The Option Space Tool

A Service Portfolio is an expression of the provider’s service strategy. Executing a service strategy involves making a sequence of major decisions. Some are made immediately while others are intentionally deferred. Some commitments once made cannot be undone. Providers can only revise their plans for future commitments. SPM sets the framework within which future strategic decisions will be made.

A useful tool for making decisions on the timing and sequencing of investments in a Service Portfolio is called an Option Space (Figure 5.18). An Option Space can guide decisions to invest and, if so, when. (This section draws on Luehrman.27)

Figure 5.18 Option Space

The Value-to-Cost axis represents the ratio of a service’s worth to its cost. A Value-to-Cost of less than one designates a service worth less than what it costs. When the measure is greater than one, the present value of the service is greater than its cost. Financial measures, however, need not be the only measure. Other factors can and should be incorporated such as:

• Mission imperatives
• Compliance
• Trends
• Intangible benefits
• Strategic or business fit
• Social responsibilities
• Innovation.

For example, fulfilling a legal compliance issue may on its own generate a Value-to-Cost measure of greater than one. Government agencies may generate Value-to-Cost measures on public policy while military organizations may generate measures based on mission imperatives.

The other axes are based on topics covered in other chapters: market space s, customers and customer needs. Each is used as a guide for strategic intent. The desire of a Type I provider to serve a new business unit, for example, may take on less value because the customer needs are already over-served. If an axis is not relevant to the portfolio, disregard its guidance. If market spaces aren’t important, and a Value-to-Cost analysis isn’t necessary, simply ignore the two axes.

Analyse

This is where strategic intent is crafted. Begin with a set of top-down questions:

• What are the long-term goals of the service organization?
• What services are required to meet those goals?
• What capabilities and resource s are required for the organization to achieve those services?
• How will we get there?

In other words, what are the perspective, position, plan and patterns? The answers to these questions guide not only the analysis but also the desired outcomes of SPM. The ability to satisfactorily answer these questions requires the involvement of senior leaders and subject matter experts.

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