Why value co-creation?

In this post I want to elaborate a point I made in the end of my previous “Going beyond ‘producers’ and ‘consumers’” post about the co-created nature of value. Why does service-dominant (S-D) logic talk about value co-creation and not about value creation?

In the traditional company-centric notion of value and value creation, value is measured by monetary terms and is something that companies create through production [1]. In this logic value is seen as something that can be embedded into company outputs such as products to make them desirable by the customers. The customers must purchase the products in order to consume the value (hence value is ‘destroyed’ while products are used).

Value creation1

S-D logic abandons the conventional logic and instead, introduces the notion of value-in-context [2], in which the customer becomes an active participant into the process of value creation. Value-in-context eliminates the company’s sole right for value creation by arguing that value actually emerges in the context of the customer when the provided service (applied resources) is integrated with other resources to achieve a wanted outcome. Hence, value is always uniquely perceived by a service beneficiary and it unfolds over time. For example this text has no value on its own when it just exists in our blog. It only becomes valuable when you read it and (if) my thoughts are connected with yours.

Based on this some have actually come to the conclusion that it is only the customer who should be called as a value creator, while the company is left with the role of a value facilitator [3].

Value co-creation2

This argument is, however, missing a crucial point. Service-for-service exchange is always reciprocal by nature meaning that both the customer and the company are simultaneously service providers and service beneficiaries. In other words, both customers and companies can be seen as resource integrating actors engaged in service provision and value co-creation both for themselves and others [2]. This actor-to-actor (A2A) perspective is fundamental to the S-D logic worldview. It is also critical, if we really want to understand the complexity of the world (and business).

Value co-creation3

Thus, S-D logic further broadens our view on value co-creation by arguing that service-for-service exchange does not occur in dyadic relationships (between two actors), but in larger ecosystems of value co-creating actors [4]. This means that when trying to achieve a certain outcome you never integrate resource from only one source (e.g. one company). Instead, a huge number of actors, scattered over time and space, are participating in the joint process of value co-creation.

Value co-creation4

If the idea of value co-creation has not convinced you yet – think of this very moment. In order for you to be able to read my blog post, you need to have a laptop or some other device equipped with an internet connection, some way of finding my text (e.g. Google) and the ability to read (just to name a few things). Can you imagine how many people’s effort has been needed to make this moment of (potential) value co-creation possible? I can’t. The greatest strength of human kind is to be able to collaborate in ways that well exceeds the understanding of a single individual.

References:

[1] Vargo, S.L. & Lusch, R.F. (2004) Evolving to a new dominant logic for marketing. Journal of Marketing, 68 (January), 1-17.

[2] Chandler, J.D. & Vargo, S.L. (2011) Contextualization: Network Intersections, Value-in-Context, and the Co-Creation of Markets, Marketing Theory, 11(1), 35-49.

[3] Grönroos, C. (2011) Value co-creation in service logic: A critical analysis. Marketing Theory, 11(3), 279-301.

[4] Vargo, S.L. & Lusch, R.F. (2011) It’s all B2B…and beyond: Toward a systems perspective of the market. Industrial Marketing Management 40, 181-187.

The Cloud and many facets of value

ValueBy: Kaisa Koskela-Huotari and Andrey Sirotkin

The word value has been used lately a lot in the discussions related to business and the Cloud. What do we, however, mean by value in this context? Roughly, one can argue that the concept of value has evolved into two quite distinct meanings [1]. Firstly, value is used to portray ‘goodness’ of something physically external to a person. This something can be another person, a product, an activity or anything else. Secondly, the concept of value can also describe ‘goodness’ as determined by an individual personally and culturally, and in an ethical sense. Usually in this meaning the plural term – values – is used.

Value (of something) and the Cloud

There are three ways to discuss the concept of value (of something) [2, 3, 4] and the Cloud.

The first one is the value-in-exchange perspective, where the focus is on outputs. Value is seen as something created by companies in their production activities and embedded in company outputs such as tangible products. Therefore, value is measured by the exchange transaction and is equal to money. In the case of the Cloud this perspective would mean e.g. that a Cloud-based service would be regarded valuable on its own – without being used by someone. We would be more worried about what our sales numbers are than do our customers perceive our service beneficial or not.

The second, value-in-use, perspective provides a very different view on value and value creation. Here, the attention is focused on the process of use, and the locus of value creation shifts from the producer’s end to the customer’s end. Hence, value is seen as something that emerges as a person uses or applies a resource provided to him/her by somebody else. For a Cloud-based solution the value-in-use perspective would mean that we would view the solution valuable only when someone is using it – e.g. to share photographs with family and friends – and therefore perceiving the service valuable for him/her.

The third value-in-context perspective can be seen as an extension of the value-in-use perspective. In this perspective value is seen as an experience. This experiential view on value implies that the perception of value is not a linear, cognitive process restricted in isolated events of use but an iterative and circular process including both lived and imaginary experiences as well as individual and collective dimensions. The value-in-context perspective for a Cloud solution would mean that we acknowledge that the value of a service does not remain the same for the individual using in, but that the perception of value constantly alters as the time, place and context of use changes, and also that the perception is influenced by social interaction.

When tapping into the potential of the Cloud it is important that we take into consideration all the different perspectives on value (of something) as they all provide us important information on how we can create solutions that are beneficial both from the business’ and customers’ perspective.

Values as beliefs

A concept of human values is different from that of value (of something). Human values are principles and beliefs that people use to evaluate goodness, fairness and the legitimacy of experiences. Human values are defined in axiological sense. These values are beliefs that people hold in aesthetics (e.g. beauty, harmony, goodness) and ethics (e.g. right, wrong, fair, legitimate). What makes values especially interesting in business studies is their motivational character. Values guide individuals’ choices, evaluate behaviour, and provide meaning to experiences (e.g. [5], [6], [7] and [8]).

Although values are abstract concepts, they are practical for understanding customer experience. By understanding we mean an ability to find reasons or explain meaning. Regardless of whether such explanations are rational or irrational they contain cues for companies for what experiences customers may value. When customers have difficulty with anticipating what future product and services they will value (in terms of goodness of something), they can describe their view of reality in terms of desires and values. Thus, values can be a very useful source of information about customer experiences.

Because values are remarkably stable and resistant to change even in dynamic environments, they may serve as a vector of strategic differentiation. That is, a strategy can be intentionally focused on the perceived value of experience, which is a key differentiation factor. Values, for example, can be used to describe customer desired experiences, which, in turn, can be disseminated throughout the organisational processes. As a result, values bring together strategy, marketing and development functions in a unified effort of staging an experience that customers will value.

This posting is modified and shortened from the original article. To see the full version and to read about more about our research in the Cloud context, check out the newest edition of VTT Research Highlights – Value-driven Business in the Cloud.

References:

[1] Ng., I.C.L. & Smith, L.A. 2012. An Integrative Framework of Value. In Vargo, S.L. & Lusch, R. F. (eds.) Special Issue – Toward a Better Understanding of the Role of Value in Markets and Marketing. Review of Marketing Research, Vol. 9. Emerald Group Publishing Limited. Pp. 207–243.
[2] Vargo, S. L., Maglio, P. P. & Akaka, M. A. 2008. On value and value co-creation: A service systems and service logic perspective. European Management Journal, Vol. 26. Pp. 145–152.
[3] Chandler, J. D. & Vargo S.L. 2011. Contextualization and value-in-context: How context frames exchange. Marketing Theory, Vol. 11. Pp. 35–49.
[4] Helkkula, A., Kelleher, C. & Pihlström, M. 2012. Characterizing value as an experience: implications for service researchers and managers. Journal of Service Research, Vol. 15. Pp. 59–75.
[5] Boudon, R. 2001. The origin of values: Sociology and philosophy of beliefs. New Brunswick, New Jersey, USA: Transaction Publishers.
[6] Kahle, L.R. 1996. Social values and consumer behavior: Research from the list of values. In Seligman, C., Olson, J.M. & Zanna, M.P. (eds.) The psychology of values: The Ontario symposium, Vol. 8. Mahwah, NJ: Lawrence Erlbaum Associates, Pp. 135–151.
[7] Schwartz, S.H. 1992. Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. Advances in Experimental Social Psychology. Vol. 25. Pp. 1–65.
[8] Rokeach, M. 1979. Understanding human values: Individual and societal. The Free Press: New York

Naples Forum – Emerging nature of value

“Service has arrived in a new and better shape, more prepared to deal with the contemporary economy. Still this is a starting point: Service deserves more attention on our research agenda!”  (clip of Reasoning for Naples Forum on Service)

We had a great opportunity take part to the third Naples Forum on Service, which is conference focusing on three research pillars: service-dominant logic, service science and network and systems theory. The conference was located in beautiful island of Ischia in close distance from city of Naples in Italy. In addition to thrilling views, sunny sky and bright blue oceans, conference offered us many research related experiences and insights, which have notable future value potential. Instead of explaining what we found valuable for us during the conference, in the following we debate how and when value of conferences can be actualized.

Conference as a platform for co-creating value

When sitting on an airplane on my way back to home from the conference I started to think about the value of Naples forum for me and for VTT. The probable reason for my thoughts was that this question is often asked after conference (to justify the made investment). On the other hand, another apparent reason was that during the conference we had many interesting presentations and informal discussions about the concept of value and value co-creation. After short puzzling, I realized that this type of conference does not create value per se, but enables opportunities for value co-creation among the participants. Thereby, conference should be seen as a platform for value co-creation, which enables researchers all over the world to present and discuss their ideas, take ideas to next level by challenging them, plant seeds for new ideas, co-operation and joint projects, create new relationships to other academics or even build life-long friendship to other like-minded people.

But how is my subjective value experience in the end created? When going through many unforgettable experiences from the conference I realized that my subjective value during the conference emerged through various types of incidents that I had experienced (e.g. inspiring presentations, feedback to my work, gala dinner with amazing people). However, because value is context specific, the value of these incidents change in time depending, for example, on where I will be, what will I do, and how I can complement these experiences with other things. Therefore, importance of certain incident at the conference may seem today irrelevant (low value), but future may reveal this incident highly valuable.

Furthermore, conference presented us numerous opportunities to co-create value in the future. Firstly, the conference is so full of interesting presentations and discussions, that you need some time on your own to process these ideas and insights. In addition, the value of the conference may be revealed later on when insights from the conference are combined with insights from other sources (e.g. resulting in to a finding of original idea for PhD. thesis). Secondly, I would argue that the most of the value for me and especially for the VTT will be actualized after the conference through realizing numerous opportunities that this type of collaboration enables (e.g research exchange, joint projects).  Thereby, if someone would ask what was the value of Naples Forum, I would explain that it was very educative, inspiring, fun, warm and warm-hearted conference, but in order to understand full value of conference we will have to see what the future reveals.

What is Naples Forum on Service?

The Naples Forum on Service is mostly academic conference, which built around three scientific pilars which are service-dominant logic, networks & systems theory and service science. First Naples Forum was organised in 2009 at the small island of Capri. The idea of the conference was to overcame geographical constrains and bring researchers interested in service research together to share ideas and discuss informally with each other. This year Naples Forum was organised for the third time, and the forum is nowadays recognized as a conference where most influential service academics are present, but at the same time the atmosphere has remained very open and relaxed. Next Naples forum is scheduled to be organised in 2015.