Service Management: why do you need it?

In the digital and technology-driven economy, every organization is becoming a service organization. Is a grocery store selling physical products such as milk and cereal or providing a service? Most, if not all, of the services the grocery store owns and manages are there to co-create value with customers. Information technology is enabling many of these services.?

A large retailer like Walmart sells a wide variety of products, from diapers to groceries. Walmart has been successful because it can provide a service to its customers that is enabled by IT. Walmart has created robust distribution and logistics systems to get its products to its stores quickly, efficiently, and cost-effectively. They rely on complex inventory tracking and logistics systems run by various IT components and services. The service Walmart offers is bringing customers grocery products at low prices.?

If a customer buys the ingredients for dinner from Walmart, Walmart can be seen as co-creating value with this customer: Walmart provides all the ingredients at a low price so that the customer can cook a delicious meal for friends. The value is the happiness of consuming dinner together. This value is co-created through Walmart's service.

Most companies are becoming service organizations as they focus more on delivering customer value through technology. IT systems play an increasingly significant role in underlying infrastructures to manage supply chains, inventory, customer profiles, etc...

This evolution to service organizations is at the heart of digital transformation. However, the greater role of technology within companies also creates challenges in managing these services effectively and efficiently.?

When set up correctly, service management can help manage costs, shorten time to market, and reduce risks.

What is Service Management

Service Management is the specialized organizational capability for providing customer value through services. The aim (where possible and applicable) is to identify the processes, people, partners, and technologies and combine them to manage the services lifecycle, focusing on delivering value.?

There are different Service Management (aka ITSM) frameworks, such as COBIT (Control Objectives for Information and Related Technologies), MOF (Microsoft Operations Framework), and ITIL (Information Services Infrastructure Library). Sometimes, TOGAF (The Open Group Architecture Framework) is also mentioned in the context of ITSM, although compared with the other frameworks, TOGAF focuses more on architecture than service management. Larger companies might not use one of the ‘standard’ frameworks and instead develop their own.

ITIL is sometimes considered the de facto standard for service management and administration. It is a set of best practices that many companies use to build their service management organization. Service Management is not just about rapidly providing a service but also about balancing speed with other factors, such as quality of service. ITIL4 and other service management frameworks encourage and enable flexibility. The point is not to create strict rules and heavy processes but to provide adaptable guidelines, clarity, and a common language around Service Management.

Unless mentioned otherwise, the next sections discuss Service Management through the lens of ITIL 4 (4 standing for the 4th industrial revolution, not version 4).

Service Management Context

Technology can play a very important role in creating a service, but technology itself is not enough. ?When you create a product or service, you can look at it from different perspectives (Figure 1). These are called the four different dimensions of service management with external factors (PESTLE) that impact the services the company is trying to create.

Service Value System

The purpose of the Service Value System is to ensure continuous value creation with all stakeholders through the use and management of products and services.

The service value system (Figure 2) describes how all components and activities of the organization work together to create value while considering the four dimensions of Figure 1. The components and activities to be used within the service value system are all tied in within the organization's resources, but they can be configured and re-configured in different combinations based on circumstances. This re-configuration will require integrating and coordinating activities, practices, teams, authorities, and responsibilities based on the four dimensions of Figure 1. Some organizations are much more flexible than others when (re)configuring.

The outer rings of the service value system describe the Guiding Principles and Continuous Improvement mindset (Figure 3). Different companies manage their services differently, but there is a set of universally applicable guiding principles (see next section). These principles are a checklist to consider when creating and managing a service.

You will notice that the guiding principles and the continual improvement mindset align very well with well-known agile methodologies such as Scrum.?

The Service Value Chain (Figure 4) contains the operating model for service creation. Practices are steps, guidelines, and/or processes to reach the objective of delivering a service. These practices are part of the value Service Management frameworks like ITIL brings (Figure 5).

Service Management frameworks contain guidance based on the combined experiences of managing services over the past decades and are continuously updated. You do not have to start from scratch with Service Management but can start with best practices and guidance.

Guiding Principles?

The guiding principles embody the core messages of ITIL and service management in general and serve as a set of principles for teams to use when working on service management-related activities. It sets a common context for the teams to think about service management.

• Focus on value: everything that the organization does needs to deliver, directly or indirectly, value for the stakeholders and service consumers.
• Start where you are: consider what is already available (and not re-invent the wheel), such as applications, data, and measurements…
• Progress iteratively with feedback: work is organized in smaller, manageable sections that can be executed and measured in a timely manner and revised where needed the more is known/understood of the product or service.?
• Collaborate and promote visibility: ensure the right people have the right roles and responsibilities and foster transparency and clear communication.
• Think and work holistically: no service, practice, process, department, or supplier stands alone. All activities should be aligned with the same focus on delivering value.
• Keep it simple and practical: make sure things are not over-complicated. Exceptions need to be defined, and rules must be implemented. Continuously ask: ‘Does this practice/process/service contribute to value creation?’
• Optimize and automate: Ensure a focus on maximizing the value of work carried out by human and technical resources. Automation can help optimize frequent and repetitive tasks, freeing human resources. These human resources can then be used for more complex tasks that contribute to value. It needs to be clear how automation will help the entire organization increase value.

Continual Improvement

Continual improvement is so important that it is not only part of the Guiding Principles but is separated in Figure 2. The purpose of continual improvement is to align the organization's practices and services with changing business needs through the ongoing identification and improvement of services, service components, practices, or elements involved in the efficient and effective management of products and services. Figure 3 is the seven-step model to manage continual improvement.

Figure 3 is similar to how the Scrum methodology approaches (software) development: iteratively focusing on measurable value creation. Scrum and Service Management serve different purposes but can be very complementary in their function.

Service Value Chain

The center of Figure 2 contains the Service Value Chain (Figure 4). The Service Value Chain operating model outlines the key activities required to respond to demand and facilitate value realization by creating and managing products and services.

While there is an arrow from left to right, the center of the Service Value Chain does not contain a pre-de-scribed order and reflects the dynamic nature of service creation and management. ?You might build a prototype with limited support and design during earlier iterations and focus on design in other iterations while iterative releasing a version of the product or service. In other situations, you can build a simple prototype before engaging stakeholders to discuss the idea.

Key are the improve & plan ‘band’ that touches the other boxes. How and what you do should also be guided by planning and improvement. Is the service being delivered improving a particular situation or pain point? Do successive service versions lead to improvements relative to previous versions?

Practices

The Service Value Chain, when used for the creation of different services, is going to use different combinations of the various practices described in this section.?

A practice is a set of organized resources designed for performing work or accomplishing an objective. Each practice will support multiple service value chain activities and includes resources based on the four dimensions of IT service management (Figure 1).

There are three categories of practices (Figure 5):

• General Management (adopted from the wider business domain)
• Service Management (adapted from the service management industry)
• Technical Management (technical functions elevated to the level of service)

What is important to note is that while technology plays a large role in many services, most practices are less about technology management and more about all the other aspects needed to manage a service successfully.

For each of the 34 practices in ITIL, there are documents with best practices and guidance on how to structure the practices and measure success. The key word is guidance. Each organization is different and will set up practices differently. However, a company does not have to re-invent Service Management from scratch; frameworks like ITIL and MOF can help companies get started quickly.

Metrics, KPIs, and Success Factors

To understand the success of the services and associated practices, it is important to define metrics, KPIs, and measures of success. Five main types of measurement/metrics can be identified:

• Progress: degree of achievement relative to defined milestones or deliverables. (E.g., 80% of development work done)
• Compliance: degree of adherence to governance and/or regulatory requirements. (E.g., changes executed without prioritization)
• Effectiveness: degree of fitness for purposes of a service or product. (Eg. Broken links on the page)
• Efficiency: degree of fitness for use (warranty) of a service or product. (E.g., uptime)
• Productivity: degree of throughput of a system. (E.g., nr of support cases solved by an employee)

Metrics define what is measured and can be further categorized in KPIs & Practice Success factors (or critical success factors):

• Key Performance Indicators (KPIs): an important metric used to evaluate the success in meeting an objective (Practice Success Factor)
• Practice Success factor (PSF): describes a condition or characteristic that must be achieved for something to be successful.

Keep the following things in mind when identifying metrics:

• What gets measured gets done. Measure the wrong things, and the wrong things are done.
• Find the right balance between metrics. Highly productive (e.g., writing many lines of code) might mean less effective (buggy and bloated code).
• Beware of cockpit metrics (an airplane passenger does not need to know every metric in the cockpit)

Be careful with vanity metrics. Not all metrics have to be useful:

• Bugs fixed (but how many are created, and why are they created?)
• Number of people followed a Scrum course (not correlated with quality of Scrum)
• Number of unique visitors (how long did they stay on the site? What is the conversion rate?)

The 34 ITIL practices guides provide a starting point for identifying Critical Success Factors (CSFs) and KPIs for the various areas. Below is an example of CSFs and KPIs for availability management,

Availability Management

CSF Identifying service availability requirements

KPI % of products and services with clearly documented availability criteria

KPI % of (critical) products and services with availability requirements documented in an SLA

KPI Timely updating of service availability requirements in case of service changes

CSF Measuring, assessing, and reporting service availability

KPI % of products and services with determined availability metrics

KPI % of products and services covered by availability and performance monitoring

KPI % of products and services included in service availability reports

Note that the Availability Management KPIs do not cover specific products or services but address holistic metrics describing the number of services; however, these KPIs imply that the service availability metrics need to be (or will be) defined for the above KPIs to have meaning.

How to start with Service Management

The previous sections described the various aspects of Service Management through the lens of ITIL. But how do you start implementing Service Management? When starting to implement, it is important to keep the guiding principles in mind (Figure 3).

Core to Service Management is the service portfolio. The Service Portfolio is the core repository for all information for all services in an organization. It contains information about the service, such as (but not limited to): Owner, Deployment Status, Version, SLAs, KPIs, Incidents, …. A subset of the Service Portfolio is the Service Catalogue. This contains the active services. The Service Portfolio also contains services being developed or de-activated (but might be activated in the future). Figure 7 shows the high-level steps to take when starting with Service Management.

Learn about Service Management: What frameworks exist that make sense for the company? Are some of these frameworks used within the company already, and can they be used to set up Service Management? Are there case studies that demonstrate the tangible benefits of Service Management? Etc….

Define vision and success factors and identify stakeholders. Leverage the different service management frameworks as a starting point. ITIL practice guides contain examples for each of the 34 practices to get you started.

Create a Service Management Office (SMO): a team that governs and manages ITSM practices and sets policies, standards, processes, and procedures to provide quality and value by delivering IT services to end-users and business functions.

Build a Service Portfolio/Catalogue. It requires identifying the services, understanding which teams are responsible for the various practices related to them, and defining what success looks like within the context of the services and associated practices. ?This means engaging the teams involved regarding their responsibilities, listening and working with them, and considering their input for managing these services. The result based on these discussions is formalized within the Service Portfolio.

Identify gaps: services, organizational, process, vendor, …. The Service Portfolio provides an overview of the state of the services and associated practices but can also be used to identify gaps and answer questions such as:

• Practices: where is improvement needed (using ITSM frameworks as guidelines)?
• Services: What services are missing, are not performing well, or can be consolidated?
• Costs: how is the budget spent, and what is the impact?

Create and execute a plan to address the gaps. This plan will depend on the available budget and priorities.

Iteratively improve. Start with a small SMO and a manageable set of services. Understand what it takes to set up service management and scale from there.

References for further reading

• University of Oxford (ITIL case study)
• Spotify (ITIL case study)
• Service Management at CERN