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July 03, 2014
Solve for service before creating capabilities
By: Mark McDonald

Capability vs. service is one of the subtle differences between feeling digital and being a digital business. It is easy to feel digital by wrapping existing business models in new technology or stamping the word ‘digitize’ on investment proposals and plans. These actions give the illusion of digital leadership often concentrating on the capabilities based on digital technology. The organization gains digital tools, but loses the essence of being a digital business.

Starting a digital strategy creates capability first. It presumes the primacy of success rests inside the company and not the customer. The assumption with capabilities is that customers want to buy our products, they just do not know about us, or how to spend their money with us. The result is strategies calling for building the marketing, sales and service capabilities. Objectifying customers sits behind such strategies.

If new capability was the major requirement for digital success, then the path to digital success is easy. You simply digitize past practices and processes with new technology and the market is yours. There would be no need for ‘test and learn’, design, disruption, etc. The evidence is clear. The new capabilities, while important, are not sufficient to build a digital business. There is something more required, a context for capabilities that sets them on the right path. That something more is adopting a service mindset.

Service seeks success from the outside in

Solving for service means taking an outside-in view on success. Identifying the innovative and tangible differences between people, products, experiences, and execution that create new sources of value that lead to revenue. This is a radically different definition of the term ‘service.’ In this context, service is not something a system does, like an IT service. It is also not something you do, like a process. Rather it is something that happens when you reimagine the context of value from the perspective of individuals, trading partners, others and finally yourself.

Digital strategies concentrate on discovering services, rather than defined capabilities. Discovery starts with looking at the world from the outside to see it for what it is rather than pushing an internal perspective to see what you want to see. Who are the people involved, where are they coming from attitudinally, demographically, physically, emotionally, etc.?

What do they value and how can we connect with those values? These are all questions that are answered in service design.

Capabilities provide an internal frame for the external world. Internal framers often say ‘this is how we see the market, those people as they are not in our target market, or they would never buy from us.’ Capability definition demands closed statements as they focus on process solutions that presume the problem statement and solution rest internally. This view creates great momentum for funding proposals. It is risky at best for generating investment returns, building a baseline for weak benefits realization.

Service sets the context for capability

Capability defines the competitive capacity of any company. What you can do, how well you do it, how it compares with others remain important in the digital world. Capability is critical for success. But the context of capability is changing as the nature of customer choice changes. The internal perspective takes the second chair to the outside world as we gain information and the ability to choose. That puts capability a close second to service in digital business thinking.

Service embodies an outside-in view. Expressed in terms of the interests, abilities, interactions, relationships and experiences that coalesce to create mutual value, they set the context for capability. Service is the “why” to the capability “how.”

Service is the strategy for a digital business compared to capability execution. It is a stark distinction, one that repudiates capability alone as strategy. Digital strategy has to answer more questions than what do we build. Too many digital strategies concentrate on capability, roadmap and business case without the guidance of a service strategy. The result is internal investment and action, digitizing old processes without regard to future customer demands.

Service helps avoid a capabilities based ‘field of dreams’ strategy. That ‘build it and they will come’ presumes that customers are walking wallets; economic drones just waiting to buy what you have to sell. If it were that simple, then defining capabilities would be easy. What makes creating capabilities hard is the assumed prior step – the service. The answer is clear. Solve for service, explore an outside-in view, before creating capability.

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