BRM - Module 6: Provider domain knowledge
The video below is the first lesson in this module, and is part of the Business Relationship Course
The ‘Business Relationship Management Professional’ foundation course
Module 6 – Provider Domain
Lesson 1 – Service Management
This Learning Module relates to syllabus area code PD
Welcome to Learning Module 6. This is the only lesson in this module; it deals with Service Management.
Topics covered include:
Products and services Service valueAnd
Let’s start by defining what a service is.
The international standard for IT service management, ISO/IEC 20000, defines as service as“A means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks”.
There are some important concepts in this definition; let’s unpick it.
First, a service delivers value – the value of the tax preparation service that we describe in our Case Study is that an individual’s legal obligation to submit a tax return is discharged. The individual does not buy the accountant’s time or skills or knowledge. In the context of an IT service, the business does not buy hardware and software – they are not interested in hardware and software – they want what that hardware and software can do for them.
A service delivers value by helping the customer achieve their outcomes. An IT service supports business activity – it helps the customer to perform that activity faster, or at less cost, or more accurately, or more securely, or more consistently. I won’t go on, I’m sure you get the idea. I could complete my own tax return but Lune Associates will get it done faster and they’re less likely to make mistakes.
A customer buys a service because they don’t want ownership of specific costs. Don’t get me wrong here – the customer is certainly interested in the total cost to them of the service but they’re not interested in detailed costs and they don’t want to manage them.
A customer doesn’t want ownership of specific risks either. The customer of an IT service doesn’t have to worry about the many things that could go wrong with the hardware, the software or the people delivering the service – that’s the service provider’s problem.
Now I want to explore the difference between services and products.
Products are created from raw materials or components and delivered to a customer as physical entities. Services on the other hand are dynamic interactions between a service provider and a customer – they are co-created. For example, a car manufacturer builds a car without the participation of a customer. But a taxi service requires a provider – a cab and its driver – and a customer – the paying passenger.
There is a difference, too, between how success is judged. A service is successful if it enables the customer to achieve their outcomes: a taxi service is successful if it gets me to the airport on time. The success of a product is determined by the quality of the product itself and independently of how it’s used. If I get to the airport on time I don’t attribute that to the car I travelled in.
The nature of value is not the same for services and products. For a service, value is created as it is used and only when it is used. Switching back to Lune Associates, I get value from the tax preparation service when my annual tax return is prepared and submitted; so, just once each year. The service is available for me to use all year round but I only get value when I actually use it. A product on the other hand retains value over time, and can be bought and sold several times over its lifetime. My car, for example, retains its value even when I’m not using it.
A process is not a service. A process is a set of structured activities that is designed to achieve a specific objective. Processes are consistent and predictable; services are not. A service is co-created each time it is used – a taxi service may take me to the airport one day and to a restaurant another day. And even if the destination is the same, the route may be different.
The concept of co-creation is important – if you think about it that’s the fundamental reason why Business Relationship Management is needed. OK it’s not needed for an individual user of a taxi service but what about a company that buys into a taxi service for business use? Doesn’t the taxi company want to know the likely level of demand? And when that demand might occur? And will their customer want limos, or sedans, or people-carriers? And won’t the customer want to know about the quality of service they can expect? And whether the taxi service can handle the extra demand for a corporate event?
The relationship between a service provider and its customers develops gradually as customers build trust in the provider and its ability to deliver on its promises.
Service-orientation is a fundamental shift and creates opportunities for new business strategies, new sources of competitive advantage, new ways of interacting with customers, and new ways of organizing work.
The information technology world is very familiar with this. Once upon a time major manufacturers built and sold hardware and software products to their customers. Increasingly they are offering services. Think cloud computing and ‘software as a service’.
Now I’m going to take a closer look at service value. As illustrated in the diagram, a service will deliver value only if it is fit for purpose AND fit for use.
Click on utility and warranty for a description of these concepts
Fitness for purpose is known as utility; in the context of an IT service this is its functionality. Remember I said that a service supports business activity? Well a service is fit for purpose if it supports the performance of the business in some way or it removes some constraint on business activity (or both of course). It might support the performance of the business by enabling it to operate more efficiently, more quickly, more reliably etc. An e-commerce service frees a retailer from the constraints of selling from stores – geographic location, store opening times, limitations on space for displaying goods.
Fitness for purpose alone is not enough. A service must also be fit for use; this is known as warranty. As you might infer from the diagram, warranty refers to service quality. For example, to deliver value an e-commerce service must be available for use when customers want to buy. The aspects of quality shown here are expressed as questions. That’s because the quality delivered must match the quality needed by the customer. Too little quality and the customer won’t get full value from the service. Too much quality and the service costs will be too high.
The diagram shows four aspects of quality but there are others.
I’ve said that the value of a service is defined by the business outcomes it supports. Well that’s true but it’s not the whole truth. A part of value is subjective; it’s what the customer perceives to be the value. A consequence of this is that a provider can deliver everything that’s been promised in a contract or agreement but the customer may still be dissatisfied, may still not believe they are getting value for money.
Customer preferences in turn derive from the customer’s position in the market or their self-image. They might see themselves as innovators and will therefore value a service that exploits cutting-edge technology more highly than a more conventional service even though the two might offer precisely the same utility and warranty.
Business Relationship Management plays a key role in each of these three aspects of service value. It ensures that business outcomes are properly understood by the provider and that services support those outcomes.
It influences customer perceptions of the service they are receiving. Customers need to be told what a great job the provider is doing.
And Business Relationship Management must develop an understanding of its partner’s preferences and not only ensure that they are taken into account by the provider but also influence their perception of the service they are receiving so that it aligns with the preferences.
There are some characteristics of value that a BRM needs to understand.
The first thing is that value is defined by customer not by the provider. For example, if you are selling your house, its value will be determined by the person who buys it, not by you.
A service or a product will deliver value if it provides an affordable mix of features. A house seller can influence the perceptions of potential buyers by ensuring that the house is clean and tidy and so on. But you won’t persuade a family of five to buy a one bedroom apartment. Customers will select the service or product that represents the best mix of features at the price they are willing to pay.
Here are two more characteristics of value:
To provide value a service must help the customer achieve their objectives which are not always financial. A service could help a company to satisfy regulatory requirements, improve its security or protect human life. It’s often not possible or sensible to express these in financial terms but the value delivered is real.
Value changes over time and circumstance. What is valuable today is not necessarily valuable tomorrow. All enterprises operate in a continually changing environment. They must adapt to competitive challenges, regulatory changes, customers who are more demanding, and many other changes. BRM must stick close to the business so that the provider can be aware of the new challenges faced by their customer and respond accordingly.
It’s crucial that the Provider and its Business partner have the same understanding of each of the services provided; that they understand what to expect and what not to expect from them. A Service Definition is the means to do this.
Your screen lists eight key questions to be answered when defining a service:
What is the service? How do I get the service? How is the service delivered? How do I use the service? How do I get help with the service? What does the service cost? How is the service supported? What does service support cost?
Clearly defined services enable customers to understand service offerings:
What a service does and does not include Service eligibility Service limitations Service cost or price How to request a service How to get assistance with a service A well-defined service identifies internal processes necessary to provide and support that service.
Service Costing is an important aspect in understanding service value:
Service costing provides critical information required to balance the investment in services across the service portfolio Understanding actual costs to serve is a prerequisite to determining benefits realization and ongoing sustainability Requires knowledge of the overall service model
Service costing is not straightforward. Most IT organizations understand how much they spend on hardware, software, people and so on. But how many of them know how much it costs to deliver the payroll service? Sure, they’ll know the license costs for the payroll application and if the service is supported by a dedicated server they’ll know the cost of that too. But what about payroll’s share of the cost of the network? Or the desktop machines? Or the support staff? These costs have to be apportioned in some fair way across all the IT services. By ‘fair’ I mean in a way that the Business Partners will perceive to be fair. I think you’ll agree that the Business Relationship Manager has an important role to play in deciding how this should be done.
The Service Provider must continually identify, assess and reduce risk within levels of tolerance set by enterprise executive management. This leads to several risk-related Service Provider goals:
IT compliance and support for business compliance (external laws and regulations) Managed IT-related business risk Transparency of costs, benefits and risk Security of information, processing infrastructure and applications Delivery of programs that deliver benefits to the business on time, on budget, and meeting requirements and quality standards
I’ll end this module by taking a look at the relationship between the Provider Domain competency and the four core disciplines of Business Relationship Management.
For the first discipline, Demand Shaping, at maturity level 5 the Business Relationship Manager has knowledge that can help the service provider prioritize activities. The BRM will also be able to help the service provider in understanding the constraints of the service in terms of value, outcomes, costs and risks.
For the Exploring discipline at maturity level 5:
The BRM works with the Service Provider to bring emerging technologies to the business.
The BRM works with the service provider to understand the cost and risk of service provisioning.
The BRM helps their business partner understand the design constraints around the service solution.
For the Servicing discipline at maturity level 5 the BRM is involved in discussions around operational readiness and service provisioning. The BRM is also able to explain to the business the costs and risks of the current service provisioning.
For the Value Harvesting Discipline at maturity level 5:
The BRM helps the service provider to ensure value realization is achieved in operations. The BRM will be involved in validating that customer requirements are achieved in production. And the BRM is able to define to the business the link between value/outcomes and cost/risk.Ok, we’re almost finished but before I wrap up this lesson here’s a quiz to check out what you’ve learned
Insert quiz here
That completes this lesson.
In this lesson you learned that a service is a means of delivering value to customers by facilitating outcomes customers want to achieve
You learned a number of things about service value. That it is a function of utility and warranty; that it is defined by customers who want the best mix of features at the price they are willing to pay; and that it changes over time and circumstance.
And you learned how a Service Definition gives the customer and the service provider a common set of expectations.
You’ve also completed this learning module on Service Management.
Before going on to Module 7 you should attempt all the quizzes provided for this Module and read the Study Guide.
In module 7 we’ll study the last BRM competency – Powerful Communications.