Demonstrating Value to the Business

For many years the ongoing mantra emanating from IT journals, blogs from so called IT evangelists and IT conferences has been ‘the need for IT to demonstrate VALUE to the business’.

As IT Service Management professionals, we understand the commercial importance of IT needing to demonstrate business value. However the topic is often expressed in fiscal and business school language that resonates with the senior members of the IT directorate, i.e. Chief Information Officer (CIO), Chief Financial Officer (CFO) but sadly excludes our IT colleagues.

Typically for most IT professionals involved in day to day IT service provision this fiscal and business school view of value seems somewhat divorced from the day job. In fact, when we better understand the concepts of value and how customers ultimately determine whether the IT service provision is providing business value, then we can see a direct and strong connection between our day to day ways of working and the delivery of value for money IT services.

This connection has been recognised and emphasised in the new ITIL Practitioner Guidance publication. ‘Focus on Value’ now being defined as one of the new 9 guiding principles that help distil the core messages of ITIL.

However, to focus on value requires us to first better understand what actually constitutes value from the customer’s perspective. We can gain a good insight from the ITIL Service Strategy core publication which defines the characteristics of value as:-

• Defined by the customer
• Affordable mix of features
• Achievement of objectives
• Changes over time and circumstances

It further expands our understanding of value by explaining the ‘structure’ of value. The book explains how the customer view of value is derived from 3 aspects:-

• Value Creation – To deliver value, the IT services provided must enable the business to achieve their business outcomes. This is a given and is not influenced by low cost. Consider if you buy a cheap rail ticket the desired outcome for you is the train departs and arrives on time. The reduced fare is of no relevance if you arrive 2 hrs late and this completely disrupts your plans.

• Value Add – The terms value added, adding value, value add inter-alia are used where additional benefits have been provided to the customer which they were not expecting and have been provided typically at no additional cost. Consider here how CSI can make a significant contribution in demonstrating to customers the value add being provided from the IT service providers people and their capabilities. The greater the value add provided the more this begins to influence the customer perception of value for money.
• Value for Money – It is only when the customer starts to consider the ‘Cost’ incurred against the ‘Value’ and benefits gained that a sense of ‘Value for Money’ is formed. As stated above, business outcomes have to be achieved before value for money is considered. The additional value provided will also strongly influence customer perception. However, If customers believe their IT costs are too high and not competitive then regardless of how well their business outcomes have been met and the additional value provided, this will create a feeling of poor value for money and a view they could get the same service at a lower cost elsewhere.

The insight provided from the above provides us with some essential learning about the customer and how they determine value. What emerges is that the ultimate decision on whether the IT services utilised have provided business value and value for money remains solely with the customer and that their view of ‘value’ is a judgement that is significantly influenced +/- by perception.

There is no point telling the customer the worth of the IT services provided and the fantastic capabilities of the IT service provider organisation if the customer doesn’t see, feel and sense the value provided.
Remember the famous saying that “perception is reality”? Where customers are unsure of the value provided by their IT service provider then their perception is set accordingly. The danger here is that in the absence of value, then this brings into sharp focus cost. Being viewed by your customer as a cost is a precarious position to be in and likely to lead to low levels of customer satisfaction and being viewed as providing poor value for money. Loss of business is a possibility.
Good IT service providers will recognize the importance and relevance of positively influencing the customer perception of value and value for money as this is more likely to achieve high levels of customer satisfaction, instill over time customer loyalty and retain their customers’ business.

Managing customer perception and their expectations is now such a commercial imperative that this should be an essential tenet of the IT service providers Service Management strategy.

When we consider ITSM strategy the ITIL guidance offered is to base this on the four pillars of service management. The ‘Four P’s’ recognizes that the value to customers in the form of high quality IT services cannot be achieved without the ‘alignment’ of all People, Processes, Products and Partners. This in essence is the ‘raison d’etre’ for IT Service Management to ensure value is delivered to customers from affordable IT services that provide good value for money.

However, as we have already seen value and value for money are interesting concepts in that they are ultimately determined by the customer and significantly predicated on perception. An extreme view to make a point could be, that for the IT service provider regardless of how well they execute their service management capabilities, how reliable their IT services are and how cost effective they are at IT service provision, that this doesn’t guarantee that their customers will feel they have had value for money. This requires the IT service provider to be proactive in positively influencing their customers perception so they see, feel and sense the value being provided.

So for the IT service provider to be successful requires more than just the Four P’s. It also requires a good understanding on how customer perceptions are formed and how these can be positively influenced so that customers can more readily recognize value and value for money from their IT service provider.
We therefore contend that Perception’ is now the Fifth P. How perceptions are positively influenced needs to be factored into your Service Management strategy and planning. In practical terms this should include:-

• Stakeholder analysis to identify and segment customer stakeholders into those who pay for the service, those who agree the SLA and those who use the service to help shape a targeted approach to 2-way communications.

• A communications strategy is required to ensure key stakeholders across the business receive timely and appropriate communication to enable the IT service provider to proactively demonstrate where they are making a difference to the customers IT services.

• Communications plans are devised for each Stakeholder grouping making use of the most appropriate communications channel, i.e. Face: Face, Email, Reports, Flyers.

• Reward and Recognition systems are geared to encourage people to focus on value to the customer and using their insight, knowledge and skills to identify and drive the low cost or no cost opportunities that help optimise service and costs for the customer.

• A CSI register(s) and supporting process is implemented to ensure all CSI improvements are captured, mapped to the relevant IT services and customers groups with benefits quantified in business terms.

To summarise and provide some final food for thought….. there is no value in value of your customers don’t recognise it and therefore no matter how good you are, if your customers can’t see, feel, or sense it, then you’re not delivering value and you are now seen as a cost!
This blog is a precis of a white paper “Recognising Customer Value” written by leading Sysop consultant Ian MacDonald and qualified as a finalist in the 2017 itSMF awards. To see the full paper, follow this link: http://www.sysop.co.uk/your-account/downloads?c=1

Is giving 100% too much?

I read an article in the Financial Times (Rhymer Rigby, 16th March 2014) that asked the question “Is giving 100% too much?” The article focused on productivity and effort but it struck me that the general thrust applied equally to the ITIL® Continual Service Improvement process.

The Ft article quoted Graham Allcott, author of How to be a Productivity Ninja, saying that people often look at tasks the wrong way – they focus on the detail of what they are doing, rather than the impact it has. “It is actually far more practical to think in terms of the 80-20 rule and focus ruthlessly on doing things that have the greatest impact.”

That, of course, is the essential point of the first stage of the CSI improvement process – “Understand the Vision”. What is the business mission? What are the business goals? Are the improvements we are contemplating going to deliver justifiable business value?

Just because we can make an improvement doesn’t mean that we should. The effort expended might achieve a better return if it were directed elsewhere. The cost might not be justified by the benefit to the business.

There’s an old, light-hearted, quality question. Which is the better bag: a designer leather hand-bag; or a supermarket carrier bag? The answer, of course is that it depends on the use to which it is to be put. A designer hand-bag won’t carry very many groceries and ladies would look pretty silly in the night-club dancing around a supermarket carrier bag.

The primary purpose of Continual Service Improvement (CSI) is to continually align and realign IT services to the changing business needs by identifying and implementing improvements to IT Services that support business processes. Of course, any improvement comes with a cost which must be justified by the value of the improvement.

Continual service improvement needs to consider the degree to which the portfolio meets the business needs. The value of continual service improvement is realised when there is closure of the gap between what has been promised and what is delivered. There needs to be a deliberate effort to recognise when requirements have changed and respond accordingly.

This is where we need to challenge ourselves. Is enough, enough? The law of diminishing returns and the Pareto 80:20 rule both indicate that there will be a point when further improvement is not justified. The (Act) point in the Deming cycle that directs us to seek out other opportunities – gradually and incrementally improving all that we do – for the benefit of the business as a whole.

Stuart Sawle

www.sysop.co.uk

 

The value of service management

I’m often asked for examples of the return on investment that sound IT service management delivers and I’m always put on the spot to quote concrete examples.

Whatever your position in your company, like me you know that IT Service Management matters. You know that implemented correctly, the ITIL® Service Management disciplines will provide you with a stable, reliable, and cost effective environment for the provision of your IT services.

I’m sure that at some point, early in the ITIL implementation lifecycle you conducted a baseline exercise and that, as you conducted further measurements, you found real evidence of process improvement:

• better problem management resulting in fewer incidents,
• Improved change management resulting in smoother implementations and fewer post-implementation glitches,
• more comprehensive monitoring of device performance resulting in fewer hardware failures and capacity issues,
• more realistic customer expectations as a result of sound service level agreements,
• greater customer satisfaction as a result of better service level monitoring and reporting.

All of these things are real and tangible benefits of improved service management processes. All are measurable. But none of them are expressed in terms of the contribution to the profit and loss account. What’s the bottom-line effect?

I’m sure there are organisations out there that have calculated the return in this way – I’m just surprised that they are not readily available as case studies. Do you know differently?

Stuart Sawle