The term “business capability” is synonymous with BIAN “Service Domain” (see BIAN Practitioners Guide), with “business component” in IBM’s CBM methodology (see Component Business Models), and with “business function” in general business management.

A “business capability” describes ability to perform certain set of related activities for providing a set of business services, by combining people, processes, resources (incl. needed systems) and governance, using the business services from other business capabilities, if needed.

Where “business service” describes externally visible unit of business functionality of a business capability, which provides value to service consumers, is provided via explicit external interfaces, and realized by business processes.

You can think of a business capability as a self-contained part of business that could be outsourced as is.

Business capabilities themselves can be hierarchically sub-divided into smaller business capabilities if needed, or combined into larger business capabilities up to a business capability to provide all the services of a certain business (for example to provide all banking services).

Business capabilities are connected to other business capabilities through the business services and form a value network.

The business capabilities for a given business domain can be found/formulated, taking as the starting point the lists of key activities needed for all the business models of given business domain. The set of business capabilities describes what things given business domain mustbe able to do, to support the business strategy and execute the businessmodels.