What we’re thinking
Resources are fundamental components of the progress economy.l
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.
They are usually carriers of capabilities (skills and knowledge) and we prefer to classify them relating to how they are involved in progress making, that is to say:
- operant resources act on other resources to make progress
- operand resources need acting upon for progress to be made.
Operant resources (for example employees) are the source of strategic benefit. A difference to our traditional thinking of operand resources (such as goods) giving the advantage.
Importantly, resources have no value themselves, only potential. It is through resource integration activities that progress is made (and value emerges).
Let’s explore what resources are!
What are resources?
Resources are the things we integrate together in order to make progress in the progress economy. They are pretty fundamental. To understand resources, we first turn to the “resource advantage theory of competition” which defines them as:
resource: the tangible and intangible entities available to an actorHunt, S. (1997) “Competing Through Relationships: Grounding Relationship Marketing in Resource-Advantage Theory”
They are physical items like tools, as well as intangible assets like skills, knowledge, and relationships. But this tangible/intangible baseline keeps us rooted in goods-dominant thinking.
Peters gives us another perspective: resources are carriers of capabilities.
resources: carriers of capabilitiesPeters L.D., Löbler, H., Brodie R. and Briedbach, C. (2014) “Theorizing about resource integration though S-D Logic”
Where capability is typically interpreted as skills and knowledge in the service-dominant logic world we build upon. It also contains time, weather, etc when involved in making progress (see “Advancing service science with service-dominant logic”). As well as physical, e.g. strength, social and cultural aspects.
We embrace this view.
It allows us to remove the goods-dominant tangible/intangible division of resources. For instance, both goods and an employee are carriers of capability. Which makes them potentially interchangeable if they facilitate the same progress to be made. This is a key property of the progress resource mix offered as part of a progress propositions. Another key property is that resources only need to be “accessible” to the seeker, not necessarily “owned”.
Whilst we remove the intangible/tangible division, it is still useful to know that resources help differently with progress.
Types of resources: operand and operant
Rather than classifying resources as tangible or intangible, we prefer to see them in the progress economy as how they facilitate making progress. They are either operant or operand* resources.
* 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 (driving in this case) on the operand resource of the car. More specifically, he is integrating his skills and knowledge of driving (operant resources) on an operand resource that can be driven.
In lone progress attempts a seeker will typically integrate their personally held operant resources with operand resources they have access to. Missing necessary resources is the root of our fundamental progress hurdle – lack of resource. Which may cause the seeker to not start, or abandon, a progress attempt.
During a progress attempts that engages a progress proposition there are resource integration between various helper and seeker operant and operand resources. The helper offers to make various pre-determined resources accessible to the seeker. These resources offered are:
- a progress resource mix – specific levels, including none, of the following resources:
- operant resources: employees and systems that act on other resources (web browsers, AI, for instance)
- operand resources: systems that need acting upon (eg pre generative AI word processors), data, goods, physical resources, locations
- a proposed series of progress making activities (an operant resource)
Let’s explore these two resource types, see some typical examples of what seekers and helpers have, and discover how they acquire them. We’ll start with operant resources.
Operant resources are those that actively contribute to progress by acting upon other resources.
operant resource: a resource that acts on other resources resulting in progress being madebased 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.
Resource-advantage theory sees them as typically:
Madhavaram, S., Hunt, S. (2007) “The service-dominant logic and hierarchy of operant resources”, Academy of Marketing, 36, pp 67-82
- 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)
Systems or technology can be considered operant resources where they act on other resources to make progress. This is a discussion that only becomes more interesting with the rise of Artificial Intelligence systems.
And our service-dominant logic foundation informs us that operant resources are the fundamental source of strategic benefit [in making progress].
Operant resource are the fundamental source of strategic benefits#4
Why “strategic benefit” rather than “strategic advantage”? Well, Vargo & Lush (2016) wanted to i) emphasise what they see as the service-service nature of our world, and ii) to move competitiveness to a secondary motivator, in favour of the co-creation of value that they see as primary.
So what are the typical operant resources seekers and helpers have access to? Lets dig in.
Seeker’s operant resources
We naturally tend to think of seekers as possessing skills, knowledge, and time. Alves, Ferriera and Fernandes (2016) highlight there is a broader range of operant resources to consider, including:
Alves, Ferriera and Fernandes (2016) “Customer’s operant resources effects on co-creation activities”
- 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
Knowing the resources a seeker lacks access to is an important feed into crafting progress propositions.
How do seekers acquire operant resources
Seekers acquire operant resources through:
- experience (gained through progress attempts)
Don’t forget they will certainly acquire operant resources from outside your industry/market. Implying that you should consider this in your progress 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.
A study by Alves, Ferreira and Fernandes (2016) found that we should consider ways to educate seekers on skills and knowledge relevant to our propositions. Seekers’:
- 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).
Helper’s operant resources
According to Hunt (2004), helpers’ operant resources typically fall into the following categories:
Hunt, S. (2004) “On the service-centered dominant logic of marketing”
- Human resources
- Organizational resources
- Informational resources
- Relational resources
Where human resources refers to the skills and knowledge that individual employees posses (rather than any 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 clientsRichard 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 employeesHoward 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 doSteve 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 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.
Basic operant resources – the tangible and intangible entities available to the firm that enable it to produce efficiently and/or effectively a market offering for some market segment(s)Madhavaram, S. & Hunt, S. (2007) “The service-dominant logic and hierarchy of operant resources”
composite operant resources – combination of two or more distinct, basic resources, with low levels of interactivity, that collectively enable the firm to produce efficiently and/or effectively valued market offerings.Madhavaram, S. & Hunt, S. (2007) “The service-dominant logic and hierarchy of operant resources”
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
Helpers acquire operant resources through various means that we can generally group as through experience, purposefully developing, or acquiring/collaborating with other helpers.
Let’s start with the origin story of helpers. It is one of seekers who have overcome a previous lack of resource hurdle and now look to leverage their newly gained skills and knowledge. They offer to help others for an equitable exchange of help they need.
Within an established helper Gallouj & Weinstein (1997) identify that individuals acquire competencies from:
Gallouj, F., Weinstein, O. (1997) “Innovation in services”
- and often from the repeated interaction with customers
And that firms often look to codify beneficial employee behaviours into processes. Enabling the firm to stabilise and spread those skills and knowledge for future benefits. Further, Madhavaram & Hunt recommend that “firm should consciously and continuously aim to (1) acquire and develop lower order resources that can take them up the hierarchy and (2) develop organizational policies, learning systems and cultures that will facilitate their moving up.”
Innovation can be a powerful tool for enhancing operant resources and staying competitive in the market. Seekers redesign their operational processes to become more efficient or effective. This can require development of new skills and competence, perhaps developed during the innovation process.
Finally operant resources can come through partnering in an eco-system with other helpers. Or even acquiring another helper. Where the choice of partnering or acquisition follows Williamson’s normal economic theory of transaction cost economics. That is to say, the minimisation of hold-ups in any transactions between the parties – make, buy or ally. [note: similar make/buy/ally concerns feed into seekers deciding where they are on the progress proposition continuum]
Consider the wind driving kites on cargo ships as in the video below. It is not a seeker or a helper resource, yet it clearly acts on the kite to make progress – an operand resource.
…resources such as time, weather, laws, which are often considered exogenous, and uncontrollable by individuals and organisations, are often integratedVargo, S.L., Lusch R.F., and Akaka, M.A (2010) “Advancing Service Science with Service-Dominant Logic Clarifications and Conceptual Development”
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!
Editing below here
Where operant resources act on other resources in order to make progress, those resources that need to be acted upon in order to make progress we refer to as operand resources
operand resource – a resource that needs to be acted upon for progress to be madebased 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.
Unlike our traditional goods-dominant way of thinking, operand resources are not the primary source of strategic benefit. However, this does not mean we don’t recognise there are plentiful examples of progress being made with only operand resources. What we do, is recognise these types of offerings typically sit at the enabling end of the progress proposition continuum. Which we might casually call self-service. And that there is an observable shift towards the relieving end of the continuum (what is referred to in goods-dominant logic as the “shift to the service economy”.
However, we need to recognise that we’re not in a one-way rush to the “service economy” and be adverse to offering operand resources. Take diabetes testing as an example. Self testing using a device (an operand resource and you as an operant resource) is often preferable by sufferers than being dependent upon a nursing service (a separate operant resource to you that uses an operand resource and you as an operand resource).
Often we think of goods and locations (intangible resources) as the main types of operand resources. These are resources that we need to do things with or utilise to make progress.
Systems can also be operand resources (we saw above they may be operant resources). For example, the web browser you are currently using to read this article is a system that you need to interact with by entering a web address.
For instance, in the context of medical surgery, the seeker’s body becomes the operand resource that is acted upon by a surgeon. However, one could argue that even in the initial diagnosis that led to surgery, the seeker acted as an operant resource by applying their knowledge of where they experienced pain in their body.
Seeker’s operand resources
Seekers typically have access to, and control of, a growing number of operand resources as they move through life. The usefulness of them will vary wildly with the context in which a seeker is attempting progress.
Arnould, Price and Melsha, who’s paper we met earlier, indicate that seekers acquire their operand resources, from:
Arnould, Price and Melsha (2006) “Toward a cultural resource-based theory of the customer”
- finding or self-creating
- inheriting or being gifted
- from previous [exchanges with helpers]
Take a moment to look around your home, you’ll notice numerous operand resources that fall into these categories. Your home itself is likely an operand resource you use in various progress attempts, along with other locations under your control.
Control being the ability and freedom to determine when resources are used (control of resource allocation, if you want a more formal phrase).
Now we have an interesting question, related back to wealth: Is money a seeker operand resource? To truly comprehend the role of money in the progress economy, it is important to explore the concept of equitable service exchange and understand how money is one example of service credits and how they function in the related progress hurdle.
What about the helper?
Helper’s operand resources
Operand resources of the helper are any:
- goods they offer (produced or sourced)
- tools/systems they use
- their physical and online locations
Systems that the helper use can be operand or operant resources, depending on how they help progress. A database, for instance, is a system as an operand resource since it needs acting upon. Whereas a chatbot could be seen as an operant resource applying its knowledge to help whoever is using it.
In the goods-dominant view of the world, which we are advocating needs replacing, a helpers operand resources were seen as the source of strategic advantage. Nowadays we see operant resources as the source of strategic advantage.
As with operant resources, a helper may offer some of their operand resources as part of a progress resource mix. Resources in that mix are integrated with seeker resources in order to make progress.
It’s important to understand that operand resources are devices for encapsulating skills and knowledge so they can be applied through resource integration at future times (and perhaps different locations). Theoretically, and in many circumstances practically, goods are interchangeable for other types of helper’s resource, such as system or employee.
Operand resources can also be gained through acquisitions of other helpers, or participating in ecosystems/networks.
Another classification of resources is given to us from the field of service science. From Spohrer et al’s “The service system is the basic abstraction of service science” we get:
all nameable things can be classified as one of four types of resources:
Spohrer, J., Anderson, L., Pass, N. and Ager, T. (2008) “Service science and S-D logic” Proceedings of the Otago Forum.
- physical-with-rights (e.g., a person)
- not-physical-with-rights (e.g., a business)
- not-physical-with-no-rights (e.g., shareable information or documents, such as a description of a patent)
- physical-with-no-rights (e.g., a technology or part of the natural environment)
The curious case of goods
In the progress economy, our perception of goods is different from what you’re probably used to. For centuries, goods have been seen as the main driver of growth, while services were considered less important.
Adam Smith, in his “Wealth of Nations” promulgates the idea that goods are good and that services do not create wealth. Further, we often define services in relation to goods, using problematic terms like Zeithaml, Parasuraman, and Berry’s IHIP framework (see “Problems and Strategies in Service Marketing“) or the 5Is framework, where services are:
- require Involvement
- cannot create an Inventory
Additionally we read that McCarthy’s 4Ps marketing mix (product, price, promotion, place) needs to be updated to handle problematic services. Now we forced into 7Ps, 8Ps, or 4Cs and more, even up to Gummesson’s 30Rs (relationships). For a comprehensive discussion on this topic, I recommend reading “The Marketing Mix Revisited: Towards the 21st Century Marketing”.
But Lush & Vargo’s “The Four Service Marketing Myths” argue that these negative attributes of services should instead be seen as benefits. And from there the seeds of service-dominant logic are born.
What if we think differently to convention. What if we believe service is primary driver in the economy, and explore where goods fit into that basis?
Let’s agree with ISIP and Vargo & Lush over the definition of service (see our discussion on service exchange for why):
i) “The application of competences (knowledge and skills) for the benefit of another party”*
ii) “the application of knowledge to co-create value”*** Vargo & Lush (2008) “From Goods to Service(s): Divergences and Convergences of Logics”
** International Society of Service Innovation Professionals ISSIP.org
Now we’re no longer talking about an output – like goods or services (plural). Rather we’re talking about the process to make progress. A handyman, for example, applies their skills to help you progress with hanging a picture on a wall.
But recall Peters et al’s definition from earlier that defined resources as:
Resources are carriers of capabilitiesPeters et al (2014) “Theorizing about resource integration though S-D Logic”
Well, the handyman is a carrier of capabilities (which we can also refer to as skills and knowledge). In fact we’ll later refer to them as an employee offered as part of a proposition’s progress resource mix. They have the knowledge and skills required to hang a picture on the wall.
They do so using goods: a drill, wall plug and a picture hook. Which themselves are carriers of capabilities, capturing the skills and knowledge required for certain tasks. For example, a drill carries the knowledge of how to drill a hole, a wall plug carries the skills of how to affix something of particular weight securely to a particular type of wall, and a picture hook serves the specific purpose of knowing how to interface with the wall plug and picture frame.
Goods, in this view, become distribution mechanisms for service provision. Service dominant logic takes this view, seeing:
Goods are distribution mechanisms for service provision#3
I like to look at it this way. Goods freeze service provision allowing it to be transported in location and time. The service is then unfrozen, when needed, in an act of resource integration. Sometimes the goods is one-use, often for multiple uses, and sometimes for ever.
Importantly, goods are therefore interchangeable with other competence carrying resources (such as sytems, or employees). This is a key understanding for the progress resource mix. Although it may not be a one-one replacement. And it often impacts the resources a seeker must have; impacting the lack of resource progress hurdle.
Still not convinced?
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) have been “frozen” in a recording studio onto a CD or digital recording, transported to your location, and “unfrozen” when you press the play button.
Now think about quenching your thirst. You can turn on your tap and pour a glass of water. The water has been captured, purified, and delivered through a system of pipes to your home. Alternatively, you can open a bottle of water. In this case, the skills of capturing, purifying water have been “frozen” into the bottle of water, and distributed through a supply chain into your fridge. Sound familiar? Once you open the bottle, you’re essentially “unfreezing” those skills for consumption.
Role of resources
Resources don’t have value on their own. They have only the potential to help make progress. And it’s through resources integration that progress is made (and therefore value (co-) created).
Think of it this way: a screwdriver or an employee are not contributing to any progress (creating no value) when they are not used. Which suggests that actors should look to maximise resource utilisation.
Hunt’s resource-advantage theory of competition is helper-focussed (the firm, for example). A helper 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”.
Similarly, a resource can help making varying amounts of progress depending on how it is used and the context it is used in (contextual element of progress).
But this view perhaps misses seeker’s resources and ambitions. It is perhaps better to say that a helper gains competitive advantage by offering resources that integrate with seeker resources to provide superior progress. Although we should switch “competitive advantage” to “strategic benefit” to align with our service-dominant logic foundations.
strategic benefit: offering resources that integrate with seeker resources to provide superior progress
Talking of use, we classify resources in the progress economy relating to how they contribute to making progress. A distinction that’s important to explore.
Relation to value
It’s important, though perhaps strange at first, to recognise that resources have no value on their own. They have only potential. Value emerges from making progress….and progress is only made through resource integration.
Resources have only potential value…which is only realised through resource integrations (progress-making activities)
We should therefore look to see how to increase the number of resource integrations any resource can participate in.
- Remember to generally think of resources as carriers of capability (typically skills and competence). We can generally substitute a resource type for another when both carry the same capability. Does altering your mix of resources improve your survivability and/or reduce progress hurdles?
- similarly applicable for those resources offered to a seeker as part of a proposition’s progress resource mix
- Resources are classified as operant or operand depending on their progress-making impact. Operant resources act on others to make progress; operand need to be acted upon.
- Do you have the right mix of operand and operant resources
- Does the seeker have right mix to engage your proposition. Do you need to offer more resources?
- Goods freeze service provision enabling it to be transported in time and space; being unfrozen in acts of resource integration.
- Resources have no value, only potential; value emerges during progress making resource integrations
- What skills and knowledge have seekers gained in other industries and markets can you leverage to help the make progress in yours?
- How can you increase your innovativeness through operand resources?
- increase your market, learning and entrepreneurial orientations
- Which resources in the helper operant hierarchy are you missing and could further develop
- You should look to complete gaps in lower levels
- Can you gain access to useful resources through acquisitions or participating in ecosystem/network?
- What beneficial behaviours have do your employees have, and which should you codify into processes to benefit you in every seeker engagement?
- Can you increase the number of resource integrations your seeker facing resources are involved in (to increase the frequency they become “valuable”)
- leads to the sharing economy
- leads to the sharing economy