the service economy

Dr. Adam Tacy PhD, MBA avatar


We need the concept of the service economy when we live in a world that believes there is a goods economy. It reflects the destination we arrive at when we follow the perceived ongoing shift from goods to service.

There are various reasons for this perceived shift. And I list these in Figure 1. As well as looking at them in detail in this article.

Figure 1: Reasons for the “shift” to the service economy

In short, there are economic, user behaviour, asset and value in data reasons that encourage/open up a move from manufacturing pure goods to providing defined services.

Ten years ago, Andreessen Horowitz said that software is eating the world. I believe it is really a case that service is eating the world. And it just so happens that software is enabling those services.

Service is eating the world; and software is increasingly enabling/powering service Click To Tweet

A main category in the service economy is servitisation. This is where we wrap goods in service. And a prime example oft quoted is Rolls Royce’s power by the hour offering. Rather than buying engines, and service and….airlines buy a capability and Rolls Royce look after all the logistics for a fixed price per hour of usage. Airlines benefit from knowing they have the capability. And Rolls Royce can innovate to reduce costs.

relationship to progress economy

It is tempting to see the service economy and the progress economy as being equivalent. And they superficially can look the same. We have a service mix. And the “shift to the service economy” reflects a re-balancing of that service mix. Moving from predominantly goods based mix to a mix of resources, systems and people.

The reasons for this re-balancing are the same as those listed in Figure 1.

However, the service economy is a restricted instance of the progress economy.

restrictions on the progress economy

The only difference between the service economy and the goods economy is that shift in the service mix. We needlessly carry over the restrictions from the goods economy thinking.

That is to say, we still believe that providers create/embed value in the solution. Rather than it being only the beneficiary that can determine value. Which in turn leads to limits on the transactional nature of the economy. And a tendency to attempt to improve current solutions rather than take a wider view.

Additionally, we carry the baggage of believing that services are a poor relation to goods. But that should not be the case.


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