These two quotes are foundational to many people’s view of business and marketing, mine included, but even Drucker himself observed in 2003 – a few years before his death – that most companies do not put these beliefs into action. In a series of posts many months ago I argued for a broader understanding of being customer-focused. Well, based on some recent reading and conversations with clients, I think we need to think even more broadly.
This broader thinking is nicely encapsulated in a concept called Service-Dominant Logic, which is based on a 2004 article in the Journal of Marketing by Stephen Vargo and Robert Lusch ("Evolving to a New Dominant Logic for Marketing"). This logic uses concepts like "value-in-use" and "co-creation of value" instead of the "value-in-exchange" and "embedded-value" concepts more familiar to the current, goods-and-services dominated paradigm that we generally operate under. Instead of companies trying to market to customers, the goal should be marketing with customers and other value-creating partners in the supply chain.
One of the most noticeable concepts to make its way from this new logic into the popular business press is the concept of value co-creation. But beware, most discussions of this concept have de-valued it to little more than co-production or customer-involved innovation, which is a small part of it’s true meaning.
To me, the heart of service-dominant logic is partnership. We need to realize that there are no clear-cut roles in the modern economy. There are not individual parties who are responsible for one section of the supply-production-consumption chain – parties who perform their role to peak efficiency, pass a "product" along to the next stage in the chain, and then convince customers it is valuable. In fact, companies cannot create or deliver value to customers. At best they can offer a value proposition to customers and then, if accepted, interactively work with customers to create value – hence value co-creation.
Here’s an example of the difference in viewpoints as described by Evert Gummerson in "Service Provision Calls for Partners Instead of Parties" in the Journal of Marketing (2004). The traditional view of exchange would see a physician providing expert advice to a patient who would receive it and (hopefully) get better. A service-dominant view sees this interaction a little differently: "The physician provides expertise in certain therapies, but patients are experts of their own experience of a disorder. To arrive at a superior solution, doctors need interactions with patients, and patients must not only consume the therapies but also produce them by taking medication, exercising, and altering their lifestyles."
Suddenly, what could be seen as a unilateral transaction where success is dependent primarily upon the expertise of one party becomes a partnership. And the success of the interaction now depends on the expertise of both doctor and patient and a network of partners supporting both sides – medical schools, pharma companies, families, insurance, access to nutrition, lifestyle coaching, fitness centers, etc.
I’m still not sure of the full impact of this view on how we function as customer advocates except that it makes our role even more critical to company success. In fact, if this view is correct, then the only real competitive advantage a company has is in the way it understands, interacts and partners with its customers and partners to create value.
Troy Powell, Ph.D.