Reducing Spend on Areas of No Competitive Advantage Using Business Capability Modelling
Background
An organisation was facing increasing operational costs and needed to identify areas where resources were being inefficiently allocated. Leadership sought to reduce spending on activities that did not contribute to its competitive advantage while ensuring resources were focused on core capabilities. Using a Business Capability Model (BCM), the organisation mapped its capabilities and uncovered significant inefficiencies. Specifically, it found that several areas had duplicate systems costing millions of dollars, some of which were not even being used. This realisation prompted a deeper analysis to streamline spending and eliminate waste.
Challenge
The organisation encountered several key challenges related to its spending and resource allocation:
- Duplicate systems: By mapping its capabilities, the organisation discovered that certain areas had multiple systems performing the same function, resulting in millions of dollars in unnecessary costs.
- Unused systems: Some systems that had been implemented were no longer being used, leading to wasted resources on maintenance and licensing.
- Lack of focus on competitive advantage: Leadership lacked a clear understanding of which capabilities truly differentiated the organisation from its competitors and which could be deprioritised.
- Need to optimise operational costs: Rising expenses were putting pressure on profitability, and leadership needed to find ways to reduce costs without negatively impacting the organisation’s core strengths.
A BCM was used to map the organisation’s capabilities and pinpoint areas where resources were being allocated inefficiently, allowing leadership to reduce costs in non-critical areas.
Solution
The BCM provided a structured approach to identifying inefficiencies in the organisation’s resource allocation. By mapping all capabilities, the organisation was able to visualise where resources were being wasted on duplicate or unused systems. Key steps in the solution included:
- Mapping capabilities and systems: The BCM was used to map out the organisation’s capabilities and the systems supporting each one. This visualisation revealed areas where multiple systems were performing the same function, as well as systems that were no longer in use.
- Identification of duplicate systems: The analysis uncovered several instances of duplicate systems across different departments. These systems were costing the organisation millions of dollars in maintenance, licensing, and support, without adding additional value to the organisation.
- Assessment of unused systems: The BCM also revealed that some systems, although still being maintained, were not actively used by the organisation. These systems were flagged for decommissioning to eliminate unnecessary costs.
- Focusing on core capabilities: The analysis helped leadership identify which capabilities provided a competitive advantage and required continued investment. Areas that were essential to the organisation’s market differentiation were prioritised, while non-core capabilities were targeted for cost reduction.
- Development of a cost-optimisation plan: A strategic plan was developed to decommission duplicate and unused systems, reduce operational costs, and reallocate resources to higher-value areas that directly supported the organisation’s competitive strengths.
Outcomes
The use of the BCM to reduce spending on areas of no competitive advantage led to several key outcomes:
- Elimination of duplicate systems: The BCM identified multiple duplicate systems, enabling the organisation to consolidate these platforms and save millions of dollars in operational costs.
- Decommissioning of unused systems: Systems that were no longer being used were decommissioned, further reducing maintenance and licensing costs without impacting organisation performance.
- Improved resource allocation: Resources previously spent on redundant or unused systems were reallocated to capabilities that provided the greatest competitive advantage, ensuring that high-impact areas received adequate funding.
- Cost-efficient operations: By streamlining its technology landscape and reducing waste, the organisation was able to significantly lower its operational costs while maintaining focus on core strengths.
- Sustained competitive advantage: The BCM allowed the organisation to cut costs in non-critical areas while preserving investments in key differentiating capabilities, ensuring long-term success.