Category Archives: Service Strategy

TO SOURCE, OR OUTSOURCE … THAT IS THE QUESTION!

Continuing our discussion about ITIL Service Strategy, lets start talking about Sourcing.  Sourcing is about analysing how to most effectively source and deploy the resources and capabilities required to deliver outcomes to customers. A sourcing decision is key in determining the best combination of suppliers (internal vs. external) to provide the most cost effective and efficient delivery of services.

Outsourcing

I’ve spoken about outsourcing at some length in the past (here, here and here), but those posts were focused more on whether or not you should outsource.  Lets talk here about what outsourcing is and why some businesses utilize it.
In a nutshell Outsourcing is using another company/organization to perform services on your behalf for your customers.  Now you could outsource lots of different things – HR Functions for your own internal team, IT Support for your customers etc… – what makes the decision on whether or not you should outsource is the question of value.  Are you able to provide more value to your customers and shareholders by outsourcing vs. doing the activity in house?  Generally speaking this question of value has been driven by financial considerations, unfortunately, most financial analyses do not include all the costs related to sourcing options, leading to difficult relationships with service providers, involving unexpected costs and service issues.  

What should you outsource?

Generally speaking you should outsource anything that is non-critical to your business.  By focusing on your core strengths you can be more successful and removing tasks that are only peripherally related (if that) to your business will allow your organization to focus even more on the things that make you successful.
Once candidates for sourcing are identified, the following questions can be used to clarify matters: 
  • Do the candidate services improve the business’s resources and capabilities? 
  • How closely are the candidate services connected to the business’s competitive and strategic resources and capabilities?
  • Do the candidate services require extensive interactions between the service providers and the business’s competitive and strategic resources and capabilities?

Dependent upon the answers to those questions a decision needs to be made on whether or not to outsource some or all of a service.  If the responses uncover minimal dependencies and infrequent interactions between the sourced services and the business’s competitive and strategic positioning, then the candidates are strong contenders – conversely however if the answers show a strong relationship with the business’ competitive or strategic position, then care must be taken.

Sourcing vulnerabilities

When outsourcing – especially in the instances where outsourcing a key service, care must be taken to ensure that businesses do not get impacted negatively.  Some of the key vulnerabilities that might be experienced are:
  • Substitution:  ‘Why do I need the service provider when its supplier can offer the same services?’ The sourced vendor develops competing capabilities and replaces the sourcing organization
  • Disruption:  The sourced vendor has a direct impact on quality or reputation of the sourcing organization.  This is of significant concern for those organizations that have outsourced their support or engineering and design organizations.
  • Distinctiveness:  The sourced vendor is the source of distinctiveness for the sourcing organization. The sourcing organization then becomes particularly dependent on the continued development and success of the second organization  

One key concern/issue with outsourcing is responsibility.  Outsourcing does not mean that a service or its performance are no longer important. In most cases, it often means that the service is so important that it should be provided by a service provider that can do a better (or more cost-effective) job. Just because a service has been outsourced does not remove the responsibility from the vendor. While a 3rd party could be providing technical support on a product or service, the customer always has recourse to organization that they purchased the original product/service from..

Other types of Sourcing

While most people consider Outsourcing (& Insourcing) as the only two options, there are in actuality a variety of different ways that services can be sourced.
  • Insourcing – internal parts of the organization do the work.  Clearly defined departments with specific responsibilities.
  • Outsourcing – a 3rd party that specializes in a specific role, provides that service to an organization through a well defined plan with specific deliverable’s, KPIs and SLAs.
  • Partnership – a formal arrangement between 2 or more parties to work together on a specific role or responsibility.  The focus here tends to be on strategic partnerships that leverage critical expertise or market opportunities.
  • Co-sourcing or multi-sourcing – a mix of insourcing and outsourcing where a number of external organizations work together to design, develop, transition, maintain, operate and/or support a portion of a service.
  • Business process outsourcing (BPO) – a growing trend (especially among the larger multinationals) where an entire business function (customer service, technical support, accounting, HR etc…) is provided by a 3rd party.
There are a host of other common (Application Services, Knowledge Process Outsourcing (KPO), Cloud etc…) and uncommon ways of sourcing services, in fact the only real distinction is that businesses will do what makes sense for the business!

8 RULES OF GOOD CUSTOMER SERVICE & 8 STEPS TO DEFINE A SERVICE


In a similar fashion to interviewing and hiring people – the hardest and most expensive exercise is getting the right employee – getting people back into the door is exactly the same.  You want that repeat custom as that is what will save you money in your marketing and advertising.  One of the key components to this in addition to the quality of the product itself is the customer service that you provide to the customer in their purchasing and ordering decisions.  You can offer promotions and slash prices to bring in as many new customers as you want, but unless you can get some of those customers to come back, your business won’t be profitable for long. Good customer service is all about bringing customers back. And about sending them away happy – happy enough to pass positive feedback about your business along to others, who may then try the product or service you offer for themselves and in their turn become repeat customers. 

Good customer service should be thought of as relationship building and networking.  It’s easy to think of a good salesperson as being the driver of a business, but in reality, anyone can sell something – once – its the way in which something is sold and the service you provide after its sold that will help you build that relationship.

“You will be judged by what you do, not what you say.” 

If you truly want to have good customer service, all you have to do is ensure that your business consistently does these things: 

  1. Answer your phone. If you don’t speak to your customers, you won’t know what problems they are having and you won’t be able to help them fix them.  Hire the right people that have the right knowledge and make sure you have enough of them as keeping your customer on hold is NOT good customer service.
  2. Keep your commitments.  If you tell someone you will find out the answer or will call them back, make sure you find out the answer and you call them back! Reliability is one of the keys to any good relationship, and good customer service is no exception. Think before you give any promise – because nothing annoys customers more than a broken one. 
  3. Listen. I’ve spoken about this before in previous posts (here) but one of the most frustrating things – especially for customers not happy with you – is forcing them to repeat themselves.  Irate customers especially can become infuriated when they find themselves transferred from person to person constantly having to explain the same issue over and over.  It is imperative to use active listening skills and show your customer that you are paying attention by making the appropriate responses at the right times.
  4. Complaints – no one likes complaints.  After all, most people are already trying to do their best and don’t like being told that it isn’t meeting the objectives they set out to address.  However, customer complaints are an opportunity to hear not only about what you might have done wrong now but rather an opportunity to learn what you might do right in the future!   Many of us have developed a reflex shrug, saying, “You can’t please all the people all the time”. Maybe not, but if you give the complaint your attention, you may be able to please this one person this one time – and position your business to reap the benefits of good customer service. 
  5. Help out – sometimes it really is the little things that make a difference.  Providing directions or parts at a nominal charge might not earn you revenue now, but it could help make that customer someone that will come back in the future when they know that you have the knowledge and skills for their problem.
  6. TrainingWhile having the phone answered on the first ring is a laudable objective if the person on the end of the line has no knowledge of your product or service it doesn’t really accomplish your objective.  You need to train your team in your products and services as well as the value of good customer service. Most importantly, give every member of your staff enough information and power to make those small customer-pleasing decisions, so he never has to say, “I don’t know, but so-and-so will be back at…” 
  7. Give them the pickle – sorry I know that’s a bit of strange turn of speech, but in some customer service training I once took its something that was taught and it stuck with me.  Giving them the pickle means going that extra mile… for example if someone asks where something in the store is – don’t just point them to the aisle … take them there and show them the item they are looking for + other alternatives that might be better! 
  8. Give them more than they are asking for – if you want them to come back, give them a reason to come back.  It can be a small coupon, it can be something that will help with whatever they’ve just purchased.  It doesn’t have to be expensive or large, but it should be useful.

If you apply these eight simple rules consistently, your business will become known for its good customer service. And the best part? The irony of good customer service is that over time it will bring in more new customers than promotions and price slashing ever did!

Defining a Service

Now I started this post talking all about good Customer Service, however, something that isn’t often discussed is how you define a service (product) in the first place.  Its all well and good to have good customer service, but if you’re selling something that the market isn’t interested in, you won’t have any customers TO service!  If you’re a reader of this blog, you’ll know that I’m a huge fan of ITIL and its methodologies … fortunately, ITIL can help here too and by a happy coincidence, it also has an 8 step plan!


      1. Define The Market & Identify Customers – who is your target market & demographic (i.e. who would be interested in your product or service and who do you want to sell to)? By identifying the market it will simplify the decision about the products or services of interest and will help you identify the customers that would be interested in your product. Markets can be defined by industry, geography, demographics or a host of other factors.
      2. Understand the Customer – knowing what your customer wants is essential to providing him with a solution to his demands.  For Type I and II organizations providing service to internal clients, this means understanding what the business is trying to accomplish, what the overall business goals of that business are and how these outcomes can be achieved.  Type III (external) service providers need to understand why they are purchasing that service and what products or services are key in achieving the objectives.  Understanding the customer involves understanding what they want to do, what their constraints are, how will they know that it has been successful etc…
      3. Quantify The Outcomes – I’ve spoken at length of the importance of measurement.  This is absolutely essential if you are providing a service to someone or purchasing a service from someone as the only way you will know whether a service meets desired outcomes is by knowing in advance what your targets are and by measuring, how close you are to reaching those targets and objectives. Defining outcomes is an important part of defining services, but customers often take it for granted that everyone understands their particular outcomes because they work on them as a matter of routine. It is therefore important that the service provider works with the customer to quantify each outcome, and document it as part of the service description that will be entered into the service pipeline.  As mentioned earlier in this post, complaints (not achieving outcomes) are not only a way for the customer to blow off steam, but are also a way for the provider of that service to improve in clearly defined ways so that they are better able to provide that service to the complaining customer and also to other customers!  Therefore it is important to review the achievement of outcomes regularly, both to ensure that the service provider is not missing an opportunity, and also to ensure that current outcomes are being delivered.
      4. Classify the Service – this could be somewhat confusing in ITIL terms as they talk about service archetypes and service utility etc… To put it into somewhat simpler English, think of this as defining a subset of resources that will meet a specific customer demand.  By combining a specific resource with a specific demand, you’ve built a specific service which you can then market and sell.  In this way, not only will you know what the service is but you will know who your customer is and also what internal resources you will need to devote to them.  This type of mapping is extremely useful as it will enable you to service not only your current customers but also through some simple analysis, future markets, and customers also!
      5. Understand the Market – OK you should by this point, have a good idea of your customer as well as what they want and how you are going to give it to them.  You’ve basically already completed this step, but by taking it just that little bit further you can define the market space in general vs. just the one specific customer.  Each customer has a number of requirements, and each service provider has a number of competencies. These intersections between the service provider’s competencies and the customer’s requirements are called market spaces.  More formally, market spaces are the opportunities that a service provider could exploit to meet the business needs of customers. 
      6. Define Services Based On Outcomes – Perhaps somewhat self-fulfilling, but a service should be defined upon what you can provide and what the customer wants.  Having the customer want a rocketship and you providing a go-cart will not be successful and to be honest, offering a rocketship when they only want to pay for a go-cart will probably not work either!  Services need to be cost-effective solutions to problems and need to address the needs of both sides.  See my previous post where I talk about Value and Utility and Warranty as that will really help you understand this concept.
      7. Build a Service model – another place where ITIL perhaps over complicates things (IMHO) in their description, a service model can be used as a template or blueprint for multiple services’.
      8. Define Service Packages and Units – Services may be as simple as allowing a user to complete a single transaction, but most services are complex. They consist of a range of deliverables and functionality. If each individual aspect of these complex services were defined independently, the service provider would soon find it impossible to track and record all services.  When a single service is delivered to a customer it is viewed by the service provider as a service. When two or more services are bundled and sold or delivered together they are viewed by the service provider as a service package.  Service Packages can be defined as core, enabling or enhancing – see my post for further details on this.

      OK lots of information on this one, so apologies if it’s a bit too wordy but it seemed to be the best option in terms of knowledge transfer.  As always, feel free to ask questions in the comments.

      TYPE I, II AND III PROVIDERS

      Service Provider Types 

      Although most aspects of service management apply for all types, it is important to differentiate between them. The domains of customers, contracts, competition, market, income, and strategy have a slightly different meaning for the different types.

      Type I- Internal Service Provider : 

      Type I is a service provider that is embedded within a business unit and provides IT service exclusively for a specific business unit.  They are often considered a cost center and are an integral part of the business’s operation.  They are dedicated to specific business units and as such, they are required to have an in-depth knowledge of the business and its goals, plans, and operations. They are usually highly specialized, often focusing on designing, customizing and supporting specific applications, or on supporting a specific type of business process.

      Type II – Shared Service Unit : 

      Type II is an internal service provider that provides shared IT services to more than one business unit.  A good example of this would be IT in fact.  In most businesses, IT provides services to many other parts of the organization (sales, operations, marketing etc…) and this is considered an SSU (Shared Service Unit).

      Type II can offer lower prices compared to external service providers by leveraging corporate advantage, internal agreements, and accounting policies. They can standardize their service offerings across business units and use market-based pricing to influence demand patterns.

      Type III – External service provider : 

      Type III is a service provider that provides IT services to external customers.  A good example of this is B2B Technical Support … most companies that are selling a product or service manufactured by a 3rd party, will require support on that product if/when they run into any issues.  While they may develop some capabilities in-house, they will definitely need more advanced support for difficult or complex installations and in those instances, they might need to access the support operations from the manufacturer directly.  The motivation may be access to knowledge, experience, scale, scope, capabilities, and resources that are either beyond the reach of the organization or outside the scope of a carefully considered investment portfolio.

      Choosing the Right Type of Provider

      Each provider type has benefits and drawbacks. Services, infrastructure, applications etc. may be sourced from each type of service provider with decisions based on possible transition costs (costs of migrating from one operating mode to another, or between service providers), and transaction costs (costs of finding a suitable provider, negotiating, defining requirements, agreements, relationship management, changes, disputes, etc.).



      Whether customers keep a business activity in-house (aggregate), separate it out for dedicated management (disaggregate) or source it from outside (outsource) depends on answers to the following questions:

      • Are highly specialized assets required? 
        • Are those assets going to be idle after the required activity is done?
          • If yes – it’s recommended to outsource it. 
        • Are those assets going be obsolete, or lose a significant proportion of the value over time?
          • If yes – it’s recommended to outsource it. 
      • Is the activity required performed sporadically?
        • If yes – it’s recommended to outsource it. 
      • Is the activity simple enough without any major changes within the activity over time? 
        • If yes – it’s recommended to outsource it. 
      • Can you define good and satisfactory performance? 
        • If no – it’s recommended to keep it in-house. 
      • Can you measure what constitutes good performance? 
        • If no – it’s recommended to keep it in-house. 
      • Is the activity tightly connected with other activities and processes, where in case of separation a new layer of complexity would be added? 
        • If yes – it’s recommended to keep it in-house. 

      Customers can decide to switch between types of service providers based on the answers to those simple questions. Of course, the answers to the questions themselves may change over time, depending on new economic conditions, regulations, and technological innovation – with the latest being inevitable. 

      Types of Services 

      I’ve covered this already in a previous post, but it bears repeating as it definitely applies in the context of the conversation we’re having here.

      Core Services : 

      Core Services are services that deliver the basic outcomes desired by one or more customers. Core services anchor the value proposition for the customers and provide the basis for their continued utilization and satisfaction as they represent the value that the customers want and for which they are willing to pay. 

      Enabling Services: 

      Enabling services are services that are needed in order to deliver a core service. Enabling services may or may not be visible to the customer, but the customer does not perceive them as services in their own right. 

      Enhancing Services: 

      Enhancing services are services that are added to a core service to make it more exciting or alluring to the customer. They are not essential to the delivery of a core service and are added to a core service as ‘excitement’ factors, which will encourage customers to use the core service more.

      THE 4 P’S OF SERVICE STRATEGY

      Competition is extremely fierce in the world of business, only a handful survive, and some can barely keep up with the demands of the times. That’s why it is necessary to have an idea of what it takes to be successful and an integrated strategy to help maintain excellent service results.

      ITIL discusses at length the four “Ps” of strategy– perspective, position, plan, and pattern, each of which represents a different way to approach your service strategy. Brief summaries are provided here:

      • Perspective – This is basically the vision statement of an organization.  Why is it in business, why is it doing what it is doing?  What are the plans and ideas for the future and how does the organization interact with its customers?  A perspective cements a service provider’s distinctiveness in the minds of the employees and customers
      • Positions – What is the competitive landscape and how will the organization compete with other similar providers?  What is the key distinction between them and other businesses in the marketplace and what are the capabilities that set them apart?  Positions are not just a description of different processes and resources … it could be as simple as cost.
      • Plans – This is the big one … it takes into account the vision and the current position and talks about the future.  How will the provider move from one space to a future space?  What activities need to be done and how will they be done?
      • Patterns – Hum, drum day-to-day … what does the organization or business do, how does it do it and what will it continue to do to be successful?  This is the housekeeping stuff that needs to be completed correctly for an organization to meet its strategic objectives.
      The thing that I’ve always liked about ITIL is that it isn’t esoteric or anything like that.  It is simple common sense and the 4 P’s are a perfect example of this

      DETERMINING THE VALUE OF A SERVICE

      English: A business ideally is continually seeking feedback from customers: are the products helpful? are their needs being met? Constructive criticism helps marketers adjust offerings to meet customer needs. Source of diagram: here (see public domain declaration at top). Questions: write me at my Wikipedia talk page (Photo credit: Wikipedia)
      Once again like in most things, ITIL helps to explain the common sense.  In this case it is the definition of “value” – basically while their definition is somewhat wordy, it gets the point across that Value is defined by the consumer.  What you might consider to be valuable, actually might not be … the person purchasing it from you will actually make that decision and will base it on whether or not the service meets their demands at the price they are willing to pay for it.

      ITIL however does go on to define value a bit further instead of just leaving it up to the customers decision.  They have indicated that value consists of two basic elements:

      • Utility – what does the product or service do?  Does it meet the needs of the customer?
      • Warranty – does the product or service meet the agreed upon requirements, specifically in regards to availability, capacity, continuity and security.  Warranty reduces fluctuations in the service and can to some extent be considered in the light of SLA conversations.
      Both elements – Utility and Warranty – are imperative and have to be taken into account and ensured to equal extent when designing and providing a service.  Remember:
      Utility = what the service does

      Warranty = how is that service delivered

      By working with other parts of the organization to improve the utility of a service, businesses are able to improve the functionality of service and what it is able to do for a customer.  However it bears pointing out that improving the Utility of a service does not have an automatic improvement on its Warranty – in fact, care must be taken to ensure that slippages do not occur in this area to the detriment of the service overall!
      Improving the warranty of a service however has a very powerful effect allowing you to do the same things (the Utility) but more reliably, faster, cheaper and with a decreased risk to the customer that they will suffer losses due to variations in service performance.
      By increasing both Utility and Warranty, organizations are able to do more and do it better.

      ITIL DEFINITION OF SERVICES

      I think you all know that I’m a big fan of ITIL but sometimes I think it does get overly complicated (despite what I’ve said in previous posts).  Take the definition of services for example:

      Internal vs. External

      OK now, I know its not rocket science by any means, but Internal services are those delivered within a business (for example IT services to a specific business unit) whereas External services are those delivered to external organizations (hence the name) … I’m assuming you’re with me so far, as this is not the overly complicated part (although it is important to recognize that internal services have to be linked to external services before their contribution to business outcomes can be understood and measured).
      Where I think it goes into too much detail is in its definition of Core, Enabling and Enhancing services.
      ITIL’s definition of each is as follows:
      • Core Services – deliver basic outcomes that represent something a customer is willing to pay for (basically the bread and butter of the service).
      • Enabling Services – these are the nuts and bolts that let you deliver the core service (support, administration, operations etc…)
      • Enhancing Services –  not needed to deliver the core service … this is something that can give the core service a “wow” factor but is not necessary.  The problem with enhancing services however is that over time they become core and/or enabling services as they become the expected norm.
      Now I don’t necessarily have a problem with how they’ve defined each of these … in itself they each make sense … my question however is more couldn’t you combine enabling and core?  Enabling by itself simply doesn’t do anything as there is no service for it to enable and core by itself similarly cannot be successful as it needs the other groups/services for it to actually work.  Personally I think Enabling Services ARE Core Services and should be included in the same list.  If they were – IT services might be looked at differently from a budgeting perspective that’s for sure!

      Service Definition Process

      Continuing this discussion, the next step is determining how you define a service.  There are five key questions that you can use to help you with this:

      1. What is the service, and how do I get it? (Service Description) 
      2. How do I get help? How do I use the service? (Help and Self-Service) 
      3. What Does It Cost? (Service Cost and Pricing) 
      4. How is the service supported? (Service Support) 
      5. How is the service delivered? (Service Delivery)

      The role of the Service Owner

      One thing that I do 100% agree with however is the definition of a Service Owner.  I have seen too often businesses role out fabulous new ideas and plans, and not have any idea who is actually responsible for ensuring that it is done correctly and responsibly.
      The Service Owner is responsible for the service REGARDLESS of where the underpinning technology components, processes or professional capabilities reside.  Basically the Service Owner is the SPOC (Single Point of Contact) for that Service and owns it.  The Service Owner is responsible to the customer for the initiation, transition and ongoing maintenance and support of a particular service and accountable to the IT director or service management director for the delivery of the service.

      SERVICE STRATEGY – AN INTRODUCTION

      Perhaps somewhat self-explanatory, but Service Strategy is the strategy used by a business to execute its business objectives and meet the customer’s requirements.  Utilizing Service Strategy within a business ensures that the business is able to create value for its customers and shareholders by contributing to the value and not just the costs of the organization.  Service Strategy ensures that organizations are able to organize themselves in an appropriate manner to deliver and support services that will enable a customers’ success and will help to achieve a positive ROI in services.  Through a variety of different tools (service catalog and Service Portfolio Management for example), Service Strategy is able to ensure a consistent understanding of what is required by a business and ensures that these services are provided in an efficient and effective manner. Get a free ITIL Service Strategy Financial Management Assessment here.

      This is a document that we use to assess process maturity, tools usage, and organizational structure in managing IT Financials. This questionnaire will allow for an assessment to be performed using a hybrid of the Capability Maturity Model for Service Management and the ITIL Best Practices for Service Support and Service Delivery. The overall structure of the effort will come from the ITIL best practices of the IT Service Management definition. Rankings within each area will conform to a modified version of the CMM scoring. This modified version will provide a greater degree of granularity in evaluating the various factors involved in each service area, and has its basis in the ITIL standard. The objectives of Service Strategy include providing:

      • A clear identification of corporate objectives and the products and services available as well as the requirements of the customers that use them.
      • The ability to define how value is created and delivered as well as the ability to prioritize projects and opportunities based on their value to the business.
      • A means to identify opportunities to provide services and how to exploit them as well as the ability to develop market spaces and drive the implementation of strategy through the service lifecycle.
      • A clear service provision model, that articulates how services will be delivered and funded, and to whom they will be delivered and for what purpose 
      • The means to understand the organizational capability required to deliver the strategy 
      • Documentation and coordination of how service assets are used to deliver services, and how to optimize their performance
      • Processes that define the strategy of the organization, which services will achieve the strategy, what level of investment will be required, at what levels of demand, and the means to ensure a working relationship exists between the customer and service provider.

      Other components of the Service Lifecycle are also involved and at a high level here are there responsibilities:

      • Service Design
        • Turns a Service Strategy into a plan for delivering the business objectives
        • Covers design principles and methods for converting strategic objectives into portfolios of services and service assets
      • 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 
      • Service Operation
        • Strategic objectives are ultimately realized through Service Operation, therefore making it a critical capability
      • Continual Service Improvement
        • Provides guidance on creating and maintaining value for customers through better strategy, design, transition and operation of services 
        • Describes best practice for ensuring that the service portfolio continues to be aligned to business needs
        • Provides guidance for linking improvement efforts and outcomes with Service Strategy, design, transition and operation 

      Service Strategy is responsible for meeting customer business objectives while ensuring that their own organizational goals and plans are not negatively impacted.  They are responsible for ensuring that these objectives are met in an increasingly competitive world and they must understand the trade-offs involved in making those strategic decisions.

      The goal of a Service Strategy can be summed up very simply:

      superior performance versus competing alternatives.

      When people talk about Project Management, their first thought is often Microsoft Project.  In a similar manner when considering Service Strategy people often think of Strategic plans.  However just like Project is not the whole answer, so to, a strategic plan doesn’t really get you where you need to go.  Service Strategy is forward-looking but with the increasing pace of change in the world today (especially in IT services), a Strategic Plan is often obsolete before it’s been published!

      A Service Strategy resolves big issues so that staff can get on with the small details – how best to provide services, for example, rather than debating what services to offer. But focusing on a strategic plan impedes the organization’s ability to respond to changing conditions.