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ITIL® Service Strategy

Course Name : ITIL Service Strategy


ITIL® is a registered trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.
Version : INVL_ITILSS_CW_01_1.2
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Course ID :ITSM - 111
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About Invensis Learning

Invensis Learning is a pioneer in providing globally-recognized certification training courses for


individuals and enterprises worldwide. Our training methodology coupled with high-quality courseware
has enabled organizations to achieve high-impact learning with increased knowledge, competence, and
performance. We offer courses in various categories such as IT Service Management, Project
Management, IT Security and Governance, Quality Management, Agile Project Management, DevOps,
and Cloud Courses. Invensis Learning certification training programs adhere to global standards such as
PMI, TUV SUD, AXELOS, ISACA, DevOps Institute, and PEOPLECERT.
Chapter 1
Introduction to Service Strategy
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Service Strategy - Introduction

Learning Objectives
This qualification provides a complete overview of service strategy including all its related activities: how
to design, develop, and implement service management not only as an organizational capability but also
as a strategic asset. Candidates can expect to gain competencies in the following upon successful
completion of the education and examination components related to this certification:

 Introduction to service strategy

 Service strategy principles

 Service strategy processes

 Governance

 Organizing for service strategy

 Technology considerations

 Implementing service strategy

 Challenges, critical success factors and risks


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Service Strategy - Introduction

Processes
1. Strategy Management for IT Services

2. Service Portfolio Management

3. Financial Management

4. Demand Management

5. Business Relationship Management

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Service Strategy - Introduction

Purpose
 Transform Service Management into a strategic asset and to then think and act in a strategic
manner

 Helps clarify the relationships between various services, systems or processes and the business
models, strategies or objectives they support

 Build Service Management as an organizational capability and as a strategic asset

 Establish the direction and guiding principles for Service Management activities across ITIL
Service lifecycle by setting goals, policies, guidelines, and processes and measures of performance
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Service Strategy - Introduction

Objectives
 Define service quality for the organization.

 Identify services and target customers

 Create and capture value for customers and differentiate from competitors

 Strategic decision making and make a case for strategic investments by using financial
management to provide visibility and control over value-creation

 Efficient allocation of resources across a portfolio of services and resolve conflicting demands for
shared resources
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Service Strategy - Introduction

Scope
Two aspects of strategy are covered in ITIL Service Strategy:

 Defining a strategy whereby a service provider will deliver services to meet a customer’s business
outcomes.

 Defining a strategy for how to manage those services.


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Service Strategy - Introduction

Value to Business
 Provides guidance on how to design, and put in place service management as a strategic asset

 Support the ability to link activities performed by the service provider to outcomes that are critical to
internal or external customers

 Enable the service provider to have a clear understanding of what types and levels of service will
make its customers successful and then organize itself optimally to deliver and support those
services

 Enable the service provider to respond quickly and effectively to changes in the business
environment, ensuring increased competitive advantage over time

 Provide the means for the service provider to organize itself so that it can provide services in an
efficient and effective manner
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Service Strategy - Introduction

Context of Service Strategy in relation to Service Design


Service design is the stage in the lifecycle that turns a service strategy into a plan for delivering the
business objectives

 Provides guidance for the design and development of services and service management practices.

 Guides organizations on how to develop design capabilities for service management


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Service Strategy - Introduction

Context of Service Strategy in relation to Service Transition


Ensures that the value(s) identified in the service strategy, and encoded in service design, are effectively
transitioned so that they can be realized in service operation.

 Provides guidance for the development and improvement of capabilities for introducing new and
changed services into supported environments.

 Describes best practices in transition across all the processes in Transition.

 Introduces the service knowledge management system, which can support organizational learning
and help to improve the overall efficiency and effectiveness of all stages of the service lifecycle.
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Service Strategy - Introduction

Context of Service Strategy in relation to Service Operation


 Service Operation describes best practice for managing services in supported environments.

 Guidance on achieving effectiveness and efficiency in the delivery and support of services to
ensure value for the customer, the users and the service provider.

 Provides guidance on how to maintain stability in service operation, allowing for changes in design,
scale, scope and service levels.

 Organizations are provided with detailed process guidelines, methods and tools for use in two
major control perspectives: reactive and proactive.

 Describes best practices in transition across all the processes in Service Operations
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Service Strategy - Introduction

Context of Service Strategy in relation to Continual Service Improvement

 Provides guidance on creating and maintaining value for customers through better strategy, design,
transition and operation of services.

 Combines principles, practices and methods from quality management, change management and
capability improvement.

 Describes best practice for achieving incremental and large-scale improvements in service quality,
operational efficiency and business continuity, and for ensuring that the service portfolio continues to
be aligned to business needs.

 Guidance is provided for linking improvement efforts and outcomes with service strategy, design,
transition and operation.
Service Strategy Principles (SSP)
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Service Strategy Principles

Fundamental aspects of Service Strategy


Basic approach of deciding a strategy

Carl von Clausewitz remarked, ‘Everything in strategy is very simple, but that does not mean that
everything is very easy’. Basic approach of deciding a strategy are…

 Acknowledge your competitors.

 Identify differentiators.

 Understanding trade-offs involved in its Strategic choices.


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Service Strategy Principles

Strategy synthesizes Opposing Dynamics

Strategic failure is often the result of an organization failing to recognize and manage these opposing
dynamics. They include the ability to react and predict, adapt and plan. In fact, high-performing service
providers are skilled in blending frames of reference when crafting service strategy

Focus on the future Focus on the present

Improvements in Improvements in
operational effectiveness functionality

Immediate value capture Value capture during


at launch ongoing operations

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Service Strategy Principles

Fundamental aspects of Service Strategy


Outperforming Competitors

A high-performance service strategy, is one that enables a service provider to consistently outperform
competing alternatives over time, across business cycles, industry disruptions and changes in
leadership. It comprises both the ability to succeed today and positioning for the future by….

 Service Provider meeting business outcomes subject to constraints

 Trade-offs involved in strategic choices

 Superior performance versus competing alternatives


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Service Strategy Principles

Fundamental aspects of Service Strategy


The four Ps (Mintzberg)

Perspective

Plans Patterns

Positions

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Service Strategy Principles

Fundamental aspects of Service Strategy

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.

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Service Strategy Principles

Service-Outcomes
Outcomes

An outcome is the result of carrying out an activity, following a process, or delivering an IT service etc.
The term is used to refer to intended results, as well as to actual results. Outcomes are often referred as
Business & Customer outcomes

Business outcomes usually refer to the context of internal customers, where the outcome for the
customer represents the overall business objectives of both the business unit and the service provider.

Customer outcomes usually refer to the context of external service providers, where the service
provider’s outcomes are based on the customer’s outcomes, but are different.

Difference between Output & Outcomes

Output Outcome

What a service provider delivers {e.g. a standard report) What the customer does with the output (e.g. the report is used to track
inventory levels)
Measured in terms of performance (e.g. uptime) Measured whether the outcome was achieved

Was the service delivered? Could the service be used to achieve the outcome?

Compliance to a standard level of performance Outcome may need variable level of performance

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Service Strategy Principles

Service–Specific Costs & Risks


What the customer does with the output (e.g. the report is used to track inventory levels)

Functionality (utility)

The Figure shows how each service is based on a balance between price, functionality (what the service does) and
performance.

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Service Strategy Principles

Fundamental aspects of Service Strategy


Value (Characteristics)

 Value is defined by customers

 Affordable mix of features

 Achievement of objectives

 Value changes over time and circumstance

Service contribute value to an organization only when their value is perceived to be higher than the cost
of obtaining the service. IT requires three pieces of information. They are…

1. What service(s) did IT provide?

2. What did the service(s) achieve?

3. How much did the service(s) cost – or what is the price of the service(s)?
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Service Strategy Principles

Fundamental aspects of Service Strategy


Creating Value

Customer’s perception of a service provider and the derived value is influenced by

 The attributes of the services delivered

 The customer’s present and prior experience of similar attributes

 Relative capability of the service provider’s competitors Business


Outcomes
 The customer’s self-image and position in its market

Value
Preferences Perceptions

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Service Strategy Principles

Fundamental aspects of Service Strategy


Economic value of a service

+ diff - diff

Losses from utilizing


the Service
Net
difference
Gains from utilizing the
service

Based on DIY Strategy


or existing arrangements

Reference value Economic value of Service

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Service Strategy Principles

Fundamental aspects of Service Strategy


Value added and value realized

realized-Porter (1996) introduced the concept of value chain- is a sequence of processes that creates a
product or service

Rules that apply for adding value areas follows:

 The amount of value added can only be calculated once value has been realized

 The value realized has to be greater than money spent, otherwise there is no value added

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Service Strategy Principles

Linking ‘value added’ to ‘value realized’


Just as there are internal and external customers,
there are internal and external services. Internal
services are delivered between departments or
business units in the same organization. External
services are delivered to external customers.

The figure shows which of these services add or


realize value, and which are classified as ‘money
spent’.

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Service Strategy Principles

Fundamental aspects of Service Strategy


Value Capture

 Value capture is an important notion for all types of service providers, internal and external.

 It is the ability of a service provider to retain a portion of the value that has been created and
realized.

 Good business sense discourages stakeholders from making major investments in any
organizational capability unless it demonstrates value capture.

 Internal providers are encouraged to adopt this strategic perspective to continue as viable concerns
within a business.

 Cost recovery is necessary but not sufficient. Profits or surpluses allow continued investments in
service assets that have a direct impact on capabilities.

 Linking value creation to value capture is a difficult but worthwhile endeavor.


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Service Strategy Principles

Fundamental aspects of Service Strategy


Utility and Warranty

Increase Gains
UTILITY

Performance supported? T/F

OR
Constraints removed?

Fit for purpose?

AND Value-created

Available enough? T/F


Fit for use?
Capacity enough?
AND
Continuous enough? T/F T: True
F: False
Secure enough?
WARRANTY

Prevent loss

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Service Strategy Principles

Fundamental aspects of Service Strategy


Effect of improved Utility of a service

Improving the utility of a service has the effect of increasing the functionality of a service or what it does
for the customer, thus increasing the type and range of outcomes that can be achieved.

Effect of improved warranty on a service

The effect of improving warranty of a service means that the service will continue to do the same things,
but more reliably. Therefore there is a higher probability that the desired outcomes will be achieved,
along with a decreased risk that the customer will suffer losses due to variations in service performance.
Improved warranty also results in an increase in the number of times a task can be performed within an
acceptable level of cost, time and activity.

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Service Strategy Principles

Fundamental aspects of Service Strategy


Combined effect of Utility & Warranty

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Service Strategy Principles

Fundamental aspects of Service Strategy


Combined effect of Utility & Warranty

Quadr Description Challenge Investment


ant
Below These services have low business These services are of little value even when Minimal investment is justified since the value to the
Left impact and range between a utility and they provide both utility and warranty. They do business is low. Where there is a warranty or utility
warranty bias not support high-value business outcomes. bias, there is little value in creating a balance, and it
might be preferable to retire the service altogether.

Top Low impact on customer outcomes, but Services with low utility do not provide value The current investment in these services is
Left with high levels of warranty and low because they do not do what the business disproportionate. The value of the services is low, since
levels of utility These services are very needs them to do, regardless of how reliable the ongoing investment to keep the service assets
reliable, but are of little value to the they are. In addition, services in this quadrant performing is probably higher than it should be. Any
business. In addition the level of utility is do not address high-value business investment should be re-allocated to improving the
low requirements. utility of these services.

Below Services in this quadrant have a high The value of these services is low since, Investment is needed to improve the level of service
Right impact on customer outcomes, but with although they have been designed to meet provided by the service provider, and this investment is
high levels of utility and low levels of high-priority customer requirements they are likely to take a high priority.
warranty. unable to do so due to poor performance of
the service assets

Top Services in this quadrant have a good Shortcomings in services that are skewed The optimum levels of investment are in the 'zone of
Right balance between utility and warranty, towards either a utility or warranty bias in this balance' since this represents services that meet both
and have a high business impact for the quadrant tend to have more visibility- since utility and warranty levels. It is much easier to justify
customer. Customer perception of the business outcomes are more valuable to investments required to move a service into the zone of
service quality and value are highest in the business balance
the zone of balance

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Service Strategy Principles

Fundamental aspects of Service Strategy


Communicating Utility

Utility and warranty is important for customers to be able to calculate the value of a service.
Communicating utility will enable the customer to determine the extent to which utility is matched to their
functionality requirements.

Communicating utility in terms of ownership costs and risks avoided means that the service provider
should be able to articulate:

 That the service enables the business to achieve the desired outcomes more efficiently. This allows
the business to reduce its costs (and in commercial organizations, to increase its profit margins).

 That the service improves the reliability of outcome achievement. In other words, the service
mitigates the risk of the business not being able to achieve its outcomes.
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Service Strategy Principles

Fundamental aspects of Service Strategy


Communicating Warranty

Warranty ensures the utility of the service is available as needed with sufficient capacity continuity and
security- at the agreed cost or price. Customers cannot realize the promised value of a service that is fit
for purpose when it is not fit for use.

Service providers communicate the value of warranty in terms of levels of certainty. Their ability to
manage service assets instills confidence in the customer about the support for business outcomes.
Warranty is stated in terms of the availability, capacity, continuity and security of the utilization of
services.
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Service Strategy Principles

Fundamental aspects of Service Strategy


Communicating Combined effect of Utility & Warranty

The ability to deliver a certain level of warranty to customers by itself is a basis of competitive advantage
for service providers. This is particularly true where services are commoditized or standardized. In such
cases, it is hard to differentiate value largely in terms of utility for customers. When customers have a
choice between service providers whose services provide more or less the same utility but different
levels of warranty, then they prefer the greater certainty in the support of business outcomes, provided it
is offered at a competitive price and by a service provider with a reputation for being able to deliver what
is promised.
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Service Strategy Principles

Fundamental aspects of Service Strategy


Customer Assets, Service Assets & Strategic Assets

Asset, Resource & Capabilities

 Capabilities are developed over a period of time

 Distinctive capabilities is enhanced by breadth and depth of experience gained in

 Solving problems

 Handling situations

 Managing risks

 Analyzing failures

‘A basic code of good business behaviour is a bit like oxygen: We take an interest in its presence only
when it is absent.’ Amartya Sen, Nobel Laureate in Economics
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Service Strategy Principles

Fundamental aspects of Service Strategy


Business Units & Service Providers

Fig 1 Fig 2

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To know more about our ITIL Service Strategy


Certification Training, please visit
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ITIL® is a registered trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.
The Swirl logo™ is a trade mark of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.