Published on July 21st, 2014 | by Peter Ward

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Service-Dominant Logic: Too Idealistic?

Service-Dominant (S-D) logic was first proposed as a new lens for marketing 10 years ago by Steve Vargo and Robert Lusch. Yet despite a lot of academic interest it has still not become a mainstream way of thinking for many companies.

Perhaps one of the reasons that companies feel uncertain about its value is that they think it’s too idealistic. That is, it relies on everyone working together to seek win-win outcomes. If this were true, then S-D logic would not be engaging in the real world where exploitative transactions and win-lose outcomes are all too common.

So I was concerned to read in Lusch & Vargo’s recent book on S-D logic, Service-Dominant Logic: Premises, Perspectives, Possibilities )that “forced or involuntary exchange is an interesting area of enquiry but one that S-D logic does not address” (p.117). Does this mean that companies are right about steering clear of S-D logic, because it only explains transactions that occur in an ideal world? Is S-D logic really impotent when it meets reality?

I think not. In fact, I think it explains such exchanges extremely well because of its inherent understanding of the importance of context and the viability of service ecosystems. Lusch & Vargo are probably being too modest, or perhaps they just omitted the word “yet”.

First, let’s remember that a good proportion of exchanges do in fact take place in essentially voluntary and unforced circumstances. When I go into a shop to buy, I’m generally doing so of my own free will and I willingly agree to pay what is asked. I go on to voluntarily co-create value from what I purchase. S-D logic has always been completely at home in these circumstances.

Forced and Involuntary Exchange

Now let us turn our attention to “forced and involuntary” exchange. What do we mean by this? Does it only apply when someone is compelled by external coercion to go through with an exchange which is totally against their will?

I think that this is the extreme end of the spectrum, the opposite end from where exchange is freely engaged in without any external influence. Between those two extremes are a range of situations where exchanges take place with varying levels of compulsion. That compulsion, of course, may be as much internal as external – something we can recognise from consumption theory and the importance of expectations in all types of consumption. So if I feel it’s expected of me to purchase an overpriced rose from a passing seller for my wife on Valentine’s Day – and we know that you can increase your prices if you can sell into the consumption context on demand, – that is somewhere along the spectrum towards “forced and involuntary” because of my internally generated compulsion. On the other hand, it’s not as far along that spectrum as being constrained at gunpoint to sell my phone for peanuts to the local gangster. Can S-D logic explain what’s going on in either of these exchanges?

Yes it can. S-D logic recognises the purpose of exchange as being to enhance the viability of the service ecosystem. In any exchange, the ecosystem in focus may just be me personally or it may be one or more interlinked ecosystems such as my marital relationship, my family, my friends, my community, the institutions I belong to, or society as a whole.

Therefore, I act to increase the overall viability of the ecosystem on which I choose to focus at that point in time. When I sell my phone to the gangster for pennies my personal ecosystem viability (life) is preserved. When I pay over the odds for a flower my personal ecosystem viability is increased (I feel good about it) and my relationship ecosystem viability is enhanced – assuming of course that my wife is pleased with it, since she may choose to focus instead on the viability of the family ecosystem and so see my purchase as a waste of money.

I could also decide not to give my phone to the gangster. I may be killed as a result, but this might be a sacrifice worth making if it leads to his eventual arrest. In this scenario, I would be thinking of the viability of the community ecosystem: my death leads to a safer city.

So we can conclude that our behaviour is determined by the ecosystem on which we’re focusing, or in other words the context in which we see ourselves at any moment. We can recognise that sometimes, as with my phone, we co-create value – increase viability – in one ecosystem but not in others. While at other times, as with the rose, we may increase viability in more than one ecosystem concurrently – or at least hope to!

Therefore, I don’t think that companies should be concerned that S-D logic only has explanatory power in an ideal world. Its understanding of multi-level service ecosystems based on differing views of context allows it to explain what’s happening in forced exchanges just as well as it does in the win-win transactions that we all wish we engaged in more of the time. This allows us to use the S-D logic lens with confidence to understand what is happening in all circumstances of exchange.

Further Reading

Ilmonen, K. (2011). A Social and Economic Theory of Consumption. (P. Sulkunen, K. Rahkonen, J. Gronow, A. Noro, & A. Warde, Eds.) (p. 250). Basingstoke: Palgrave Macmillan.

Lusch, R. F., & Vargo, S. L. (2014). Service-Dominant Logic: Premises, Perspectives, Possibilities (p. 225). New York, NY: Cambridge University Press.

Ng, I. C. L. (2013). Value & Worth: Creating New Markets In The Digital Economy (1st ed., p. 286). Innovorsa Press.

Vargo, S. L., & Lusch, R. F. (2004). Evolving to a New Dominant Logic. Journal of Marketing, 68(January), 1–17.

 

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Peter is studying for a PhD within WMG's Service Systems Group. The research question for Peter's PhD is "Why are some supply chains better than others at delivering value propositions that address contextual variety in the last yard? The case of patient adherence in sub-Saharan Africa".

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