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Business value streams and capabilities

Strategy Analysis
Strategy Analysis
11 November 2020

What do business value streams and capabilities mean to an agile team?

Agile teams help their organizations to implement change more effectively. It means that solutions produced by an agile team deliver more value to organization and their customers.  Examples of this could be increased customer satisfaction, implementation of a more efficient business process or the automation of a tedious tasks thereby freeing staff up to perform more challenging work.

To produce solutions that bring value to an organization requires that the agile team have a basic understanding of the business architecture. Agile teams, through their deliverables, impact business architecture elements such as business capabilities and business value streams. Let us take a look at what these elements are, and why an agile team should care about them.

Capabilities

A capability can be defined as an ability that an organization must possess in order to be successful in whatever the organization wants to achieve. For example, Coolblue (a Dutch online electronics shop with the slogan “Everything for a customer smile”) wants happy customers. What capabilities do they need to have to achieve this? They need excellent Customer Service, Customer Management, and Quality Management. These are examples of some of Coolblue’s capabilities.

Another example could be a hospital. A hospital must be good at managing the occupation of beds, managing occupation of the operation rooms (also called theatres), making sure qualified staff are available at all times. These things they want to be good at are capabilities which we can name: Bed Management, Operating Room Management, Staff Rostering. In other words, a hospital has to have these capabilities to deliver quality health services.

These capabilities are one of the building blocks of business architecture. Every organization defines, evaluates and manages its capabilities. Business architects and business managers perform assessments of business capabilities to identify improvements. Then, one of these improvements may be translated to features or epics on the agile team’s product backlog.

Capability Levels

We can define capabilities on different levels. Let’s go through the most popular approach:

You start with defining a capability area. For a hospital it can Patient Care or Medical Data Management.

A capability area can be decomposed into different capability groups, for a capability area Patient Care we can identify groups like Care Delivery, Care Administration or Planning and Funding.

Each capability group can be further decomposed into individual capabilities. For a Care Delivery group we can identify these singular capabilities e.g. Chronic Disease Management, Lab Management, or Operating Room Management.

One can even decide to decompose individual capabilities into smaller sub-capabilities. The Lab Management capability can be decomposed to: Test Administration, Test Analysis, or Lab Work Reporting.

In figure below you will find these elements summarized in one overview.

Capability Area Patient Care
Capability Group Care Delivery Care Administration Planning and Funding
Capabilities Chronic Disease Mngt

Operating Room Mngt

Lab Management *)

Bed Mngt.

Rostering

Patient Level Costing

Pricing

Patient Billing

Sub-Capabilities *) Test Administration

*) Test Analysis

*) Lab Work Reporting

Working with capabilities

Business Architects manage these overviews for all capabilities. By nature, capabilities are fairly stable. They focus on what an organization does. Only in the case of major changes will capabilities be affected. When a hospital wants to embrace a concept of e-health, this change may result in adding new capabilities and altering some existing ones.

Why are capabilities important?

It is essential for a business analyst to find the capability map/overview for the organization and check which capabilities the agile team helps to enhance or contributes to its creation. Understanding why a change is required and what the organization expects once the change is implemented helps the agile team to make better decisions.

Business Value Streams

Next to capability maps we have business value streams. The focus of value streams is to illustrate how the organization delivers value to its customers from the customer perspective. It is an end-to-end flow consisting of a series of high level stages. Each stage produces some value to the customer. Splitting organization operations into a series of value streams helps us to take a holistic view on what the organization does.

An example can be a person who wants to be tested for COVID-19. Value for a patient (customer) is a quick result of the test to give them clarity about their infection.

Business Value Stream

A business value stream may look like the one depicted in the figure above.

A business value stream has a customer who triggers value delivery. In the Test for COVID-19 it is a patient, a person who suspects having the virus and wants to check this. The value proposition delivered is a test result. In order to deliver this value to the patient the organization takes a number of steps – value stream stages.

Value Steam Elements

Value streams as a whole represent the external perspective of how the organization delivers value to its customers. Value streams link to more detailed business process maps and business processes, that explain how internal parts of the organization work together to add value. A Business value stage can be detailed with internal information like a short description, pre- and post-conditions, or participating stakeholders and their activities within a stage.

Cross-check capabilities and business value streams

The capabilities possessed by the organization enable stages/steps of business value streams. We can judge how business-critical a certain capability is based on its role in value streams in which this capability is applied. By improving capabilities we realize an improvement in value streams. On the other side, changes in business value stream may result in the identification of a missing capability that an organization must develop in order to be able to deliver value to its customers. As you see both models complement each other. To identify organizational improvements we need both capability model and business value streams. Therefore we analyse each business value stream stage and we map capabilities that are required to perform this stage efficiently and effectively, as presented below:

Mapping Value Stream Capabilities

From this analysis we may discover either improvements to a business value stream, or to some capabilities, or both. The identified improvements are then assessed by a broad group of business managers and (if accepted) detailed so that finally Product Owners take them into their teams for implementation.

Conclusions

The knowledge of business value streams and capabilities provide agile teams with context information that helps them understand the importance of the work they are doing. The investigation of value stream and capability changes is a good starting point for requirements elicitation process. They help us identify business requirements which later on, through further analysis, are translated to solution requirements for an agile team to implement.