26.02.21
26.02.21
The Service logic has proven to be a promising paradigm for companies to answer the complexity and chaos in the post-corona age, as already mentioned in our article ‘Are you ready for post-corona?’. This logic encourages companies to rethink their business models and step away from the prominent Goods logic where value is solely embedded in tangible output. The Service logic can therefore on the one hand meet the challenges of more demanding customers and shrinking competitive advantages. On the other hand, this logic has additionally shown to have positive impacts on a company’s sustainability. It can thus also guide companies who are willing to tackle challenges such as the depletion of natural resources and ecological degradation. But how exactly can the Service logic help a company perform more sustainable? Find out more in the article below.
Our current economy is strongly characterized by a goods-centred view where value is perceived as the production of tangible output that in turn is destroyed by the consumer. An example of this model is a company that produces light fixtures, sells them to the customer who then uses them until they are broken. Companies thus separate the customers from the production process and then market their products in order to sell them.
Even though the Goods logic has been the dominant view in our economy for the last decades, it is becoming painfully clear that it doesn’t always provide an answer to the challenges of today’s world. This is why since a few years a new marketing ideal has emerged, namely the Service logic. This service-centred view is of great importance within the ‘Act Human’ philosophy where the essences of marketing isn’t selling products, but offering mental and emotional services and building relationships. In order to do so, cocreation and ecosystems are very important basic principles. The Service logic consists of three main differences with the current Goods logic:
It firstly contradicts the goods-centred view because of its focus on intangibility, knowledge and specialized skills. Companies must provide their customers of a service or an experience and use goods as distribution mechanisms to be able to do so. In our example the company would then sell ‘lighting’ and provide light fixtures in order to create this lighting.
In addition, within this new logic, value is ‘cocreated’ with the customers. Companies must involve their customers in every step of the production process and market with them. Only they can determine value so, according to the Service logic, light fixtures that don’t service a customer therefore have no worth. Companies can thus only cocreate this value with their customers and heavily rely on their input.
Finally, the Service logic does not only consider the customer as relevant, but every company, partner, employee, supplier and individual within society is an important factor in the value creation process. Companies namely conduct business within a so-called ‘ecosystem’ where communication and cooperation with different companies and partners are key. For instance, the light fixtures can be co-designed by the customer, produced by a company, installed by local technicians and provided with energy by partners.
Now how can a company tackle the environmental challenges of today’s world with the help of the Service logic? The answer is by applying the three main concepts of the Service logic within their business models. Each concept can reduce environmental ramifications of the company’s processes and have positive effects on its sustainability.
By offering a service instead of a product, a company can address resource consumption while creating value with the customer. Now there is less focus on goods and more focus on the service provided by these goods, ownership is less important and often stays with the company. This increases the opportunity and motivation for companies to design durable products, decrease the energy consumption, reuse certain components and to properly recycle materials.
The concept of value cocreation equals long-term relationships and more frequent communication with customers. This improves the company’s position to convince and guide their customers toward more sustainability and to establish a cultural shift. Companies thus involve customers and make them more conscious about sustainability or even stimulate more sustainable consumption patterns through durable design.
The implementation of an ecosystem has the possibility to deliver sustainable benefits throughout the entire product life cycle. A company can work with suppliers of recycled materials and green energy or they can team up with partners to recycle and maintain the products. A company and its ecosystem can thus mutually help each other and improve sustainability of each other’s processes.
Several companies have already proven how sustainability can improve by implementing the Service logic.
A first example, is the best practice case Signify. This company achieves its sustainability goals by offering ‘lighting’ in the form of Lighting as a Service and Circular Lighting. Within these offerings, they incorporate regular maintenances to extend the product’s life cycle and take-back offers to correctly recycle the light fixtures. They additionally have strong relationships with their B2B customers and offer them training about the operation of the lighting systems and how to replace components to make the products last longer. Finally, Signify has developed an extensive ecosystem and even guaranteed sustainability for the entire supply chain with their Supplier Sustainability Declaration.
A second company that acts as a best practice, is Q-lite. This company manufactures displays and offers solutions for companies to present their message with Display as a Service. Within this offering, they provide upgrades and reuse certain components in order to extend the product’s life. In addition, they improve sustainability through the relationship with their customers where they give tips on how to minimize energy usage. Q-lite also exchanges waste, recycles products, provides their displays of green power and uses recycled aluminium via the establishment of a valuable ecosystem.
How can my company implement this Service logic and attain sustainability, you might ask? There are no fixed answers, but together we can face the challenges your company is confronted by today. Let Callebaut Collective act as a valuable partner within your ecosystem in order to attain your sustainability goals. These two compagnies illustrate how offering well established service offering can help achieve high level sustainability goals and prove the potential of applying the Service logic.
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