All services, all the time

Do you think you can manage to suspend disbelief for the next few minutes, to consider an idea that may seem ridiculous at first?  Can you at least momentarily entertain the notion that every business may usefully be seen as a service business, and even what we normally think of as products can be viewed according to the services they provide?  This is the essence of the “all-services, all-the-time” perspective.  This perspective stems directly from the observation that people, with their talent, knowledge, skills, and experience constitute the ultimate source of value. No matter what business you’re in, this perspective can serve you well.


A widely-accepted point of common knowledge says that there are three major divisions of employment – agriculture, manufacturing, and service.  In the Standard Industry Classification (SIC) codes “services” is cited as a classification as distinct from agriculture, mining, construction, manufacturing, transportation, communications, electric, wholesale trade, retail trade, finance, insurance, public administration and others.  For many purposes this sort of classification scheme makes a lot of sense.  However, from the point of view of what and how people actually accomplish work and create value, a hard and fast separation of “services” from other forms of production seems less helpful.

The all-services, all-the-time viewpoint is supported by the work of Frédéric Bastiat, a French statesman and economist of the 19th Century.   Bastiat was a tireless advocate for free trade, and he made a witty and entertaining case against the regressive effects of tariffs and other barriers to exchange.  In his work titled Harmonies of Political Economy, he explained the positive benefits that come from open exchange and commerce.

The most fundamental pattern within Bastiat’s political economy consists of 1) human desires and wants, 2) human efforts, and 3) the satisfaction of wants.  Wants inspire efforts to achieve satisfactions.  His list of human desires and wants includes (in general order of urgency): respiration, food, clothing, lodging, preservation or re-establishment of health, locomotion, security, instruction, diversion, and sense of the beautiful.  The efforts to address satisfaction of these desires, also called “labor”, may be physical, intellectual, or even moral.  From this we can see that Bastiat’s pattern of economic thinking is very wide-ranging and inclusive.

Bastiat talks about the “indefinite expansibility” of the desires and wants of people.  Not infinite, but indefinite, so that as certain wants are satisfied, others come into view.  It is interesting that he defines a want as a “painful desire”.  He separates the ideas of wealth and value, saying that effort of people on behalf of others must be recompensed, but wealth is to be found in utility, which is the combination of the gifts of nature and labor.  He gives examples of water, air, and energy to emphasize the point that when these are freely available to all, there is no basis for putting value on them, and therefore no basis for exchange. 

“If we all always had a spring right at our feet, evidently water would not have any value, since there would be no occasion to exchange it. But if it is half a mile away, we must go and get it; that is work, and there is the origin of its value. If it is a mile away, that is double work, and hence double value, although the utility remains the same. [If] I go and get [water] myself, I render myself a service by taking some pains.  If I entrust this task to another, I put him to some trouble and owe him a service. Thus, there are two pains, two services, to compare and discuss.  … Air is a gratuitous gift of Nature; it has no value. … But if you enter a diving bell and have a man send down air to you with a pump for two hours, he will be put to some trouble; he will render you a service; you will have to repay him. Will you pay for the air? No, for the labor.    Services are exchanged for services. … Do this for me, and I will do that for you. It is very trivial, very commonplace; it is, nonetheless, the beginning, the middle, and the end of economic science.”

I have assembled this set of snippets of quotation from Harmonies in order to focus on the pattern of want, effort, satisfaction at the very heart of economy, emphasizing the basis of economy as the exchange of services.  By the general law of service for service, the receivers of current services must recompense the efforts that have been made for them.  “But” I hear you say, “what about services that are simply paid for?”  And of course, the normal case is that services are simply paid for with money.  But hear Bastiat on that point.

“The primitive form of exchange is barter which has …  two wants as the motivating force, two efforts as the means, two satisfactions as the result.  … We can [also] conceive of roundabout barter, involving three contracting parties. Paul renders a service to Peter, who renders an equivalent service to James, who in turn renders an equivalent service to Paul, thereby completing the cycle. … It is easy to understand that roundabout barter in kind cannot be greatly expanded, and there is no need to dwell on the obstacles that prevent its further development. … Barter cannot go beyond a small circle of persons acquainted with one another. Humanity would soon have reached the limits of the division of labor, the limits of progress, if a means of facilitating exchange had not been found. … When this type of intermediate commodity is resorted to, two economic phenomena appear, which are called sale and purchase. …  Exchange is not complete until the [person] who has made an effort for another [person] receives in return an equivalent service, that is, a satisfaction.”   We thus sell services for an “intermediate commodity” (some form of money) and then eventually buy equivalent services. 

Some efforts are engaged with services currently being rendered, while others set people up in order to render those current services.  Bastiat gives us the example of the water carrier, who makes his own barrow and cask and then amortizes that effort across the many immediate services of providing water.  In agriculture he talks about plowing, sowing, harrowing, weeding, harvesting, on the one hand vs. clearing, enclosing, draining and improving the land, on the other.

Bastiat summarizes the cumulative effect of services compounded across a whole economy, resulting in a powerful concatenation of effort.  Remember, this is from a mid-19th Century point of view, but it’s easy to transfer this thinking to the 21st Century, where the networks and forces are vastly more powerful: As Bastiat reports, a common worker purchases a pair of cotton stockings for half day of wages.  This is nothing compared to the effort that it would take for him to perform every aspect of bringing those stockings into existence.  His small price (multiplied by all buyers of stockings and other cotton goods) provides recompense for the chain of labor, and the interest on capital that enlisted the “gratuitous” services of nature.  That is, “Capital does not consist of the vegetative force that has made cotton germinate and flower, but in the pains taken by the planter.”

More recently (much more recently!), two professors of marketing, Stephen Vargo and Robert Lusch make the case for service-dominance. They contrast this service-dominant logic with the prevailing view in the 20th Century:  “The old dominant logic: The purpose of economic activity is to make and distribute things that can be sold. To be sold, these things must be embedded with utility and value during the production and distribution processes and must offer to the consumer superior value in relation to competitors’ offerings.  The firm should set all decision variables at a level that enables it to maximize the profits from the sale of output. For both maximum production control and efficiency, the good should be standardized and produced away from the market.  The good can then be inventoried until demanded and then delivered to the consumer at a profit.” 

This seems to indicate that services-orientation is a matter of perspective, with the pendulum of perception recently swinging strongly back to Bastiats position that exchange of services, mediated by “intermediate commodity” (money of some kind).  That variable perspective creates the opportunity to bring the services aspect into the foreground.  For instance, the painter of a chassis in an automobile manufacturing plant can be classified as a service provider. That is true if the painters are subcontracting to the manufacturer, but how is it really different if they are employees performing the service of painting?  IBM Research can be seen as a service provider within IBM as a computer manufacturer and software vendor. Whole industries, such as the consumer electronics industry, have been broken down into multiple enterprises that provide specialized services to each other in complex supply networks.

From the “all-services, all-the-time” perspective, even those things we typically call “products” can be seen as services, as well.  A manufacturing plant creates products that are sent out to store shelves, commodity warehouses, or are accessible through mail-order catalogs or Internet retail are all intended to perform services for the buyer.  It’s just that in the “product” case, the service is released from constraints of time and distance.  The co-creation of value happens in stages: the manufacturing stage and the usage stage.  A car exists to provide a transportation service, but without any intervention of the original maker of the car.  A chair exists to provide the service of a place to sit.  A flashlight exists to provide the service of a portable light source.

An interesting exercise is to try to think of some product for which this relationship does not hold true.  This exercise is left to the imagination of the reader!

The all-services, all-the-time perspective makes it clear that no matter your business, you offer services, sometimes with immediate, sometimes with deferred time horizons.  Once you start to see all businesses as service businesses, all work as performing services of some kind, and all products existing to provide services at a distance in time and space, a kind of pattern language becomes useful. The kinds of questions that are prompted by taking an all-services perspective include:
  • What purpose is this interactive or deferred service intended to satisfy?
  • What desire, want, or need does it fulfill?
  • What value is being created?
  • Who receives the value that the service provides?
  • How effective is it?
  • Are we being rewarded based on effective performance? 
  • Who decides what level of value requires remuneration?
  • How else might the need be fulfilled?
  • What providers of alternate services might become competitors?
In other words, the services perspective is based on a recipient with reactions and judgments that you, the business leader, need to listen to.  In turn, careful listening opens up vistas of service enhancements and follow-on opportunities to establish on-going relationships.  

The early 21st Century provides a particularly appropriate opportunity to focus on services, just as the Internet of Things is starting to gain momentum, and new generations of people are coming of age who have never experienced the world without a powerful computer and communication device in their pockets.  It's easier now than ever before to see a web or graph of interconnected services.  Or, as we've heard: "Services are exchanged for services. …Do this for me, and I will do that for you. It is very trivial, very commonplace; it is, nonetheless, the beginning, the middle, and the end of economic science.”

To get back to the hub list of healthy business factors, click here.
To get back to the discussion of businesses as living systems, here.

References:
Claude Frédéric Bastiat, The Bastiat Collection, Auburn Alabama, Ludwig von Mises Institute, 2011

“Service-Dominant Logic: The New Frontier of Marketing -- Business Briefing for the Otago Forum on Service-Dominant Logic, November 25, 2005, Robert F. Lusch, University of Arizona, Stephen L. Vargo, University of Hawaii at Manoa

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