Maria Aunsholt Storgaard, Maya Kousholt Schmitt, and Annie Gisslen

In our experience, transformation is a critical enterprise capability for organisations to be able to navigate in their industries. However, many are failing to realise the expected value, especially when the transformation is enabled by technology. In previous articles, we have outlined the importance of having a business-led approach to digital transformation and the criticality of aligning on a clear transformation vision and ambition across the organisation that provides transparency on the impact and cost. This is the third article in a miniseries that goes through the key topics to ensure a lasting, positive impact when pursuing a business-led digital transformation. This article presents how to define a transformation roadmap that supports your strategy and allows you to deliver on your vision and ambition.

KEY TAKEAWAYS

• A transformation roadmap is critical to bring the transformation vision and ambition to life
• A business capability model is an effective tool to help shape the transformation roadmap, ensuring alignment with the overall strategy and allowing you to consider all types of enablers such as data, process, talent, and technology
• Business capabilities are the ‘abilities’ organisations need to have to operate, deliver on their strategy, or create competitive advantages in the market. Each capability consists of six dimensions: mission, insights, technology, talent, process, and governance

A TRANSFORMATION ROADMAP IS CRITICAL TO BRINGING THE VISION AND AMBITION TO LIFE
From our observations, having a clear direction is not valuable by itself, if you do not know how to get there. Therefore, a transformation roadmap is critical to bring the vision and ambition to life and to take your organisation from the “as-is” to the “to-be”. A transformation roadmap that is continuously revisited, supports the organisation in ensuring all initiatives and projects running in the organisation ultimately align with the same transformation vision and ambition. Therefore, the transformation roadmap should cover all initiatives needed to achieve the transformation vision and ambition and the interdependencies between them. It is from the transformation roadmap that detailed implementation plans for individual programs are defined.

Before the transformation roadmap can be defined, first one needs to understand the current state (where are we coming from?) in relation to the vision and ambition (where do we want to be?) to identify gaps between the current state and the vision. Understanding the maturity of your organisation’s capabilities* and combining it with the transformation direction, will guide the prioritisation necessary to develop a realistic and effective transformation roadmap.

“Understanding the maturity of your organisation’s capabilities and combining it with the transformation direction, will guide the prioritisation necessary to develop a realistic and effective transformation roadmap.”

A CAPABILITY MODEL IS AN EFFECTIVE TOOL FOR DEFINING THE TRANSFORMATION ROADMAP
A business capability is any ability an organisation must have in order to operate, deliver on the business strategy, and create competitive advantages in the market - for instance, pricing capabilities and manufacturing capabilities. Overall, a capability consists of six dimensions: its overall mission, the insights, the processes, the technologies, the talent, and the governance required to deliver the capability. Altogether, these six dimensions form the Capability Hexagon Framework as illustrated below:

Figure 1: Capability Hexagon Framework

Collectively, all individual capabilities form the business capability model, where the capabilities are clustered based upon a common denominator. The common denominator can for instance be structured based on functions, departments, or processes. An illustration of three capability clusters of the “Acquire and grow the customer” process as a common denominator is showcased in Figure 2:
 

Figure 2: Illustrative example of three clusters of a Capability Model with clusters organised according to end-to-end processes

The capability model is an effective tool as it can provide an exhaustive and aligned view of capabilities and their maturity across the organisation. The overview provided by the capability model serves as an essential foundation for assessing priorities aligned with the transformation vision and ambition.

Understanding the maturity level of each capability and comparing it to the transformation vision and ambition defined in accordance with the overall business strategy, should guide which capabilities to focus on enhancing first. By assigning business ownership to prioritised capability clusters (e.g., invoice to cash) or individual capabilities (e.g., invoice management), the otherwise non-operational capability overview becomes an actionable steering tool. Subsequently, the identified maturity gaps and corresponding initiatives to close the gaps can be articulated to ultimately form the roadmap for transformation.

CREATING THE TRANSFORMATION ROADMAP
The capability model can be activated and used as a design and decision management tool to configure the transformation and enable the overall business strategy. The 10 steps illustrated below indicate how the capability model can be utilised to define the transformation roadmap.

1. Define the mission and purpose for each capability
   
2. Segment capabilities based on if they are 1) Strategic, 2) Foundational or 3) Core capabilities
3. Determine the maturity of capabilities compared to market standards and the defined mission (lagging, performing, leading)
4. Analyse segmentation and maturity outcomes to prioritise key capabilities based on transformation vision and ambitions defined in accordance with the overall business strategy
5. Define and design the remaining dimensions of the capability hexagon for each prioritised capability
6. Identify and prioritise initiatives to close the maturity gap across the dimensions for each prioritised capability
7. Consolidate all initiatives in a prioritised sequence to form the transformation roadmap
   
8. Implement the initiatives
9. Measure value of initiatives
10. Update maturity of capabilities as initiatives are implemented

Activating the capability model is as much an art as it is a science. It is therefore not expected that management has complete and accurate information, but by including the right people in assessing capabilities, the organisation can achieve an accurate overview. Managers know their systems, people and processes, stakeholders (internal customers/service receivers), and know external strengths and weaknesses, whereas top management knows the organisation's capacity. This is the information that your organisation should rely on when using the capability model as a decision-management tool.

USING THE CAPABILITY MODEL TO ENSURE ALIGNMENT WITH BUSINESS PRIORITIES
Summarising the capability model, it can figuratively be considered a funnel as illustrated in Figure 3 below. First, the business strategy enters the funnel. Second, through several prioritisation exercises (steps 1-7), the strategy is translated into key projects that are ready to be executed to ensure the success of the strategy. This approach enables organisations to focus on closing the most critical gaps in their operating model first. For instance, it ensures organisations do not implement a technology initiative without also considering other potential gaps in the capability related to the Insights, Talent, Process, and Governance which may need to be closed first or in parallel.
 

Figure 3: Capability model illustrated as a funnel

Consequently, the capability model answers the question “how does the organisation operate and what capabilities must it have” as part of defining the operating model layer illustrated in the previously introduced Business Architecture Pyramid and Choice Cascade. The capability model collectively and exhaustively integrates the building blocks of the business-led digital transformation as illustrated on the left-hand side of the Business Architecture Pyramid in Figure 4.
 

Figure 4: Business Architecture Pyramid

BENEFITS WHEN USING A CAPABILITY MODEL

Applying the capability model to configure the transformation brings several benefits as it is a foundational structure to support collaboration, alignment, and flexibility. In our experience, organisations benefit from:

• A transparent overview of capabilities based on a bottom-up flow of information that allows management to make the correct prioritisations according to the strategy
• A holistic overview of each capability from multiple angles including HR and IT perspectives, which helps to break down silos and foster collaboration
• A common language across the organisation in terms of what the capabilities are and how they are linked together, which ensures there is transparency and alignment across all levels in the organisation
• Allowing ongoing monitoring of project delivery that links directly to business impact

DESIGNING FIT-FOR-PURPOSE SOLUTIONS

With this article, we have introduced the capability model which provides a holistic overview of the capabilities in your organisation, and we have outlined how it can be used as a management decision tool forming the basis for your transformation roadmap. However, the capability model is just a starting point for identifying where to focus first. In the next article, we will provide a perspective on how to go about designing end-to-end solutions that are fit for purpose and maximise business value.

Read the remaining articles in our series on business-led digital transformation:

• Article 1: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/a-business-led-approach-to-maximize-value-of-digital-transformations.html
• Article 2: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Setting-the-direction-for-a-business-led-digital-transformation.html
• Article 4: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Designing-end-to-end-solutions-that-are-fit-for-purpose.html
• Article 5: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Orchestrating-complex-transformations.html
• Article 6: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Maximising-value-from-transformations.html