Document de travail du LEM 2009-05

NOT ALWAYS CO-CREATION: INTRODUCING

INTERACTIONAL CO-DESTRUCTION OF VALUE IN SERVICE-DOMINANT LOGIC

Loïc Plé, Ruben Chumpitaz

IÉSEG School of Management, CNRS-LEM (UMR 8179)

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Not always co-creation: introducing interactional co-destruction of value in Service-Dominant Logic

Abstract

Purpose – This article aims to demonstrate that, even though Service-Dominant (S-D) logic has essentially considered value co-creation so far, it should not overlook the risks of value co-destruction either.

Design / methodology / approach – This conceptual paper critically reviews the co-creation and value-in-use concepts to elaborate on the notion of value co-destruction by service systems (i.e. configurations of resources connected to other systems by value proposition).

Findings – We show that value can be co-destroyed through the interactions between different service systems, although the extant literature usually suggests that it results in value co-creation. Co-destruction of value is due to a service system misusing either accidentally or intentionally its own resources or the ones of another service system.

Research limitations / implications – Empirical research supporting our theoretical findings could concern service systems’ characteristics, dynamics between co-destruction and value-in-exchange (i.e. price), or dynamics and antecedents of misuse.

Practical implications – At a time when so many firms engage in co-creation strategies, it is important not to forget that these are not the ultimate panacea to get value. Analyzing how, where and to what extent value co-destruction may occur must not be neglected.

Originality / value – To the best of our knowledge, this research is one of the first to underline the limits of co-creation and to explore both the potential and process of value co-destruction in S-D logic.

Keywords Co-destruction; Service system; Value-in-use; Service-Dominant Logic; Destruction-through-misuse

Paper type Conceptual paper

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1. Introduction The role of the customer as a co-producer of a product offering has been underlined early in the

academic literature (Barnard, 1948; Parsons, 1956). Yet, researchers have only begun to actually

investigate this topic since the end of the seventies (e.g. Chase, 1978; Eiglier and Langeard, 1977;

Lovelock and Young, 1979; Mills et al., 1983), paving the way for a rather impressive quantity of

theoretical and empirical contributions (see Bendapudi and Leone, 2003 for a summary of the

literature). Most of these have focused on the participation of the customer to the production of a

service (Bateson, 1985; Bitner et al., 1997; Bowers et al., 1990; Lengnick-Hall, 1996), or of a

tangible good (Thomke and Von Hippel, 2002; Von Hippel, 1978). However, more recently,

some authors have suggested that the customer should primarily be seen as a co-creator of

experience (Prahalad and Ramaswamy, 2000). From this point of view, the customer has become

a co-creator of value (Prahalad and Ramaswamy, 2002, 2004), rather than a mere co-producer of

the core offering (be it a good or a service) that enables the delivery of the experience.

This shift has been studied in greater depth by Vargo and Lush (e.g. Lusch and Vargo, 2006a;

Lusch et al., 2007; Vargo and Lusch, 2004; Vargo and Lusch, 2008b, 2008c). These authors

contend that marketing has been evolving towards a new dominant logic, i.e. a service-dominant

(S-D) logic, as opposed to the good-dominant (G-D) logic that has prevailed for decades.

According to S-D logic, the customer is always a co-creator of value, implying that value is

interactional by nature (Vargo and Lusch, 2008c). More precisely, value is phenomenologically

determined, i.e. the value of a good or a service does not exist per se, but is function of the way

customers perceive the contextual experiences enabled by this good or service (Woodruff and

Flint, 2006). As a consequence, the firm can merely deliver value propositions to the market,

whereas customers evaluate the benefits they may get from the firm’s offer. From the customer’s

point of view, value-in-use is thus the result of this perception. Another consequence of this

distinction is that co-production of the core offering, which arises through co-design, joint

production or collaborative inventiveness with the customer, becomes a component of value co-

creation. Hence, co-production is distinct from, yet nested in, value co-creation (Lusch and

Vargo, 2006a).

Moreover, co-creation of value occurs though the exchange of service, which in S-D logic is the

fundamental basis of exchange (Vargo and Lusch, 2008c, 2008a). Service does not refer here to

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the unit of output resulting from a (co-)production process. It is rather defined as “the application

of specialized competences (operant resources – knowledge and skills), through deeds, processes

and performances for the benefit of another entity or the entity itself” (Vargo and Lusch, 2008a,

p. 26). This definition highlights the process nature of the service, which relates back to “doing

something beneficial for and in conjunction with some entity” (ibid.). In other words, according

to S-D logic, service is exchanged for service, whereas tangible goods are mere appliances (i.e.

tools, distribution mechanisms) serving as alternatives to direct the provision of service. The

entities concerned by this service-for-service exchange are also called service systems (Spohrer et

al., 2007), which are “configurations of resources (including people, information and

technology) connected to other systems by value propositions” (Vargo et al., 2008, p. 145). So,

firms are service systems, as well as their customers, suppliers, employees, and all the other

partners of a firm’s network (Lusch and Vargo, 2006b).

In summary, S-D logic posits that service systems exchange a service, either through direct or

indirect interaction (in the latter case, through artifacts such as goods). Accordingly, the locus of

value creation is “a collaborative process of co-creation between parties” (Jacob and Ulaga,

2008, p. 248; Vargo and Lusch, 2008b, p. 256), and value in this context refers to value-in-use for

these parties. Therefore, each system of this process contributes to the creation of value for itself

and for the other (Vargo et al., 2008). However, since it can be created, we deem that it is likely

that value may also be destroyed through such an interactional process. Yet, marketing thought

remains deficient to fully understand value-related processes (Payne et al., 2008; Vargo et al.,

2008). In particular, relatively little is known neither about devaluation (Woodruff and Flint,

2006), nor about what we label value co-destruction. Though, it is important to identify where

value can be destroyed so that it can be remedied.

Therefore, this article proposes to introduce value co-destruction in S-D logic, and to show how

this co-destruction may happen through the interactions between a firm and its customers. Our

arguments are developed in the three following parts. Firstly, we show how optimistically value

has been studied so far in S-D logic, even though, from time to time, the idea of co-destruction

has been underlying in this literature. The second part proposes a definition of value co-

destruction, and gives some details about the co-destruction process. Lastly, we show that the co-

destruction process may result either from accidental or intentional actions from service systems.

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2. The absence of value co-destruction in S-D logic The marketing literature seems to have essentially focused on value creation so far, and it would

appear that it is even more the case in S-D logic. Yet, some authors have raised the issue of value

creation costs and devaluation, but have not explicitly dealt neither with value destruction, nor

value co-destruction.

2.1. An optimistic point of view about value

As we mentioned earlier, S-D logic has mainly underlined the possibilities of value co-creation

through interaction so far, back to Vargo and Lusch’s seminal paper (2004). It reflects what

seems to be a shared standpoint in the academic literature that deals both with value and

collaborative relations between a firm and its customers. Indeed, a research on the EBSCO

database with “value creation” in the field “Abstract or Author-supplied Abstract” delivers 805

results. About half of them relate to marketing. Another research with “creation of value” reveals

128 results, with once again a large part of them in marketing. And “co-creation” results in 72

references, all of which are related to marketing research. Moreover, in the index of The Service-

Dominant Logic of Marketing book (2006), the entry “value creation” (p. 448) shows that it is

studied in 17 chapters out of 32.

On the contrary, the same kind of research on EBSCO provides only a total of 25 results for

“value destruction” (17 results) and “destruction of value” (8 results). As for “co-destruction”,

there are only two results. None of these 27 entries concerns marketing. Finally, in the index of

the aforementioned 2006 book dedicated to S-D logic, the expression “value creation costs” is

only associated with one chapter. Anyhow, these are just the costs associated to the value creation

process, and they are different from value destruction. Besides, we haven’t noticed any other

entry that may be related to value destruction or co-destruction.

Explaining these differences goes far beyond our paper. As far as S-D logic itself is concerned,

we suggest that it could be the result of an optimistic standpoint adopted in the definitions of

some determining contributions. Thus, the foregoing definition of service (Vargo and Lusch,

2008a), considers that it is “at the benefit”, or “doing something beneficial” (our emphasis).

What’s more, S-D logic defines value as “an improvement in a system well-being”, and is

measured in terms of “a system’s adaptiveness or ability to fit in its environment” (Vargo et al.,

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2008, p. 149, our emphasis). Doing so, it adopts a very optimistic and favorable point of view on

value processes, which cannot but lead to value co-creation and implicitly exclude value co-

destruction.

2.2. The implicit risks of value co-destruction

Schematically, G-D logic has usually regarded value through the lens of a two-stage sequence

(Grönroos, 2006; Vargo and Lusch, 2008a). First, value is created by the firm during the

production process (hence the “added value” concept). It is subsequently destroyed by the

consumer at the moment of consumption. Accordingly, G-D logic posits that both value creation

and value destruction are separate and unilateral (i.e. they are not interactional).

As for S-D logic, to the best of our knowledge, value co-destruction has been rather implicit until

now. For instance, Jaworski and Kohli (2006) mention that under some conditions, the firm

should not engage in co-creation of value with the customer because it would most certainly be

suboptimal for both parties. However, they do not analyze the way value may be co-destroyed,

since they insist on factors and circumstances under which the two parties should not interact.

Furthermore, Woodruff and Flint (2006) also notice that devaluation processes may happen, i.e.

there is a diminution of the co-created value, but these authors do not actually mention any

potential co-destruction of value. Nor do they explain what dynamics lead to devaluation, while

underlining the need for further research on this topic.

Finally, Etgar (2006) studies the costs associated to co-production, hence to value co-creation. He

explains that the customer makes a trade-off between these costs and thus could engage in

activities that would “minimize the costs of performing value co-creation activities” (: 129).

Nevertheless, he remains silent about the content of the interaction between the firm and the

customer, as well as about the results for the firm in terms of value.

3. Co-destruction: an interactional process We begin this part with a definition of value co-destruction through the interactions of different

services systems. The second section focuses on the process of value co-destruction, and

introduces what we label “destruction-through-misuse”.

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3.1. Defining value co-destruction

As showed before, value co-destruction has remained allusively tackled, even though it is

underlying in some recent articles. As a consequence, the concept is blurred, and needs to be

defined. To that end, we propose to rely on the aforementioned definitions of value and service in

S-D logic. Thus we suggest that value co-destruction is an interactional process between

service systems (limited here to the firm and its customers) that results in a decline in at least

one of the systems’ well-being. During this process, systems interact either directly (person to

person) or indirectly (via appliances such as goods) through the integration and application of

resources. Eventually, the level of value co-destruction that results from this process may not be

the same for all the systems involved. There, we follow Woodruff and Flint (2006) who suggest

that the level of co-created value may be imbalanced between the firm and the customer – except

that we transpose this to value co-destruction. Given the manner S-D logic measures value, this

means that when two systems co-destroy value, their adaptiveness (or ability to fit in their

environment) may be impacted differently.

Nonetheless, this definition is only a first step, as it does not enlighten us on the co-destruction

process as such. In other words, it does not enable us to understand how value is co-destroyed

through the interactions between the firm and the customer. To overcome this limitation, we rely

anew on the manner value is co-created in S-D logic.

3.2. The co-destruction process

S-D logic focuses on value-in-use. This means that value is co-created through the interactions of

systems which integrate and apply both their own resources, and the ones of other systems

(Lusch and Vargo, 2006b; Lusch et al., 2007). Most of them are operant, i.e. resources that act on

other resources (typically, knowledge and skills), even though some operand resources may be

used as well (usually, tangible and inert resources that are acted upon). However, these resources

may be used in a detrimental manner for one of the service systems, or for all of them. For

instance, a customer who buys a car but does not maintain it destroys value for herself and the

firm that sold it: she will have problems with the car, and consider that the firm’s value

proposition is not good. So she will most certainly have a bad image of the firm and convey it,

destroying value for the firm due to her bad utilization of the car. At the same time, she destroys

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the value she gets from using the car. Hence, the customer has triggered a value co-destruction

process by misusing the firm’s value proposition.

There is misuse because she integrated and / or applied resources (the firm’s and her own) in a

“wrong” way. By “wrong”, we mean that she did not either integrate and / or apply these

resources as the firm expected her / him to: the customer misused these resources. Accordingly,

we contend that value co-destruction results from the misuse by a system of its own resources, or

the ones of the other system, or from the misuse of these resources by both systems. So doing, we

oppose destruction-through-misuse to value-in-use. By the way, it is important to note that,

albeit this example illustrates customer misuse, the firm may also misuse its own resources and /

or the ones of its customers. Drawing on what precedes, we deem that value co-destruction

through the interactions of a firm and its customers can be studied at two different levels: the

firm’s, and the customer’s one. Each of these service systems may misuse either its own

resources, either the resources of the other service system. In each case, this misuse results in

value co-destruction for at least one of the two service systems (see Figure 1).

~~~~~~ TAKE IN FIGURE 1 ~~~~~~

Finally, we now need to specify why we suppose that misuse is a use that was unexpected by the

other service system. In fact, when the firm and its customers interact (directly or indirectly), they

have expectations related to their own role, and to each other’s role (Bateson, 2002). According

to script theory, it is preferable that each system is able to foresee the actions and behaviors of the

other, in addition to knowing how to act and behave on its own (Solomon et al., 1985). This helps

to be successful or, expressed in S-D logic terms, to co-create value-in-use through a better

integration and application of resources. To put it another way, when two service systems have

congruent expectations of the way these resources should be used through their interactions, it

should result in value co-creation. However, discrepancies can occur between the systems’

expectations, resulting in a system’s behavior that would be regarded as inappropriate by the

other system (Hubbert et al., 1995). Under such circumstances, it is highly probable that the

interaction results in value co-destruction for at least one system. Consequently, we view misuse

as the integration and / or the application of resources by a service system, in a way that is not

expected by the other system with which it interacts.

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4. Accidental vs. intentional misuse of resources At first thought, value co-destruction evokes negative consequences of a process between two or

more service systems. With that in mind, it seems natural to think of misuse as purely accidental.

However, an analysis of extant academic contributions shows that it is not always the case

(Harris and Ogbonna, 2002, 2006). Indeed, some service systems intentionally misuse their own

resources or the ones of other systems.

4.1. Accidental misuse

When interacting, service systems most likely intend to co-create value rather than co-destroy it.

Since co-creation depends on congruent expectations of the manner they should integrate and

apply their resources through the interaction, it would seem logical that discrepancies are not

deliberately created by the systems. Yet, they may exist, causing co-destruction. We characterize

this situation as the result of accidental misuse of resources by at least one of the interacting

service systems. Thereafter, we provide two examples of accidental misuse and of some

circumstances under which it may occur.

The first one refers to co-innovation, i.e. implicating customers in the innovation process. It is

thought to be a very powerful means to innovate (Chesbrough, 2003). However, the results can

be disappointing in many situations. In fact, due to limited knowledge about new technologies or

new materials, customers cannot always forecast future usages of innovations, or the kind of

innovation that may be created (Ulwick, 2002). Accordingly, customers may be unable to use

their resources and the firm’s ones as the firm expected them to, because they are limited by their

frame of reference. There, customers accidentally misuse these resources: misuse is not the result

of a deliberate choice. In view of that, the advantages of this process may be minor, if the

outcome is nothing more than incremental innovation or “me-too products”. From the firm’s

perspective, such an outcome leaves the field open for competitors (Ulwick, 2002). In this case,

co-innovation becomes a co-destruction process that decreases the firm’s competitive well-being,

and limits its capacity to adapt to its competitive environment. Besides, this relative innovation

failure necessitated the customer to bring in resources she could have employed for other more

beneficial activities. This might provoke frustration and other psychological costs and eventually

negatively affect her well-being.

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Our second illustration is related to role conflict felt by service employees who are in direct

contact with customers. Role conflict results from competing expectations between the

organization and its customers (Eddleston et al., 2002; Wetzels et al., 1999). For instance, a

customer may ask an employee to take a lot of time to deal with her demand, whereas the firm’s

policy is to shorten the contact length. Therefore, from the firm’s viewpoint, the customer

misuses its resource (in this case, the employee), as she does not use it as the firm expected her

to. Misuse here is accidental because the customer usually is not aware of a firm’s policy about

contact length, and thus does not try to overcome it intentionally. From this on, there are two

possibilities.

On the one hand, the employee bends to the customer’s expectations. So doing, the customer gets

what she wants, and the interaction actually improves her well-being. Hence, misuse actually

generates value-in-use for the customer. However, this situation supposedly diminishes the firm’s

well-being, since it is less efficient (co-destruction). But contrary to this first possibility, the

employee can finally comply with organizational expectations. There, the customer does not get

what she wants: the interaction generates destruction-through-misuse, which reduces her well-

being. Yet, the firm is more efficient and supposedly increases its well-being. This time, misuse

generates value-in-use for the firm.

This second example shows how role conflict can be interpreted in light of value processes. In

particular, it shows how destruction-through-misuse may result from service systems’

interactions. More interestingly, it also hints that the interaction may not engender the same

value-related effects for service systems. Indeed, it would seem that a co-destruction process can

lead to clear differential results, since it may conduct to actual co-destruction for one system,

whereas it may even engender co-creation for another one.

4.2. Intentional misuse

Even though this may be counter-intuitive, service systems may sometimes have an interest in

misusing resources. Intentional misuse refers to a situation when a service system misuses its

own resources or the ones of another system on purpose. Doing so, this system plans to increase

its well-being and its capacity of adaptiveness to the detriment of another system’s well-being

and capacity of adaptiveness. This is totally different from accidental misuse, where major value

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imbalances are unplanned. So intentional misuse implies that value co-destruction should

normally concern one of the service systems, at the benefit of the other interacting system.

In our previous example about role conflict, we have addressed the firm’s viewpoint to illustrate

value co-destruction. However, we have deliberately specified that this situation “supposedly

diminishes the firm’s well-being”. Now, from the customer’s standpoint, it is the firm that

misuses its own resources (employee), since they are not used as the customer expected to. So

from the customer’s angle, this interaction results in value co-destruction, whereas it co-creates

value for the firm, since it enables it to be more productive and more efficient (Singh, 2000).

In our second example, employees are regarded as service systems, and not merely as firm’s

resources (Vargo et al., 2008). In this case, employees who are directly in touch with customers

interact with two other systems: the firm and the customers. Employees are in position to use

their own resources (e.g. skills and knowledge) as well as the firm’s and the customers’

resources. These employees may engage in “sabotage behaviors”, i.e. “behaviors that are

intentionally designed negatively to affect service” (Harris and Ogbonna, 2002, p. 166). This

means that they misuse some of the resources they have at their disposal (theirs or others’) to

improve their well-being, while decreasing the one of the other systems (Harris and Ogbonna,

2006). Indeed, service sabotage behaviors might increase the saboteurs’ self-esteem, perceived

status and job satisfaction, and lower their level of stress. At the same time, it has negative

impacts on the firm’s performance and on the quality of service delivered to customers (Harris

and Ogbonna, 2002).

Our third illustration focuses on distribution channels management. Firms may have interest (cost

economies, productivity improvement, etc.) in making their customers switch from traditional

human-based service encounters to self-service (Curran and Meuter, 2005). Yet, not all the

customers have the same preferences towards self-service. Some may be very prone to use this

technology, while others may be reluctant (Lee, 2002). Therefore, a firm which imposes on all its

customers the use of a self-service technology (that is, does not use its resources as its customers

expected it to) will most certainly have a negative effect on the well-being of a part of them.

Fourthly, customers too can intentionally misuse the firm’s and their own resources to get more

value, leading to co-destruction for the firm. Customers misuse a firm’s resources and their own

when they complain illegitimately (Reynolds and Harris, 2005). Furthermore, it has been

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empirically demonstrated that they can adopt opportunistic behaviors to take advantage of

interactions with service employees (Plé, 2006). For example, they can lie to a front-line

employee to benefit from a preferential treatment. In other words, they use their own resources

(e.g. intelligence and other skills) in a manner that was not expected by the firm to influence the

employee’s actions so that they can get more value.

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5. Contributions and implications

5.1. Theoretical contributions

Grounded in S-D logic, this conceptual article aims to show that interactions between service

systems (e.g. firms, customers, etc.) are likely to have detrimental consequences. In particular, we

concentrate on the way these interactions may support a value co-destruction process. Such a

process is triggered when at least one of the interacting service systems misuses its own resources

and / or the ones of another system. In this case, misuse happens when a service system does not

integrate and / or apply these resources in a way that is not expected by the other service system.

As far as we know, this is the first attempt to introduce, and thus to comprehend value co-

destruction in S-D logic (and one of the very few to study value destruction in the marketing

literature at large). So doing, we try and answer the call of Vargo and Lush (2008c) for

developing this new logic of marketing. Indeed, until now, S-D logic has largely highlighted the

possibilities of value co-creation through service systems’ interactions, leaving co-destruction

aside.

Related to its initial goal, this paper also hopes to contribute to the understanding of value-related

processes, about which marketing thought has remained relatively silent so far (Payne et al.,

2008; Vargo et al., 2008). To this extent, we have explained that these processes may result in

either accidental or intentional misuse of resources by service systems. In addition, we have

shown that they may engender imbalanced levels of value between different service systems.

What is even more interesting is how important the imbalance may be. In fact, co-destruction

processes between two systems may actually result in value co-destruction for one of the two

systems, whereas value is co-created for the other.

5.2. Directions for further research

This study does not pretend to be exhaustive in any way. Instead, it most certainly raises more

interrogations for further empirical and theoretical research than it answers questions. Four

directions are proposed below.

First of all, exploring the potential influence of service systems’ characteristics on the co-

destruction process may be of interest. For instance, some customers may have a greater

knowledge and understanding of a product and the way it can be used than others (Ulwick, 2002;

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Von Hippel, 1978). In other words, they have more resources than other customers. Their

interactional behavior with the firm might be different from the latter. Identically, not all the

customers are interested in having a relationship with a firm (Ward and Dagger, 2007), meaning

that not all of them are ready to bring the same quantity and quality of resources in this

interaction. Does this impact the intensity of value-related processes, by improving or

diminishing chances of co-destruction?

Some of our previous examples have also raised the issue of the dynamics of value-related

process. Consider the case of multichannel management. We have noticed that a firm that obliges

its customer to use self-service technology would co-create value for itself, while co-destroying

value for some of its customers. But this observation does not take time into account. On the

short-term, the firm may get value from this decision. Yet, it may result in long-term co-

destruction if too many customers are disappointed and eventually leave the firm. Hence,

longitudinal research on co-destruction and on value-related processes at large is needed

(Woodruff and Flint, 2006).

In the same vein, studying dynamics and antecedents of misuse is of primary importance, given

that it is at the origin of co-destruction. For instance, under which circumstances will a service

system misuse its own resources, or the ones of others? Is a service system more liable to misuse

its own resources, or others’ ones? Does accidental misuse formalize over time to become

intentional?

Lastly, dynamics between co-destruction and value-in-exchange (i.e. money one service system

gives to another to get its value proposition) should be examined. We showed that a co-

destruction process may have imbalanced consequences on service systems. Does this impact

value-in-exchange as well? If it does, to what extent?

5.3. Managerial implications

This paper also has some interesting managerial implications. In an era where a growing number

of firms rely (or at least claim to be relying) on co-production and co-creation, it is important to

bear in mind that such strategies do not come without risks. Beyond obvious financial costs, there

may be significant hidden costs, or side-effects, associated to transforming the customer into a

co-creator.

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These costs must also be determined over time: short-term value co-creation may eventually

become long-term value co-destruction, as we showed it. It does not seem to us that these kinds

of costs are usually taken into account. Yet, analyzing a value-related process from its initial

stages may enable to identify where and how co-destruction can occur. Accordingly, it might

reveal new ways to use resources, and untapped possibilities of value co-creation and competitive

advantage.

6. Conclusion The potential for co-creating value through interactions is huge. But so are the dangers and issues

that might come with them. Therefore, the risks of interactional value co-destruction should not

be overlooked. This is why we have strived to underscore throughout this paper that value co-

creation is not the only possible outcome of service systems’ interactions. Side effects and

negative externalities may happen for different reasons during the process. Hence, before

implementing a strategy based on S-D logic, it is primordial to consider where, how and to what

extent co-destruction may occur.

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Figure 1 : Sources of value co-destruction through the firm / customer interactions

May result in

Firm Customer Interaction

Due to either a Due to either a

May happen

Interactional value co-destruction

At the firm’s level At the customer’s level

Misuse of the firm’s own resources

Misuse of the customer’s resources

Misuse of the customer’s own

resources

Misuse of the firm’s resources

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