Block 1 Part 4: Service strategy

Question 1

Name three primary objective of Service Strategy in ITIL?

Answer 1

The primary objective of Service Strategy in ITIL is to:

• address important questions
• establish priorities
• ensure that decisions align with the overall business vision and desired outcomes.

Question 2

What three high level questions will Service Strategy in ITIL focus on?

Answer 2

The main focus of Service Strategy is:

• determining which services should be offered
• to whom
• how they should be delivered

all in alignment with the organization’s strategic goals.

Question 3

What role does Service Strategy play when there are very few existing services in the organization?

Answer 3

When there are very few existing services, Service Strategy is responsible for driving the initial iteration of the service lifecycle by developing appropriate service strategies for new services.

Question 4

How does Service Strategy relate to Continuous Service Improvement (CSI) in the service lifecycle?

Answer 4

In organizations with mature services, Service Strategy sets the general context for improvements driven by Continuous Service Improvement (CSI) within the service lifecycle

Question 5

What is the primary purpose of the service strategy stage in ITIL?

Answer 5

The primary purpose of the service strategy stage in ITIL is to define what a service provider needs to do to support its customers.

this comes through the process of:
* address important questions
* establish priorities
* ensure that decisions align with the overall business vision and desired outcomes

Question 6

How does the concept of value relate to the purpose of service strategy?

Answer 6

The purpose of service strategy involves delivering value to customers, where customers want specific outcomes from a service, and they are willing to pay for the value they receive, allowing the business to accrue value expressed in terms of “business outcomes.”

Question 7

How does service strategy address competition among service providers?

Answer 7

In the presence of multiple service providers, service strategy works towards choosing which services to provide to gain a strategic advantage and maximize business outcomes, effectively addressing competition in the service industry.

Question 8

What two key aspects define the scope of Service Strategy in ITIL?

Answer 8

The scope of Service Strategy in ITIL involves two key aspects:
1) Defining a strategy for delivering services that bring customers value,
2) Defining a strategy for how to manage those services effectively.

Question 9

How does Service Strategy relate to business outcomes?

Answer 9

Service Strategy in ITIL is fundamentally about planning and delivering services that meet customer’s business needs, and by doing so, it aims to bring value to customers, which is the basis for achieving business outcomes.

Question 10

What are the three types of service providers mentioned in ITIL, based on the nature of their customers?

Answer 10

In ITIL, service providers can be categorized into three types:
* internal service providers
* shared service providers
* external service providers

depending on their customers and the level of autonomy they have in setting their service strategies.

Question 11

What distinguishes internal service providers from external service providers in ITIL?

Answer 11

The key distinction between internal service providers and external service providers in ITIL is whether they serve internal customers within the organization or external customers.

Internal service providers often take payment with internal accounting processes for services and will often provide services to a single function or department within the company

while external service providers receive payments with real money from external customers.

Question 12

How do shared service providers differ from internal service providers in terms of autonomy and customer base?

Answer 12

Shared service providers in ITIL provide services to various departments within an organization and have more autonomy in setting their service strategies compared to internal service providers.

Internal service providers, on the other hand, are closely associated with a single business function.

Question 13

What distinguishes external service providers from internal and shared service providers in ITIL?

Answer 13

External service providers in ITIL operate in competitive markets, set their own priorities and strategies, and primarily focus on providing services to external customers.

They are less constrained by internal organizational structures and priorities.

Question 14

What are service assets in the context of service strategy?

Answer 14

Service assets in service strategy encompass capabilities and resources.

Capabilities refer to what a service provider can do with its resources, while resources include raw materials such as software, network capacity, and personnel, which can be purchased or developed, often through training and education.

Question 15

What is the first step in managing services and developing a service strategy?

Answer 15

The first step in managing services and developing a service strategy is to understand the services that are currently being provided or will be needed in the future.

Question 16

How is a service defined, and what is its primary purpose?

Answer 16

A service is defined as a means of delivering value to customers by facilitating outcomes they want to achieve without the ownership of specific costs and risks. The primary purpose of a service is to deliver an outcome that provides value for customers and users, in contrast to merely providing software or technology.

Question 17

What are the two components that determine the value a service delivers to a customer?

Answer 17

The value a service delivers to a customer depends on its:
* utility (what the service does)
* warranty (how well it does it).

Utility measures whether the service is fit for purpose, and warranty measures whether it is fit for use.

Question 18

How can the concepts of utility and warranty be illustrated in the context of a customer purchasing an item from a website?

Answer 18

Utility, in this context, refers to whether it is possible to choose, pay for, and arrange the delivery of the item,

while warranty assesses whether it is easy to find the item, pay the correct price, provide a delivery address, and ensures the website functions reliably without issues.

Both utility and warranty must be appropriate for value to be delivered.

Question 19

In the context of determining value, how is utility and warranty typically depicted in a logical model, and what are the gate types used for each?

Answer 19

In a typical logical model, utility is shown as a logical OR gate because utility is satisfied as long as any of the customer’s desired outcomes are provided. Warranty is depicted as a logical AND gate because all the suggested criteria must be satisfied for the service to be considered fit for use.

Question 20

What is the critical requirement for delivering value according to the ITIL model that incorporates utility and warranty?

Answer 20

According to the ITIL model, both appropriate utility and the required warranty must be present for value to be delivered.

Question 21

In the first of two models of value proposed by ITIL, components of value , what are the three circles surrounding the center circle of “value,” and what do they represent?

Answer 21

• Business outcome - The results or achievements that a service delivers, typically in terms of meeting specific business goals or objectives.
• Perceptions - The customer’s individual views and opinions about a service, which can influence their perception of its value. These perceptions are shaped by factors such as past experiences.
• Preferences - The customer’s personal choices and inclinations that can affect how they perceive a service’s value. This includes factors like brand loyalty and individual tastes.

These circles reflect that value is not solely determined by the business outcome, as customer perceptions and preferences can influence how they view the value of a service.

Question 22

What is the second model of value (nagle and holden) based on, and what is it primarily concerned with?

Answer 22

The second model of value is based on an approach to pricing described by Nagle and Holden (2002).

It is primarily concerned with comparing the economic value of a new or alternative service solution to the customer with the cost of their existing system or mechanism for achieving a desired outcome.

Question 22

How does the second model of value, based on Nagle and Holden’s approach, evaluate the economic value of a new or alternative service solution for a customer?

5 steps

Answer 22

1. Begin by considering the customer’s existing system or mechanism for achieving a desired outcome, which is associated with a known cost (reference value).
2. Introduce a new or alternative service solution that offers a similar outcome. This new service may come with additional costs, which need to be evaluated.
3. Compare the cost of the customer’s existing system with the cost of the new or alternative service. This comparison involves not only monetary costs but also factors like time, effort, and any potential positive gains and negative losses.
4. Calculate the net difference between the positive gains and negative losses associated with the new service solution.
5. To determine the final value of the new service to the customer (the economic value of the service), add the previously paid cost to the net difference. This represents the overall value of switching to the new or alternative solution.

This step-by-step approach helps assess the economic value of the new service solution and whether it provides a better overall value to the customer compared to their current system.

Question 22

What are the five processes associated with the service strategy phase of the ITIL service lifecycle?

Answer 22

• Strategy management for IT services
• Service portfolio management
• Financial management for IT services
• Demand management
• Business relationship management.

Question 22

What is the key process in the service strategy phase of the service lifecycle, and how do the other four processes relate to it?

Answer 22

The key process in the service strategy phase is “Strategy Management for IT Services.” The remaining four processes, to some extent, underpin or enable strategy management.

Question 23

What questions do these gropings of service strategy processes answer

• Strategy management for IT services
• Service portfolio management and financial management
• Demand management and business relationship management

Answer 23

The service strategy processes help service providers answer the following questions:

• Strategy management for IT services - What services should we offer, to whom, and why?
• Service portfolio management and financial management - How should we offer those services, using which providers, and at what cost?
• Demand management and business relationship management - Which of our customers need which services, when, and how much of them can we provide?

Question 24

What do the service strategy processes establish in relation to service strategy, and which processes contribute to each aspect?

Answer 24

The service strategy processes establish the following aspects of service strategy:

• “What” service strategy is about is determined by “Strategy Management for IT Services.”
• “How” it is achieved is addressed by “Service Portfolio Management.”
• “Why” it is important is emphasized by “Business Relationship Management.”
• “For whom” it is intended is the focus of “Demand Management.”
• “At what cost” it can be delivered is managed through “Financial Management for IT Services.”

Question 25

What is the primary focus of Strategy Management for IT Services in the context of service management, and what high-level questions does it aim to answer?

Answer 25

Strategy Management for IT Services primarily focuses on answering high-level questions, such as:

• What services shall we offer to whom?
• Why should we offer them?

Its goal is to achieve business value by delivering services to customers that provide desired outcomes and are valued by customers.

Question 26

How does Strategy Management for IT Services differentiate between high-level strategy and detailed tactical and operational plans in its approach?

Answer 26

Strategy Management for IT Services distinguishes between high-level strategy (the “why” and “what”) and more detailed tactical and operational plans (the “how”).

It focuses on the high level “what” and “why” aspects of strategy, leaving the detailed execution to tactical and operational planning.

Question 27

How is governance different from management in the context of service strategy, and what is the primary role of governance?

Answer 27

Governance in the context of service strategy involves making decisions on what to deliver (the “what”) rather than the mechanics of how to deliver (the “how”).

It is distinct from management and ensures that the enterprise is doing the right things and doing them correctly.

Question 28

What is the key goal of Strategy Management for IT Services in terms of business value and competitive advantage?

Answer 28

The key goal of Strategy Management for IT Services is to deliver overall business value by offering services to customers that deliver the outcomes they desire and are willing to pay for.

It also aims to gain a competitive advantage by knowing what to do for whom, better than competitors, to achieve a competitive edge.

Question 29

How does the overall vision created as part of the strategy relate to the Continual Service Improvement (CSI) approach?

Answer 29

The overall vision created in the strategy serves as a key driver for the Continual Service Improvement (CSI) approach. The vision filters and helps decide which service improvement plans align with the business vision and are worth pursuing.

Question 30

why…?

what…?
what…?
what…?

What high-level questions must be understood in the context of service strategy, and what do they aim to clarify?

Answer 30

In the context of service strategy, it’s essential to understand high-level questions like:

• Why do the visitors need these services?
• What outcomes will be facilitated?
• What value will be delivered?
• What would represent acceptable delivery of that service?

These questions aim to clarify the purpose, outcomes, and value of the services being considered.

Question 31

How can strategy management help identify the requirements of a service, and what aspects does it focus on?

Answer 31

Strategy management aids in identifying the requirements of a service by addressing high-level questions about:

• what outcomes should be supplied to whom
• understanding why delivering those outcomes brings value to the business.

It focuses on determining the purpose, outcomes, and value of services.

Question 32

What are the utility, warranty, and value associated with a service like “available booking dates,” as mentioned in the provided example?

Answer 32

In the example of the “available booking dates” service, the utility is the list of available dates, the warranty includes the timeliness and accuracy of the list, and the value is a combination of these factors, although it may not be a simple arithmetic function.

Question 33

In summary, what is the core purpose of strategy management in the context of service strategy?

Answer 33

In summary, strategy management in service strategy is about identifying the requirements of a service, such as:

• determining what outcomes should be supplied to whom
• understanding why delivering those outcomes brings value to the business.

Question 34

Apart from forming requirements for a service, what other considerations should be taken into account in service strategy, and which service strategy processes address these considerations?

Answer 34

In addition to forming requirements for a service, service strategy also involves considering:

• Trade-offs and cost (addressed in the service portfolio and financial management processes of strategy management).
• The feasibility of providing services to all potential users (explored in the demand management process).
• Non-functional issues such as maintaining customer relationships (part of the business relationship management process).

Question 35

What is the distinction between functional and non-functional aspects/issues in service management, and how do they relate to the core features and capabilities of a service?

Answer 35

Functional aspects/issues in service management primarily concern what a service does and how tasks are performed, focusing on its core features and capabilities.

Non-functional aspects/issues are more abstract and encompass elements like performance, security, user experience, scalability, and quality-related factors.

While functional aspects deal with the “what” and “how,” non-functional aspects address the “how well” and “how reliably” of a service’s performance.

Question 36

What are the key questions addressed within Service Portfolio Management, and how does this process relate to Strategy Management for IT Services and Financial Management?

Answer 36

Service Portfolio Management addresses questions such as

• how to offer services
• who should be commissioned to provide them

Service Portfolio Management builds upon the answers/output provided by Strategy Management for IT Services (what services to offer, to whom, and why)

Service Portfolio Management also takes input from Financial Management.

It serves as an ongoing governance process that determines which services will actually be offered.

Question 37

What is the essence of Service Portfolio Management, and what types of decisions does it manage?

Answer 37

The essence of Service Portfolio Management involves prioritization, acknowledging that not all services can be executed simultaneously.

This process manages decisions related to which services will be maintained, which new ones will be added, and which will be withdrawn.

Question 38

What does the Service Portfolio include, and how does it relate to the service lifecycle?

Answer 38

The Service Portfolio includes every service under the control of the provider, regardless of whether it is currently being offered.

This database underpins the entire service lifecycle and encompasses services in various stages, including those in planning, design, development, retirement, and potential services.

The group of planned, under development, or future services is referred to as the “service pipeline.”

Question 39

what are the three main categories or distinctions within the service portfolio, and what do they represent?

Answer 39

The provided diagram illustrates three main categories within the service portfolio:

• The service pipeline, which includes planned, under development, or future services.
• The service catalog, which comprises current services.
• Retired services, which are services that are no longer available.

The diagram suggests that the service portfolio should be recorded in a database, which is part of a configuration management system

Question 40

What are the three broad areas encompassed by Financial Management for IT Services, and what are the first two areas that are considered routine?

Answer 40

Financial Management for IT Services embraces three broad areas:

• accounting (recording the costs of and the income from delivering a service)
• charging (billing customers for the use of services)
• budgeting (allocating resources for services).

The first two areas, accounting and charging, are considered routine and will not be discussed further.

Question 41

Why is budgeting an important aspect of Financial Management for IT Services, and what does it involve in terms of resource constraints?

Answer 41

Budgeting in Financial Management for IT Services is important because it involves reconciling the aspirations of service strategy with the reality of resource constraints.

It ensures that services are provided in a cost-effective manner and that they do not cost more than their value, which is what customers are willing to pay for them.

Question 42

What is the crux of evaluating the financial aspects of a service in service strategy, and what is one of the most important documents in this evaluation?

Answer 42

The crux of evaluating the financial aspects of a service in service strategy is to compare the anticipated costs of a service against its expected benefits.

A business case, which presents the financial arguments for investing or not investing in a particular service, is one of the most important documents in this evaluation.

Question 43

What is the key difference between a project and a service in the context of investment, and why is this distinction important in the context of service portfolio management?

Answer 43

A key difference is that a project has a clear beginning and end point and usually requires new investment, whereas a service is an ongoing set of activities that will incur costs and deliver value for as long as they are being delivered.

This distinction is important because effective service portfolio management typically requires a business case for the continuation of existing services and for starting new ones.

Question 44

What is the payback period, and how is it calculated in scenarios involving different factors like value generation and associated costs?

Answer 44

The payback period is the number of years it would take to recover the initial investment. It is calculated in various scenarios:

• Initial investment, with value generated first year: Investment/income
• Initial investment, with value generated first year, but associated cost each year: Investment/(income - cost per year)
• Initial investment, with value not generated until year n: (n + investment) / income
• Initial investment and additional expected cost, profit generated on year n with associated cost per year: (n + (investment + additional cost) / (profit - running cost))

Question 45

What is the concept of the time value of money, and how does it relate to the idea of making money work through investment?

Answer 45

The time value of money suggests that any amount of money is worth more now than it will be in the future. This concept emphasizes the importance of making money work by putting it into investments or activities that can generate future value.

Question 46

What is the formula for calculating the future value (FV) of an investment after a certain number of years, given a fixed interest rate, and how does it relate to the time value of money?

Answer 46

The formula for calculating the future value (FV) of an investment is

FV = I * (1 + r) ^ n

where I represents the initial investment, r is the fixed interest rate, and n is the number of years. This formula illustrates the idea of the time value of money, indicating that the value of an investment can grow over time.

Question 47

What is the formula for calculating the present value (PV) of a future income, and how does it account for the fixed, risk-free interest rate?

Answer 47

The formula for calculating the present value (PV) of a future income is

Pv = I / (1 + r) ^ n

, where I is the expected income in n years, r is the fixed, risk-free interest rate, and n is the number of years. This formula accounts for the time value of money and helps evaluate the current value of future income.

Question 48

What is the net present value (NPV) of an investment, and how is it calculated?

Answer 48

The net present value (NPV) of an investment is the result of

subtracting the present value (PV) of the overall investment from the PV of the income generated.

If the NPV is positive, the investment is expected to return more than it costs over time, making it financially worthwhile.

If the NPV is negative, it indicates that the investment will cost more, over time, than it generates in income, rendering it financially undesirable.

The NPV allows for a direct financial comparison between different investments, even if the services resulting from those investments will run over different periods.

Question 49

In the context of IT services, why is it essential to consider the costs associated with various components such as hardware, software, infrastructure, and personnel when assessing financial viability?

Answer 49

IT services rely on various components, each with associated costs.

When adding new services that utilize existing components, spreading the costs over these shared resources can significantly impact the net present value (NPV) of the new service.

Services have lifetimes during which they may require investments, necessitating business cases to decide whether to continue or retire them.

Question 50

What are intangible benefits, and why should they be considered when evaluating the financial worth of a service?

Answer 50

Intangible benefits refer to non-monetary advantages, such as the value a customer places in a brand or services that indirectly contribute to overall business value.

These benefits may not directly bring financial gains but can have a significant impact on customer loyalty, brand exposure, and the smooth operation of other services.

Question 51

In the context of service portfolio management, why is it important to determine which service provider can offer the best value for each service, and what should be considered beyond cost when making this determination?

Answer 51

It’s important to identify the best service provider for each service based on their service assets (capabilities and resources) to offer the best value.

Beyond cost, quality thresholds for service provision must also be considered, as the cheapest tender may not always result in the best outcome.

Question 52

What is the administrative function of financial management for IT services, and why is it important?

Answer 52

The administrative functions of financial management include

• recovering costs
• securing sufficient funds to provide the current service portfolio.

It is crucial because services should be able to pay for their own resources, and adequate funding is essential for maintaining and delivering services.

Question 53

According to ITIL principles, what is the primary focus of financial management for IT services, and why is it essential to consider this focus?

Answer 53

Financial management for IT services should focus on informing decisions about the costs and benefits of current or planned services to contribute to associated business cases.

It’s important to avoid solely focusing on reducing costs and maximizing profit in isolation, as it must align with the broader business and service objectives.

Question 54

How do business cases contribute to service portfolio management, and what elements are typically included in a business case?

Answer 54

Business cases contribute to service portfolio management by providing cost and benefit estimates for new or existing services, considering various scenarios and providers.

A business case typically includes an evaluation of costs and benefits associated with a service, helping prioritize services within the portfolio.

Question 55

Why is prioritization crucial in service portfolio management, and how does it relate to financial assessment?

Answer 55

Prioritization is vital in service portfolio management because not all services can be implemented at once.

It involves ranking business cases and services from best to worst.

Financial assessment plays a significant role in this process by providing cost and benefit estimates for each business case and helping determine which services should be prioritized based on their financial viability.

Question 56

What is the role of demand management in service provision, and how are Patterns of Business Activity (PBA) related to it?

Answer 56

Demand management involves understanding customer service usage patterns, captured as Patterns of Business Activity (PBA).

PBA helps service providers tailor their services to meet customer needs and enhance satisfaction. It ensures that services are adjusted in real-time to meet demand efficiently.

Question 57

Why is it challenging to manage demand for services, and how can influencing customer behavior help address this challenge?

Answer 57

Managing demand for services is challenging because services cannot be stockpiled. They must meet demand as it arises in real-time.

Influencing customer behavior, such as implementing peak pricing, can help adjust demand to ensure services are provided efficiently and effectively.

Question 58

What is the focus of Business Relationship Management in the context of service provision?

Answer 58

Business Relationship Management centers on understanding the customer’s needs, when they need services, and aligning service offerings with those needs.

It involves enhancing customer relationships by addressing complaints and disputes strategically, aiming to ensure the customer feels heard and satisfied.

Question 59

How can Business Relationship Management contribute to service improvement and innovation?

Answer 59

Business Relationship Management not only aligns services with a customer’s business needs but also explores potential improvements and innovations by considering customer requirements and current technology trends.

This strategic approach helps enhance service offerings to better serve customers.

Question 60

In the context of the service lifecycle, which stages are often considered as the driving forces for the development and improvement of services?

Answer 60

Service Strategy and Continual Service Improvement (CSI) are considered as key drivers for the development and improvement of services in the service lifecycle.

While Service Strategy sets the direction for service deployment and development, CSI identifies areas for improvement and deficiencies in the service portfolio.

Question 61

What are the primary concerns of the processes within the Service Strategy phase of the service lifecycle?

Answer 61

The primary concerns of the processes within Service Strategy are:

• Strategy Management - Specifying business outcomes.
• Service Portfolio Management - Managing service management investments.
• Financial Management - Assembling cost and value information.
• Demand Management - Balancing demand against available resources.
• Business Relationship Management - Aligning services with customer business needs.

Question 62

What are the key components in service strategy, and what questions do they address?

Answer 62

The key components in service strategy are as follows:

Strategy Management: Addresses what services should be provided, to whom, and why.
Service Portfolio Management: Focuses on how services should be provided, by which service provider, and at what cost.
Financial Management: Deals with the financial aspects of delivering services.
Demand Management: Manages the relationship with the customer and balances demand with available resources.
Business Relationship Management: Focuses on understanding customer needs and aligning services with those needs.

These components work together to determine the most appropriate service provider for each service in the service portfolio, taking into account their capabilities and resources.

Services are supplied to consumers, delivering value through outcomes that depend on both utility and warranty.

Question 63

What are the key challenges faced by service strategy in the context of setting the overall strategic direction for service provision?

Answer 63

Service strategy faces two main challenges:

• It introduces a business focus into the design of services, emphasizing business strategy over technical development.
• It requires effective dialogue and alignment between business and IT components to ensure that IT can be properly understood and translated into business terms.

Question 64

What are the key takeaways from service strategy?

Answer 64

The key takeaways from service strategy are:

• Service strategy focuses on ensuring alignment between service provision and business strategy, in order to deliver business value.
• Financial management for IT is about understanding the costs, benefits and risks of particular services – not just minimising costs.