SERVICE STRATEGYSERVICE STRATEGY

Service Strategy - Service Strategy - DefinitionDefinitionService Strategy is a strategic

plan designed to achieve defined objectives

The Service Strategy defines a clear path to delivering value to the customer

Purpose of Service Purpose of Service StrategyStrategyService providers must have the ability to think

and act in a strategic mannerThe achievement of strategic goals or objectives

requires the use of strategic assetsService Strategy shows how to transform service

management into a strategic assetTechnical knowledge of IT is necessary but not

sufficientStrategy requires knowledge from the disciplines

such as operations management, marketing, finance, information systems, organizational development, systems dynamics, and industrial engineering

Service ModelService ModelA Service Model performs the

following tasks:◦Codifies the Service Strategy for a

market space◦Outlines process and functions

needed to create value◦Describes how service assets create

value for a given portfolio of contracts

◦Increases effectiveness in Continual Service Improvement

Elements of ValueElements of ValueUtilityAttributes of the service that have a positive effect on the performance of activities, objects, and tasks associated with required outcomesWarrantyThe positive effect being available when needed, in sufficient capacity or magnitude, and dependably available in terms of continuity and security

Value Creation Through Value Creation Through ServicesServices

Formula: Service Warranty + Service Utility = Service Value

Service AssetsService AssetsCapabilities and ResourcesAsset Types

Management

Processes

Organization

Knowledge

CapabilitiesCapital

Applications

Infrastructure

Information

Resources

People

ServiceAsset

Services ServiceProvider

Value

Customer

The Four Ps of Service The Four Ps of Service StrategyStrategyPerspective: Describes a vision

and directionPosition: Describes the decision to

adopt a well-defined stancePlan: Describes the means of

moving from the current state to a future state

Pattern: Describes a series of consistent decisions and actions over time

Service ProvidersService ProvidersInternal Service Provider (Type I) – business functions embedded within the business units

Shared Service Provider (Type II) – shared functions are consolidated into an autonomous special unit called a shared service unit (SSU)

External Service Provider (Type III) – offer competitive prices and drive down unit costs by consolidating demand

Internal Service Provider Internal Service Provider (Type I)(Type I)

Shared Services Provider Shared Services Provider (Type II)(Type II)

External Services Provider External Services Provider (Type III)(Type III)

Choosing Service Provider Choosing Service Provider TypesTypesServices may be sourced from

each type of service provider with decisions based on:◦Transaction costs◦Strategic industry factors◦Core competence◦Risk management capabilities of the

customerThe principles of specialization

and coordination costs apply

Sourcing ApproachesSourcing Approaches Insourcing relies on using internal

organizational resourcesOutsourcing uses the resources of an

external organization or organizationsCo-sourcing is a combination of insourcing

and outsourcingPartnership or multi-sourcing is an

arrangement between two or more organizations to work together

Business Process Outsourcing (BPO) relocates entire business functions

Application Service Provision involves formal arrangements with an Application Service Provider (ASP) organization

PROCESS OF STRATEGY GENERATION

Service Strategy

Strategy GenerationStrategy GenerationDifferentiate your services from the

competitionUse existing opportunities:

Customers who are not well-supported represent opportunities for services to be offered as solutions

Use new opportunities: New opportunities emerge when changes in the business environment cause a previously well-supported customer to be poorly supported

Main Activities of Service Main Activities of Service StrategyStrategyDefine the marketDevelop the service offeringsDevelop strategic assetsPrepare for implementation

Setting ObjectivesSetting ObjectivesObjectives represent the results

expected from pursuing strategiesStrategies represent the actions to

be taken to accomplish objectivesClear objectives provide for

consistent decision making, minimizing any future conflicts. They set forth priorities and serve as standards

Defining Critical Success Defining Critical Success FactorsFactorsCritical Success Factors are

influenced by:◦Customer needs◦Business trends◦Competition◦Regulatory environment◦Suppliers◦Standards◦Industry best practices◦Technologies

PROCESS OF SERVICE PORTFOLIO MANAGEMENT

Service Strategy

Service Portfolio Service Portfolio Management (SPM)Management (SPM)Service Portfolio represents the commitments and investment made by a service provider across all customers and market spaces

Service Portfolios represent the ability and readiness of a service provider to serve customers and market spaces

Service Portfolio Management is critical to having the right services available to offer to customers

Service Portfolio Service Portfolio ManagementManagement

Service Portfolio Service Portfolio Management GoalsManagement GoalsEvery planned and operated service by the

provider is documentedEvery new service must complete a set of

standardized activities and proceduresEssential information is documented and

provided to the relevant management processes

Each service and its design package is regularly reviewed

Every service is reviewed within the Continual Service Improvement Process

Through the service portfolio, an information base for a service catalog is provided

Service Portfolio Service Portfolio Management ActivitiesManagement ActivitiesDefine

◦Collect information from all existing services

Analyze◦The intent strategy is designed

Approve◦Deliberate approvals or disapprovals of

the proposed portfolioCharter

◦Decisions are communicated, resources are allocated, and services are chartered.

PROCESS OF FINANCIAL MANAGEMENT

Financial ManagementFinancial ManagementFinancial Management as a

strategic tool is equally applicable to all three service provider types

Financial Management consists of the following benefits:◦Enhanced decision making◦Speed of change◦Operational control◦Value capture and creation

Financial Management Financial Management GoalsGoalsTo ensure that management of IT

Services are cost effectiveTo provide full accountability for

IT Service expenditures to the services delivered to customers

To assist management in making decisions on IT investment by providing detailed business cases for changes to IT Services

Financial Management Financial Management ConsiderationsConsiderationsDirect versus indirect costsLabor costsVariable cost elementsTranslation from cost account

data to service value

Financial Management Financial Management ActivitiesActivities

Plan◦Address critical questions, outline activities

Analyze◦Gather details, perform service valuation

Design◦Processes, valuation models, chargeback

methodsImplement

◦Activation plan processesMeasure

◦Perform regular audits

PROCESS OF DEMAND MANAGEMENT

Demand ManagementDemand ManagementEssential that Demand

Management techniques be usedDemand Management includes

techniques such as:◦Off-peak pricing◦Volume discounts◦Differentiated service levels

Activity-based Demand Activity-based Demand ManagementManagementPBA define dynamics of a

business and include interactions with customers, suppliers, partners, and other stakeholders

Services often directly support PBA

Demand Management Demand Management GoalGoalThe goal of demand

management is to reduce cost and create value by being able to predict demand and reduce idle capacity

Demand Management Demand Management ActivitiesActivitiesStudy the business of the customer to

identify, analyze, and codify patternsVisualize the business activity and plans in

terms of the demand for supporting services

Identify, codify, and share patterns of business activity (PBA) across process for clarity and completeness of detail

Construct user profiles (Ups) using one or more predefined PBAs

Associate each user profile with one or more PBAs