02. Service Strategy Principles Flashcards
SS. Basic Approach
-acknowledge that there exists other orgs whose aim is to compete with your org
-Decide on an objective that differentiates the value of what you do or how you do it, so that customers do not perceive great value could be generated from any other alternative.
*The basic premise of SS is that service providers must meet objectives defined in terms of their customers’ business outcomes while subject to a system of constraints.
*By understanding the trade-offs involved in its strategic choices such as services to offer or markets to serve, an org can better serve customers and outperform competitors.
=> 4 Ps
SS. Opposing Dyanamics
-Future v Present
a Service Strategy resolves big issues so that staff can get on with the small details (how to provide serive rather that which service)
-Operational Effectiveness vs improvements in functionality
(effectiveness not enough to remain competitive)
-Value Capture
(Value capture is that portion of value creation that a provider is able to keep. Maybe not always be possible–may not last indefinitely) learn more!
Outperforming Competitors
The goal of servie strategy - superior performance vs competing alternatives
- understanding of customers required outcomes
- design within known constraints
- balance between current success and future reqs.
- a high-performance SS is one that enables a service provider to consistently outperform competing alternatives over time across business cycles, industry disruptions and changes in leadership.
- it comprises both the ability to succeed today and positioning for the future.
4 Ps of Strategy
- Perspective–Vision & direction
- Position–distinguish from other competitors–
- How the SP will transition from their current situation to their desired situation. Plans describe the activities that the SP will need to take to achieve their perspective and position.
- Describe the ongoing repeatable actions that a SP will have to perform in order to continue to meet its strategic objectives.
A high performance SS comprises both the ability to succeed today and positioning for the future.
Services & service mgmt
A service is a means of delivering value to customers by facilitating outcomes that customers want to achieve w/o the ownership of specific costs and risks
Service Mgmt is a set of functions and processes for managing services over a lifecycle.
IT Service Mgmt - transforms IT resources and capabilities into IT services that are appropriate to the business requirements of an organisation
==> Resources and capabilities transform raw materials into value ==> customers fund it.
Service Strategy
Responsibility for specific costs and risks
(DO IT RIGHT FIRST TIME!)
Failed changes
Risks vs Costs.
Triangle!
Price==>Performance (warranty) ==> Functionality(utility) ==> Price ==> …
Customers concerned what a service will cost them & how reliable
Customers do not know every cost and risk mitigation by SP
Customer primarily interested in outcome it will receive and does not need to be concerned with specific costs and specific risk that the SP will have to uncur in order to deliver
Customer should only see sum total price–which includes all the SPs costs and risk mitigation measures. Customer can then judge the value of service based on a comparison of price and reliability with the desired outcome.
A good relationship relies on customer receiving a service that meets their needs, at an acceptable level of performance and at a cost that they can afford.
The SP need to work out how to achieve a balance between there 3 areas & communicate with the customer if there is anything that prevents them being able to deliver the required service at the required level of performance or price
Service Strategy
Internal & external services
Internal services are delivered between depts or business units in the same org.
External services are delivered to external customers
Reason? is to differentiate between the services that support an internal activity and those that actually achieve business outcomes
Diff. may not be so signif at 1st since the activity to deliver is often similar–however important to recognise that internal services have to be linked to external services b4 their contribution to business outcomes can be understood and measured.
This is esp important when measuring the ROI of services.
Service Strategy
Supporting internal and external services
Internal & external services are to differentiate between services that support an internal activity and those that actually achieve business outcomes.
- Supporting services-not directly used by the business but is required by the IT SP so they can provide other IT services
- Internal customer facing service directly supports a business process managed by another business unit.
- External customer facing service - directly provided by IT to an external customer
Service Strategy
Supporting internal and external services
Supporting Services
not directly used by the business but is required by the IT SP so they can provide other IT Services e.g. directory services, naming services, the network or the comms. services.
Service Strategy
Supporting internal and external services
Internal Customer facing Service
Directly supports a business process manged by another business unit for example, Sales reporting service, enterprise resource management etc.
Service Strategy
Supporting internal and external services
External Customer facing Service
directly provided by IT to an external customer for e.g. internet access at an airport.
Service Strategy
Core, enabling and enhancing services
Core services deliver the basic outcomes desired by 1 or more customers
-Enabling services are services that are needed in order for a core services to be delivered
-Enhancing services are services that are added to a core service to make it more exciting or enticing to the customer.
Service Strategy
Core Services
Deliver the basic outcomes desired by 1 or more customers. They represent the value that the customers wants and for which they are willing to pay. Core services anchor the value proposition for the customer and provide the basis for their continued utilisation and satisfaction.
Service Strategy
Enabling Services
: are services that are needed in order for a core service to be delivered. These services may or may not be visible to the customers but the customer does not perveive them as services in the their own right. They are ‘basic factors’ which enable the customer to receive the ‘real’ (core) service.
Service Strategy
Enhancing Services
: are services that are added to a core service to make it more exciting or enticing to customers. These services are not essential to the delivery of a core service and are added to a core service as excitement factors, which will encourage customers to use the core service more.
Service Strategy
Value and its characteristics
THE LEVEL TO WHICH THAT SERVICE MEETS THE CUSTOMERS EXPECTATIONS
- it is often measured but how much the customer is willing to pay for the service rather than the cost of the service or any other intrinsic attribute of the service itself.
- value is defined by customers
- affordable mix of features
- achievement of objectives
- value change over time and circumstance
Service Strategy
Value
Achievement of objectives
Customers do not always measure value in financial terms.
- they may indicate how much they are willing to pay to help them realise a desired outcome
- Many services are not designed to produce revenue but to meet some org. objective (social responsibility HR program)
- Commercial orgs tend to measure by financial returns
- Gov. orgs. tend to focus on other objectives.
Service Strategy
Creating Value
There is more to value than just the function of the service and its cost.
Needs to be defined in the following terms:
-The Business outcomes achieved
-The Customers preference
-The customers perception of what was delivered.
Experience is what happened
Perception is the view of the customer
Service Strategy
Understanding the value of IT
- What service did IT Provide?
- What did the service achieve
- How much did it cost or what is the price of it?
- If it is just servers–then how does customer understand value? Customer must be able to discern a specific, discrete service and link it to specific business activity and outcome
- The customer will identify what they were able to do with the service and just how important that was to them.
- When a customer compares price/cost of a service with that the service enabled them to achieve they will be able to judge who valuable it actually is.
Service Strategy
Creating value
Perceptions of value are influenced by expectations and drive preference.
Business Outcomes - Preferences - Perceptions => Value
-Attributes of a service drive perception
-customer self-image or position in the market drive preferences
-What the customer values is different from what IT Org believes it provides
-Customers do not buy services they buy fulfilment of needs
=> customers business outcomes and perceptions are of primary importance
Service Strategy
Marketing Mindset
- insight into customer’s challenges and opportunities
- what is our business?
- Who is our customers?
- What does the customer value?
- Who depends on our services?
- How do they use our services?
- Why are they valuable to them?
For customers the positive effect is the utility of the service
The assurance of that effect is the warranty
Understanding the customers business is crucial to be able to provide services that differentiate themselves
Service Strategy
Utility and Warranty
Utility : Performance Supported & Constraints removed
Warranty: ACCS or CACS Available Capacity Continuous Secure
Service Strategy
Utility and Warranty
Utility: Supporting business outcomes in terms of enhancing or enabling the performance of customer assets
Warranty: Providing assurance in terms of availability, capacity, security and Continuity
The removal of constraints would be perceived as a positive effect.
Service Strategy
Utility
Utility is fit for purpose:
Perceived by the customer from the attributes of the services that have a positive effect on the performance of tasks associated with desired outcomes. Removal or relaxation of constraints on performance is also perceived as a positive effect.
Service Strategy
Warranty
Fit for use
derived from the positive effect being available when needed, in sufficient capacity or magnitude and also in terms of continuity and security.
Service Strategy
Utility and Warranty
Utility is what the customer gets
Warranty is how it is delivered
Service Strategy
Utility and Warranty
Warranty and utility are both crucial elements of creating real value for customers and the business as a whole.
Customers cannot benefit from something that is fit for purpose but not fit for use and vice versa.
Service Strategy
Resources and Capabilities
Resources and capabilities are types of assets organisations use them to create value in the form of services. Resources are direct inputs for production whilst capabilities represent an organisations ability to use its resources to deliver value.
Service Strategy
Resources and Capabilities
E.G.
2 SPs may have similar resources such as pplications infrastructure and access to finance–their capabilities differ in terms of mgmt systems, organisation structure, processes and knowledge assets
Service Strategy
Framing the value of services
Communicating utility
-in terms of outcomes supported
-in terms of ownership costs and risks avoided
(by using a service rather than operating a service costs and risks can be avoided.)
Communicating Warranty
-generally part of the value proposition
-in terms of levels of certainty
For customers to realize the value provided by the utility, warranty must be assured in terms of availability, capacity, security and continuation of services.
Service Strategy
Elements of Warranty
Availability
-available for use under agreed terms and conditions
Capacity
-support a specified level of business activity at a specified quantity
Continuity
-assures services through major failures or disruptive events
Security
-assures customer utilization will be secure
Service Strategy
Elements of Warranty
Availabilty
Often more complex than whether a service is available or not.
Understanding the tolerance for certain business functions to be available or not is key–you may protect vital business functions with more fault tolerance than other areas
Service Strategy
Elements of Warranty
Capacity
Important where the utility of a service arises from use of shared resources
SPs removes risk by helping customers with shortages at periods of peak demand. Businesses that face highly uncertain demand prefer capacity on demand with little or no latency
Service Strategy
Elements of Warranty
Continuity
This is assured primarily through redundancy and dedicated resources.
e includes return to normal in a pre-defined time limit to restrict the overall impact of a serious failure.
Service Strategy
Elements of Warranty
Security
Reduces the following risks:
unauthorised/unaccountable usage of services,
protection of customer assets from unauthorised or malicious access an no security between customer and service assets.
Service Strategy
INTERNAL AND EXTERNAL SERVICES
Graph with high warranty and high utility
if utility is great but warranty is not then service no good and vice versa
Service Strategy
RESOURCES, CAPABILITIES AND SERVICE ASSETS
Resources and capabilities are both services assets used to create value in the form of goods or services
- Resources need capabilities to use the available resources to develop distinctive value-adding services to customers
- capabilities cannot produce value w/o adequate resources
Service Strategy
RESOURCES, CAPABILITIES AND SERVICE ASSETS
Resources
Resources--direct inputs for production: Financial capital infrastructure applications information people
Service Strategy
RESOURCES, CAPABILITIES AND SERVICE ASSETS
capabilities
Ability to use resources to produce value: Mgmt Organistion Processes Knowled`ge people
Service Strategy
RESOURCES, CAPABILITIES AND SERVICE ASSETS
Resources: need capabilities to use the available resources to develop distinctive value adding services for customers
Capabilities:
cannot produce value w/o adequate resources–it is usually easier to acquire resources than capabilities
Service Strategy
RESOURCES, CAPABILITIES AND SERVICE ASSETS
balance of resources and capabilities to ensure overall delivery
Service Strategy
Business unit and Service Providers
A business unit (BU) is an organisational entity that performs a defined set of business activities that create value for customers in the form of goods an services
The good or services are produced and delivered using a set of assets referred to as customer assets.
Service Strategy
Business unit and Service Providers
Customer Assets
Customer assets are used to drive the achievement of business outcomes. The better the customer assets perform the more business outcome can be achieved
The smooth operation of the customer assets however is slowed by constraints–these could be internal such as lack of knowledge or funding or external such as weak economy or regulations
The BU’s capabilities coordinate control and deploy its resources to create value.
Value is always defined in the context of customers and customer assets.
Service Strategy
Business unit and Service Providers
Service Assets
Service Providers (SP) use services assets to deliver services to the business unit.
These services are designed to enhance the performance of the customer assets and/or to reduce the effect of constraints.
Service Strategy
Business unit and Service Providers
Service Potential
Service potential comes from SP’s exploiting their service assets by developing their resources and capabilities.
Service potential is converted into performance potential of customer assets
w/o this potential there is not justification for customers to use services.
Increasing the performance potential frequently stimulates additional demand for the service in terms of scale or scope.
Service Strategy
Business unit and Service Providers
Service Potential
Demand
based on greater demand it can translate into:
- greater use of service assets (increased service potential)
- justification for the on-going maintenance and upgrades of service assets
- reduction in unused or idle capacity
- the recovery costs incurred in fulfilling the demand based on the agreed terms and conditions.
Service Strategy
Service Providers
3 Types
Type I: internal Service provider
Type II: Shared Services unit
Type III: External Service Provider
Service Strategy
Service Providers
3 Types–why Distinguish?
While most aspects of service mgmt apply equally to all types of service provider, other aspects such as customers, contracts, competition, market spaces, revenue and strategy take on different meaning depending on the specific type
Service Strategy
Service Providers
Type I
Typically business functions embedded within the BU.
Type I have the benefit of tight coupling with their owner/customers, avoiding certain costs & risk
Type I operate within internal market spaces–their growth is limited by the growth of the BU they belong to. Each BU may have its own Type I.
Success not measured in terms of revenues or profits because the tend to operate on a cost recovery basis with internal funding
Service Strategy
Service Providers
Type II
Type II are functions such as finance, IT, HR and logistics
Not always core of an org’s competitive advantage
Share Services Unit SSU
Serve business units as direct customers
Can standardise their service offerings use market based pricing to influence demand patterns
Service Strategy
Service Providers
Type III
The business strategies of customers sometimes require capabilities readily available from a Type II provider.
The additional risks that Type II providers assume over Type I/II are justified by increased flexibility and freedom to pursue opportunities.
They can offer competitive prices and drive down unit costs consolidating demand. Not all Business strategies are served by internal service providers–customers may pursue sourcing strategies requiring services from external providers
The motivation may be access to knowledge experience scale scope capabilities and resources that are either beyond the reach of the org or outside the scope of a carefully considered investment portfolio
Service Strategy
Service Providers
Aggregation or insourcing can move control and hence decision making closer to the business. Which for some businesses may make the difference in maintaining a competitive edge.
Outsourcing or dis-aggregation will move operational decisions outside the direct control of the org and thus the services is seen more as a loosely coupled provision.
Service Strategy
Choosing a supplier type
- Does the activity require highly specialised assets?
- Will those assets be idle or obsolete if that activity is not longer performed?
- How frequently is the activity performed within a period or business cycle?
- How complex is the activity? Is it simple and routine? Is it stable over time with few changes?
- Is it hard to define good performance?
- Is it hard to measure good performance?
- Is it tightly coupled with other activities or assets in the business?
- Would separating it increase complexity and cause problems of coordination?
Service Strategy
Defining Services
Step 1 - Define the market and identify customers
Step 2 - Understand the customer
Step 3 - Quantify the outcomes
Step 4 - Classify and visualise the service
Step 5 - Understand the opportunities (market spaces)
Step 6 - Define services based on outcomes
Step 7 - Service models
Step 8 - Define service units and packages
How to identify customers and their requirements and whether there is an opportunity that the SP can fulfil.
Typically happens as part of Service Portfolio Mgmt
Service Strategy
- Define the market and identify the customers
The group of customers that are interested in and can afford to purchase the service a SP offers and to whom the service provider is able legally and logistically to supply those services.
Markets can be defined by the following criteria:
- Industry
- Geographical
- Demographic
- Corporate