The Capability Compass

Initial situation

The digital transformation has a noticeable impact on an organization’s business activities; it affects all areas of the company. A major challenge for organizations lies in developing the right culture and adapting to the new circumstances, for example reconciling traditional banking business with digital offerings. In order for this transformation to succeed, a high willingness to change and learn is a must across the entire organization. When it comes to change, the focus for company management must be on a holistic approach so that “organizational garden plots” can be avoided and an effective (what) and efficient (how) transformation can be carried out.

However, viewing fintech integration or the digitalization of processes as a holistic transformation is too short-sighted. It is not just about automation etc. and the integration of digital products, but about a strategic, cultural, organizational, system-based and partnership-based focus on the end customer. This brings us to the holistic approach and how this can be taken into account. If we look at the individual as such, we can see that everyone possesses certain skills and has the opportunity to (further) develop existing and new skills. The same applies to organizations and their skills; they can be developed and enhanced organically.

To support companies on their transformation journey, there are a number of models that can provide a structure and, to a certain extent, show the way. However, this does not answer the question of what to look at. The complexity in companies is high, and the problem areas are usually difficult to pinpoint. Statements such as: “We don’t think about our processes from an end-to-end perspective enough” or “We need to become more innovative and agile” do not provide enough clues to tackle the problem. A structured approach is needed to create a basis for discussion and relevant criteria as reference points and measuring instruments so that a transformation (from actual to target) can be initiated.

Illustration 1Transformation process, Source: Adapted from St.Gallen House of Digital Business (IWI-HSG); Osmundsen, Iden, & Bygstad (2018). Digital Transformation: Drivers, Success Factors and Implications. In: Mediterranean Conferance on Information Systems (MCIS) (Vol.37)
The Capability Compass

The Capability Compass (CK), an analysis tool (GAP analysis) for a holistic view of transformation projects, is a tool to support this process. The CK is based on various models (Agile Adoption Framework, Agile Software Solution Framework, Agile Maturity Map, SAFe Measure & Grow, Squad Health Check Model and Deloitte’s Organizational Agile Maturity Assessment) as well as input from partners from the Competence Center Ecosystem of the BEI St. Gallen. The verification of the criteria and the associated practical testing were also carried out with the partners of the CC Ecosystem. The close cooperation with the partner banks enabled the design of this validated instrument and its continuous further development.

Illustration 2Models considered for the development of the CK, source: Katharina Schache’s dissertation

The CK is based on 135 scientifically researched and field-tested criteria that allow different dimensions of an organization to be considered and can thus support holistic transformation projects. Consideration means that the establishment and further development of individual capabilities (criteria) take place in one category.

Illustration 3Business Engineering Model / Holistic view of an organization

The criteria, each of which reflects a capability of the organization, are grouped into the following categories:

Table 1: Categories of the CK

In order to work with the 135 criteria, a simple and efficient approach is important. The approach for applying the CK is derived from different methods:

The topics allow the 135 criteria to be quickly filtered according to the existing problem. Each topic is mapped to between 10-30 criteria that have a direct impact on it. For example, the criterion “Effective use of IT” contributes to the topic “Efficiency” in the “IT” category or the criterion “Promoting internal and external collaboration” contributes to the topic “Collaboration” in the “Strategy & purpose” category.

The application

In order to work with the 135 criteria, a simple and efficient approach is important. The approach for applying the CK is derived from different methods:

In the defined procedure, it is recommended that the pre-selection and final selection of criteria be channeled through different parties and that the derivation of measures be carried out by the relevant bodies.

The approach developed includes a certain degree of flexibility so that individual needs can be taken into account. The CK allows for consideration from two basic perspectives: ACTUAL to TARGET or TARGET to ACTUAL. After this analysis, subsequent action measures are derived and an implementation roadmap is drawn up. The application of the CK is intended for five different levels:

  • Overall organization
  • Organizational unit (OU)
  • Team
  • Management level
  • External (cooperation partners & network partners)

The application of the Capability Compass requires a clear definition of objectives and focus, whereby a bottom-up approach (employee level) or top-down approach (management level) can be selected. The selection of the criteria to be examined for the respective problem is crucial, and the discussion based on these criteria forms the basis for a common understanding of the challenge. These discussions must be held when selecting the criteria. With 15-25 selected criteria, we believe that a targeted narrowing down can be undertaken in order to make the question manageable. The duration of the analysis is variable and depends on the specific problem. For example, an analysis of an organizational unit is estimated to take 3-4 months (without implementation), taking into account the availability of those involved and sufficient time for communication and assessment of the criteria. Different application constellations are possible within the five levels. The scope of application of the Capability Compass is diverse. Here are a few examples for inspiration:

  • Positioning OU “Sales”
  • Examination of innovative strength and ability to respond to market changes
  • Assessment of the overall organization in the context of future-oriented skills
  • Assessment of the resilience of an organization for further transformation projects
  • Classification of the agile skills of two internal teams (product development & sales)
  • Measures to deal with the increasing pressure for innovation and changes in the recruitment of skilled workers
  • Investigation of cooperation partners in the transition to value streams
  • GAP analysis for planning the future strategy period
  • Determining the level of desired or aspired leadership skills
  • Development path of change management capabilities of an OU
  • Comparison of two departments IT & Sales (internal benchmarking) with regard to future relevant skills

We hope that this blog post has given you an insight into the Capability Compass.

Contact: joel.eugster@bei-sg.ch

Joël Eugster

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