Value

Value and value co-creation

An organization is alive to produce values for stakeholders. The term value is generally used during ITIL service management.

Value definition: 

Value is the perceived benefits, usefulness, and importance of something.

Value creation

Value creation is a balancing act involving outcomes, costs and risks. The goal is creating value for stakeholders.

Value co-creation

There are outdated and updated opinions about value creation. In the outdated view, value is delivered in the same manner as sending a package from a source (service provider) to a destination (customer). The relationship between the provider and customer is one-way, the value is delivered just through the received service(s) at the customer side, the customer/consumer has no role in the creation of value and the service provider acts in an isolated environment. But in the updated opinion, the value is created by a collaboration between service providers, customers, other organizations, and stakeholders who are parts of the relevant service relationships. Providers do not work isolated. They work interactively in relation to other stakeholders and all stakeholders are involved in the definition, design, and implementation of elements in a service chain.

In order to make value, it is important to support the consumers to achieve outcomes from services. Therefore, it will be important to know the differences between terms of outcome and output.

Output

A tangible or intangible deliverable of an activity is defined as output.

Outcome

A result for stakeholder which is enabled by one or more outputs.

As an example, the output of a powerplant is electricity, but the outcome is more welfare for the families.

Because the outcomes are not tangible, it will be difficult to understand the expectation of customers.

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Cost

The amount of money spent on a specific activity or resource.

Actually, there are two types of costs: The first type is known as a value because it’s the cost removed from the consumer by running the service. For example, A cost of paperwork will be removed by running a paperless software system. The second type of costs are which the consumer should pay for them. E.g. Monthly Charge for cellular access. The balance between two types of costs makes Value and Financial benefits.

Different views of value

The definition of value can be varied by different stakeholders e.g. customers, users, suppliers, etc. Therefore, value is subjectively defined.

Risk

A possible event that could cause harm or loss, or make it more difficult to achieve objectives. It can also be defined as the uncertainty of outcome and can be used in the context of measuring the probability of positive outcomes as well as negative outcomes. There are two types of risks: The first type is risks that reduced or removed through enabling the service. E.g. reducing downtime of servers by migrating them to a highly available network. And the second type of risks are the ones that may be produced by the service. E.g. risk for lack of data during a migration. The approach should be the reduction of risk. In terms of service relationship, the consumer will be the risk owner and the provider will be the risk actionee and the consumer performs these activities in risk management:

1. It helps to define the requirements and outcomes properly.
2. It communicates clearly the critical success factors (CFS) and constraints that apply to the service.
3. Makes sure that providers have efficient access to necessary resources.

Utility

The utility is the functionality offered by a product or service to meet a particular need.

The utility can be summarized as ‘what the service does’ and can be used to determine whether a service is ‘fit for purpose‘. To have utility, a service must either support the better performance of the consumer or remove constraints from the consumer. Many services do both.

Warranty

Assurance that a product or service will meet the agreed requirements. Warranty can be summarized as ‘how the service performs’ and can be used to determine whether a service is ‘fit for use’. The warranty often relates to service levels aligned with the needs of service consumers. This may be based on a formal agreement. The warranty typically addresses such areas as the availability of the service, its capacity, levels of security, and continuity. Service may be said to provide acceptable assurance, or ‘warranty’ if all defined and agreed conditions are met.

As an example to declare the difference between utility and warranty, a projector that does not have the necessary ports to connect to source devices, may not have enough utility, likewise if it cannot be up and running 8 hours a day, it may not gratify the warranty.