Service-dominant logic

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Service-Dominant Logic
Service-dominant logic is a service-centered alternative to the traditional goods-centered paradigm for describing economic exchange and value creation. The central idea is that service is the fundamental basis of value creation when defined as the application of competencies for the benefit of another through exchange. As a component of the service package, facilitating goods may be involved in the exchange, but value-in-use (value as realized and determined by the customer) is the important feature. Table 2.4 contains the 10 foundation premises (FP) of service-dominant logic with a brief explanation/justification of each. provide further elaboration below:

• FP1: Service is seen as an activity or process (thus singular), not an intangible unit of output (plural in the goods analogy), derived from applying (operant rather than operand) competencies (knowledge and skills) for the benefit of another party.
• FP2: The process of value creation in a postindustrial society is complex with many intermediary systems (e.g., Internet) facilitating the process of exchange.
• FP3: Although goods are a store of energy, material, and labor costs, they realize a value only upon use (e.g., a car providing the service of transportation).
• FP4: Competitive advantage is captured in a firm’s intellectual capital, skills, and knowledge that can be applied to creating value for the customer.
• FP5: If service is the application of competencies for the benefit of others, then all economic activity is essentially service no matter whether the economy is considered agrarian, industrial, or postindustrial.
• FP6: If value is co-created with the customer, then the service activity must involve the customer in some capacity (e.g., mind, body, belongings, information) in an interactive relationship

• FP7: Just as a product has no intrinsic value until used, a service is only a capacity to create value upon customer activation (e.g., a seat on an airplane has no value if empty upon takeoff).
• FP8: Because a service is co-created with the customer, the service exchange naturally becomes customer-focused.
• FP9: Value is created when the customer integrates and applies the resources of the service provider along with other resource-integrators to achieve the exchange (e.g., purchase on eBay using PayPal).
• FP10: Each customer determines the value or quality of the service based on personal needs at the specific time (e.g., fast lunch or dinner date) and in the particular context (e.g., alone or group) as an experience

Service-dominant logic has become the foundation of a new field of study called “service science” championed by the IBM Almaden Research Center and called Service Science, Management, and Engineering (SSME). SSME is the application of scientific, management, and engineering disciplines to tasks that one organization beneficially performs for and with another organization or individual. The objective is to make productivity, quality, performance, compliance, growth, and learning improvements more predictable in work-sharing and risk-sharing (coproduction) relationships. The heart of service science is the transfer and sharing of resources within and among service systems. The normative function of service systems is to connect people, technology, and information through value propositions with the aim of co-creating value for the service systems participating in the exchange of resources within and across systems.

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