Capability Mapping for Energy Enterprises

1. Capability Mapping the Energy Sector's Strategic Advantage www.capstera.com 1

2. Illuminate What Matters, Transform What Delivers In today's turbulent energy landscape, organizations that ▪ clearly understand their capabilities don't just survive disruption—they harness it to create competitive advantage. Business capability maps give energy companies a powerful ▪ lens to visualize, assess, and transform their essential functions. By creating a shared understanding of what the organization does—distinct from how it operates—capability mapping bridges the critical gaps between strategic intent, operational execution, and technology enablement. For energy companies navigating unprecedented change, this architectural foundation turns complexity from a liability into a strategic asset. www.capstera.com 2 2

3. The Energy Sector's Strategic Imperative 1 Energy companies face unprecedented pressures requiring strategic clarity and organizational agility. Business capability mapping provides the structural foundation for navigating this complex transformation landscape. • Industry Disruption: Traditional energy value chains are being fundamentally restructured by renewable energy growth, distributed generation, and evolving regulatory frameworks that demand new organizational capabilities. • Strategic Opacity: Most energy companies struggle to translate abstract strategic objectives into concrete operational changes, creating disconnects between leadership vision and execution reality. • Transformation Complexity: The interconnected nature of energy operations makes change initiatives particularly challenging without a clear mapping of capabilities, their relationships, and their strategic importance. • Investment Prioritization: Limited capital and operational resources require ruthless focus on capabilities that deliver genuine strategic differentiation versus those that simply maintain operational parity. • Technology-Business Alignment: Digital transformation initiatives frequently deliver disappointing results when technology changes aren't explicitly connected to capability enhancements that drive strategic outcomes. www.capstera.com 3

4. What Are Business Capability Maps? 2 A business capability map creates a comprehensive view of what an organization does to deliver value, independent of how it's accomplished through processes, organization, or technology. • Functional Essence: Capabilities represent stable business functions like "Energy Trading," "Demand Forecasting," or "Regulatory Compliance" that remain consistent even as implementation methods evolve. • Hierarchical Structure: Effective maps organize capabilities in 3-4 levels of increasing detail, from major value areas to specific functions, creating a complete yet navigable enterprise view. • Strategic Lens: Unlike process models (how work flows) or organizational charts (who does the work), capability maps focus on what must be done to execute strategy and deliver customer value. • Common Language: Capability mapping establishes a shared vocabulary between business and technology stakeholders, bridging the communication gaps that derail transformation initiatives. • Assessment Foundation: Well-defined capabilities provide the basis for evaluating strategic importance, performance, maturity, and technology support across the organization. www.capstera.com 4

5. Strategy Development Through Capability Lens 3 Business capability maps transform abstract strategies into concrete operational requirements for energy organizations navigating complex market transitions. • Strategic Translation: Capability mapping converts high- level strategic objectives like "accelerate renewable integration" into specific capability requirements, closing the gap between vision and execution. • Differentiation Focus: Capability assessment forces explicit decisions about which functions provide competitive advantage versus those that should maintain industry parity at minimal cost. • Capability Gap Analysis: Mapping current capabilities against future strategic requirements reveals critical development areas and reshapes resource allocation priorities across the enterprise. • Portfolio Balancing: Visualizing capabilities by strategic importance enables conscious balancing of transformation investments between innovation, optimization, and maintenance efforts. • Scenario Planning: Capability-based modeling of different strategic scenarios creates resilient transformation roadmaps that can adapt to changing market, regulatory, and competitive conditions. www.capstera.com 5

6. Operational Excellence Through Capability Clarity 4 Energy companies with well-defined capability maps achieve superior operational performance by aligning resources with strategic priorities and eliminating structural barriers. • Performance Transparency: Capability-based metrics provide comparable performance indicators across organizational silos, exposing inconsistencies and improvement opportunities. • Accountability Framework: Clear capability ownership establishes explicit responsibility for outcomes, breaking down the matrix management complexities common in energy organizations. • Duplication Elimination: Mapping operational capabilities across business units reveals redundant functions that consume resources without adding proportional value. • Capability Sourcing: Objective assessment of strategic importance and performance drives optimal make/buy/partner decisions for capabilities across the energy value chain. • Cross-Functional Alignment: Visualizing capability interdependencies enables coordinated improvement initiatives that optimize end-to-end performance rather than local efficiencies. www.capstera.com 6

7. Did You Know Strategic Alignment Impact: Energy companies with mature ▪ capability mapping practices achieve 42% higher alignment between strategic objectives and transformation initiatives compared to those lacking this architectural foundation, according to a 2023 industry benchmark study. www.capstera.com 7

8. Technology Rationalization Through Capability Mapping 5 Energy companies use capability maps to transform complex, fragmented technology landscapes into coherent platforms that enable operational agility and strategic execution. • Application Rationalization: Mapping systems to capabilities exposes redundant applications, capability gaps, and critical integration needs across the technology portfolio. •Investment Prioritization: Capability-based heat maps that overlay strategic importance with application effectiveness focus technology investments on the highest-impact opportunities. • Architecture Alignment: Well-defined capabilities provide the stable foundation for technology architecture that persists through organizational changes and market evolution. • Vendor Management: Capability mapping creates a framework for evaluating vendor solutions against actual business needs rather than feature comparisons or technical specifications. • Technology Roadmapping: Sequencing application investments based on capability priorities ensures technology evolution directly supports strategic objectives and operational requirements. www.capstera.com 8

9. Energy-Specific Capability Map Fundamentals 6 Effective capability maps for energy companies require specialized structures that reflect the industry's unique operational demands and value chains. • Value Chain Coverage: Comprehensive energy capability maps span generation/production, trading/wholesale, transmission/distribution, and retail/customer operations for complete value chain visibility. • Regulatory Integration: Energy capability models must explicitly address regulatory compliance functions across operational domains, reflecting their outsized importance in the industry. • Asset-Intensive View: Capabilities related to capital-intensive infrastructure management receive particular focus, including generation assets, transmission/distribution networks, and operational technology. • Market Interface: Energy-specific maps highlight capabilities at the intersection of physical operations and market mechanisms, where significant value creation and risk exposure occur. • Sustainability Dimension: Modern energy capability maps incorporate emerging functions related to carbon management, renewable integration, and energy transition that traditional models often overlook. www.capstera.com 9

10. Mapping Generation and Production Capabilities 7 The generation domain requires specialized capability mapping to address both traditional and renewable energy sources with appropriate granularity. • Portfolio Optimization: This capability area encompasses resource planning, generation mix modeling, and capacity investment decisions across diverse energy sources and technologies. • Operational Execution: Day-to-day generation management capabilities include unit commitment, dispatch optimization, and market offer development for different generation types. • Asset Management: This domain covers maintenance strategy, outage planning, performance monitoring, and life- cycle optimization for generation infrastructure. • Fuel Management: Traditional generators require specialized capabilities for fuel procurement, inventory management, and consumption optimization that impact cost structure and reliability. • Renewable Integration: Modern generators need capabilities for forecasting, curtailment management, and storage coordination that address the unique characteristics of intermittent resources. www.capstera.com 10

11. Mapping Energy Trading and Market Capabilities 8 Energy trading represents a complex capability domain requiring specialized mapping approaches to capture its unique market interactions. • Market Intelligence: This capability area encompasses monitoring, analyzing, and interpreting market signals across multiple energy and environmental products and timeframes. • Position Management: Trading organizations require capabilities for portfolio visualization, exposure calculation, and limit management across physical and financial instruments. • Deal Execution: Capabilities in this domain enable transaction execution, counterparty management, and settlement across diverse market mechanisms and platforms. • Risk Quantification: Sophisticated capabilities for modeling market, credit, operational, and regulatory risks provide the foundation for informed trading decisions and exposure management. • Physical-Financial Integration: This critical capability area connects physical asset parameters with market opportunities to maximize value across day-ahead, real-time, and forward market horizons. www.capstera.com 11

12. Did You Know Technology ROI Enhancement: Energy sector CIOs report ▪ that capability-based technology planning delivers 38% higher return on digital investments by ensuring initiatives directly enhance strategically important business functions rather than pursuing technology for its own sake. www.capstera.com 12

13. Mapping Transmission and Distribution Capabilities 9 Grid operations require specialized capability mapping to address the evolving relationship between centralized infrastructure and distributed resources. • Network Management: This domain encompasses capabilities for operating transmission and distribution infrastructure, including switching operations, outage management, and constraint resolution. • Reliability Assurance: Grid operators require capabilities for contingency analysis, protection coordination, and service restoration that maintain system integrity under varying conditions. • Distributed Resource Integration: Modern grid operators need capabilities for managing two-way power flows, hosting capacity analysis, and non-wires alternatives assessment. • Investment Planning: This capability area covers load forecasting, capacity planning, and infrastructure investment prioritization across network segments and voltage levels. • Operational Technology Management: Grid operators require specialized capabilities for SCADA systems, operational data management, and OT/IT integration that enable safe, reliable operations. 13 www.capstera.com 13

14. Retail and Customer Operations Capabilities 10 As the relationship between energy providers and consumers evolves, capability maps must reflect new engagement models and value propositions. • Customer Acquisition: This domain includes capabilities for market segmentation, product development, channel management, and enrollment processes across customer classes. • Service Delivery: Energy retailers require capabilities for meter management, billing, payment processing, and exception handling that support the core utility relationship. • Customer Experience: This capability area encompasses communication management, self-service enablement, and personalization across the customer lifecycle. • Energy Solutions: Beyond commodity energy, providers need capabilities to develop, market, and deliver value-added services from efficiency programs to carbon reduction solutions. • Prosumer Management: Modern energy retailers require capabilities for managing customers who both consume and produce energy, including distributed generation integration and net metering. www.capstera.com 14

15. Building Your Capability Map: Methodology and Approach 11 Creating an effective capability map requires a structured approach that balances energy industry standards with organizational uniqueness. • Reference Model Leverage: Begin with industry-standard capability models for energy producers, then customize to reflect your organization's unique strategic priorities and operational needs. • Top-Down Structure: Start with Level 1 capabilities representing major value areas like generation, trading, and customer operations, then systematically decompose into Levels 2-3 for appropriate detail. • Cross-Functional Input: Conduct facilitated workshops with business and technology leaders to validate capability definitions and relationships across operational domains. • Strategic Assessment: Rate each capability for its strategic importance, current performance, and future potential to identify critical gaps and investment priorities. • Technology Overlay: Map supporting applications, data, and infrastructure to capabilities to reveal rationalization opportunities and technology investment priorities. www.capstera.com 15

16. Capability Assessment for Strategic Insight 12 Evaluating capabilities through multiple lenses transforms a static map into a dynamic decision-making tool for energy companies. • Strategic Importance: Assessment scales typically range from "Differentiating" (provides competitive advantage) to "Basic" (necessary but not strategic) based on market context and corporate strategy. • Performance Evaluation: Capability assessment examines current effectiveness against industry benchmarks, revealing critical gaps in strategically important areas requiring intervention. • Maturity Measurement: Standardized maturity models evaluate capabilities from "Initial" to "Optimized" based on process consistency, measurement sophistication, and continuous improvement mechanisms. • Technology Support: Assessment of how well current systems enable each capability identifies areas where technology limitations constrain business performance and strategic execution. • Heat Map Visualization: Color-coded capability maps that combine strategic importance with performance gaps create visual priorities for transformation initiatives and investment allocation. www.capstera.com 16

17. Did You Know Transformation Success Rates: Energy organizations using ▪ capability-based transformation approaches report 67% higher success rates for major change initiatives and complete these transformations 34% faster than companies using traditional project-based approaches without architectural guidance. www.capstera.com 17

18. From Mapping to Transformation: Strategic Application 13 Creating the capability map is just the beginning—systematic application transforms it from documentation to strategic enabler. • Strategic Planning: Using capability performance assessments to guide strategic planning ensures resources flow to areas of greatest strategic importance and performance gap. • Merger Integration: Comparing capability maps between combining organizations creates a structured framework for identifying complementary strengths, redundancies, and integration priorities. • Regulatory Response: Mapping regulatory requirements to affected capabilities ensures comprehensive compliance coverage while minimizing duplicative efforts across the organization. • Digital Transformation: Capability-based technology roadmapping ensures digital initiatives directly enhance business functions that drive strategic outcomes rather than technology for its own sake. • Organizational Redesign: Capability models provide the functional foundation for organizational structure changes that align resources with strategic priorities rather than historical patterns. www.capstera.com 18

19. Making Capability Maps Living Assets 14 Energy companies extract sustained value from capability mapping through governance mechanisms that keep the model relevant and applied. • Ownership Structure: Establish clear capability owners with responsibility for definition, performance metrics, maturity assessment, and improvement planning within their domains. • Change Management: Define formal processes for proposing, reviewing, and implementing changes to the capability model as business strategies and industry context evolve. • Update Cadence: Establish regular review cycles (typically annual) for the overall model, with more frequent updates to performance metrics and transformation priorities. •Integration with Planning: Embed capability assessment and prioritization into strategic planning, budgeting, and portfolio management processes for sustained relevance. • Continuous Communication: Maintain ongoing education and communication about the capability model to ensure consistent understanding and application across the organization. www.capstera.com 19

20. Future-Proofing Energy Capabilities 15 The evolving energy landscape requires capability models that anticipate emerging industry shifts and organizational requirements. • Ecosystem Integration: As energy value chains become more interconnected, capability models must extend beyond enterprise boundaries to include partner and ecosystem capabilities. • Carbon-Centric Operations: Climate imperatives require carbon-aware capabilities embedded throughout operations, from generation dispatch to customer engagement and financial planning. • Algorithmic Decision-Making: Energy producers must develop capabilities for AI governance, algorithmic transparency, and automated decision systems as operations become more autonomous. • Digital Twin Development: The convergence of physical and digital infrastructure requires capabilities for real-time synchronization, simulation, and optimization across operational domains. • Resilience Enhancement: Increasing system volatility demands capabilities for scenario planning, rapid reconfiguration, and graceful degradation that maintain essential functions during disruptions. www.capstera.com 20

21. Takeaway Business capability mapping provides energy companies with an essential architectural foundation for navigating industry transformation. By creating a clear connection between strategic objectives, operational requirements, and technology enablement, capability models transform complexity from a barrier to a source of competitive advantage. In an industry facing unprecedented disruption, this structural clarity enables energy companies to focus limited resources on the capabilities that truly differentiate their market position while optimizing those that simply maintain operational parity. 21 www.capstera.com 21

22. Next Steps 1. Assess Your Current State: Evaluate your organization's existing capability documentation, identifying gaps, inconsistencies, and areas where greater clarity would deliver immediate value. 2. Start With Strategic Priorities: Focus initial capability mapping efforts on areas of greatest strategic importance and transformation activity rather than attempting comprehensive coverage immediately. 3. Leverage Industry Standards: Utilize energy-specific capability reference models as starting points rather than building maps from scratch, accelerating development while incorporating sector best practices. 4. Involve Cross-Functional Leaders: Engage stakeholders from across business domains in capability definition and assessment to ensure the model reflects operational realities and strategic priorities. 5. Connect to Ongoing Initiatives: Apply the capability map to active strategic planning, technology portfolio management, or organizational design efforts to demonstrate immediate practical value. 22 www.capstera.com 22

23. Capstera is a treasure trove for Business and Enterprise Architects. ▪ Capability Maps for Various Functions and Sectors. ▪ Value Streams ▪ Business Data Models ▪ Insights ▪ Tools, Templates, and Tutorials Stay in touch with Capstera. www.Capstera.com https://www.linkedin.com/company/capstera https://www.X.com/Capstera https://www.facebook.com/capstera Note: Capstera’s products and their contents may differ from the general information offered in these guides.) 23 www.capstera.com 23

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