ITIL Service Strategy – Principles – Value creation

The life-cycle defined by ITIL has, at its core, the volume known as Service Strategy.

In this post, we’ll be focusing in the principles behind Service Strategy, as cover in the respective ITIL volume.

“People do not want quarter-inch drills. They want quarter-inch holes.”

Professor Emeritus Theodore Levitt, Harvard Business School

Value Creation

Mind the gap

What a customer values in a service, usually is not exactly the same as what the IT organization thinks it’s providing.

This gap can be explained in many different ways, but it is important to keep in mind that a customer doesn’t buy features of a service, but fulfilment of needs.

Finding out the true economic value of a service has different degrees of difficulty, depending on the specifics of the situation, but even when it’s hard, you have to focus on the expected business outcome (and by expected, I mean, by the customer).

Marketing mindset
You need to look at your service not from the technical details of what it is, but instead, from the look of the needs it intends to serve. Ask yourself:

• What is our business ?
• Who is our customer ?
• What does the customer value ?
• Who depends on our services ?
• How do they use our services ?
• Why are they valuable to them ?

With a marketing mindset you need to identify the components of the value that your service has, from a customer standpoint. This value is composes basically of:

• Fitness for purpose: that’s a positive effect the service has on the activities, tasks and objects associated with desired outcomes.
• Fitness for use: it’s related to the notion of warranty. It has to do with the availability, reliability and performance of the mentioned positive effect.

Framing the value of services

It is important to describe the value of a service in terms of utility and warranty.

The explanation for utility has to be related to possible gains in the performance of customer assets, which increase the probability to achieve desired outcomes.

The explanation for warranty has to be related to the decrease in possible loses from variations in the performance of the service.

Utility should be communicated in terms of:

• supported outcomes
• ownership cost and risks avoided

Warranty should be communicated in terms of:

• Availability
• Capacity
• Continuity
• Security

Conclusion

Value creation is made up of the conjunction of utility and warranty. Customer value can be raise by increments in the perception of either of these factors. Most likely, only one of them will not be enough.