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ITIL 4 Value System, Value Chain, Value Stream: What’s the Difference?

By | April 23, 2019 in ITIL

ITIL 4 Value System, Value Chain, Value Stream

ITIL 4 Foundation was released in February this year. This new version of the leading best practice framework for IT service management (ITSM) introduced a number of new concepts. You can read an overview of ITIL 4 in my previous blog: Everything You Officially Need to Know About ITIL 4.

Three of the concepts introduced in ITIL 4 are:

  • The ITIL service value system
  • The service value chain
  • Value streams

Because these have very similar names, I’m seeing some confusion about what exactly they are, and what the difference is between them. The three ideas are related, and the names certainly help to emphasize that ITIL 4 is all about how value is created through services.

In short:

The highest-level concept is the service value system.

The service value chain refers to activities that lie at the heart of the service value system.

Value streams offer more detailed descriptions of the activities needed to respond to specific types of demand and opportunity.

The ITIL service value system

The ITIL service value system includes everything needed to create value in the form of services. It encourages service providers to think about how all the different components needed to deliver services can work together to help co-create value with service consumers. The diagram below provides a way to visualize this.

Figure 1.1 on Page 3 of ITIL Foundation.

Figure 1.1 on Page 3 of ITIL Foundation.
Copyright © AXELOS Limited 2019.
Used under permission of AXELOS Limited. All rights reserved.

My previous blog about ITIL 4 included a brief description of each of the service value system components, so I won’t repeat that here, but I will offer a few thoughts about the system as a whole.

As the diagram shows, at the heart of the ITIL service value system is the service value chain.  But it’s not there on its own, because a service value chain does not exist in a vacuum.  It’s both constrained and supported by the governance and practices that surround it. Moreover, as you can see in the diagram, guiding principles and continual improvement surround all three, because they support all three. They need to be embedded within the culture of an organization and practiced by everyone involved in the governance and management of services. If you want to know more about continual improvement, then see my blog The Help You Need to Adopt Continual Service Improvement. If you’re not familiar with the guiding principles, then see my blog The 7 Guiding Principles of ITIL 4.

You can’t assign continual improvement to one person or group while everyone else follows existing processes and rules. A culture of continual improvement needs everyone in the organization to think about how they could improve, and to take responsibility for making improvements that are within their area of control. Even the most junior member of staff can think about their own personal development and how they could improve.

Similarly, the guiding principles apply to everything the service provider does, all of the time. If we consider one guiding principle, for example “focus on value”, this is something that applies to everything that the service provider does, to all people, and all services. If we decide not to focus on value one day then we’ll probably do the wrong things all day!

The diagram reminds us that the 7 guiding principles and continual improvement apply to governance, as well as to practices. The governing body of a service provider that practices continual improvement and makes use of guiding principles is much more likely to make useful, consistent, and profitable decisions about how they want the organization to operate.

It is, perhaps, more obvious that practices like incident management and supplier management are part of the service value system. Each practice includes resources needed to achieve an objective. For example, an incident management practice may include:

  • Organizations and people, with the skills and competence needed to log, manage, diagnose, and resolve incidents. This doesn’t mean that there needs to be a dedicated incident management team, just that an effective organization will have people who are responsible for managing incidents, and have the skills and competence needed to do so.
  • Any information and technology required, for example a knowledge base and a ticketing system.
  • Value streams, processes and procedures that define relevant activities.
  • Relationships with suppliers and partners, including support contracts for third party products, providers of training, cloud services and many more.

It’s easy to get lost in the everyday detail of what we do, which is why it’s so important to stand back and think about the whole system working together to create value. When we approach what we do by thinking about the service value system we’re prompted to take a systems view, and this helps ensure that nothing gets forgotten, or over-emphasized at the expense of other equally important things. We’re also more easily able to identify areas of weakness that we can work to improve.

Service value chain

The service value chain describes six activities that work together to take incoming demand and create corresponding value - by creating and managing the products and services which enable the service provider to co-create value with the service consumers.

Figure 4.2 on Page 58 of ITIL Foundation.

Figure 4.2 on Page 58 of ITIL Foundation.
Copyright © AXELOS Limited 2019.
Used under permission of AXELOS Limited. All rights reserved.

The six value chain activities identified in ITIL 4 are listed below.  They can be considered as ‘archetypes’ or classes of activity. They do not describe in detail exactly how products and services are created in the co-production of value. This is because exactly what needs to be done, and exactly which of an organization’s practices will be involved in doing it, varies depending on the specific situation. Nor do the value chain activities occur in a fixed order, as we’ll see in the next section, and each may be repeated many times in a single value stream.

  • Plan involves creating plans, portfolios, architectures, standards, policies etc. for use throughout the service provider organization. People contributing to this activity need to have great analytic and management skills, as well as understanding business drivers and constraints, financial issues, and the capabilities of the service provider organization.
  • Engage involves engagement with external stakeholders, including users, customers, suppliers, and regulators. People contributing to this activity need to understand concepts like customer experience and user experience, and they need skills and competence in negotiation and communication.
  • Design & transition centers on the creation and release of new and changed services. People contributing to this activity must be able to balance the trade-off between time, cost, risk, and quality, they must have a comprehensive understanding of service management and of how services contribute to value creation.
  • Obtain/build involves creating service components. This could include software development, management of cloud infrastructure, procurement of third-party hardware, software, and services. People contributing to obtain/build need to have very specific technical and process skills, related to their area of expertise. They also need to understand the methodologies in use in their organization, such as agile, lean, DevOps, or PRINCE2 project management.
  • Deliver and support ensures that services are delivered and supported in a way that meets stakeholder expectations. This may include resolving incidents, monitoring applications and infrastructure, generating reports, analyzing problems and other ongoing activities. People contributing to this activity need to be very good at prioritizing and managing conflicting workloads, with a clear understanding of customer and user expectations.
  • Improve includes creating improvement plans and initiatives to ensure continual improvement of all products, services, and practices. People contributing to improve need to have a combination of analytic and creative skills, as well as the ability to influence and drive other people to help them achieve their goals.

Although some aspects of a value chain activity will remain constant, the details are likely to vary wildly, which is why ITIL 4 avoids being prescriptive. People involved in creating value think about what they’re doing from different perspectives, depending on their specific roles and organizational contexts.  For example, the culture and mindset of people contributing to engage will necessarily be different from the culture and mindset of people involved in design & transition.  Similarly, these value chain activities may bear very little resemblance to the same activities being carried out in a different organization. But when you think about what you’re doing as part of a value chain, and can identify which value chain activity it belongs to, it becomes much easier to identify the skills and competencies your organization needs and ensure that they’re in place. And, as we’ll see in the next section, this systems level thinking can help us to understand the detailed value streams that are needed to co-create value.

Value streams

A value stream is a specific journey through the service value chain, starting with demand and ending with value creation. There is only one value chain, but each organization may have many different value streams, and these are likely to be completely different to the value streams in another organization. Each value stream may loop around the value chain, involving many different types of engage activity for example, before finally resulting in value creation. Each value stream may also include contributions from many different practices, for example one value stream may involve relationship management, portfolio management, service design, software development and management, service validation and testing, release management, change control, and organizational change management.

ITIL describes the service value system and the service value chain in detail, as these high-level concepts can be readily adopted with little change by many organizations. Value streams are different. The ITIL Foundation publication describes four example value streams, but these are in an Appendix and it’s not intended that anyone will follow them as described.

Value streams can be used in two very different ways:

  1. To describe what actually happens in a specific situation. This is achieved by using a technique like value stream mapping. Value stream mapping creates a very detailed flow diagram showing every activity and communication, and is a great tool for identifying improvement opportunities. The examples in the ITIL Foundation book are of this type, and they describe the exact steps taken in specific situations. But they may NOT be ideal for use in other similar situations, and they should definitely NOT be copied for use in your organization!
  2. To describe what should happen in a specific situation. This type of value stream is used in planning. For example, you may create a value stream for incident management that shows how:
    • Engage activity, through a service desk practice, captures all the information you need, and sets user expectations (remember this may be a portal, the service desk practice is more than just people and phones).
    • Deliver and support activity from the incident management practice identifies a workaround or solution.
    • Obtain/build activity from the IT asset management, change management, and deployment management practices may be invoked to swap a failed laptop or phone.
    • Engage activity from the service desk practice ensures that the user is satisfied with the resolution and that value has been created.
    • Improve activity from the problem management practice may identify that there is an underlying issue that should be resolved.

This value stream for resolving a user incident could have included many more iterations of value chain activities, depending on the exact situation.

When you document your own value streams, you’ll identify resource requirements across many different practices, including:

  • What process activities are required from each practice involved?
  • What skills and competence are needed?
  • What information should be provided, when and where is it needed?
  • What tools and automation can be used to improve the workflow?
  • What supplier contracts and relationships are needed?
  • What metrics and reporting will help to ensure the value stream is working optimally?

Conclusion

The word ‘value’ appears in many different places in ITIL. This is because the whole purpose of IT service management is to ensure that we co-create value with our service consumers.

The ITIL service value system provides a very high-level view of everything needed to co-create value.

The service value chain describes six activities that take in opportunity and demand and deliver products and services that in turn help to co-create value.

Value streams are a useful tool for analyzing and documenting the flow of work so that it can be understood and optimized.

I hope this was helpful. As always, feel free to comment below or you can catch me on Twitter at @StuartRance.

Stuart Rance

About Stuart Rance

Stuart is an ITSM and security consultant, working with clients all round the world. He is one of the authors of ITIL 4, as well as an author of ITIL Practitioner, ITIL Service Transition, and Resilia: Cyber Resilience Best Practice. He is also a trainer, teaching standard and custom courses in ITSM and information security management, and an examiner helping to create ITIL and other exams. Now that his children have all left home, he has plenty of time on his hands for contributing to our blog - lucky us!

4 thoughts on “ITIL 4 Value System, Value Chain, Value Stream: What’s the Difference?”

  1. Avatar MICHAEL KEELING

    Nicely packaged Stuart; hopefully the concise nature here will translate into real understanding on the part of those seeking to adopt ITIL 4 guidance and adapt it into their organization…

    Reply

  2. Stuart Rance Stuart Rance

    Thank you for the feedback Michael. I hope that people will understand how to adopt this new guidance in their organizations. ITIL 4 has a lot of potential to help organizations that understand the intent.

    Reply

  3. Avatar Jürgen Herrmann

    No real change, just made more „visible“ for the general audience.
    May it help to get the attention needed for the mostly ignored functions in V3.
    Great idea!

    Reply

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