The Calculus of Capabilities- An integrated maturity model

by Brad Martin + Tom Reeder

 

For years executives (and more than a few consultants) have applied judgment in assessing a business’s capability readiness based at least in part on one-on-one interviews.  However, the need for a holistic understanding of core competences has been out of academia and in the real world for nearly 20 years.  To what effect?  Are you routinely measuring your core competencies?  Are you thinking about your capabilities holistically? Are you managing capabilities toward your goals defined by the corporate mission, vision and strategy?

During our initial post “The Calculus of Capabilities“, we explored the breadth of various capability maturity models, and we observed from our reverse engineering of approximately 20 capability maturity models (CMMs) the linkage between maturity-level and scope-of-involvement – said another way: the broader the true social collaboration, the higher the maturity level, independent of business focus. In this closing post of the two part series, we will explore two possible integrated frameworks for a holistic approach- fighting the trend toward fractionalized specialization of CMMs.

Working Draft Foundation 1- Proven Business Improvement Framework

Key components could follow a modified Hammer framework (People, Process, Technology and Strategy1)

  • Strategy
  • People (SEI P-CMM)
  • Process (Hammer’s Process & Enterprise Maturity Models PEMM2)
  • Technology (SEI SW-CMM)

As we consider what is missing from this modified Hammer framework- we did not uncover any widely-cited, or referenced, strategy capability maturity models.  Nor have we been exposed to a rigorous strategy CMM during our collective consulting and business experience.  That said, we propose the following to begin to fill the referenceable Strategy Capability Maturity Model gap.

Strategy is such a broad and often mis-applied concept (see our “Unpack Strategy” series for a more detailed treatment). To simplify, let’s stand on the shoulders of giants and assume our “realized strategy” is crafted from two forms of strategy- deliberate strategy and emergent strategy3 (see Mintzberg’s “Forms of Strategy”).

Why do we need two forms of strategy? Consider the types of scenarios we face as we develop strategy (opportunities) and then execute strategy (choices).  Not to get too wrapped around the axle with this concept as Mr. Rumsfeld did with the press, the known and unknown two by two matrix can provide an interesting reference frame for at least the need-based emergent strategy to complement the deliberate strategy of our planning processes.

Adding one final note to rationalize the selection of axes of the known-unknown two by two: We think of competitive environment, marketplace, economy etc. as providing us with opportunities and, paraphrasing from Professor Porter4, we make choices to execute certain opportunities and forgo others.

In the following we propose leading questions as a surrogate for exploring the types of capabilities necessary to develop and execute strategy.

Opportunities (creating and acting on market insights; adjusting go-to-market for maximum short-term and long-term impact)

  • Unknown- How does our risk management function help us with highly uncertain and highly impactful scenarios?  How actively are we considering black-swan5 events?
  • Known- How effective has our planning process been at preparing us for certain and highly impactful trends, regulations and events?

Choice (supported by decision making frames/mental models, roles and process)

  • Unknown- How ready are we to rapidly respond through, for example, realigning strategic project resources to respond to unexpected events and environmental changes?   How quickly do we share information from employees who interact in the market?  Do we have practices in place to formalize and fund emergent, innovative ideas?
  • Known- How right were we (key performance metrics and goals)?  How do we plan for being wrong6?

Advantages and Challenges of using Hammer’s process-based framework, modified to include strategy

Advantages Challenges
  • Broadly recognized process, technology and people capability maturity models e.g., Hammer’s PEMM assessment tools published (HBR 2007) and in use; SEI CMM models
  • Execution bias misses more market-focused elements e.g., customer, distribution channels
  • No broadly recognized strategic capability maturity model

Working Draft Foundation 2- Proven General Management Framework

Through our experience with a General Management Framework combined with more than 20 years of management consulting and business leadership, we have successfully used a general management framework in multiple industries.  The following summarize the areas of capability focus within the high-level framework of alignment, engagement and enblement.

Strategy & Leadership for alignment

  • Management & Direction
  • Financial/Asset Management
  • Goals & Objectives
  • Strategy/Vision including target market, offering and distribution

People/Management engagement for collaboration- how we work together

  • Relationships including customers, channel partners and suppliers
  • Organization
  • People/Talent/Community
  • Culture/Core Values
  • Environment
  • Communication

Systems/Processes for enablement

  • Measures
  • Data/Information
  • Systems/Tools/Technology
  • Work Processes

Advantages and Challenges of using General-Management-Model-based framework

Advantages Challenges
  • Focus on business strategy, not just functional strategy nor for specific strategic planks
  • Holistic approach to capabilities tied to driving profitable sales
  • Need to create a mutually exclusive and collectively exhaustive (MECE) framework of capabilities
  • Effort required to tie business strategy requirements to key supporting capabilities

 

Side bar

This general management model is the basis of our Rapid Assessment Framework for a Rapid Opportunity Assessment- a surrogate for trained consultative interviews.  Participants assess key opportunity areas prioritized during an on-line survey session based on perceived opportunity to impact a specific business issue (current performance and what should be tomorrow’s objective). 

The areas for detailed assessment are chosen through a proven card-sort7 methodology of 14 business elements and today-tomorrow assessment of a relevant subset of approximately 100 topic areas detailing observable behaviors in a capability maturity model fashion.  We apply a four-level maturity model in this framework intentionally omiting level 5, disruptinve innovation.

 

Closing thoughts

Restating the obvious

There doesn’t appear to be a common capability maturity model for all elements of a rigorous business model.  However, this is no reason not to begin to blend rigorous capability planning (measure, prioritize and plan) into your existing and planned business planning processes.

Areas of necessary competitive advantage

Benchmarking is not enough for strategy where durable competitive advantage is necessary.  For example, consider Professor Hamel’s recent comment8  “Who did NASA benchmark for Curiosity9?”

Innovation embeds a life-cycle approach to whatever business element you consider.  Innovation drives S-curves and a constantly march to the next five levels of capability maturity by jumping from the previous curve.  While benchmarking can rapidly spread best practices, innovation is required for long-term competition.

This is the closing of a pair of posts focused on measuring capabilities and specifically exploring the use of Capability Maturity Models.  Also see the opening post “The Calculus of Capabilities

 

End notes

1   Based on authors’ process improvement work, strategic alignment needs to be explicit and inform traditional process reengineering framework elements (e.g., people, process and technology/information), and yet is often overlooked. See Hammer and Champy, Reengineering the Corporation, (New York, New York: Harper Business, 1993) p80, “The business system diamond”.  Also see, McDonald,  Improving Business Processes, (Boston, MA: Harvard Business School Publishing: 2010) p5.

2   See Hammer, “The process audit”, Harvard Business Review, April 2007 (reprint 14 pages).

3   See Mintzberg, The rise and fall of strategic planning, (New York, New York: Free Press, 1994) p24.  Also, see  graphic shown here sourced from a blog post [Internet] [cited May 7, 2013]. Graphic available from  http://richardjamessharp.files.wordpress.com/2010/10/deliberate.jpg.

4   See Porter, “What is strategy?”, Harvard Business Review, November-December 1996.  Pay particular attention to the concept of choice through a series of trade-offs- a way to establish a unique activity system in how you go-to-market.

5   As used in this post, consider the “undirected and unpredicted” event (9/11/2001) or series of events constituting an environment (the great recession) [internet] [cited 5.08.2013] Available from http://en.wikipedia.org/wiki/black_swan_theory.

6  See Heath (Chip and Dan), Decisive, (New York, New York: Crown Business, 2013), p 23.

7  See card sort [internet] [cited 5.8.2013] Available from http://en.wikipedia.org/wiki/Card_sorting.

8  From authors’ webinar notes of “Change the Conversation, Change the Game”, a CIO/HBR panel discussion, [internet] webinar 5.6.2013

9  Regarding Curiosity- the car-sized rover exploring Mars since 8.6.2012- see [internet] available from http://en.wikipedia.org/wiki/Curiosity_rover

 

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