On value and value co-creation: A service systems and service logic perspective

Abstract

The creation of value is the core purpose and central process of economic exchange. Traditional models of value creation focus on the firm's output and price. We present an alternative perspective, one representing the intersection of two growing streams of thought, service science and service-dominant (S-D) logic. We take the view that (1) service, the application of competences (such as knowledge and skills) by one party for the benefit of another, is the underlying basis of exchange; (2) the proper unit of analysis for service-for-service exchange is the service system, which is a configuration of resources (including people, information, and technology) connected to other systems by value propositions; and (3) service science is the study of service systems and of the co-creation of value within complex configurations of resources. We argue that value is fundamentally derived and determined in use - the integration and application of resources in a specific context - rather than in exchange - embedded in firm output and captured by price. Service systems interact through mutual service exchange relationships, improving the adaptability and survivability of all service systems engaged in exchange, by allowing integration of resources that are mutually beneficial. This argument has implications for advancing service science by identifying research questions regarding configurations and processes of value co-creation and measurements of value-in-use, and by developing its ties with economics and other service-oriented disciplines. © 2008 Elsevier Ltd. All rights reserved.