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A process improvement programme reduces the time the staff have for existing
service duties, causing a decrease in service
quality – exactly the opposite of intended programme goals. As quality falls, pressure to work harder increases. Pressured staff then cut back on improvement efforts.
Funding cuts affect service quality, which in turn diminishes demand for services. The reduced demand prompts yet more funding cuts.
Increase in service demand generates increases in operations staff. The ratio of experienced staff to new staff decreases. Less mentoring and coaching opportunities are available for the newcomers; quality of service suffers; demand for services slows; morale and productivity decrease, and staff are let go.
Apart from driving change through continual improvement, organizations must be prepared for rapid transitions and transformations driven by changes in an organization’s environment or internal situation. Changes may be driven by mergers, acquisitions, legislation, spin-offs, sourcing decisions, actions of competitors, technology innovations and shifts in customer preferences. Service management should respond effectively and efficiently. The approach to service management provided is useful for understanding the combined effects of management decisions, dependencies, actions and their consequences.
2 Service management as a practice
2.1 What is service management?
Service management is a set of specialized organizational capabilities for providing value to customers in the form of services. The capabilities take the form of functions and processes for managing services over a lifecycle, with specializations in strategy, design, transition, operation, and continual improvement. The capabilities represent a service organization’s capacity, competency, and confidence for action. The act of transforming resources into valuable services is at the core of service management. Without these capabilities, a service organization is merely a bundle of resources that by itself has relatively low intrinsic value for customers.
Service management
Service management is a set of specialized organizational capabilities for providing value to customers in the form of services.
Case study
Organizational capabilities are shaped by the challenges they are expected to overcome. An example of this is how in the 1950s Toyota developed unique capabilities to overcome the challenge of smaller scale and financial capital compared to its American rivals. Toyota developed new capabilities in production engineering, operations management and supply-chain management to compensate for limits on the size of inventories it could afford, the number of components it could make on its own, or being able to own the companies that produced them. The need for financial austerity, tight coordination, and greater dependency on suppliers led to the development of the most copied production system in the world.7
Service management capabilities are influenced by the following challenges that distinguish services from other systems of value creation such as manufacturing, mining and agriculture:
Intangible nature of the output and intermediate products of service processes: difficult to measure, control, and validate (or prove).
Demand is tightly coupled with customer’s assets: users and other customer assets such as processes, applications, documents and transactions arrive with demand and stimulate service production.
High-level of contact for producers and consumers of services: little or no buffer between the customer, the front-office and back-office.
The perishable nature of service output and service capacity: there is value for the customer in receiving assurance that the service will continue to be supplied with consistent quality. Providers need to secure a steady supply of demand from customers.
The characteristics described above are not universal constraints.8 Innovative businessmodels and technological innovation have relaxed the constraining effects of these characteristics. What matters is the need to recognize these characteristics when they do appear, and identify them as challenges in service management.
Service management is also a professional practice supported by an extensive body of knowledge, experience, and skills. A global community of individuals and organizations in the public and private sectors fosters its growth and maturity. Formal schemes that exist for the education, training and certification of practising organizations and individuals influence its quality. Industry best practices, academic research and formal standards contribute to its intellectual capital and draw from it.
The origins of service management are in traditional service businesses such as airlines, banks, hotels and telephone companies. Its practice has grown with the adoption by IT organizations of a service-oriented approach to managing IT applications, infrastructure and processes. Solutions to business problems and support for business models, strategies and operations are increasingly in the form of services. The popularity of shared services and outsourcing has contributed to the increase in the number of organizations who are service providers, including internal organizational units. This in turn has strengthened the practice of service management, at the same time imposing greater challenges on it.
2.2 What are services?
2.2.1 The value proposition
Service
A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.
Services are a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks. Outcomes are possible from the performance of tasks and are limited by the presence of certain constraints. Broadly speaking, services facilitate outcomes by enhancing the performance and by reducing the grip of constraints. The result is an increase in the possibility of desired outcomes. While some services enhance performance of tasks, others have a more direct impact. They perform the task itself.
The preceding paragraph is not just a definition, as it is a recurring pattern found in a wide range of services. Patterns are useful for managing complexity, costs, flexibility and variety. They are generic structures useful to make an idea work in a wide range of environments and situations. In each instance the pattern is applied with variations that make the idea effective, economical, or simply useful in that particular case.
Take, for example, the generalized pattern of a storage system. Storage is useful for holding, organizing or securing assets within the context of some activity, task or performance. Storage also creates useful conditions such as ease of access, efficient organization or security from threats. This simple pattern is inherent in many types of storage services, each specialized to support a particular type of outcome for customers (Figure 2.1).
Figure 2.1 Generalized patterns and specialized instances9
For various reasons, customers seek outcomes but do not wish to have accountability or ownership of all the associated costs and risks. For example, a business unit needs a terabyte of secure storage to support its online shopping system. From a strategic perspective, it wants the staff, equipment, facilities and infrastructure for a terabyte of storage to remain within its span of control. It does not want, however, to be accountable for all the associated costs and risks, real or nominal, actual or perceived. Fortunately, there is a group within the business with specialized knowledge and experience in large-scale storage systems, and the confidence to control the associated costs and risks. The business unit agrees to pay for the storage service provided by the group under specific terms and conditions.
The business unit remains responsible for the fulfilment of online purchase orders. It is not responsible for the operation and maintenance of fault-tolerant configurations of storage devices, dedicated and redundant power supplies, qualified personnel, or the security of the building perimeter, administrative expenses, insurance, compliance with safety regulations, contingency measures, or the optimization problem of idle capacity for unexpected surges in demand. The design complexity, operational uncertainties, and technical trade-offs associated with maintaining reliable high-performance storage systems lead to costs and risks the business unit is simply not willing to own. The service provider assumes ownership and allocates those costs and risks to every unit of storage utilized by the business and any other customers of the storage service.
2.2.2 Value composition
From the customer’s perspective, value consists of two primary elements: utility or fitness for purpose and warranty or fitness for use.
Utility is perceived by the customer from the attributes of the service 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.
Warranty is derived from the positive effect being available when needed, in sufficient capacity or magnitude, and dependably in terms of continuity and security.
Utility is what the customer gets, and warranty is how it is delivered.
Customers cannot benefit from something that is fit for purpose but not fit for use, and vice versa. It is useful to separate the logic of utility from the logic of warranty for the purpose of design, development and improvement (Figure 2.2). Considering all the separate controllable inputs allows for a wider range of solutions to the problem of creating, maintaining and increasing value.
Figure 2.2 Logic of value creation through services
Take the case of the business unit utilizing the high-performance online storage service. For them the value is not just from the functionality of online storage but also from easy access to no less than one terabyte of fault-tolerant storage, as and when needed, with confidentiality, integrity, and availability of data. Chapter 3 of Service Strategy provides further detail on the concepts of utility and warranty.
An outcome-based definition of service moves IT organizations beyond Business-IT alignment towards Business-IT integration. Internal dialogue and discussion on the meaning of services is an elementary step towards alignment and integration with a customer’s business (Figure 2.3). Customer outcomes become the ultimate concern of Product Managers instead of the gathering of requirements, which is necessary but not sufficient. Requirements are generated for internal coordination and control only after customer outcomes are well understood. Chapter 4 of Service Strategy provides detail on the practical use of outcome-based definitions.
Figure 2.3 A conversation about the definition and meaning of services
2.3 The business process
Business outcomes are produced by business processes governed by objectives, policies and constraints. The processes are supported by resources including people, knowledge, applications and infrastructure. Workflow coordinates the execution of tasks and flow of control between resources, and intervening action to ensure adequate performance and desired outcomes. Business processes are particularly important from a service management perspective. They apply the organization’s cumulative knowledge and experience to the achievement of a particular outcome (Figure 2.4).
Figure 2.4 Business processes apply experience, know-how and resources
Processes are strategic assets when they create competitive advantage and market differentiation. As a result, business processes define many of the challenges faced by service management. The nature and dynamics of the relationship between business processes and IT best explains this.
The workflow of business processes is a factor of business productivity. Business processes can span organizational and geographic boundaries, often in complex variants creating unique designs and patterns of execution (Figure 2.5). As the importance of business process has emerged, businesses have realized they must consider not only internal practices, but also their interactions with suppliers and customers. These fundamental needs form the basic motivation for the management of business processes as valuable assets.
Figure 2.5 The end points of a business process are often defined by enterprise applications
Business managers demand IT systems that make processes more transparent, dynamically serving and expediting business process flows. End-to-end business processes have come to depend on distributed systems. Business managers challenge IT organizations to engage with them at the level of business processes. They want assurance that applications and infrastructure will support new business initiatives. However, there are coordination and cooperation problems between the two sides. Business managers may not understand the complexity and detail of creating the business process within the realm of information, applications, and infrastructure. IT managers may not have a clear understanding of exactly what business managers are trying to accomplish. The problem gets worse with complexity, duplication, and the absence of clear models for coordination and control. The following section shows how the principles of service management are useful in solving many of these problems between the business and IT.
Process10
A process is a set of coordinated activities combining and implementing resources and capabilities in order to produce an outcome, which, directly or indirectly, creates value for an external customer or stakeholder.
2.4 Principles of service management
Service management has a set of principles to be used for analysis, inference, and action in various situations involving services. These principles complement the functions and processes described elsewhere in the ITIL Core Library. When functions and processes are to be changed, these principles provide the necessary guidance and reference. When solving problems related to services, these principles are to be used to resolve ambiguity and conflict.
2.4.1 Specialization and coordination
The aim of service management is to make available capabilities and resources useful to the customer in the highly usable form of services at acceptable levels of quality, cost, and risks. Service providers help relax the constraints on customers of ownership and control of specific resources. In addition to the value from utilizing such resources now offered as services, customers are freed to focus on what they consider to be their core competence. The relationship between customers and service providers varies by specialization in ownership and control of resources and the coordination of dependencies between different pools of resources (Figure 2.6).