Capabilities & Value Streams: Business Architecture's Essential Alliance

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There is good news on the business architecture front. The level of discourse has elevated dramatically around how to effectively represent the business architecture. At the forefront of this discussion are two essential focal points: the business capability and the value stream. While certain camps have rallied around one or the other, transformative business architecture can only be achieved by incorporating both concepts into those efforts. A quick primer on business capability and the value stream puts our discussion into perspective.

The business capability is “a particular ability or capacity that a business may possess or exchange to achieve a specific purpose or outcome”.[i] Capability maps contain boxes decomposed into subset boxes. Capabilities are expressed in noun format, such as “Product Management”. Each decomposition level provides a more granular view of what a business does. The capability map is a pure business view, contains only capabilities and uses no arrows. There is one capability map for an enterprise with every capability rationalized into a single view. Executives use capability maps as input to strategic business analysis and planning, particularly when viewed as a color-coded “heat map”.

The value stream is an end-to-end collection of activities that create a result for a customer.[ii] Value streams are commonly represented as a series of progressive stages that move from left to right with an arrow connecting each stage. A value stream is initiated by an internal or external stakeholder and ends when stakeholder gratification is achieved. Value is accrued at each stage. Stages are expressed in verb / noun format such as “Process Payment”. Consider a value stream where a policy is prospected, sold, recorded, paid for and the stakeholder is notified accordingly. Value streams should not be confused with business processes because they represent a high-level view that aggregates all paths, rolled up into an executive friendly view void of decision structures, alternate routes or information.

The capability map and value stream are used for root cause analysis, strategic planning, funding allocation and executive communication. Value streams enable a wide range of capabilities and capabilities can be mapped to each stage of the value stream. Many capabilities map to multiple value streams. This is where best practices and standards become important. Best practice-based mappings leverage a simple data model or a metamodel to map capability, value stream and other aspects of business architecture. Basic capability / value stream mappings used in practice include:

  • Capability level one maps to major organization unit and information group
  • Capability level one maps to capability level two, which maps to capability level three[iii]
  • Capability level three maps to stages within the value stream
  • Value stream stage decomposes into business process

We note that this last bullet item is beyond the scope of this article but this mapping is essential to solution deployment. The union of capability and value stream provides a powerful basis for deploying a wide range of analysis and transformation scenarios.

Value streams decompose into business processes allowing you to visualize the business “in motion” while capabilities visualize the business “at rest”. Capabilities mapped to various value stream stages also map to organization units, information and applications (application is an IT architecture domain), creating robust focal points for transformation activities. Capability based transformation addresses core organization, collaboration and backend IT architecture requirements while value stream / process based transformation enables business process alignment and automation across critical aspects of an enterprise. Collectively, this approach allows you to divide issues and solutions into manageable chunks, build near-term value with customer facing capabilities and apply more measured approaches for core, entrenched backend capabilities.

If you are wondering why I introduced aspects of IT architecture into this discussion, it is because transformation initiatives rarely succeed when attempted in total isolation from IT architecture. The reverse is even truer. Suggesting otherwise is not only impractical but irresponsible. While business architecture analysis and planning must stand on its own, creating a viable transformation roadmap requires IT architecture mapping in the vast majority of scenarios. And marrying capability with value stream within the business architecture is the lynchpin to achieving success.

When either the business capability or the value stream is left out of the equation, organizations face a much higher risk of having a transformation initiative go awry. So where can we find out about how to leverage business capability and value stream concepts within business transformation initiatives? Several options are available. Neal McWhorter and I have a new book out – Business Architecture: The Art and Practice of Business Transformation. We discuss these ideas using a variety of industry examples and case studies.

Additional information will also continue to emerge from OMG’s Business Architecture Special Interest Group (BASIG). Sample models have been posted to the BASIG wiki page showing capability / value stream and related business and business / IT mappings. The BASIG will be posting more formal views of these models in coming months. Finally, the recently established Business Architecture Guild will be producing a Business Architecture Body of Knowledge in 2011 that will expand dramatically on these concepts. In the mean time, keep up the good work.

[i] “A Business-Oriented Foundation for Service Orientation”, Ulrich Homann, 2006[ii] “Enterprise Business Architecture”, Whittle & Myrick, Auerbach, 2005[iii] Note: Capability can be decomposed further.

William Ulrich is President of TSG, Inc. and a management consultant who focuses on business architecture / IT architecture alignment. He may be reached via his web site at www.tsgconsultinginc.com.

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