The economic climate and tightening regulations are prompting large enterprises to invest in capability management tools - a new category of software that helps senior decision-makers to understand the organisation’s readiness to implement new initiatives.
Large, complex enterprises run a huge risk every time they implement a new strategic initiative. The risk is that something important will have been overlooked in the planning stage that will cause the initiative to fail, run over time or over budget, or fall foul of regulators.
Many organisations view those risks as a fact of life. That’s because anticipating and mitigating them is next to impossible, especially if the organisation wants to move quickly. It’s simply too difficult to amass and analyse the mountains of information from across the business – and beyond – that might have some impact on how the new initiative could roll out.
The result is that major change programmes are implemented without senior management being fully confident that they will happen as intended, or that the outcomes will be the desired ones.
Economic pressures and new regulations are hardening attitudes to risk
Now, the economic climate is making senior management more risk-averse. They want to act, but they want to be confident that a new product launch, or expansion into a new market, will be a success. Straitened budgets mean there’s less appetite for risk and lower tolerance for failure.
At the same time the regulatory environment is tightening, with the financial services industry in particular starting to see new, stricter regulations coming into force as a result of the recent crisis.
In June 2013, for example, the UK’s Prudential Regulation Authority instructed five banks to find £13.4bn in additional capital – a demand that will likely have caught some off guard and derailed investment plans. And the insurance industry is living in the shadow of new Solvency II regulations whose detail and timescales continue to shift, making it hard to plan new growth initiatives.
Capability management can reduce the risk of business failure
It’s this kind of uncertainty that has led to the emergence of capability management as a management discipline.
Pioneered by the armed forces, capability management is now making its way into the commercial arena. Essentially, it’s the practice of analysing and understanding the organisation’s ability to carry out a planned strategic initiative or change programme, and making decisions based on that insight.
It may sound straightforward, but the barrier to capability management has always been the need to sift through enormous amounts of information to understand where capabilities, risks and gaps lie.
In most organisations, information about different functions is kept in silos, so it’s been almost impossible to get a clear view of – for example – which products are affected by which regulations in which countries, or which existing systems, processes and people can be deployed to support a major launch into a new geography.
These are hugely important questions that can have a significant bearing on the cost, timescale and deployment plan for any new initiative. But most enterprises have lacked the software tools to connect information from different systems to create a ‘big picture’ view of the organisation’s capabilities in a given area.
Some try to use spreadsheets or Powerpoint to cobble the information together, but that requires a massive manual effort for an end result that’s usually incomplete and out of date. Others have invested in ‘point’ software tools that are very good in a given area – for example process management – but can’t link different areas of the business to provide the big picture.
The first capability management tools are now here
Until now, there hasn’t been a good alternative to these two (flawed) approaches. But now, the first truly holistic capability management tools are appearing on the market.
At SecondFloor, capability management is a function we’ve built into our TopEase® business control software, which is used by large banks and insurers across Europe to map, connect and analyse every element that makes up the business.
Using TopEase® for Capability Management, organisations can get a truly holistic view of business capabilities, with heatmaps revealing risks and gaps that must be addressed to ensure an initiative runs smoothly.
For more information about how TopEase® for Capability Management can accelerate major change initiatives, reduce operational risk and increase successful outcomes, contact SecondFloor today.