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ITIL – Framing the value of services (part II)

In my previous article, ITIL – Framing the value of services (part I), using the Help Desk (or Service Desk) as a service example, we’ve established that value is a byproduct of service outcomes, and not the service itself. With both tangible and intangible service outcomes, value comes mainly from utility (fit for purpose) and warranty (fit for use) elements, and in today’s article we’ll explore that paradigm.

Utility plus warranty equals value

In our Help Desk / Service Desk example from the previous article, effective incident resolution will eliminate any issues that prevent end-users (customers) from continuing with their daily operations. By fulfilling the need for quick service restoration when it gets down, our Help Desk service is providing utility (fit for purpose). If we look at performance across all of our end-users, we will see that there are always some whose issues weren’t resolved in time (low performance), and some with minimum or no downtime in daily operations (high performance), but most of them will fall somewhere in between those two extreme conditions.  When service is more fit for purpose, utility has a positive effect on performance, and consequently on service value (as shown in Figure 1).

As people run the Help Desk, we can’t expect that every person will be equally effective in their performance. Such variation may decrease service value; that’s why we establish procedures, e-mail, and other templates when communicating with customers, all in order to minimize or completely eliminate variations each individual may bring into the system. By providing enough capacity, availability, and continuity, we are creating warranty (fit for use). Warranty doesn’t increase performance in absolute terms, but rather ensures a uniformed service experience as shown in Figure 1. Both utility and warranty together result in a better performance average with the least deviation, i.e., value created for the customer.

Utility_and_warranty_effect_on_performanceFigure 1 – Utility and warranty effect on performance

How do you measure value?

By simply reading books on ITIL, one might get the feeling that doing utility and warranty right will result in happy and satisfied customers who consume high-quality services. While that might be true, there is still an unanswered question regarding exact value measurement.

Since utility is perceived by the customer from the attributes of the service that have a positive effect on the performance of tasks associated with desired outcomes, how do we measure the “perceived by the customer” part?

Luckily, there is a way of measuring what’s perceived, and while it’s not something from ITIL, it has been around since the 1980s. It’s SERVQUAL (later known as RATER) – a quality management framework that identifies five elements of service quality:

  1. Reliability is the “Ability to perform the promised service dependably and accurately.” From an ITIL perspective: it’s utility.
  2. Assurance is the “Knowledge and courtesy of employees and their ability to inspire trust and confidence.” Inspiring trust and confidence during interactions with consumers spans continuity and security, and thus, is part of warranty.
  3. Tangibles describe the “Appearance of physical facilities, equipment, personnel, and communication materials” – think the usability of documentation, interfaces, handsets, keyboards, monitors, etc.; all of which fit neatly under the “how it’s delivered” concept of warranty.
  4. Empathy is the “Caring, individualized attention the firm provides its customers.” Empathy can arise from offering convenient business hours or being available for support or service when needed, and so on – another component of warranty.
  5. Responsiveness is the “Willingness to help customers and provide prompt service.” Providing prompt service is applicable to the concepts of capacity, performance, and latency – making the dimension of Responsiveness an attribute of warranty.

Perceived value is an individual thing

To sum up: the greatest impact on service value has both utility and warranty. Utility impacts service value either by removing existing constraints, or by improving the outcomes for the customer – thus, fit for purpose. Warranty, on the other hand, describes how well those outcomes are delivered to the customer, or how fit for use they are in terms of availability, capacity, performance, security, and continuity.

Value comes from the ability to fulfill the need, so understanding the need is a basic requirement for value creation.  However, needs change with time, place, and other conditions, and may even vary from person to person; a bottle of water has little or no value in our everyday lives, but to a dehydrated person in the middle of the desert, it has more value than its weight in gold.

Check this free Strategy Management for IT Services Process template to find out more about IT Service Strategy and value creation.