How SDL (Service Dominant Logic) and VDL (Value Dominant Logic) Overlap in Business

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Christian Kowalkowski wrote an article “What does a service-dominant logic really mean for manufacturing firms?”, 2010, CIRP Journal of Manufacturing Science and Technology, (3), 4, 285-292.

http://dx.doi.org/10.1016/j.cirpj.2011.01.003

According to him the new purpose of a firm is Creating Value.

Kowalkowski wrote that SDL helps repurpose a firm to co-creation of value. He goes on to state that If value creation is the focus, the traditional distinction between goods and services is not relevant. I am not sure this is what SDL has in mind as there is a clear distinction between goods and services. The function of goods is therefore to deliver and be part of service. Kowalkowski is saying if the goal is creating value, what does it matter whether goods create value or service?

Woodruff and Flint in “Marketing’s Service Dominant Logic and Customer Value” (see https://books.google.co.in/books?hl=en&lr=&id=JczfBQAAQBAJ&oi=fnd&pg=PA183&dq=value+dominant+logic&ots=Qo_Byyn045&sig=3XzGLGvwqNwPPTFFJpRbq37xe8c#v=onepage&q&f=false) are saying similar things. They state that in at least 3 points, Vargo and Lusch have used the word value many times because they believe the proposed paradigm shift of SDL has value as an end goal. Woodruff and Flint go onto state that for SDL to succeed, a greater understanding of customer value is essential.

These are seen in SDL’s foundation premises 1 (specialised skills have a value), 6 (co-creation of value by customer and service provider) and 8 (where a supplier is not only doing things for a customer but working with the customer to create value) all relate to value and why value is considered important. Also, their premises 10 and 11 relate to value. Premise 10, Value is always uniquely and phenomenologically determined by the beneficiary; and Premise 11, Value cocreation is coordinated through actor-generated institutions and institutional arrangements.

Woodruff and Flint go further to suggest that marketing is deficient in creating customer value. This is one reason for my talking about Value Dominant Logic to get business to focus on value creation.

While I disagree with the authors definition of value, in business apart from doing good, value is to enhance the worth of a product, service, person or institution, where worth is generally the benefits less costs or sacrifice.

In November, 2019, Hunter Hastings et al wrote an article, ‘Towards a Value Dominant Logic of Marketing”. (https://www.researchgate.net/publication/337109161_Towards_A_Value-Dominant_Logic_of_Marketing)

Their paper focuses on marketing alone and compares Value Dominant Logic with SDL. My work on Value Dominant Logic (I wrote my article on Value Dominant Logic in 2017 (https://doi.org/10.1177/2394964317730655) and a book in 2018,

Value Dominant Logic, Helping Individuals and Their Companies to Succeed (Routledge, Taylor and Francis, 2018)) predates Hastings et al’s articles is more general though marketing, customers etc are also discussed in detail.
Hastings et al concluded that VDL was a powerful idea and that it is founded in solid economic thinking and can be applied to any kind of business.

I go beyond: that Value preservation, avoiding Customer Value Starvation shown in my book Customer Value Starvation can Kill, and value destruction are important aspects to keep in mind.

My take is more from a business angle than just from a firm’s viewpoint on how they could use SDL. I think the strategy of some firms has moved from selling goods and products to selling a service, which includes the product. Great examples are airline engine manufacturers not selling engines, but selling a service which includes the use of the goods, and taking care of the engine, which makes it much more efficient for the engine manufacturer than for the customer were they only to buy the engine.

This is happening in services such as lifts or elevators, cleaning systems etc. Airbnb provides a service, so does Uber. Here services have become more tangible rather than intangible. Thus the knowledge of the service provider is bundled with the goods.

Where, then does VDL fit in? The goal of all firms is to create value. The goal of SDL is value co-creation. Thus, there is no real mismatch in objectives.

Value Dominant Logic is focused on changing mind sets to create value. The role of an executive is to create value and not just be good performers in their jobs. S/he has to go beyond performance not only in action but also in thought process. People who reach the top do so by being seen as value creators.

Value creation is all about doing good and improving the well being of society, people, businesses, environment, partners, employees, customers and shareholders among others.

VDL emphasises that value extraction can only follow if you create value. It is important to create value for all stakeholders who in turn will create value for you. If stakeholders create more value for you, than you for them, then a positive value or a form of profit is created for you.

In short, you can only create so much value for yourself, more value coming from those you create value for. Thus, the importance of creating value for others. Businesses that understand this tend to create more value for themselves because they focus on creating value for others such as their stakeholders.

Businesses will sell a service (which includes their skills and knowledge) when it creates more value for them. If they learn to use SDL to co-create more value, they will do so.

This has been shown by my examples earlier, and customers and suppliers co-create value for themselves by using service.

Value Dominant Logic goes one step further. It goes beyond the process to mindset changes within managers and companies.    

Republished with author's permission from original post.

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).

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