Resources – carriers of capabilities

Dr. Adam Tacy PhD, MBA avatar
What we’re thinking

Resources are the fundamental component of the progress economy.

We stumble when we lack them; integrate them in order to make progress ((co-) creating value as we do so); and offer them to others in exchange for service we need (often indirectly)

They are integrateable carriers of capabilities, often skills and knowledge, but let’s not forget physical characteristics such as strength, or other characteristics such as time.

In the progress economy we find it helpful to classify resources relating to how they help make progress, rather than as tangible/intangible, namely:

  • operant resources – act on other resources to make progress
  • operand resources – need to be acted upon for progress to be made

We see operant resources, employees for example, are the source of strategic benefit. That’s different to our traditional thinking where we see operand resources, such as goods, giving the advantage.

We can swap one resource for another if they carry the same capability. A goods, for example, which in the progress economy are seen as freezing skills and knowledge, could be swapped for an employee or a system; or vice-versa. Though it may be a one to many swap. This underpins innovation in the resource mix of a proposition.

Importantly, resources have no value themselves, only potential to help make progress. Only when we perform resource integration does progress get made (and subsequently, value emerge).

Innovation should generate resources that help make better progress, or progress better. These are often helper resources but there is no reason why this cannot relate to seeker ones.

Let’s explore resources!

What are resources?

Resources are the things we integrate together in order to make progress. A call centre employee interacting with a customer to solve their problem; the sun irradiating a solar panel to generate electricity; a hammer hitting a nail to secure two pieces of wood together, etc.

As highlighted by Vargo et al (2010), human ingenuity continues to spawn “countless resources” that “continues to drive the market and society”. De Gregori’s “Resources are not; they become: an institutional theory” nicely walks us through the fascinating story of resource bootstrapping through human life-time.

Resources are fundamental to the progress economy. Without resources to integrate we can make no progress!

The traditional view – tangible vs intangible

To understand resources, we let’s first turn to the traditional view. Hunt’s “resource advantage theory of competition” tells us resources are:

the tangible and intangible entities available to an actor

Hunt, S. (1997) “Competing Through Relationships: Grounding Relationship Marketing in Resource-Advantage Theory

So in this view, they are physical items like tools, as well as intangibles like skills, knowledge, and relationships. But this tangible/intangible focus of the definition risks keeping our thinking rooted in goods-dominant.

Peters gives us the perspective that resources are carriers of capabilities:

…no tangible or intangible item represents a resource in its own right; rather a resource is a “property of things…”. In this sense, a resource is a carrier of capabilities

Peters L.D., Löbler, H., Brodie R. and Briedbach, C. (2014) “Theorizing about resource integration though S-D Logic

Capabilities encompass a wide range of things, including:

  • skills and knowledge
  • physical attributes like strength
  • organisational traits such as culture
  • and many others.

Common resources are: seekers, helpers, progress propositions, goods, locations. Additionally, resources can be beyond human control, such as time and weather (as discussed in Vargo, Lush and Akaka’s “Advancing service science with service-dominant logic“).

The progress economy view – carriers of capability

We embrace the view that resources are carriers of capability. So we start our definition of a resource as:

resource: a carrier of capability…

But we also want to emphasise that something happens with resources. That is to say we integrate them. Successfully integration leads us to make progress; which in turn means value emerges. Therefore our full definition of resource is:

resource: a carrier of capability that can be integrated in one or more progress-making activities.

It’s interesting to note that if we have two different resources carrying the same capability, we can swap them. And in the progress economy, the scope for this is wider than what is obvious in the goods economy. We could swap a goods for an employee (servitisation). Or a system for an employee (applying generative AI, for example). This is something we’ll discuss more when looking at the progress resource mix.

Our attention on capability and carrying them opens the door for us to replace traditional tangible/intangible classifications. We will classify resources based on how they help make progress. They are either operant or operand resources as we’ll see.

There is a little issue, though…

The resource-capability confusion

We find that both the literature and our everyday language are somewhat fluid when using concepts of resource and capabilities. If you agree with our view that resources are carriers of capabilities, then the world sometimes refers to capabilities as resources. Here’s some examples:

  • skills – these should be capabilities that can be carried by, for example, the following resources: human, system, or frozen in goods; but we often refer to them as resources
  • strength – again a capability carried by humans and animals, but we often refer to as a resource, or human-augmenting machines, where we do think of it as a capability
  • wind – we often refer to as a resource although technically it is a capability carried by the resource we know as the atmosphere

Yet, interestingly, we don’t make this ‘confusion’ with, for example, water, which we clearly see as a resource that has the capability to move things (current).

This linguistic short-cut, which likely stems from how we see ourselves as using capabilities and thus seeing them as resources, is something we just have to live with.

They are a competitive advantage

Hunt’s resource-advantage theory of competition tells us a firm gains a competitive advantage by having superior resources. Weaker firms look to improve their resources through “better management of existing resources or by acquisition, imitation, substitution or major innovation” (Hunt, S. (1997) “Competing Through Relationships: Grounding Relationship Marketing in Resource-Advantage Theory”).

In our progress economy, we see seekers as primarily trying to make progress. When they lack of resource to progress themselves, they the look to progress helpers. Progress helpers offer propositions (bundles of supplementary resources) intended to help seekers progress. They make these offers in order to exchange for service, often indirectly, they are looking for.

So we should think that a seeker is primarily looking to have superior resources. And they may turn to a progress helper for those. As such, a helper should be looking to have superior resources themselves.

We like to expand on that and rephrase in terms of progress, giving us:

  • a progress seeker looks to have superior resources in order to make progress. Weaker seekers look to improve their resources through either:
    • “better management of existing resources or by acquisition, imitation, substitution or major innovation”*, or
    • engaging a progress helper that offers appropriate supplementary resources
  • a progress helper looks to have superior resources and capabilities to maximise service exchanges they partake in. Weaker firms look to improve their resources through
    • “better management of existing resources or by acquisition, imitation, substitution or major innovation”*
* inner quote from Hunt, S. (1997) “Competing Through Relationships: Grounding Relationship Marketing in Resource-Advantage Theory

What does superior mean? It can only be that the resources do one or more of the following:

And that just happens to be part of the progress economy’s definition of innovation.

Allocative control

An essential characteristic of most resources is allocative control, denoting the ability and freedom to determine when resources are employed.

allocative control (of resource) – the ability and freedom to control when a resource is used

Allocative control can be temporarily transferred to another actor, highlighting a crucial distinction between goods and physical resources in a helper’s resource mix. Physical resources are essentially goods whose allocative control is temporarily delegated to another actor.

Classifying better – by How they help make progress

In the progress economy we classify resources by how they help make progress. They are either operant or operand resources.

Operant Resource*

acts on other resources resulting in progress being made

Operand Resource*

need to be acted upon for progress to be made

* definitions adapted for the progress economy from Constantin & Lush 1994’s book “Understanding Resource Management: How to Deploy Your People, Products and Processes for Maximum Productivity“.

For instance, in the progress attempt “John drives the car to get to the office”, John is an operant resource acting (integrating his skills and knowledge of driving) on the operand resource of the car (which needs to be driven for progress to be made).

Interestingly, we find that a resource’s classification can vary depending on the specific capability we are looking to harness.

Consider water. It carries both the capability to quench thirst and turn a turbine. Each capability is different according to our definitions:

  • force/movement capability implies water is an operand resource – the water acts upon turbine blades to make progress
  • quenching our thirst implies water is an operant resource – we need drink (act on) the water in order for progress to be made

Temptingly I wonder if capabilities rather than resources are operand or operant; but lets not go there yet.

OK, let’s delve into both these types of resources, starting with operant, and see what they are, what seekers and helpers typically have and how they gain new resources.

Operant resources

Operant resources are those resources that act on other resources.

operant resource: a resource that acts on other resources in order for progress to be made

based on definition in Vargo, S.L.and Lusch, R.F.(2004) ‘Evolving to a New Dominant Logic for Marketing’, Journal of Marketing 68(1): 1–17.

The act is an attempt to make one or more progress-making steps. Where those other resources may be operant (such as a seeker or another employee) or operand (such as goods).

Resource-advantage theory sees operant resources as typically:

  • human (e.g. skills and knowledge of individuals)
  • organisational (e.g. controls, routines, cultures, and competencies)
  • informational (e.g. knowledge about markets, competitors, and technology)
  • relational (e.g. relationships with competitors, suppliers, and customers)
Madhavaram, S., Hunt, S. (2007) “The service-dominant logic and hierarchy of operant resources”, Academy of Marketing, 36, pp 67-82

We also consider certain systems as operant resources – when they meet the condition of acting on other resources to make progress. A web browser, for example, is an operant resource whereas a typewriter is not. The browser integrates built in skills to translate HTML code (itself an operand resource) received from a web server into a fully-rendered web page. Compare that to a basic word processor that needs to be acted upon to make progress (a system as an operand resource). For an in-depth exploration, refer to Akaka and Vargo’s discussion in “Technology as an operant resource in service (Eco)systems“.

This discussion about systems takes on even greater relevance in light of the recent surge in Artificial Intelligence. These serve as operant resources designed to “augment or automate” human activities, as Spohrer discusses in “Service in the AI era”.

They are fundamental source of strategic benefit

Our service-dominant logic foundation informs us that operant resources are the fundamental source of strategic benefit [ie making progress].

Operant resource are the fundamental source of strategic benefits

#4

Why do we use the term “strategic benefit” rather than “strategic advantage”? The choice stems from Vargo and Lush’s perspective in 2016. Their intention was twofold: i) to underscore the inherent service-service nature of our world, and ii) to prioritize the primary notion of co-creating value over competitiveness, relegating the latter to a secondary motivator.

So what operant resources do seekers and helpers typically have access to? Lets dig in.

Seeker’s operant resources

The seeker is seen as the primary operant resource in the progress economy. They are seeking to make progress, and capable of acting on other resources to reach that.

That said, the progress proposition continuum informs us that a seeker becomes more operand the nearer we get to the relieving end.

We naturally think of seekers as possessing resources (capabilities) such as skills, knowledge, and time. Alves, Ferriera and Fernandes (2016) point to a broader range, including:

  • physical – include sensory-motor endowment, energy, emotions and strength.
  • social – made up of both personal and cultural relationships
  • cultural – include specialised knowledge and skills, life expectancy and historic imagination
Alves, Ferriera and Fernandes (2016) “Customer’s operant resources effects on co-creation activities” referencing Arnould, Price and Mashe () “Towards a cultural resource-based theory of the customer
How do seekers acquire operant resources

Some capabilities seekers are born with but the majority they acquire in several ways:

  • observation/imitation: by observing others making progress attempts
  • experience: hands-on involvement in their own progress attempts
  • experimentation/innovation: using resources available to them, or combining them, in new ways.
  • education and training: taking formal education and training programs to acquire specific capabilities (eg skills and knowledge from a teacher, or strength from weight training)

Let’s not forget that seekers will certainly acquire operant resources via these ways from outside your industry/market. The implication being you should look to see what seekers have when building your propositions. I often point to use of QR codes as an example of this. Originally from the auto industry, they are now used, and expected to be used by seekers, in many different industry/market use cases.

Research by Alves, Ferreira, and Fernandes (2016) underscores the importance of educating seekers in relevant skills and knowledge related to your propositions.

Seeker operand resources

Such education empowers seekers to better leverage your offerings as:

  • expertise and self-efficacy can be increased by the helper educating the seeker (H4 in the diagram below).
  • value co-creation (jointly making progress in our view) is increased with customer expertise, customer education, and self efficacy (H1, H3 and H5 in the diagram).

What operant resources do helpers have?

Helper’s operant resources

A progress helper is the entity that offers supplementary resources to a seeker, in the form of a progress proposition, to help the seeker progress. It can be a one-person band, an organisation/firm, or an ecosystem/network. Therefore, some of its operant resources may be seeker facing and others internal.

Hunt (2004), sees a helpers’ operant resources falling into the following categories:

  • Human resources
  • Organizational resources
  • Informational resources
  • Relational resources
Hunt, S. (2004) “On the service-centered dominant logic of marketing

Where human resources refers to the skills and knowledge that individual employees posses (rather than a HR function). From this we see the roots of these famous business leader quotes:

Clients do not come first, employees come first. If you take care of employees, they will take care of the clients

Richard Branson

We built Starbucks brand first with our people, not with consumers. Because we believed the best way to meet and exceed the expectations of our customers was to hire and train great people, we invested in our employees

Howard Schultz

It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do

Steve Jobs

Backing up human resources are often organisational resources. And here we refer to the controls, routines, culture and competences of the helper. The proposed series of progress making activities in a progress proposition is an organisational resource that seekers are given access to. But there are many routines etc that are not externally available and which helpers’ consider their magical sauce.

Information resources often come about through relational resources. The relationships that the helper has with competitors, suppliers, and customers. Helping progress helpers gain critically needed knowledge about market segments, competitors, and technology.

Hierarchy of helper operant resources

Madhavaram and Hunt (2008)The service-dominant logic and hierarchy of operant resources” introduce firm’s operant resources as a hierarchical structure consisting of three levels: Basic, Composite, and Interconnected.

At the Basic level, abbreviated as BOR (Basic Operant Resources), we find resources that enable the helper to operate efficiently and effectively. Such resources are “easily” accessible and measurable, and are referred to as the building blocks of the organisation. For instance, a consulting company’s BORs may include the expertise of their consultants; a manufacturing company, the skills of machine operators.

Moving up the hierarchy, we encounter 13 Composite Operant Resources (COR). These resources represent combinations of two or more distinct basic resources or other composite resources. They are characterised by low levels of interactivity but collectively enable the firm to produce market offerings efficiently and effectively.Some examples are market orientation, technology competence and absorptive capacity.

Lastly, there are Interconnected Operant Resources (IOR), which are more complex and interdependent than composite resources. In this category, each component resource significantly interacts with and reinforces the others, enabling the firm to produce market offerings efficiently and effectively. Among the seven interconnected operant resources identified by Madhavaram and Hunt, two examples are organisational learning capability and entrepreneurial proclivity. Which we’ll see again when looking at how to increase innovativeness.

How helpers acquire operant resources

Let’s first recall the origin story of helpers. Helpers are seekers who have overcome a lack of resource progress hurdle, either through experience or purposefully. They now look to leverage their newly gained resources to help others progress (in exchange, often indirectly, for service they need).

An established helpers acquires new operant resources through a variety of ways:

  • experience: involvement in progress attempts
  • purposefully developing: such as training/education
  • innovation: taking the next step towards resources that help progress
  • acquiring/collaborating with: other helpers

Gallouj & Weinstein (1997) identify that individuals within firms (helper organisations) acquire competencies through:

  • education
  • training
  • experience
  • and often from the repeated interaction with customers
Gallouj, F., Weinstein, O. (1997) “Innovation in services

They also noted that helpers often endeavour to codify valuable employee behaviours into standardised processes. That allows their institutionalisation and dissemination for future benefits.

Relating to their hierarchy, Madhavaram and Hunt offer two strategic approaches. That firms should consciously and continually aim to:

  1. acquire and develop lower-order resources that can elevate them within the hierarchy
  2. cultivate organisational policies, learning systems, and cultures that facilitate this ascent.

Innovation plays a pivotal role in enhancing operant resources and maintaining competitiveness in the market. Helpers should constantly seek to identify resources that help seekers make better progress. As well as resources that manage the ever changing progress sought and progress origins of seekers.

Operant resources can also be secured by the helper through ecosystem partnerships with other helpers or by acquiring another helper, following Williamson’s transaction cost economics theory to minimize transactional inefficiencies in these relationships. Leading to the standard make, buy, or ally choices.

non seeker/helper resources

Some resources are not owned by seeker or helper.

Consider the example of wind propelling kites on cargo ships, as demonstrated in the video below. Wind itself is neither a seeker nor a helper resource (or a capability). Yet it clearly acts upon the kite to facilitate progress, functioning as an operand resource. (If we’re not pedantic with the short-cut of wind as a resource, remember).

Watch This Cargo Ship Fly a Giant Kite to Save Fuel and Cut Emissions - Airseas SeawingWatch This Cargo Ship Fly a Giant Kite to Save Fuel and Cut Emissions – Airseas Seawing

…resources such as time, weather, laws, which are often considered exogenous, and uncontrollable by individuals and organisations, are often integrated

Vargo, S.L., Lusch R.F., and Akaka, M.A (2010) “Advancing Service Science with Service-Dominant Logic Clarifications and Conceptual Development

Time is another resource that is not seeker or helper owned. But seekers attempt to manage the fixed amount they have. When seekers don’t have the time to make progress they either defer that progress attempt or look for relieving propositions.


That’s our overview of operand resources done. They are the primary resources in a service-dominant logic way of thinking, and therefore, in the progress economy.

What, then, of their counterparts: operand resources? Let’s now explore them!

Operand resources

Operand resources are those resources we need to do something with to make progress.

operand resource – a resource that needs to be acted upon in order for progress to be made

based on definition in Vargo, S.L.and Lusch, R.F.(2004) ‘Evolving to a New Dominant Logic for Marketing’, Journal of Marketing 68(1): 1–17.

The most obvious examples are goods – cars, hammers, sweets, machinery, etc. And in our modern, IT-forward, world, that includes digital goods – such as music and video streams. Data, usually as a digital goods, has become an increasingly important resource.

We also see locations, such as hospitals, classrooms, garages, as operand resources. So are their digital companions – websites, mobile apps, social media and virtual worlds.

As we discussed earlier, some systems are operand resources. Like a word processor or a manufacturer’s tooling. Both these examples need to be acted upon in order for progress to be made.

However, there is a stark contrast to the traditional goods-dominant mindset to note. Operand resources, such as goods, do not constitute the primary source of strategic benefit in the progress economy. That role, as we have seen, belongs to operant resources.

Let’s look at the typical operand resources seekers and helpers have and how they acquire them.

Seeker’s operand resources

As seekers progress through life, they accumulate a diverse array of operand resources. Arnould, Price, and Melsha, whose paper we encountered earlier, propose that seekers acquire their operand resources through:

  • finding or self-creating
  • inheriting or being gifted
  • from previous [exchanges with helpers]
Arnould, Price and Melsha (2006) “Toward a cultural resource-based theory of the customer

Take a moment to look around your own home, I’m sure you’ll notice numerous goods and potentially systems that fall into these categories. Your home itself is an operand resource, a location, you use in various progress attempts – to rest in, to feel safe and protected, to entertain etc.

In the last section we spoke of a seeker being the primary operant resource. And of the proposition continuum that tells us a seeker’s operant impact reduces the closer we get to relieving propositions. That does not mean their role as an operand resource necessarily increases. In fact it doesn’t change in three of Lovelock & Wirtz’s processing categories (possession, mental and information; see here).

However for the people processing category, a seeker may even function as an operand resource themselves. For example, during surgery or getting a hair cut.

Helper’s operand resources

Turning our attention to a helper’s operand resources, they are any:

  • goods they offer (produced or sourced; physical or digital)
  • tools/systems they use
  • their physical and online locations

Whether a system is considered an operand or operant resource depends on its contribution to facilitating progress. For instance, a database is categorized as an operand resource since it requires action, while a chatbot can be regarded as an operant resource, leveraging its knowledge to assist users.

Helpers acquire their operand resources through

  • finding them
  • purposely developing them
  • previous exchanges
  • securing allocative rights to them from other helpers.

Securing allocative rights means either taking-over another helper (buy), or forming a partnership/ecosystem (ally). This includes platform-style helpers – those that offer to connect two other parties together.

The curious case of goods

Historically, goods have been seen as the primary driver of growth, while services were considered less important. This conventional view traces its roots back to Adam Smith’s seminal work, “Wealth of Nations”.

In the progress economy we look at goods differently.

Goods are, like all other resources, a carrier of capability. Their super-power is to freeze skills and knowledge, allowing them to be transported in time and location. Those skills and knowledge are then unfrozen during acts of resource integration.

An example will help here. Let’s consider listening to a band. You can directly experience their skills and knowledge by attending a live concert. Alternatively, you can listen to their CD or digital stream. In this second case, their performance (application of skills and knowledge) has been “frozen” in a recording studio onto a digital recording, transported physically or digitally to your location, and “unfrozen” when you press the play button (integrating the recording resource with a playback resource).

Goods, as service-dominant logic tells us, become distribution mechanisms for service provision.

Goods are distribution mechanisms for service provision

#3

What does this really mean? Well, a goods can be swapped for another resource that carries the same capability; and vice-versa. In practice it might be a many-one swap.

Nevertheless, we can envisage a swap of resources rather than the goods-dominant logic battle between goods and services.

Wealth as an operand resource

We often think of wealth as a resource. Does that hold up in the progress economy?

Well, wealth and value in the goods economy are somewhat synonymous. Wealth being a measure of value you hold that you can exchange. In the progress economy this is not true. Value emerges from making progress and needs to be recognised by a seeker for it to be real.

Wealth is the capability to partake in transitive service exchange. It is carried by service credits of which money, assets, IOUs, bitcoin are some examples of implementations. The more service credits you hold the wealthier you are and the more service you can indirectly exchange for.

Relation to value

It’s important, though perhaps strange at first, to recognise that resources have no value. They have only potential to help make progress when integrated with other resources.

Resources have only the potential to help make progress; which is released used during resource integrations…

Which raises the question of resource efficiency. Something we’ll come back to when considering innovation opportunities.

Resource integration

In the progress economy we see value as emerging from making progress. And progress is only made through resource integration. This is the fundamental basis of value (co-) creation in the progress economy. Leading to the concepts of value-through-progress and value-in-use.

We integrate 2 or more resources during progress-makings steps of progress attempts.

Progress Zip Tool
Progress Zip Tool

Naturally, at least one resource in any integration needs to be operant – acting on the other resources. It comes from either the seeker (often the seeker themselves) or the helper (a resource from their progress resource mix).

Relation to innovation
offering better progress

We primarily innovate resources to improve progress that can be made through resource integrations.

The overall goal of a seeker’s progress attempt is to reach their progress sought. They may attempt to use their existing resources in innovative ways, including in novel combinations.

Alternatively a seeker looks to a progress helper for supplementary resources. The helper may innovate their resources in order to:

  • get their progress offered to closer match individual seeker’s progress sought
  • better reach their current progress offered
  • reduce one or more of the six progress hurdles

The helper offers some of their resources to the seeker to integrate with in the form of the progress resource mix.

A progress proposition includes proposed progress-making steps. These are also ripe for innovation to meet the same goals as above.

Leveraging skills from other markets/industries

Seekers are constantly attempting to progress with many things. This means they experience many markets and industries that are different than yours. They are learning new skills and gaining new knowledge there.

Innovators should be aware of what seekers are learning elsewhere and identify what can be “carried” into the helpers resource integration proposals. Think of the pervasive multi-uses of QR codes, as an example.

Educating seekers

We saw above (Alves, Ferreira, and Fernandes (2016)) that educating/training seekers increases co-value creation. How can you educate your seekers to improve resource integrations in your proposal? Where we should think of education in its broadest sense (one-one, group, physical, virtual, trial usage, AI instructors/tools and so on)

Increasing resource usage efficiency

We saw that resources are only creating value when used in acts of integration. Think of it this way: a screwdriver or an employee are not contributing to any progress (creating no value) when they are not used.

There’s even an academic debate on whether they can be called resources when not in action. Rather than jump down that rabbit hole, let’s summarise this as saying innovation should look at how to maximise use of resources. Which hints to subscription or sharing models – as long as allocation does not become a problem…


Related articles

Discussion

Let’s progress together through discussion…