USM Value Maturity Model
The term maturity is frequently confused with the term 'capability' (skill, competence). Capability refers to the degree of perfection with which a party delivers a certain performance, according to the definition of that performance. However, that says nothing about the value of that performance for the customer. Services have only one goal: to create value. For that reason, USM considers maturity from the perspective of value creation.
Value
If we want to put value creation at the center of a maturity model, it is necessary to first define the concept of value.
Value is the change in the vitality of a system.
If there is to be added value, then the vitality of the system in question will have to be improved. Because this concerns services, the system here is the business operations of the customer ('the business'). USM follows the principle "Value is determined by the observer". The perspective of that observer, the customer, therefore determines whether there is added value.
Another USM principle is: "Value is created through co-creation". Both the provider and the customer must benefit from the service if there is to be a sustainable relationship. Because of these different valuation perspectives, value is by definition multi-dimensional. Another characteristic is that value arises in the interaction and that value can only be determined afterwards.
Value can manifest itself in different ways, from the use value for the customer (value in use), to social values (eg image of customer and/or provider), environmental values (eg sustainability, the ecological footprint) and relationship values (the meaning of customer and provider for each other). Many values translate into financial benefits, both for the customer and for the provider.
Maturity model based on value creation
USM applies a maturity growth model described by KPMG'*' in 1998, which has not been improved since then. The model describes the maturity of a provider in five growth phases, where the added value in a customer-provider relationship is central:
- Technology driven. In the provider's first growth phase, the customer is not leading but following. The provider focuses on the goods component of the service, with particular attention to technology.
- System driven. In the second growth phase, the technology is under control. The provider is able to make coherent systems available. The provider has reasonable control over its own activities, but the policies are not focused at the customer.
- Service driven. In the third growth phase, the provider's attention is focused on providing services: the provider is aware of being a service provider. The provider also pays special attention to its own position and policies. The provider knows which services it can provide, and the policies are aimed at providing the best services. The better the provider can provide those services, the better the provider thinks it performs.
- Customer driven. In the fourth growth phase, attention shifts to the customer. The customer and the provider cooperate in specifying the service and how this creates value for both the customer and the provider. The provider is able to translate the needs of the customer into services and actively respond to the wishes of the customer. He understands the business of the customer and supports him by contributing expertise. The provider performs at a constant level within agreements made and is in constant consultation with the customer.
- Business driven. In the fifth growth phase, the customer and the provider deliver added value to the customer's business activities through a partnership. The provider invests at its own risk in the development of services that create (even) more value for the customer. The provider continuously innovates, is aware of business developments in the customer's domain, and can translate these into opportunities for the customer. On its turn, the customer organization has detailed knowledge of the services provided.
'*' Theo Bosselaers, Mark Griep, Joost Dudok van Heel, Joachim Vandecasteele and Rob Weerts (1998). The future of the IT organization. A multi-client study on the development of IT organizations. In: IT Management Yearbook 1998, J. van Bon (ed.), Publisher ten Hagen & Stam.
Strategies
The value maturity level is not a matter of 'good' or 'bad': an organization can determine its own strategy in terms of creating value, and there's lots of money to be made in the lower regions of the Value Maturity Model.
The model specifies three strategies:
- Operational Excellence - If services are not the core business of the provider, they can focus on delivering goods. This means that the provider has no relationship with the business of the customer: they focus on the delivery of goods, and the customer should figure out how to benefit from these in the customer's business. The examples of Dell and Apple (above) are examples of this strategy. These providers have an inside-out approach of their position in the market. The agreements in this strategy will contain many details on technological merits of the products of the provider.
- Service Excellence - If a provider focuses on delivering services, they will compete with other providers for the best services. This can still be done from an inside-out perspective. The agreements in this strategy will still contain lots of technological details that are mainly of interest to the provider.
- Customer Excellence - If a provider focuses on delivering value, they must understand the business of the customer. They will work closely with the customer, because their contribution has a significant influence on the business success of the customer. As a consequence, the provider might earn a seat at the table of the customer's Board. Agreements in this strategy contain business terminology; they specify the provider's services in terms of business effect.
A provider can only successfully apply a Customer Excellence strategy after having "mastered" the Operational Excellence and the Service Excellence strategies: the strategies build on each other.
Assessing the maturity phase of an organization
The growth curve shows a provider's phase in their development towards customer driven services. The model follows the view that a higher maturity level can only be fully realized if the organization has "mastered" the underlying levels. Most organizations aim for level 4 (customer driven service, the green arrow), but in practice they are climbing from level 2 (system driven) to level 3 (service driven, the red arrow).
The model illustrates the transition from the service driven organization to the customer driven organization. The service driven organization optimizes its services from the provider's perspective. That organization strives for the "best services" from a performance perspective. The capability of the technical deployment is still central. Only if the provider takes the demand of the customer as a starting point and focuses on cooperation with that customer, can that provider reach the level of the customer driven organization. This is where an inside-out approach is converted to an outside-in approach.
USM describes customer driven services delivery.
The capability with which a provider performs the service is therefore of a completely different order than the maturity assessment according to value creation.
Example: Dell and Apple are known as highly skilled providers, but they act at the technology driven or system driven level. They have no idea of the business activities their users will do with the stuff they provide. A lease company can offer its services in an extremely competent manner, but it still acts at the system driven or service driven level. A taxi company can shamefully perform services at the level customer driven.
A provider's position on the maturity value scale may be limited by the provider's skills, but it can also be an informed choice. Providers can compete with each other along various dimensions: "We are the best provider at level X" or "We provide services with more value than the competition".
Example: A lease company can focus on the best performance (capability) of a service at the system driven level (“We provide the most beautiful cars at the best rate”). That provider can then argue in competition with other providers that they provides "better" services. However, this proposition is level-bound: the provider assumes competition at the same level. Another lease company can compete with such a proposition by offering a service at a higher level. A service driven proposition could then be "We not only offer the best cars, but we also ensure that you can exchange them for another model at any time". A proposition at a customer driven level could go even further: “We draw up a portfolio of suitable cars together with you, and we tailor the support of the fleet to the requirements of your business”.
Please note: maturity in terms of value creation does not only relate to the position of the provider, but also to that of the customer. If there are major differences in maturity between provider and customer, it is necessary to take this into account in order to avoid conflicts of thinking, policies and mutual expectations. The customer and provider must therefore be at a somewhat equivalent level, or act on it, to achieve successful cooperation.
Service agreements as symptoms of maturity
The maturity of the provider (and the customer) is often easy to deduce from the service agreements. If those agreements are drawn up in technical terms, which are especially meaningful for (the infrastructure of) the provider, this is a symptom of a lower maturity: system driven or service driven. Here we find the traditional SLAs: service level agreements.
If the service contracts are drawn up in terms that are meaningful to the customer, in business terms that indicate what value is added to the customer, this is a symptom of a more mature service delivery, at the customer driven or business driven maturity level. Here we find agreements that we simply call service agreements - because that is what they are. In analogy with the traditional 'SLA', we might call them business level agreements (BLAs), not to be confused with the fancy products that are offered under the name of XLAs: experience level agreements: these shot not be mistaken for each other.
USM user organizations can take a Workshop Service Agreement, where they learn in half a day how to convert their traditional SLA to a simplified and meaningful SA.
Balance between provider and customer
What is true for the maturity of the provider is equally true for the customer. An imbalance between the relative maturity levels of customer and provider leads to a service misfit. So always make sure that investments in maturity growth always even out on both sides of the relationship.
