Upload
nirmala-last
View
1.041
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Citation preview
S-D Logic
The Emerging Service-Logic Mindset:An Introduction and Global Implications
Presentation for the
Pacific Asian Management InstitutePALS Lecture Series
July 11, 2006
Stephen L. Vargo, University of Hawaii at Manoa
S-D Logic Overview 2
S-D Logic
The Backdrop Globalization concerns
Outsourcing Especially valued manufacturing jobs.
Unfair trade concerns Violation of intellectual property rights
Environmental concerns Competition for and deletion of scarce natural resources Concerns about Environmental irresponsibility
Negative attitudes toward business—especially marketing
Seen as primary villain in creating the above greed driven Frequent instances of corporate corruption Environmental destruction
Perceptions of economic colonialism Declining service in a “service economy” Complaints by business about relevance of business-
school education
S-D Logic Overview 3
S-D Logic
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
4
S-D Logic
Related Work 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)
S-D Logic Overview 5
S-D Logic
Restricted Exchange
Fisherman FarmerFish
Wheat
Fishing
Farming
S-D Logic Overview 6
S-D Logic
Complex Exchange
Fisherman
Farmer
Fishing
Plow MakingTool Maker
BakerBaking
Farming
Hook Making
Fishing FarmingBaking
Bread, Fish, etc
Bread, Fish, etc
Bread, Fish, etc
Bread, Fish, etc
S-D Logic Overview 7
S-D Logic
Monetized Exchange
Fisherman
Farmer
$
$
Tool Maker
Baker
Baking
Plow Making
Fishing Wheat Farming
$$
S-D Logic Overview 8
S-D Logic
Monetized & Assisted Exchange
Fisherman
Farmer
$
Tool Maker
Baker
Baking
Plow Making
Fishing
Wheat Farming
Other Service/Goods
$
$ $’s
Other Service/Goods
MerchantMarketing, Inc
Fisherman, Inc
Baker, Inc
Toolmaker, Inc
Farmer, Inc
S-D Logic Overview 9
S-D Logic
Intermediaries Mask the Service-for-Service Nature of Exchange
Fisherman FarmerFishing
Farming
GOODS
MONEY
OGANIZATIONS
S-D Logic Overview 10
S-D Logic
Precursors Historical treatment of services
Smith’s (1776) bifurcation Bastiat’s (1848) reconsideration
“Services are exchanged for services…it is the beginning, the middle, and the end of economic science”
Industrial revolution Economic science modeled after Newtonian
mechanics Microeconomic model based on perfect competition
Other disciplines (marketing, HR, etc,) inherited
As did society as a whole, including government
S-D Logic Overview 11
S-D Logic
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
S-D Logic Overview 12
S-D Logic
Dissention and Shifts Calls for a paradigm shift in marketing (other
disciplines) Shift away from goods focus in marketing
Relationship marketing, experiences, value-constellations, co-production, interactivity, solutions, resource advantage, etc
Breakout of service marketing, management, operations
“Service’ approaches to manufacturing Dell, Nike, etc.
Business initiatives to shift from “goods” companies to “services” companies
GE IBM—”Computing on demand,” “Service Science” “Software as a Service” (SaaS) movement etc.
Apparent shift from manufacturing to service economy
S-D Logic Overview 13
S-D Logic
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
S-D Logic Overview 14
S-D Logic
Evolving To a New Frame of Reference
To Market(matter in motion)
Market To(management of
customers &markets)
Market With(collaborate with
customers & partnersto produce & sustain value)
Through 1950 1950-2005 Future
S-D Logic Overview 15
S-D Logic
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
16
S-D Logic
Foundational Premises 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
S-D Logic Overview 17
S-D Logic
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
18
S-D Logic
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
S-D Logic Overview 19
S-D Logic
Goods vs. Service-Dominant: Where do the logics point us?
Goods-Dominant Make stuff Sell to Mass market
Produce product Promote product Charge for product
(price) Distribute product
(value) Create transaction Money as goal
Service-Dominant Serve and satisfy Respond to markets of one--
customization Find solutions, co-create
value Conversation & dialog Offer value proposition Integrate value network &
processes Build relationships Profit as feedback (learning)
20
S-D Logic
Difficult Conceptual Transitions
Goods-Dominant ConceptsGoods
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 ConceptsService
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)
21
S-D Logic
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
GlobalSustainability
CustomerAlienation
Respect forMarketingIn Firm
Less
More
Less
More
Less
More
The Emerging Reorientation of Business
22
S-D Logic
General Implications for the Firm Co-create solutions
Customers, employees, value-chain partner, stakeholders
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
S-D Logic Overview 23
S-D Logic
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
S-D Logic Overview 24
S-D Logic
Global Implications: The Traditional (G-D) “Wealth of Nations”
Historical View of National Wealth (G-D) Operand-resource driven Use labor and capital to create surplus
goods (operand resources) for export Import desired operand resources = wealth
S-D Logic Overview 25
S-D Logic
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) Points toward:
Education Immigration Competition
International trade creates international trade (e.g., Boeing) Reduce barriers to trade
S-D Logic Overview 26
S-D Logic
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: [email protected] Bob Lusch: [email protected]