What Is a Business Capability Model?
A business capability model is a visual representation of what a business does to deliver value, completely independent of how it’s done, who does it, or what systems are used.
It breaks down the organization into a set of capabilities—like Customer Management, Product Development, or Logistics—that describe its core strengths. These capabilities are organized into a structured model to help leaders understand, analyze, and improve the business at a high level.
A business capability model helps you:
- Get a clear picture of what your organization is truly capable of
- Identify strengths and weaknesses
- Plan for change, whether you’re launching a new product or transforming digitally
- Align business and IT by speaking the same strategic language
How it’s structured
Business capability models are typically built in a layered, hierarchical format that gives you both a high-level view and the option to drill down into more detail—without losing strategic focus.
At the top, you have Level 1 capabilities—broad, stable functions that describe what the business does, such as:
- Marketing
- Operations
- Customer Service
- Product Development
These are not roles or departments, but strategic functions that define how value is created and delivered.
Beneath each Level 1 capability, you can break things down into Level 2 or Level 3 sub-capabilities. For example, under Marketing, you might see:
- Campaign Management
- Brand Strategy
- Customer Insights
This multi-level approach helps you zoom in where needed without making the model overly complex or tactical.
Capability groupings
Capabilities are usually grouped into logical domains to reflect different areas of the business. Common groupings include:
- Customer-facing capabilities – e.g., Sales, Customer Support
- Internal operations – e.g., Finance, HR, Supply Chain
- Enabling capabilities – e.g., IT Services, Data Management, Security
These groupings help structure the model clearly and allow stakeholders to focus on the areas most relevant to their goals.
Key Components of a Business Capability Model
A business capability model becomes more valuable when you enrich it with details that help with planning and analysis. Here are the key elements to include:
1. Capability name and description
Each capability should have a clear name (e.g., Customer Support) and a short explanation of what it covers. Focus on the what, not the how.
2. Capability maturity (optional)
This shows how well the capability is currently performing—whether it’s basic, developing, or optimized. It helps identify where improvements are needed.
3. Performance indicators or metrics
Use measurable data like Customer Satisfaction, Time to Market, or Error Rates to track how effectively each capability is working.
4. Related systems/applications (optional)
List the tools or platforms supporting each capability. This helps with IT planning and identifying system overlaps or gaps.
5. Capability heatmaps
Use color coding to show performance or priority levels (e.g., red = needs improvement, green = strong). Great for spotting issues at a glance.
Key Steps to Create a Business Capability Model
Step 1: Define the scope and strategic intent
Start by understanding why you’re creating the model. Is it for digital transformation? Planning new investments? Aligning business and IT?
Define:
- The business area or the entire organization?
- Strategic goals you want to support
This gives your model focus and purpose.
Step 2: Identify capabilities
Next, figure out what your business needs to be capable of. There are two common approaches:
- Top-down: Start with business goals and define capabilities needed to achieve them.
- Bottom-up: Review existing processes, roles, and systems to uncover capabilities already in place.
Aim for outcome-focused capabilities—e.g., Talent Acquisition, not Job Posting.
Step 3: Organize capabilities into domains or layers
Group capabilities into logical domains like:
- Customer-facing (e.g., Sales, Marketing)
- Operational (e.g., Logistics, Finance)
- Enabling (e.g., IT, HR)
You can also structure them into levels (Level 1, 2, 3), with top-level capabilities broken down into more detailed sub-capabilities.
This structure makes the model easier to navigate and analyze.
Step 4: Validate with stakeholders
Review the draft model with business leaders, product owners, IT, and key teams.
Ask:
- Are these the right capabilities?
- Are we missing anything?
- Do the names and groupings make sense?
Stakeholder input ensures the model reflects real needs and builds alignment.
Step 5: Visualize the model
Use Creately to turn your capability list into a clear, interactive visual map.
- Smart shapes and containers let you easily group capabilities into domains and layers
- Color coding and heatmaps highlight performance, maturity, or investment areas
- Link related systems, teams, or initiatives right on the canvas for added context
- Real-time collaboration makes it easy to review and update with stakeholders
- AI-powered templates and suggestions speed up model creation
A visual model makes it easier to communicate and collaborate.
Step 6: Maintain and update regularly
Treat your model as a living document. As the business grows or changes, update capabilities to reflect new strategies, tools, or priorities.
When to and Why Use a Business Capability Model
Business capability models are most useful when your organization is going through change or planning for the future. They help you make smarter decisions by showing what the business is truly capable of.
1. Digital transformation: When updating systems or shifting to new ways of working, a capability model helps you focus on what really needs improvement, not just adding new tech. It shows which capabilities are strong, which are outdated, and where to prioritize digital investments.
2. Mergers and restructuring: In times of major organizational change, capability models help compare the strengths of two companies, identify overlaps, and decide how to integrate or reorganize. It provides a common view of business functions—so you can make smarter decisions, faster.
3. IT strategy and app rationalization: Use the model to map existing systems to capabilities and see where tech overlaps, is underused, or missing. This helps align IT with business needs, reduce costs, and support modernization efforts.
4. Innovation and strategic planning: When exploring new products, services, or business models, a capability model shows if your organization has what it takes—or where new capabilities are needed. It supports opportunity mapping and helps align innovation with strategic goals.
Business Capability Modeling Best Practices
| ✅ Do’s | ❌ Don’ts |
| 1. Focus on the “what,” not the “how”: Capabilities describe what the business does—not how. Avoid mixing them with processes or org charts. | 1. Don’t confuse capabilities with processes or departments: Capabilities are independent of roles, systems, or workflows. |
| 2. Keep it strategic and high-level: Start simple with top-level capabilities. Go deeper only when needed. | 2. Don’t overcomplicate it early on: Too much detail too soon can make the model hard to use. |
| 3. Use consistent naming: Stick to short, action-based names like Product Development. It keeps things clear. | 3. Don’t build it in isolation: Without stakeholder input, the model risks being inaccurate or ignored. |
| 4. Engage both business and IT stakeholders: Cross-functional input ensures the model is accurate and aligned. | 4. Don’t ignore capability maturity: Even simple maturity scores help guide where to improve or invest. |
| 5. Update the model regularly: Treat it as a living tool—update it as business goals, tech, or teams evolve. | 5. Don’t let it sit unused: Use the model to inform strategy, reviews, and transformation initiatives. |
Creately Business Capability Model Examples for Different Use Cases
Bank or financial services company business capability model
Focuses on managing customer relationships, delivering financial services like lending and payments, and ensuring compliance with regulatory and risk standards.
SaaS company business capability model
Centers around building and maintaining software products, supporting customer success, and managing subscriptions and revenue operations.
Healthcare provider business capability model
Highlights capabilities needed to deliver patient care, manage clinical services, and handle administrative tasks like billing and compliance.
Telecommunications company business capability model
Highlights capabilities like network management, service provisioning, customer billing, device support, and customer care to maintain reliable service delivery and retention.
Insurance company business capability model
Includes capabilities such as underwriting, claims processing, policy administration, risk assessment, and customer servicing to support end-to-end insurance operations.
References
Offerman, T., Stettina, C.J. and Plaat, A. (2017). Business capabilities: A systematic literature review and a research agenda. 2017 International Conference on Engineering, Technology and Innovation (ICE/ITMC). doi:https://doi.org/10.1109/ice.2017.8279911.
Kotusev, S. and Alwadain, A. (2023). Modeling Business Capabilities in Enterprise Architecture Practice: The Case of Business Capability Models. Information Systems Management, [online] 41(2), pp.201–223. doi:https://doi.org/10.1080/10580530.2023.2231635.
Raj Vayyavur (2024). Modeling Business Capabilities and Processes Techniques and Practical Applications. International Journal of Research, [online] 11(09), pp.156–160. doi:https://doi.org/10.5281/ZENODO.13767709.
Creately AI helps teams move faster from planning to action by making capability modeling more dynamic, data-driven, and contextual. You can use the model to:FAQs About Business Capability Modeling
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