The Progress Economy

Service (singular): the application of capabilities to make progress; distinguished from product category of services (plural), the dual of goods.

The traditional perspective of services

Traditionally we talk of services (plural), seeing them as a product category, the dual of goods. This categorisation sits at the heart of goods-dominant logic and value-in-exchange thinking. It leads us to see services as poor relatives to goods, with them being:

• inconsistent
• intangible
• can’t create an inventory
• require involvement and
• are inseparable

These are the “5Is” of services, a slight expansion of Parasuraman and Berry’s IHIP attributes (described in “Problems and Strategies in Service Marketing”). Marketers, and other disciplines have stuck fast to these as a way of describing and driving growth in our economies.

However, Vargo and Lusch challenge these 5Is in “The Four Service Marketing Myths“, arguing that the traditional distinctions between goods and services are misleading.  Here’s what they say (with my annotations in square brackets):

• Unless tangibility has a marketing advantage; it should be reduced or eliminated if possible [enabling rapid scalability, think Spotify versus CDs]
• the normative marketing goal should be customization rather than standardization [enabling greater progress to individual seeker’s progress sought from their progress origin = resulting in greater value emerging]
• the normative marketing goal should be to maximize customer involvement in value creation [enabling greater alignment to individual progress sought from progress origin = greater value emerging through co-progress making (may be called value creation in the literature]
• the normative goal of the enterprise should be to reduce inventory and maximise service flows [why tie up cash through storing multiple units that don’t align with individual progress journeys?]

Vargo & Lush (2004) “The Four Service Marketing Myths“ with notes

A cursory glance at our modern economies shows they are predominantly service-based and intangibility leads to rapid scaling (“software is eating the world”, streaming services using digital goods etc) and even goods based industry strive towards minimising inventory.

The alternative perspective

As Bo Edvardsson and colleagues observe, service should be understood as “a perspective on value creation rather than the product category of ‘services’ (plural).” (Edvardsson, Gustafsson and Roos. (2005) “Service portraits in service research: a critical review”).

Grönroos talks of service being “a process, made up of activities” and Vargo and Lusch define service as:

the application of competences (knowledge and skills) for the benefit of another party

Vargo & Lusch (2008) “From Goods to Service(s): Divergences and Convergences of Logics”

Services (plural) vs Service (singular)

In The Progress Economy we want to focus on the process nature of service as value emerges from making progress (the execution of progress-making activities).

Therefore, just like Vargo & Lusch in their “From Goods to Service(s): Divergences and Convergences of Logics” (Vargo & Lusch (2008)), we draw a distinction between services (plural) and service (singular).

Instead of asking What products (goods or services) does the organisation sell?, we begin asking What capabilities are needed to be applied for progress to be made? What capabilities are the customer missing? What capabilities can we offer?

Applying capabilities, making progress

The Progress Economy builds directly on Vargo and Lusch’s insight but broadens it in three ways.

First, service is not limited to just helping another. We recognise self-service as well. This reflects Vargo and Lusch’s earlier formulation of service as benefiting “another entity or the entity itself.” (Vargo & Lusch (2004), “Evolving to a new dominant logic for marketing”, Journal of Marketing, Vol. 68, pp. 1-17).

Second, service involves more than the application of competences, which is narrowly defined as knowledge and skills. Progress may equally depend upon physical capabilities, such as strength; natural capabilities, such as the movement of wind or flowing water; or abstract capabilities, such as time and availability.

Third, within the Progress Economy, the idea of benefit becomes more precise. To benefit someone is to help them improve their well-being – that is to make progress towards a more desirable state.

The Progress Economy Perspective

For the reasons above, The Progress Economy broadens Vargo and Lusch’s definition of service (singular) by replacing competences with the wider concept of capabilities and by making progress explicit.

Service is the application of capabilities to help oneself, or another party, make progress.

Once service is understood as the application of capabilities, the longstanding goods-versus-services debate disappears. Goods are no longer the opposite of services. They are the mechanism through which service is transported across time and space. Capabilities are frozen in the goods, to be unfrozen when a it is integrated into progress-making activities.

Different ways of understanding service

Rather than being at output/product category, service is an active entity. Quite who applies the capabilities leads to a continuum between enabling and relieving service. Such a continuum gives insights into how capabilities are packaged in a resource mix and where a proposition expects (requires) other capabilities to reside.

Moving an offering along this continuum is one of the most powerful innovation levers available to organisations.

The second useful classification comes from Lovelock and Wirtz (Lovelock & Wirtz’s four types of service processing (from ”Services Marketing”), who categorise service according to what is being transformed.

They identify four broad forms of service:

• People processing, where capabilities are applied directly to people (such as healthcare, fitness, or hairdressing).
• Possession processing, where capabilities are applied to physical possessions (such as repair, transport, or storage).
• Mental-stimulus processing, where capabilities influence thoughts, learning, or emotions (such as education or entertainment).
• Information processing, where capabilities manipulate information or data (such as banking, insurance, or IT services).

Viewed through the lens of the Progress Economy, these are simply different classes of functional progress that organisations help Seekers achieve.

An additional aspect arises from considering “application” in the definition. That implies there is effort expended by an actor. In the case of a self-service, that effort is the “my” effort. In cases of someone helping me, that effort is theirs, and it is reasonable that they expect something in return. This lays the seeds of service exchange, often indirectly through service credits. Of which money has been a successful implementation. This way, we can see price as an indicator of effort expected in return by an actor offering their help.