Best Practices for Service Management: The Value Chain in ITIL 4

Tags: ITIL4, IT Service Management, Service Provider

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ITIL 4 is here with a service value system including a value chain.

ITIL or IT Infrastructure Library is a set of best practices and universally accepted terms for ITSM providers, customers, and potential buyers. It is used to help ensure easy implementation, integration and ultimately the greatest value. In ITIL 3 the added value was created based on the service lifecycle. However, this approach was often represented with a sequential structure, or waterfall model, and the framework lacked the flexibility to respond quickly to changes. In ITIL 4, this cycle has been replaced by a service value system which includes an integrated value chain.

This article is a translation and expansion on the article "Best Practices für das Service Management Die Value Chain in ITIL V4" originally written by Marcus Wagner, Principal Consultant at Serview GmbH and Peter Schneider, Chief Product Officer at Efecte. You can read the original article (in German) from DataCenter Insider here.

ITIL 4 Value System

The value system introduced within ITIL 4 emphasizes the need to consider all of the different aspects and areas which affect the creation of value. The key components of the value system are guiding principles, continual improvement, governance, practices and at the heart, service value chain. This article will primarily focus on the topic of the service value chain and the effects on services and service design.

ITIL 4 Value System
Figure 1: The service value system according to ITIL 4

ITIL 4 Value Chain

As seen in the image above, the value chain is the central operating model of the service value system in ITIL 4. The value chain provides a structured description of the most important activities which create added value for service customers. The value chain is made up of six components: plan, improve, engage, design & transition, obtain & build, and deliver & support (see: Figure 2). In ITIL 4, all of the activities of a value chain closely interact with one another. The sequential numbering is only used to label the individual aspects, not the sequence for processing content. The ability to incorporate a flexible approach in service design makes it possible to generate additional value for all stakeholders involved based on clearly defined input-output relationships.

ITIL Value Chain

Figure 2: The service value chain according to ITIL 4

1.Plan

All plans for service management will be created and coordinated in the context of these activities. The “Plan” activity includes both the strategic level (portfolio decisions), the tactical area (specifications and guidelines) and the operational level for planning day-to-day service operations.

2. Improve

All improvements in service management are prompted, prioritized, controlled and implemented through the "Improve" activity. This activity includes all the components needed for service delivery, including added-value flows, technology, organizational aspects and the necessary processes (referred to as practices in ITIL 4).

3. Engage

Communication and interaction between service providers and the corresponding stakeholders takes place through the "Engage" activity. This activity improves the transparency of the requirements and optimizes the common exchange of information and the relationship management of the partners involved.

4. Design & Transition

This activity is responsible for designing and delivering new and modified products and services. "Design & Transition" is also responsible for providing all other value chain components with the necessary information and knowledge. This centralization ensures that service delivery is always aligned with the current expectations of the stakeholders.

5. Obtain & Build

The “Obtain & Build” activity is responsible for providing new service components that are needed to adapt existing products and services, or create new ones. These components must meet the defined specifications and are provided to the subsequent value chain activities, including all required information.

6. Deliver & Support

The operation of the services and products is carried out during this activity to generate added value for customers and users. In this activity, the provider must continuously ensure that the service operation is performed in accordance with the co-ordinated customer service-level agreements.

ITIL 4 Value Stream

Value streams are best categorized as a specific path starting with a need and ending with created value. Value streams can serve two key purposes, to describe what is happening or what should happen. It should be noted that value streams differ from the value system and value chains as they are not meant to be universally adopted, but serve as a set of steps. This distinction is primarily due to their practical nature.

The best illustration of a value streams is through the use of a specific example: A customer needs a new service and passes on the relevant requirements as a service request to their provider. According to ITIL 4, the IT project required for delivery is implemented with the aid of a value stream consisting of 11 consecutive steps assigned to the 6 value chain activities, based on the ITIL 4 framework.

ITIL 4 Value Stream

Figure 3: Value stream interacting with defined value chain activities

As the example shows, the value stream within ITIL 4 can be designed to be very flexible. This flexibility of ITIL 4 creates the advantage over ITIL 3 by allowing service providers to now simultaneously map traditional sequential projects, agile process models or individual combinations (hybrid solutions).

Benefits of implementing ITIL 4

One key advantage of ITIL 4 for service providers and service customers is the immediate transparency of the entire value stream. This allows for traceability within the value stream and simultaneously forms the basis for continuous optimizations.

For example, it is possible to identify and resolve non-value adding activities quicker. These activities constitute a form of waste for lean management and should therefore always be removed or minimized. Based on this principle, the value stream should be continuously optimized, a key message in ITIL 4.

All activities of service providers should always be directly oriented toward generating traceable, added value for the stakeholders.

Value streams can be very extensive and complex, regardless of industry or market. To control and manage this complexity, all steps of the value stream are always coupled with the associated six value chain activities. These, in turn, are combined with ITIL principals, practices and governance to create the value system. This coupling allows providers to design their service management holistically and control them in a more traceable manner promoting continuous improvment.

If you want to learn more about ITIL 4, how it differs from previous versions and the value it will bring to service management organizations then view our webinar recording from April 23rd 2019.

Webinar: ITIL 4 is here - what should we expect?

View webinar recording

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Written by Efecte