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Which customers, channels or purchase occasions are the most profitable?Again, the form of value can be monetary, social or other.
Which of our activities in our value chain or value network are the most different and effective?
The answers to these questions will likely reveal patterns that lend insight to future strategic decisions. These decisions, and related objectives, form the basis of a strategic assessment. See Table 4.5.
Factor
Description
Strength and weaknesses
The attributes of the organization. For example, resources and capabilities, service quality, operating leverage, experience, skills, cost structures, customer service, global reach, product knowledge, customer relationships and so on.
Distinctive competencies
As discussed throughout the chapter, ‘What makes the service provider special to its business or customers?’
Business strategy
The perspective, position, plans and patterns received from a business strategy. For example, a Type I and II may be directed, as part of a new business model, to expose services to external partners or over the internet.
This is also where the discussion on customer outcomes begins and is carried forward into objectives setting.
Critical success factors
How will the service provider know when it is successful? When must those factors be achieved?
Threats and opportunities
Includes competitive thinking. For example, ‘Is the service provider vulnerable to substitution?’
Or, ‘Is there a means to outperform competing alternatives?’
Table 4.5 Internal and external factors for a strategic assessment
4.4.2 Setting objectives
Objectives represent the results expected from pursuing strategies, while strategies represent the actions to be taken to accomplish objectives. Clear objectives provide for consistent decision making, minimizing later conflicts. They set forth priorities and serve as standards. Organizations should avoid the following means of ‘not managing by objectives’.
Managing by crisis – the belief that the measure of an organization is its problem solving ability. It is the approach of allowing events to dictate management decisions.
Managing by extrapolation – continuing the same activities in the same manner because things are going well.
Managing by hope – making decisions on the belief they will ultimately work out.
Managing by subjective – doing the best you can to accomplish what should be done. There is no general plan.
To craft its objectives, an organization must understand what outcomes customers desire to achieve and determine how best to satisfy the important outcomes currently underserved. This is how metrics are determined for measuring how well a service is performing. The objectives for a service include three distinct types of data. These data sources are the primary means by which a service provider creates value. See Table 4.6.
Type of Objective Data
Description
Customer tasks
What task or activity is the service to carry out? What job is the customer seeking to execute?
Customer outcomes
What outcomes is the customer attempting to obtain? What is the desired outcome?
Customer constraints
What constraints may prevent the customer from achieving the desired outcome? How can the provider remove these constraints?
Table 4.6 Customer tasks, outcomes and constraints
There are four common categories of information frequently gathered and presented as objectives. Senior managers should understand the risk that comes with each category, if not altogether avoided:23
Solutions – customers present their requirements in the form of a solution to a problem. Customers may lack the technical expertise to be able to arrive at the best possible solution. Customers may be ultimately disappointed by the very solution they present. To mitigate this risk, rather than looking to customer ideas about the service itself, look for the criteria they use to measure the value of a service.
Specifications – customers present their requirements in the form of specifications – vendor, product, architectural style, computing platform, etc. By accepting specifications, a provider needlessly prevents its own organization from devising optimal services.
Needs – customers present their requirements as high-level descriptions of the overall quality of the service. By their nature, high-level descriptions do not include a specific benefit to the customer. For example, ‘...service will be available 99.9% of the time’. These inputs are frequently ambiguous and imprecise. They leave the provider wondering what customers really mean: ‘99.9% of business hours? 99.9% of a calendar year? Does this include maintenance windows? Can the 0.1% be used all at once?’ By leaving room for interpretation, the provider leaves too much to chance. Be sure all input is measurable and actionable (Figure 4.20).
Benefits – customers present their requirements in the form of benefit statements. Again, the risk is in the ambiguity or imprecision of the statements. ‘Highly reliable’, ‘Faster response’ and ‘Better security’ take on many meanings and present different implications for the organization.
Figure 4.20 Moving from customer-driven to customer-outcomes
When service providers solicit requirements, customers respond in a manner and language meaningful and convenient to them. This customer-driven approach fails because it inevitably solicits the wrong inputs – the type that cannot be used to predictably ensure success. This explains the frequent disconnection between IT organizations and the businesses they serve. What the customer values is frequently different from what the organization believes it provides. Service providers should think very differently. A clear understanding of what the customer values is called a marketing mindset, compared to a manufacturing mindset. Rather than focusing inward on the production of services, look from the outside in, from the customer’s view. Rather than lagging indicators, begin with the leading indicators of Table 4.6, Common business objectives. These indicators lead to a clearer understanding of service utility and service warranty, which in turn lead to defining better requirements. Customers do not buy services; they buy the satisfaction of a particular need.
4.4.3 Aligning service assets with customer outcomes
Service providers must manage assets much in the same manner as their customers. Service assets are coordinated, controlled, and deployed in a manner that maximizes the value to customers while minimizing risks and costs for the provider. For example, a messaging service such as wireless email increases the performance of one of the most critical and expensive type of customer assets: managers and staff. The customer deploys these assets in a manner that gets the most out of their productive capacities.
This means, for example, that sales managers spend more time on-site with clients, technicians are quickly dispatched to cover equipment failures in the field, and administrative staff are consolidated at strategic locations to improve operationaleffectiveness. To support the customer, the service provider configures and deploys its assets in a manner that effectively supports the customer’s own deployments. It may require the design, deployment, operation, and maintenance of highly available and secure messaging on wireless phones or computers. What matters is that the customer’s employees are able to coordinate business activities, access business applications and control business processes.
4.4.4 Defining critical success factors
For every market space there are critical success factors that determine the success or failure of a service strategy. These factors are influenced by customer needs, business trends, competition, regulatory environment, suppliers, standards, industry best practices and technologies. Critical success factors are also referred to in business literature as strategic industry factors (SIF) and have the following general characteristics:24
They are defined in terms of capabilities and resources
They are proven to be key determinants of success by industry leaders
They are defined by market space levels, not peculiar to any one firm
They are the basis for competition among rivals
They change over time, so they are dynamic not static