Service Strategy
London: TSO
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First published 2007
ISBN 978 0 11 331045 6
Printed in the United Kingdom for The Stationery Office
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iii
List of figures iv
List of tables viii
OGC’s foreword ix
Chief Architect’s foreword x
Preface xi
Acknowledgements xii
1 Introduction 1
1.1 Overview 3
1.2 Context 5
1.3 Purpose 9
1.4 Expected use 10
2 Service management as a practice 13
2.1 What is service management? 15
2.2 What are services? 16
2.3 The business process 18
2.4 Principles of service management 19
2.5 The Service Lifecycle 24
2.6 Functions and processes across the Lifecycle 26
3 Service strategy principles 29
3.1 Value creation 31
3.2 Service assets 38
3.3 Service provider types 41
3.4 Service structures 47
3.5 Service strategy fundamentals 52
4 Service strategy 63
4.1 Define the market 65
4.2 Develop the offerings 70
4.3 Develop strategic assets 78
4.4 Prepare for execution 84
5 Service economics 95
5.1 Financial Management 97
5.2 Return on Investment 112
5.3 Service Portfolio Management 119
5.4 Service Portfolio Management methods 123
5.5 Demand Management 129
6 Strategy and organization 139
6.1 Organizational development 142
6.2 Organizational departmentalization 147
6.3 Organizational design 148
6.4 Organizational culture 149
6.5 Sourcing strategy 150
7 Strategy, tactics and operations 159
7.1 Implementation through the lifecycle 161
7.2 Strategy and design 163
7.3 Strategy and transition 168
7.4 Strategy and operations 170
7.5 Strategy and improvement 173
8 Technology and strategy 179
8.1 Service automation 182
8.2 Service interfaces 185
8.3 Tools for service strategy 188
9 Challenges, critical success factors
and risks 191
9.1 Complexity 193
9.2 Coordination and control 193
9.3 Preserving value 194
9.4 Effectiveness in measurement 197
9.5 Risks 199
Afterword 209
Appendix A: Present value of an annuity 213
Appendix B: Supplementary guidance 217
B1 Description of asset types 219
B2 Product managers 221
Further information 223
References 225
Further reading 226
Glossary 229
Acronyms list 231
Definitions list 233
Index 257
Contents
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All diagrams in this publication are intended to provide an
illustration of ITIL Service Management Practice concepts
and guidance. They have been artistically rendered to
visually reinforce key concepts and are not intended to
meet a formal method or standard of technical drawing.
The ITIL Service Management Practices Integrated Service
Model conforms to technical drawing standards and
should be referred to for complete details. Please see
www.best-management-practice.com/itil for details.
Figure 1.1 Sourcing of service management practice
Figure 1.2 The ITIL Core
Figure 1.3 The Golden Pony
Figure 2.1 Generalized patterns and specialized
instances
Figure 2.2 Logic of value creation through services
Figure 2.3 A conversation about the definition and
meaning of services
Figure 2.4 Business processes apply experience, know-
how and resources
Figure 2.5 The end points of a business process are
often defined by enterprise applications
Figure 2.6 Relationships defined by the dynamics of
ownership, control and utilization
Figure 2.7 The agency model in service management
Figure 2.8 Encapsulation based on separation of
concerns and modularity
Figure 2.9 Types of feedback
Figure 2.10 The Service Lifecycle
Figure 2.11 Great leverage for sustainable change lies in
structure
Figure 2.12 Today’s problem is often created by
yesterday’s solution
Figure 2.13 Performance over time for differing service
management structures
Figure 2.14 A basic process
Figure 2.15 Service management processes are applied
across the Service Lifecycle
Figure 3.1 Attributes, perceptions and preferences
Figure 3.2 Economic value of a service
Figure 3.3 Utility increases the performance average
Figure 3.4 Warranty reduces the performance variation
Figure 3.5 Value of a service in terms of return on assets
for customer
Figure 3.6 Utility framed in terms of outcomes supported
and constraints removed
Figure 3.7 Combined effects of utility and warranty on
customer assets
Figure 3.8 Resources and capabilities are the basis for
value creation
Figure 3.9 Business units are coordinated goal-driven
collections of assets
Figure 3.10 Customer assets are the basis for defining
value
Figure 3.11 Common relationships between business units
and service units
Figure 3.12 Type I providers
Figure 3.13 Common Type II providers
Figure 3.14 Type III providers
Figure 3.15 Customer decisions on service provider types
Figure 3.16 Advantage of being a well-performing
incumbent
Figure 3.17 Generic value network
Figure 3.18 Basic value chain and value network
Figure 3.19 Example value network
Figure 3.20 Unit of analysis for value nets in service
management
Figure 3.21 Existing flowchart of how the Service Desk
was supposed to work
Figure 3.22 Value net exchanges showing how things
really worked
Figure 3.23 Innovative solutions break through
performance barriers
Figure 3.24 Building blocks of a high performance service
strategy
Figure 3.25 Perspectives, positions, plans and patterns
Figure 3.26 Strategic approach taken by a Type II provider
for an international law firm
List of figures
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Figure 3.27 Variety-based (left) and needs-based (right)
positioning
Figure 3.28 Positioning based on location, scale or
structure
Figure 3.29 Combining variety-based, needs-based and
access-based positioning
Figure 3.30 Operational plans and patterns are driven by
strategic positioning
Figure 4.1 Strategies for services and services for
strategies
Figure 4.2 Analysing an outcome
Figure 4.3 Customer outcomes are used to tag services
and service assets
Figure 4.4 Provider business models and customer assets
Figure 4.5 Asset-based and utility-based positioning
Figure 4.6 Visualization of services as value-creating
patterns
Figure 4.7 Market spaces are defined by the outcomes
that customers desire
Figure 4.8 Actionable components of service definitions
in terms of utility
Figure 4.9 Actionable components of service definitions
in terms of warranty
Figure 4.10 Service Portfolio
Figure 4.11 Service Pipeline and Service Catalogue
Figure 4.12 Elements of a Service Portfolio and Service
Catalogue
Figure 4.13 Service Catalogue and Demand Management
Figure 4.14 Growth and maturity of service management
into a trusted asset
Figure 4.15 Mutual welfare when service assets are
engaged in supporting customer outcomes
Figure 4.16 Service management as a closed-loop control
system
Figure 4.17 Service management as a strategic asset and
a closed-loop system
Figure 4.18 Closing the loop with demand, capacity and
cost to serve
Figure 4.19 Forming and formulating a service strategy
Figure 4.20 Moving from customer-driven to customer-
outcomes
Figure 4.21 Critical success factors
Figure 4.22 Critical success factors leveraged across
market spaces
Figure 4.23 Critical success factors and competitive
positions in playing fields
Figure 4.24 Strategic analysis of Customer Portfolio
Figure 4.25 Prioritizing strategic investments based on
customer needs
Figure 4.26 New service development
Figure 4.27 Customers and market spaces
Figure 4.28 Strategies and market spaces
Figure 4.29 Expansion into adjacent market spaces
Figure 4.30 Growth in a market space
Figure 4.31 Differentiation in the market space
Figure 5.1 Shared imperatives framework: business
and IT
Figure 5.2 Customer assets are the basis for defining
value
Figure 5.3 Translation of cost account data to service
account information
Figure 5.4 Shared services
Figure 5.5 Business Impact Analysis
Figure 5.6 The funding lifecycle
Figure 5.7 Single business impact can affect multiple
business objectives
Figure 5.8 Multiple business impacts can affect a single
business objective
Figure 5.9 Post-programme ROI approach
Figure 5.10 Trend line analysis
Figure 5.11 Business service and IT service
Figure 5.12 Service perspectives
Figure 5.13 Simplified vertical view of an IT organization
Figure 5.14 Process as a means for managing the silos of
the organization chart
Figure 5.15 The IT management continuum
Figure 5.16 The embedded nature of services
Figure 5.17 Service Portfolio process
Figure 5.18 Option Space
Figure 5.19 Investment categories and budget allocations
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