The Emerging Service Logic MindsetPresentation Transcript
The Emerging Service-Logic Mindset: An Introduction and Global Implications Presentation for the Pacific Asian Management Institute PALS Lecture Series July 11, 2006 Stephen L. Vargo, University of Hawaii at Manoa
Especially valued manufacturing jobs.
Unfair trade concerns
Violation of intellectual property rights
Competition for and deletion of scarce natural resources
Complaints by business about relevance of business-school education
The Value Proposition in Brief
The mindset or logic we use for understanding business and globalization is flawed and restricting
We are (slowly) evolving from a logic of exchange based on stuff (goods) to a logic of exchange based on service (applied knowledge and skills)
This transition should be encouraged and amplified
This service logic has implications for rethinking firm and societal well-being and national wealth
Vargo, S. L. and R.F. Lusch (2004) “ Evolving to a New Dominant Logic of Marketing, ” Journal of Marketing , 68 (1),
Harold H. Maynard Award for “significant contribution to marketing theory and thought.”
Vargo, S.L. and R. F. Lusch (2004) “The Four Service Myths: Remnants of a Manufacturing Model” Journal of Service Research
Vargo, S.L. and F.W. Morgan (2005) “An Historical Reexamination of the Nature of Exchange: The Service Perspective,” Journal of Macromarketing
Lusch, R.F. and S.L. Vargo, editors (2006), The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions, Armonk , NY: M.E. Sharpe
Lusch, R.F., S.L. Vargo (2006), “The Service-Dominant Logic of Marketing: Reactions, Reflections, and Refinements, Marketing Theory
Lusch, R.F., S.L. Vargo, and M. O’Brien (2006), “ Competing Through Service: Insights from Service-Dominant Logic,” Journal of Retailing , (forthcoming)
Lusch, R.F., S.L. Vargo, and A. Malter (2006), Marketing as Service-Exchange: Taking a Leadership Role in Global Marketing Management, Organizational Dynamics , (forthcoming)
Lush, R. F. and S. L. Vargo, editors (2007) “Evolving to a New Dominant Logic for Marketing: Continuing the Debate and Dialog, Special Issue of the Journal of the Academy of Marketing Science, (forthcoming)
Restricted Exchange Fisherman Farmer Fishing Farming Fish Wheat
Breakout of service marketing, management, operations
“ Service’ approaches to manufacturing
Dell, Nike, etc.
Business initiatives to shift from “goods” companies to “services” companies
IBM—”Computing on demand,” “Service Science”
“ Software as a Service” (SaaS) movement
Apparent shift from manufacturing to service economy
Service-Dominant Logic Basics
A logic that views service, rather than goods, as the focus of economic and social exchange
i.e., Service is exchanged for service
Essential Concepts and Components
Service: the application of competences for the benefit of another entity
Service (singular) is a process—distinct from “services”— particular types of goods
Shifts primary focus to “ operant resources ” from “ operand resources ”
Sees goods as appliances for service deliver
Implies all economies are service economies
All businesses are service businesses
Evolving To a New Frame of Reference To Market (matter in motion) Market To (management of customers & markets) Market With (collaborate with customers & partners to produce & sustain value) Through 1950 1950-2005 Future
Service-Dominant (S-D) Logic
Identify core competences, knowledge and skills that represent a potential competitive advantage
Cultivate relationships with potential customers
develop customized, compelling value propositions
Co-create value with customer
Use financial performance as an instrument of learning for improving the level of service for customers and markets
FP1. The application of specialized skill(s) and knowledge is the fundamental focus of exchange.
Service (application of skills and knowledge) is exchanged for service
FP2. Indirect exchange masks the fundamental process of exchange.
Goods, organizations, intermediaries, and money obscure the service-for-service nature of exchange
FP3. Goods are distribution mechanisms for service provision.
“ Activities render service; things render service” (Gummesson 1995) : goods are appliances
Foundational Premises (2)
FP4. Knowledge is the fundamental source of competitive advantage
Operant resources, especially “know-how,” are the essential component of differentiation
FP5. All economies are service economies.
Service only now becoming more apparent with increased specialization and outsourcing
FP6. The customer is always a co-creator of value.
There is no value until offering is used—experience and perception are essential to value determination
Foundational Premises (3)
FP7. The enterprise can only make value propositions.
Since value is always determined by the customer (value-in-use)—it can not be embedded through manufacturing (value-in-exchange)
FP8. A service-centered view is inherently customer oriented and relational
Resources being used for the benefit of, and in interaction with, the customer, places the customer at the center of value creation and implies relationship.
FP 9. Organizations exist to combine specialized competences into complex service that is demanded in the marketplace.
The firm is an integrator of macro and micro-specializations
Goods vs. Service-Dominant: Where do the logics point us?
Sell to Mass market
Charge for product (price)
Distribute product (value)
Money as goal
Serve and satisfy
Respond to markets of one--customization
Find solutions, co-create value
Conversation & dialog
Offer value proposition
Integrate value network & processes
Profit as feedback (learning)
Difficult Conceptual Transitions Product orientation To Market Promotion Supply Chain Equilibrium systems Price Profit maximization Value-added Feature/attribute Products Goods Goods-Dominant Concepts Market Orientation Market to Integrated Marketing Communications Value-Chain Dynamic systems Value delivery Financial Engineering Co-production Benefit Offerings Services Transitional Concepts Service-Dominant Logic (Consumer and relational) Market with Dialog Value-creation network/constellation Complex adaptive systems Value proposition Financial feedback/learning Co-creation of value Solution Experiences Service Service-Dominant Concepts
Goods Logic Goods Tangibles Operand Resources Asymmetric Propaganda Value Added Transactional Maximize Profits Service Dominant Service Intangibles Operant Resources Symmetric Conversation Value Propositions Relational Financial Feedback Global Sustainability Customer Alienation Respect for Marketing In Firm Less More Less More Less More The Emerging Reorientation of Business
Making services more “goods-like” (tangible, separable, etc.) may not be correct normative marketing goal
Make goods-more service-like.
Consider becoming more pure marketing-services firms
Outsource manufacturing (as well as other non-core competences)
Consider selling service flows rather than ownership, even when goods are involved
Treat employees and customers as operant resources
Essential parties to value creation
Implications for Public Policy and Society
Rethink “industrial” and employment classifications
Develop better metrics for tracking none-goods exchange
Encourage retention of tangible goods and sale of service flows?
Encourage operant resource creation through education and research
Enforce protection of intellectual property rights
Global Implications: The Traditional (G-D) “Wealth of Nations”
Historical View of National Wealth (G-D)
Use labor and capital to create surplus goods (operand resources) for export
Import desired operand resources = wealth
Global Implications: Toward a New (S-D) “Wealth of Nations”
National wealth is based primarily on operant resources (skills and knowledge), rather than operand resources (stuff)
Focus on creation of higher-level knowledge and skills
Most important imports and exports are operant resources
Operant resources become commoditized and must be replaced, replenished, and newly created
Outsourcing allows resource development (relieves and enables)
International trade creates international trade
Reduce barriers to trade
Thank You! For More Information on S-D Logic visit: sdlogic.org We encourage your comments and input. If you would like your working papers or teaching material and/or links to your research displayed on the website, please e-mail us Steve Vargo: firstname.lastname@example.org Bob Lusch: email@example.com