Capturing value in the service economy

The benefits of specialization have been driving the rise of the service economy and pushing capability frontiers and economic growth. In service economies, almost any activity, asset, and skill can be bought on competitive markets, making it harder to build competitive advantage on those inputs. Therefore, firms have to carefully decide what to own in order to capture value, and they need to prioritize investments in those assets while outsourcing almost everything else. Service businesses capture value by connecting resource markets with service markets, and we identified three types of assets that allow a firm to connect markets and capture value in the process. They are: (1) resource-based assets shaping capabilities and capacities of services; (2) platform-based assets connecting resource owners with users,allowing to generate network effects, critical mass, volume and/or liquidity; and (3) market-based assets providing the interface for interaction with customers. We propose further three key dimensions that shape each service-asset type: Physical capital, intellectual capital and social capital including service climate as a framework for a typology of service assets. We identify further two domains of service management that allow firms to capture value: (1) business models for designing the architecture and "Gestalt" of value creation; and (2) the effective management of an integrated web of processes and activities. We discuss implications for management and further research

Asset-based strategies for capturing value in the service economy

In advanced service economies, almost any activity, skill, and asset can be bought on competitive markets, making it increasingly difficult to build competitive advantage on any of those inputs. Therefore, firms have to carefully decide what to own in order to capture value. That is, firms have to explore what types of assets can add value to their customers and at the same time are difficult or illegal to copy by competition. We examined this question and identified asset categories that potentially allow a firm to appropriate value. They are (1) resource-based assets (e.g., proprietary equipment and systems, manufacturing-related intellectual property (IP), and social capital with employees); (2) platform-based assets (e.g., physical and intellectual platform assets, and critical mass and volume-based advantages,); and (3) market-based assets (e.g., brands and related brand equity, physical and virtual points-of-sale, access to physical and virtual distribution networks, and customer information and loyalty programs). Furthermore, we propose that each of these three asset categories can take the form of three types of capital. They are (1) tangible capital (i.e., it has a physical manifestation such as equipment and physical points-of-sale); (2) intangible capital (i.e., it can be codified and legally protected such as patents and brands); and (3) social capital (i.e., it is embedded in people’s minds and cannot be legally protected such as trust, goodwill and engagement of employees, partners and customers). The three asset types and their three manifestations are integrated into a framework for an asset typology. For example, market-based assets can come in all three forms, that is in tangible (e.g., point-of-sale networks), intangible (e.g., brands), and social (e.g., customer equity) form. Finally, we identified four important organizational capabilities of asset integration that are independent of asset ownership but effectively link owned and outsources assets, capabilities, and processes to value creation and can also allow a firm to capture value. They are (1) business models for designing the architecture and “Gestalt” of value creation; (2) a customer-centric culture and a climate for service; (3) innovation capabilities, and (4) the effective management of an integrated web of processes and activities. We discuss the why and how of this asset typology and its implications for management, strategy, and research