1-2-What is an Organizational Capability?

What is an Organizational Capability?

An organizational capability is the means by which an organization brings together its people and other resources to respond to changes in the business environment and deliver value to its customers and stakeholders.

What is an Organizational Capability?

Organizational capability is a foundational concept for this guidebook. Because this term is used in different ways by different people, this section provides some background on how it is defined in this guidebook – and the basis for this definition.

Webster’s dictionary defines the word “capable” as “having the qualities or abilities that are needed to do or accomplish something”. While one might generally think of a capability is something that an individual has, a capability can also exist at the organizational level.

A 2004 Harvard Business Review article characterizes organizational capabilities as:

“the collective skills, abilities, and expertise of an organization...” which are “the outcome of investments in staffing, training, compensation, communication, and other human resources areas.”

This article identifies eleven capabilities of well-managed companies: talent, speed, shared mindset, accountability, collaboration, learning, leadership, customer connectivity, strategic unity, innovation and efficiency.1

Enterprise Architecture View of Capabilities

Organizational capability is a core concept in the Enterprise Architecture (EA) literature. For example, in the TOGAF 2, a capability is defined as:

“an ability that an organization, person, or system possesses. Capabilities are typically expressed in general and high-level terms and typically require a combination of organization, people, processes, and technology to achieve...Capabilities are driven by the organization’s business strategy. Defining desired or target state capabilities is integral to an organization’s strategic planning process.“

The Department of Defense Architectural Framework (DODAF) defines a capability as:

"the ability to achieve a desired effect under specified standards and conditions through combinations of means and ways to perform a set of tasks.” 3

In the DODAF, capabilities are linked to the agency’s mission, and serve as requirements that drive development of services and operational activities.

Developing a business capability map is one of the initial activities of creating a business architecture (which is one of the components of an enterprise architecture). The business capability map provides “a self-contained view of the business that is independent of the current organizational structure, business processes, information systems and applications, and the rest of the product or service portfolio.” 4

Figure 1.1 illustrates a capability map for a DOT. In this map, capabilities are segmented into strategic (or business-evolving), core and enabling categories:

Business-Evolving or Strategic Capabilities enable the organization to respond to change and plan for future evolution.
Core Capabilities are related to the core operation of the agency – which in a DOT would be things like maintenance management, project delivery and highway operations
Enabling Capabilities support day to day operations and are common across multiple types of organizations. Examples are financial management, human resources management and information management. Capability maps are intended to provide a stable model that can be used to plan organizational improvements and relate them to value.

Figure 1.1 Example DOT Capabilities

Organizational capabilities can be vertical, aligning with organizational functions, or horizontal, i.e. spanning multiple functions. Whereas many of an organization’s existing capabilities can be discerned from its structure (e.g. highway maintenance or human resource management), cross-cutting (horizontal) capabilities such as change management or innovation are more enterprise in nature.

Capabilities in this Guidebook

Building on the several views of capabilities presented above, this guidebook uses the following definition of “organizational capability”:

the means by which an organization brings together its people and other resources to respond to changes in the business environment and deliver value to its customers and stakeholders

This definition focuses the strategic and enabling capabilities that DOTs need to adapt to change, recognizing that these same capabilities are needed to deliver value to customers and stakeholders on an ongoing basis. The definition also emphasizes that in talking about capabilities, we are interested in not only what the organization is able to do, but also how it is able to do it, through bringing together people and other resources.

Example Capabilities

Because many of the capabilities needed to adapt to change are intangible, some examples are listed below – along with associated evidence that might be used to determine that they are present in an agency:

• A State DOT has a high capability for agility – they have a streamlined management decision making process, they have flexible contracting mechanisms in place, and have a dedicated change management function.
• A State DOT has a well-developed capability for technology adoption – they have a strategic plan that is updated regularly and used to guide decision making, strong information technology-business partnerships, a dedicated innovation group whose job it is to experiment, and have set up mechanisms to partner with the private sector and educational institutions to support research and development of cutting edge technology.

See Chapter 2 for further discussion of how organizational capabilities are represented in the Agency Capability Building framework.