The Progress Economy

DRAFT

The model’s constraints

Value-in-use represents a significant evolution in our understanding of value. It effectively addresses many of the limitations associated with the value-in-exchange model. However, it also introduces certain constraints:

• defining value (well-being) remains challenging
• lacking clear mechanisms for value creation
• constraining definition of service
• only the beneficiary determines value
• lose actionable definition of price
• moving to direct service is all consuming

Here’s what I mean by those.

defining value (well-being) remains challenging

Replacing price with an increase in well-being as the measure of value is an improvement, yet defining well-being remains challenging.

An ideal definition would ensure consistency across different well-being dimensions and help us avoid neglecting significant aspects. For example, we’ve seen context is important, but the term “well-being” doesn’t immediately imply that importance. Similarly, non-functional elements of well-being may not be adequately considered. Say a beneficiary is looking to travel 100km, useful value propositions vary greatly depending on whether the individual has a driving license.

We could address part of this challenge by broadening the definition of “well-being” to encompass these elements. We’ll do just that in our next model – value-through-progress – although we will use the concept of “progress” instead of “well-being” as that also helps us with our next constraint.

lacking clear mechanisms for value creation

In the value-in-exchange model, the mechanism for value creation is straightforward: successive manufacturers in the supply chain embed increasing value into products. Whereas we talk of value co-creation through resource integrations In the value-in-use model.

Whilst the level of resource integration is fine for the marketing nature of where service-forward logics comes from, it falls short in providing the detailed levers needed to make innovation more systematic. We want to arrive at a better definition of innovation than improve resources and resource integration.

Why do beneficiaries engage with propositions? How do they decide between alternatives? What transpires during their engagement? What obstacles do they encounter? Answering these questions in a deeper way is key to enhancing our methods of value creation, innovation and growth.

constraining definition of service

Is the definition of service limiting? It’s defined, if you remember, in terms of competence, ie skills and knowledge.

service is the application of competence (skills and knowledge) for the benefit of 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

What about strength? A house moving service uses the strength of their employees (or their tools) to move heavy objects. Is strength a skill or knowledge? Perhaps we should talk of capabilities (and see resources as carriers of such capabilities).

only the beneficiary determines value

While the value-in-use model rightly emphasises the beneficiary as the primary determiner of value, it’s important to recognise that this model might overstate by claiming that beneficiaries are the only actors involved in this determination.

In certain scenarios, the actor proposing the value also determines value from their perspective.

For instance, if you wish to purchase a high-end sports car, the dealer will evaluate whether engaging with you will create sufficient value to justify their time. Similarly, during service provision, a provider might decide to withdraw resources if they perceive that value is not being adequately co-created.

Hence, it’s more precise to state that the beneficiary predominantly determines value, although the value proposition owner may also play a determining role in some cases.

lose definition of price

Back in the value-in-exchange model, price clearly indicated the value of a product, often set at the highest price a customer would pay.

However, the value-in-use model eliminates this direct link since there is no longer an exchange of embedded value. Nonetheless, price remains an obvious aspect of our daily life.

Vargo, Maglio & Akaka take a more meta view:

The process of co-creating value is driven by value-in-use, but mediated and monitored by value-in-exchange

Vargo, Maglio and Akaka (2008) “On value and value co-creation: A service systems
and service logic perspective”

They view value-in-use as the way to understand value co-creation and value-in-exchange as a means to measure relative value within surrounding service systems.

In the progress economy, we’ll propose that price indicates the effort expected, by a provider, in the service being exchanged for their service. This potentially is given in service credits. We’ll look at that in the value-through-progress model.

^* Ingenbleek (2007) “Value-informed pricing in its organizational context: literature review, conceptual framework, and directions for future research”; Journal of Product & Brand Management 16(7): pp441-458.

move to direct service is all consuming

We’ve explored numerous reasons why beneficiaries are moving from indirect to direct service, a trend often described as the “shift to service economy” from a goods-dominant viewpoint. However, it’s constraining to believe the ultimate objective is to transition as fully as possible to direct service.

We need to be conscious that well-being may be enhanced for some beneficiaries by shifting from direct to indirect service or by preserving/improving existing indirect service.

There will always be a place for “craft” methods and for beneficiaries who relish the challenge of doing things on their own.

This consideration is perhaps no