SS

It is common practice to develop capabilities and resources that achieve strategic objectives. It is also true that strategic options considered are often constrained by capabilities at hand. Improvements and innovations can extend the range of capabilities and resources, allowing organizations to pursue new or modified objectives, in turn placing new demands on capabilities and resources. These are the dynamics of business , and service management plays an active role. Service management creates viable options for strategy and helps exercise those options through a portfolio of services. It is therefore important to understand the dependencies between strategy and service management processes.

1.4.1 Some warnings

Many problems and situations in IT resist improvement and lack predictability. At times a solution is conceived and deployed, only to present as many unintended consequences as intended ones. The long-term performance of a service or process may be frustratingly different from its short-term performance. Obvious solutions fail or worsen the situation (Figure 1.3).

Figure 1.3 The Golden Pony (inspired by Nelson P. Repenning, MIT Sloan School of Management)

Organization s find it difficult to maintain the benefits from initially successful process improvement programme s. Worse, despite the demonstrated benefits, many process improvement programmes end in failure.5 In some puzzling instances, successful programmes worsen business performance and decrease morale. This is phenomenon is referred to as the ‘Improvement Paradox’.6

The phrase ‘People, Process , and Technology’ is a useful teaching tool. A closer examination, however, reveals complexities such as time delays, dependencies, constraints and compensating feedback effects. The following are observations in the real world:

 A process improvement programme reduces the time the staff have for existing service duties, causing a decrease in service quality – exactly the opposite of intended programme goals. As quality falls, pressure to work harder increases. Pressured staff then cut back on improvement efforts.

 Funding cuts affect service quality, which in turn diminishes demand for services. The reduced demand prompts yet more funding cuts.

 Increase in service demand generates increases in operation s staff. The ratio of experienced staff to new staff decreases. Less mentoring and coaching opportunities are available for the newcomers; quality of service suffers; demand for services slows; morale and productivity decrease, and staff are let go.

Apart from driving change through continual improvement, organizations must be prepared for rapid transition s and transformations driven by changes in an organization ’s environment or internal situation. Change s may be driven by mergers, acquisitions, legislation, spin-offs, sourcing decisions, actions of competitors, technology innovations and shifts in customer preferences. Service management should respond effectively and efficiently. The approach to service management provided is useful for understanding the combined effects of management decisions, dependencies, actions and their consequences.

2 Service management as a practice

2.1 What is service management?

Service management is a set of specialized organizational capabilities for providing value to customers in the form of services. The capabilities take the form of function s and processes for managing services over a lifecycle , with specializations in strategy , design , transition, operation , and continual improvement. The capabilities represent a service organization’s capacity , competency, and confidence for action. The act of transforming resource s into valuable services is at the core of service management. Without these capabilities, a service organization is merely a bundle of resources that by itself has relatively low intrinsic value for customers.

Service management

Service management is a set of specialized organizational capabilities for providing value to customers in the form of services.

Case study

Organizational capabilities are shaped by the challenges they are expected to overcome. An example of this is how in the 1950s Toyota developed unique capabilities to overcome the challenge of smaller scale and financial capital compared to its American rivals. Toyota developed new capabilities in production engineering, operations management and supply-chain management to compensate for limits on the size of inventories it could afford, the number of component s it could make on its own, or being able to own the companies that produced them. The need for financial austerity, tight coordination, and greater dependency on supplier s led to the development of the most copied production system in the world.7

Service management capabilities are influenced by the following challenges that distinguish services from other system s of value creation such as manufacturing, mining and agriculture:

 Intangible nature of the output and intermediate products of service processes: difficult to measure, control , and validate (or prove).

 Demand is tightly coupled with customer’s asset s: user s and other customer assets such as processes, application s, document s and transaction s arrive with demand and stimulate service production.

 High-level of contact for producers and consumers of services: little or no buffer between the customer , the front-office and back-office.

 The perishable nature of service output and service capacity : there is value for the customer in receiving assurance that the service will continue to be supplied with consistent quality . Providers need to secure a steady supply of demand from customers.

The characteristics described above are not universal constraints.8 Innovative business model s and technological innovation have relaxed the constraining effects of these characteristics. What matters is the need to recognize these characteristics when they do appear, and identify them as challenges in service management.

Service management is also a professional practice supported by an extensive body of knowledge, experience, and skills. A global community of individuals and organizations in the public and private sectors fosters its growth and maturity . Formal schemes that exist for the education, training and certification of practising organizations and individuals influence its quality. Industry best practice s, academic research and formal standards contribute to its intellectual capital and draw from it.

The origins of service management are in traditional service businesses such as airlines, banks, hotels and telephone companies. Its practice has grown with the adoption by IT organizations of a service-oriented approach to managing IT applications, infrastructure and processes. Solutions to business problems and support for business model s, strategies and operation s are increasingly in the form of services. The popularity of shared services and outsourcing has contributed to the increase in the number of organizations who are service provider s, including internal organizational units. This in turn has strengthened the practice of service management, at the same time imposing greater challenges on it.

2.2 What are services?

2.2.1 The value proposition

Service

A service is a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.