Equitable Service Exchange

Dr. Adam Tacy PhD, MBA avatar
The idea

In the progress economy we make the shift to see service as the basis of exchange rather than value. Our focus is on process rather than outputs.

We see a world where service is exchanged for service. I apply my knowledge and skills for your benefit (perform a service) and in return you perform a service (apply your skills and knowledge) for my benefit. Rather than cash for embedded value. Which is necessary for growth (innovation and circular economy).

Equitable service exchange is an important concept. It means both actors in an exchange perceive each other is investing the same effort in the service they perform. A progress hurdle may arise if they do not.

There’s a lot to unpack here. Not least how do we mediate such equality. Further complicating things are that service exchanges are usually masked by indirect exchanges (transitive, use of goods) and not simultaneous.

Service credits* – representing service owed – lubricate indirect exchange and mediate temporal and magnitude differences. This way of thinking has implications on what price means (it is effort, not value, related) and subsequently opens the mind to business model innovation.

This view encourages us to look for growth in more places and removes a constraining artificial division between goods and services.

* of which fiat money is a common form of service credits (amongst its other roles).

TRANSITIONING FROM value exchange…

In the progress economy, we shift our perspective away from today’s prevailing goods-dominant logic, which revolves around value-in-exchange and the embedding of value in tangible goods through manufacturing processes.

Goods-dominant logic limits our thinking in two significant ways.

Firstly it focusses us on to a single point of exchange, often blinding us to growth/innovation opportunities in the wider context. Including missing out on the circular economy. A case in point is how relatively simple it is to map the linear economy’s “take-make-waste” model to the goods-dominant logic view of value.

Secondly it drives a division between goods and services. Services are seen as the awkward, poor, relatives of goods (also plural). They are outputs. And seen as intangible, inconsistent, inseparable, require involvement and you cannot create an inventory. The desire should be to produce standard units of outputs whilst minimising customer changes/inputs. Additionally they require us to extend McCarthy’s familiar 4Ps of the marketing mix – product, price, place, promotion – to be 7Ps, or 8Ps, or maybe 4Cs, or

We can look back to Adam Smith’s “Wealth of nations” in 1776 for the seeds of this division between goods and services and ultimately focussing economics (and subsequently marketing) on a logic of growth revolving around tangible outputs: goods.

Goods-dominant logic is also the view we tend to observe in life (if we know no different); and is extensively taught in marketing and economics classes as well as at business schools today; often without any alternative view.

It’s been useful since the time of Adam Smith. But, I believe we are now reaching the limits of usefulness in hunting new growth. For example, it leaves us struggling to explain the ongoing shift to a service economy.

…to service exchange

So what’s the alternative? We need a way of thinking that encourages us to look before and after the point exchange. In fact, we’d like to get rid of thinking about that point-like moment of exchange altogether.

We do this by shifting from focussing on units of output (goods and services – note the plural) to the process of making progress (often called: service – singular). This means we shift from a narrow point-like value-in-exchange (cash for output) to a more continuous value-in-use thinking (built on value-through-progress).

Now we are adopting Vargo & Lush’s service-dominant logic. Whose first axiom informs us that we exchange service for service.

Service is the fundamental basis of exchange


Why do we believe this is the exchange? Well, every actor is trying to make progress in all aspects of their lives. And often a lack of resource, such as skills, knowledge, time, or strength, hinders them from making progress. Some actors offer service to help other actors make progress. Their motivation is to attract services in return for their own needs in different areas – a mutual exchange of services: I help you and in return you help me.

You might question if this view aligns with your real-world experience, where cash seems to be the primary medium of exchange. Well, bear with me. There are two things which we need to clarify first to show this is the case. These are the:

  • definition of service
  • indirect nature of service exchange (including how goods and money fit)

As we delve into the topic, we’ll encounter that not every service is equal (in terms of effort). Which leads us to the concept of equitable service exchange.

equitable service exchange: a balanced and fair exchange of service, where each actor phenomenologically perceives that the same effort is being reciprocated by the other actor

When the exchange is perceived as inequitable, it becomes a progress hurdle

Throughout our exploration, we’ll discover how service credits, with money being a prime example, facilitate transitive indirect exchanges. This understanding will guide us in discussing pricing and business model innovation, all while keeping the equitable service exchange progress hurdle in mind.

Let’s first clarify what we mean by service.

What is Service?

Ideally, we would prefer to avoid using the terms “service” or “services” altogether, and instead, solely discuss progress and progress propositions. However, due to historical reasons, we are stuck using this terminology. So let’s try and navigate our way through.

Unlike the goods-dominant logic, which views services (plural) as intangible outputs, we shift our focus to service (singular) as a dynamic process of making progress. This process involves applying competencies (knowledge and skills) through resource integration activities to make progress.

With this transition from output-oriented thinking to process-oriented thinking, we can define service in three interchangeable ways (the first two being significant definitions in the literature, and the last being our own definition):

service is the:

i) “application of competences (knowledge and skills) for the benefit of another party”*

ii) “application of knowledge to co-create value”**

iii) execution of a series of progress-making resource integration*** activities in an attempt to make progress.

* Vargo & Lush (2008) “From Goods to Service(s): Divergences and Convergences of Logics
** International Society of Service Innovation Professionals, ISSIP.org
*** resources are carriers of skills and knowledge

These definitions steer us away from the goods vs. services debate and emphasis the dynamic nature of progress. Skills and competence are applied in order to make progress (realise benefit).

They also shed light on the goods-dominant dilemma of the shift to service economy. We can really see this as a shift in skills and knowledge applied (service) – from mass production/management skills to resource integration skill – rather than diverse product categories.

Yet, despite this discussion, I imagine there are still many who wonder if service exchange is truly prevalent in the real world. And this will be because indirect exchange is masking that we exchange service.

The indirect nature of service exchange

When we buy into the traditional goods-dominant logic, we buy into a whole set of phraseology reflecting a point-like exchange. We make transactions, buy things, pay for things, etc. We are fixated on that point-like moment of exchange. And so it seems that in our daily lives, we may not always be aware that we are actually exchanging services. We rarely explicitly ask for something in return when helping others; even less when dealing with companies.

But these service for service exchanges are often masked. Which is what service-dominant logic tells us:

Indirect exchange masks the fundamental basis of exchange


That’s to say we really are exchanging service for service, but sometimes that is not immediately obvious. To understand this better, Vargo and colleagues discussed in 2010’s “Service-dominant logic a review and assessment” four ways that mask direct service exchange.

These are:

  • money as a medium of exchange – this is the most visible form of indirect exchange, and we will call it transitive service exchange. Service tokens, of which money is a successful example, represent service owed
  • goods as distribution channels – removes the goods vs services debate by showing goods freeze service allowing them to be distributed and unfrozen when and where needed
  • organisations as resource integrators – this and the next are further examples of transitive service exchanges
  • networks as linkages for exchange

Let’s explore them in a little more detail.

transitive service exchange – lubricated by service credits

We often perceive money as a medium of exchange, where we hand over cash for goods and services. This readily masks service as the fundamental basis of exchange. However, money (and service credits, of which money is an example) actually represent services owed rather than value. Let’s explore this concept further.

When one actor performs a service for another, service-dominant logic tells us that the second actor will reciprocate with a service in return. This forms the basis of exchanging service for service. But what if the return service is not immediate, and there’s a delay of, say, 6 months? We need a way to keep track of who owes what to whom. Enter service credits – a placeholder for services owed. So, when I provide you a service, you give me a service credit, which I can use later to obtain the service you owe me.

Now, consider the scenario where everyone in a society agrees that service credits are transferable among members. If I perform a service for you and receive a service credit, I can choose to use that credit with someone else whose service I might require more than yours. The essence remains the same – service is still exchanged for service, but we’ve enabled it to be indirect, or transitive, through service credits.

There’s still a part of the service credit story to explore: dealing with services that differ in magnitude of effort. Or, put another way: how to have equitable service exchange, which embodies the notion of fairness in service exchange, regardless of variations in effort. We’ll discuss that shortly.

Distributing service – the curious case of goods

Goods also mask that service is the fundamental basis of exchange. After all, goods-dominant logic leads us to the conclusion that services are different, poor relatives to goods, right?

However, we need to shift away from the goods-dominant perspective that creates a division between goods and services. Embracing a service-first view, we realise that goods actually serve as distribution mechanisms for service.

In this perspective, goods freeze skills and knowledge, allowing them to be distributed elsewhere. When these goods are utilised in resource integration activities, the skills and knowledge are unfrozen facilitating progress. Hence, there’s no need for a distinct separation between goods and services. Goods are resources – carriers of competence (skills and knowledge), much like employees or systems. This is an important observation in the progress economy, feeding into the progress resource mix and innovation.

The only difference we see lies in how goods are involved in progress. They are operand resources, meaning they must be acted upon for progress to be made. Whereas employees, for example, are operant resources, actively working on other resources to make progress.

We often find that progress propositions where seekers execute the majority of progress-making activities – known as enabling propositions – rely heavily on goods. This approach is akin to self-service.

We are therefore still exchanging service when using goods. Since service is frozen into goods to be unfrozen when and where needed.

Organisations as resource integrators; Networks as linkages for exchange

Another example of masking is that organisations integrate and combine micro-specialisations – various departments, assembly line workers, layers of management, etc. Often there are limited, or no, direct service exchanges between these micro-specialisms.

However, when we zoom out we can see another case of transitive service exchange at play. Within the organisation, each employee performs a service for the overall functioning of the organisation. In turn, the organisation provides a service to a seeker—such as customers or clients. These seekers, in all likelihood, provide service tokens to the organisation, which then distributes these tokens among its employees.

We see similar in a network of organisations, such as an ecosystem, performing a service. The linkages between these organisations might mask the true basis of exchange. Yet again, service credits likely come into play, facilitating the transitive nature of ecosystem linkages.

Alright. Now that we’ve shifted our focus from outputs to the process, recognising service as the application of skills and knowledge to make progress, we can hopefully agree that service is the fundamental basis of exchange. However, the complexities of the modern world often obscure this through indirect exchanges.

As mentioned earlier, we assert that service credits play a vital role in facilitating transitive indirect exchange. Yet, it’s essential to acknowledge that not all services are equal in terms of effort. This brings us to the crucial topic of equitable service exchange, where we’ll delve deeper into ensuring fairness and balance in the exchange of services.

Equitable service exchange

So, in our progress economy world we believe service is exchanged for service. Although this exchange may be masked by its often indirect nature. Service-dominant logic provides solid reasoning for this way of thinking. And there are two main masking mechanisms:

  • transitive exchange masking – service owed is represented as transferable service credits
    • money as a medium of exchange
    • organisations as resource integrators
    • networks as linkages for exchange
  • delivery masking – service doesn’t immediately look like service
    • goods as distributors of service

For our purposes, we can think of this service-dominant logic view as encouraging us to rethink our view of growth opportunities, since it:

  1. expands our focus on a point-like moment of value exchange (the sale) into a continuous process of incremental value co-creation through making progress.
  2. enables us to better see how to flex the progress resource mix to meet seekers wishes by removing the artificial goods vs services divide

We introduced service credits as a means of enabling and mediating transitive indirect exchange. These credits represent a future “I owe you” for service received. They can be redeemed directly with the actor that gives them simultaneously or at a later time point. Or used with another progress helper in an indirect transitive service exchange.

However, there is a critical point to consider: assuming that one service credit equals one owed service probably does not hold true. Different services require varying levels of effort (application of knowledge and skills). This brings us to the concept of equitable service exchange.

equitable service exchange: an exchange of service where each actor perceives the other is reciprocating with the same level of effort

editing below here

A helper may, for example, ask for a service with effort of 2 service credits in exchange for performing their service. Of course, in our real world this equitable exchange is likely masked by indirect exchange. And so we observe the exchange of credits between two actors rather than service. But we know from above this represents transitive service performance – the seeker will have performed service elsewhere to obtain the 2 service credits asked for this service.

And it here we see the basis of the equitable service exchange progress hurdle. Where a seeker judges (as always phenomenologically and uniquely) that a helper may be asking for too many service credits.

It’s important to note that we are not talking about a bartering system when discussing service for service exchange. Nor is profit or capitalism excluded.


perhaps best to talk about cost first. What is the cost of providing a proposition? Its all the effort required to run the helper (marketing, execution, innovation + the support functions) plus any effort of other actors in the ecosystem

price is effort * frequency

Explain self-service/enabling and relieving in terms of effort exchange

Business model innovation

Can you reduce Equitable service exchange requested? ESE = service from seeker + service from elsewhere

and that elsewhere could be ad-based, or otherwise supported.
helper effort could be all at once or spread over periods (subscription models)

Key considerations

Next steps
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