Kudryavtsev D., Grigoriev L., Bobrikov S.Strategy-focused and value-oriented capabilities: methodology for linking capabilities with goals and measures // Proceedings of the 1st International Workshop on Capability-oriented Business Informatics (CoBI) as part of the 16th IEEE Conference on Business Informatics, Geneve, 14-17 July, 2014. PP. 15-26. http://cbi2014.unige.ch/ Capability-based enterprise modeling is gaining presence in business practice. Capability is the central concept of the resource-based view of a firm, and it helps to bridge strategy with business operations. The use of capabilities for behavior modeling provides flexibility, stimulates reuse, and helps the firm to focus on its core competencies. In order to benefit from this approach, capabilities must be strategy-focused and value-oriented. In other words, strategic goals and measures must be linked to capabilities. The paper provides a methodology to solve this task, which integrates a set of principles (way of thinking), a step-by-step method (way of working), viewpoints, and a meta-model (way of modeling). The article also points to the enterprise architecture management tool, which supports the suggested methodology.

1. Strategy-focused and value-oriented
capabilities: methodology for linking capabilities
with goals and measures
Dmitry Kudryavtsev
Lev Grigoriev
Svyatoslav Bobrikov
2014
1. 2. 3.
1, 2, 3
1
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2. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Outline
1. Introduction
2. Principles for linking capabilities with goals and
measures (Way of thinking)
3. Method for linking capabilities with strategic goals and
measures (Way of working)
4. Meta-model and viewpoints (Way of modeling)
5. IT support - ORG-Master (Way of supporting)
6. Application of the approach
7. Related work
8. Conclusion
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3. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Resource-based view (RBV) and capabilities
Basis for the competitive advantage of a firm lies primarily in the application of a
bundle of valuable tangible or intangible resources at the firm's disposal
Wernerfelt B. (1984). The Resource-Based View of the Firm // Strategic Management Journal. Vol. 5,
No 2. P. 171 - 180.
RBV explains that a firm’s sustainable competitive advantage is reached by virtue of
unique resources being valuable, rare, inimitable, non-tradable, and non-
substitutable, as well as firm-specific (VRIN-resources).
Barney J. Firm resources and sustained competitive advantage //Journal of management. – 1991. – Т.
17. – №. 1. – С. 99-120.
Core competency is a specific factor that a business sees as central to the way
the company or its employees work.
Prahalad, C. K. and G. Hamel (1990). The core competence of the corporation, Harvard Business
Review, 68(3), pp. 79-91.
Internal resources and capabilities provide the basic direction for a firm’s strategy.
Resources and capabilities are the primary source of profit for the firm.
The capabilities of a firm are what it can do as a result of teams of resources
working together. A firm’s capabilities can be identified and appraised using a
standard functional classification of the firm’s activities.
Grant R. M. The resource-based theory of competitive advantage: implications for strategy formulation.
– California Management Review, University of California, 1991. – С. 114-135.
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4. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Definitions for Business Capabilities (1)
Merriam Webster‘s Dictionary
Capability: the ability to do something (short)
1: the quality or state of being capable; also : ABILITY
2: a feature or faculty capable of development : POTENTIALITY
3: the facility or potential for an indicated use or deployment
Wikipedia
A Capability is the ability to perform or achieve certain actions or
outcomes through a set of controllable and measurable faculties,
features, functions, processes, or services
unique combination of resources allowing the firm to take
specific actions (e.g., marketing, R&D, etc.) that are intended to
create value for customers.
Sirmon, D. G., Hitt, M. A., & Ireland, R. D. (2007). Managing firm resources in dynamic
environments to create value: Looking inside the black box. Academy of Management
Review, 32(1), 273-292.
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5. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Definitions for Business Capabilities (2)
A business capability defines the organization’s capacity
to successfully perform a unique business activity.
Capabilities:
• Are the building blocks of the business,
• represent stable business functions,
• are unique and independent from each other,
• are abstracted from the organizational model,
• capture the business interests.
Cameron, B.; Kalex, U.: Webinar (Web Seminar) on
Business Capability Management; Forrester Research &
alfabet AG, June 2009.
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6. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Capability modeling approaches
Microsoft approach
Homann, U. (2006). A business-oriented foundation for service
orientation. MSDN, Microsoft Corporation.
IBM Component business model (CBM)
Cherbakov, L., Galambos, G., Harishankar, R., Kalyana, S., &
Rackham, G. (2005). Impact of service orientation at the business
level. IBM Systems Journal,44(4), 653-668.
Pohle, G., Korsten, P., Ramamurthy, S., & Foecking, S. (2005). The
specialized enterprise: A fundamental redesign of firms and
industries. IBM Institute for Business Value.
Other approaches
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7. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Capability modeling approaches
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8. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Levels of enterprise engineering and capability role
Kudryavtsev D., Grigoriev L., Koryshev I.
Applying Quality Function Deployment method for business architecture alignment. 8th European
Conference on IS Management and Evaluation (ECIME 2014), Business Architecture Modelling mini track,
Ghent, Belgium, 11-12 September 2014. Accepted paper (2014)
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9. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Strategy-focused and value-oriented capabilities
Capabilities
Goals Measures
Priorities
Evaluation
Necessary competencies
Core competencies
Areas for investments and outsourcing
IT strategy
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10. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of thinking, principles
1. goal cascading follows the structure of the capability
maps (or more generally, behaviour structure).
2. two dimensions for capability decomposition.
3. capability not only includes “primary” value-creating
activities, but also
– the necessary domain-specific managerial capabilities
– the requirements for enabling capabilities (which can be received
as a service).
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11. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Example 2-dimensional decomposition of the “Selling” activity
Types of Selling
Sell what?
• Sell process
• Sell service
• Sell product
Sell to whom?
• Sell to businesses
• Sell to consumers
Sell how?
• Sell via store
• Sell via face-to-face sales
• Sell via other direct marketing
Sell via what channel?
• Sell direct
• Sell via broker
• Sell via distributor
Components (Parts) of Selling
Identify
potential
customers
Identify
potential
customers'
needs
Inform
potential
customers
Obtain
order
Deliver
product
or
service
Receive
payment
Manage
customer
relationships
11
Malone, T. W., Crowston, K. G., Lee, J., Pentland, B., Dellarocas, C., Wyner, G., Quimby, J., Osborn, C.
S., Bernstein, A., Herman, G., Klein, M., & O’Donnell, E. Tools for inventing organizations: Toward a
handbook of organizational processes. Management Science, 1999, 45, 3 (March), 425-443 (1999)

12. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Two dimensions for activity and capability decomposition
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13. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Capability decomposition viewpoint
Primary capability X
…
Capability component X.1
Capability
component
X.2
…
Capability type / Capability value configuration 2
Capability type / Capability value configuration 1
Capability component X.1.1
Capability component X.1.2
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14. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Capability decomposition example
Sales capability
Selling to retail chains
Selling to small retail stores
Sales leads
Managing
sales orders
Managing
customer
relationships
ContractingPresale
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15. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Adding managerial and enabling elements to primary capability
Kudryavtsev, D., Grigoriev, L. Systemic approach towards enterprise functional decomposition // The workshop
“Convergence of Business Architecture, Business Process Architecture, Enterprise Architecture and Service
Oriented Architecture” within the 13th IEEE Conference on Commerce and Enterprise Computing, September 5-7,
2011. P. 310-317.
+
+
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16. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of working, Method
Two streams: I. capability structuring and II. goals/requirements specification
Primary capability X
Capability type 2 (“WHAT”- and/or “to WHOM” facets)
Capability type 1 (“WHAT”- and/or “to WHOM” facets)
Capability
component X.1
Capability
component X.2
…
Capability
component X.3
Capability type 4 (“HOW” and/or other technology-influencing facets)
Capability type 3 (“HOW” and/or other technology-influencing facets)
Goal 1
Goal 2
Goal 3
Enabling elements
… … … … … …
Management elements
… … … …
1
2
3 4
5
6
7
8
9
9
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17. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of modeling: Metamodel
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18. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of modeling (viewpoints): goal-cascading matrices
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19. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of modeling (viewpoints): from Capability to Strategy map
Learning&
Growth
perspective
Internalperspective
Primary capability X
…
Capability component X.1
Capability
component
X.2
…
Capability type / Capability value configuration 2
Capability type / Capability value configuration 1
Capability component X.1.1
Management capabilities
Enabling capabilities
Operational planning for X other
Capability Y.1 Capability Y.2
Customer perspective Financial perspective
Capability type 1
Capability
component X.1
Capability
component X.1
G 2.1 G 2.2
G 3.1 G 3.2 G 3.3 G 3.4
Capability type 2
G 2.3 G 2.4
Capability Y.1 Capability Y.2
G 5.1 G 5.2 G 5.3 G 5.4
G 1.1 G 1.2 G 1.4 G 1.5
CC X.1.1 CC X.1.2
G 4.1 G 4.2 G 4.3 G 4.4
Capability component X.1.2
…
Operational planning
for X
G 3.5 G 3.6
…
… …
…
… …
G 1.3
Capability map viewpoint Strategy map viewpoint
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20. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Example: from Capability to Strategy map
Internalperspective
Sales capability
Selling to retail chains
Selling to small retail stores
Sales leads
Managing
sales orders
Managing
customer
relationships
ContractingPresale
Capability type 1
Capability
component X.1
Capability
component X.1
G 2.1 G 2.2
G 3.1 G 3.2 G 3.3 G 3.4
Capability type 2
G 2.3 G 2.4
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21. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Example: Strategy map
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22. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Example: Goal-Subgoal matrix
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23. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of supporting: ORG-Master software tool (general framework)
Grigoriev L., Kudryavtsev D. Non-diagrammatic method and multi-representation tool for
integrated enterprise architecture and business process engineering // Proceedings of 15th IEEE
Conference on Business Informatics (CBI 2013), 15-18 July, 2013, Vienna, Austria. PP. 258-263.
Knowledge
distribution
Knowledge
acquisition
Knowledge
structuring and
integration
Non-structured
and semi-
structured
information
Integrated
model
Diagrams
Matrices
“Internal”
representation
Diagrams’
Text reports
Table reportsClassifications &
Matrices
“External”
representations
“External”
representations
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24. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of supporting: ORG-Master software tool (general framework)
Enterprise
model editor
(classifications
& matrices)
Enterprise
model
Reporting
and
query
module
Documents
Diagrams
2
Meta-editor
Diagram editors
Query
results
Diagrams 1
Metamodel
(incl. ontology)
Web-portal
Non-structured
and semi-
structured
information
Grigoriev L., Kudryavtsev D. Non-diagrammatic method and multi-representation tool for
integrated enterprise architecture and business process engineering // Proceedings of
15th IEEE Conference on Business Informatics (CBI 2013), 15-18 July, 2013, Vienna,
Austria. PP. 258-263.
24

25. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Way of supporting: ORG-Master software tool
(capability-related functionality)
Enterprise
model editor
(classifications
& matrices)
Enterprise
model
Reporting
and
query
module
Documents,
Query results,
Web-portal
Diagram
editor
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26. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Application of the approach
This methodology or its parts helped to develop and
deploy:
• corporate strategies for 5 companies,
• business strategies for 7 companies,
• functional strategies for 4 companies.
Business Engineering Group provides consultancy, tools,
research, best practice models and training in the following
service lines: enterprise architecture management, business
model management, strategic business process management,
capability management, organizational design, knowledge
management and IT strategy.
Business Engineering Group has more than 15 years experience
with projects in Russia (from Saint-Petersburg and Moscow to
Vladivostok) and CIS countries (Ukraine, Kazakhstan etc).
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27. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Related work
• Kaplan and Norton methodology (2004, 2006) for making
a strategy-focused company, linking goals and measures
with internal behavior.
• “Goal-process” relationship models and methods
(Kavakli, Loucopoulos, 1999; Clargo, 2002; Burlton,
2010; etc)
• “Goal-capabilities” relationship models and methods
(Hafeez, 2002; Azevedo et al, 2013)
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28. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Conclusion: Specialties of the suggested methodology
• “capability-oriented” instead of “business unit oriented”
decomposition,
• more attention to capability decomposition (e.g. type-
component differentiation, ‘primary – enabling –
management’ classification), which is the basis for goal
cascading,
• goals differentiation (see perspectives) – certain group
of goals is associated with certain element of capability
decomposition
• full set of model-driven methodology components:
principles, metamodel, viewpoints (maps, tables,
matrices), method, tool.
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29. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Conclusion: Benefits of the methodology
• Use the right capabilities for the requirements (e.g. quick
transportation capabilities for fast delivery),
• Precise capabilities classification for decision making
(areas of competitive advantage / strategic importance
 develop, protect, outsource, …)
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30. Strategy-focused and value-oriented capabilities, COBI CBI 2014, Kudryavtsev D., Grigoriev L., Bobrikov S.
Conclusion: Current/Future work
Problem:
Too many behavior modeling concept: process, function,
capability, service, case: what is “receiving payments”?
Return on Modeling ? Added value?
Tasks:
Clarify differences
Provide clear integrated framework
Show added value
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31. 31
Thanks
Questions?
Dmitry Kudryavtev
dmitry.ku@gmail.com
http://www.linkedin.com/profile/view?id=17582861
https://twitter.com/kudryavtsev_d
Lev Grigoriev
griglev@gmail.com
Svyatoslav Bobrikov
svyatoslav.bobrikov@gmail.com