Toward a Value Metrics˗A Service-Dominant

Logic View˗Md. Abul Kalam Siddike

Graduate School of Knowledge Science

Japan Advanced Institute of Science and Technology, Japan, Email: kalam.siddike@gmail.com

Kazuyoshi Hidaka

Professor, School of Environment and Society

Tokyo Institute of Technology, 3-3-6 Minato-ku,

Tokyo, Japan, Email: hidaka.k.ac@m.titech.ac.jp

30-07-2016

This research is supported by Grants-in-Aid for Scientific Research (A)(Grants ID:26245044), Japan Society for the Promotion of Science (JSPS)

Highlights of Presentation• Develop a framework of value metrics of service systems in the

paradigm of service dominant (SD) logic.

• Interaction, context, time, and institutional arrangements are the candidates of mediators for converting potential value into realized value.

• Suggests future research direction for developing and validating concrete scales of measuring value in the view of SD logic.

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Outline of Presentation• Service-Dominant (SD) Logic

• What is value? And its dimensions

• Potential value and Realized Value

• Candidates of Mediators for Conversion of Potential Value into Realized Value

• Framework of Value Metric

• Significance and Implications of Value Metric

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Service-Dominant (SD) Logic• SD logic is a perspective new thought of market and marketing. (Vargo and Lusch, 2004)

• It continues its evolution from 2004 to 2016.

• ‘Value’ or ‘value co-creation’ is the core concept or heart of SD logic or service science.

(Vargo and Lusch, 2016, 2008, 2004; Lusch and Vargo, 2014; Spohrer et al., 2008)

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What is value?• Value relates to the benefits for some actors and value is co-created

through the establishment of new resources, from resources provided by multiple sources (Vargo and Lusch, 2012)

• Benefits experienced by beneficiaries using providers’ competencies, customers’ experiences, and other stakeholders’ intention.

• More specifically, these providers’ competencies, customers’ experiences and other stakeholders’ intentions are alternatively considered as “service content”.

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Multi-Dimensionality of Value• Neoclassical economists view value as utility that provides the

satisfaction. (Sampson, 2015; Lovelock, 1983)

• Happiness economists view that value is happiness that is subjective to well-being, quality of life and life satisfaction.

(Sampson, 2015; MacKerron, 2012; Easterlin, 2001)

• SD logic view that value is co-created through the application of resource integration by providers and customers.

(Vargo and Lusch, 2016, 2008, 2004; Lusch and Vargo, 2014)

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Nature of Value• There are two phases/nature of value:

1. Potential value

2. Realized value

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Potential Value (1)• Potential value is a stochastic estimate of impact on subject to well-

being (Sampson, 2015).

• It is a function of value realization (Sampson, 2015).

• Potential value is defined as value proposition offered by the service providers using their experiences, knowledge and skills for the benefits of service recipients.

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Potential Value (2)• In SD logic, actors cannot deliver value but can participate in the

creation and offering of value proposition (Vargo and Lusch, 2016).

• Potential value invites actors one another to engage or serve one another in order to achieved realized value (whether it is economic, financial, or social or some combinations of those).

Proposition 1: Potential value has a great positive impact on realized value.

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Realized Value (1)• Realized value is the actual change in the subject of well-being

resulting from interaction with an offering (Sampson, 2015).

• “Co-creation of value” is considered as “realized value” in this paper.

• Realized value is the actual benefits received or gained by service beneficiaries including the customers, stakeholders, providers and the community people through the integration of operant resources via service-for-service exchange.

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Realized Value (2)• In achieving realized value, actors namely customers interact with the

service offerings through the exchange of operant resources (skills, knowledge and experiences).

• Value is realized in the service system, which have several dimensions like, interactions, economic and social background, time and space.

Proposition 2: Interactions, context, time, and institutions positively affect the conversion of potential value into realized value.

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Candidate of Mediating Factors for Conversion of Potential Value into Realized Value

• There are several candidates of mediating factors that greatly influence the conversion of potential value into realized value namely:

-Interaction;

-Context;

-Time; and

-Institutions and institutional arrangements

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Interaction• Interaction is one of the most influential candidate of mediator for

conversion of potential value into realized value.

• In service systems, there are either direct or indirect interaction between or among service providers, customers, and other stakeholders.

Proposition 3: Direct and indirect interactions positively mediate the conversion of potential value into realized value.

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Context• As value is uniquely and phenomenologically determined by the

beneficiary. (Vargo and Lusch, 2016)

• Value-in-context suggests that value is always co-created; but it is contingent on the integration of other resources and actors thus is contextually specific.

Proposition 4: Context positively affects the conversion of potential value into realized value.

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Time Dimension• Time dimensions (short-term and long term) affect the realized value

from potential value (Sampson, 2015).

• In general, there is less realized value in short-term orientation. But in the long-term, there is a high possibility of realized value.

Proposition 5: Time dimension positively affects the realized value from potential value.

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Institutions and Institutional Arrangements

• Institutions and institutional arrangements control and coordinate the behavior of actors (service providers, customers and other stakeholders) under economic and social constraints.

• Without institutions, actors are the freely moving actors in the service systems.

Proposition 6: Institutions and institutional arrangements positively affect the realized value from potential value.

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Potential value

Realized value

Candidates of Mediators

Interactions

Context

Time

Institutions and Institutional

arrangements

Framework of Value Metrics

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Significance of Value Metrics• Our framework provides an opportunity for SD logic as well as service

science researchers for quantitatively measurement of value.

• It is an initial attempt to develop more concrete scales for quantitatively measurement of value.

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Implications of Value Metrics• Service industries will be greatly benefited from understanding the

value realization process which is composed of operational mediators in our value metrics framework.

• Theoretical service study including service science as well as SD Logic discipline will also be greatly benefited through the use of our theoretical framework of value metrics for further discussion about value co-creation mechanism.

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Limitations of the Research• First of all, our framework of value metrics is based on literature

review and our understanding of SD logic and service science.

• Secondly, our value metrics framework is conceptual and it is not validated yet. But we provide several propositions for developing concrete measurement scales as future research agenda.

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Future Research Directions• How we can drill down four mediators?• Deepen down each mediator's categorization and mode, etc.

• What are the value transforming mechanisms in service systems?

• How can we connect actual service system (i.e. healthcare, IT companies, Telecommunications).

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Acknowledgement• This research is supported by Grants-in-Aid for Scientific Research (A)

(Grants ID:26245044), Japan Society for the Promotion of Science (JSPS)

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References• Easterlin, R.A.: Income and Happiness: Towards a Unified Theory. Econom. J. 111, 465--484 (2001)• Lovelock, C.H.: Classifying Services to Gain Strategic Marketing Insights. J. Mark. 47, 9--20 (1983)• Lusch, R.F., Vargo, S.L.: Service-Dominant Logic: Premises, Perspectives, Possibilities. Cambridge University Press,

Cambridge (2014)• MacKerron, G.: Happiness Economies from 35 000 Feet. J. Econom. Surveys. 26, 705--735 (2012)• Sampson, S.E.: Value Paradoxes and the Time Value of Value. Serv. Sci. 7, 149--162 (2015)• Spohrer, J., Vargo, S.L., Casewell, N., Maglio, P.P.: The Service System is the Basic Abstraction of Service Science. In:

41st Hawaii International Conference on System Sciences, pp. 1--10. IEEE Press, New York (2008)• Vargo, S.L. and Lusch, R.F.: Institutions and Axioms: An Update of Service-Dominant Logic. J. of the Acad. Mark. Sci.

44, 5--23 (2016)• Vargo, S.L., Lusch, R.F.: Evolving to a New Dominant Logic of Marketing. J. of Mark. 68, 1--17 (2004)• Vargo, S.L., Lusch, R.F.: Service-Dominant Logic: Continuing the Evolution. J. of the Acad. Mark. Sci. 36, 1--10 (2008)• Vargo, S.L., Lusch, R.F.: The Nature and Understanding of Value: A Service-Dominant Logic Perspective. Rev. of

Mark. Res. 9, 1--12 (2012)

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Questions PleaseThank You Very Much

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Directions for Future Research (1)• Initially, a series of workshop could be arranged for getting the

feedbacks from service scientists from all over the world.

• In the second phase, we could conduct interviews with service providers from purely service industries globally.

• Next, we could develop the constructs or variables for our value metrics.

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Directions for Future Research (2)• Furthermore, we could survey with the customers of the same

companies for validating and justifying our value metrics.

• Finally, we could develop our final version of value metrics based on the data from three phases as well as we could also use simulations and mathematics.

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