Many people who read my blog for a while now, know I have a particular interest in Service Dominant Logic. And whenever I get to teach or talk about my profession (marketing & service) I take the opportunity to explain why I think Service Dominant Logic provides an excellent perspective on the challenges the profession, the brands and the companies we represent, face.
In general most people I discuss this with largely (seem to?) agree with what I’m saying when I explain that we need to move from a Goods Logic into a Service Dominant Logic world. A world where value is not something that is embedded into the products or services that companies design or offer, but value is created by Customers when using them. Yet, when I continue that, in accordance with the same logic, value is always co-created in use, the discussion starts.
I’ve had this discussion several times over the past three years. The most recent event was in a class of senior professionals and experienced managers of a Post-MSc course Customer Management of the AOG School of Management. This course resides under the supervision of Prof. dr. P.C. Verhoef, who also attended (part of) my guest-lecture last week. It was such a fun and lively discussion that I decided to write down my point of view here, sharing my views and hoping to spark thinking (and debate!).
Off to a false start
I always ‘blamed’ the debate, the misunderstanding, the disbelief, the confusion, on the use of the word ‘co-created’, for that (co-creation) word is mostly used in a pre-use context, i.e. in a context of new product development. And thus it might confuse people, was my reasoning. And so I countered that with the explanation of how there are different styles of co-creation. But I was wrong, dead wrong!
So, what is the case, you might ask (or already know, and are now waiting to see if I get it right or not ;)?
Stuck in Goods-logic paradigms
The true reason people object, disagree or are confused lies in the Goods Dominant logic that is deeply rooted in our thinking patterns.
We have been ‘programmed’ to link value to products and money (‘worth’ as Irene Ng puts it). Ask Customers why they rated a product or service high, it is likely you get an answer like: “it’s good value for money”. We just are not ‘programmed’ to think of value as separate from the good that we buy, rent or use. Hence the trend to productize services, or servitize products. And as a consequence it is difficult to think of value as ALWAYS being co-created IN USE.
For in a goods-dominant-logic world we think of “in-use” as something that happens after value-exchange. It is next phase in a chain of value adding events, the value-chain. Following sd-logic, with a goods logic mindset, it would be impossible to create value prior to ‘goods-logic-value-exchange’ or even at the moment of exchange, because ‘value is always created in-use’. And since that is not true (because in a goods-logic world value is added in each step of the value-creation process, up to the moment of exchange, when value is handed over), the premise that ‘value is always co-created in-use’ cannot be true, according to goods-logic thinking that is.
It’s not the product that is co-created in-use, but value!
Yet, if we detach value from product and recognize that value is something that can only be defined by its beneficiary and (thus) that value is experiential and effectively an emotional state of mind, it is clear that
value is something that can be co-created before, during or after something else (mostly a good, a right or a service) has been exchanged (for money). Value can even be co-created without any exchange of money or goods ever taking place,
it probably is more often so anyway.
So yes, value is co-created in use when someone (e.g. employee, Customer or partner) is using her competencies to help a company develop a new product, or to put it in other words: when people are co-creating new products or services. It makes them feel valued, useful, happy, proud etc etc..
Also value (to me!) is co-created in use with my competencies, the platform WordPress provides, the MacBook I use to access the KPN-provided Internet and the couch I’m sitting on, to write this post (at least to me that is ;) using my Iittala glass to drink a new Spanish wine, that I first tasted together last week with a good friend on a wine-tasting event at my favorite winery, on a Saturday evening that my wife is enjoying a concert with one of her best friends.
This last example shows that, like Irene Ng makes perfectly clear in her book Value and Worth,
value creation is not only a ‘product’ of resource integration, but also, and maybe even more so, of the context in which this is executed. And to any extent it is experiential, it requires doing, verbs, not nouns.
You can try selling all the products you want and servitize them, or sell services you productize. If you cannot see value as separate from your products or services, if you cannot shake of the goods-logic thinking patterns, you will continue to focus your efforts on designing products and experiences that serve you, not your Customers. And with such a small focus you will fail to see (Customers’) opportunity in contextual variation when it is being created, for what it is really worth. And trust me, there are plenty who will.
The good thing is that logic is not a fact. It is a way of thinking or a lens through which one can see the world or explain how things work. And much like value, you decide what logic is yours.
I’m inspired by the logic of Service and I hope you are too. I’m inspired by the people who introduced it: Steve Vargo and Robert Lusch. And I’m inspired by the people who are turning it into a practice, like Irene Ng.
I hope that you are co-creating value when reading this post. If not, if you disagree, agree or have something to add, please share your views in the comments. I value that :)
p.s. I had this post sitting on my blog as a concept for some days, and then Irene Ng published this post: “From Service Systems to Digital Lives“. It touches upon this topic as well. A must read!
p.s. 2: I have updated my Value Co-Creation Canvas to make it easier to use. Still work in progress, so please feel free to comment on that too. [click on the image to enlarge]