ITIL 4 Key Concepts Part 1: Value Co-Creation
In this series, we explore some of the new concepts introduced in ITIL 4. This blog looks at the concept of value co-creation and what it means from a service provider and a consumer perspective.
Text in “italics and quotation marks” source: ITIL 4 Foundation Manual. Copyright AXELOS Limited 2019. Material is reproduced under license from AXELOS Limited. All rights reserved.
All About Value
“Value is the perceived benefits, usefulness and importance of something.”
If consumers don’t feel that they get value from a product or service, they will stop consuming it. Think about some of the commodity type products and services you interact with every day, like the applications on your mobile phone. If an app is buggy, overwhelms you with adverts or doesn’t work well, you will uninstall it.
Service providers also need to get value from products and services, through some type of payment or funding. The provider of that buggy app might be making a fortune from advertisements based on the number of installs. But if the number drops, so does their revenue. Service providers need to deliver value to be successful. They can only do this if they understand:
- Who their consumers are
- What ‘value’ looks like
- How their services contribute to delivering value
Value isn’t a one-way street
In personal life and in services, a relationship has to go both ways. ITIL 4 introduces the concept of value co-creation from a service management perspective.
“Co-creation is as business strategy focusing on customer experience and interactive relationships. Co-creation allows and encourages a more active involvement from the customer to create a value rich experience.”
Put simply, organizations and consumers need to collaborate for value to happen. Here are a couple of examples to bring this concept to life.
Consumers not contributing to value
You might have heard of ‘shelfware’ – software that is purchased but never used. This is an example of an output being delivered, but no value is created because no outcome has been achieved.
“Shelfware is a term given to software that has been purchased but never used. Typically, software becomes shelfware when a user buys it on a whim because of a great discount or for future need but does not use or install that software.” Source: Techopedia.com
If the consumer doesn’t feel that they’ve had value from a product or service, the service provider is unlikely to get any ongoing/repeat business from them. This makes it harder for the service provider to have any certainty about how much to invest in a product or service for the future.
Service providers not contributing to value
Mainly because I enjoyed the Netflix documentary so much, let’s take the Fyre Festival as an example of a service provider that did not fulfil their side of the bargain. From a service management perspective, some of the major errors were:
- Selling a low quality product at a luxury price
- Failing to manage their supply chain and put all the necessary service elements in place
- Failure to communicate with their customers
We could go on, but it’s pretty clear where they went wrong!
Why is co-creation so important?
Focusing on co-creation makes sure that service providers concentrate on what their consumers really want and the outcomes that their services support. It also helps to reinforce the fact that consumers have a role to play in value creation, including sharing information about their needs and any constraints that might affect the service. Building strong relationships over time gives the service provider confidence to invest in service development, knowing they will see a return and their consumers will continue to be happy. It’s a win win!
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