Service Capability Analysis as a Contribution to Co-Creation

Introduction

The emergence of service-centered dominant logic (S-D logic), in contrast with the goods-centered dominant logic, brought an important focus on firm-customer interaction, transforming customers into “active participants in relational exchanges and co-production” (Vargo & Lusch, 2004). Value co-creation – a key aspect of S-D logic – is strongly focused on interaction, as discussed in Gronroos (2012), who introduced the concept as “a joint collaborative activity by parties involved in direct interaction, aiming to contribute to the value that emerges for one or both parties”. Even in environments characterized by a technology-enabled value co-creation, the interaction plays a major role (Breidbach & Maglio, 2016). Furthermore, as mentioned by Agrawal and Rahman (2015), “the customer as an active player in value co-creation could enhance the efficiency and effectiveness of the value creation process”.

Under this perspective, value is perceived and determined by the consumer on the basis of “value in use” (Vargo & Lusch, 2004), which means that value only occurs when the offering is useful to the customer or beneficiary (Lusch & Nambisan, 2015).

Regardless of whether one is referring to goods or services, measurement plays a major role in management decisions, from several perspectives.

The conceptual measurement system is quite different between goods and services. The interaction between customer and service providers is usually much larger than the interaction between customers and product suppliers. In S-D logic, the customer assumes the role of an active player in the service delivery interaction, unlike typical goods-dominant transactions.

In fact, as regards goods production, the measurements are performed within the production process and on the final product. Therefore, these measurements are performed away from customers. Alternatively, when production and consumption occur simultaneously, as is typical of service provision, customers become part of the production process, and inevitably part of the measurement process (Figure1). This represents an important constraint to the utilization of the classic indices to assess process capability in services), as will be demonstrated in the sequel.

Figure 1.

The measurement system of products and services

The common indices utilized in process capability analysis, within the framework of quality engineering, are based on the assumption that both the process performance and the specification limits use the same units of measurement. In fact, this is an obvious pre-requisite for the calculation of those indices.

However, this assumption is not compatible with a co-creation perspective since it does not reflect the customer’s input regarding value creation.

In some way, this is also reflected in the distinction between internal measures, which come from technical and operational records, and external measures, that are directly obtained from customers. This distinction and the importance of assuring a proper interaction among those measures is supported by Johnston (2005) that refers to the importance of assuring a match between service quality as the operation delivers and service quality as perceived by customers. For instance, the time for answering a phone call can be monitored by a company, which would be a service characteristic measured by “the operations”. However, this is an internal record that does not give an evidence about customer satisfaction, unless companies can match it with customer perceptions.

As it will be later addressed in this chapter, customers’ expectations regarding service provision are not a “single point”, but a range (Johnston et al, 2005). This range, which is limited by the adequate service (the minimum tolerable) and the desired service (what the customer wants to receive), is commonly known as the “zone of tolerance”.