Business Capabilities Are The Strongest Foundation For Tech Strategy

In developing a technology strategy for your organization, what will be your basis for deciding which technologies to pursue, when to pursue them, and how to implement them? In other words, what will be the foundation for your technology architecture and strategy? In considering this question, I assume we agree that technology strategy should directly support improvement of business outcomes, both now and over the long haul. To provide for the long haul, your technology architecture and strategy must be crafted to support a continuous stream of business change, both small incremental steps and large radical shifts.

Your strategy could begin with a list of hot technologies — perhaps even ones that business colleagues are clamoring for — but how would you know which of them would lead to the most important improvements in business outcomes? You could begin with your top executives’ current business plans and strategies — which would clearly address today’s priorities for improving outcomes — but over the long haul, business plans change, sometimes dramatically, making them an unstable foundation for technology strategy.

Since the goal of technology strategy is to improve business outcomes, let’s refine the question with that as our focus: What basis for technology architecture and strategy:

(a) Aligns best with the ways that business leaders conceive, plan, execute, and measure improvements to business outcomes,

(b) Provides the best structure for building technology implementations that align with and facilitate the ways that businesses change both now and over the long haul, and

(c) Best guides the prioritization, planning, architecture, design, and usage of technology within business improvement projects?

Succinctly stated, a CEO’s view of a business improvement generally follows a pattern something like this: “We will improve ABC (one or more measurable business outcomes) by improving XYZ (something that the organization does) through 123 (a specific means of changing XYZ).” For example, “We will improve profitability and consistency of foreign operations by improving our foreign exchange capability through tighter integration of sales forecasts and pricing with foreign exchange operations.”

The CEO’s view is centered on the organization’s capabilities. After an acquisition, an organization may merge its duplicate human resource capabilities, taking the best processes and practices from each. When a business outsources its customer contact center (or manufacturing, or IT, or whatever), it is outsourcing a business capability. When Charles Schwab reframed the market by inventing the discount brokerage, it reorganized and optimized a number of existing business capabilities and added a few new ones. Executives make business change decisions based on their understanding of how small and large changes to business capabilities will improve business outcomes.

As a tech strategy foundation, business capabilities meet requirement (a) — they align best with the cycle from conceiving to measuring outcome improvements. To meet requirement (b), we can study the ways in which business capabilities change, using the insights gained to design our technology architecture to change in the same ways that business capabilities change. To meet requirement (c), we can extend the CEO’s organizing structure — business capabilities as the basis for business improvements — down into the solution roadmaps, technology infrastructure plans, and change management plans that actually deliver improvements to business outcomes.

In short, business capabilities provide the best foundation for technology architecture and strategy. This means that, to both improve the business now and maintain forward business momentum over the long haul, you must reframe your architecture and strategy to align with and to directly connect your business capabilities to the real world business and technology implementations that embody them. This is what’s driving Forrester’s development of Business Capability Architecture.

Do you think there is a stronger foundation for technology architecture and strategy than business capabilities? How do you connect technology strategy to business outcomes? Talk to me...