Service Strategy Processes Tutorial

4.1 Learning Unit 04 - Service Strategy Processes

Welcome to the learning unit 4. This unit covers the topics on Service Strategy Processes. It sets out the processes and activities on which effective service strategy depends. These comprise both Lifecycle processes and those almost wholly contained within service strategy. Each is described in detail, setting out the key elements of that process or activity. The processes and activities specifically addressed in this chapter are: •Strategy Management for IT Services •Service Portfolio Management •Financial Management for IT Services •Demand Management •Business Relationship Management Let us go ahead and learn more about Service Strategy Processes.

4.2 Learning Unit 4.1 - Strategy Management For IT Services

Let us begin with the first process STRATEGY MANAGEMENT FOR IT SERVICES.

4.3 Learning Unit Objectives

This section describes a process for strategy management for an enterprise and shows how it is applied to managing a strategy for IT services. Although senior IT executives will participate in this level of strategy management, most IT organizations use this process to manage a service strategy which forms part of the overall enterprise strategy. This lesson will help us to understand about: • Purpose, Objectives and Value of the Process •Process Flow For Strategy Management •Steps for Strategic Assessments •Strategy Generation, Strategy Execution - Concepts •Measurement and Evaluation Let’s begin with the purpose and objective in the next slide.

4.4 Purpose and Objectives

Strategy management for IT services is the process of defining and maintaining an organization’s perspective, position, plans and patterns with regard to its services and the management of those services. The purpose of a service strategy is to articulate how a service provider will enable an organization to achieve its business outcomes; it establishes the criteria and mechanisms to decide which services will be best suited to meet the business outcomes and the most effective and efficient way to manage these services. Strategy management for IT services is the process that ensures that the strategy is defined, maintained and achieves its purpose. The objectives of strategy management for IT services are: •Analyze the internal and external environments in which the service provider exists •To identify the opportunities that will benefit the organization •Identify constraints that might prevent the achievement of business outcomes, the delivery of services or the management of services, and define how those constraints could be removed or their effects reduced •Produce and Maintain strategy planning documents and ensure that all relevant stakeholders have updated copies of appropriate documents. In the next slide, we will learn about the scope and value to business of the Strategy Management for IT Services process.

4.5 Scope and Value

Strategy management is the responsibility of the executives of an organization. It enables them to set the objectives of the organization, to specify how the organization will meet those objectives and to prioritize investments required to meet them. However, in medium to large organizations it is unlikely that the executives themselves will conduct the assessments, draft the strategy documents and manage the execution. This is normally performed by a dedicated strategy and planning manager reporting directly into the board of directors. An organization’s strategy is not limited to a single document or department. The overall strategy of an organization will be broken down into a strategy for each unit of the business. There are likely to be several strategies within each organization. Strategy management for the enterprise has to ensure that these are all linked and consistent with one another. Strategy management for IT services has to ensure that the services and the way they are managed support the overall strategy of the enterprise. The list here gives an example of how a business strategy might be broken down into strategies for IT and for manufacturing, these are: •The IT strategy is derived from the Business Strategy •Technology Standards •Architecture •IT organizations and Governance •What business Outcomes must we support? •What IT services will we offer to support these objectives? •Who are our Internal and External Customers? •What Market Spaces do we serve? •How do we prioritize and decide. Value to the business: The strategy of an organization articulates its objectives, and defines how it will meet those objectives and how it will know it has met those objectives. Without a strategy the organization will only be able to react to demands placed by various stakeholders, with little ability to assess each demand and how it will impact the organization. In these cases the actions of the organizations tend to be led by whoever is making the loudest demands, rather than by what is best for the organization. Strategy becomes a function of organizational politics and self-interest, rather than the overall achievement of its objectives. A well-defined and managed strategy ensures that the resources and capabilities of the organization are aligned to achieving its business outcomes, and that investments match the organization’s intended development and growth. The process adds value to business in following areas: •Strategy Management for IT Services enables the service provider to determine the best way to change its priorities and balance its resources, capabilities and investments •For a service provider, it ensures that it has appropriate set of services in its portfolio that all of its services have a clear purpose, and that everyone in the service provider organization knows their role in achieving that purpose. •For the customer of the service provider, it enables them to articulate clearly their business priorities in a way that is understandable to the service provider Let us now move on to our next slide.

4.6 The Scope of Strategy Management Process

This slide describes the Scope of Strategy Management process in a figure. Let us look into this for further reference. Now, we will discuss the Strategic Analysis of Customer Portfolio of the Strategy Management for IT Services process in the next slide.

4.7 Strategic Analysis of Customer Portfolio

This analysis is necessary for service providers to avoid being surprised by changes in the market space that can completely destroy their value proposition. Internal service providers may be particularly vulnerable to such blind spots if they are not accustomed to the business analysis found in external service providers. Internal service providers also face competition even if they have captive customers within their enterprise. The playing field is used to conduct strategic analysis of market spaces, customer portfolios, service portfolios and customer agreement portfolios. Managers decide the required to construct using applicable strategy, industry factors scales and indices. In the Figure 4.5, four customers are positioned in relation to two strategic industry factors. This service provider is currently focused on providing industry average services to these customers. However, the licenses provided to the customer with the highest contract value are approaching market leadership. For customer 1, it is important that the service provider invest in assets that will solidify their position and enable further growth into the market leadership position. After the analysis it was learned that customer 2 was especially focused on strategic industry factor Y. In future the service provider would need to invest in assets that make them more competitive in strategic industry factor Y. In the next slide let us look at the Processes for Strategy Management.

4.8 Process Flow for Strategy Management

Strategic assessment: The objectives defined as an output of the strategic assessment are the results the service provider expects to achieve by pursuing a strategy. Once the objectives have been defined, the service provider will need to define how it will achieve the anticipated results. Clear objectives facilitate consistent decision-making, minimizing later conflicts. They set forth priorities and serve as standards. Strategy generation: The 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. Strategy Execution (through service Lifecycle): Every model represents a kind of process. This model represents a clear and practical approach for formulating service strategies. It does not, however, guarantee success. What is needed is, through reflection and examination, to make a strategy suitable in an organization’s context or situation. Strategy involves thinking as well as doing. For senior managers accountable for investment decisions, financial- and personnel-related, the stakes are high. Strategy is critical to the performance of the organization. Service strategies must be formed and be formulated. Broad outlines are deliberate while details are allowed to emerge and adapt en-route. Let us look at the steps involved and the flow of these processes in the next slide.

4.9 Process Flow for Strategy Management

This is the pictorial representation of the Process Flow for Strategy Management. As discussed in the previous slide the figure shows how the three process of Strategy management, which are Strategy assessment, generation and execution steps interact with each other. We will discuss each process and the corresponding steps in detail in the coming slides. Let us begin with the strategic assessment.

4.10 Strategic Assessment

Strategic assessment is where while crafting a service strategy a provider should first take a careful look at what it does. It is likely that a core of differentiation already exists there. An established service provider frequently lacks an understanding of its own unique differentiators. The following questions can help elucidate a service provider’s distinctive capabilities: Which of our services or service varieties are the most distinctive? Are there services that the business or customer cannot easily substitute? The differentiation can come in the form of barriers to entry, such as the organization’s know-how of the customer’s business or the broadness of service offerings. Or it may be in the form of raised switching costs, due to lower cost structures generated through specialization or service sourcing. It may be a particular attribute not readily found elsewhere, such as product knowledge, regulatory compliance, provisioning speeds, technical capabilities or global support structures. 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. We will look into the next slide, to observe the steps for Strategic Assessment of the Strategy Management with the help of a pictorial representation.

4.11 Steps for Strategic Assessment

These are the steps for the Strategic Assessment: •Strategic Assessment - Analyze the External Environment: There are several publications that provide detailed guidance on analyzing the external environment. Some of these are referenced at the end in the section entitled ‘References and Further Reading*. This current section summarizes the most important external factors for a service provider to consider. Whereas internal analysis focuses on analyzing strengths and weaknesses, the external analysis focuses on opportunities and threats, and especially how they will develop in the future. The aim in defining a strategy will be to identify which opportunities to exploit and which threats to defend against. •Strategic Assessment – Define Market Spaces: The concept of market spaces is described in previous units. In summary, market spaces define opportunities where a service provider can deliver value to its customers). They identify opportunities by matching service archetypes with customer assets. In strategy management, this step results in documentation of all current market spaces and any potential new market spaces that were identified from the internal and external analysis. •Strategic Assessment – Identify Strategic Industry Factors: For every market space there are critical factors that determine the success or failure of a service strategy. In business literature these factors are called strategic industry factors. These are influenced by customer needs, business trends, competition, regulatory environment, suppliers, standards, industry best practices and technologies. •Strategic Assessment - Analyze the Internal Environment: Strategic analysis should take into account not only the current benchmarks for a playing field but also the direction in which they are expected to move (higher or lower), the magnitude of change and the related probabilities. This analysis is necessary for service providers to avoid being surprised by changes in the market space that can completely destroy their value proposition. Internal service providers may be particularly vulnerable to such blind spots if they are not accustomed to the business analysis found in external service providers. Internal service providers also face competition even if they have captive customers within their enterprise. •Strategic Assessment – Establish Objectives: The objectives defined as an output of the strategic assessment are the results the service provider expects to achieve by pursuing a strategy. Once the objectives have been defined, the service provider will need to define how it will achieve the anticipated results. Clear objectives facilitate consistent decision-making, minimizing later conflicts. They set forth priorities and serve as standards. When an organization avoids rigorous analysis and objective setting, or where they do not have a good understanding of their services and customers, they tend to use the following strategies (or ways of ‘not managing by objectives’). These are surprisingly common, but organizations should not mistake them for valid strategies: Now, we will discuss the Steps of Strategy Generation.

4.12 Strategy Generation - Evaluation and Selection

Once the assessment has been completed and the service provider has defined the objectives of the strategy, it is possible to generate the actual strategy in terms of the ‘four Ps’. Strategy Generation Evaluation and Selection will be in given terms. Strategy Generation: Determine Perspective-. The perspective of a service provider defines its overall direction, values, beliefs and purpose; and, at a high level, how it intends to achieve these. The most common forms of perspective statements are vision and mission statements. The vision statement articulates what it is the service provider aims to achieve. Vision statements look at a desired state that will be achieved at some time in the future. Mission statements articulate the basic purpose and values of the organization and its operation. Mission statements are more about how the organization will make its vision a reality. Strategy Generation: Form a Position – The strategic position defines how the service provider will be differentiated from other service providers in the industry. For example, positioning could be based on the type or range of services offered, or providing services at the lowest cost. Positioning is based on the output of the strategic assessment, especially the analysis of market spaces and strategic industry factors. The position of a service provider is frequently expressed through policies about what services will be provided, to what level and to which customers. These policies will also define any standards or criteria that are used to ensure that differentiation is properly designed and built into the services, operations and organization. The policies defined during this stage of the process will be used as input into the other service Lifecycle stages. There are 4 broad types of position for service providers. •Variety Based Positioning: Variety-based positioning focuses on delivering a narrow catalogue of services to a variety of customers and types of customer. •Needs based positioning: This is sometimes called a ‘customer intimate’ approach because it focuses on a single customer or customer type and provides a range of services to meet a broad number of customer needs. •Access Based Positioning: Access-based positioning does not (as the name might suggest) have to do with how customers apply for or receive a service. It refers to providing a service, or range of services, to multiple customers who have something in common - usually their location, scale or structure. •Demand- Based Positioning: This type of positioning contains features of both variety- and needs-based positioning in that it offers a broad range of services to a potentially unlimited number of customers. Strategy Generation: Craft a Plan: A strategic plan identifies how the organization will achieve its objectives, vision and position. The plan is a deliberate course of action towards strategic objectives and describes how the organization will move from one point to another within a specific scenario. Although a strategic plan could be a single document, more often it could comprise several plans - especially when the service provider is pursuing more than one position or more than one market. •The typical contents of a strategic plan could include: •Executive summary: This should outline the strategy at a high level, giving a summary of the mission and vision, major goals and key strategies. •Authorization: It is important to know who signed off on the plan, as this indicates ownership of the plan. •Background: This is a brief description of the events leading up to the current strategy. It might be a regular strategy review, but more likely there were some specific triggers that initiated the current plan. •Vision, mission and value statements: This section describes the overall perspective of the organization. It acts as a yardstick against which the rest of the plan and any resulting actions should be measured. Although it may seem that many values (such as integrity or fairness) are intangible, they encourage those who execute the strategy to make the values part of their tactical decision-making process. For example, one of the regions where the organization wishes to grow new opportunities requires them to pay substantial bribes to government officials - will that be supported? •Objectives: These are the objectives as defined in previous slides. •Strategies: This section outlines the strategic positioning, services and key milestones. It is important to know what the strategy is, as well as how to know that it has been successful. Strategy Generation: will be based on adopting the Patterns of Actions. A pattern of action is how an organization works. Formal hierarchies show one view of the organization, but the interactions between these hierarchies, the exchange of information, the handover of units of work and the exchange of money all contribute to a network of activity that gets things done. Patterns of action work in two ways. On the one hand, the strategy defines patterns that executives believe will be efficient and effective means of achieving objectives. These patterns are discernible and are usually defined and documented in the form of management systems, organizational structures, policies, processes, procedures, budgets, schedules etc. Patterns are also defined in the formal interactions between service provider staff and their customers. The organization makes investments in tools and training to ensure that these patterns are supported and understood, so they can be executed as anticipated. Let us proceed to the next slide to learn about Strategy Execution which is the last process phase of Strategy management.

4.13 Strategy Execution

Once a strategy has been agreed, it needs to be put into action. The question of how to execute the strategy is answered in a set of more detailed tactical plans. Tactical plans describe what approaches and methods will be used to achieve the strategy. If a strategy answers the question 'where are we going?’ then tactics answer the question 'how will we get there?’ All service management processes have a role to play in executing a strategy since they are all about achieving the vision, objectives and plans defined in strategy management. In a very real sense, the other stages of the service Lifecycle all have to do with strategy execution. In addition, all services and business outcomes should be in line with the strategy. If they are not then the strategy management process was ineffectual, was not updated regularly enough or was simply bypassed by parts of the organization. There are various aspects of Strategy Execution such as: •Once a strategy has been agreed, it needs to be put into action •Communicating the strategic plan The plan typically communicated as follows: •Distribute a copy of the plan to every executive and key Stakeholder. •It may be helpful to produce a summary of the plan or a Presentation for everyone in an organization. •Board members of IT steering group members should be trained on how to talk about the strategy. •Key aspects of the strategy, such as Vision, mission and main objectives should be visible throughout the Workplace. •Relevant parts of the strategy should be included in Policies, procedures and employee manuals •It also might be helpful to provide key strategic partners, such as vendors and investors, with a summary of plans, with briefing about how they expect to use them. Let us now look at the Strategy execution activities in the next slide.

4.14 Activities - Strategy Execution

Strategy Execution: Other Services Management Process. Contribution of Other SM processes contribute to service. For a service provider, no strategy can be executed without being able to manage the services that it will be providing. Service management processes enable the service provider to achieve alignment between the services and the desired outcomes on an ongoing basis. Without service management processes, the very best the service provider can do is to react promptly to customers, but it will often not be able to follow through to deliver high-quality services over time. The combination of multiple perspectives allows greater flexibility and control across environments and situations. The Lifecycle approach mimics the reality of most organizations where effective management requires the use of multiple control perspectives. Those responsible for the design, development and improvement of processes for service management can adopt a process-based control perspective. Those responsible for managing agreements, contracts, and services may be better served by a Lifecycle-based control perspective with distinct phases. Both these control perspectives benefit from systems thinking. Each control perspective can reveal patterns that may not be apparent from the other. 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. Optimize CSF’S: The term 'critical success factor1 refers to any aspect of a strategy, process, project or initiative that needs to be present in order for it to succeed. Critical success factors could be specific skills, tools, circumstances, finances, executive support or the completion of another activity or project. CSFs are determinants of success in a market space. They are also useful in evaluating a service provider’s strategic position in a market space and driving changes to such positions. This requires CSFs to be further refined in terms of some distinct value proposition to customers. For example, being competitive in a market space may require very high levels of availability, fail-safe operation of IT infrastructure, and adequate capacity to support business continuity of services. In many market spaces cost-effectiveness is a common CSF, while in others it may be specialized domain knowledge or reliability of infrastructure. Customer satisfaction, richness of service offerings, compliance with standards and global presence are also common CSFs. Type I and Type II providers tend to score well on familiarity with the customer’s business. Conduct a strategic analysis for every market space, major customer and Service Portfolio to determine current strategic positions and desired strategic positions for success. This analysis requires service providers to gather data from customer surveys, service level reviews, industry benchmarks, and competitive analysis conducted by third parties or internal research teams. Each critical success factor is measured on a meaningful index or scale. It is best to adopt indices and scales that are commonly used within a market space or industry to facilitate benchmarking and comparative analysis. Critical success factors are used to define playing fields, which serve as reference frameworks for evaluation of strategic positions and competitive scenarios. Prioritizing investments: Each new service or project will require funding. It is not unusual for a strategy to be established, and then amended after reviewing the detailed investment analysis, simply because there is insufficient funding set aside, or because the anticipated return does not support the investment. Service portfolio management will ensure that every proposed new service, or any strategic change to an existing service, is analyzed to determine the level of investment required and the proposed return on that investment. One common problem service providers have is prioritizing investments and managerial attention on the right set of opportunities. The best opportunities for service providers lie in areas where an important customer need remains poorly satisfied. In the next slide we will learn about the Measurement and evaluation stage of Strategy management.

4.15 Measurement and Evaluation

This stage of strategy management is performed by a number of different areas, including: Customers and users: The customers and users of services will often be the first to determine whether a strategy is being achieved or not, since they are monitoring the performance of business outcomes. CSI activities measure and evaluate the achievement of strategy over time. CSI contributes to strategy measurement and evaluation in two main ways. Firstly, CSI activities identify areas that are not performing to expectation, and therefore threaten the achievement of the strategy. CSI activities provide feedback into the strategy generation and execution phases of the process. Secondly, CSI activities set the baseline for the next round of strategy assessments. Since the organization exists in (and is itself) a continuously changing environment, the strategy needs to be continually assessed and revised. CSI activities assist in this process by monitoring and reporting on changes to relevant aspects of the internal environment, the ability to expand market space opportunities and the ability to meet strategic industry factors. Expansion and Growth: As the organization achieves its existing strategy, it gets better at being able to deliver services to its existing market spaces. This raises questions such as: ‘Can we provide the same services to new customers?’ ‘Can we provide new services to existing customers? Once service strategies are linked to market spaces, it is easier to make decisions on service portfolios, designs, operations and long-term improvements. Investments in service assets such as skills sets, knowledge, processes and infrastructure are driven by the critical success factors for a given market space. The growth and expansion of any business is less risky when anchored by core capabilities and demonstrated performance. Successful expansion strategies are often based on leveraging existing service assets and customer portfolios to drive new growth and profitability. Growth in a market space is achieved by: •Extensions to existing contracts (same service/same customer) •Increases in demand (greater share of customer’s wallet) •Providing complementary services. Next, we will discuss on the Strategy Management for Internal IT Service .

4.16 Strategy Management for Internal IT Service Providers

The process described earlier applies directly to external service provider organizations, but it also has to be applied to internal (Types I and II) service providers. Internal IT organizations often make the mistake of thinking that they do not play a strategic role in the organization, and that they should confine their activities to tactical planning and execution. In many organizations even senior technical staff members have no insight into the organizational strategy, and are caught unaware by fluctuations in business activity and demand. However, IT is a strategic part of most businesses, and it is important that the IT organization strategy is closely aligned and measured with the business strategy. This is done in two ways: Ensuring that, the IT strategy is closely linked to the business strategy. For example, action plans devised during the business strategy will include actions for the internal IT service providers. Also, many of the activities in strategy execution rely on IT. Whereas the organization’s overall strategy is the responsibility of its executives, the strategy of internal service providers is the responsibility of the IT executives, led by the CIO (Pronounce as C-I-O). In larger organizations it is likely that strategy management is executed by a dedicated person or team reporting into the CIO. The second way is by Using a narrower scope, specific inputs and defined parameters. The next slide will further explain the concept of the Strategy Management for Internal IT Service Providers with the help of a table.

4.17 Strategy Management for Internal IT Service Providers - Cont

Strategy Management for Internal IT Service Providers has various Contributions and Factors such as: Strategic Assessment for Internal Service Providers: The internal environment that should be assessed by IT organizations includes: The Organization’s business strategy, Existing Services, Existing technologies, IT Service Management, Human Resources, Relationship with the Business Units Strategic Assessment for External Service providers: The external environment that should be assessed by IT Organizations specifically includes: Other Organizations, Industry IT spending rates, Vendor strategies and product roadmaps, Partners, Technology Trends, Customers, and Standards Strategy Generation for Internal Service Providers includes Generating an IT Strategy should ideally be done in concert with the business strategic and tactical planning. As the business strategy starts to prepare its plans, these are communicated to the IT executives who test and validate them, or offer more alternatives. Strategy Execution for Internal Service Providers: As with external service providers, strategy execution will be a combination of the normal activities of service management processes, and the Initiation of a number of Projects- usually coordinated through the PMO (Pronounce as P-M-O). Measurement and Evaluation for Internal Service Providers: CSI is the primary mechanism for measurement and evaluation, using the same techniques and processes as for External Service providers. IT. In the next slide, we will discuss about Information management - Overview of the main sources.

4.18 Information Management - Overview of the main sources

The documentation and information required for effective strategy management for IT services have been described throughout section, but an overview of the main sources is as follows: •Information about the external environment, including market research, research of competitors practices, economic and political trends, technology directions and innovations, industry benchmarks, •Results of assessments of the internal environment, which includes formal assessment reports, self-evaluation, interviews, polls of employee opinion etc. •Information about customer needs and satisfaction levels, current service capabilities and performance levels. •Financial Management information is critical for evaluating potential market space, and whether it is feasible for the service provider to invest in services aimed at those opportunities. •Business Relationship Management and demand management are critical sources of information about what customers need, why they need it and how they will use it. •CSI provides feedback that is vital for evaluating the effectiveness of strategies, and which enable strategy management for IT services to make changes to strategies as quickly as necessary. Let us proceed to discuss about the Inputs and Outputs of the Strategy Management for IT Services process in the next slide.

4.19 Inputs and Outputs

Various inputs for Strategy Management for IT Services process includes: •Existing Plans •Research on aspects of the environment by specialized research organization •Vendor Strategies and product roadmaps, which indicate The Impact of new or changing technology •Customer Interviews and strategic plans •Service Portfolio to indicate the current and planned future service commitments •Service reporting to indicate the effectiveness of the •Strategy •Audit reports And the Outputs of strategy management for IT services include: Strategic plans - in this context especially the service strategy Tactical plans that identify how the strategy will be executed Strategy review schedules and documentation Mission and vision statements Policies that show how the plans should be executed, how services will be designed, transitioned, operated and improved Strategic requirements for new services, and input into which existing services need to be changed. Strategy management for IT services will also articulate what business outcomes need to be met and how services will accomplish this. Let us now move on to the next slide, which talks about the Triggers and Interfaces of the Strategy Management for IT Services process.

4.20 Triggers and Interfaces

Triggers of strategy management for IT services include: •Annual planning cycles Strategy management for IT services is used to review and plan on an annual basis. •New business opportunity Strategy management for IT services is used to analyze, set objectives, perspectives, positions, plans and patterns for new business or service opportunities. •Changes to internal or external environments Strategy management for IT services will assess the impact of environmental changes on the existing strategic and tactical plans. Mergers or acquisitions •The merger with or acquisition of another company will trigger a detailed analysis and definition of the strategy of the new organization. The various interfaces are: •Input to the Financial Management to indicate what types of returns are required and where investments need to be made •It enables service transition to prioritize and evaluate the services that are built to ensure that they meet the original intent and strategic requirements of the services. If any variation is detected during service transition this will need to be fed back to strategy management for IT services so that the existing strategy can be reviewed, or so that a decision can be made about the priority and validity of the service. Financial management, in turn, provides the financial information and tools to enable strategy management for IT services to prioritize actions and plans. •Knowledge Management plays an important part in structuring information that is used to make strategic decisions. It allows strategic planners to understand the existing environment its history and its dynamics, and to make informed decisions about the future. •Linkages, especially in terms of the execution of strategic priorities, and the ability to measure whether strategy is being met. Operational tools and processes must ensure that they have been aligned to the strategic objectives and desired business outcomes. •CSI will help to evaluate whether the strategy has been executed effectively, and whether it has met its objectives) Let us understand the Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s) of the Strategy Management for IT Services process.

4.21 Critical Success Factors (CSFs) and Key Performance Indicators (KPIs)

This slide provides examples of critical success factors (CSFs). Each CSF will include examples of key performance indicators (KPIs). These are metrics that are used to evaluate factors that are crucial to the success of the process. KPIs, as differentiated from general metrics, should be related to CSFs. •CSF Access to structured information about the internal and external environments in which the service provider exists, and which can be used to define the components of the organization’s strategy. •KPI Every market space in the strategy is supported by documented evidence of the opportunity. •KPI Every finding or recommendation in the strategic assessment is based on validated information. •CSF The service provider has a clear understanding of their perspective, and it is reviewed regularly to ensure ongoing relevance. •KPI Vision and mission statements have been defined and all staff members have been trained on what they mean in terms of their roles and jobs within the organization. •KPI Each business unit has a strategic plan that clearly shows how the business unit’s activities are linked to the objectives, vision and mission of the organization. •CSF The service provider has a clear understanding of how it positions itself to ensure competitive advantage. The service strategy clearly identifies which services are delivered to which market spaces, and how the service provider will maintain its competitive advantage. •KPI Every strategic and tactical plan contains a statement of how the contents of the plan support the competitive advantage of the service provider. •KPI Each service in the service portfolio has a statement about which business outcomes it meets, and is measured in terms of these outcomes. •CSF: The ability to translate strategic plans into tactical and operational plans that are executed by each organizational unit. •KPI Every organizational unit lead can identify the plans for their unit, and provide an overview of the contents of the plan. •KPI Each tactical and operational plan is identified by the strategic plans they support, and changes to the strategy are managed through change control to ensure that tactical and operational plans are aligned. In the next slide, we will explain the Challenges of the Strategy Management for IT Services process.

4.22 Challenges

There are many challenges faced such as: •Strategy management for IT services is conducted at the wrong level in the organization — It should be driven by senior executives, and each organizational unit should follow through with the production of a strategic, tactical and operational plan that is a subset of the enterprise strategy. •Lack of accurate information about the external environment. •Lack of support by the stake holders. •Lack of appropriate tools or a lack of understanding of how to use the tools and techniques identified in this section •Lack of the appropriate document control mechanisms and procedures •Operational targets needs to be matched to the strategic objectives. Failure to do so will result in operation managers striving to achieve targets that are not in support of the strategy Let us now look at the Risks of Strategy Management for IT Services process in the next slide.

4.23 Risks

Risks to strategy management for IT services include: •A flawed governance model that allows managers to decide on whether to implement all aspects of a strategy, or which allows them to deviate from the strategy for shorter-term goals. •Short-term priorities override the directives of the strategy. For example, a shortfall in sales for one quarter may encourage managers to implement incentives and measures that move the organization away from its stated policies and strategic objectives. •Making strategic decisions when there is missing information about the internal or external environments, or using information that is incorrect or misleading (i.e. information that has not been validated). It is easier to evaluate whether information is accurate than to ascertain whether it is complete. The organization should seriously consider how to verify their sources, and should include a validity check as part of the strategic review. •The risk of choosing the wrong strategy. It is very important to evaluate and provide feedback to the service management process at all stages so that incorrect decisions can be detected early and corrected. •Strategies are seen as an exercise that happens once a year and that has no bearing on what happens for the rest of the year. It is critical to align the metrics of each organizational unit to those of the strategies, and to ensure that managers and staff alike are educated about the contents and objectives of the strategies at the appropriate level of detail. Performance reviews should be linked to the achievement of strategic objectives. The next slide summarizes the Strategy Management for IT Services process and the topics covered in this process.

4.24 Summary

The topics that we covered under Strategy Management for IT Services process are: •Purpose , Objectives, Scope and Value •Processes for Strategy Management •Process Flow for Strategy Management •Concepts of Strategic Assessment, •Strategy Generation, Strategy Execution •Inputs and Outputs •Triggers and Interfaces •CSF's •Challenges •Risks Let us now move on to our next topic on Service Portfolio Management process.

4.25 Learning Unit 4.2 - Service Portfolio Management

The next process of Service Strategy is Service Portfolio Management. Let us begin with the objectives of Service Portfolio Management in the next slide.

4.26 Learning Unit Objectives

A service portfolio describes a provider’s services in terms of business value. It articulates business needs and the provider’s response to those needs. By definition, business value terms correspond to marketing terms, providing a means for comparing service competitiveness across alternative providers. This unit will help us to understand about: •Purpose, Objectives, Scope and Value •Detailed concepts on Service Portfolio, Service Pipeline, Service Catalogue •Process Activities, Methods and Techniques •Triggers, Inputs, Outputs and Interfaces •CSF's and KPI's •Challenges and Risks Let us get started with understanding the purpose and Objectives of the Service Portfolio Management process, in the next slide.

4.27 Service Portfolio Management

The Purpose of service portfolio management is to ensure that the service provider has the right mix of services to balance the investment in IT with the ability to meet business outcomes. It tracks the investment in services throughout their Lifecycle and works with other service management processes to ensure that the appropriate returns are being achieved. In addition it ensures that services are clearly defined and linked to the achievement of business outcomes, thus ensuring that all design, transition, and operation activities are aligned to the value of services. The objective of service portfolio management is to: •Provide a process and mechanisms to enable an organization to investigate and decide on which services to provide, based on an analysis of the potential return and acceptable level of risk •Maintain the definitive portfolio of services provided, articulating the business needs each service meets and the business outcomes it supports •Provide a mechanism for the organization to evaluate how services enable it to achieve its strategy, and to respond to changes in its internal or external environments •Control which services are offered, under what conditions and at what level of investment Track the investment in services throughout their Lifecycle, thus enabling the organization to evaluate its strategy, as well as its ability to execute against that strategy •Analyze which services are no longer viable and when they should be retired. Now, we will learn about the Scope and value to business of the Service Portfolio Management, in the next slide.

4.28 Service Portfolio Management

The scope of Service Portfolio Management is all services a service provider plans to deliver, those currently delivered and those that have been withdrawn from service. The primary Concern is whether the service provider is able to generate value from the services. It evaluates the value of services throughout their Lifecycles, and must be able to compare what newer services have offered over the retired services they have replaced. Service Portfolio Management adds the Value to Business as it enables the business to make sound decisions about investments. Services are implemented only if there is a good business case demonstrating a clear ROI. Service Portfolio Management does this by comparing the outcomes that are expected by the customer with the investment required to build and deliver the service. Service Portfolio Management is a tool for innovation for the organization. Customers are able to understand exactly what the service provider will deliver to them and under what conditions, enabling them to make decisions about whether the service is a good or bad investment, and to evaluate additional opportunities that the service will open. In this way service portfolio management can also be a tool for innovation for the organization. The service provider is viewed as a steward of service assets that are key to the customer's success and, provided the service provider delivers what they promised, the service provider can equip their customers to build their strategies. In the next slide, we will understand the Key Concepts of the Service Portfolio Management.

4.29 Key Concepts

Let us start with understanding the Service Portfolio. What is a Service Portfolio? The Service Portfolio represents the commitments and investments made by a service provider across all customer and market spaces. It represents present contractual commitments, new services development and ongoing service improvement plans initiated by CSI. The portfolio also includes 3rd Party Services, which are an integral part of service offerings to customers. Some third party services are visible to the customer while others are not. In other words ,it is the complete set of services that is managed by a Service provider. In other words, the service portfolio is the complete set of services that is managed by a service provider. The service portfolio also identifies those services in a conceptual stage, namely all services the organization would provide if it had unlimited resources, capabilities and funding. This documentation exercise facilitates understanding of the opportunity costs of the existing portfolio and better fiscal discipline. If a service provider understands what it cannot do, then it is better able to assess if it should keep doing what it is doing or reallocate its resources and capabilities. In continuation to this slide, the next slide will also explain the Key Concepts of the Service Portfolio Management, and we will understand what the service pipeline is.

4.30 Key Concepts - Cont

The service pipeline is a database or structured document listing all services that are under consideration or development, but are not yet available to customers. It also includes any major investment opportunities, such as a data center relocation or virtualization project. This is because these investments have to be traced to the delivery of services and the value that is realized. The service pipeline provides a business view of possible future services and is part of the service portfolio that is not normally published to customers. The service pipeline represents the service provider’s growth and strategic outlook for the future and reflects the general health of the provider. It also reflects the extent to which new service concepts and ideas for improvement are being fed by service strategy, service design and continual improvement. Good financial management for IT services is necessary to ensure adequate funding for the pipeline. There are many ways in which a Service can enter a Service Pipeline: •When A customer requests a new service •When The service provider’s strategy has identified a new opportunity •When A customer has identified a new business opportunity and that will require support from IT •When A business outcome is under-served by current service •When A technology available and has the potential to create new business opportunities •When Service Management processes such as Capacity Management; SLM etc identify a better solution to the services that are currently offered •Or When CSI identifies a gap in the current service portfolio In the next slide, we will continue the key concepts and know what is Service Catalogue?

4.31 Key Concepts - Cont

Service Catalogue is a database or structured document with information about all “Live IT Services,” including those available for deployment. It is the only part of the service portfolio published to the customers, and is used to support the sale and delivery of IT services. Only Operational services can be found in the service catalogue and resources are engaged to fully support active services. Service Catalogue defines and communicates the policies, guidelines and accountability required for the service provider to deliver and support services to its customer. It acts as the acquisition portal for customers, including pricing and SLA, and the terms and conditions for service provision. Also the Service Catalogue contains the details about standard service requests, enabling users to request those services using appropriate channels. In the next slide we will look at a diagram that describes the concept of Service Portfolio and Service Catalogue of the Service Portfolio Management.

4.32 Service Portfolio and Service Catalogue

A Service Catalogue articulates the provider’s operational capability within the context of a customer or market space. The Service Catalogue is also a tool for service portfolio management decisions. At one level it identifies the linkage between service assets, service and business outcomes. This information is used to identify where existing services are used to meet current business outcomes, and to identify potential gaps in the service portfolio. A comparison of the typical content and purpose of the Service Portfolio and Service Catalogue is shown in the figure. Let us now move on to the next slide which talks about the concept of Retired Services and Configuration Management System (CMS) of the Service Portfolio Management.

4.33 Service Portfolio and Service Catalogue

Some services in the service portfolio are phased out or retired. There is a decision to be made by each organization, following a service review, on when to move a service from catalogue to retired. Some organizations will do this when the service is no longer available to new customers, even though the service is still being delivered to existing customers. Other organizations will only move the service out of the catalogue when it is no longer delivered to any customers. Retired Services are maintained in the service portfolio for a number of reasons including •The replacement service might not meet all requirements, and it is important to be able to fall back to the previous services •When defining a new service, service portfolio might discover that some functionality is available from a retired service. This might result in service being reinstated as part of a new service •There might be Regulatory Requirements to maintain archived data that can only be accessed using the previous service, in which case information is exported to a read only database for future use. The configuration management system (CMS) is a set of tools and databases that are used to manage an IT service provider’s configuration data. The configuration management system also includes information about incidents, problems, known errors, changes and releases, and may contain data about employees, suppliers, locations, business units, customers and users. The configuration management system includes tools for collecting, storing, managing, updating and presenting data about all configuration items and their relationships. The configuration management system is maintained by configuration management and is used by all IT service management processes. •Configuration Management System also includes information incidents. Problems, known errors, changes and releases, and may contain data about employees, suppliers, locations, business units, customers and users. •The service portfolio is a part of the service knowledge management system (SKMS) and is based on data from sources in the CMS In the next slide, we will discuss the concept of Application and customer Portfolio of the Service Portfolio Management.

4.34 Key Concepts - Cont

Application Portfolio is a database or structured document used to manage applications throughout their Lifecycle. It contains key attributes of all applications, the application portfolio is sometimes implemented as part of the service portfolio or, if this does not yet exist, as part of the service knowledge management system. One of the most common mistakes is to use the application portfolio as the service portfolio. Although all applications are represented in the service portfolio, they are usually not, in and of themselves, services. Wherein, the Customer Portfolio is maintained by the business relationship management process. The customer portfolio is a database or structured document used to record all customers of the IT service provider. The customer portfolio is the business relationship manager’s view of the customers who receive services from the IT service provider. Service portfolio management uses the customer portfolio to ensure that the relationship between business outcomes, customers and services is well understood. The service portfolio document’s these linkages and is validated with customers through business relationship management. Let us continue to understand the key concepts of Service portfolio management in the next slide.

4.35 Key Concepts - Cont

First is the Customer Agreement Portfolio: The customer agreement is a database or structured document used to manage service contracts or agreements between an IT service provider and its customers. It enables the service provider to track the relationship between customer, service and contractual requirements. The business relationship management process uses the customer agreement portfolio extensively, and provides important input to its contents. Project Portfolio: is a database or structured document used to manage projects that have been chartered. It is used to co-ordinate projects; ensuring objectives are met within time and cost and to specification. This project portfolio also ensures that projects are not duplicated, that they stay within the agreed scope and that resources are available for each project. The project portfolio is the tool used to manage single projects as well as large-scale program, consisting of multiple projects. It is defined and maintained by a PMO in larger organizations Service Models: Service portfolio management uses service models to analyze the impact of new services or changes to existing services. Service models are also valuable in assessing which existing service assets can be used to Support new services. Aligning service assets, services and business outcomes- Service Portfolio Management plays an important role. In how assets are allocated, deployed and managed. Service portfolio management plays an important role in achieving this since the service portfolio and configuration management system (CMS) documents the relationship between business outcomes, services and service assets. Market Spaces and Service Growth: Market spaces are helpful to service portfolio management to evaluate the impact of a proposed new service or change to an existing service, since they clarify the opportunity being served. Market spaces are helpful to service portfolio management to evaluate the impact of a proposed new service or change to an existing service, since they clarify the opportunity that is being served. Service Portfolio Management throughout the Lifecycle plays an important part in every stage in the service Lifecycle .e.g. in Service Design; service portfolio management ensures that design work is prioritized according to business needs, and that there is a clear understanding of how the service will be measured by the business. Let us now move on to discuss the Process Activities – 4 Main Phases of the Service Portfolio Management.

4.36 Process Activities - 4 Main Phases

Service portfolio management consists of four main phases of activity. If we think of SPM as a dynamic and ongoing process set, it should include the following work methods as shown in the Figure: •Define: inventory services, ensure business cases and validate portfolio data. Define stage begins with collecting information from all existing services as well as every proposed service. Every proposed service would include those in a conceptual phase. Namely, all services the organization would do if it had unlimited resources, capabilities and time. This documentation exercise is to understand the opportunity costs of the existing portfolio. If a service provider understands what it cannot do, then it is better able to assess if it should keep doing what it is doing or reallocate its resources and capabilities. •Analyze: maximize portfolio value, align and prioritize and balance supply and demand. The next step in the process set, Analyze, should be well defined prior to beginning this phase. If the organization does not understand what analysis it will perform, it is unlikely to know the right data to collect. Data collection exercises are usually disruptive and should be as streamlined as possible. This is where strategic intent is crafted. Begin with a set of top-down questions: oWhat are the long-term goals of the service organization? oWhat services are required to meet those goals? •Approve: finalize proposed portfolio, authorize services and resources. The previous phases have led to a well-understood future state (‘to be’). This is where deliberate approvals or disapprovals of that future state take place. With approvals, comes the corresponding authorization for new services and resources. •Charter: communicate decisions, allocate resources and charter services. This phase Begins with a list of decisions and action items. These are to be communicated to the organization clearly and unambiguously. These decisions should be correlated to budgetary decisions and financial plans. Budget allocations should enforce the allocation of resources. The expected value of each service should be built into financial forecasts and resource plans. Tracking both tracks the progress of service investments. Newly chartered services are promoted to Service Design. Existing services are refreshed in the Service Catalogue. Retired services begin their sunset to Service Transition. Let us now move on to the next slide.

4.37 Process Activities - 4 Main Phases

In our last slide we discussed about the 4 Main Phases of the Service Portfolio Management. This slide explains the Service Portfolio Management Process diagram. An example of how these four phases can be executed in a process is given in the shown Figure and described in detail below. Before defining and executing the process, however, it is important that the service portfolio itself is defined. Defining the service portfolio begins with collecting information from all existing services as well as every proposed service. The cyclic nature of the SPM process set means that the ‘define’ phase not only creates an initial inventory of services, but also validates the data on a recurring basis. Different portfolios will have different refresh cycles. Some cycles will be triggered by a particular event or business trend. For example, a merger and acquisition event triggers a portfolio re-examination. In the next slide, we will learn about the Process Activities – Process Initiation of the Service Portfolio Management.

4.38 Process Activities - Process Initiation

Process Initiation: once the Service Portfolio itself has been established, all new services and changes to existing services will need to go through a formal process of assessment and approval. New services or changes to existing services can be initiated from a number of sources, and will be presented in a number of different forms. As a result there is no fixed record for inputs to the Service Portfolio Management Process. Rather, the initiation of the process will often be as a result of changes to plans or the identification of a service improvement plan. Process Initiation – Strategy Management for IT Service: the primary input to Service Portfolio Management is from strategy management for IT services. This will be in the form of the strategic plans, which outline initiatives for new business opportunities and outcomes, together with the services that are required to deliver them. Service portfolio management will be responsible for evaluating each initiative to ensure that the required levels of investment and return are feasible, and that the strategy is achievable from a services point of view. Process Initiation – Business Relationship Management: the Business Relationship Management process is a direct interface to customers and users, and it is likely that it will receive a number of different types of request. These range from requests for information about services to requests for training, to requests for new services and changes to existing services. In many cases these requests can be dealt with through change management, request fulfillment or incident management - but some requests will need to be submitted to service portfolio management. Process Initiation – CSI: continual service improvement initiates three types of input to service portfolio management. Firstly, the opportunities to improve the performance or service level achievements of services in the portfolio. Secondly, CSI defines new opportunities within the current strategy, or gaps in the current portfolio of services. Thirdly, CSI defines opportunities for overall improvements in cost, mitigation of risks etc. In the next slide we will understand the Process Activities – Define stage of the Service Portfolio Management.

4.39 Process Activities - Define

Why Define? And the answer is: this part of the process is about defining desired business outcomes, opportunities, utility and warranty requirements and the services themselves as well as the anticipated investment to achieve these Activities. Define Strategy: any new strategy or change to an existing strategy s

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