A successful organizational strategy must be balanced. The organization's existing success is built on customer and market relevance, which should not be abandoned. The new objective of operational excellence should be integrated into the strategy, not replace the existing focus. According to ITIL 4 DITS, while an organization may choose a primary competitive focus (e.g., operational excellence), it must maintain threshold standards in other areas (e.g., customer intimacy) to remain viable. A balanced strategy ensures that internal improvements are aligned with external market demands, creating a holistic approach that sustainably increases commercial success, in line with the 'think and work holistically' guiding principle.

A. Focusing entirely on operational excellence is a narrow approach that risks alienating the customer base and losing the market position that brought success.

B. Creating separate strategies leads to silos, conflicting priorities, and a lack of alignment, preventing the organization from achieving synergistic benefits.

D. Operational excellence requires deliberate planning and investment; it does not emerge automatically simply by focusing on customer relevance.

1. AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 2.2.1, "Strategy is about being different": This section discusses the concept that organizations must choose a competitive position but cannot completely ignore other dimensions. It states, "An organization that chooses to compete on the basis of operational excellence must still maintain a threshold of product leadership and customer intimacy." This directly supports the need for a balanced strategy (Option C) over a singular focus (Option A).

Section 3.1, "Digital and IT strategy and the organization’s strategy": This section emphasizes the critical importance of alignment between different strategic levels. A new focus on operational excellence must be integrated with the overall business strategy, which includes customer and market relevance, rather than being treated as a separate, disconnected plan (Option B).

ITIL Guiding Principles (referenced throughout the DITS publication): The principle of 'Think and work holistically' is fundamental. It dictates that no part of an organization stands in isolation. A strategy must consider the interplay between internal operations and external customer value, making a balanced approach essential.

The scenario describes an organization adopting a "completely new way of creating its services." This is the definition of innovation, which is the introduction of something new and is a fundamental driver of digital and IT strategy. This change is not incremental but represents a significant, potentially radical, shift in processes and value creation, which is a core aspect of innovation within the ITIL 4 DITS framework.

B. Operational technology: This refers to technology used to manage physical processes and machinery. While it might be part of the change, it is a category of technology, not the act of changing the way of working.

C. Ecosystem disruption: This is the effect a change has on the wider market or business ecosystem. The question describes the organization's internal action, which is the cause, not the external effect of disruption.

D. Incremental transformation: This involves small, continuous changes. The phrase "completely new way" directly contradicts the concept of an incremental approach, suggesting a more radical or transformational change.

AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 2.2.1 (Strategy and innovation): Defines innovation as 'the introduction of something new'. It further explains that innovation can be incremental or radical. A "completely new way" aligns with the concept of radical innovation, which is a key theme.

Section 4.3.3 (Approaches to digital transformation): Contrasts incremental improvement with radical transformation. The scenario clearly points towards a more radical approach, which is a form of innovation, rather than a gradual, incremental one.

Section 3.2.2 (The convergence of IT and OT): Defines Operational Technology (OT) as the hardware and software that monitors or controls physical devices, distinguishing it from the strategic act of innovation.

The most effective approach to defining vision and strategy in a complex organization with multiple divisions is collaborative. Involving both senior organizational leaders and the leaders of the specialized divisions ensures that the resulting strategy is both aligned with the overall enterprise goals and grounded in the operational realities and capabilities of each division. This collaborative process fosters a shared understanding, promotes buy-in, and creates a sense of collective ownership, which is critical for successful strategy execution. This approach directly reflects the ITIL 4 guiding principle of 'Collaborate and promote visibility'.

A. This purely top-down approach risks creating a strategy that is disconnected from divisional realities, leading to poor adoption and a lack of commitment from those responsible for implementation.

B. While the governing body provides oversight and approval, defining the strategy in isolation from operational leaders makes it less practical and actionable. Their role is governance, not sole creation.

D. Enterprise architects and consultants are important contributors, but the ultimate ownership and accountability for the vision and strategy must lie with the organization's business and divisional leaders.

1. AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 2.1.2, Creating a vision: "The process of creating a vision should be inclusive and collaborative. It should involve leaders from across the organization, as well as other key stakeholders. This helps to ensure that the vision is relevant, meaningful, and inspiring to everyone in the organization." This directly supports option C.

Section 3.2.1, The role of the leader in a digital organization: This section emphasizes that a key responsibility of leaders is to "foster a culture of collaboration and transparency." Defining strategy in isolation (as suggested by A and B) contradicts this principle.

Section 2.2.3, The strategy cycle: This section describes strategy as an iterative and collaborative activity, stating, "Strategy is not a one-off activity that is performed by a small group of senior managers. It is an ongoing process that involves people from all levels of the organization." This refutes the siloed approaches in options A, B, and D.

The concept of 'funding mix' refers to the combination of different internal and external sources of finance that an organization utilizes. The scenario describes a review focused on understanding the amount of money available from these various sources. This activity directly aligns with analyzing and managing the organization's funding mix to support its strategic objectives. The goal is to ensure a balanced and sustainable financial structure by evaluating all available funding avenues.

B. Operating expenditure: This refers to the ongoing costs of running a business (e.g., salaries, utilities). It is a type of spending, not a source of finance.

C. Capital expenditure: This is money spent to acquire or upgrade physical assets (e.g., buildings, servers). It is a form of investment spending, not a source of finance.

D. Freemium models: This is a specific pricing strategy where basic services are free and advanced features are paid. While it generates revenue, it is only one potential source, not the overall concept of reviewing all sources.

AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 3.2.3.2 (Funding models): "Organizations can be funded from internal sources (e.g. retained profits) or external sources (e.g. debt or equity). The combination of these sources is called the funding mix." This directly supports the correct answer, as the question describes an analysis of these very sources.

Section 3.2.3.1 (Financial management concepts): This section defines and contrasts capital expenditure (CapEx) and operating expenditure (OpEx) as types of costs, confirming why options B and C are incorrect.

Section 3.2.3.3 (Charging models): This section describes freemium as a type of charging model, which is a method for generating revenue, not the overarching concept of analyzing all funding sources.

Developing a digital strategy is a high-level activity focused on setting the organization's direction, vision, and approach to leveraging digital technology. It involves analyzing the environment, identifying opportunities, and assessing associated risks. While the strategy will guide technology choices, defining the specific systems that will form a technology programme is a more tactical activity. This detailed planning occurs during portfolio and programme management, which are the vehicles for executing the strategy, not developing it. The strategy defines the 'what' and 'why', while the programme defines the 'how' and 'with what'.

B. Understanding emerging technologies that could affect the organization: This is incorrect because environmental scanning, including analyzing technology trends, is a fundamental input for creating a relevant and forward-looking digital strategy.

C. Understanding how to identify potential opportunities: This is incorrect because the core purpose of a strategy is to identify and select the best opportunities to pursue to achieve the organization's vision and goals.

D. Understanding the risks involved with digital opportunities: This is incorrect because a sound strategy must include a thorough assessment of risks to ensure that the chosen path is viable and that potential negative impacts are managed.

1. AXELOS, ITIL® 4: Digital and IT Strategy (2020), Section 3.2.2, The strategy planning process: This section outlines the process of creating a strategy, which includes defining a vision, assessing the current state, and defining the target state. It states, "The strategy should be translated into a set of initiatives, which are managed as a portfolio." This confirms that defining specific systems for a programme (an initiative) is a post-strategy activity.

2. AXELOS, ITIL® 4: Digital and IT Strategy (2020), Section 2.3.2, The drivers of digital transformation: This section explicitly lists "New technology" as a key driver that must be understood when formulating a strategy, making option B an essential consideration.

3. AXELOS, ITIL® 4: Digital and IT Strategy (2020), Section 3.4.3, Managing risks in a digital organization: This section states, "A key part of any strategy is to understand and manage the risks that are associated with it." This directly supports the necessity of considering risks (option D) during strategy development.

4. AXELOS, ITIL® 4: Digital and IT Strategy (2020), Section 2.2.1, What is strategy?: This section defines strategy as a plan that involves "choosing what to do and what not to do," which inherently requires the identification and evaluation of opportunities (option C).

In the context of the ITIL 4 Digital and IT Strategy (DITS) framework, strategy is not a periodic event but a continuous and dynamic activity. The modern business environment, characterized by volatility, uncertainty, complexity, and ambiguity (VUCA), renders traditional, long-term, static planning ineffective. Instead, organizations must continually sense changes in their internal and external environments and adapt their strategic direction accordingly. This approach treats strategy as an ongoing journey of learning and adjustment, enabling the organization to remain agile and responsive to opportunities and threats as they emerge.

A. Once, and never again: This is fundamentally incorrect as strategy must evolve with the organization and its environment; a static strategy guarantees obsolescence.

B. Annually: An annual cycle is a traditional approach that is too slow and rigid for the pace of digital disruption and change.

D. Every three months: While more frequent than annually, a fixed quarterly cadence is still a periodic approach and lacks the continuous, adaptive nature required by modern strategy.

1. AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 2.2, "Strategy is no longer a long-term plan": This section explicitly states, "In a VUCA world, the idea that an organization can define a strategy and follow it for several years with only minor adjustments is no longer viable... Strategy is a continual journey." This directly supports the concept of continuous strategic management.

Section 2.2.1, "Strategy as a direction": This section elaborates that strategy provides a "direction of travel that helps an organization to make decisions on a day-to-day basis," which implies a continuous application and adjustment of strategy, not a periodic review.

Section 4.3.2, "The role of the ITIL guiding principles in digital and IT strategy": The principle 'Progress iteratively with feedback' is highlighted as crucial for strategy. This principle advocates for continuous, small-scale actions and adjustments based on feedback, which is the essence of a continual approach to strategy.

The most beneficial approach to customer analytics for identifying improvement opportunities is to create a holistic and contextualized view of customer behavior. Correlating internal data, such as product/service usage and support interactions, with external environmental factors (e.g., market trends, competitor activities, seasonal effects) allows an organization to understand not just what customers are doing, but why. This deep, contextual understanding is crucial for identifying the root causes of issues and uncovering meaningful opportunities for innovation and improvement that align with the broader market landscape.

B. Avoiding subjective factors like informal feedback is detrimental. This qualitative data provides rich insights into customer sentiment and perception that quantitative data alone cannot capture.

C. Using only data from direct distribution channels creates a biased and incomplete view by ignoring customers who purchase or interact through partners, resellers, or other indirect channels.

D. Using only data from digital communication channels overlooks valuable interactions from non-digital sources like phone calls or in-person visits, leading to a partial view of the customer journey.

AXELOS, ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office), 2020.

Section 4.3.2.3 (Sources of data): This section explicitly states, "The most valuable insights are often generated by combining and correlating data from different sources." It lists various sources, including operational data (like usage and support data), customer feedback, and market data (which includes environmental factors). This directly supports the comprehensive approach in option A and contradicts the limiting approaches in B, C, and D.

Section 3.3.2 (Knowing your customers): This section emphasizes the need for a deep understanding of customer behavior, context, and motivations to deliver value. Correlating diverse data sets as described in option A is a primary method for achieving this deep understanding.

The service provider's decision demonstrates a risk-seeking attitude. This attitude is characterized by a willingness to accept significant risks in pursuit of substantial rewards. In this scenario, the organization is aware that the new technology is unreliable and may cause service outages (the risk). However, they are proceeding with the launch because they are convinced the new functionality will be highly popular and provide a competitive advantage (the reward). They are prioritizing the potential high reward over the known high probability of a negative outcome, which is the definition of a risk-seeking approach.

A. Risk-averse: A risk-averse organization would avoid introducing a known, significant risk and would likely delay the launch until the technology was proven to be reliable.

C. Risk-tolerant: While the organization is tolerating risk, 'risk-seeking' is more accurate because they are proactively introducing a known high-risk element to achieve a high reward, not just accepting an existing risk.

D. Risk-neutral: A risk-neutral organization would make a decision based on a calculated expected value, not by being swayed by the potential for a very high reward despite the significant risk.

1. AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 4.3.3.1, 'Risk Attitude': This section defines the different risk attitudes. It states, "An organization with a risk-seeking attitude is willing to enter into a venture where the probability of a negative outcome is high, but where there is also a possibility of a very high reward." This directly describes the actions of the service provider in the scenario. The same section contrasts this with a risk-averse attitude, which would avoid such a venture.

The ITIL 4: Digital and IT Strategy guidance describes a balanced strategy using four perspectives, which are based on two dichotomies: customer/market relevance versus operational excellence, and an internal versus an external view. The scenario states the organization has already addressed the two external perspectives. To achieve a balanced strategy, they must now address the two internal perspectives.

Investigating how the provider's technology can enhance customer experience is an internal view of customer/market relevance ("How can we create more value?"). Analysing staff capabilities to identify strengths is an internal view of operational excellence ("What must we excel at?"). These two actions complete the four perspectives required for a balanced strategy.

Analyse threats to their existing customer base: This is an external view of market relevance, which the organization has already performed as part of its initial analysis.

Identify new opportunities to provide services to the market: This is also an external view of market relevance, which the scenario indicates has already been addressed.

AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 3.1.3, Figure 3.2 'The four perspectives of a balanced strategy': This figure and the accompanying text explicitly detail the four quadrants of a balanced strategy. The question describes the completion of the two external-facing quadrants. The correct answer provides the two missing internal-facing quadrants: the internal view of customer/market relevance (option 3) and the internal view of operational excellence (option 4).

The scenario describes an organization that has successfully addressed several key components of a digital transformation, including vision, value streams (processes linked to value), technology, and risk management. However, a critical element is missing from the description: the 'Organizations and people' dimension. A successful digital transformation is not solely about technology or processes; it fundamentally depends on the people within the organization. Managing and developing staff skills, competencies, and fostering a supportive culture are essential for executing the strategy, adopting new technologies, and sustaining new ways of working. Without this focus, the transformation is likely to fail.

A. Management of threats and opportunities: This is incorrect because the organization already "understand[s] and manage[s] risks." Comprehensive risk management inherently includes the identification and management of both threats and opportunities.

B. Improved use of automation: This is incorrect because the organization already "use[s] technology appropriately to maximize... operational excellence," which implies automation is being leveraged. This is an ongoing activity, not a missing foundational element.

D. Linked processes and practices to value creation: This is incorrect because the organization has "documented all their value streams and started to improve these." The very definition of a value stream is the series of steps that create and deliver value.

1. AXELOS. (2020). ITIL® 4: Digital and IT Strategy. TSO (The Stationery Office).

Section 5.3.2, "Developing digital leadership and skills": This section explicitly states, "A digital transformation requires new skills and new ways of working... Organizations need to assess their current skills and competencies, identify gaps, and create a plan to address them." This directly supports the necessity of managing staff skills and competence (Option C).

Section 3.2, "Strategy and the service value system": This section re-introduces the four dimensions of service management. The question describes activities related to 'Value streams and processes', 'Information and technology', and implicitly 'Partners and suppliers' through the value stream, but conspicuously omits the 'Organizations and people' dimension, highlighting it as the missing piece.

Section 4.2.1, "Risk and the digital organization": This section details that risk management involves dealing with uncertainty, which encompasses both threats and opportunities, confirming that Option A is already covered in the scenario.