What Are Business Capabilities?

05/18/2023 14:36:37 +0000
When you run your own business, understanding how the business works and operates is absolutely essential.
Without this knowledge, it is impossible to make decisions for the benefit of your company, and difficult to know if your business is operating well.
So, if you plan on running your own business, you need to make yourself familiar with business capabilities.

So what are business capabilities?

Well, simply put, business capabilities are graphical representations of the capabilities of a business.

But, in order to run your own business successfully, you need to make yourself familiar with business capabilities in much more depth.

In this guide, we're taking a look at business capabilities in depth to understand what they are, how to identify them, and how to define them for your business.

Read on to find out more!

What Are Business Capabilities?
First things first, let's take a look at exactly what business capabilities are. Business capabilities are something that a lot of people in business struggle to define.
While the theory behind them is simple, a lot of people struggle to fully understand exactly what business capabilities are, and how to define them for their company within their industry.

Within business, the word "capability" is a very overloaded term. This can make it difficult to pinpoint exactly what this term means for you and your company.

Even within your company, different departments will consider "capabilities" to be different things. This is why the majority of companies struggle to understand this term fully.

Bluntly put, a business capability is what a business does, and its ability to do something. However, depending on the purpose of your business, the way that you define these capabilities may differ.

With that in mind, let's take a look at some of the different methods that businesses can use to identify and define their business capabilities.

How Do You Identify Business Capabilities?
When it comes to business capabilities, the most important thing is to identify what you define as a business capability early on in your business journey.
Capabilities will differ throughout the business, so getting a base understanding of what constitutes a "business capability" is essential to ensure that your business moves forward.

It is fine for different departments to have different business capabilities, as long as the definition of what constitutes a "capability" is the same throughout the business.

Capabilities refer to what a department contributes to the business, so once these are defined it is then possible to create frameworks within the business.

These frameworks will ensure that the business operates efficiently and that business goals are achieved.

Identifying business capabilities will involve taking a look at the operations of the business.

As you look at the operations of your company, you will be able to identify areas of the business where it is contributing to other departments, and ultimately the business goals.

These areas of contribution are the business's capabilities, which is why they will differ between each department.

When identifying capabilities, it is important to ensure that the capabilities are not bound to a specific implementation.
To avoid doing this, ask yourself if that capability would be achievable if a new system was implemented, or if that capability would change if a department were to split up.
If the capability is bound by a specific implementation, and it would change with department shifts, then it isn't a true capability.

As we have moved through this definition, it is really easy to see why so many businesses struggle to define business capabilities.

As you read into it, the term itself really is difficult to break down because there is so much weight to it. With that in mind, let's take a deeper look at how to define business capabilities.

How To Define Business Capabilities
In order to define business capabilities, you first need to identify them.

As we have just seen, identifying business capabilities will involve looking at the different departments within your business and what they contribute towards the business goals.

All departments will have their own capabilities and these will all contribute ultimately to the output of the business.

To define business capabilities, you should look at them as building blocks. All businesses will be made up of multiple different blocks that together contribute to the running of the organization.

The blocks of capabilities should be separated into different categories, such as people, processes, and physical aspects.

Doing this will make it a lot easier to define capabilities.

Flow charts can be used to break each category down into the structure and hierarchy of the business.

For example, a flow chart for the people in the organization will have the CEO of the organization at the top and then work down through management to entry-level workers.

This system can be used to define all areas and systems within the organization. That is why using building blocks to define business capabilities is the easiest way to understand your organization.

In short, as the name suggests business capabilities are the capabilities of a business.
Generally, business capabilities will be shown through graphical representations, and they will look at the relationships between the business capabilities, and the hierarchy of these capabilities.

In this guide, we have taken a deep look at what business capabilities are, how to identify them, and how to define them within your business. We hope this information has been helpful.

Thanks for reading!

Frequently Asked Questions
What Are Some Examples Of Business Capabilities?
There are lots of different examples of business capabilities. Business capabilities include a variety of different functions, such as recruitment, pricing, risk management, and product design.
Business capabilities refer to lots of different areas of a business's operations, and that is why this term is used so frequently.
What Are Good Capabilities In Business?
Good capabilities in business will differ depending on the company that you are discussing.
For some businesses, good capabilities may include marketing, sales, services, etc.
For others, it could include logistics or manufacturing. Depending on the business views and goals, capabilities will differ.
About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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