The Progress Economy
» fixing the innovation problem
» enabling the circular economy
» firing up growth
At the heart of the progress economy are three mindset shifts from the traditional way of viewing our world:
Mindset shift #1
value creation
⇒
making progress
1. Stop creating value ⇒ Start making progress – moving over time to a more desirable state.
Value. Simple as a word, but complex to truly understand…
When we base our innovation definitions and approaches around “creating” or “adding” value, we risk heading off into a world of disappointment, failure and missed opportunities (the innovation problem).
Instead… ︾
…let’s realise everyone is trying to progress – to move over time to more desirable states.
progress: move over time to more desirable state
Where i) reaching that more desirable state implies maximum value has emerged, ii) before starting the journey there is only the potential to reach a particular state (potential value) and iii) the more desired state – progress sought – may evolve during the progress attempt.
With this mindset shift, we see that:
- value incrementally emerges as progress is made (value-through-progress)
- value is a trailing indicator of progress.
However, this emerging value is still an abstract thing. To mean something to the actor seeking progress it needs to be “recognised” by them.
And this recognition may take place on a different schedule to emergence. At the end of each sub progress-making activity, for example, or at defined milestones, or perhaps only at the end of the journey.
Now we can answer questions like “how valuable is reaching 80km of a 100km journey?”. Well, it depends on the progress seeker’s value recognition approach.
Progress, like value, is a complex concept. But one we can neatly capture as a noun, a state, a verb, and a state transition. And we can define it in terms of functional, non-functional and contextual elements.
Two additional benefits of focussing on progress are that we get a:
- more actionable definition of innovation: helping improve progress made and reducing hurdles to progress
- powerful way to segment seekers (on progress origin and progress sought) to identify opportunities to help make progress
2. Stop selling outputs ⇒ Start applying your skills and knowledge to help others make progress.
For centuries we’ve built our economy around exchanging value. We manufacture products, embedding value along the way, and sell them for cash.
As successful as this value-in-exchange perspective has been, we are hitting its limitations with respect to growth… ︾
…the heavy focus on a point of exchange ignores what happens before and after that point, leaving missed opportunities. Moreover, it fools us into believing that we, as suppliers and producers, determine value.
In the progress economy we instead view the exchange of service – applying skills and knowledge for benefit – as the fundamental exchange. I help you progress and in return you help me progress*. This is Vargo & Lush’s service-dominant logic.
Now our focus is on how to help make progress – a process that occurs over time. We are invested in the whole journey, which increases our growth opportunities. Addressing the circular economy becomes natural (if that is part of the progress sought). And we can react to changes in progress sought during the journey.
A further implication of this thinking is that “price” no longer signals value. Instead it signals the equitable effort requested in return. I can propose that the effort involved in my service is 5 units. An equitable exchange (direct or indirect) would be for a service I need that also uses 5 units of effort.
And business model innovations flow naturally from this insight. For instance, 5 executions of a service with 1 unit of effort (subscription, credit) can meet that equitable exchange. So can a service of 3 unit effort together with 2 units of effort coming from another party (subsidisation).
* service exchange often occurs indirectly. For instance, through transitive exchanges – I help you progress, receiving service credits from you for that; and using those credits I seek progress help from another party.
Where service credits can take various forms, including traditional currency like cash, cryptocurrencies, or even rocks; they also mediate temporal and magnitude differences in service exchange.
MINDSET SHIFT #2
value exchange
⇒
service exchange
MINDSET SHIFT #3
goods vs service
⇒
interchangeable resource mix
3. Stop the goods vs service debates ⇒ Start offering a mix of interchangeable resources that help make progress.
Our current world view is built around goods – the tangible items we sell. And we define services from that perspective – usually as poor relatives (intangible, inconsistent, inseparable, need involvement, no inventory)
By doing so, we create an unnecessary and constricting division.
In the progress economy, we look at things differently… ︾
…defining service first and then seeing how goods fit:
service: applying skills and knowledge for another’s benefit
It turns out that goods freeze service; enabling it to be transported and unfrozen when/where needed.
Think about trying to entertain yourself. You could go and watch a live band playing. They apply their skills to instruments in order to entertain you. Or you could listen to their CD. Where you still get entertained by those same skills.
The same functional progress is made in both cases. Just in the first it happens immediately performed by employees, without you doing anything. Whereas in the other it happens through a goods where the original performance has been frozen and transported. And you have needed to do something (the huge task of hitting “play”).
These resources are practically interchangeable from a functional progress perspective.
This interchangeability allows us to build and offer different resource mixes to meet a particular progress sought. Where a proposition’s resource mix can include different levels of: employees, systems, goods, physical resources, data, locations.
Interestingly, altering the offered mix is an inspiration for innovation.
We see this in offerings that relieve people, “the shift to the service economy”, Platform as a Service, digitisation, and integration of artificial intelligence (AI), etc.
As well as in offerings that that enable people through increasing goods/systems elements of a mix . Such as home diabetes test tools or hospital at home approaches*, etc.
* my father was recently ill but rather than needing to remain on a hospital ward and be monitored, he was able to go home with a collection of measurement devices (heart rate, blood pressure monitor etc). He had to use those loaned items daily and report the figures via a tablet for remote monitoring. The resource mix shifted from employee based to goods and system based. He benefitted by being home and the health service benefitted from freeing up a bed.
Emerging from these shifts are a set of building blocks and levers aiding the systematic hunt for innovation and growth.
The progress economy is a natural home for, and explains, design thinking, Jobs to be done theory (both Christensen’s and Ulwick’s views), Blue Ocean Strategy (Kim & Mauborgne) disruptive innovation (in Christensen’s true sense), and, much more.
…Fixing the innovation problem
The innovation problem: “94% of executives are unsatisfied with innovation performance”; yet “84% see innovation as important to growth”! And “54% of companies struggle to bridge the gap between innovation and business”. Worse, “very few executives know what the problem is and how to fix it”; and we end up performing innovation theatre – where our “innovation activities deliver no/few tangible results”.
In the progress economy innovation shifts from vague notions of “something new that creates value” to being an act that clearly improves seekers’ progress. It’s time to get systematic and to minimise innovation theater! Whilst still unleashing creativity.
innovation: creating and executing new – to the firm, market/industry or world – progress proposition(s) that offer some combination of:
i) helping progress seekers reach closer to their progress sought
ii) helping progress seeker to better make existing progress
iii) lowering one or more of the six progress hurdles*
whilst maintaining, or improving, the survivability of the progress helper (entity, ecosystem).
* lack of resource, adoptability, resistance, misalignment on proposition continuum, lack of confidence, and equitable service exchange.
The progress economy provides us a number of levers to make hunting innovation more systematic: progress sought, progress offered, proposition continuum, progress hurdles, resource mix, progress-making activities, and more.
…Enabling circular economy
And it’s our view that value-through-progress is exactly what the Ellen MacArthur Foundation need when they say:
one of the biggest challenges…to transition from linear to circular is that it requires…revisiting the very notion of value creation
Ellen MacArthur Foundation (2023) “From ambition to action: an adaptive strategy for circular design”
The traditional goods economy thinking of value-in-exchange aligns closely with the linear economy’s take-make-waste model. Shifting to the progress economy thinking means embracing circular economy as part of progress sought, which:
- takes our mindset beyond a point of exchange
- encourages helpers to
- encapsulate skills and knowledge of reuse, recycle etc into their goods along with functional skills and knowledge
- explore shifts in resource mixes away from goods
- updating their ways of working
- see the potential for extended propositions
Assuming enough seekers truly are looking for circular economy implementation.
…Firing up growth
As for firing up growth? We help seekers make progress and constantly try to find ways to help them make better progress. Therefore innovation becomes a natural daily activity rather than a distinct (disjoint?) one.
We get back to, and firther interpret, Drucker’s well known view of “the purpose of a firm” as:
the purpose of a progress helper is to attract maximum (size or number of) equitable service exchanges* – as such a progress helper has three, and only three, functions:
- marketing – the ongoing discovery of ever evolving progress sought
- executing – the delivery of progress offered
- innovating – the continuous innovation of progress offered
* directly or indirectly (through service credits – of which cash has been a widely successful implementation)
Through the progress economy, marketing, innovation and execution becomes the heartbeat of a helper. Progress sought by seekers constantly evolves both in terms of scope as well as expectations bought in from what seekers are doing in other markets and industries. Your progress offered risks being left behind if it cannot keep up or if it fails to execute (and doesn’t learn from those failures – even past success risks becoming today’s failures).
Helpers need to restructure around these three functions. And a progress owner role emerges, accountable for offering the best progress help possible. That role handles all three functions for a particular progress offered: marketing, executing and innovation. With the functions needed to support that provided by the rest of the helper organisation and or partners (aligning with standard transactional economics). The SAfE methodology might hold some answers.
Are you ready to help progress seekers reach nearer their progress sought?
selected case studies / examples
[under development – anything below is likely to be a placeholder / work in progress at the moment…]
The four actionable layers
We build the progress economy on solid foundations and broad shoulders.
We are informed by a foundation layer that includes service-dominant logic. This leads us to a set of fundamental definitions. Onto this we construct the following three layers:
- Strategic – What is progress?
- Operational – How is progress made?
- Determination – Who determines progress, and how?
And it all neatly plugs together, as shown below, to shine a light on how our world operates. Giving us the insights necessary for more systematically innovating, finding growth, and harnessing the circular economy.
