Join Mark Thomas for an in-depth discussion in this video Service Strategy: Value creation, part of Cert Prep: ITIL Foundations.
- Okay, within Service Strategy, we've talked about the processes, we've talked about the key concepts. Remember in Service Strategy, one of the primary things we're getting at is value creation, and this is very important to our customers, and there are a lot of ingredients and a lot of things we need to think about when we're trying to determine value creation and help to define what that is, and even market what that value creation is for our customer. So, from a value creation perspective, take a look at some of the characteristics of this value creation. First of all, we have, they are defined by the customer.
So, I would certainly agree that value, I can't determine value, my customer has to help me determine that value. Too many times we try to assume what we think the value is, and we may have an interpretation of the value of that, but we may be looking at it the wrong way. Remember value isn't always looked at strictly from an outcome or strictly from a financial perspective, it's a blend of many things. So we also have to look at what the affordable mix of features are for that service. It's possible to influence the customer with good features, good things that they want, but the bottom line is they've got to select the service and they're making an investment, and they have to look at the price they're willing to pay for the mix of features.
So therefore, we're looking at how affordable is that from the customer's perspective. Can it achieve its objectives? Can that service, so remember that customers may not always measure value in terms of cost, they may look at other things, so we have to look at whether or not those objectives are even met, from the customer's perspective. And then finally, we have these things are going to change over time, so we don't always have to make a value statement today, what might be valuable today could be different tomorrow.
Changing times, changing market spaces, needs, external, internal drivers might be a part of that as well. So as we take a look at that, I wanna make sure you understand that one of the key points to this whole thing is that a service only contributes value for my customer when the value perceived is greater than the cost. Very important, so when the perceived value is greater than the cost, that's a very good tip to remember when you're looking at value creation. So, to understand this fully, we need to understand that there are a couple cases here that we contribute value, so when it's higher than the, what is perceived to be higher than the cost.
Well, what did it provide? Did it actually produce and understand what the business outcomes are supposed to be on this? What did the service achieve, did the customer... can they tell you what it did, and how, why was it important for them? And how much did the service actually cost? Remember there's a cost of value relationship that's assessed by the customer, and so when we're taking a look at these things, of course the value is perceived not just as business outcome, but also includes perception and preferences.
Number one we have business outcomes right here, right, it's gotta do what we intend for it to do, at the business side of the house. Remember that's just one piece of this. So we've got to balance these other things like perceptions and preferences. Because again, preferences and perceptions can change, and perceptions may drive those preferences when we're planning this stuff. So realize that value is not just measured in terms of business outcomes, it's dependent on their perceptions and their preferences. So, as we look at the value creation, it's very interesting to take a look at how this is actually just calculated, or what type of model we might be able to use to understand the value creation on this.
Okay, so the second part of this value creation here, is really understanding the economic value of the service, that's where we're really trying to get at. So what we're trying to illustrate here is number one, you have a starting point, and at that starting point, what's the reference value? We're talking about the reference value here is, what the customer's reference points are, are they rumors or experienced? They have a generic or a general reference point of the value for that. So, once you then take a look at the second thing, is, with this service, what is it that they gain? What is the positive difference of what they gain? And that could be basically, are they gaining functionality, are they gaining in efficiencies? Those types of things.
Take away from that positive difference the negative difference, so in many cases, maybe that new service there're positive difference, but there might be some negative aspect. They may be losing quality in some cases, they may be paying more price or more cost for that, there may be hidden costs that are associated with that. The net difference there that we look at and that we come up with is basically what's left, between the positive and negative difference. Now, the sum, over here when we talked about the economic value of the service, the sum of the net difference and the starting reference point is basically equal to our total value.
And that's what we're trying to drive to when we're looking at value from a service perspective for our customers.
ITIL® is a registered trade mark of AXELOS Limited. This ITIL Foundations course is offered by Interface Technical Training, ATO of EXIN.
Skill Level Advanced
Qualification scheme3m 51s
1. Service Life Cycle
2. Service Management as a Practice
3. Key Principles, Models, and Concepts
4. Life-Cycle Phases
5. Life-Cycle Processes: Part One
6. Life-Cycle Processes: Part Two
7. Service-Management Functions
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