Micro Capability Centers: Innovation and Scalability Engines


In the rapid pace of the digital economy, everyone is looking for innovation and scalability. This is what has given birth to micro capability centers.

What Are Micro Capability Centers?

Micro capability centers are provider-managed incubators of fewer than 100 employees that are uniquely tailored to meet the needs of fast-paced enterprises.

As companies invest in new digital ventures, for example testing market potential or creating new marketplace models, they need specialized insights and expertise. These initiatives are not full-fledged solutions or multi-billion-dollar products but rather pilots that will inform the larger solution and product strategy. Therefore, it makes sense for companies to explore these ideas without committing extensive resources and capital at the outset. By partnering with a provider who already possesses the necessary skills and resources, a company can mitigate risks and minimize upfront costs. Once the initiative gains traction and earns some revenue, it can then decide to transition it in-house. Rather than losing the time and institutional knowledge to start building the capability internally, the micro center is transitioned from the provider to the company, allowing the scaling to continue without disruption.

A Scalable and Cost-Efficient Way to Test Digital Initiatives

Micro capability centers have emerged as a cost-effective, capex-friendly solution for companies exploring new digital initiatives by allowing them to test feasibility and determine true value potential. These micro capability centers enable critical elements of innovation: agility, scalability, cost-efficiency and versatility. Conversely, if an innovation falls short of expectations, the business can rapidly pivot to another idea or dissolve the operation and minimize losses.

One key advantage of these centers is that they can assemble diverse and talented teams for digital experimentation and innovation. They are typically nimbler than the internal staffing capabilities of larger organizations, enabling any organization, including digital-native enterprises, to adapt promptly to a fast-paced digital landscape.

Another advantage of these centers is that they offer access to talent who are essentially trained by other G1000 enterprises. Providers today have numerous individuals who have developed, over the years, the know-how and experience to deliver top strategic and business-critical capabilities. Their influence can foster a culture of excellence and raise the overall performance of any organization.

Benefits for Enterprises: Breadth of Skills and Low Initial Expense

Organizations benefit from micro capability centers in several ways.

  1. Access to a wide range of multifaceted skills and expertise, including call center support, chat escalation centers, inside sales teams, marketing copywriting and development resources
  2. Access to fractional resources on a pay-as-you-go basis, so you can more easily tap into the required skill sets without investing heavily in building an in-house team
  3. Access to a global talent pool trained by G1000 organizations to deliver business-critical capabilities

Benefits for Services Providers: Resource Optimization and New Revenue Potential

For providers, micro capability centers present a valuable opportunity. They can use existing talent pools, such as developers or other specialists, and allocate them to specific projects as needed. By doing so, they can generate ongoing revenue and – establish long-term partnerships. Providers understand that, if these capability centers become an integral part of their clients' operating model, it can mean real growth potential.

Provider-managed micro capability centers are emerging as catalysts for innovation. Because they are agile, cost-effective and scalable, these centers embody the spirit of continuous evolution and disruption inherent to the digital economy.

ISG helps enterprises and service providers design and implement micro capability centers that drive business growth and innovation. Contact us to discuss how we can work together to enable your ambitions.

The ISG Buyer Behavior program researched Global Capability Centers (GCCs) in a recent study, which aimed to gain a perspective from over 300 enterprises on their use of GCCs across IT, corporate and industry-specific functions. Click here to read the summary.


About the authors

Sarah Diaz

Sarah Diaz

Sarah Diaz joined ISG in October of 2020 and is a Principal Consultant within the Digital Strategy and Solutions group focusing on Future of Work and Enterprise Agility engagements. She is working to identify how the Office of the Future may change in order to ensure a safe office environment for employees post pandemic. She also works with clients to guide on how to transition into a Product Aligned Organization.
Shriram Natarajan

Shriram Natarajan

As ISG’s Business Transformation team, Shriram brings 25+ years of experience in operational roles, entrepreneurial startups that were instrumental in specifying, architecting, building, and rolling out multi-billion-dollar initiatives in various industry verticals. He offers ISG clients his comprehensive digital imagination and adoption experience for their mission critical initiatives and their innovation ventures.