Continuing on our journey making service-dominant logic more approachable, we arrive at an interesting point. And I mean “interesting” with a typical Englishman’s understatement.
In our typical view of how economies work – the so-called goods-dominant logic – everything focusses on the goods and exchange for value.
Now we’re going to make some observations about goods, service and the economy. And we’ll find this goods-dominant focus isn’t the best fit. It hampers our growth and innovation ability. Rather, we’ll discover service-dominant logic’s 3rd foundational principle:
Goods are distribution mechanisms for service provisionVargo & Lush (2016) – Foundational Premise #3
We’ll see that goods either capture skills/knowledge or freeze a service so a beneficiary can use at a later time/different place. And the starting point to understand this is the jobs to be done theory.
First, we need to look at the mythical division of goods and services we arrive at from a goods-dominant logic. This (false) division is one we are most familiar with.
The goods-dominant world
In the goods-dominant logic suppliers exchange goods for cash. Doing so exchanges the value suppliers/manufacturers have embedded into the goods to the customer.
In such a logic we try and interpret services in two ways. First, we define services in relation to goods. They are intangible and inconsistent. We cannot inventorise them. And their delivery is inseparable (produced and consumed at the same time) and require customer involvement. All of these come across as bad things, i.e. services are somehow less than a goods.
However, we secondly observe that there is a continuum between goods and services. In some cases, there are only goods. In others there are goods used in services. And at the other end there are pure services that use no goods.
Let’s think about getting something to eat and see how this continuum works out. At the completely tangible end, there is cooking at home. Here it is goods based – you buy the raw ingredients and cook yourself. If we move along the continuum, we might eat at a buffet. Here the focus is still on the food (the goods) but there are some service elements involved (replenishing the buffet; preparing tables to sit at, etc). Moving further along, we might eat out at a 5-star gourmet restaurant. Now the service aspect is right upfront – you expect a great experience – and the goods (food) are the supporting element.
Goods-dominant logic is the lens we have viewed the economy and marketing through for over 300 years.
The service-dominant world
But what if we have got our view wrong. What if goods are not dominant and that describing services as inferior is not right?
Could it be that the 5Is of service – intangible, inconsistent, involvement, inseparable, inventory – are positive attributes. Vargo & Lush thought this in their (2004) “The Four Service Marketing Myths”. The key figure from which I’ve presented in Figure X.
A newer take on intangibles is in Haskell and Westlake’s book “Capitalism without Capital”.
So we could see that services are great and that goods are the challenge – they are tangible and we can create an inventory (which means we have to distribute and are slow to react). They don’t require involvement and are separable and consistent – which means we could lose touch with the customer and they are not easily tailored.
But we also can observe that both goods and service are hired by customers to get a job done. And that’s an important detour for us to make before we come back to our realising that goods are a distribution mechanism for service.
Job to be done Theory
Think about when you purchase a goods or a service. What are you really doing? The insight that Christensen et al make in 2016’s “Competing Against Luck” is that you are hiring something in order to get a job done.
What is the customer hiring you to do?
And that there is plenty of competition to get that job done. It’s also useful to note that we are not looking at tonnes of data or market segmentations. We’re observing what customers are hiring things for.
In an earlier article Christensen describes Job to be done theory using milkshakes as an example. The work identified customers in the morning hire a milkshake to take the boredom away from daily commute. And so, a thicker milkshake would work best. Since it takes time to drink. It was competing against coffee, bagels, protein bars etc.
However, in the afternoon, customers hired the milkshake whilst they engaged with their children. Now the milkshake was competing against a stop at the toy store or other family time activities. Making the milkshake servings half the size and easily drinkable by children would be the key.
Two different jobs to be done. Both achieved through a goods. But they are goods that have somehow captured a service.
Job to be done and service
I believe we can use the same job to be done thinking to explore why we should look at goods as a mechanism for distributing service. A job to be done is fulfilled by an entity that applies skills and resources to benefit the beneficiary (the definition of a service!)
For example, let’s say the job you need doing is to hang a picture up on a wall.
There are many ways of achieving this. You could, for example:
- Hire a person/company to do the job
- Join a tool-sharing service and then access the tools you need
- Buy a hammer and knock a nail in yourself
The first you would definitely look at as a service. In the second you are using a service. And in the third? Well, like the second, you are performing a self-service. But you are using a goods that has been produced using the application of skills and resources – that in itself is the definition of service. A service has been captured in the goods that you are using to perform your self-service act.
[?And this all ties in a little to hassle maps – which type of service I choose is based on my tolerance of hassle?]
So we start to observe that there isn’t a goods-service continuum. Rather there are many ways to solve a job to be done. Some are a pure service, some are services moved by goods (self-service). And in-between, are these services moved by goods wrapped by other services.
We can observe that goods move services in a couple of ways. Either by capturing skills and resources as we have seen above, which we then use in a self-service. Or by freezing a service in action, which we then unfreeze at point of use. Let’s look at both of those.
Goods capturing skills and resources
Over in my article on describing services “Describing a service (to help discover innovations)” I show this as in Figure X.
What I am saying is that provider competences and technical characteristics result in a service with certain external characteristics. And that limited to no customer competences are involved. In other words, a manufacturer uses its skills and resources to produce the output of hammering a nail into a wall. It does so, by creating a hammer, which I can then use (with limited or no competence myself).
A service is defined as the application of skills and resources to benefit a beneficiary. The food at a farmer’s market is the output of the farmer applying their skills and resources. The output of their farming service, to put it another way.
Think of a ready meal, or a frozen pizza. What you are holding in your hand is also the output of a firm applying their skills and resources to create a means of giving you nourishment.
Goods freezing a Service
Sometimes it is easier to think of a goods freezing a service.
Bottled water, for example, get the job of quenching my thirst done. If I’m thirsty I could go and get a glass of freshwater from the tap/faucet. Or, I could grab a bottled water.
Now, the tap water has come from the water service that has transported water from the fresh hills of Wales into my house through pipes. The bottled water, on the other hand, has been “frozen in time” at the bottling plant somewhere in the foothills of France. Then it has travelled to my local shop, where I bought it and placed it in my fridge. When I have now grabbed it, taken the top off and poured into my glass, I have unfrozen the service. In our old way of thinking, one is a service, the other a goods. In our new way, they are both services.
Another great example is a music performance. I can go to a concert and listen to a band play. And I can also buy a CD of that band’s music. On the CD, the musical performance in the recording studio has been frozen. Every time I play the CD I am unfreezing that performance.
And we can wrap back to our 5Is here. The CD is a tangible object. So I the producer needs to distribute and have an inventory. But we’re all streaming these days. The MP3 file, a so called digital-goods, has no inventory and needs no physical distribution. Sending another copy has negligible costs; or maximal profit.
Do you still believe we need to think in product-dominant logic and see services as separate inferior things?
We have seen that by taking the step up to the Job to be Done theory then the unhelpful distinction of goods and services are driven by goods-dominant logic, disappears. Instead, we have a continuum of services that fulfil the job to be done. Ranging from self-service that use goods through to a service involving no goods.
In all cases where goods are used, they either have captured the skills/resources of a service provider are now being used. Or they have frozen a service which is nor being unfrozen.
Goods are therefore a mechanism for the distribution of service.