Dr. Shue-Jane Thompson
According to Computer Economics, “among organizations that outsource IT work, the percentage of their total IT budget going to service providers rose at the median from 6.1 percent in 2009 to 7.1 percent in 2010…[and] then jumped to 8.6 percent in 2012.”1 These statistics speak to an increasing trend in IT outsourcing where greater offshoring and/or outsourcing of services operations has shifted the IT service culture from internal command and control of IT assets to IT service as a utility. Consuming IT services as a utility shifts the risks to the service provider, but it often results in the loss of valuable business intelligence.
In any service and support situation, the relationship between service providers and consumers is mechanically bounded by the service terms and conditions and a set of agreeable payment terms. What’s often missing in outsourcing-based provider-consumer relationships is a set of business rules that governs the processes for handling the valuable information generated during IT’s day-to-day operations, such as consumers’ activity patterns and details of the interactions between consumers and the service ecosystem. This phenomenon, which has become the norm in today’s cloud-based outsourcing environment, often results in the loss of business intelligence. The effect of these losses can far outweigh the money an organization might save by outsourcing. But are there ways to reverse this trend? Absolutely.
Lockheed Martin is a global security, aerospace, and information technology company that does the majority of its business with the US Department of Defense and other federal government agencies. In addition to an “outside-in,” consumer-focused service methodology that helps it manage services demand, Lockheed Martin’s service practice leverages advanced “Big Data” analytical capabilities that turn information from day-to-day operations into business intelligence, which enables its clients’ to make informed decisions. In short, the outsourcing services Lockheed Martin provides focus both on affordability and the use of business intelligence to empower decision making.
Service providers continually seek the ways and means to meet their consumers’ needs and strive for business success. The most successful service providers understand that although consumer interaction is the reason work is performed, managing the consumer experience is what service management is really all about. Service operations, such as the service desk and the consumer service center, are at the forefront of interactions that generate valuable real-time insights into consumers’ experiences and desired services. When handled appropriately, this information can be turned into valuable business intelligence, providing leading indicators on patterns of business activities and user behavior. If information is power, then business intelligence gives organizations the wisdom to exercise that power.
Taking advantage of the business intelligence derived from service operations can add tremendous value. Adopting a consumer-focused service methodology like Ian Clayton’s “outside-in” approach helps to further enhance business intelligence by incorporating rich consumer content. Within Lockheed Martin, the Services Engineering practice models the “outside-in” approach and takes advantage of operational business intelligence, turning them into an automated consumer-demand query engine (i.e., “Big Data” analytics). This near-real-time, continual stream of business intelligence provides timely augmentation of its services design and delivery approach, enabling it to provide the just-in-time outcomes consumers desire and eliminate the costly trial and error involved in meeting consumers’ needs.
For most service and support organizations, there’s a natural tendency to look inward at what they do and how the work is designed and accomplished, and to measure performance using internal goals that rarely align with their consumers’ needs and wants. This is the so-called “inside-out” approach, and organizations with a heavy emphasis on engineering are especially prone to this type of internally focused thinking. It’s also characteristic of organizations that fail to connect their services to their consumers’ needs.
Many service management frameworks, such as ITIL, provide nonintrusive methods for improving an organization’s service offerings and gaining greater effectiveness and efficiency. However, ITIL, even though it’s been widely adopted and is an outcomeoriented framework, lacks an “outside-in,” consumer-oriented service approach and doesn’t provide a mechanism for reinforcing the alignment of services with consumers’ desired outcomes. And while ITIL laudably promotes knowledge-based operations, it doesn’t include any processes for optimizing the business intelligence derived from the service operation stage in the lifecycle, nor does it promote using the “outside-in” methodology to use consumer demands to drive the service portfolio.
Service design driven by “outside-in”-validated demands and the successful use of business intelligence enables a set of services that are better aligned with consumers’ experiences and desired outcomes. This is especially important when it comes to providing outsourced or offshored services and planning the service pipeline.
The Essence of Demand Management
According to Brandon Buteau and Sandy Shrum, “services make up 80 percent of the world economy and comprise more than half of the US Department of Defense’s acquisition.” With services accounting for such a large portion of the global economy, service providers are striving to increase their market shares by raising their value propositions and improving the ways they meet their consumers’ demands and expectations. Many of these providers have found they are most successful at predicting service demand when they take full advantage of business intelligence.
The essence of demand management is twofold. Fundamentally, it means having the ability to evaluate current service assets to ensure that your organization is delivering the right services at the right time and in the right way (i.e., the way consumers desire to consume them). In addition, it requires an understanding of current and future demands. Information gleaned from day-to-day service operations is an organization’s best asset for understanding business activity patterns and the consumer experience, and for empowering consumers to make informed, strategic decisions.
Organizations have long relied on tools like consumer satisfaction surveys to gain understanding of consumers’ demands. However, traditional surveys and interviews merely capture a snapshot of consumers’ needs at a specific point in time, making them lagging indicators, not leading indicators. In addition, consumers don’t always have a clear idea of which services might best fit their needs. One of the keys to demand management is influencing consumer behavior and steering consumers toward the services that will meet their needs. This is where “outside-in” meets service strategy and design. Service providers should focus on mechanisms that relate their services to their consumers’ value points; in other words, organizations need to look at their services from the consumer’s perspective. To create a service environment that pleases consumers and prompts them to make purchases, service providers need to be able to mine their operational data and turn that data into information and valuable business intelligence. This kind of “Big Data” analytics can provide exceptionally sophisticated business intelligence.
In addition, social media, such as blogs, Twitter, or instant messaging, allows consumers to freely share their experiences and needs with their service providers. Enabling a social media-based service environment that allows consumers to actively engage and provide real-time feedback is a worthwhile investment. Service providers can leverage this environment to keep a finger on the pulse of consumers’ changing needs and steer consumers toward the new and existing services that might meet those needs. They can also use intelligence from this channel to drive their service vision and strategy. Ultimately, social media is most effective when it’s coupled with an effective provider-consumer engagement model. Otherwise, it’s just noise and busywork.
Above all, service providers should avoid guessing at or interpreting their consumers’ needs, practices that often result in continually chasing make-believe requirements. This is a common hazard in large system development environments where complex sets of requirements derived from so-called systematic approaches define how the system will behave. Developers then “translate” these requirements into system designs and “imagine” how consumers will interact with and experience the system. Consumers’ needs are often considered at the very end, either during consumer testing or after consumers have already been forced to adopt the system. The outcomes? Frustrated consumers, very expansive systems, and sometimes both.
An “Outside-In,” Consumer-Oriented Information Fusion
Traditionally, business intelligence is extracted by using rule-based “Big Data” analytics to aggregate, correlate, and deduce patterns and trends. The figure at right illustrates an “outside-in,” consumer-oriented information fusion where business activity patterns, industry trends, and consumer experiences are aggregated and fused, producing the business intelligence needed to define services demands and achieve more successful services outcomes, such as happier consumers, better consumer relationships, lower operational costs, and higher profits. Lockheed Martin models this approach, maximizing business intelligence to enhance its service capabilities by proactively identifying trends and patterns of consumers’ demands and experiences and by embedding “Big Data” analytical capabilities in its service solution design. For Lockheed Martin, two trends are of particular relevance as we move into 2013: outsourcing and the cloud.
Outsourcing and the Loss of Business Intelligence
Few outsourcing contracts go beyond the basic business terms and conditions, and fewer still focus on information-fusion requirements, let alone the need to push business intelligence to stakeholders. This loss of valuable business intelligence often results in dissatisfied consumers, service quality degradation, and loss of revenue. Similar situations can also occur when the renewal of contracts or the transition of services cause a disruption in the flow of business intelligence. In the worst cases, this disruption can lead to the mishandling of information, resulting in security incidents like privacy violation, proprietary information leaks, etc. Taking advantage of business intelligence starts with protecting and ensuring the continuity of business intelligence throughout the outsourcing transition. Outsourcing services doesn’t mean losing information. In fact, handling outsourcing business intelligence properly can maximize the returns on the outsourcing relationship.
Business Intelligence in the Cloud
Service and support has entered a new era, one in which utility-based computing enables IT capabilities to be consumed as metered services. This pay-by-the-drink model has several key benefits for consumers: they pay for services by consumption, they aren’t responsible or liable for the behind-the-scenes infrastructure, and they aren’t required to make any upfront investment. In addition, consumers have more choices; they can select the service provider that best meets their needs and expectations, and they can negotiate to retain their business intelligence, further enhancing the outcomes of the outsourcing relationship. From a cloud service provider’s point of view, to secure its market share in a competitive cloud service environment, it needs to understand consumers’ needs and offer the right services at the right time. Business intelligence on consumer preferences and trends can help service providers design better services, attract more consumes, and increase revenue. Therefore, the use of business intelligence can give cloud-based service providers a competitive advantage.
Cloud-based service offerings, where service providers commoditize their assets to provide a wide spectrum of services to multiple user communities, are a key feature of this new era of service and support. Unlike traditional IT environments, where organizations own a good portion of their infrastructure, the cloud environment allows communities to consume services they desire without the burden of ownership. While everyone focuses on the clouds most obvious benefit (i.e., reducing operational costs), they overlook the fact that cloud-based services also have a more complex set of consumer profiles that require additional attention to ensure secure, scalable, timely, and affordable service delivery. The business intelligence generated by complex public cloud environments can be powerful fuel for a business’s strategy, but if it isn’t properly protected, it can also cause extensive damage. Nevertheless, risk aside, maximizing business intelligence in the cloud is essential to achieving continual service success.
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Today’s service providers are challenged by smart, savvy consumers who want providers that understand their needs and expectations. Being able to meet and exceed your consumers’ needs and expectations is essential for locking down their business. Business intelligence is the key. At Lockheed Martin, service and support are disciplined engineering practices that take advantage of business intelligence driven by ITIL’s outcome-based service design and Ian Clayton’s “outside-in”-based approach to demand management. These are the secret sources that enable Lockheed Martin to continue to be the federal government’s number-one IT service provider.
A Very Short Introduction to “Outside-In” Thinking
by Ian Clayton
“Outside-in” thinking is a philosophy and management approach that places the interests of customers ahead of the organization’s capabilities. Organizations that adopt an “outside-in” approach focus on satisfying their customers by efficiently and consistently delivering a combination of superior service experience and successful customer outcomes.
In economically stressful times, management teams may focus almost entirely on internal processes—improving productivity, downsizing and so forth. Decisions are made based on internal knowledge and instincts. This is “inside-out” thinking, and it can cause you to lose touch with your customers. This is particularly true for enterprise IT organizations.
“Outside-in” thinking, on the other hand, emphasizes the need to look at everything you do from the customer’s perspective, and to manage your organization’s performance as a service provider or business based upon customer satisfaction levels. An explicit customer-based justification is sought for every decision. The what and how of process engagement and activity performance are driven by the why.
“Outside-in” thinking ensures that your organization is customer-centric, not just customer-aware, and it gives you the ability to answer the following key questions:
- Who are our customers?
- What activities do our customers perform in the pursuit of success?
- How do we help our customers perform these activities?
- How satisfied are our customers with the service and/or support we provide?
Organizations that can answer these types of questions are able to commit effort and resources where they will have the greatest impact on customer satisfaction, easily adapt to changes in customer behavior and needs, and make targeted improvements to internal operations and offerings.
“Outside-in” thinking is the key to success in the “age of the customer.”
Shue-Jane and Ian Clayton will be presenting a session on this topic at the HDI 2013 Conference & Expo (session #301, “The Outside-In, Inside-Out Continuum: The Lockheed Martin Experience”). To learn more, or to register for the conference, visit
Dr. Shue-Jane Thompson is the chief of the itSM Office, CTO, at Lockheed Martin Information Systems & Global Solutions. With more than two decades of professional experience, including leading and managing many large nation-wide and international businesses and IT programs, she possesses the critical business and technology skills to deliver needed solutions to US federal agencies, the Department of Defense, and state, local, and commercial consumers. Shue-Jane is a certified ITIL Expert, a PMP, an IEEE Distinguished Visitor Program awardee, and a Distinguished Professional in Service Management through The priSM Institute.