SS

4.4.8 Alignment with customer needs

Understand the mutual relationship between customers and market spaces. Customer s can contain one or more market spaces. Market spaces can contain one or more customers (Figure 4.27).

 The market spaces of Type I service provider s are internal to the organizational unit within which they are embedded.

 The market spaces of Type II providers are internal to the enterprise but distributed across the constituent business unit s and the corporate function s.

 The market spaces of Type III providers are typically distributed across more than one enterprise customer .

Figure 4.27 Customers and market spaces

The business strategy of a service provider usually determines the placement of market spaces. However, the placement of market space s also influences the type of strategies to be pursued. This mutual influence will lead to adjustments and changes over any given planning horizon (Figure 4.28). Since market spaces are defined based on outcomes desired by customers, the changes and adjustments are ultimately based on the dynamics of the customer’s business environment . Over time there will be cohesiveness between strategies and market spaces from mutual alignment and reinforcement.

Figure 4.28 Strategies and market spaces

Since market spaces are defined in terms of the business needs of customers, service provider strategies are therefore aligned to customers. This is the most important reason why service providers must think in terms of market spaces and not simply industry sectors, geographies, or technology platforms. This is intuitive to the senior leadership of Type I providers because they are accustomed to being driven more by the outcomes expected by their business unit s than by the traditional segmentation of markets.

4.4.9 Expansion and growth

Once service strategies are linked to market spaces, it is easier to make decisions on Service Portfolio s, designs, operations, and long-term improvements. Investments in service asset s such as skills sets, knowledge, processes, and infrastructure are driven by the critical success factor s 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 (Figure 4.29) and Customer Portfolio s to drive new growth and profitability.

Figure 4.29 Expansion into adjacent market spaces

The resultant exposure to costs and risk s is far lower in this approach compared to ad hoc expansions, which are purely opportunistic in nature. This is because expanding into adjacent market spaces leverages service assets that are common across market spaces. This means that additional investments are hedged across new and existing market spaces. If for any reason the expansion fails or business opportunities do not materialize, there will be a greater salvage value for the new investments made. To further reduce the risks of expansion strategies, it is best to leverage the presence in market spaces that have achieved sufficient growth. Growth and maturity could mean either improving results in existing market spaces or expanding the portfolio to other market spaces with a high potential for success.

Contract s represent combinations of customers and services. Contracts exist where there are commitments to a customer with respect to a service . Service agreement s are types of contracts. It follows that Contract Portfolio s are based on the interaction of the Customer Portfolio and the Service Portfolio. Changes to the Contract Portfolio are driven by changes to either the Customer Portfolio or the Service Portfolio (Figure 4.30). 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.

Figure 4.30 Growth in a market space

Strategic planning and review includes examining opportunities for growth within current customers and services. Growth in a market space is dependent on demonstrated ability to deliver value and a strong record with existing customers. Chapter 5 provides further guidance to senior managers on how to prioritize investments and allocate resource s in a manner that reduces risk s of failure .

4.4.10 Differentiation in market spaces

In a given market space, services provide utility to customers by delivering benefit with a level of certainty (i.e. warranty ). Market spaces can be defined anywhere an opportunity exists to improve the performance of customer assets. Service strategy is about how to provide distinctive value in each market space. Service providers should analyse every market space they support and determine their position with respect to the options that customers have with other service providers.

In any given market space there are critical success factor s that determine whether or not a service provider is competitive in offering services. These factors are defined in terms of the relative importance of a set of outcomes or benefits as perceived by customers. Examples are affordability, number of service channels or delivery platforms, lead times to activate new accounts, and the availability of services in areas where customers have business operations (Figure 4.31).

Figure 4.31 Differentiation in the market space

Appropriate indices or scales are necessary. A value curve can then be plotted by linking the performance on each scale or index corresponding to a critical success factor.25 Market research can determine the value curve that represents the average industry performance or one that represents key competitors. Feedback obtained from customers through periodic reviews or satisfaction surveys are used to plot your own value curve in a given market space or for your Customer Portfolio .

Service strategies should then seek to create a separation between the value curves, which are nothing but differentiation in the market space. The greater the differentiation, the more distinctive the value proposition offered in your services as perceived by customers. The differentiation is normally created through better a better mix of services, superior service design s, and operational effectiveness that allows for efficiency and effectiveness in the delivery and support of services. Through various combinations of factors there are many ways in which to create differentiation. Service management is about making decisions on the service design, transition , operation , and improvement that lead to differentiation in every supported market space.