What’s the sense of Service-Dominant Logic?

My interest in specifying a model of public service has involved me in the study of more general notion of service. I have been most taken with two models of service, in particular:

  • Resource-Event-Agent model (REA)
  • Service-Dominant Logic (S-DL)

The scholarship associated with the Resource-Event-Agent model has included a substantial investment in specifying an REA ontology using both a formal language representation (the Web Ontology Language or OWL) and a graphical representation (the Unified Modeling Language or UML Profile for OWL). The International Standards Organization has incorporated REA into the Open-edi Business Transaction Ontology (OeBTO).

The scholarship associated with Service-Dominant Logic has been less concerned with formal language representation, and more concerned with bringing a certain perspective to bear on the widest-possible range of human behavior – aspiring to be a “unifying and transcending view of business and, more broadly, economic and social organization” (Lusch and Vargo, 2014). The status of Service-Dominant Logic as a model was enhanced when IBM proposed that Service-Dominant Logic should be the foundation of a new, multidisciplinary “science” of service  (Maglio and Spohrer 2008).

There is no doubt that Service-Dominant Logic has had a far greater impact on our thinking about service than has the Resource-Event-Agent model. The primacy of Service-Dominant Logic is even more evident when one considers the design, delivery, and innovation of service in the marketplace.

There is also an aspirational – indeed, an inspirational – quality to the scholarship associated with Service-Dominant Logic that is lacking in somewhat dry, technical approach of the scholarship associated with the Resource-Event-Agent model.

For all that, the formulation of Service-Dominant Logic needs to be tightened up – in the end, the rhetoric may be less inspiring, but it will also be less confusing.

Let’s first consider the formal elements of Service-Dominant Logic – taking Lusch and Vargo’s (2014) book-length treatment of their model and Vargo and Lusch’s (2015) update as our points of reference.

Institutional Logics

Lusch and Vargo begin with the proposition that “part of our nature as humans is to develop belief systems that become handy ways of seeing and understanding the world around us and for ordering our reality.” [Ch 1] Belief systems enable viewing a complex world in what promises to be coherent terms and provide a lens for perceptually separating noise from signal. Thus, belief systems contribute to comfort, understanding and sense-making.

Belief systems become normative and play a key role in guiding and determining our behavior. Lusch and Vargo promote at least some belief systems to the status of “institutional logics”.1 In 2004, they began to formulate a Service-Dominant Logic (S-D Logic) “to contribute to the understanding of the world of economic and social exchange among human actors.” Service-Dominant Logic is a “mindset” that offers an alternative “worldview” to traditional Goods-Dominant Logic (G-D Logic).

Lusch and Vargo have associated Service-Dominant Logic with a set of terms they call a Lexicona set of propositions they call Foundational Premises, and a set of Axioms that represent a subset of the Foundational Premises.

In 2014, Lusch and Vargo identified ten Foundational Premises including four Axioms. In 2015, Vargo and Lusch introduced a fifth Axiom (an eleventh FP) and revised the wording of one other Axiom and three other FPs. We will designate these two versions of the Axioms/Foundational Premises of Service-Dominant Logic as FP-2014 and FP-2015, respectively. The terms of Lexicon are arranged in a hierarchy; the Foundational Premises are also arranged in a hierarchy.

Lusch and Vargo (2014) present the hierarchical structure of the Lexicon of Service-Dominant Logic (hereafter referred to as Lexicon-2014) in Figure 1 …

Lusch and Vargo 2014 - Figure 3.2 S-D Logic lexicon
Figure 1 S-D Logic Lexicon-2014 (Lusch and Vargo 2014).

… and the hierarchical structure of FP-2014 in Figure 2.

Lusch and Vargo 2014 - Figure 3.1 Axioms and foundational premises of S-D Logic
Figure 2. Axioms and foundational premises of S-D Logic – aka FP-2014 – (Vargo and Lusch 2014).

The Lexicon is used to develop and elaborate the Axioms and Foundational Premises [57].

Let’s consider how meaningful or potentially confusing  this last point might be – and examine the overlap between the terms of the Lexicon-2014 and the terms used to express the FP-2014 and the FP-2015. Before we dive in to this exercise, we first need to identify how Lusch and Vargo use the word “lexicon” and then we need to bring in some basic concepts of semantics.

Lexicon

We would highlight six passages where Lusch and Vargo (2014) discuss their idea of the Lexicon of Service-Dominant Logic. Half of these passages speak of the general idea of Lexicon; the other half address the way a shift in thinking about a concept like Service motivates a shift in lexicon – and the difficulties that can and often do immediately ensue in efforts to communicate about the concept.

General idea of Lexicon

A key challenge we have faced in developing and communicating S-D logic is the precision of its lexicon. We soon realized how important words and language are in framing our view and conceptualization of the world and, hence, how it influences our actions or behavior. We found subtle yet important distinctions between terms such as "services" versus "service," "customers" versus "consum­ers," static and tangible resources and dynamic and intangible resources. Thus, much of what is to be learned from this book concerns how to uncompact new and/or revised meanings for old terms - for example, what are a resource, cocreation, and value? But we also found it necessary to develop new "concepts" and language, which we will introduce and explain here. These include "service ecosystems," "resource integration," "resourceness," and "value-in-context." We believe that, although it will take some effort to develop an understanding of the lexicon, most readers will find it worthwhile. [xxii]
All logics are based on premises and assumptions. Often these are not explicit or spoken but are implicit and unspoken. Logics can be observed in everyday practices and language. In the development of service-dominant (S-D) logic we have attempted to be explicit about its premises, assumptions, and language (or what we call its lexicon). [53]
Theories and models are abstractions of reality. Language and words are used to develop abstractions, and these abstractions are then related to each other in order to describe or explain the phenomena of interest. The goal is to be parsimonious, while still being as isomorphic as possible. This implies using as few concepts as necessary to describe and explain the phenomena of interest; while, at the same time, striving for correspondence between the theory or model and real-world phenomena. Predictably, it is very difficult to be both parsimonious and isomorphic with the same theory, model, or logic. We suggest that S-D logic strikes a reasonably good balance between these two objectives.

As noted, we believe S-D logic is reasonably parsimonious in its lexicon. In fact, it deals with only four core, foundational concepts (actors, service, resour­ces, value), and from these we derive ten additional concepts. [55 - also footnote 2 gives "The lexicon of S-D logic is continuing to develop and includes many other emerging terms such as service ecosystems ..."]

A shift in thinking that motivates a shift in Lexicon

All logics also have a lexicon developed by the community that supports and uses the logic. The lexicon comprises the terms and concepts, represented through words or symbols, which communicate meaning and help to coor­dinate thought among the community. To understand S-D logic, its axioms, and FPs, it is critical to become familiar with its lexicon. This can be difficult because some of the language is similar to the language of G-D logic, albeit with nuanced meanings. [54]
From the rapid ascendance and impact of the services marketing and management literature in the 1970s and 1980s, we began to see other currents of change in thinking. As is often the case, when thinking starts to change, it is supplemented or leveraged by the emergence of a new lexicon, which, in turn, further influences thinking and ultimately behavior or action. [202]
Part of the difficulty of mastering S-D logic is the enduring, strong pull of G-D logic. G-D logic is not only embedded in many organizational routines and practices, it is also embodied in our minds, and practices and institutions of society. In fact, even after nearly two decades of intense work on S-D logic and its associated lexicon, we still find ourselves occasionally slipping back to the G-D logic mindset and lexicon. Be forewarned: it takes work and training to see every firm offering, tangible or intangible, as just an input, something whose value is only realized in its use and in the context of and integration with resources from other sources. It is difficult to emancipate oneself from the restricted perspective of the firm-centric model, which treats customers as operand resources, whose role is to be captured for the net present value of their flow of financial resources to the enterprise - what, in G-D logic terms, is referred to as lifetime value of the customer, which is inappropriately paraded as "relationship" marketing. It is difficult not to think about the firm as the center of the wealth creation or as the producer and provider of value. It can be equally difficult to divorce oneself from that view that customers consume and destroy value. It is difficult not to think about innovation as something that primarily occurs in the laboratories and offices of the enterprise, as opposed to something that occurs throughout the service ecosystem, through the social and economic processes of resource inte­gration and service exchange. The pervasive influence of G-D logical lexicon and frameworks on all of the business and management disciplines is a hard one from which to break free. It is extremely difficult not to think about a profit shortfall as the fault of management and employees but rather as due to the inadequacy of the G-D logic model.

We believe commitment to S-D logic and its premises and lexicon, focusing on and understanding its nuances and fully grasping its transcending nature, will reveal not only new solutions to old problems but also unlimited and unbounded opportunities for market expansion and the creation of new markets. That is a fairly bold value proposition but one that we think is achievable through becom­ing untethered to G-D logic and mastering S-D logic. [204]

Terms and hierarchical structure of the S-DL Lexicon

Lusch and Vargo identify four “core, foundational concepts” – Actor, Service, Resource, and Value – in Lexicon-2014, and “derive” from these ten additional “concepts.” As we saw above, Lusch and Vargo characterize Service-Dominant Logic as “reasonably parsimonious” on the basis of the relatively few terms in its Lexicon [55]. It’s disconcerting that, in the same breath (or at least in a related footnote), Lusch and Vargo advise that “The lexicon of S-D logic is continuing to develop and includes many other terms such as service ecosystems …” It’s also disconcerting that Lusch and Vargo do not identify the place of a key term like “service ecosystem” in the hierarchical structure of the Lexicon (Figure 1).

Lexical semantics

In order to take a proper look at the terms of the S-DL Lexicon, we need to draw upon some model of language and meaning – and for this we want to set out some of the basic ideas of lexical semantics.

Wordform An orthographic or phonological form e.g. the written word “sing”, or the spoken word “songs”.
Sense The meaning associated with a wordform.
Lexeme A pairing of a wordform and (one of) its sense(s).
Lemma The grammatical form that is used to represent a lexeme. This is often the base form e.g. carpet is the lemma for “carpets”, or the infinitive form e.g. to sing is the lemma for “sang”.
Lemmatization The process of mapping a wordform to a lemma. Lemmatization is not always deterministic – it may depend on the context e.g. the wordform “found” can map to the lemma find (meaning “to locate”) or the lemma found (meaning “to create an institution”), and on part-of-speech e.g. the wordform “tables” has two possible lemmas, the noun “table” and the verb “table”. Each word sense is represented by placing a superscript on the orthographic form of the lemma, as in table1 and table2.
Lexicon A finite list of lexemes.

Table 1. Lexical semantics: some basic terms and definitions.

We will describe the procedures of lexical semantics only when we need to call upon them in our analysis of Lexicon-2014.

For now, let’s use some of the concepts of lexical semantics to recast Lusch and Vargo’s presentation of Lexicon-2014:2

Wordform Lemma FP-2014 FP-2015
Core concepts
“Actors” Actor 9 9
“Resources” Resource 4, 9 4, 9
“Service” Service 1, 3, 5, 8 1, 3, 5, 8
“Value” Value 6, 7, 10 6, 7, 10
Derived concepts
“Time-bound” Time
To bind1
“Relationally-bound” Relation 8 8
To bind2
“Resource-integrating” Resource 4, 9 4, 9
To integrate 9 9
“Operand” Operand
“Operant” Operant 4 4
“Goods” Good 3 3
“Currency” Currency
“Unique” Unique 10 10
“Co-created” Co- 6 6
To create 6 6
“Proposition” Proposition 7 7

Table 2. Mapping the “core concepts” and “derived concepts” of the Lexicon-2014 to their equivalent wordforms and lemmas.

A few notes about Table 2:

  • we allow that the sense of “to bind” as in “time bound” in different from the sense of “to bind” as in “relationally bound”
  • we associate a single lexeme – resource  with the two wordforms “resources” and “resource integrators”
  • we associate the wordform “cocreated” with two lexemes – to create and co- meaning “along with others

Finally, we note that four (or five) lexemes in Lexicon-2014  –  TimeOperand, Currency, To bind1 (and maybe To bind2) – are not put to use in expressing any members of FP-2014 or FP-2015.

Thus, some of the terms of Lexicon-2014 are not necessary for expressing the terms of FP-2014 or FP-2015.

Table 3 highlights those wordforms that are used to express the terms of FP-2014 and FP-2015 that have no apparent counterpart in Lexicon-2014. Clearly, the Lexicon-2014 is also not sufficient for expressing FP-2014, let alone FP-2015.

Axiom/FP Overlap with Lexicon-2014
FP1 – Axiom 1 2014/15: Service is the fundamental basis of exchange.
FP2 2014/15: Indirect exchange masks the fundamental basis of exchange.
FP3 2014/15: Goods are a distribution mechanism for service provision.
FP4 2014: Operant resources are the fundamental source of competitive advantage.
2015: Operant resources are the fundamental source of strategic benefit.
FP5 2014/15: All economies are service economies.
FP6 – Axiom 2 2014: The customer is always a co-creator of value.
2015: Value is co-created by multiple actors, always including the beneficiary.
FP7 2014: The enterprise can only make value propositions.
2015: Actors cannot deliver value but can participate in the creation and offering of value propositions.
FP8 2014: A service-centred view is customer oriented and relational.
2015: A service-centred view is inherently beneficiary oriented and relational.
FP9 – Axiom 3 2014/15: All economic and social actors are resource integrators.
FP10 – Axiom 4 2014/15: Value is always uniquely and phenomenologicaly determined by the beneficiary.
FP11 – Axiom 5 2015: Value co-creation is co-ordinated through actor-generated institutions and institutional arrangements.

Table 3. Wordforms of the FP-2014 and FP-2015 and their overlap with the Lexicon-2014 of Service-Dominant Logic. Non-overlapping wordforms in FP-2014 are highlighted in blue; additional non-overlapping wordforms in FP-2015 are highlighted in red.

Thus, we see clearly that the terms of the Lexicon are neither necessary nor sufficient for expressing the Foundational Premises of Service-Dominant Logic .

Next time we’ll take up the more complicated challenge of determining (if we can) the exact meaning that Lusch and Vargo want to associate with the lexemes of the Lexicon of Service-Dominant Logic.

References

Lusch, RF and Vargo, SL (2014), Service-Dominant logic: Premises, perspectives, possibilities, Cambridge University Press.

Vargo, SL and Lusch, RF (2015), Institutions and axioms: an extension and update of service-dominant logic, Journal of the Academy of Marketing Science, 1 – 19.

 

  1.   Friedland, R and Alford, RR – Bringing society back in: Symbols, practices, and institutional contradictions (1991).
  2. Lusch and Vargo are inclined to dispense with hyphens – we favour them, and have inserted them here into the wordforms “time-bound,” “relationally-bound,” “resource-integrators,” and “co-created.”