Service-Dominant Logic (S-D Logic)

Overview

Service-Dominant Logic reframes marketing from goods-centered (value-in-exchange) to service-centered (value-in-use). Vargo and Lusch (2004, 2008, 2016) articulate foundational premises: service is the fundamental basis of exchange, value is always co-created with beneficiaries, and all economic actors are resource integrators.

When to Use

• Redesigning value propositions to emphasize service and outcomes
• Analyzing how value is co-created across actor networks
• Shifting organizational mindset from product-centric to service-centric
• Designing service ecosystems and platform strategies

When NOT to Use

• Operational cost optimization of existing manufacturing processes
• Short-term pricing decisions requiring goods-dominant accounting
• When stakeholders require traditional financial metrics without translation

Assumptions

IRON LAW: Value is ALWAYS co-created. The firm can only offer value
propositions, not deliver value. Value is uniquely and phenomeno-
logically determined by the beneficiary in context of use.

Key assumptions:

1. Service (application of competences) is the fundamental basis of exchange
2. Goods are distribution mechanisms for service provision
3. Operant resources (knowledge, skills) are the primary source of advantage
4. All actors (firms, customers, partners) are resource integrators
5. Value is always co-created within service ecosystems

Methodology

Step 1 — Map the foundational premises

Evaluate the current business through S-D Logic's key foundational premises (FPs):

FP	Premise	Diagnostic Question
FP1	Service is the fundamental basis of exchange	What competence application does our offering enable?
FP6	Value is co-created by multiple actors	Who participates in value creation beyond the firm?
FP7	Actors cannot deliver value, only offer propositions	Are we assuming value is embedded in the product?
FP9	All actors are resource integrators	What resources do customers bring to the exchange?
FP10	Value is uniquely determined by the beneficiary	Do we measure value-in-use or only value-in-exchange?

Step 2 — Identify operant vs operand resources

Resource Type	Definition	Examples
Operand	Resources acted upon (static)	Raw materials, equipment, money
Operant	Resources that act on others (dynamic)	Knowledge, skills, technology, relationships

Shift strategic focus from operand to operant resources.

Step 3 — Map the service ecosystem

Identify all actors, institutions, and resource flows in the value co-creation network:

• Micro level: dyadic interactions (firm-customer)
• Meso level: service systems and platforms
• Macro level: institutional arrangements and shared norms

Step 4 — Redesign value propositions

Reframe offerings as value propositions that enable beneficiary value creation:

• From "what we sell" to "what outcomes we enable"
• From "product features" to "resource integration support"
• From "delivery" to "co-creation facilitation"

Output Format

## S-D Logic Analysis: [Context]

### Current Logic Assessment
- Dominant logic: [goods-dominant / transitioning / service-dominant]
- Value definition: [value-in-exchange / value-in-use / both]

### Foundational Premise Audit
| FP | Current State | Gap | Action |
|----|--------------|-----|--------|
| FP1 (Service basis) | | | |
| FP6 (Co-creation) | | | |
| FP10 (Beneficiary value) | | | |

### Service Ecosystem Map
- Key actors: ...
- Resource flows: ...
- Institutional arrangements: ...

### Redesigned Value Propositions
1. [From]: [product-centric statement] → [To]: [service-centric proposition]
2. ...

Gotchas

• S-D Logic is a lens/mindset, not a predictive model — it reframes thinking but does not forecast outcomes
• "Co-creation" does not mean the customer does the work; it means value emerges in use context
• Value co-destruction is possible when resource integration fails — do not assume co-creation is always positive
• Operant resources are harder to measure than operand resources; resist defaulting to tangible metrics
• S-D Logic's vocabulary (operant/operand, service ecosystem) can alienate practitioners — translate carefully
• Institutions and institutional logics (added in 2016 update) are essential for ecosystem-level analysis

References

• Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1), 1-17.
• Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1-10.
• Vargo, S. L., & Lusch, R. F. (2016). Institutions and axioms: An extension and update of service-dominant logic. Journal of the Academy of Marketing Science, 44(1), 5-23.