Co-creation of value

Derivative Proposition 4

 Firms gain competitive advantage by engaging customers and value network partners in co-creation and co-production activities.

One opportunity for organizations to compete through service is to identify innovative ways of co-creating value. Interactivity and doing things with the customer versus doing things to the customer is a hallmark of S-D logic. Goods may be instrumental in relationships, but they are not parties to the relationship; inanimate items of exchange cannot have relationships (Vargo and Lusch 2004). Consequently, S-D logic places a high priority on understanding customer experiences over time.

As parties specialize, they need to rely increasingly upon other entities for value co-creation—that is, they draw increasingly upon and are dependent on the resources of others. Some of these other resources are private and some public. For example, if one purchases an automobile but also  has access to well-built highways, public parks, enforced traffic laws, and so forth, then, over time, one obtains a different service experience than if these public resources were not present. Similarly, if one purchases an automobile and has access to a garage to keep the auto clean and in good condition the experience of using the auto is again altered. In short, the resources that are endogenous to value creation often include those traditionally categorized as belonging to the uncontrollable, “external” environment. This also suggests that the customer is a primary integrator of resources in the creation of value through service experiences that are interwoven with life experiences to enhance quality of life.

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