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:
- Service (application of competences) is the fundamental basis of exchange
- Goods are distribution mechanisms for service provision
- Operant resources (knowledge, skills) are the primary source of advantage
- All actors (firms, customers, partners) are resource integrators
- 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.