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Edited by Gary L. Lilien and Rajdeep Grewal
Chapter 7: Gaining Competitive Advantage with Service-Dominant Logic
Robert F. Lusch and Stephen L. Vargo Competitive advantage never comes easy. However, it is more difficult to achieve when operating with an outdated or inappropriate logic of the market and marketing. We argue that a goods-dominant (G-D) logic guided most of marketing and competitive practice during the past two centuries and largely continues today. Unfortunately, much of the educational foundations of current managers are also grounded in G-D logic. As we show later in the chapter, G-D logic is deeply entrenched in the division of labor and specialization in society. This logic of separation and division puts firms, their customers and suppliers, and other stakeholders at odds. Slowly replacing the G-D logic is the service-dominant (S-D) logic (Vargo and Lusch 2004, 2008). S-D logic is grounded in the service-providing nature of all economic actors who use their skills, capabilities and resources in general to provide benefits to other actors. S-D logic is grounded in togetherness, or the integration of resources, and focuses on how actors collaborate for the common purpose of value co-creation; in brief all B2B enterprises are co-creators of value. More and more enterprises are beginning to recognize that to compete effectively they must view themselves and the strategies they develop as centered not on goods but on service provision. Though not yet fully recognized, compelling evidence shows that competing through service is becoming the central competitive reality in highperformance organizations in every industry and in every country throughout the world. Importantly, when firms compete through service...
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