Session 402 ©2017 JPCGroup Developing a Strategic Service ...professionalprograms.net/downloads/HDI_12017_8/PDFS/Session40… · 25 ITSM Service Management Experts to Watch in 2017

Session 402 ©2017 JPCGroup Developing a Strategic Service Plan 1

Session 402: VOCRIt’s What Customers Care AboutUnderstanding What To Report

John Custy Managing Consultant

JPC Group

John Custy

john.custy

John [email protected]

Service Management Practitioner, Consultant and Educator

Ron Muns Lifetime Achievement Award IT Industry Legend – Cherwell SoftwareDevOps Certified InstructorITIL Expert and ITIL Accredited TrainerITIL Intermediate – SS, SD, ST, SO, CSI, OSA, SOA, PPO, RCVISFS, ISMAS based on ISO/IEC 27002ISO/IEC 20000 ConsultantKCS Verified ConsultantHDI Faculty & Certified Instructor

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What To Report to Leadership1

Value – Benefits the service creates for the customer

Outcomes – What did the customer achieveCost – What was spend to achieve the

outcomes and benefitsRisk – what might impact the ability of the

customer to achieve the outcomes


1 – from work by Stuart Rance and Paul Wilkinson

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Cost – too focused on IT costs, which are typically <5% of enterprise costs. Need to focus on enterprise cost reduction

Challenges around IT Value 2017 Gartner CIO Agenda report, CIOs

reported their top barriers to successfully show the value of IT – Talent being number one, citing ‘Business knowledge and acumen’.

CIO.com’s 2017 State of the CIO survey revealed ‘59 percent of CIOs said IT collaborates with business units to build business cases for new technology initiatives, while only 24 percent of business leaders said that was the case’. I


WHAT IS REPORTED TODAY


Focus on Easy to Measure?


Reporting IT Performance


Source: Gartner 2016 Reporting the IT Organizations Performance

IT Service MetricsService AvailabilityService ReliabilityProcess efficiency, compliance Resolution TimeNumber of callsFirst call/level resolutionCustomer Satisfaction


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Transactional metrics A separate Gartner survey of I&O IT leaders (see “Map Infrastructure and Operations Metrics to Business Value” in Further Reading”) found that 92% have very limited or no integration between business and IT operational metrics (e.g., dashboards, monitoring and automation for optimized business processing

Benchmarking



HOW TO IDENTIFY VALUE


Enabling Business Outcomes


Based on Axelos ITIL® SS Figure 3.22Service Provider Enabling Business Outcomes

ValueWhat is value? How do measure it? How do you know if you are providing value?

What does your organization value?How do your services impact that value?


Value Chain


Adding value to a product passing through a chain of activities is called Porter's value chain (after Michael Porter for his discussion of it in Competitive Advantage: Creating and Sustaining Superior Performance).

Based on Axelos ITIL® SS Figure 3.8

Money spent, value added and value realized

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To better describe the relationship between costs and value, Porter (1996) introduced the concept of value chains. A value chain is a sequence of processes that creates a product or service that is of value to a customer. Each step of the sequence builds on the previous steps and contributes to the overall product or service In Figure 3.8 a number of components are used to deliver a service, and each component is managed by a department in IT. The database is managed by the database administration department, the application is managed by the application management department, application hosting is carried out by the application hosting department etc.

Value Creation Though Services


Value is defined by the customerAffordable mix of featuresAchievement of objectivesValue changes over time

Based on Axelos ITIL® SS Figure 3.5

What is a Service?A services is a means of delivering value to

customers by facilitating outcomes customers want to achieve without the ownership of specific costs

or risks. IT managed as a set of services IT deploys products as assets to deliver servicesAssets are the components that make up servicesOutcomes are achieved when the activities

performed by the business facilitate outcomesThe business must define the outcomes


Value Question Process


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Where do I begin? What metrics do I use?

Determining Value of a Service


Based on Axelos ITIL® SS Figure 3.14Value of a Service

Understanding ValueValue can only be calculated once value is

realized (outcomes achieved)Value realized must be greater than cost

IT must link activities to where the business realizes value

If unable to link to where value is added, IT is cost, no value-added

If no linkage, then value only perceived when costs are reduced.


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So how does IT ensure that it is perceived as a value adder, rather than a money spender? The secret is in being able to link IT activities to services, and then link those services to outcomes. In other words, IT should not be undertaking activities unless they can show that each activity helps to achieve the business outcome Since the infrastructure, applications and staff used to deliver services are generally not visible to the customer, it is difficult for them to understand just how much value has been added to their service. Attempts to describe their investment to the customer will be perceived as defensive, and an attempt to drive up the price of the service. Instead, the service provider should focus on building a model whereby they can measure the contribution of each internal service, and then link it to the achievement of the customer’s business outcome.

Service Value Perception What service(s) did IT provide?

Components and systems Facilitating business activities and outcomes Service Portfolio and Service Catalog are critical to

communicating value What did the services achieve?

How did the IT services help the customer? How important are the IT services to facilitating the business

outcomes? What is the cost/price of the services?

What the cost/price compared with what the customer achieved using the service?


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Services contribute value to an organization only when their value is perceived to be higher than the cost of obtaining the service If IT doesn’t know cost, then unable to ascertain value.

Value Capture Value capture is the ability of a service provider to retain a

portion of the value that has been created and realized. The ability of a service provider to differentiate themselves

and offer more value over time depends on: Whether they are able to obtain funding to develop and

improve services, over and above the cost of operating the services.

Value capture is a good way of obtaining this funding Easier to link the cost of this development to the service directly Easier for the customer to evaluate the value of service

improvements.


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Value capture is an important notion for all types of service providers, internal and external. Good business sense discourages stakeholders from making major investments in any organizational capability unless it demonstrates value capture. Internal providers are encouraged to adopt this strategic perspective to continue as viable concerns within a business. Cost recovery is necessary but not sufficient. Profits or surpluses allow continued investments in service assets that have a direct impact on capabilities.

METRICS


Outputs vs. OutcomesOutputs

What IT delivers, e.g., reports

Availability, reliability, downtime

Was the service delivered?

Compliance to the standard performance levels

Outcomes What the customer does with

the reports Was the customer outcome

achieved? Did the customer use the

service to achieve the outcomes?

Business cycles or outcomes may need variable level of performance


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Business outcomes are measurable, practical, linked to business process When a service provider focuses on outputs alone, they are able to demonstrate that they delivered a specific level of service, but they do not know whether the service actually achieved the intended results. This is often characterized by situations where the IT service provider meets its service level agreements consistently, but has a low customer satisfaction rating. In other words IT is able to deliver a consistent output, but it is not enabling customers to meet their intended outcomes. Outcomes are achieved when the business is able to perform activities which meet business objectives. Outcomes can be limited by the presence of constraints – for example, manual processes take too long and are too expensive for the organization to be competitive. Services enhance the performance of key activities and reduce the limits of constraints. The result is an increase in the possibility of achieving desired outcomes



Business MetricsRevenue/MarginCustomer/Product segmentationCustomer loyalty/retentionCost of customer acquisitionChurn rateProductivity ratiosVariable-cost percentageRisk reduction/mitigation


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A business metric is a quantifiable measure businesses use to track, monitor and assess the success or failure of various business processes. The main goal of measuring business metrics is to track cost management, but the overall point of employing them is to communicate a company's progression toward certain long- and short-term objectives. This often requires the input of key stakeholders in the business as to which metrics matter to them. Some organizations outline business metrics in mission statements, which require buy-in from all levels of the company, while others simply incorporate them into their general workflows.

Service MetricsCustomer/Client SatisfactionNet Promoter Score (NPS)

Reliability - MTBF, MTBSI, MTBSFAvailability – uptime, unplanned downtimeChange rateSuccess/Failure % - time, budgetTime to implement


ExampleRevenue/Margins Order entry Online sales (carts) CRM Customer/Client supportWorkforce optimization Asset optimization

Risk Reduction/Mitigation Compliance Governance Security Reputation Vulnerabilities


Current StateWhich IT services, systems, applications, or

initiatives impact the business metrics?Which have greatest impact? Perceived Value?Business Impact Analysis (BIA) to identify business

priorities and perceived value

Keep the list small (3-5 max)


Business Value LanguageIT Metric 99.85 availability (Network,

Host, Operations) Implemented systems A, B,

C and changes … Increase in calls due to new

customers Virtualization project

competed Migration to cloud services

resulted in …

Business Metric Revenue impacting services

available as planned IT upgrades resulted in

operation cost reduction $$ New clients reached NPS

score 25% faster Virtualization reduced

operating costs Future capital investments

reduced


Business Value LanguageIT Metric Increased availability to

99.99% Increase network

bandwidth and systems response time

IT Service Desk increased FCR to 85%

Business Value Metric 6 minutes downtime for

service XYZ Reduction in abandoned

carts and increase in average sales

Reduced # interruptions for sales by 25%


Five Areas for IT Reporting

Session 402 ©2017 JPCGroup Developing a Strategic Service Plan 33Source: Gartner 2016 Reporting the IT Organizations Performance

Map Your Scores


ChallengesFocused on outputs or outcomes?Do you know what your customers care about? Is the focus on IT costs or enterprise costs? Is Change Management aligned so the business

pain-point is identified in the RFC?How do your services support/enable business

outcomes? It’s a journey – Efficiency, Projects, Effectiveness…What business metrics are impacted?


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A Business Metric is a quantifiable measure that is used to track and assess the status of a specific business process. It's important to note that business metrics should be employed to address key audiences surrounding a business, such as investors, customers, and different types of employees, such as executives and middle managers. Every area of business has specific performance metrics that should be monitored – marketers track marketing and social media metrics, such as campaign and program statistics, sales teams monitor sales performance metrics such as new opportunities and leads, and executives look at big picture financial metrics.

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Session 402 ©2017 JPCGroup Developing a Strategic Service ...professionalprograms.net/downloads/HDI_12017_8/PDFS/Session40… · 25 ITSM Service Management Experts to Watch in 2017