High-Impact Capability Roadmaps (Preview)

© 2015 CEB. All rights reserved. EAEC4641915SYN

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HIGH-IMPACT CAPABILITY ROADMAPS

OVERVIEW

An approach to align technology solutions to strategic business objectives through capability roadmapping.

EXECUTIVE TEACHING

Leverage the process used to create capability roadmaps to obtain a deeper shared understanding of strategic business goals and shift the dialogue with business partners away from short-term, project-based discussions. By broadening the conversation to include people, process, and technology, capabilities can achieve a more holistic understanding of the underlying need.

COMPONENT TEACHINGS

■ Linking Business Strategy to Capabilities—Shift the dialogue between the IT liaison and business owner away from projects and toward long-term plans.

■ Establishing Capability Targets—Put capability target choices into financial terms to help business partners make better investment trade-off decisions.

■ Setting Capability Realization Horizons—Help business partners understand the business and technology implications of different paths to the target state.

■ Driving Application Rationalization—Explicitly link programs to business capabilities to ensure application retirement goals are being met.

■ Managing Demand—Use the capability roadmap to manage demand by reconciling new project requests against established goals.

COMPONENT TEACHINGS

■ The Master–Planning Process, pp. 12–15 ■ Linking Business Strategy to Capabilities, pp. 16–17 ■ Establishing Capability Targets, pp. 18–22 ■ Managing Demand, pp. 23–24

COMPANY SNAPSHOT

Merck & Co., Inc.

Industry: Pharmaceuticals Through medicines, vaccines, biologic therapies, and consumer and animal products, Merck works with customers and operates in more than 140 countries to deliver innovative health solutions. Merck also demonstrates a commitment to increasing access to health care through far-reaching programs that donate and deliver products to the people who need them.

2009 Revenue: US$27.4 Billion

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ENABLING BUSINESS OUTCOMES

Challenge

In a complex environment with more than 5,000 applications, more than 10,000 interfaces, and 35 different technical environments, Merck was challenged to reduce IT maintenance and operations costs to increase funds available for strategic projects the business required.

Approach

Merck develops a master-planning process that EA provides to business units. The process uses capability roadmaps to identify consolidation opportunities and align new technology investments to strategic priorities.

Results

Merck reduces the total number of applications by 20% and increases the portion of the IT budget devoted to strategic investments by 50%.

To make the most progress on portfolio simplification efforts, use capability roadmaps to align technology investments with business priorities.

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THE MASTER-PLANNING PROCESS

6–12 Weeks (Depending on Business Area Scope)

Current BusinessCapability

Current Solutions

Capability Roadmap

Strategy Identification

Future Business Capability

Future Solution

Business Value AddStrategic discussions are focused on long-range business priorities.

Business Value AddCurrent state evaluation enables capability prioritization.

Business Value Add Consensus and buy-in on future state solutions are achieved.

Business Value AddIT investments are clearly aligned with business priorities.

Output ■ Strategy on a Page

Outputs ■ Solution Evolution Plan ■ Capability Roadmap

Outputs ■ Capability Model ■ Capability Prioritization

Output ■ Current State Architecture

Outputs ■ To-Be Capability Map ■ Capability Gap Assessment

■ To-Be Process Framework

Outputs ■ Solution/Capability Map ■ Target Architecture

Leverage the process used to create capability roadmaps to obtain a deeper shared understanding of strategic business goals.

See Implementation Guide, pp. 12–15.

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DO frame business goals in key stakeholder experiences to help business partners articulate pain points.

DON’T let the absence of documented strategy serve as a barrier to capability roadmapping.


Shift the dialogue between the IT liaison and business owner away from projects and toward long-term plans.

■ Merck’s EA group uses the Business Journey Storyboard to surface pain points.

■ The Strategy on a Page Template articulates a set of business imperatives that EA can map to relevant capabilities.

1. LINKING BUSINESS STRATEGY TO CAPABILITIES

Illustrative

Strategy on a Page

FINANCE

Business Journey Storyboard

2012 Experience I have one source I can go to for my annual-planning needs, and I know the data is correct.

Strategic and Tactical Financial Planning

2010 Experience It’s difficult to create annual plans because the budget data I need comes from multiple sources, and I’m not always sure it’s accurate.

Optimize corporate performance through strategic financial planning.

What we desire to accomplishBusiness

Drivers and Goals

Business Capability

Annual-planning time reduced while increasing accuracy in forecasting.

How we know we’ve achieved the goal

Outcomes

Define and adopt a standard global-planning, budgeting, and forecasting process utilizing a common data source.

Actions we need to take to accomplish the goal

Business Imperatives

Source: Merck; CEB analysis.

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2. ESTABLISHING CAPABILITY TARGETS

Finance Capability Realization (Total Budget $9 M)Illustrative

Capability Target Assessment Criteria

Merck’s EAs work with business partners to force trade-offs between cost and capability targets across the following four dimensions: 1. People: Skills needed to support new capabilities and/or process improvements 2. Process: Level of process maturity and standardization required 3. Information: Quality and completeness of data required 4. Technology: Availability of tools that provide end-to-end support

Current Range of Capability Maturity

Average Capability Maturity

Initial Capability Target

Reset Capability Target

CapabilityBelow Industry Standard (IS-)

Industry Standard (IS)

Industry Leader (IL)

Distinctive Leader (DL)

Strategic and Tactical Financial Planning

Accounting to Reporting

Treasury and Capital Management

$2.5 M $4 M

$3 M$1.5 M

$5 M


Put capability target choices into financial terms to help business partners make better investment trade-off decisions.

■ Merck’s EA group researches industry capability models and standards to help business partners assess current maturity and identify targets.

■ Rely on business partners’ internal assessments and maturity goals when industry benchmarking is not warranted.

“Business partners always want more than budgets allow. It’s our

job to help them assess where they need to be industry leaders and where it’s okay to meet the industry standard by illustrating the business costs and technical costs.”

Paula KowalczykSenior Director, Business and Solutions

ArchitectureMerck & Co., Inc.


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3. SETTING CAPABILITY REALIZATION HORIZONS

Implementation ScenariosIllustrative

DO present business partners with alternative paths to reaching the target state that they can choose from.

DON’T assume there’s only one right path to the target state.

Help business partners understand the business and technology implications of different paths to the target state.

■ Create implementation scenarios that enable certain capabilities before the target state is reached.

Year 0 Year 1 Year 2 Year 3

Current State Interim State Interim State Target State Feasibility Assessment

Scen

ario

A

■ Current state evaluation

■ 100% of capabilities realized

■ New applications rolled out

■ Legacy applications decommissioned

L M H

Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery

Scen

ario

B


■ Capability 1 urgency: low

■ Capability 2 urgency: moderate

■ Capability 2 realized



Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery

Scen

ario

C


■ Capability 1 urgency: high

■ Capability 2 urgency: moderate

■ Capability 3 urgency: low

■ Capability 1 realized ■ Capability 2 realized



Cost

Legacy Life Span

Complexity

Business Urgency

Time to Delivery


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Explicitly link programs to business capabilities to ensure application retirement goals are being met.

■ Key program milestones mark occasions for major reductions in now redundant applications.

■ The roadmap identifies all applications supporting a business capability.

■ Interim and target state goals for application retirement are captured in the out years.

4. DRIVING APPLICATION RATIONALIZATION

Business Unit Roadmap—Program and Capability ViewsIllustrative

Program Key

Concept/Preparation

Design

Construction

Capability Key

Current Solution (Primary/Total Number Applications Used to Support Capability)

Planned Solution

Solution Being Considered

Rollout

Multiple: Concept Through Rollout

Program Being Considered

Symbol Key

Extends Before Timeline

Extends After Timeline

Transition Between Phases

Fixed Phase Start

Fixed Phase Completion

Milestone

Program 2

Program 3

…

…

Program 5

Program 4

Program 1Geo 1 Geo 2 Geo 3 Geo 4 Geo 5

2007

Jan.Jan.Jan. Jan.Apr.Apr.Apr.Apr. Apr.JulyJulyJulyJuly JulyOct.Oct.Oct.Oct. Oct.

2008 2009 2010 2011

Capability 1 (5) (3) (2)

Capability 3 App. C (3) (2)

Capability 5 (1) ERP (1)

Capability 6 App. H (9) (2)ERP (5)

Capability 7 App. M (15) (3)ERP (4)

Capability 4 (4) (3) (1) (0)

Capability 8 App. Z (44) (19)ERP (20) (5)

Capability 2 App. A (6) (5) ERP (3) (1)

(43)

Programs

Business Capabilities


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Use the capability roadmap to manage demand by reconciling new project requests against established goals.

5. MANAGING DEMAND

Demand Management Decision Tree

Already on roadmap?

Business Request: New Imperative

Yes. Adjust timing?

No. Aligned

to strategy?

No.

Yes. Forward?

No.

Yes.

Yes. Aligned to capability?

No. Review trade-offs (what comes off/gets delayed?) and adjust roadmap.

Yes. Review trade-offs (what comes off/gets delayed?) and adjust roadmap.

No.

No. Add capability?

Yes. Include capability in roadmap,

identify solutions, and make trade-offs.

Yes. Existing solution?


“We had new technology requests coming in from all over the place. The

roadmap allowed us to stop demand for two years. Now we have a plan, and when a new request comes in, we can assess if and how it fits within that existing plan.”

Stacie Kyle IT Account Executive Merck & Co., Inc.


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0%

50%

100%

77%

23%

65%

35%

0

50

100100

95

81

RESULTS

Net Reduction in ApplicationsIndexed

IT Budget AllocationPercentage of Total IT Spend

Capability roadmaps enable Merck to simplify the portfolio and shift funds from maintenance to strategic investments.

∆ = 15%∆ = 5%

2008 2009 2010 (Projected)

2003 2010 (Projected)

Source: Merck; CEB analysis. Source: Merck; CEB analysis.

Strategic Investments

M&O

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KEY TAKEAWAYS

1. Use capability roadmaps to achieve a deeper shared understanding of longer-term strategic business goals. Too often, conversations with the business focus on short-term, technology solutions. By broadening the conversation to include people, process, and technology, capabilities can achieve a more holistic understanding of the underlying need.

2. Give business partners flexibility when developing a capability roadmap by presenting them with multiple paths to the target state. To facilitate better trade-off decisions, make sure they understand the financial implications of capability improvement choices.

3. Involve business partners in the roadmap creation process to increase their ownership of and accountability for specific roadmap outcomes. By tying roadmap milestones to application retirement and demand management objectives, getting business buy-in to more IT–centric goals becomes easier.

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IMPLEMENTATION GUIDE OVERVIEW

The Master- Planning Process

■ Master-Planning Methodology, pg. 12

■ Master Planning—Definition, pg. 13

■ Master Planning—Deliverables and Responsibilities, pg. 14

■ Business and Solutions Architect/Strategist Job Description, pg. 15

Linking Business Strategy to Capabilities

■ Business Context Summary, pg. 16

■ Strategy on a Page Template, pg. 17

Establishing Capability Targets

■ Enterprise Business Capability Model, pg. 18

■ Capability Maturity-Level Definitions, pg. 19

■ Capability Gap Analysis, pg. 20

■ Capability Gap Self-Assessment, pg. 21

■ Capability Gap Analysis Template, pg. 22

Managing Demand

■ Business Capability Roadmap (Executive View), pg. 23

■ Business Capability Roadmap (High-Level Planning View), pg. 24

© 2014 CEB. All rights reserved. CIO9884614SYN

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High-Impact Capability Roadmaps (Preview)