ITIL®4 Service Value Chain Model

The Service value chain (SVC) is the core part of Service value system (SVS) which has all the key activities, which are required to be performed for accomplishing the service value, through the service results (outputs) & outcomes.

The ITIL service value chain defines six key activities that can be combined in many ways, forming multiple value streams. The service value chain is flexible enough to be adapted to multiple approaches, including DevOps and centralized IT, to address the need for multiple models of service management. The adaptability of the value chain enables organizations to react to changing demands from their stakeholders in the most effective and efficient ways. (Ref: ITIL4 book from AXELOS®)

Figure 27:The Service Value Chain (Ref: ITIL4 book published by AXELOS®)

The six service value chain activities are;

• Plan
• Improve
• Engage
• Design & Transition
• Obtain / Build
• Deliver & Support

Organization sustenance and success depends upon the way it responds to different scenarios. Establishing a service value stream by establishing the specific combination of activities and practices for the specific situation is very important. The value stream has to be defined and designed to suit the specific scenario, and has to provide a complete guidance to the roles, practices & activities required to address the needs of the initiative or for resolving an issue (or issues).

The different combinations of the various practices defined with certain specific set of activities are performed throughout the service value chain. ITIL®4 defines 34 practices, which are classified as General management practices, Service Management practices and Technical Management practices. The activities are performed by in-house & third-party resources with specific skills & capabilities (skills & competencies) for the practices defined to accomplish the value.

For example, the value chain activity, “engage”, might draw upon the practices like service relationship management, service desk management, service request management and (or) supplier management etc., for responding to the varying demands for services & products which would support in making the right decisions by collecting right information from various stakeholders. 

An Example: HR Management Services

A HR Management of an organization will have to establish the value chain across various services provided by them like Employee engagement, Training & Development, Career Management, Employee Retention, Conflict Management, Claims Management etc. Assume a scenario, where the organization has decided to introduce an intranet application which would consolidate and provide all the service through this portal.

This requires development and management of an application which involves conceptualization, business analysis, development, release, and support. The organization has to develop a number of practices which are supported with specialized resources and techniques.

 28: HR Value Chain Activities

This would involve:

• The development of the HR application starts with initial engagement with various stakeholders in the organization, then proceed to business analysis, prototyping, drawing up the plans, development, testing, and eventually to release and support. That is, Engage, Design & Transition, obtain & build and deliver activities of service value chain.
• Further while the application is live and employees start using the application, it is required to deliver & support to sustain & improve the performance of the HR application.
• While the application is released and deployed, it is used by employees. It is also important to plan and improve the HR services continually.

The establishment of value streams happens through the combination of practices and value chain activities in various ways. This has to be improved by improving utility and warranty of products and services and by increasing the potential value for the consumers and the organization.

Further, it is very important for the organization to be able to adapt to the changing circumstances. This would involve changing the utility & warranty aspects of products & services by which organization can always align and fulfil the customer requirements in the modern dynamic world.

ITIL®4 considers the needs of becoming Agile and emphasis on adopting Agile way of doing IT Service Management in modern service environment. The Agile Manifesto was proclaimed during the year 2001, by the seventeen signatories, which are acknowledged and adopted across the IT Industry. It recommended the new approaches which help in improving customer experience through better collaboration and the ability to bring the changes rapidly which would suit the changing customer / consumer demands.

This is required to be adopted in the scenarios where;

• The requirements of the customer keep varying due to changing circumstances of the market and consumer behaviours
• It is required to move quickly in short iterations
• There is an emphasis on producing the working modules to improve the performance
• When forming a self-organizing team having visibility towards end-to-end picture of the service / products
• When ensuring collaboration among the teams through visible systems like Kanban, daily stand-up meetings etc.

In our scenario example; i.e. HR Service Application; the dynamics need not be agile, however, the need for agility happens while the organization wants to bring in the innovative solution to HR Services with unique features and functionalities like an automatic analysis engine for claim trends of an employee, which would recommend allocation of specific amount to that employee month on month, by default. This may help in understanding the need of the claim and its effective usage. Similarly, many such features and functionalities can be identified.

6.1 SVC Activities

The SVC activities working together, in unison establish the service value stream. Each of the SVC activities ensures a unique contribution and complements every other service value chain activity. They establish a specific combination of activities, process, and practices and involve various different types of resources. Each activity has specific objectives, and these objectives align to value stream enablement. All the activities have specific set of inputs and specific set of outputs.

The SVC activities are Plan, Improve, Engage, Design & Transition, Obtain/Build and Deliver & Support.

6.2 Plan

The service or products being delivered by an organization would have an intended purpose and address specific objectives. This would be always in alignment to the vision and direction of the organization, as established by the governing body of an organization. The plan value chain activity has to ensure the right understanding of the vision, its current status, and improvement for all the four dimensions and all products and services across the organization.

The inputs and outputs for the activities come from (& go to) other value chain activities like engage, improve, design and transition, obtain/build and governing body.

Input:

• Governing body provides policy, requirement and constraint (For example: The applicable policies for HR services, which are to be followed by the employees of the organization)
• The details of demand, opportunity, third-party service components form engage (For example: Demand can be expressed like, number of employees using the intranet portal, opportunity can be improvement which can be brought into the organization by using portal services, third-party service can be internet services, hosting services etc.)
• Improvement initiatives, value chain performance information, plans, improvement status are provided by improve (For Example: Plan for improving the production by saving time used to submit claims, give the uniform experience across the employee community, providing opportunity by creating a learning module as part of HR Portal etc.)
• Details about new or changed services or products are provided by design & transition, obtain/build activities (For Example: Details like currently running processes and practices, tools used for HR services are captured, and used to understand the details of newly defined services or products or improvements for HR services)

Output:

• Strategic, tactical, and operational plans (Here the strategic plan would be to improve the efficiency and effectiveness of the organization as a whole, tactical at service level and operation at transaction level)
• Portfolio decisions for design and transition (Defined list of services which can be availed through the HR service portal and their design and transition blueprints)
• Architectures and policies for design and transition (Defined list of architecture or solution, technological, MIS and tools, processes, measurement methods and metrics etc., for HR service portal)
• Improvement opportunities (Identified list of improvements which are addressed through the new solution i.e. HR service portal)
• Contract and agreement requirements for engage. (The defined list of contract and agreements needed to establish the HR portal services like Under-pinning contracts, for the service provided by external suppliers like internet service providers, AMC services, hosting services etc.)

6.3 Improve

All the services / products perform at certain levels and they should be improved on a continual basis. Improvement is not one folded, it is multi-folded. That is, improving the processes, practices, services, products, individual skills etc.are essential. This needs consideration of all the four dimensions of the service management.

The inputs and outputs for the activities come from (& go to) other value chain activities like engage, design and transition, obtain/build, deliver & support and all the value chain activities.

Input:

• Information and knowledge about product and service performance from deliver and support (While the HR Portal services are provided and availed by employees, the performance of the services has to be monitored and measured, which reveals & provides insights towards opportunities to improve)
• Feedback from stakeholders through engage (Engaging with stakeholders like employees of the organization who are using the HR Service portal, employers who have invested etc.), can help in understanding the contribution or achievement of the intended objectives and further improvising it. The feedback from stakeholders shall also involve sharing the opportunities for improvement.
• Performance information and improvement opportunities provided by all value chain activities (As the service progresses through the service life cycle, the coordination among the various activities, processes, practices etc., would provide the information about the improvements required. For example: if the submission of a request done by an employee is taking a certain amount of time and one of the reasons for it is filling the template while raising the request, then this is an opportunity to improve the process by optimizing the number of inputs required and ensuring the reduction in time to submit the request.)
• Knowledge and information about third-party service components from engage. (The performance measurement of an internet service used to access the HR Portal services would help in optimizing or increasing the internet service bandwidth to enhance the service experience seamlessly.)

Output:

• The improvement opportunities / initiatives identified and the plans to accomplish those improvements with prioritization considering all the value chain activities
• Evaluating, producing & sharing the performance of value chain activities
• Producing and sharing the improvement status reports of all the value chain activities
• Provide the service performance information for value chain  activities like design and transition.

6.4 Engage

The service can be termed as successful, when the stakeholders realize the value. Value is always defined in customer perspective. However, the need of all the stakeholders cannot be ignored. The value realization is critical and only then the utility & warranty defined would make sense.

While the services are consumed, one has to establish a mechanism to become aware about the service value creation and acknowledgement of value realization. To accomplish this, it is very essential to engage with the stakeholders continually i.e. customer, consumers, suppliers, team etc. This will help in obtaining a good understanding of the needs of stakeholders, and will create transparency and establish a good relationship with the stakeholders.

Input:

• The entire list of portfolios of product and service, provided by plans like claims services, skill enhancement, employee engagement, leave and attendance management, medical claims etc.for the HR portal service depicted earlier.
• The details of demand identified and assessed for services and products provided by internal and external customers like employees, management, HR executives etc. Identifying services regularly availed by users of the services (like leave), and those availed occasionally (medical claim) etc.
• The detailed list of requirements provided by customers which have to be fulfilled by services and products. For example, in the instance of the HR portal services, the list of improvements identified and agreed upon. Feedback on current performance of the services and identified opportunities for improvement etc.
• Occurrence of incidents (i.e. failure of services or service component) and how quickly the restoration of services happened over a period of time and incident resolution performance etc., so that employees can continue to use the HR portal services.
• Information on the completion of user support tasks from delivery and support i.e. incidents, user queries, access requirements, information of delivered services etc.
• Engaging with partners and suppliers and evaluating their performance through the established cooperation and obtaining feedback, contract and agreement etc.
• Capturing the knowledge and information about the new and changed products and services from design and transition, and obtain/build, deliver and support, about third-party service components from suppliers and partners etc., and producing the improvement status report on a continual basis.

Output:

• A consolidated view of the demands and opportunities for the product or services requirements throughout the value chain activities i.e. design and transition, deliver and support, obtain and build which comprises of requirements of products & services, tasks for user support, request for change supported through contracts and agreement established with partners and suppliers respectively.
• The captured knowledge and information about third-party service components which contributes to all of the value chain activities across the service life cycle.
• Reports depicting the service performance throughout the service value chain.

6.5 Design & Transition

The design and transition activity of service value chain ensures, meeting the objectives and expectations of the stakeholders by designing and transitioning the service & products as per the required cost, quality & time aspects. Design and transition have to consider all the four dimensions of the products & services i.e. people & organization, Information & Technology, value stream & process and partners & suppliers.

Releasing the services & products to market in time is a very important factor to ensure the utilization of the services and products. In our example of HR portal services, if there is a delay in introducing the portal services, the value realization will delay. Further, the required quality aspects like products features, functionalities, and performance has to meet the defined expectations and has to be produced within the defined budget. Design and transition have to justify the total cost of ownership.

The inputs and outputs for the activities comes from (& goes to) other value chain activities like engage, obtain/build, deliver & support, partners & supplier and all the improvement initiatives.

Input:

• The decision captured in the plan for portfolios of services and products, which provides policies, architectures, service requirements, improvement initiatives etc.
• The details of the products performance status reported (both for improvement, change implemented & performance of product in production environment) etc.
• Performance of the services & products supplied from the partner & suppliers, their knowledge & information.

Output:

• Definition of all the requirements and specifications for obtain/build
• All the contract and agreement like Service Level Agreement, Operation Level Agreements
  • Underpinning contracts capturing the requirements which may be needed for effective engagement.
  • Releasing the new and changed services & products delivery and support, their knowledge & information.
• Information required for improvement of performance through identified improvement opportunities and current performance information.

6.6 Obtain / Build

The obtain/build activity of service value chain focuses on acquiring the resources required to build the services, build them (configure and implement), integrate, test and confirm the performance, which has to be in line with the specification established in architectures (i.e. solution architecture, technology architecture, requirements established etc.)

As part of obtain/build, all the components acquired are tested at component level first and at the next level of integration till the service or product achieves the requirements.

The inputs and outputs for the activities come from (& go to) other value chain activities like engage, design & transition, deliver & support, partners & supplier and all the improvement initiatives.

Input:

• The detailed architectures and policies, contracts/agreements with partners & suppliers (both internal & external to organization), goods and services supplied, requirements and specifications, initiatives taken for improvement & their status
• Further, proposed changes, change requests raised to improve the performance or modify the features of the services or products
• The detailed knowledge & information about new or changed services & products and the third-party service components supplied from supplier or partner.

Output:

• Service & service components for design & transition and deliver & support
• The detailed information & knowledge about the new or changed services & service components
• The contract & agreement requirements for effective service engagement
• Information about the performance and identified opportunities for improvement of service & products

6.7 Deliver & Support

The value chain activity delivers and supports focus on delivering the services or products to the customers and ensures that they are supported throughout their lifecycle. It is essential to ensure that customers realize the value required. Here all the service actions performed have to be focused towards providing the uniform customer experience and also seek the opportunities for improvements continually.

Input:

• The new and changed services & products, contracts and agreements, service components.
• Improvement initiatives, plans and improvement status reports
• All the user support tasks, information & knowledge about the new or changed services, third party services & service components

Output:

• The delivered services (& their information) to customers & consumers
• Information & knowledge about the performance of service or products, about the completion of user support tasks for engage, identified opportunities for improvements etc.

Summary:

To summarize, in this module we looked at service value chain activities, their interactions to create service value streams. The six service value chain activities are;

• Plan
• Improve
• Engage
• Design & Transition
• Obtain / Build