Digital Capability: Building Lego Like Capability Into Business Competency

Digital Capability

Building Lego Like Capability into Business Competency

Pearl Zhu

Copyright @2017 Pearl Zhu

All rights reserved. No part of this book may be reproduced, stored, or transmitted by any means –whether auditory, graphic, mechanical, or electronic –without written permission of both publisher and author, except in the case of brief excerpts used in critical articles and reviews. Unauthorized reproduction of any part of this work is illegal and is punished by law.

ISBN: 978-1-387-01233-6

Contents

Introduction

Chapter 1 Digital Capability Assessment

Chapter 2 Digital Capability Dot-Connection

Chapter 3 Digital Capability Development

Chapter 4 Digital Capability Portfolio

Chapter 5 Digital Capability Maturity

Acknowledgement

About the Author

Introduction

The organization’s competency is based on a set of cohesive capabilities and how fast and effective they can be built upon.

Figure 1 Digital Capability Introduction

We are experiencing the major societal TRANSFORMATION from the industrial machine age to the information/knowledge /insight/ digital era. Digitalization implies the full-scale changes in the way business is conducted so that it’s a multi-dimensional planning and orchestration. Although living in the digital sea, you have to change with the tide, you also have to follow the well-defined principles which would guide you in decisions and how you relate to others, with which speed can you swim in the uncharted water, what capabilities help you survive and thrive, and how to laser focus on the destination without getting lost. These changes and transformations are reshaping our thinking and recasting the way we view ourselves, the systems of which we are the part, the environments in which we live. Organizations have to transform the underlying functions, processes and build a unique set of digital capabilities to develop the core business competency in order to adjust to the digital speed.

A capability is an ability that an organization, person, or system possesses for either problem solving or making a certain achievement. A business capability is the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. The corporate capability is the collective ability to implement strategy, innovation and make changes. Traditional management often focused on process or functional based business views which are perceived via inside-out, single-dimensional operational lens. Capability views seem to be more open to considering both internal or external sourcing and provide a level of abstraction that allows more open considerations of the business ecosystem from the multidimensional lens. As capability is an acquired and organized ability within a company and takes hard work to put in place, it can therefore not be completely transferred because of the degree of organizational learning and organization that goes with it. So, the high-mature organizational capability is the digital business differentiator, to keep the business unique, competitive and innovative, to improve business maturity significantly. Therefore, the organization should spend more resources upon crafting unique business capabilities and capturing business growth opportunities.

The purpose of the book "Digital Capability - Building Lego-Like Capabilities into Core Business Competency is to provide an insightful understanding of assessing, developing, and managing organizational capabilities in a structural way. The organization’s competency is based on a set of cohesive capabilities and how fast and effective they can be built upon. The high-mature organizational capability is the digital business differentiator, to keep the business unique, competitive, and innovative, to improve business maturity significantly. The capability views enable dot connections and help the business identify actuality, capability, and potentiality," build Lego-like capabilities into core business competency and improve the success rate of strategy execution and overall business maturity.

Chapter 1 Digital capability assessment: A good definition for a capability is the ability of the business to consistently deliver an expected result to the marketplace. A business capability describes what is a business entity in the organization, what is their purpose and output to the enterprise. Business capabilities are different from the mere sum of individual abilities and skills of its members. Business processes underpin business capabilities, and business culture nurtures capability coherence. It’s about what we do as a company, how we do it. It’s the collective capabilities to ensure the organization as a whole can achieve more even it is consist of a group of normal people. Business capabilities are fundamental pillars to achieve the corporate strategy, and digital capabilities are dynamic and recombinant by nature, without them, strategy execution cannot be sustained.

Chapter 2 Capability dot connection: Digital capabilities directly decide the overall organization’s competency, and how well they can make the digital transformation, deliver the value to the customers and build a long term winning position. Connecting the dots, both across and within organizational boundaries, is the great practice to understand, map, and develop the unique set of business capabilities. Few organizations have found a way to reward the type of thinking that allows people to connect the dots. Dot connecting is knowledge alignment and innovation stimulation.

Chapter 3 Digital capability development: Business capability provides a differentiation and the ability to do things and finish tasks in a consistent manner. It is important to take the logical steps for managing a typical capability lifecycle which spans need, requirements, acquisition, in-service, obsolescence, and disposal. First, identify your business core capabilities, and hone them into organization-wide competency. Identify the capability gaps for strategy management; also, comparing your set of capabilities with competitors' to ensure that it is developing differentiated capabilities to gain unique competency.

Chapter 4 Digital capability portfolio: Enterprise capability management, in essence, consists of a portfolio or matrix of capabilities that are used in various combinations to achieve outcomes. Within that portfolio, a capability will be transient unless managed and maintained over time. To stay competitive, companies must go beyond experimenting with digital, build solid digital capabilities, manage a healthy digital capability portfolio, and commit to transforming themselves into a fully digital business powerhouse.

Chapter 5 Digital capability maturity: All businesses have certain capabilities, what matters is maturity, the high-mature set of business capabilities can make organizations more adaptable to fulfill their strategy and drive enterprise-wide digital transformation. Compared to industrial capabilities, digital business capabilities are more complex in design, with the synthetic nature requiring cross-functional collaboration, embedding agility into processes for adapting to the changes. The right set of high mature digital capabilities directly decides the overall organization’s competency.

Figure 2 Digital Capability in Metaphors

Let capability shine. Silo thinking, overly rigid organizational hierarchy, inflexible business processes, or negative working environments often block capability. Blocking capability is to stifle innovation, decelerate business speed, lock potential, and drag down human progress. Let capability shine. The capability-based strategy is not only leading to a destination - the business vision but also cultivating and optimizing the differentiated business competency dynamically and proactively, to further improve business effectiveness and maturity. Here are three metaphorical understanding about digital capabilities.

●       The Lego-like digital capabilities: Most of the enterprise capabilities need to be woven cross-functionally, it takes seamless communications and collaborations to bridge functional silos and fine-tune key business processes for the business as a whole to build a set of dynamic and high-cohesive organizational capabilities. Modular business capabilities enable flexible strategic planning and execution with agility. The digital capability is like Lego toys. It's about breaking down the business capability blocks, recombine them into new business competency to achieve the business goals. There is the variety of hard and soft business elements such as skills (ability), knowledge (internal/external), policies/routines, business processes, any type of tangible/intangible resources, assets, cultures, and forms of communications. These modular business capabilities can be recombined into dynamic digital capabilities with much shorter building cycle.

●       The burger-like core competency: Just like the tastiest part of the burger is in the middle, the core competency is the business differentiator. A core competency is a harmonization of multiple capabilities such that it permeates to the entire organization with a focus, and in alignment with the resource-based view, it is at the same time valuable, rare, and difficult to imitate. Therefore, organizations have to continually work on developing and building differentiated and dynamic business capabilities into multiple competencies. The goal of all businesses is to generate revenue, increase net-new business and enlarge their footprint, and monetize their core competencies.

●       A garden-like digital capability portfolio: Metaphorically, organizations are like vegetable gardens, where each capability is a different type of vegetable growing in the garden. You can retard some plants and encourage others by selective nurturing - plant or sow completely new vegetables. What you want, however, is the right mix of productive plants to match your culinary needs. The business capability management and architecture activities are like landscaping, the goal is to design a scene with fully taking advantage of resources effectively.

The digital ecosystem is complex and volatile, for complex problem solving, understanding context is often the first and the important step in framing the problem, create the relevant context to make a more lasting solution - without it, you are working without any boundaries, or basis for understanding what you are doing. So, if the organization can actively influence its environment, it means that it can actively develop its unique set of capabilities, and build differentiated business competency to adapt to the environment proactively.

Chapter 1 Digital Capability Assessment