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9.3.5 Leveraging intangible assets

Intangible assets are non-physical claims to future benefits generated by innovation, unique system s, processes, designs, organizational practices and competencies. They are combined with tangible and financial assets to create economic value for their owners.37 Certain assets such as physical assets, human resources and financial assets are called rival or scarce assets because a specific deployment of such assets prevents their concurrent use elsewhere. Examples include bank tellers assisting customers, storage space, or financial capital invested in a certain office facility. Thus rival assets suffer opportunity cost s. In contrast, intangible assets are generally non-rival because they can be replicated and concurrently deployed to serve multiple instances of demand. For the most part the concurrent deployments do not interfere with each other or reduce their utility with an increase in the number of deployments. Of course, poor system design may lead to congestion at points where underlying resources are being shared.

The use of intangible assets, such as web-based technologies and software-based automation of processes, can increase the scalability of service systems. Knowledge-intensive systems and processes can be highly leveraged with virtually zero opportunity costs. From a service management perspective, the structure of service model s, designs, processes and infrastructure can be analysed to determine the ratio of intangible elements over tangible elements. Where possible, the tangible elements should be substituted with intangible ones so that the service design becomes more scalable and non-rival. Online service interfaces such as web browsers can effectively replace the many tangible assets required to interact with customers through physical channels such as branches, stores, kiosks and call centre s. In other words, when services elements are well defined, it is possible to increase the throughput of the service delivery system by software-based replication, where software agents supplement human agents by taking care of some or all types of transaction s.

The use of Interactive voice response systems with speech recognition, automated installation, automatic updates and rich-browser applications, can greatly reduce the cost of serving the same population of customers. They also reduce variations in service quality and compliance risks by reducing the workload on the human resources. The availability of services can be enhanced (or maintained in the face of an increasing workload) by the use of service interfaces or channels that rely more on intangibles than physical or human assets. It is much easier and faster to scale up an online customer support system to handle an extra million transactions through web browsers, than it is to support the same surge in demand by upgrading the voice infrastructure of a call centre or stores in a retail network. Also, the scalability does not bring the risk s linked to installing additional network capacity or the training and orientation of new staff.

The non-rival or non-scarce attribute of intangibles represent the facility to deploy such asset s simultaneously across a portfolio of services without diminishing their utility to any one customer . The scalability of intangibles is usually limited only by the size of the markets they can serve. The separation of intangibles from tangible assets may be difficult when they are embedded in physical assets. For example, the tacit knowledge stored in people in the form of experience, insight and certain skills is hard to codify or extract. Therefore there is considerable interaction between intangible and tangible assets in the creation of value. While this property of being embedded is a form of security for the owner, it does pose a challenge in the measurement and valuation of the intangibles.

9.4 Effectiveness in measurement

Case example 14: Monitoring services

Some time in 2004, a global automobile manufacturer sent out a call to its infrastructure outsourcing service provider s. The manufacturer, with 20+ data centres and 10,000+ server s spread across the globe, was frustrated by the inability to separate the service monitoring signal from noise. It sought a better way, one where the providers received their relevant service information and the manufacturer received business impact information.

What is your response or suggestion?

(Answer at the end of the section)

Organization s have long understood the Deming principle: if you cannot measure it, you cannot manage it. Yet despite significant investments in products and processes, many IT organizations fall short in creating a holistic service analytics capability . When combined with a disjointed translation of IT components to business process es, the results are operational model s lacking in proactive or predictive capabilities.

Performance measurements in service organizations are frequently out of step with the business environment s they serve. This misalignment is not for the lack of measurements. Rather, traditional measurements focus more on internal goals rather than the external realities of customer satisfaction. Even the measurements of seasoned organizations emphasize control at the expense of customer response. While every organization differs, there are some common rules that are useful in designing effective measurements, as shown in Table 9.1.

Principle

Guidance

Begin on the outside, not the inside of the service organization

A service organization should ask itself, ‘What do customers really want and when?’ and ‘What do the best alternatives give our customers that we do not?’

Customers, for example, frequently welcome discussion on ways to make better use of their service providers. They may also welcome personal relationships in the building of commitment from providers.

Responsiveness to customers beats all other measurement goals

Care is taken not to construct control measures that work against customer responsiveness.

For example, organizations sometimes measure Change Management process compliance by the number of RFCs disapproved. While this measurement may be useful, it indirectly rewards slow response. An improved measurement strategy would include the number of RFCs approved in a set period of time as well as the percentage of changes that do not generate unintended consequences. Throughput , as well as compliance, is directly rewarded.

Think of process and service as equals

Focusing on services is important but be careful not to do so at the expense of process. It is easy to lose sight of process unless measurements make it equally explicit to the organization. Reward those who fix and improve process.

Numbers matter

Use a numerical and time scale that can go back far enough to cover the explanation of the current situation.

Financial metric s are often appropriate. For non-commercial settings, adopt the same principle of measuring performance for outcomes desired. For example, ‘beneficiaries served’.

Compete as an organization. Don’t let overall goals get lost among the many performance measures

Be mindful of losing track of overall measures that tell you how the customer perceives your organization against alternatives. Train the organization to think of the service organization as an integrated IT system for the customer’s benefit.

Table 9.1 Measurement principles

Measurements focus the organization on its strategic goals, tracking progress and providing feedback. Be sure to change measurements as strategy evolves. When they conflict, older measurements will beat new goals because measurements, not strategic goals, determine rewards and promotions. Crafting new strategic goals without changing the related measurements is no change at all.