The application of Capabilities Based Planning is baked into the acquisition of federal government programs in most domains like Defense and Energy, through the development of the Concept of Operations and the Statement of Objectives. This process is shown below, abstracted from “Capabilities‒Based Planning – How It Is Intended To Work And Challenges To Its Successful Implementation,” Col. Stephen K. Walker, United States Army, U. S. Army War College, March 2005.
In the previous post on Requirements elicitation, Capabilities Based Planning was mentioned as part of the process. Here's the next level of detail for this critically important process.
Capabilities Based Planning provides guidance on the specific capabilities and levels of capability that will be expected to develop and maintained. A capability may be delivered with any combination of properly planned and organized work efforts that produce the outcomes needed to fulfill the Scenario.
The key difference between Capabilities Based Planning and Requirements Elicitation is that CBP starts with a top-down definition through scenarios.
But unlike the previous use of scenarios, these scenarios are focused on Output rather than Inputs.
- Decisions should be based on explicit criteria of national interest, not on compromises.
- Needs and costs must be considered simultaneously.
- Major decisions should be made by choices among explicit, balanced, feasible alternatives.
A Case Study
The use of capabilities-based planning is widely credited for the success of several large businesses, most notably the phenomenal growth of Wal-Mart. In 1979, K-Mart was the leading discount retailer in the United States, while Wal-Mart was a regional discount outlet in the southern United States. K-Mart produced approximately twice the revenue per store compared to Wal-Mart. By 1989, Wal-Mart was the leading discount retailer in the United States, if not the world, and was producing twice the return of K-Mart.
Some analysts believe that the fundamental difference between Wal-Mart’s twenty-five percent per year rise and K-Mart’s decline is that Wal-Mart focused on capabilities-based planning. The relationship between K-Mart’s approach to business and Wal-Mart’s approach to business presents a suitable analogy to DoD’s approach to generating military requirements. K-Mart’s approach to business is analogous to DoD’s old requirements generation methodology, and Wal-Mart’s approach to business is analogous to the new, capabilities-based planning methodology.
K-Mart made strategic decisions to optimize sub-sections of their business. For example, K-Mart subcontracted trucking operations because they thought it was less expensive than operating their own, and even leased out some in-store departments to subcontractors based on calculations that the lease payments were more profitable than sales revenue.
Wal-Mart, on the other hand, concentrated on capabilities needed to produce the outcome desired, which was happy customers. They determined what the customers wanted (readily available, quality goods at competitive prices from a trustworthy source) and then determined what infrastructure capabilities were required to deliver it (logistics, distribution, communications, employees).
Wal-Mart then invested heavily in processes to provide those capabilities, always focused on the end result of delivering what the customers wanted. This is referred to as a “pull” system, where the customers generate demands rather than the retailer providing items for the customer to take or leave as they choose.