ITIL 4 Value System, Value Chain, Value

Stream: What’s the Difference?

By Stuart Rance | April 23, 2019 in ITIL

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.

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.

The #ITIL service value system includes everything needed to create value in

the form of services. @StuartRance shares the differences between the oh so

familiar sounding Value System, Value Chain and Value Stream.CLICK TO TWEET

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.

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 enablement, 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:
o 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).
o Deliver and support activity from the incident management practice identifies
a workaround or solution.
o Obtain/build activity from the IT asset management, change management,
and deployment management practices may be invoked to swap a failed
laptop or phone.
o Engage activity from the service desk practice ensures that the user is
satisfied with the resolution and that value has been created.
o 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.