Value-in-use

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

By removing the all-consuming focus on a single point of value exchange the value-in-use model addresses the growth blind spots inbuilt into our traditional value-in-exchange view.

Instead we see value emerging – being co-created – as value propositions are actively used. Where value creation is limited only by the scope of value propositions. And where that value is determined by the beneficiary of the proposition(s).

We’re also taking a service-forward view of the world. Where goods are transporters of service – the application of competence for the benefit of others. There is no longer any goods vs services debate.

However, we leave behind the (already debatable) linkage of price and value, but struggle to replace it, and any definition of value, with something more meaningful. For that we need one more evolution to value-through-progress.

Value-in-use

Our traditional model of value creation, value-in-exchange, has a number of growth blindspots. These arise because we have an intense focus on a point of value exchange. This point exists because we see manufacturers as embedding value in products that customers are willing to exchange other items of value for, typically cash.

This point of exchange encourages us to be less interested in opportunities before, after and over that point. Since growth comes from maximising either the size of an exchange or the number of exchanges. And manufacturers determine value embedded, signalling that as price.


What if, rather than seeing value being embedded in outputs/outcomes – goods and services – we saw value created in the process of using them. As Grönroos lays out for us:

It is of course only logical to assume that the value really emerges for customers when goods and services do something for them. Before this happens, only potential value exists

Grönroos (2004) “Adopting a service logic for marketing

This leads us to our first evolution in thinking about value: value comes through using goods and service – value-in-use.

value-in-useA view of value creation that sees value being incrementally co-created through using value propositions (offers of service, where goods are a mechanism for transporting a service in time and space).

This concept of value-in-use is the basis of service-forward logics – such as Grönroos’ Service Logic or Vargo & Lush’s Service-Dominant Logic. These logics eliminate the emphasis on a singular point of exchange, preferring to view interactions as ongoing. Importantly, the beneficiary/consumer/customer (depending on the logic) typically plays a predominant role in determining value. Service and service-dominant logic are the culmination of many years of thinking, as you can see in this evolution diagram.

Arriving at service-first logics; from where the value-in-use model of value is found
Arriving at service-first logics; from where the value-in-use model of value is found

I’ll concentrate on Vargo & Lush’ service-dominant logic. This choice is not driven by any deep philosophical reasons but rather practicality and chance. It was the first non goods-dominant logic I encountered, it addressed my initial questions, and it is elegantly explained through 11 foundational principles, five of which are considered axiomatic. In exploring ideas of value-in-use I draw inspiration from both service-dominant logic and service-logic without hesitation.

How it works

In the value-in-use model we see value as being co-created as value propositions are actively used.

The value-in-use model of value creation
The value-in-use model of value creation

We start with Grönroos’ observation, from above, that value only emerges as goods and services are used. We can say there is no value when a product is unused; and postulate that maximum value co-creation has happened when the product has been fully used. Between those points value is co-created on a journey.

Turning to Vargo & Lush’s service-dominant logic, that tells us that actors cannot deliver value. That is to say there is no embedding of value in products as we view in value-in-exchange. Actors can only offer value propositions.

Actors cannot deliver value but can participate in the creation and offering of value propositions

#7

So now we say that value emerges through using value propositions. How does value emerge? It is through successful resource integrations.

Finally, unlike value-in-exchange, where the manufacturer determines value, in value-in-use, only the beneficiary can determine value.

Value is uniquely and phenomenologically determined by the beneficiary

#10

We’ll come across the wonderful word “phenomenologically” a lot. It loosely means lived and living experience. The baggage and how you are feeling right now that influences your decisions.

The implications

Value-in-use is a way of thinking that puts service first and then attempts to explain goods. Which starkly contrasts with value-in-exchange way of awkwardly seeing services as poor relatives of goods (intangible, inconsistent, etc). Service (note the singular) is:

the application of competence (skills and competence) for another’s benefit

Vargo & Lush (2008

From there we say goods freeze service, allowing it to be transported in time and space, to be used as needed:

Goods are distribution mechanisms for service provision

#3

That might feel odd at first. Think of it this way. You could go and listen to your favourite band playing live. That’s a service – the band applied their music skills for your entertainment. Alternatively, you could listen to the band by playing their vinyl record, or CD. Now the service was frozen at some point in the past and at another point has been transported to where, and when, you hit the play button on your playback device, and unfrozen.

Finally, the notion of exchange doesn’t vanish but transforms from an exchange of value to an exchange of service. I do something for you, and in return, you do something for me. 

Service is the fundamental basis of exchange

#1

This exchange of service helps us understand why one actor would apply their competence for another’s benefit. Because they need application of someone else’s competence. And this may be a bi-party direct exchange; although, as service-dominant logic informs us, this service exchange may be hidden by the often indirect nature of exchange (for example transitive exchange).

Oh, and we switch from services (plural) to service (singular) to reflect the process, not output, way of thinking.

Value-in-context

Another term you’ll find used in service-dominant logic literature is value-in-context. This underscores the importance of considering the context in which a service is engaged when discussing value-in-use.

A car, for example, will generate less value-in-use if your destination is surrounded by deep water. We’ll come back to context when discussing value-through-progress.

The benefits

Value-in-use allows us to address the blind spots to growth we noted for value-in-exchange. Looking at value this way we increase our chances of:

  • seeing opportunities before, after, and across the point of exchange
  • fixing our shortsighted on solution space and business models
  • finding value predominantly judged by the beneficiary

Let’s take a deeper look.

Seeing opportunities before and after a now non-existent point of exchange

One considerable challenge with value-in-exchange view is it channels us to focus on that point of exchange. We risk missing, or not being interested, in what happens before, after or across the exchange.

Evolving to a value-in-use view offers the opportunity to minimise that risk. As Ballantyne & Varney put it, “the time logic of marketing exchange becomes open-ended”.

the time logic of marketing exchange becomes open-ended, from pre-sale service interaction to post-sale value-in-use, with the prospect of continuing further, as relationships evolve

Ballantyne and Varey (2006) “Creating Value-in-use Through Marketing Interaction: The Exchange Logic of Relating, Communicating and Knowing”, Marketing Theory Vol. 6, No. 3(3)

We should look to customise our offerings and involve the customer. Two points that Vargo & Lush advocate for in “The Four Service Marketing Myths“:

the normative marketing goal should be:

  • customisation rather than standardisation
  • to maximise customer involvement in the creation of value

The more we can customise and involve the customer the greater the chance we give them exactly what they are uniquely and phenomenologically after.

Even after what would have traditionally been considered the point of exchange, our emphasis should be on continuing to maximise customer involvement and co-creation of value – the circular economy.

Harnessing the circular economy

Value-in-use is the view The Ellen MacArthur foundation need when they say:

one of the biggest challenges…to transition from linear to circular is that it requires…revisiting the very notion of value creation

Ellen MacArthur Foundation (2023) “From ambition to action: an adaptive strategy for circular design

Value-in-exchange, with its embed-exchange-use basis and focus on maximising exchanges, is the poster child for the linear economy’s take-make-waste.

In contrast, in a value-in-use view “the time logic of marketing exchange becomes open-ended” (Ballantyne & Varney). Gone is the hedonistic point of exchange. Now we should be considering the timeline in which the beneficiary sees using our proposition.

For some propositions that might be when they have finished using it for their task (our traditional view). Other propositions we should consider Christensen’s big hire/little hire concept from jobs-to-be-done theory.

Increasingly, this timeline includes re-purposing, repairing, reselling etc. These should be considered part of the same value co-creation journey. As such, we should create/design propositions that offer that potential. Whether by offering it directly ourselves, or by not preventing others offering it by our poor design choices.

In thinking how to minimise the waste aspect of the linear economy the value-in-use view shows us that service is not the poor relative to goods. We more readily see how to move from tangible offerings (services frozen in physical goods) to intangible offerings (digital goods, or direct service).

Additionally, value-in-use suggests we have a problem with inefficient usage of resources. If products are not creating value when not being used, shouldn’t we look to increase their usage? Here we see the seeds of the sharing economy.

A range of domains and players in the sharing economy within the context of urban cities
A range of domains and players in the sharing economy within the context of urban cities
Seeing a wider solution space

We talked about the perceived “shift to services” when looking at value-in-exchange. This is where goods are swapped by goods wrapped in services or even fully replaced by services. And This is a big thing in a logic that sees a goods and services as different beasts. Hence the term “shift to services”. Here’s several reasons for why this “shift” is happening.

In a goods-dominant logic (value-in-exchange) we see a “shift” to a service economy. This shift is driven by the reasons above. In a value-in-use view of value the shift is less dramatic – it is merely moving from indirect service (frozen as goods for distribution that you use) aka enabling propositions, to more direct forms of service (relieving propositions). The reasons are still the same.
In a goods-dominant logic (value-in-exchange) we see a “shift” to a service economy. This shift is driven by the reasons above. In a value-in-use view of value the shift is less dramatic – it is merely moving from indirect service (frozen as goods for distribution that you use) aka enabling propositions, to more direct forms of service (relieving propositions). The reasons are still the same.

In a value-in-use view, such a change is not a big thing. It is simply moving from what have been called enabling propositions – indirect service, such as service frozen as goods for distribution that you use – to relieving propositions that are more direct forms of service. The reasons for the change are still the same.

The growth of Uber-like car share services or take-away delivery services are examples.

Without there being a goods vs service division in value-in-use, it’s easier to see how to between different means of offering the same service.

Seeing a wider business model space

Similarly, since we’ve removed the exchange of embedded value for cash as a concept, we open ourselves to different business models – subscription, add subsidised etc.

Value is judged by beneficiary

Finally, value-in-use shifts us away from seeing the manufacturer as judging value. Instead we see value as only being judged by the beneficiary. As service-dominant logic’s foundational premise #10 informs us:

Value is always uniquely and phenomenologically determined by the beneficiary

#10

This is in stark contrast to value-in-exchange where the manufacturer judges the value they have embedded and sets a price they feel is appropriate.

Now we see beneficiaries as judging value we start to think in terms of beneficiaries choosing which proposition to use, whether to continue using it, and if they will choose it next time.

A debate exists here in the service-forward logics regarding value co-creation, with service-dominant logic advocating that all value creation should be considered co-creation, while service logic posits that co-creation only occurs when firms offer resources capable of dialogue, such as employees (Grönroos (2008) ”Service Logic Revisited: Who Creates Value? And Who Co-creates?”). We’ll steer away from this debate for now, since we’re using value-in-use as a stepping stone model.

comparing goods- and service-dominant logics

Here’s how Vargo, Maglio and Akaka compare goods-dominant and service-dominant logics. You’ll note a strong contrast between them.

Comparing various aspects of value-in-exchange and value-in-use models

In service-forward / value-in-use we now see the process of value as to “increase adaptability, survivability, and system wellbeing through service” of others. Whereas we previously saw it as to increase the wealth of the firm. I’d also argue there exists self-service.

To further understand this table further, let’s jump into how we define, create and measure value within a value-in-use model. Then we’ll consider the implications for innovation and value-in-exchange blind spots.


The constraints

Value-in-use is a nice evolution in thinking about value. However, there are still some constraints, namely:

  • removing the point of exchange leaves the concepts of money and price unclear
  • there is too narrow a focus on who determines value
  • value is still hard to define

And here’s what we mean by these.

What does value even mean?

With value-in-exchange value meant, rightly or wrongly, price. The more we pay, the more valuable something is. With value-in-use we’re now saying value is tied to using something. We say that there’s no value when a prodct has not been used; and claim maximum value has emerged when a product is fully used. But is that maximum co-created value the actual maximum value? How does a beneficiary choose which proposition to use? As proposition creators, how can we create a proposition that offers more value?

The answer is in our next evolution of thinking: value-through-progress.

What does price mean?

Similarly, when we replace exchange of value with exchange of service, we loose the notion of price. Yet in our world price is something very obvious. Kowalkowski proposes:

Price becomes part of the value proposition

Kowalkowski “What does a service-dominant logic really mean for a manufacturing firms?”

whilst Ingenbleek determines:

price is the reward for the application of specialized knowledge and skills

Ingenbleek (2014) “The theoretical foundations of value-informed pricing in the service-dominant logic of marketing”, Management Decision 52(1)

But “how is price set?”, “what is profit?”, and “if it is a reward, when is it realised?” are all valid unanswered questions.

Too narrow a focus on beneficiary judging value

A foundational premis of service-dominant logic…

value co-destruction

value co-destruction…interactions between actors result in a decline in at least one of the actors’ well-being.

Plé and Cácares (2010) “Not always co-creation: introducing interactional co-destruction of value in service-dominant logic”

Lintula, Tuunanen, and Salo shows us the framework below on causes of value co-destruction (“Conceptualizing the Value Co-Destruction Process for Service Systems: Literature Review and Synthesis”).

Lintula, Tuunanen & Salo’s framework on value co-destruction. 
Value co-destruction can be seen, in the progress economy, when one or other party is hampering progress being made
Lintula, Tuunanen & Salo’s framework on value co-destruction. 
Value co-destruction can be seen, in the progress economy, when one or other party is hampering progress being made

We reflect this in the engagement decision process.. Where we allow for the helper terminating service if they feel progress is being hampered by the seeker. For example through misuse of helper resources by the seeker.


You’ll not be surprised that there is a further evolution to be done. One that nails down what value is in an actionable way and addresses price and value determination concerns. I call it value-through-progress.

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Discussion

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