Business Capability Mapping for Capital Goods Manufacturing Firms

1. Mastering Business Capability Mapping in Capital Goods Manufacturing www.capstera.com 1

2. From Complexity to Clarity: Unleashing Strategic Potential Through Capability Architecture Organizations face escalating pressure to optimize ▪ operations, accelerate digital transformation, and deliver exceptional customer value in the fiercely competitive capital goods manufacturing sector. Success hinges on clearly understanding your organizational capabilities—the fundamental building blocks defining your business and how it creates value. A well-structured Business Capability Map is the cornerstone ▪ of effective enterprise architecture, providing a powerful lens through which to view your organization's abilities, identify gaps, prioritize investments, and align technology with strategic objectives. For capital goods manufacturers, with their complex supply chains, specialized production processes, and evolving service models, capability mapping is not merely a useful exercise—it's an essential foundation for sustainable competitive advantage. www.capstera.com 2 2

3. Understanding Business Capability Mapping for Manufacturers 1 Business Capability Mapping provides a structural view of your organization's work, independent of how it does it or who performs it. For capital goods manufacturers, this clarity is essential for focusing transformation efforts on the most strategic areas. • Strategic Foundation: Business Capability Maps serve as the stable foundation upon which strategic planning, technology roadmaps, and organizational design can be confidently built and aligned. • Common Language: The capability map establishes a shared vocabulary across business and technology stakeholders, eliminating siloed thinking and promoting cross-functional collaboration. • Transformation Framework: A comprehensive map provides the framework for assessing current performance, identifying capability gaps, and prioritizing improvement initiatives. • Technology Alignment: The capability perspective ensures technology investments directly support business outcomes rather than creating isolated technical solutions. • Complexity Management: For capital goods manufacturers with diverse product lines and global operations, capability mapping cuts through operational complexity to reveal the essential functions that drive value. www.capstera.com 3

4. The Strategic Value of Capability Mapping in Capital Goods 2 Capital goods manufacturers must balance long-term asset investments, specialized production capabilities, and evolving customer expectations. A well-crafted capability map provides the clarity needed to navigate these complex demands. • Investment Prioritization: Clear capability assessment enables manufacturers to direct capital investments toward capabilities that deliver the greatest competitive advantage. • Merger Integration: Capability mapping provides an objective framework for evaluating acquisition targets and streamlining post-merger integration of manufacturing operations. • Digital Transformation: The capability perspective ensures digital initiatives focus on enhancing the most strategically important manufacturing and supply chain capabilities. • Service Expansion: A comprehensive map helps manufacturers identify capability requirements for expanding from product-focused models to service-oriented or outcome- based business models. • Resource Optimization: Capability-based assessment helps manufacturing leaders make informed decisions about which capabilities to develop internally versus outsourcing to strategic partners. www.capstera.com 4

5. Core Components of an Effective Capability Map 3 A robust capability map for capital goods manufacturers follows a hierarchical structure that balances comprehensiveness with usability. The most effective maps incorporate several essential elements. •Capability Hierarchy: Well-structured maps organize capabilities in logical levels—typically L1 (strategic), L2 (operational), and L3 (tactical)—allowing stakeholders to navigate from high-level concepts to detailed capabilities. • Capability Definitions: Clear, consistent definitions eliminate ambiguity and ensure shared understanding of what each capability encompasses and delivers. • Capability Relationships: Effective maps illustrate the interconnections between capabilities, highlighting dependencies and interactions across the manufacturing value chain. • Strategic Classification: Categorizing capabilities as strategic, competitive, or foundational helps leadership focus attention on the capabilities that drive market differentiation. • Performance Dimensions: The best maps incorporate dimensions for assessing capability performance, such as maturity, strategic importance, and technical health. www.capstera.com 5

6. Preparing for Your Capability Mapping Journey 4 Before diving into capability mapping, capital goods manufacturers must establish a solid foundation of understanding, sponsorship, and resources to ensure success. • Executive Sponsorship: Securing active support from senior leadership ensures the capability mapping initiative receives appropriate visibility, resources, and organizational engagement. • Clear Objectives: Establishing specific goals for the capability mapping initiative—whether strategic planning, technology rationalization, or process optimization—sharpens focus and improves outcomes. • Stakeholder Alignment: Engaging key stakeholders from across the organization builds consensus on terminology, approach, and expected outcomes before the mapping begins. • Resource Commitment: Allocating dedicated resources with appropriate business and architectural knowledge ensures consistency and quality in the mapping exercise. • Scope Definition: Determining whether to map the entire enterprise or focus on specific domains (e.g., manufacturing operations, supply chain, product development) provides important boundary conditions for the initiative. www.capstera.com 6

7. Did You Know According to a recent Gartner study, organizations with ▪ mature business capability mapping practices achieve 35% higher success rates in their digital transformation initiatives compared to those without structured capability models. www.capstera.com 7

8. Building Your Capability Map: The Discovery Phase 5 The discovery phase establishes the foundation for your capability map by gathering inputs from diverse sources across the manufacturing organization. • Document Analysis: Reviewing strategic plans, organizational charts, process documentation, and technology inventories reveals existing capabilities and their current alignment. • Stakeholder Interviews: Conducting structured interviews with leaders across functions uncovers capabilities that may not be documented but are essential to operations. • Industry Reference Models: Leveraging industry frameworks and reference models provides a starting point that can be customized to your specific manufacturing context. • External Benchmarking: Studying capability patterns from industry leaders and competitors helps identify potential capability gaps and opportunities for differentiation. • Workshop Facilitation: Collaborative workshops with cross- functional teams validate initial findings and build organizational ownership of the emerging capability map. www.capstera.com 8

9. Structuring Your Manufacturing Capability Map 6 Capital goods manufacturers require a capability structure that reflects their unique value chain, from product design and engineering through production, distribution, and aftermarket services. • Value Chain Alignment: Organizing capabilities to reflect the end-to-end manufacturing value chain ensures comprehensive coverage of all critical business functions. • Capability Categorization: Grouping capabilities into strategic, core, and supporting categories helps stakeholders understand their relative contributions to business success. • Level of Detail: Balancing breadth versus depth ensures the map includes sufficient detail to be actionable without becoming overwhelmingly complex. • Naming Conventions: Establishing consistent naming patterns using business-friendly terminology promotes understanding and adoption across the organization. • Visual Representation: Creating intuitive visualizations of the capability landscape enhances communication and engagement with diverse stakeholders. www.capstera.com 9

10. Manufacturing-Specific Capability Domains 7 Capital goods manufacturers must ensure their capability maps encompass several industry-specific domains that are critical to their success in increasingly complex markets. • Engineering and Product Development: Capabilities spanning concept development, detailed design, testing, and certification are essential for manufacturers to bring innovative products to market. • Production Operations: Advanced manufacturing capabilities including production planning, quality management, and continuous improvement form the operational core of capital goods producers. • Supply Chain Orchestration: Capabilities for supplier management, materials planning, and logistics optimization are increasingly strategic as supply networks grow more complex. • Service and Aftermarket: Capabilities supporting installation, maintenance, spare parts management, and performance optimization represent growing sources of revenue and customer value. • Sustainability Management: Environmental compliance, circular design, and resource efficiency capabilities have become essential for manufacturers facing increasing regulatory and market pressures. www.capstera.com 10

11. Assessing Capability Maturity and Performance 8 Once the capability map is structured, manufacturers must assess the current state of their capabilities to identify improvement priorities and investment opportunities. • Maturity Assessment: Evaluating each capability's maturity using a structured model (typically 1-5 scale) provides an objective measure of current performance versus potential. • Strategic Importance Rating: Assessing each capability's contribution to strategic objectives helps identify capabilities that warrant priority attention and investment. • Heat Mapping: Creating visual heat maps that combine maturity and strategic importance helps leadership teams quickly identify critical capability gaps. • Performance Metrics: Establishing key performance indicators for critical capabilities enables objective measurement of improvement over time. • Benchmarking Analysis: Comparing capability performance against industry standards and competitors provides context for setting appropriate improvement targets. www.capstera.com 11

12. Did You Know Research by the Business Architecture Guild reveals that ▪ capital goods manufacturers leveraging pre-built capability maps reduce their time-to-value by an average of 60% compared to those building maps from scratch. www.capstera.com 12

13. Accelerating Value with Pre-Built Capability Maps 9 Developing a capability map from scratch requires significant time and expertise. Pre-built, customizable capability maps offer capital goods manufacturers a faster path to value with reduced risk. • Time-to-Value Acceleration: Starting with a pre-built map reduces the time required to develop a comprehensive capability framework from months to weeks. • Industry Best Practices: Quality pre-built maps incorporate proven industry patterns and best practices that might be missed in a purely internal development effort. • Reduced Resource Requirements: Adapting an existing framework demands fewer internal resources than creating a map from scratch, allowing your team to focus on customization and application. • Completeness Insurance: Pre-built maps ensure comprehensive coverage of capability areas, preventing critical domains from being overlooked in the mapping process. • Implementation Guidance: The best pre-built solutions include methodologies and tools for effective implementation, reducing the learning curve for your team. 13 www.capstera.com 13

14. Customizing Pre-Built Maps for Your Manufacturing Context 10 While pre-built capability maps provide an excellent starting point, effective customization is essential to reflect your organization's unique characteristics and strategic priorities. • Strategic Contextualization: Aligning the capability framework with your specific strategic objectives ensures the map supports your particular business direction and priorities. • Terminology Alignment: Adapting capability names and definitions to match your organization's vocabulary enhances understanding and adoption across stakeholder groups. • Organizational Validation: Conducting validation workshops with key stakeholders ensures the customized map accurately reflects your operational reality. • Granularity Adjustment: Modifying the level of detail in specific capability areas allows deeper focus on domains of particular strategic importance to your organization. • Competitive Differentiation: Incorporating your unique capabilities and competitive advantages ensures the map reflects your specific sources of market differentiation. www.capstera.com 14

15. Applying Your Capability Map to Drive Business Value 11 A capability map delivers value only when applied to address specific business challenges. For capital goods manufacturers, several high-impact application areas deserve priority attention. • Strategic Planning: Using capability assessment to inform strategic planning ensures investment in the capabilities that most directly support your market differentiation and growth objectives. • Technology Portfolio Rationalization: Mapping applications and technologies to business capabilities reveals redundancies, gaps, and opportunities for consolidation and modernization. • Process Optimization: Linking business processes to capabilities highlights process fragmentation and opportunities for end-to-end process improvement. • Organizational Alignment: Connecting organizational structures to capabilities identifies structural issues such as fragmented ownership or capability silos. • Investment Prioritization: Capability-based portfolio management ensures investment decisions reflect strategic priorities rather than departmental influence. www.capstera.com 15

16. Capability-Based Technology Portfolio Management 12 For capital goods manufacturers with complex technology landscapes, capability-based portfolio management provides a powerful approach to optimizing technology investments. • Application-Capability Mapping: Documenting the relationships between applications and the capabilities they support reveals redundancies, gaps, and improvement opportunities. • Technical Health Assessment: Evaluating the technical fitness of applications supporting critical capabilities guides modernization and replacement decisions. • Investment Alignment: Assessing technology investment proposals against capability priorities ensures resources flow to the most strategically significant capabilities. • Architecture Guidance: Using capability requirements to inform architecture decisions ensures technical solutions align with business needs and strategic direction. • Legacy Modernization Planning: Capability-based assessment of legacy systems helps prioritize modernization efforts based on business impact rather than technical factors alone. www.capstera.com 16

17. Did You Know A McKinsey analysis found that manufacturing companies ▪ using capability-based investment prioritization realized a 22% higher return on their technology investments over a three-year period compared to companies using traditional project-based approaches. www.capstera.com 17

18. Capability-Based Process Excellence for Manufacturers 13 Business capabilities provide an ideal framework for analyzing and optimizing the complex process landscape of capital goods manufacturers. • Process-Capability Alignment: Mapping business processes to capabilities highlights process fragmentation and opportunities for end-to-end process integration. • Process Ownership Clarification: Capability-based process analysis identifies ownership gaps and overlaps that impede operational excellence. • Automation Opportunity Identification: Capability assessment reveals high-volume, rules-based processes that are prime candidates for automation and digitalization. • Cross-Functional Integration: Capability perspectives highlight process disconnects across departmental boundaries that affect customer experience and operational efficiency. • Process Standardization: Capability mapping exposes unnecessary process variations that increase complexity and undermine operational excellence. www.capstera.com 18

19. Sustaining Your Capability Map as a Living Asset 14 For capital goods manufacturers, a capability map delivers sustainable value only when maintained as a living asset that evolves with the business. Effective governance is essential. • Ownership Establishment: Assigning clear ownership for the capability map—typically within the enterprise architecture function—ensures ongoing maintenance and evolution. • Update Mechanisms: Implementing regular review cycles and change management processes keeps the capability map aligned with evolving business strategies and structures. • Tool Selection: Choosing appropriate repository and visualization tools supports effective distribution, analysis, and maintenance of the capability map over time. • Integration with Architecture: Embedding capability perspectives in enterprise architecture practices ensures consistent application across initiatives and domains. • Stakeholder Communication: Regular communication of capability-based insights maintains stakeholder engagement and demonstrates ongoing value to the organization. www.capstera.com 19

20. Future Trends in Capability Mapping for Manufacturers 15 The practice of capability mapping continues to evolve as capital goods manufacturers embrace digital transformation and ecosystem-based business models. • Digital Twin Integration: Leading manufacturers are integrating capability maps with digital twins to create comprehensive virtual representations of their business and operating models. • Ecosystem Capability Mapping: Forward-thinking organizations are expanding capability maps beyond enterprise boundaries to include partner and ecosystem capabilities. • AI-Enhanced Analysis: Artificial intelligence is increasingly applied to analyze capability patterns, predict performance issues, and recommend improvement priorities. • Real-Time Capability Monitoring: Advanced manufacturers are implementing dashboards that provide real-time visibility into capability performance across the enterprise. • Sustainability Capability Focus: Environmental, social, and governance considerations are being explicitly incorporated into capability maps as sustainability becomes a strategic imperative. www.capstera.com 20

21. Takeaway A well-structured Business Capability Map provides capital goods manufacturers with a powerful tool for navigating complexity, aligning strategy with execution, and focusing investments on the capabilities that drive competitive advantage. By creating a shared understanding of what your organization does—distinct from how it operates or who performs the work—capability mapping establishes the foundation for strategic planning, technology rationalization, process optimization, and organizational design. While developing a comprehensive capability map requires significant effort, pre-built industry-specific maps offer an accelerated path to value with reduced risk and resource requirements. The key to success lies in effective customization, systematic application, and sustainable governance to ensure your capability map remains a living asset that evolves with your business. 21 www.capstera.com 21

22. Next Steps 1. Assess your current state by evaluating existing capability documentation, strategic plans, and architecture artifacts to establish a baseline for your capability mapping initiative. 2. Secure executive sponsorship by developing a compelling business case that connects capability mapping to strategic priorities and tangible business outcomes. 3. Evaluate make-vs-buy options by comparing internal development of a capability map against industry-specific pre- built maps, considering time, cost, and quality factors. 4. Establish governance mechanisms by defining ownership, maintenance processes, and integration points with related architecture disciplines before launching your initiative. 5. Start with high-impact applications by identifying specific business challenges—such as digital transformation, technology rationalization, or process optimization—where capability mapping can deliver immediate 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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