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S-D Logic Conceptual Foundations for a Science of Service Presentation for the Conference on the Art and Science of Services Madrid, Spain May 24, 2006.

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Presentation on theme: "S-D Logic Conceptual Foundations for a Science of Service Presentation for the Conference on the Art and Science of Services Madrid, Spain May 24, 2006."— Presentation transcript:

1 S-D Logic Conceptual Foundations for a Science of Service Presentation for the Conference on the Art and Science of Services Madrid, Spain May 24, 2006 Robert F. Lusch, University of Arizona Stephen L. Vargo, University of Hawaii at Manoa

2 S-D Logic S-D Logic Overview2 The Service Science Imperative The meek shall inherit the earth but not the mineral rights. – J. Paul Getty Gentlemen, examine this ground carefully it is going to be the battlefield. –Napolean, eleven hours before the battle of Austerlitz For years we have thought of the intangible in terms of the tangible: wireless, post- industrial, goods vs. services, the world is flat. We have a tangibility fixation. I find the great thing in this world is not so much where we stand, as in the direction we are moving. –O.W. Holmes

3 S-D Logic S-D Logic Overview3 Service The application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself (self-service). Intermediaries are involved such as goods, money, organizations and networks. However, the real work of economies is mutual service provision.

4 S-D Logic S-D Logic Overview4 Goods-dominant (G-D) Logic Purpose of economic activity is to make and distribute units of output, preferably tangible (i.e., goods) Goods are embedded with utility (value) during manufacturing Goal is to maximize profit by decreasing cost and increasing number of units of output sold For efficiency, goods should be standardized, produced away from the market, and inventoried till demanded

5 S-D Logic S-D Logic Overview5 Uneasiness with Dominant Model What is needed is not an interpretation of utility created by marketing, but a marketing interpretation of the whole process of creating utility (Alderson, 1957) The historical marketing management function, based on the microeconomic maximization paradigm, must be critically examined for its relevance to marketing theory and practice. Webster (1992) The exchange paradigm serves the purpose of explaining value distribution (but) where consumers are involved in coproduction and have interdependent relationships, the concern for value creation is paramount…There is a need for an alternative paradigm of marketing. Sheth and Parvatiyar (2000) The very nature of network organization, the kinds of theories useful to its understanding, and the potential impact on the organization of consumption all suggest that a paradigm shift for marketing may not be far over the horizon. Achrol and Kotler (1999)

6 S-D Logic S-D Logic Overview6 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

7 S-D Logic S-D Logic Overview7 Language as Co-Creation: The Emergence of S-D Lexicon Language and norms are co-created. The goods-dominant language and norms evolved via co-creation over hundreds of years. However, there are signs it is decaying and/or morphing into what we refer to as a service-dominant lexicon.

8 S-D Logic S-D Logic Overview8 Shift in Focus from Operand to Operant Resources Operand Resources Resources upon which an operation or act is performed to produce an effect primarily physical resources, goods, etc. Operant Resources Resources that produce effects e.g., primarily knowledge and skills competences Everything is nothing until you know what to do with it.

9 S-D Logic S-D Logic Overview9 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 1950-2010 Future

10 S-D Logic S-D Logic Overview10 Evolving Toward a Service-Dominant Logic Operand Resources Tangible Value Added Goods Products Transactional Units of Output Promotion Brand Equity Profit Maximization Operant Resources Intangible Co-creation of value Service Experiences Relational Processes Conversation/Dialog Customer Equity Financial Feedback G-D Focus S-D Focus

11 S-D Logic 11 Difficult Conceptual Transitions Goods-Dominant Concepts Goods Products Feature/attribute Value-added Profit maximization Price Equilibrium systems Supply Chain Promotion To Market Product orientation Transitional Concepts Services Offerings Benefit Co-production Financial Engineering Value delivery Dynamic systems Value-Chain Integrated Marketing Communications Market to Market Orientation Service-Dominant Concepts Service Experiences Solution Co-creation of value Financial feedback/learning Value proposition Complex adaptive systems Value-creation network/constellation Dialog Market with Service-Dominant Logic (Consumer and relational)

12 S-D Logic S-D Logic Overview12 Marketing Redefined Marketing is the process in society and organizations that facilitate voluntary exchange through collaborative relationships that create reciprocal value through the application of complementary resources. Therefore marketing can be viewed as the means by which societies are able to create value through the voluntary exchange of knowledge and skills.

13 S-D Logic S-D Logic Overview13 Using S-D Logic to Improve Firm and Societal Well-Being Co-Creation of Solutions Customers, Employees, Supply & Value Chain Partners, Stakeholders Focus on Service Flows Differentiating the Service vs. Differentiating with Service Focus on Off-Balance Resources Customer, Channel and Societal Equity Transform External Environments Into Resources Turn Resistances into Resources via Collaboration

14 S-D Logic S-D Logic Overview14 Thank You! For More Information on S-D Logic visit: 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: svargo@sdlogic.netBob Lusch:

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