The Idea

I find Gallouj & Weinstein’s model of service as four separate vectors of characteristics (see figure 1) as very useful. It helps explain service in a consistent, and structured way. And allows us to systematically hunt for innovation

Where we can read Figure 1 as telling us that the customer competencies () integrate with provider employee competencies (), perhaps with either party integrating with technical characteristics () to realise the external characteristics (). And those technical characteristics are goods, resources or systems (including process etc) of the provider.

Using such a model we can readily describe common patterns of service from across the service-service continuum. From intangible service, through tangible service and on to self-service. And recall that we see goods as distribution mechanisms for service, so self-service, here, includes goods.

But the model, from 1994, is grounded in goods-dominant thinking, doesn’t really reflect the ecosystem nature of service; and the external characteristics have little guidance.

The proposed updates

I’m proposing to make three updates to the model, by:

• using service-dominant logic terminology
• reflecting the ecosystem often found in services
• guiding external characteristics to be the value proposition

And in Figure 3 you can swipe between the original model and where we will arrive with these updates.

So, if you ready to start the journey, then, let’s start with updating the terminology.

Updating terminology

There are a few terms I want to update from Gallouj & Weinstein’s original model. That model was steeped in product-dominant thinking. And, I don’t mean to criticise – they built on the work of Saviotti & Metcalfe on innovation in goods; which itself was built on the work of Lancaster. And we had yet to uncover the concepts of service-dominant logic. I propose updating the terminology as you see in Figure 4.

Let’s look at these in more detail. And first up, it’s actors and the beneficiary.

Introducing Actors and the Beneficiary

In the original model Gallouj & Weinstein use the terms customer and provider. The problem when we use such terms is that we introduce an artificial divide (ref to this). By doing so, we emphasise a goods-dominant logic world thnking. Where we see one party as creating value – the provider. Whilst the other – the customer – consumes that value. But we have evolved our view to one where value is co-created during use.

Value is co-created by multiple actors, always including the beneficiary

Foundational premise #6 / Axiom 2 of Service-Dominant Logic

Service-dominant logic uses the term actors to avoid this artificial divide. And additionally identifies that one of the actors involved in the service provision is the beneficiary. So I’ll make two simple terminology changes. Firstly, rather than customer, I’ll use the service-dominant logic term of beneficiary. And secondly, I’ll use other actors rather than provider. Using the plural here as recognition of ecosystems/networks that I will cover shortly.

This is purely a terminology change as we’ll now observe.

Observations on the beneficiary and other actors competences

We can make the same observations about beneficiary competences as we did customer competences in the original model. That is to say, the service may:

• require the beneficiary to gain new competencies so that co-creation of value can occur. And so we need to plan how to help them do that, to minimise:
  • innovation resistance
  • value co-destruction
• be improved by leveraging competences and skills the beneficiary has acquired in other industries/markets (a source of innovation)

Similarly, for other actor competences, we can make the same observations as in the original model. This means they are the skills and competence of the individuals – employees – in those actors, not of the enterprises themselves. Though naturally, we would expect beneficial other actor competences and skills to become encoded over time as technical characteristics for future use and distribution within the enterprise.

Gallouj & Weinstein roughly categorise skills and competences as follows:

• scientific and technical
• internal and external relational
• combinatory or creative (i.e. those that combine technical characteristics into coherent sets and subsets)
• operational (or manual).

And individuals typically gain them from:

• education
• training
• experience
• and often from the repeated interaction with customers

Moving from outcomes to value

Gallouj & Weinstein said the external characteristics described the experience of the service. I’d like to tighten that up as we know from service-dominant logic we know that only the beneficiary can determine the value made:

Value is always uniquely and phenomenologically determined by the beneficiary

Foundational premise #10 of service-dominant logic

And so, it makes sense to already talk about the external characteristics as a description of the value proposition rather than experience/outcomes. We’ll look at what this actually means beyond terminology shortly.

Co-creating rather than co-producing value

Finally, where Gallouj & Weinstein use co-production in their description, I’ll use co-creation.

Unfortunately, co-production has taken on the meaning of the beneficiary being involved in creating the value proposition (see service-dominant logic). And that is too focused a view for me. Sure, it may sometimes be the case that a beneficiary is involved creating the vale proposition, but it is not a requirement. Using co-creation is better terminology.

OK, with those terminology updates done, we will move on to addressing networks/eco-systems.

Reflecting EcoSystems

When the original model was defined, service was seen as awkward sibling of goods. And that the majority of the world was built around goods and manufacturing. However, service is taking over the world. And a lot of service we see today involve integrations with other services. That is to say there is often an ecosystem involved.

This is most obvious when you think about payment, advertising and delivery of items from eCommerce sites. Where those “sub” services are typically handled by an ecosystem partner. Payment, for example, might be through a credit card processor, a buy-now-pay-later service such as Klarna, or perhaps a direct bank transfer service as we saw with Swish in my original article. Usually what you have bought needs delivering to you. And physical goods will come through a postal service. Whereas digital/e-goods through the internet via you internet service provider.

We can readily describe each of these partner services in our model in their own right. They might require beneficiary competences. Or have employees competences and/or technical characteristics. And they offer an ability to make progress, i.e. meeting one or more external characteristics.

I propose we reflect this sub system nature by grouping other actor competences and technical characteristics together in actor groups in the model.

For now I chose not to group external characteristics, nor beneficiary competences, together in a similar way for reasons of simplicity.

Observations on ecosystem nature

The most immediate benefit of doing this relates to innovation – helping a beneficiary make progress better than they currently can… From the original model we know that innovation is adding/deleting/updating characteristics. Now we can include adding/swapping eco-system providers. And understand the impact of doing that.

In Sweden, for example, it is not uncommon for eCommerce sites to offer the choice of various delivery sub-services. I can chose traditional mail service (which in Sweden delivers parcels not to my address but to pre-determined pick-up points). Or a service that delivers to a drop-box located near me – often more convenient than traditional mail’s pick-up points. And even other new delivery services that do aim to deliver to my address at convenient times. These alternatives all help me make progress in my “job” better than the traditional mail. And offering me a choice further helps (noting the different choices have different cost impacts).

And that brings us to updating our thinking around external characteristics.

Guiding External Characteristics as the Value Proposition

This update is perhaps the biggest. And has the largest impact. I want to guide external characteristics to be the value proposition.

Gallouj & Weinstein’s took a, typical for the time, product features approach to defining external characteristics. That is to say, the characteristics should capture the main and complementary characteristics as well as externalities. Or even classic Kottler types of core, generic, expected, augmented and potential features, if you want.

I want us to think differently.

What is important to the beneficiary is the progress they can make in some aspect of their life when they integrate with a service. This is the fundamental point of my view of value – what functional and non-functional progress the service proposes it can help the beneficiary make. Therefore, the external characteristics of a service is actually the value proposition. And that value proposition describes what functional and non-functional progress could be made.

As you can see in Figure 6, I propose grouping external characteristics into two groups. One for the functional progress. And the other for the non-functional progress.

And within the non-functional progress we find beneficiary visible business model aspects and the servicescape. These are the “cheap”, “low monthly fee”, “secure”, “safe”, “quickly” etc.

Functional Progress

Beneficiaries seek to make functional progress. And that is essentially the job to be done in the sense of Christensen in “Competing Against Luck” – what is a customer hiring you to do / what is the job to be done? But we can also see two useful subsets of jobs. Beneficiaries seek to overcome hindrances they have. And they have problems to solve. Both are really jobs, but perhaps bring a wider lens to the thinking.

So we can view functional progress as the:

• solution to a problem
• avoidance of a hindrance
• job to be done

And whilst functional progress is important, we can’t forget the non-functional progress the beneficiary is also trying to make in parallel.

Non-functional Progress

We also can see that beneficiaries have non-functional progress they are seeking to make. Those could be emotional, or a feeling of inclusiveness or other attributes. I feel Almquist, Senior, & Bloch’s “Elements of Value” brings a number of these attributes together (see Figure 7).

And within this we can carve out 2 sub categories. First, there are the beneficiary facing aspects of the business model. And second, the servicescape.

Beneficiary facing aspects of business model

A business model, whilst easy to think we can define, turns out harder than that. This HBR article gives an interesting discussion on business model and definitions: https://hbr.org/2015/01/what-is-a-business-model

And I believe parts of the business model – those that are visible to the beneficiary – are part of the non-functional progress of the value proposition. And as such, we should list them as external characteristics. This would be things such as payment method (one-off, subscription, per use etc) and even who is the intended beneficiary if clarification is needed.

Servicescape

Additionally, relevant non-functional aspects of the servicescape are part of the external characteristics. And by servicescape I think of both Bitner’s description of the servicescape as “the physical environment the service is delivered in” and Harris & Goode’s eServicescape.

A distinction needs to be made between feeling part of servicescapes and their actual manifestation. The former is an external characteristic – safe, clean, etc. How that is realised is a technical characteristic.

Updating the Swish Example

In my article on the original Gallouj & Weinstein model I explored Swedish direct payment service Swish. Where mobile phone numbers are used as proxies to bank accounts. Enabling real-time customer-to-customer payments and increasingly customer-to-business payments.

In Figure 8 you can see a comparison between how this Swish service would look in the original model and in my updated one.

You’ll see that we keep the same beneficiary skills and competences. And that we introduce no new other actors competences.

But when it comes to external characteristics we see the expected 2 groups. Firstly the functional progress offered. That is to say the transfer of money between two bank accounts. And second, the non-functional progress, which start to differentiate this service.

Additionally, the technical characteristics now has three groups. One for each of the actors involved in this ecosystem: Swish, banks and BankId. And actually, the act of ecosystem thinking has helped us clarify technical characteristics. Resulting in three new technical characteristics being clarified – previously we just talked about co-ordinating or interfacing. Now we have to be clear that the banks and bankid ecosystem partners need to provide interfaces to their systems.

Observations on Innovation

Now I hope you can see why I suspect this model helps us with innovation.

• functional: are we offering to help with the right function…
  • is the problem we offer to solve the right problem?
  • are there additional hindrances to help remove?
  • is this the real job beneficiaries hiring for?
• non-functional: are we offering to help make progress better than others
  • are we best at helping beneficiaries in secure, simple, real-time progress; mobile-first, cheap (no fee)?
  • does the beneficiary care about these non-functional progress? are there others we are missing?
• are there things in other markets/industries that the beneficiary has learnt to use that we can make use of here to help beneficiary make functional/non-functional progress better?
  • for example, Swish added ability to use QR codes to simplify/reduce risk of entering phone numbers you don’t immediately know. Think payment to a business. Beneficiaries have learnt that skill in the travel/entertainment industry for ticketing.
• are there other ecosystem partners we can swap in or add that enhance the ability to make progress?

Lots of questions, lots of innovation space. And systematic.

Wrapping Up

So, in the slidable comparison below you can compare the differences between the original and updated models.

I see them more as gentle updates to put the model in the context of service-dominant logic, and a little bit more useable in my mind, rather than earth shattering updates.

But with the model in the state above, we can go and look at what innovation means. As well as how to start systematically searching for those innovations.