A FOCUSED APPROACH TO BUSINESS CAPABILITY
Vaughan Michell
Informatics Research Centre, Henley Business School, University of Reading, Whiteknights, Reading, U.K.
Keywords: Business capability, Core competence, Resource based theory, Enterprise architecture.
Abstract: The term ‘business capability’ is widely used and generally understood, but definitions vary greatly and are
often insufficiently detailed to avoid confusion. Business processes are often mistakenly seen directly as a
capability without any specific detail that would differentiate such a capability or process in a similar
competitive firm or business. The increasing use of enterprise architecture approaches in consulting practice
to analyse and make critical business change decisions such as business service divestment or outsourcing
has resulted in the need to develop a more specific focused definition in order to differentiate between
capabilities and their enabling resources. This paper seeks to create a focused and specific business
capability definition that reduces confusion and enables clarity in defining capabilities within an enterprise.
The approach reviews and categorises existing definitions, identifying four key elements of capability that
are then analysed using resource based theory and operations theory to produce an integrated definition. The
paper proposes an operational definition of resource capability relating to driving and passive resources. A
structured tabulation is proposed that enables specific capabilities to be defined in terms of a delivery
process, tangible and intangible resources used or consumed and the specific value added by the capability.
1 INTRODUCTION
The concept of capability is increasingly important
due to the focus on enterprise architecture and the
way a business serves its customers. Despite the
wide use of the term, there are large differences in
definitions (Curtis et al, 1995) based on their origins
in business strategy, operations management and IS
and service oriented architecture. Capability is often
used to describe the generic potential ability of a
business or parts of a business. There is an intuitive
view of what capability may mean, but little work
has been done to qualify and compare specific
capabilities despite their use in analytical
architecture frameworks. Students and practitioners
often find it difficult to explicitly pin down and
differentiate the key capabilities and services
provided by a business. This can lead to problems in
identifying different capabilities needed for strategic
alignment when using enterprise and domain
architecture tools (Liu et al, 2011). An explicit and
measurable definition is necessary to make informed
business decisions for people, systems and process
change. For example when deciding whether to
divest or outsource IT services that support specific
business service capabilities (Liu et al, 2011), or the
allocation of the correct resources such as in medical
process pathways and patient safety (Ball et al,
2003). This paper analyses the variety of existing
definitions of capability to identify key themes that
characterise the term. Working from first principles
and using these themes and two examples it
proposes more specific definitions to support
architectural frameworks. The work is in the process
of being tested with an industrial collaborator (for
potential inclusion in EA analysis) and is also part of
a current research project into the impact of
capabilities and patient safety with a major hospital.
2 CAPABILITY DEFINITIONS
2.1 Business Strategy
There has been a focus on organisational aspects of
capability as part of the research into business
strategy to support the idea of core competences
advanced by Porter (Porter and Millar, 1991) and
Prahalad and Hamel (Prahalad and Hamel, 1990).
This is based on the resource based view of the firm
that sustainable competitive advantage is a result of
the specific grouping and use of resources (Penrose,
105
Michell V.
A FOCUSED APPROACH TO BUSINESS CAPABILITY.
DOI: 10.5220/0004459101050113
In Proceedings of the First International Symposium on Business Modeling and Software Design (BMSD 2011), pages 105-113
ISBN: 978-989-8425-68-3
Copyright
c
 2011 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

RefC: DefinitionofCapability KeyFactors KeyComponent Source
1 whatabusinessfunctiondoesandwhatits
externallyvi sibl ebehaviouris
what a function does and its
behaviour
Capability is related to work functions and
behaviour
Homann,
2006
2 itsfundamentalpurposeintermsoftheoutcomes
oftheactivity
purpose, outcome, activity Capability relates to activity outcomes Merrifield et
al, 2008
3 afirm’scapacitytodeployResources,usuall yin
combination,using organizationalprocesses,to
effecta
desiredend.
capacity to deploy
resources using
organisational processes
Capability is a capacity to use resources Makadok,
2001
4 operatio nsstrategyinvolvesexploiting
capabilitiesofoperationsresources’
exploiting resources
capabilities
Capabilities are functions of resources Slack et al,
2004
5 anorganization'sabilityto assemble.Integrate,
anddeployvaluedresources
ability to assemble and
integrate resources
Capability as an ability to do coordinate
resources for action
Bharadwaj,
2000
6 processcapabilitydescrib estherangeofexpected
result sthatcanbeachievedbyfollowinga
softwareprocess
results of a process Capability relates to the result of a process Paul et al,
1993
7 theabilitythatanorganisation,
personorsystems
p
ossesses
ability of a person or system Capability depends on resource Josey et al,
2009
8 abilitieswith i n afirmwhichcanbelinked
togetherasbusinessprocessesinordertoenablea
specificpurposeoroutcome’
abilities, process, outcome Capability as ability related to the specific
outcome of a business process
Beimborn et
al, 2005
9 capabilityisthecapacityofateamofresourcesto
p
erformsometaskoractivity’
capacity of resources to
perform tasks
capability relates to groups of resources Grant, 1991
10 capabilitiesare‘fo rmedthroughthecoordination
andintegrationofactivitiesandprocesses
coordination of activities
and processes
capabilities depend on process
integration/coordination
Hafeez et al,
2002
Figure 1: Content Comparison of Capability Definitions.
1959); (Wernerfelt, 1984). For example Grant’s
theory of organisational capability focused on how
integration of specialist knowledge aids capability as
a process input (Grant, 1991).
The resource based theory of competitive
advantage suggests ‘capability is the capacity of a
team of resources to perform some task or activity’.
Bharadwaj sees capabilities similarly referring to the
assembly, integration and deployment of valued
resources providing competitive advantage
(Bharadwaj, A. S. 2000). A more explicit definition
is provided by Makadok who describes a business
capability in terms of a ‘capacity to deploy resources
in combination with processes. (Makadok R. 2001.).
These definitions critically imply that the use of
resources in a particular way is fundamental to the
concept of capability. Other authors refer to
capabilities of a firm and their importance in adding
value and value creation. For example Moller et al
(Moller and Torronnen, 2003) develop a capability
profile for suppliers, but don’t specifically define
what capability is. Gallouj et al (Gallouj and
Weinstein, 1997) in their paper on innovation in
services see capability in terms of competences
bought to bear or mobilised by a service provider.
They represent competences as a vector set and are
careful to focus on teams or individual competences
and exclude organisational competences. Nelson and
Winter cited in Gallouj and Weinstein 1997, see
competences as skills and intangible technical
characteristics referred to codified routines and
includes knowledge, knowhow and technical
characteristics which refer to methods and selection
tests. This reminds us that competences include the
intangible, but it misses the fact that capability and
what we see as a subset; human and related
competences are a function of resources, all
resources and their organisation and application.
Hafeez et al (Hafeez et al 2002) point out the
relationship between core competence and capability
and the fact that capability is formed by the
integration of resources. They further suggest
capabilities result from integration of activities,
highlighting an important and intuitive linkage
between resources and actions in a process.
2.2 Operations and Informatics
A second area to refer to capability is operations
management theory, where capability and service
are associated with of operational performance. For
example Slack et al suggest ‘operations strategy
involves exploiting capabilities of operations
resources’ (Slack et al, 2004). This view further
advocates capabilities as a function of a firm's
resources. Capability is also used in informatics web
and service orientated architecture. TOGAF makes
an attempt to define capability as ‘the ability that an
organisation, person or systems possesses’. This
reminds us that business structures possess
capability (Josey et al, 2009). Merrifield (Merrifield
et al, 2008) sees capability relating to the purpose of
business activity and its outcomes. Beimborn
(Beimborn et al, 2005) regards capabilities relating
BMSD 2011 - First International Symposium on Business Modeling and Software Design
106

to repeatable actions citing Wade & Hulland where
capabilities relate to assets capable of producing
products for the market. They also suggest that
capabilities can be linked to together as business
processes to deliver a specific outcome. This
usefully relates capabilities to the outcomes of
actions via processes. However, it adds to confusion
by implying processes can simply be labelled as
capabilities such as ‘pay employees’ and ‘ship
products’, without understanding that capabilities
perhaps relate more to the character of the resources
delivering capability via the processes and not just
the sequence of action or recipe for the series of
activities. Homann (Homann, 2006) also relates
capabilities to process and suggests capability is a
model of the behaviour of a business function.
However, whilst intuitively reasonable, both
Homann and Merrifield’s approach (Merrifield et al,
2008) avoid mentioning or invoking the contributing
resources and the often complex way they enable the
capability. We can summarise the definitions of
capability by comparing the semantic content in
Figure 1.
3 CONTENT COMPARISON
3.1 Operations and Informatics
By comparing the content of these definitions from
the summary table we can see that there are a
number of key themes we can explore to better
define capability. Firstly capabilities relate to work
processes and the outcome of the work process (C1)
(C2) (C6) (C8) (C9). We can also identify that
capabilities relate to the capacity, promise or
potential to do something (C3) (C5) and also to a
specific outcome, value or result of an activity (C2)
(C6) (C8).Finally capability is a characteristic of an
organisation and specifically how it uses and applies
its resources. However, an organisation is an
organised collection of resources which themselves
also provide the basis for value adding capability
(C4) (C5) (C7) (C8) (C10). The four themes can be
summarised as:
• Capabilities relate to work activities
• Resources possess capability
• Capabilities are the potential for action
• Capabilities relate to outcome/value.
We will now analyse these themes using two
relatively easy to understand practical examples.
3.2 Capabilities and Activities
The traditional input-process-output model of
business work activities sees business work
activities as transformations of input resources via a
transformation process or work activity into outputs
(Slack et al, 2004). At the lowest level any work
activity involves some kind of resource
transformation. For example, reading a book
transforms the reader’s input knowledge from one
level to another. Assembling an electronic device
transforms the components into a new structure as
part of a saleable product. Thus any work process
(activity acting on inputs) transforms the value of
the inputs and their state from one value to another.
The transformation process involves the
transformation of input resources in terms of a
change of state (eg tangible; such as melting or
forming materials or intangible in the form of a
change in the level of knowledge, or 1s and 0s in a
computer program). These input resources may be
utilised to transform the inputs eg a person and a
tool. Alternatively some of the input resources may
be consumed as part of the conversion process, for
example the solder used in soldering an ipod
electrical component as part of the business of
producing ipods, or the ingredients used in the act of
making a pie. We need to differentiate between
resources that are utilised to make the transformation
process work vs. resources that are consumed in the
process of transformation. The transformation
process transforms the business inputs into outputs
that, via a sequence of activities or process, are
valued by the customer (Strnadl, 2006). We can say
that a business is capable of producing a) products
and services or at a lower level b) functions and
components and service features that support the
value added in the products and services delivered to
the end customer. Each transformation activity adds
value that leads to a product of service that can be
sold to the customer as the output of a business. A
process is a sequence for action or a recipe for the
right combination of work activities and procedures
to realise the potential to produce saleable products
and services. Using the Davenport definition
(Davenport and Short, 1990)we define a process as:
a structured and defined sequence of activities that
transforms a set of inputs (of specific value) to
produce a specific output (of a different value).At
this stage it is also useful to remind ourselves that a
process may be tangible (Pt), i.e. we can see the
activities being performed in a production line, or in
an intangible process (Pi), where the process, e.g. a
lecture, may transform knowledge in student’s
A FOCUSED APPROACH TO BUSINESS CAPABILITY
107

heads, without any obvious transformation being
visible, i.e. a service process (Slack et al, 2004).
3.3 Resources and Capability
A resource has a capability for interaction with the
environment to create value. One of the key
characteristics of capabilities is that they are a
property of an object or thing, i.e. a property of
business resources as suggested by some of the
definitions. We talk about people having
capabilities, but we are also aware that objects have
capabilities. We may consider a person in a
particular role has a skill or capability to do
something. For example an assembly worker has a
capability to assemble an object based on their
knowledge of the object, their training and the
procedures and the skill to operate a machine or tool
to assemble the components that form the object.
However, it is not only the person that has the
capability. If we consider the assembly of an ipod
may involve soldering electronic components in
place by means of a soldering iron. The soldering
iron has a capability to melt specific materials, in
this case solder, to attach the component to a circuit
board. Unlike the person, the soldering iron needs
the person to enable or execute its capability.
ICT technology also possesses capability. For
example we can replace the person soldering the
component with a dedicated programmable machine
or robot. The difference here is that the soldering
robot is capable of soldering with very limited
human intervention; perhaps only turning on the
machine and ensuring inputs and outputs. Also the
components of intelligent products themselves, such
as an ipod, may possess intelligent capability, for
example the chipsets used in the phone are
themselves capable of controlling devices. To
efficiently manufacture an ipod, or most objects we
may use intelligent agents (Russell and Norvig,
1995) that act on the environment in order to
perform a transformation. These may be people or
intelligent machines (robots, software etc) and are
resources that configure and transform the
consumable resources used within the process of
production.
The capabilities these agents possess could be
considered intelligent capabilities that involve the
powerful ability to adjust their work actions to suit
variations in the work conditions. Other resources,
e.g. materials, and subassemblies are effectively
passive and possess no intelligent capability.
However, some are more or less capable than others.
For example a component such as an on-off switch
is not intelligent, but has what we could call a
potential or capability to turn the ipod on or off. This
suggests that we should consider a hierarchy of
resource capabilities to reflect the way that the
resource possesses ability to impact the environment
and the type of capability such as intelligent/passive
and whether they are part of the process (utilised to
make the transformation process happen) or are
consumable resources to it.
ResourceCapability
Intelligent Passive
Used intelligent process agents (eg
production line workers),
intelligent machines (robots,
fixed production lines, ICT
systems)
tools (eg soldering iron),
codified information
(procedures, drawings etc)
Consumed intelligent components (eg
computer chips, memory - ICT
components)
materials, subassemblies,
mechanical components
Figure 2: Resource Capability & Use.
3.4 Resource Capability Types
We can separate capabilities into three types;
capabilities of people, capabilities of ‘intelligent’
machines and capabilities of inanimate objects.
However, there is a fundamental difference
intelligent resources (people, intelligent machines)
have an intrinsic capability to act on the
environment themselves to transform and add value,
whereas the passive resources only add value when
they are used by an intelligent agent. Very often
these intelligent resources actively drive the process
and coordinate the value added transformation. We
can call these driving resources of the process.
Driving resources use other resources, such as tools
and machines and passive resources such as
materials to achieve the transformation:
• Agent resources have a potential for interaction
with the environment to create value
• Driving resources (people agents, intelligent
agents) orchestrate and trigger the transformation
process
• Passive resources require agents to realise their
capability.
A person (human agent) or an intelligent agent e.g. a
machine such as a robot or application is an agent
resource of the business that will trigger and drive
the process. For example a web bot may search,
collect and group search terms (information
resource) and return them as part of its search
capability. An autonomous production line may act
BMSD 2011 - First International Symposium on Business Modeling and Software Design
108

as a driving agent to utilise tool resources (e.g.
soldering tip) to solder and manipulate ipod
components (passive resources). We should also
think of capability as not just a property of
individual resources, but of organised and structured
groups of resources assembled in a process or a
functional business group and ultimately as part of a
whole business as per definitions C3, C5, C7.
Person (Rt) Intelligent
Agent
‘Artificially’ Intelligent
Agent (Rt/Ri)
Passive Resource (Rt, Ri)
Humans in a variety of roles with
specific/generic skills & knowledge
Autonomous machines, applications/software,
intelligent machines, ICT based tools etc
Materials, passive tools
DrivingResources
Passive Resources
Figure 3: Driving & Passive Resources.
We can then relate capabilities to the basic
resources of the firm. This approach allows us to
identify core capabilities that ultimately relate to
core competences of the firm as a whole and key
capabilities relating to a specific functional group, as
per the capability pyramid Figure 4.
Core
Key
function level
process level
task level
Process
Sequence of
consumed
& used resources
Group of consumed
and us ed res ources
Property of
individual
resources
Intelligent
Resource
People
Passive
RESOURCE
Figure 4: Business Resource Capabilities.
3.5 Tangible and Intangible Resources
Resources can also be tangible or intangible (Slack
et al, 2004). For example the implicit knowledge in
an employee’s head, e.g. a doctor is intangible, but
critical in performing useful work activities, such as
diagnosing an illness and providing capability based
on the resource based theory of the firm Beimborn
(Beimborn et al, 2005). For example one assembly
worker may be capable of assembling ipods faster
than others because of their better knowledge and
experience or by using the standard tools in superior
ways. Similarly intellectual property such as a patent
provides a unique license to use specific knowledge
and prevent other businesses from using it in the
same way.
Tan gibleResources
People
Materials
Machines (passive/ICT enabled)
Artefacts
Tools
Codified information and Knowledge
Documents/forms/drawings
Properties
Can be physically touched
Observably transformed
Observable capability of physical action/use
IntangibleResources
Software
Knowledge
Encoded information/data
Intellectual property
Culture/values
Skills
Behaviour
Properties
Cannot be physically touched
Not observably transformed
Non observable capability for action/use
Figure 5: Tangible/Intangible Resources.
The properties of tangible and intangible
resources can be summarised in Figure 5.
3.6 Capabilities as Potential
The confusion of capabilities with processes is
reasonable if we think of a capability as the potential
for action is to create a transformation to produce a
tangible or intangible output. We can say: A
capability can only be realised by an action on an
environment.
The capability needs to be realised by a work
activity or sequence of actions/process that delivers
the capability. In other words a capability requires a
process to define its potential for action. We can
therefore name capabilities using a verb for example
a production line has a capability to manufacture, a
person in the role/with the skills of a design engineer
has the capability to design. A pizza delivery agent,
with the right resources (address and price
information, pizza, moped etc.) has the capability to
deliver. Capabilities are realised by interaction with
other resources and are inextricably linked to
process.
3.7 Capabilities and Value
Another important factor is that capabilities must
provide the ability to deliver an outcome or a change
A FOCUSED APPROACH TO BUSINESS CAPABILITY
109

Activity Takeorder Makedough Formpiebase&
ingredient
s
CookPie Servepie Tran sactbill
Value V0 V1 V2 V3 V4 V4
DrivingResource Waite r PastryChef MasterChef Cook Waiter Frontofhouse
Capability To manage customer
needs, take and enter
order details
To make pastry To as s emble pie,
To manage
catering resources
To cook pie To serve order and
provide bill
To transact bill
Process greet customer, take
order, pass order to
chef
place ingredients in
dough machine, set
machine controls, start
and stop
collect, cut and
shape pastry case,
select and add
ingredients
place raw pie in
oven, set oven
controls, remove
cooked pie
serve pie, calculate
bill
transact bill,
receive payment
Output pie order for table n mixed dough uncooked pie cooked pie served pie, billed
order
paid bill
Utilisedresource ordering system pastry mixer pastry cutter, knife oven ordering system Electronic till
Capability store order, calculate
price, display order
make pastry shape ingredients cook pie display and print bill display bill,
calculate change
link to electronic till
Consumable
resource
paper flour, water raw pie
ingredients
electricity pie electricity, till roll
Figure 6: Capability Example.
adding value to the business/customer. Each internal
activity or sub-process creates added value, which
like the parts of a product are assembled and sum to
a final value add. This value add must be sufficient
for a customer to be willing to pay the price for it.
We can illustrate the interaction of resource
capabilities to add value by using an intuitive
example of a restaurant that specialises in producing
hand made pies. It has this capability as a result of
specific capabilities of the restaurant staff and the
resources they employ in the restaurant processes.
Each capability transforms a consumable resource or
utilises a resource to add value that the customer will
pay for in the food and service they receive. Let us
suppose the master chef has unique skills that enable
him to design and skilfully make a unique range of
pies that draws customers to the restaurant. The
restaurant has the capability to make unique pies to
order due to the capability of the master chef who
organises other agent resources such as the pastry
chef and the cook to work with him to make the
pastry and cook the pies. This integrated capability
of the restaurant may also provide it with a
competitive advantage. However the capability also
requires the use of utilised resources such as pastry
mixers, ovens etc. and passive resources such as
kitchen utensils, each with their own capability that
contributes to the overall capability. In additional
intelligent information processing resources such as
the electronic ordering system and till are part of the
capability. We also must not forget the consumable
resources transformed by the driving resources as
part of the process delivering the capability. For
example pastry is created from flour eggs and water
and shaped. Meat, vegetables and seasonings are
cut/mixed and placed in the pie. Each activity has
used a capability of a driving resource to transform
the consumed resources, or organise another
resource to add value. But, we have only considered
part of the mechanism that delivers the capability.
The pies have to be served to the diners and the
diners have to be managed and billed. This requires
the coordination of other driving resources such as a
waiter and front of house roles that deliver the pies
and the bill to the customer and complete the
business transaction by ensuring the customer’s
payment that pays for the value adding capabilities.
3.8 An Integrated Definition
From the previous sections we can see that a
capability:
• Is possessed by a resource or resource groups of
resources (tangible Rt and intangible Ri)
• Is the potential for action via a process P
• Produces a value for a customer V
(internal/external)
Process(es)P
Capability Diagram
Driving Resource
Utilised
Resources
Consumed
Resources
Capability to:
Delivering Value: V
Executesactio n
uses
Possesses:
Figure 7: Capability Components.
BMSD 2011 - First International Symposium on Business Modeling and Software Design
110

Realising the capability requires interaction with
the environment and the use of other resources: A
capability is the potential of a business resource (or
groups of resources) to produce customer value by
acting on their environment via a process (P) using
other tangible (Rt) and intangible Resources (Ri).
CapabilityvalueV=f(Rt,Ri,P)
CustomerVal u e
Usesotherresources(Rt,Ri)
torealise
Actonthe
environment
Realisedb
y
a
p
otential
p
rocessP
Figure 8: Capability Characteristics.
This definition allows us to account for the fact
that individual resources possess active and passive
capability as well as the organisation of groups of
resources as in an organised business function and
ultimately the complete business. Business or
organisational capability refers to the collective
capability or a group of resources with potential to
deliver a specific business value output to an
external customer. This capability depends on the
way the grouping for action is made eg in a process
structure or team structure etc.
4 DISCUSSION
4.1 Capability vs. Process
Using the pie example we can define a formal
structure to document the capability. Firstly the
capability must be labelled using a verb/noun
combination to semantically describe the potential it
provides. In this case we might choose a capability
at the key level (not just a single process) for
example ‘to provide customised pies to order’ note
the operational action elements: ‘serve’ and the
deliverable: ‘pie’ and the form in which it is
provided ‘to order’. The semantic choices in the
statement if chosen wisely will provide much
specific evidence about the capability. For example
the choice of ‘to serve’ vs. ‘to provide’, implies that
the pies are not merely made available as in an
environment, but served in controlled conditions
such as a restaurant.
Process (P) Tangible Resources (Rt) Intangible Resources (Ri)
description from
p
rocessarchi tecture
driving,passive,active
Capability f(P, Rt, Ri) to: action/deliverable/conditions
Driving Resource: processowner
Value: relatedtocustomerneedandbusinessobjectivesandidentifiable
products/services
Process (P) Tangible Resources (Rt) Intangible Resources (Ri)
Pie Making master chef, pastry chef,
cook
knowledge of pies, cooking skills
Restaurant service waiter service skills
Billing front of house, order
system, till
knowledge of order value,
simple mathematics
Value: hand crafted country pies
Driving Resource: Maitre de
Capability f(P, Rt, Ri) to: serve customised pies to order
Figure 9: Capability Template/Example.
To enable this capability we need to include the
driving resource responsible for the related process,
in this case the Master Chef or Maitre de. The
driving resource will need to consume and utilise
other resources (tangible and intangible) within a
process or series of processes to deliver the
capability. The process names can be sourced from
the business process architecture. The level of
description of the tangible and intangible resources
will depend on the capability level described (see
Figure 4).
The other critical element is the value or benefit
of the capability to enable use in evaluative
decisions in enterprise architecture (Liu et al, 2011)
and process engineering/reengineering decisions.
For example, when deciding whether to develop a
process or system or to divest it or whether to
outsource etc.
This value is also critical for strategic decisions
in understanding core competences as we discuss
later. The value can be simply a statement of the
benefit, in this example we may suggest a unique
benefit, such as ‘make to order pies’ or ‘hand crafted
country pies’. However, we need to ensure the value
relates to customer need and expectations and also to
the business objectives. Ideally the value should be
linked to identifiable products and services. This
link will enable a meaningful inventory of capability
to be established that can help a business understand
how value is developed by combinations of different
resources and processes. Numerical values can also
be included using activity based costing analysis or a
similar approach to define the monetary value of this
capability for the business.
4.2 Internal and External Capability
We need to consider two types of capability to sup-
A FOCUSED APPROACH TO BUSINESS CAPABILITY
111

port the idea that the value produced by the
capability may be internal to the business or external
and to the customer as well as the business. External
customer focused capabilities occur where the
potential output is of core importance to customer
benefit. This relates to Merrifield’s and Porter’s
definition relating capability to fundamental
business success and customer value. In contrast an
internal business capability is where the potential
output is delivered within the business ie to help run
the business and plays no part in adding customer
specific value. This relates to Beimborn’s (Beimborn
et al, 2005) view about capability being ‘what a
business function does’.
4.3 Generic vs. Specific Capabilities
Driving resources using different combinations of
activities and resources will produce variations in
the realisation of the capability. For this reason we
need to consider generic capabilities eg to
manufacture something vs. the specific capabilities
to manufacture a specific item such as an ipod, or a
computer chip that is a component of the ipod in a
dedicated and focused, reasonably invariant
processes. We should also consider that some
capabilities depend more on the linkage and
coordination of resources than on a specific
resources. Many capabilities reside in a purposely
integrated group of people, process and technology
and the way they are ingeniously organised and
architected by the business. Hence capabilities may
vary and actually disappear over time. This alludes
to the organisational capability mentioned by some
authors, i.e. the ability to coordinate disparate
resource capabilities to produce a greater capability
for the business is a key capability in itself.
4.4 Capabilities and Competences
Competences are abilities of a company to add value
(customer benefit) to their products and services.
(Prahalad and Hamel, 1990) As Gadrey (Gadrey,
2000) suggests ‘competences are a network of
capabilities’ and not a single process Competences
are usually referred to in very generic terms such as
the ability to do x or manufacture y, which makes
use of the intelligent and wide ranging grouping of
the capability of the driving resources and the
intelligent machine resources as well as passive
resources. As these authors mention core
competences are seen as the cross functional
integration and coordination of capabilities ie core
capabilities support core competences. Core
competences are delivered by core capabilities.
Defining capabilities as core or non-core in terms of
being critical for the customer value add, embedded
and unique (Prahalad and Hamel, 1990) enables us
to understand at the resource level how the core
competences of a business are developed and
supported. The more the competence is
interconnected, ie integrated, into a business
structure the better you can retain control of it and
the more sustainable it is. By definition then the
more a resource capability or a group of core
resource capabilities are integrated the greater the
core competence. By definition you will not
therefore be able to outsource it (ie find source
another business that has the capability and can do it
more cheaply/effectively) unless you give the core
capability away to another business.
5 SUMMARY
We have analysed a range of definitions of
capability from economics, business strategy,
operations management and informatics and
employed practical examples to develop a definition
of a capability to include specific and potentially
measurable elements; the potential of a business
resource (or groups of resources) to produce
customer value by acting on their environment via a
process (P) using other tangible (Rt) and intangible
Resources (Ri). We have shown that some resources
may be intelligent or passive agents in a business
process and that agents or driving resources use
other active or passive resources to execute
transformation activities that add business value.
The elements of the proposed concept can be
included in an architecture model and have the
following characteristics:
• Capability verb/noun definition forces specificity
and clarity
• The output value of the capability is defined and
could be enumerated and linked to economic
information (finance architecture)
• Capability is linked to a named process (from
enterprise architecture)
• Capability is linked to both driving and other
resources that are critical to enable and ensure the
quality of the output.
This approach enables a more structured definition
of capabilities of an enterprise and its resources and
a format to compare them at a variety of levels. It
reduces confusion over meaning and enables
different capabilities to be objectively assessed for
BMSD 2011 - First International Symposium on Business Modeling and Software Design
112

use in strategic and operational business decisions
such as outsourcing and divestment selection and
resourcing and creation of new processes such as in
new product development or reengineering.
Further field research with industrial partners is
planned to further test and develop the structure and
analyse the semantic formulation of the capability
description and its meanings. Opportunities to test
the approach in other area are being taken up. A
doctor or clinician needs to provide or source the
right capability at the right time to ensure patient
safety. Additional research in the medical patient
safety arena (Rosenorn-Lanng et al, 2011) aims to
investigate the link between this form of capability
structure and resourcing to improve patient safety.
REFERENCES
Curtis, B., Fefley, W. E., Miller, S., 1995. Overview of the
people capability maturity model. CMUSEI 95 MM01.
Porter, M E., Millar, V. E., 1991. How Information Gives
You Competitive Advantage. HBR
Prahalad, C. K., Hamel G., 1990. The Core Competence of
the Corporation. HBR. May-June pp2-15.
Grant, R. M., 1991. The Resource-Based Theory of
Competitive Advantage- Implications for Strategy
Formulation. California Management Review
Bharadwaj, A. S., 2000. A Resource Based Perspective on
Inf. technology Capability and Firm Performance: An
empirical investigation. MIS Quart., Vol 24 Issue 1
Makadok, R. 2001. Towards a synthesis of the resource
based dynamic capability views of rent creation.
Strategic Management Journal.22: 387–401.
Moller, K. E., Torronnen P., 2003. Business suppliers
value creation potential: A capability-based analysis
Industrial Marketing Management 32) 109– 118
Ball, M. J., Garets, D. E., Handler T. J., 2003. Leveraging
IT to Improve Patient Safety. IMIA Yearbook
Gallouj, F., Weinstein O., 1997. Innovation in services.
Research Policy, Vol 26, Issues 4-5
Hafeez, K., Zhang, Y., Malak, N., 2002. Determining key
capabilities of a firm using analytic hierarchy process.
Int. J. Production Economics 76 39–51CS9
Slack, N., Chambers, S., Johnston, R., 2004. Operations
Management. Prentice Hall 4th edition.
Paul, M.C., Curtis, B., Chrissis, M.B., Weber C.V., 1993
Capability Maturity Model for Software, Vers. 1.1.
Tech. report CMU/SEI-93-TR-024 ESC-TR-93-177.
Josey, A.,et al 2009. Togaf Version 9 - A Pocket Guide.
The Open Group. Van Haren Publ. 2
nd
ed.
Penrose, E. T. 1959. The theory of the growth of the firm
Oxford University Press, Oxford.
Wernerfelt, B. 1984. A resource-based view of the firm,
Strategic Management Journal (5). pp 171-180.
Beimborn, D., Martin S. F., Homann U. 2005. Capability
Oriented Modelling of the Firm. IPSI Conference.
Homan, U., 2006. A Business oriented foundation for
service orientation. Microsoft Corporation.
<http.//msdn.microsoft.com/enus/library/aa479368.asp
x>
Merrifield, R., Calhoun J., Stevens D., 2008. The next
revolution in productivity. Harvard Business Review.
Russell, S., Norvig P., 1995. Artificial Intelligence - A
Modern Approach. Prentice-Hall, Inc.
Davenport, T., Short, J., 1990. The New Industrial
Engineering: Inf. Technology and Business Process
Design. Sloan Management review 31 - (4) Summer.
Strnadl, C., 2006 Aligning Business and IT - The process
driven arch. model. Inf. Systems Management.
Gadrey, J., 2000. The Characterisation of goods and
services: An alternative approach. Review of Income
and Wealth. Series 46, Number 3.
Rosenorn-Lanng, D. J., Michell, V., Fielden, J., 2011. Yes,
yes, yes! BMJ Letters. 14 May.
Liu, K., Sun, L., Jambari, D., Michell, V., Chong S., 2011.
A Design of Business-Technology Alignment
Consulting Framework. CAiSE’11.
A FOCUSED APPROACH TO BUSINESS CAPABILITY
113