02. Service Strategy Principles

Question 1

SS. Basic Approach

Answer 1

-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

Question 2

SS. Opposing Dyanamics

Answer 2

-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!

Question 3

Outperforming Competitors

Answer 3

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.

Question 4

4 Ps of Strategy

Answer 4

1. Perspective–Vision & direction
2. Position–distinguish from other competitors–
3. 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.
4. 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.

Question 5

Services & service mgmt

Answer 5

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.

Question 6

Service Strategy

Responsibility for specific costs and risks

(DO IT RIGHT FIRST TIME!)

Failed changes

Risks vs Costs.

Answer 6

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

Question 7

Service Strategy

Internal & external services

Answer 7

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.

Question 8

Service Strategy

Supporting internal and external services

Answer 8

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

Question 9

Service Strategy

Supporting internal and external services

Supporting Services

Answer 9

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.

Question 10

Service Strategy

Supporting internal and external services

Internal Customer facing Service

Answer 10

Directly supports a business process manged by another business unit for example, Sales reporting service, enterprise resource management etc.

Question 11

Service Strategy

Supporting internal and external services

External Customer facing Service

Answer 11

directly provided by IT to an external customer for e.g. internet access at an airport.

Question 12

Service Strategy

Core, enabling and enhancing services

Answer 12

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.

Question 13

Service Strategy

Core Services

Answer 13

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.

Question 14

Service Strategy

Enabling Services

Answer 14

: 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.

Question 15

Service Strategy

Enhancing Services

Answer 15

: 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.

Question 16

Service Strategy

Value and its characteristics

Answer 16

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

Question 17

Service Strategy

Value

Achievement of objectives

Answer 17

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.

Question 18

Service Strategy

Creating Value

Answer 18

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

Question 19

Service Strategy

Understanding the value of IT

Answer 19

1. What service did IT Provide?
2. What did the service achieve
3. How much did it cost or what is the price of it?
4. 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
5. The customer will identify what they were able to do with the service and just how important that was to them.
6. 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.

Question 20

Service Strategy

Creating value

Answer 20

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

Question 21

Service Strategy

Marketing Mindset

Answer 21

• 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

Question 22

Service Strategy

Utility and Warranty

Answer 22

Utility : Performance Supported & Constraints removed

Warranty: ACCS or CACS
Available
Capacity
Continuous
Secure

Question 23

Service Strategy

Utility and Warranty

Answer 23

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.

Question 24

Service Strategy

Utility

Answer 24

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.

Question 25

Service Strategy Warranty

Answer 25

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.

Question 26

Service Strategy Utility and Warranty

Answer 26

Utility is what the customer gets Warranty is how it is delivered

Question 27

Service Strategy Utility and Warranty

Answer 27

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.

Question 28

Service Strategy Resources and Capabilities

Answer 28

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.

Question 29

Service Strategy Resources and Capabilities

Answer 29

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

Question 30

Service Strategy Framing the value of services

Answer 30

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.

Question 31

Service Strategy Elements of Warranty

Answer 31

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

Question 32

Service Strategy Elements of Warranty Availabilty

Answer 32

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

Question 33

Service Strategy Elements of Warranty Capacity

Answer 33

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

Question 34

Service Strategy Elements of Warranty Continuity

Answer 34

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.

Question 35

Service Strategy Elements of Warranty Security

Answer 35

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.

Question 36

Service Strategy INTERNAL AND EXTERNAL SERVICES

Answer 36

Graph with high warranty and high utility if utility is great but warranty is not then service no good and vice versa

Question 37

Service Strategy RESOURCES, CAPABILITIES AND SERVICE ASSETS

Answer 37

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

Question 38

Service Strategy RESOURCES, CAPABILITIES AND SERVICE ASSETS Resources

Answer 38

``` Resources--direct inputs for production: Financial capital infrastructure applications information people ```

Question 39

Service Strategy RESOURCES, CAPABILITIES AND SERVICE ASSETS capabilities

Answer 39

``` Ability to use resources to produce value: Mgmt Organistion Processes Knowled`ge people ```

Question 40

Service Strategy RESOURCES, CAPABILITIES AND SERVICE ASSETS

Answer 40

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

Question 41

Service Strategy RESOURCES, CAPABILITIES AND SERVICE ASSETS

Answer 41

balance of resources and capabilities to ensure overall delivery

Question 42

Service Strategy Business unit and Service Providers

Answer 42

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.

Question 43

Service Strategy Business unit and Service Providers Customer Assets

Answer 43

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.

Question 44

Service Strategy Business unit and Service Providers Service Assets

Answer 44

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.

Question 45

Service Strategy Business unit and Service Providers Service Potential

Answer 45

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.

Question 46

Service Strategy Business unit and Service Providers Service Potential Demand

Answer 46

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.

Question 47

Service Strategy Service Providers 3 Types

Answer 47

Type I: internal Service provider Type II: Shared Services unit Type III: External Service Provider

Question 48

Service Strategy Service Providers 3 Types--why Distinguish?

Answer 48

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

Question 49

Service Strategy Service Providers Type I

Answer 49

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

Question 50

Service Strategy Service Providers Type II

Answer 50

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

Question 51

Service Strategy Service Providers Type III

Answer 51

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

Question 52

Service Strategy Service Providers

Answer 52

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.

Question 53

Service Strategy Choosing a supplier type

Answer 53

- 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?

Question 54

Service Strategy Defining Services

Answer 54

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

Question 55

Service Strategy 1. Define the market and identify the customers

Answer 55

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