16TH INTERNATIONAL DEPENDENCY AND STRUCTURE MODELLING

CONFERENCE, DSM 2014

PARIS, FRANCE, JULY 2 – 4, 2014

Towards a Capability Framework for Systems Architecting

and Technology Strategy

Andreas M. Hein1, Yuriy Metsker2, Joachim C. Sturm3

1 Institute of Astronautics, Technische Universität München, 2 Lehrstuhl für Flugantriebe,

Technische Universität München, 3 Lehrstuhl für Luftfahrtsysteme, Technische

Universität München

Abstract: Capabilities and competencies play a vital role in developing technologies

and systems. They have been extensively treated in the strategic management

literature. Yet, the existing system architecting and product development literature

does not seem to have considered them. This paper provides a first step towards

aligning system architecting with capability assessment and development. First, the

existing literature on capabilities is assessed and approaches for measuring

capabilities introduced. Next, design structure matrices and multi domain matrices

are used for modeling capabilities and their relationships to strategies and systems

planned to be developed. Finally, a capability assessment method is presented and

used for an actual liquid rocket engine project, based on additive manufacturing. The

results from the case study show the applicability of the framework to an innovative

project, oriented towards capability development.

Keywords: technology strategy, strategic management, competency, capability,

product architecture, design structure matrix, multi domain matrix

1 Introduction

Competencies or also called capabilities play a vital role in the technology and innovation

strategy literature. Both describe the ability of an organization to execute a certain task,

for example to develop and deploy a type of product. Nevertheless, to the authors’

knowledge, both concepts have not yet been sufficiently addressed by the existing product

development and system architecting literature. Addressing this gap is important, as

technology and system development is often undertaken for developing capabilities or

leverage on previously developed ones.

This paper focuses on how design structure matrices (DSMs) can be used for assisting

capability assessment and development.

The main hypothesis is that DSMs can assist in eliciting the dependencies between

capabilities, organizations, and system architectures. For this purpose, the notions

competency and capability are first clarified. Next, possibilities for measuring both are

introduced. Then, capabilities are modeled and the relationships between capabilities,

organizations, and system architectures established. These relationships are modeled by

using multi domain matrices (MDMs) and domain mapping matrices (DMMs). Finally,

the modeling approach is demonstrated by a real-world development project.

Towards a Capability Framework for Systems Architecting and Technology Strategy

DSM 2014

2 Literature

The terms competency and capability are difficult to distinguish. In the literature,

competencies are often described as more elemental, for example a certain manufacturing

method, whereas capabilities aggregate competencies, for example in a whole value chain

(Schilling, 2010). As these are rather questions of hierarchy, in this paper the terms

“capability” and “competency” are used interchangeably.

The literature on capabilities can be linked to two prevalent concepts: the resource-based

view of the firm and core competencies. The resource-based view of the firm focuses on

the internal resources of an organization as a source of its competitiveness (Wernerfelt,

1984), (Peteraf, 1993), (Barney, 2001). More specifically, it looks at resources, which are

valuable, rare, in-imitable, and non-substitutable. Such resources can lead to a competitive

advantage. This internal perspective is in stark contrast to strategic frameworks which

emphasize positioning a firm with respect to external factors, for example Porter’s Five

(Porter, 1996).

Within the resource-based view, core competencies were introduced by Prahalad & Hamel

(Prahalad & Hamel, 1990). They define “core competencies” as competencies that are not

easy for competitors to imitate, can be reused widely for many products and markets, must

contribute to the end consumer's experienced benefits from the value of the product or

service. For example, they identify the core competencies of Canon as “precision

mechanics”, “fine optics”, “microelectronics”. Each Canon product is based on one of

these core competencies. Core competencies are used in of so-called “core products”, on

which a variety of end products is based. For example, one of NEC’s core products is

semiconductors. Within the DSM literature, Bonjour & Micaelli (2010) use DSMs and

DMMs for evaluating projects with respect to their contribution to desired core

competencies. Danilovic & Leisner (2007) use DMMs for identifying core products.

Other important types of competencies are competency-enhancing and destroying

innovation (Tushman & Anderson, 1986). Competency-enhancing innovation sustains and

even improves an existing competency, whereas competency-destroying innovation

makes an existing competency obsolete. For example, introducing an existing product to

a new market enhances the existing competency, as the organization gains new experience

in addition to already existing experience with the product. An example for competency-

destroying innovation is the introduction of computers for doing calculations. Before their

introduction, human calculators were common. Computers quickly outperformed them

and made them obsolete.

Capabilities are also vital for maintaining technologies. Szajnfarber (2011) and

MacKenzie & Spinardi (1995) show that technologies are dependent on their underlying

organizational capability. By analyzing NASA technology development programs,

Szajnfarber describes how technologies were lost when teams broke apart. Taking nuclear

weapons development as an example, MacKenzie & Spinardi illustrate, how tacit

knowledge is vital for keeping a technology alive.

To summarize, the strategic management literature focuses on capabilities on an

organizational level and its implications for competitiveness. A high-level mapping

between capabilities and products has been demonstrated. However, a prescriptive

approach is currently missing, especially for assessing a large number of system

architectures with respect to their impact on capability development.

Andreas M. Hein, Yuriy Metsker, Joachim C. Sturm

DSM 2014

3 Capability framework

3.1 Need for a capability framework

From the authors’ experience, capabilities are regularly taken into account when product

development projects are initiated. This starts with assigning work packages to partners,

subcontractors, divisions, departments, and individuals, based on their capability to

accomplish them. For example, make or buy decisions are often made on the basis of an

informal capability assessment. Such assessments look at the evidence that a sufficient

capability is present or could be developed. However, there are still cases where

development projects are initiated, without sufficient capability assessment. Insufficient

capability assessments have contributed to major cost overruns, in particular with respect

to heritage systems. Heritage systems are already developed systems, which can be used

to reduce development risk. However, heritage is often claimed, although the supplier has

already lost its capability to produce that system, as vital personnel has retired or the

production line has been closed. For example, false claims of heritage have caused

significant cost and schedule overruns within NASA programs (Chaplin et al., 2010).

3.2 Framework objectives

Thus, the objectives of a capability framework can be defined as:

Provide guidance for making system architecture decisions together with a

capability assessment in the early phases of system development

Able to model capabilities and their interdependencies

Able to measure capabilities

Able to relate capabilities to system architectures and strategies

3.3 Framework overview

The framework consists of the following elements:

Method for capability measurement

Capability model

Mapping between capabilities, system architectures, and strategies

4 Defining and measuring capabilities

In the following, capabilities are defined as:

The ability to perform a task with or without a set of performance criteria.

A capability can be measured by checking whether the sufficient conditions for executing

the task are satisfied. A task can be executed if three conditions are present: required

resources, processes, and priorities (Christensen & Kaufman, 2006). Resources can be for

example people, tools, information, and infrastructure. Processes are activities and

routines for performing a task. Priorities guide decision-making within an organization.

They can be based on organizational values, for example the principles of Lean. The

following example illustrates the conception of capability: A person capable of playing

the piano can prove this by playing the piano on request. The preconditions are the

existence of a piano (resources) and completed piano lessons (studying processes and

Towards a Capability Framework for Systems Architecting and Technology Strategy

DSM 2014

priorities). A firm can prove its capability to develop a certain type of system by

developing such a system. Thus, fulfilling the preconditions is a necessary condition,

whereas successful task execution is a sufficient condition for the existence of a capability.

A less thorough way of capability testing would be prototyping and performing a design

“spike”. A design spike is the development of a small part of the system down to a

sufficiently detailed level in order to prove that an organization is capable of developing

the whole system. Taking samples is thus another way to show the existence of a

capability. Another, possibly weaker approach is to look for similar capabilities, which

can be stretched. The von Braun team, which was responsible for developing the V-2

rocket was tasked with developing a larger ballistic missile in the US (Neufeld, 2009).

Although a novel task, their prior experience was sufficient evidence that they would be

capable of accomplishing it.

Thus, capabilities can be measured in four ways: a) Check whether adequate resources,

processes, and priorities exist b) Collecting evidence by performing the same task; c)

Collecting evidence based on sampling; d) Collecting evidence based on task similarity

The strength of evidence depends on what type of capability is measured. The following

questions can guide the process of finding appropriate pieces of evidence: Is the piece of

evidence an indicator for a capability? How strong is the piece of evidence?

In other words, the questions check the relevance and importance of a piece of evidence.

5 Modeling capabilities with MDMs

Capabilities themselves can be modeled by MDMs, which have been introduced by

Maurer (2006) and Danilovic & Browning (2007). A capability can be modeled as a

mapping between an organization architecture DSM, tool architecture DSM, and process

architecture DSM, as shown in Figure 1. The organization and tools are the resources

considered here. The priorities are left out at this stage but an interesting topic for further

research might be the modeling of a network of organizational values with DSMs and

mapping it to a capability. There are alternative ways of decomposing resources, for

example, organizations, tools, methods, facilities. The proper way of decomposition

depends on the modeling objectives.

Capabilities Processes Organization Tools

Capabilities Depends on Consist of Consist of Consist of

Processes Needs output

from

Performed by Uses

Organization Interacts with Uses

Tools Interacts with

Figure 1. Capability MDM meta-model. It is read from the row to the column, e.g. “capabilities

consist of processes”

Andreas M. Hein, Yuriy Metsker, Joachim C. Sturm

DSM 2014

Capability networks or systems can be modeled as graphs and DSMs. An adjacency

matrix which maps capabilities to capabilities is named a “capability - capability” DSM.

Variations to these matrices are for example a “capability as-is – capability to-be”

matrix.

Another MDM can be used for assessing the alignment of capabilities with strategic goals

and products, as shown in Figure 2. Strategies channel an organization’s efforts towards

high-level goals. For a university, a strategy can be “publish papers in prestigious

international journals”, which is linked to the goal of improving its position in university

rankings.

Strategies Capabilities Systems

Strategies Depend on Need Based on

Capabilities Contribute to Depend on Proven by

Systems Contribute to Based on Based on

Figure 2. Strategies – capabilities – Systems MDM meta-model

Note that the matrix of the MDM meta-model is not symmetric with respect to the product

– capability and capability – product mapping. A capability can be proven by developing

a certain product. Having developed a high-quality car demonstrates that an organization

has the capability to develop high-quality cars. However, developing a high-quality car

depends on the capability to acquire a high-quality gasoline engine, developing a chassis

using latest results from materials science etc.

6 Capability assessment and planning

Capability assessments are done for various purposes. One purpose is assessing the

capabilities of an entity as-is, another is identifying the best path to a to-be capability.

The capability assessment and planning process consists of:

1. Determine goal capabilities

2. Measure existing capabilities

3. Identify capability development paths to goal capabilities (consider outsourcing,

licensing, subcontracting, joint development)

4. Align paths with technology strategy and system architecture options

5. Select development path with respect to evaluation criteria, e.g. cost, schedule

If the goal is only to determine the as-is capability, only step 2 is performed.

7 Case study: Additively manufactured rocket engine

The capability framework was applied to an actual project. The project’s objective was to

develop a small liquid-propellant rocket engine (LPRE) thrust chamber, which is produced

entirely by additive manufacturing (AM). Conventional thrust chamber manufacturing

takes place with subtractive manufacturing methods, for example milling. This leads to a

high number of process steps, large number of components, and results in high

Towards a Capability Framework for Systems Architecting and Technology Strategy

DSM 2014

manufacturing cost. Additive manufacturing can reduce the number of process steps

considerably and decouples geometric complexity from manufacturing process

complexity. Thus, it is attractive for highly integrated components, as in this case a rocket

engine.

The initial thrust chamber architecture trade-space is shown in Table 2. The determining

characteristics of the thrust chamber are listed in the first column. Options for the

characteristics are listed in the “Option” columns.

Table 2. Rocket engine trade-space options

Characteristic Option 1 Option 2 Option 3 Option 4

Injector Showerhead

(low)

Impingement

(high)

Fuel Gas Liquid

Propellant combination

Kerosene / Ox Methane / Ox Alcohol / Ox Methane / N2O

Combustion

chamber cooling

Regenerative

cooling (high)

Porous cooling

(high)

Perforated

cooling (high)

Capacitive

(low)

Thrust chamber features which are particularly valuable in demonstrating AM capability

are combustion chamber cooling and injector options which exhibit high geometric

complexity. The geometric complexity for individual options for both elements is

indicated in brackets.

In the following, a capability assessment is performed in accordance to the process from

section 6.

1. Determine goal capability

Two goal capabilities were identified:

a) Designing and testing a functional additively manufactured LPRE thrust chamber

b) Provide the basis for future, performance-oriented LPRE thrust chamber

development with additive manufacturing

As a first step, the desired goal capability a) was broken down into sub-capabilities:

(1) Combustion chamber design according to AM design rules

(2) Nozzle design according to AM design rules

(3) Injector design according to AM design rules

(4) Cooling design according to AM design rules

(5) Overall thrust chamber performance assessment via simulation

(6) Thrust chamber manufacturing with AM

(7) Assembly, Integration, & Testing of engine assembly

Andreas M. Hein, Yuriy Metsker, Joachim C. Sturm

DSM 2014

2. Measure existing capability

The existing capabilities of the organizations which plan to participate in the project were

identified. The relevance of the capabilities for the project is depicted in a capability as-is

– capability to-be matrix in Table 4.

Table 4. Mapping capabilities as-is to capabilities to-be

(1) (2)

(3) (4) (5) (6) (7)

Main team Guided rocket development

Main team Hybrid rocket engine development P P P P P

Research institution Liquid rocket engine development &

testing, liquid rocket engine

P P P P P P

Research institution Engine simulations P P P P P

Research institution Reach out to industry and other research institutes

Manufacturing

enterprise

Design for additive manufacturing C C C C

Manufacturing enterprise

AM manufacturing C

Most of the relations are of type “partial” (P), as there are some characteristics of the as-

is capabilities which can be used in the context of new system development. Capabilities

related to AM are only covered by the manufacturing enterprise. These are indicated by

“complete” (C). In the next iteration, these missing capabilities can be broken down and

the matrix further refined. Note that two as-is capabilities have no relationship with the

capability development objectives.

3. Identify capability development paths to goal

The desired capabilities were decomposed into a process architecture DSM, organization

DSM, as shown in Fig. 3.

Figure 3. Decomposition of capabilities into processes, organization, and tools.

Towards a Capability Framework for Systems Architecting and Technology Strategy

DSM 2014

4. Align paths with technology strategy and system architecture options

The strategies – capabilities – systems MDM is used for assessing the relationship between

the goal capabilities and strategies, as shown in Figure 4. Furthermore, the contribution of

the systems to-be-developed to the capabilities and strategies is evaluated. In the case at

hand the relationships between the systems and capabilities is trivial. The benefit of using

this MDM increases with complex development roadmaps with numerous prototypes,

which contribute to capability development.

Fig. 4. Mapping capabilities to strategies and systems. “1” indicates that a relationship exists.

The defining characteristics of the LPRE thrust chamber are now mapped to the seven

sub-capabilities. The contributions of each characteristic to the sub-capabilities is shown

in Figure 5.

Injector Fuel

Propellant

combination

Combustion

chamber

cooling

(1) 1

(2)

(3) 1

(4) 1

(5) 1 1 1 1

(6) 1 1 1 1

(7) 1 1 1 1

Sum 4 3 3 5

Fig. 5. Contribution of system features to sub-capabilities

Next, each of the options for the characteristics was evaluated with respect to its level of

required capability, low (1), medium (2), and high (4). The more sophisticated an option

is, the higher the contribution to capability development. For example, the showerhead

injector makes a low contribution to capability development, as it is a simple design. An

impingement injector on the other hand demonstrates sophisticated analysis and design

capabilities. Each value is multiplied by the number of sub-capabilities associated with it

from Figure 5. The same is done for each feature with respect to the effort required for

developing it: little (1), intermediate (2), a lot (4). The showerhead requires little effort,

whereas the impingement injector requires a lot of effort. These estimates should be

replaced by quantitative values as soon as possible. Plotting the sum of capability

I II III IV V VI

Strategies Do research on innovative rocket engines I 1 1 1 1

Open up new markets for 3D-printing II 1

Capabilities Develop functional LPRE with 3D-printing III 1 1 1 1

Develop performance LPRE with 3D-printing IV 1 1 1

Systems Functional 3D-printed LPRE V 1 1 1 1

Requirements-driven 3D-printed LPRE VI 1 1 1

Andreas M. Hein, Yuriy Metsker, Joachim C. Sturm

DSM 2014

contributions and development efforts for each architecture yields Figure 6. Architecture

identifiers are composed of the four characteristics and respective option numbers from

Table 2. A sensitivity analysis was conducted by decreasing the estimates for the

capability contribution and development effort to the next lower level and the other way

round. The former architectures are indicated by “x”, the latter by a triangle.

Figure 6. Architecture options and two Pareto frontiers, one for the original evaluation and the

other with the sensitivity analysis.

The team members were well aware, that these results need to be backed up by further

engineering analysis. Nevertheless, it helped focus further analysis on a smaller set of

architectures.

The case study demonstrates that the capability framework can be applied to an innovative

project, which is oriented towards capability development. The MDMs helped the team to

link the different areas and assess them coherently. Further case studies should aim at

demonstrating the applicability of this framework to running product lines and the use of

heritage systems.

8 Discussion

The relationship between capability maturity and readiness was not considered in the

paper. To the authors’ current understanding, capability maturity depends on the lifecycle

phase of a capability, e.g. its novelty or obsolescence. Capability readiness indicates

whether a capability can be used for a certain purpose or not.

Capabilities might be difficult to measure and to isolate. How do we know all the relevant

elements which constitute a certain capability? For example, tacit knowledge might

contribute to a unique capability, which is difficult to imitate (Westrum & Wilcox, 1989)

(MacKenzie & Spinardi, 1995). There is indeed sufficient evidence that some forms of

capabilities are contingent. A famous example is “Greek fire”, a kind of ancient

flamethrower. The liquid could not be properly reproduced. The authors argue that

although individual capabilities are unique, many capabilities can be developed, measured,

and diffused. Otherwise, innovations could not be diffused.

Towards a Capability Framework for Systems Architecting and Technology Strategy

DSM 2014

9 Conclusions

This paper provided an initial step for integrating capability assessment with system

architecting. For this purpose, approaches for measuring capabilities, relationships

between them, and DSMs, MDMs, DMMs for mapping capability relationships were

introduced. Furthermore, a capability assessment method was presented and its

applicability demonstrated for a small liquid rocket engine thrust chamber development

project. Future work aims at using the framework for linking technology roadmaps and

capabilities with system architecture options.

References

Barney, J. B., 2001. Resource-based theories of competitive advantage: A ten-year retrospective

on the resource-based view. Journal of management, 27(6), 643-650.

Bonjour, E., & Micaelli, J. P. (2010). Design core competence diagnosis: a case from the

automotive industry. Engineering Management, IEEE Transactions on, 57(2), 323-337.

Chaplin, C., Oakley, S. S., Berkholtz, J. M., Cederholm, R. A., Dunleavy, J. D., Greifner, L., &

Sun, R. T. 2010. NASA Assessments of Selected Large-Scale Projects. United States

Government Accountability Office, Report No. GAO-10-227SP.

Christensen, C. M., & Kaufman, S. P., 2006. Assessing Your Organization’s Capabilities:

Resources, Processes, and Priorities. Burgelman, R. A.; Christensen, C. M.;

Wheelwright, S. C. (Eds.), Strategic Management of Technology and

Innovation. McGrawHill, pp.153-163.

Danilovic, M., & Browning, T. R. (2007). Managing complex product development projects with

design structure matrices and domain mapping matrices. International Journal of Project

Management, 25(3), 300-314.

Danilovic, M., & Leisner, P. (2007). Analyzing core competence and core products for developing

agile and adaptable corporation. In Proceedings of the 9th Dependency Structure Matrix

(DSM) International Conference, 16-18 October 2007, Munich, Germany.

Fenton, N. E., & Neil, M. D., 2012. Risk Assessment and Decision Analysis with Bayesian

Networks. CRC Press.

MacKenzie, D., & Spinardi, G., 1995. Tacit Knowledge, Weapons Design, and the Uninvention of

Nuclear Weapons l. American Journal of Sociology, 101(1), 44-99.

Maurer, M. S. (2007). Structural awareness in complex product design. PhD thesis, Technische

Universität München, Munich, Germany.

Neufeld, M. J., 2009. Von Braun: Dreamer of Space, Engineer of War. Knopf, 1st Edition.

Peteraf, M. A., 1993. The cornerstones of competitive advantage: A resource‐based view. Strategic

management journal, 14(3), 179-191.

Porter, M. E., 1996. What is Strategy? Harvard Business Review 74, no.6.

Prahalad, C. & Hamel, G., 1990. The Core Competency of The Corporation. Harvard Business

Review, 68(3), 79-91.

Schilling, M.A., 2010. Strategic Management of Technological Innovation. McGrawHill, pp.121-

122.

Szajnfarber, Z., 2011. Innovation pathways in technology intensive government organizations:

insights from NASA, Doctoral dissertation, Massachusetts Institute of Technology.

Tushman, M. L., & Anderson, P. (1986). Technological discontinuities and organizational

environments. Administrative science quarterly, 439-465.

Wernerfelt, B., 1984. A resource‐based view of the firm. Strategic management journal, 5(2), 171-

180.

Westrum, R., & Wilcox, H. A., 1989. Sidewinder: Creative Missile Development at China Lake.

Naval Institute Press.