Capability Mapping for Software Companies

1. Capability Mapping as Software Developer's Strategic Advantage www.capstera.com 1

2. Transform Your Software Business Through Capability-Based Planning and Execution. In today's rapidly evolving software landscape, organizations ▪ struggle to align strategic vision with operational execution. Business Capability Maps provide the missing link, offering a comprehensive view of what your software company does— independent of how it's done—creating a stable foundation for strategic planning and transformation initiatives. Software development companies face unique challenges in ▪ capability modeling due to their rapid innovation cycles, evolving delivery models, and complex value chains. A well- crafted Business Capability Map enables your organization to visualize capabilities, identify gaps, eliminate redundancies, and strategically align investments with business priorities— transforming abstract strategy into concrete execution plans. www.capstera.com 2 2

3. Understanding Business Capabilities in Software Development Context 1 Business capabilities represent the fundamental building blocks of what your software company does to create value. Unlike processes that focus on how work is performed, capabilities provide a stable, outcome-focused view of your organization's core functions. ▪ Capability Definition Clarity: A business capability describes what your organization does to enable business outcomes, independent of how it's performed, who performs it, or where it's performed. ▪ Software Industry Relevance: Software companies require specialized capability models that reflect the unique aspects of digital product development, iterative delivery, and technology-driven innovation cycles. ▪ Strategic Planning Foundation: Capabilities provide the ideal lens for strategic discussions because they remain relatively stable while processes, organizational structures, and technologies continually evolve. ▪ Transformation Framework: A capability map creates the essential skeleton for transformation initiatives by connecting strategic objectives to specific capability investments. ▪ Common Language Creation: The capability-based approach establishes a shared vocabulary that bridges the communication gap between business and technology stakeholders. www.capstera.com 3

4. The Anatomy of an Effective Software Capability Map 2 A comprehensive capability map follows a hierarchical structure that accommodates both breadth and depth. This structure enables stakeholders to navigate from enterprise-wide views to detailed capability components. ▪ Level 1 - Capability Domains: These represent the highest- level groupings such as Product Management, Software Development, Customer Success, and Business Operations. ▪ Level 2 - Capability Groups: Each domain breaks down into logical groups, such as "Software Development" containing Development Planning, Engineering, Quality Assurance, and Release Management. ▪ Level 3 - Capabilities: These represent discrete business functions like Requirements Management, Code Development, Testing, and Deployment Automation. ▪ Level 4 - Capability Components: The most granular level describes specific functions like Test Case Design, Automated Testing, and Performance Testing within the Testing capability. ▪ Cross-Domain Connections: Effective maps illustrate relationships between capabilities across different domains, revealing interdependencies critical for transformation planning. www.capstera.com 4

5. Developing Your Software Business Capability Taxonomy 3 Building an effective taxonomy requires balancing comprehensiveness with usability. This structured approach ensures your capability map serves as a practical tool rather than a theoretical exercise. ▪ Industry Reference Leverage: Begin with software industry reference models from APQC, BIZBOK, or technology-specific frameworks to avoid starting from scratch. ▪ Capability Naming Conventions: Establish consistent naming patterns using a noun-verb format that clearly communicates the what, not the how (e.g., "Product Roadmap Management" rather than "Creating Product Roadmaps"). ▪ Decomposition Principles: Apply consistent rationale for breaking capabilities into sub-capabilities, ensuring logical hierarchies that maintain capability independence. ▪ Capability Definition Format: Create standardized capability definition templates that include purpose, outcomes, key performance indicators, and information requirements. ▪ Granularity Balance: Decompose capabilities only to the level needed for strategic decision-making—typically 3-4 levels deep—to prevent the map from becoming unmanageably detailed. www.capstera.com 5

6. Identifying Software Development Core Capabilities 4 Software development companies possess distinct capability requirements that reflect their unique business models and value creation approaches. These core capabilities form the center of your map. ▪ Product Innovation Engine: This capability domain encompasses market research, concept development, and product planning functions that drive your software company's innovation pipeline. ▪ Software Development Factory: This domain includes all capabilities related to designing, building, testing, and deploying software products and features. ▪ Customer Success Ecosystem: Software companies require robust capabilities for implementation, adoption, support, and value realization that extend beyond traditional customer service. ▪ Technology Platform Management: Modern software businesses need capabilities for managing architectural standards, technical debt, platform evolution, and infrastructure scalability. ▪ Digital Business Operations: Software-specific operational capabilities include subscription management, usage analytics, feature adoption tracking, and digital delivery infrastructure. www.capstera.com 6

7. Did You Know According to research by The Open Group, organizations ▪ with well-defined capability maps are 2.5x more likely to successfully execute major digital transformation initiatives than organizations lacking this architectural foundation. www.capstera.com 7

8. Mapping Enabling and Strategic Capabilities 5 Beyond core capabilities, software companies must identify the enabling functions that support value delivery and the strategic capabilities that drive competitive differentiation. ▪ Enabling Capability Identification: These cross-cutting capabilities include talent acquisition, financial management, governance, and technology services that make core capabilities possible. ▪ Strategic Capability Prioritization: Identify capabilities that directly enable competitive differentiation, such as AI development expertise, UX innovation, or unique data analytics offerings. ▪ Capability Evolution Tracking: Document capability maturity stages from emerging capabilities to those being enhanced or phased out as part of strategic evolution. ▪ Value Chain Alignment: Connect capabilities to your software company's value chain to ensure the map reflects how your organization actually creates customer value. ▪ Ecosystem Capability Integration: Modern software companies increasingly rely on partner capabilities—identify these ecosystem dependencies in your capability map. www.capstera.com 8

9. Assessment and Heat Mapping Techniques 6 Once capabilities are documented, assessment techniques reveal gaps, strengths, and investment priorities that drive transformation planning. This analytical layer transforms the map from documentation to decision support tool. ▪ Maturity Assessment Framework: Develop a consistent scale (typically 1-5) to evaluate each capability's current maturity level against industry benchmarks and strategic requirements. ▪ Performance Gap Identification: Measure the gap between current capability performance and required future state to prioritize improvement investments. ▪ Strategic Importance Classification: Rate each capability's contribution to strategic objectives, creating a heat map that highlights critical focus areas. ▪ Investment Portfolio Alignment: Analyze how current project investments map to capabilities, identifying over-invested and under-invested areas. ▪ Competitive Differentiation Analysis: Evaluate which capabilities provide unique competitive advantage versus those that are industry table stakes requiring only adequate performance. www.capstera.com 9

10. Accelerating Time-to-Value with Pre- Built Capability Maps 7 While custom capability mapping delivers long-term value, starting with pre-built and customizable maps dramatically accelerates time-to-value and reduces resource requirements. This approach provides immediate benefits while allowing for tailored evolution. ▪ Rapid Foundation Establishment: Pre-built maps provide an 80% solution that can be operational in weeks rather than the months typically required for ground-up development. ▪ Industry Best Practice Integration: Quality pre-built maps incorporate industry standards and best practices that might be missed in an internally developed approach. ▪ Resource Requirement Reduction: Purchasing pre-built maps requires significantly fewer internal resources— typically 60-70% less effort than building from scratch. ▪ Accelerated Strategic Application: Organizations can rapidly progress from capability documentation to strategic application, delivering business value months earlier. ▪ Risk Mitigation: Pre-built maps reduce the risk of structural flaws, taxonomic inconsistencies, and change management challenges common in first-time mapping efforts. www.capstera.com 10

11. Technology Integration - Capability- Based Application Portfolio Management 8 Software companies face unique challenges in managing complex application portfolios. Capability mapping provides the essential framework for rationalizing technology investments. ▪ Application-to-Capability Mapping: Document which applications support which business capabilities, revealing redundancies, gaps, and integration needs across your technology landscape. ▪ Technical Debt Prioritization: Identify where technical debt creates the greatest business risk by understanding which capabilities are supported by aging or fragile applications. ▪ Investment Rationalization: Use capability performance and strategic importance ratings to prioritize application investments, upgrades, and retirement decisions. ▪ Architecture Governance Framework: Establish capability- based criteria for evaluating new technology investments, ensuring they address strategic capability needs rather than creating siloed solutions. ▪ Platform Strategy Alignment: Define which capabilities should be supported by common platforms versus specialized applications based on their role in your software business model. www.capstera.com 11

12. Did You Know According to Gartner, organizations that leverage pre- ▪ built capability map frameworks reach effective implementation 4-6 months faster than those building completely custom maps, with total cost reductions averaging 40-60%. www.capstera.com 12

13. Capability-Based Strategic Planning and Roadmapping 9 Capability maps transform abstract strategies into concrete implementation plans by connecting strategic objectives to specific capability enhancements. This approach ensures investments directly support strategic priorities. ▪ Strategy Translation Mechanism: Convert strategic goals into capability enhancement requirements by identifying which capabilities must be strengthened to achieve desired outcomes. ▪ Initiative Portfolio Optimization: Evaluate proposed initiatives based on how effectively they address capability gaps that impact strategic priorities. ▪ Roadmap Sequencing Logic: Develop transformation roadmaps based on capability dependencies, ensuring foundational capabilities are addressed before those that build upon them. ▪ Investment Alignment Validation: Use the capability map to validate that budget allocations reflect strategic priorities rather than organizational politics or legacy spending patterns. ▪ Progress Measurement Framework: Establish capability-based metrics to track transformation progress beyond project milestones, focusing on actual business capability improvements. 13 www.capstera.com 13

14. Organizational Alignment Through Capability Ownership 10 Clear capability ownership is essential for effective governance and accountability. This dimension of the capability map connects what the organization does to who is responsible for performance and evolution. ▪ Capability Owner Assignment: Designate specific executives or managers accountable for the performance, maturity, and strategic alignment of each capability. ▪ Governance Structure Definition: Establish capability-based governance forums that bring together stakeholders from across organizational silos that contribute to shared capabilities. ▪ Collaborative Improvement Framework: Create cross- functional improvement mechanisms for capabilities that span multiple departments, ensuring coordinated enhancement efforts. ▪ Talent Strategy Alignment: Connect capability requirements to talent development programs, ensuring your organization builds the skills needed for strategic capabilities. ▪ Organizational Change Navigation: Use the capability map to guide organizational restructuring, minimizing disruption by maintaining focus on capability outcomes rather than just reporting lines. www.capstera.com 14

15. Data Architecture Integration with Capability Mapping 11 For software companies, data is a core asset that requires architectural clarity. Connecting data architecture to capability mapping ensures information resources effectively support business needs. ▪ Information Domain Alignment: Map information domains to the capabilities they support, creating clear connections between data assets and business outcomes. ▪ Data Governance Prioritization: Focus data quality and governance efforts on the information resources that support strategically important capabilities. ▪ Master Data Relationship Clarification: Identify which capabilities create, consume, and modify master data entities, establishing clear data stewardship responsibilities. ▪ Analytics Capability Enhancement: Define analytics capabilities required to support data-driven decision-making across product development, customer success, and operational domains. ▪ Data Product Development: Identify opportunities to create data-based products and services by understanding the unique data assets created by your existing capabilities. www.capstera.com 15

16. The Role of Capabilities in Product Portfolio Management 12 Software companies must continually evolve their product portfolios to maintain market relevance. Capability mapping provides the foundation for strategic product decisions that maximize organizational leverage. ▪ Capability Reuse Analysis: Identify common capabilities that should be leveraged across multiple products to maximize efficiency and consistency. ▪ Product Differentiation Focus: Direct innovation investments toward capabilities that drive unique product value propositions rather than duplicating commodity functions. ▪ Build vs. Buy Decision Framework: Establish criteria for determining which capabilities should be built internally versus sourced from partners based on strategic importance. ▪ Product Roadmap Alignment: Ensure product roadmaps build complementary capabilities across the portfolio rather than creating redundant or conflicting investments. ▪ End-of-Life Decision Support: Base product sunset decisions on capability evolution patterns, maintaining capabilities with ongoing strategic value while retiring those that no longer differentiate. www.capstera.com 16

17. Did You Know Companies that implement capability-based planning ▪ report 24% higher strategic alignment scores and 18% more effective resource allocation compared to those using traditional project-based portfolio management, according to Strategy& research. www.capstera.com 17

18. Capability Mapping for Mergers and Acquisitions 13 Software industry consolidation requires robust approaches to integration planning. Capability mapping provides the ideal framework for evaluating and integrating acquisitions. ▪ Acquisition Target Evaluation: Assess potential acquisitions based on how their capabilities complement or enhance your organization's capability map. ▪ Integration Priority Identification: Determine which capabilities should be rapidly integrated, which can remain separate, and which might be maintained as centers of excellence. ▪ Redundancy Resolution Framework: Create objective criteria for resolving capability overlaps, ensuring decisions serve strategic objectives rather than organizational politics. ▪ Capability Transfer Methodology: Develop approaches for transferring tacit knowledge and expertise related to critical capabilities from acquired organizations. ▪ Culture and Capability Connection: Recognize how organizational culture impacts capability performance, addressing cultural integration as a critical success factor. www.capstera.com 18

19. Evolving Your Capability Map for Continuous Relevance 14 Business capability maps must evolve as your software business model and strategic priorities change. This governance approach ensures the map remains a living strategic tool rather than static documentation. ▪ Regular Review Cadence: Establish a predictable cycle for reviewing and updating the capability map, typically aligned with strategic planning processes. ▪ Emerging Capability Identification: Create mechanisms for identifying new capabilities required by evolving business models, customer expectations, or technological innovations. ▪ Sunset Capability Archiving: Document capabilities being phased out to maintain historical knowledge while keeping the active map focused on current and future needs. ▪ Strategic Alignment Validation: Periodically reassess capability strategic importance ratings based on evolving company priorities and market conditions. ▪ Metadata Management: Maintain capability definitions, assessment history, and relationship data to preserve the map's value as an organizational knowledge asset. www.capstera.com 19

20. Practical First Steps to Capability Mapping Success 15 Begin your capability mapping journey with these proven approaches that build momentum while managing complexity. These practical steps ensure early wins while establishing the foundation for comprehensive mapping. ▪ Start with Strategic Focus: Begin mapping the capabilities most relevant to current strategic initiatives rather than attempting to document every capability simultaneously. ▪ Leverage Existing Knowledge: Mine strategic plans, process documentation, system inventories, and organizational charts to identify capabilities already documented in different forms. ▪ Engage Cross-Functional Stakeholders: Include perspectives from business, technology, operations, and strategy teams to ensure the map reflects diverse viewpoints. ▪ Use Iterative Development: Build the map in layers, starting with high-level domains and progressively adding detail rather than attempting comprehensive detail immediately. ▪ Connect to Immediate Decisions: Apply the evolving map to current strategic decisions to demonstrate value while the mapping effort continues, creating a virtuous cycle of improvement. www.capstera.com 20

21. Takeaway Business Capability Maps provide software development companies with the strategic foundation to align technology investments with business priorities, eliminate redundancies, identify gaps, and create coherent transformation roadmaps. Capability mapping creates a stable framework for decision- making amid constant technological and organizational change by focusing on what the business does rather than how it's done. Whether built from scratch or accelerated through pre-built frameworks, a well-crafted capability map transforms abstract strategy into concrete execution plans while providing a common language that bridges business and technology perspectives. 21 www.capstera.com 21

22. Next Steps 1. Assess Your Current State: Inventory existing documentation that could inform your capability map, including strategic plans, process models, and system catalogs. 2. Define Your Mapping Scope: Determine whether to begin with enterprise-wide mapping or focus on strategic domains requiring immediate attention. 3. Establish Governance: Designate capability mapping ownership, update processes, and integration points with existing architecture and planning functions. 4. Consider Accelerators: Evaluate pre-built capability maps that could provide a foundation for rapid customization to your organization's specific needs. 5. Connect to Strategic Initiatives: Apply capability mapping concepts to a current strategic initiative to demonstrate immediate value while building mapping expertise. 22 www.capstera.com 22

23. Capstera is a treasure trove for Business and Enterprise Architects. ▪ Capability Maps for Various Functions and Sectors. ▪ Value Streams ▪ Business Data Models ▪ Insights ▪ Tools, Templates, and Tutorials Stay in touch with Capstera. www.Capstera.com https://www.linkedin.com/company/capstera https://www.X.com/Capstera https://www.facebook.com/capstera Note: Capstera’s products and their contents may differ from the general information offered in these guides.) 23 www.capstera.com 23

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