In recent decade we have observed a service revolution, where the advanced economies all have transitioned to so called service economies – servitazation. Cool, uh? But what is and are these services? It feel like the concept is one that everybody knows, but nobody when asked is able to define or explain it clearly. Often explanations are formulated like: “for example when eating att a restaurant there is a service…” etc. (In general, I can not stand explanations that starts with the phrase “for example” because often the one explaining do not know the earth nor sky about the subject)
Thus the word “service” is a business lingo used in everyday life, without any concern to what it actually represents. This blog post will try to shred some light on this vague issue.
Putting It All Together…
The best fast definition I found was from the Information Technology Infrastructure Library (ITIL) which defines a service as:
“a means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks”
However, the presented definition is not universal because many different contradictive opinions and views exists. Service as a concept remains elusive and has of yet not reached a consensus, although common ground is found and agreed upon in which ways services are different from goods or products. Likewise, a consensus regarding the distinctive features of a service have been reached, which are referred to as “IHIP” – an acronym for intangible, heterogeneous, inseparable and perishable.
The intangible feature points out that services are not physical things and are therefore humorously said to be “something that you cannot drop on your foot”. However, the intangible feature distinction between product and service is at times blurry. For example, both music and software have intangible features but the media files that are sold as tangible goods, therefore some ambiguity remains.
A service is “something that you cannot drop on your foot”
Services are complex bundles of activities, where each customer perceives and experiences a service differently. This is because there are numerous implementation varieties in the aspect of its context, nature, and requirements. In addition, services vary across different geographical regions, cultural backgrounds, and the char-acteristics of the providers. Thus, services are truly a multifaceted approach of delivering value to a consumer. Yet there are some discussions that some products are also gaining heterogeneous features, such as the Mercedes E Class car that is offered in 1024 different variations, and that some services in fact are homogenously similar to a product . For example, Mc Donald’s hamburger offerings are executed and performed in a standardised manner and has the same taste all over the world. Therefore, this distinction has flaws that needs to be considered.
Services are inseparable in that sense that both the production and consumption process occurs simultaneously and cannot be separated or distinguished. Essentially, this means that services cannot be produced without an engaged consumer – a counterparty- similar to the yin and yang dualism and therefore services cannot be owned.
The last feature, perishable, refers to fact that service capacity cannot be stored for future use, like stocks or other fixed assets. For example, an empty unsold flight seat cannot be inventoried and sold in the future because it simply perishes after the flight.
In Addition to these aforementioned features, Grönroos (2001) identifies further three basic characteristics of a service that is:
“services are processed using a series of activities (a business process) rather than things, services are to some extent produced and con-sumed simultaneously, and the customer participates in the service delivery process”.
This view shares many similarities with the postulates of IHIP, though complementing the conceptual understanding of services significantly.
What is Service Dominant Logic?
Professors Vargo and Lusch presented the idea in the beginning of the millennia, that marketers have transitioned from a goods-dominant logic (G-D) into a service-dominant logic (S-D) perspective. The G-D logic concerns primarily with value-in-exchange, where value is embedded into physical objects, also known as operand resources, on which an act or operation is performed to produce an effect. In G-D logic the consumer is also to be seen as a passive recipient of depreciating goods, whose production ends after its manufacturing process and where services are considered as a mere special cate-gory of marketing offerings.
In contrast, the S-D logic is a philosophy of reorientation that focuses on the actual value creation that is the process of co-creation with customers and other actors, rather than a conservative value production paradigm. A Similar view is shared by Grönroos who formulates himself as follows:
“The focus is not on products, but on the consumers’ value -creating processes, where value emerges for consumers, and is perceived by them…the focus of marketing is value creation rather than value distribution”
The S-D logic argues and contends that all products and services, both tangible and in-tangible, in the end are different vehicles for providing various services to the customer or consumer. In other words, service is the fundamental basis of all exchange activities because essentially “everything is a service” and thus all existing marketing offerings are applicable to the S-D logic. The concept of service can in this context be redefined as “the application of the knowledge and skills (competences) of one actor for the benefit of another”, hence S-D logic is a logic about “togetherness” where mutual benefits are generated through a foundation based on relationships, trust and a win-win exchanges.
Everything is a Service
The final explanation of “what is a service” is a fairly simple one: everything is a service. Sounds like a cliché, eh? But as we have seen the are many opaque views that are at times very complex and even philosophical at times. Therefore it is easier to just apply the “keep-it-simple- stupid” (a.k.a. “KISS”) principle. And there is nothing wrong with keeping things as simle as Eistein points out:
“If you can’t explain it to a six year old, you don’t understand it yourself.”
― Albert Einstein