Supported by:
The 13th INTERNATIONAL RESEARCH CONFERENCE IN SERVICE MANAGEMENT
La Londe les Maures, France May 27, 28, 29 & 30 2014
SERVICE ECOSYSTEM PERSPECTIVE AT THE BASE OF THE PYRAMID: IMPLICATIONS FOR RESEARCH AND PRACTICE
Soumaya BEN LETAIFA Javier REYNOSO
SERVICE ECOSYSTEM PERSPECTIVE AT THE BASE OF THE PYRAMID:
IMPLICATIONS FOR RESEARCH AND PRACTICE
Soumaya BEN LETAIFA Javier REYNOSO
ABSTRACT
Purpose - This paper aims at developing an ecosystem framework for implementing
sustainable services for the BoP market. Design/methodology/approach – A conceptual paper that integrates service and
ecosystems research to build successful service ecosystems for the BoP. Findings - Four fundamental premises for implementing sustainable service
dominant-logic ecosystems are suggested (multi-actors approach to services, social embeddedness, multifaceted roles of actors, and ecosystemic value creation).
Practical implications (if applicable) - The study provides a meaningful framework for BoP service innovation and management.
Social implications (if applicable) - Successful BoP approaches generate economic and social impacts.
Originality/value - Builds on current marketing and management frameworks to propose a service ecosystem perspective for the BoP research and management.
Key words - service logic, service-dominant logic, base of the pyramid, ecosystem, value co-creation, value-in-use.
Soumaya BEN LETAIFA Professor Département de stratégie, responsabilité sociale et environnementale, École des Sciences de la Gestion Université du Québec À Montréal Case postale 8888, succursale centre-ville Montréal Québec,H3C3P8, Canada Phone: +1-514-746-1420 Email: [email protected]
Javier REYNOSO Professor and Chair, Service Management Research EGADE Business School – Monterrey Institute of Technology (ITESM) Av. Eugenio Garza Lagüera y Rufino Tamayo S/N, Col. Valle Oriente, San Pedro Garza García, C.P. 66269, Nuevo Leon, Mexico Phone: +52 (81) 8625 6179 Email: [email protected]
SERVICE ECOSYSTEM PERSPECTIVE AT THE BASE OF THE PYRAMID: IMPLICATIONS FOR RESEARCH AND PRACTICE
INTRODUCTION Eighty percent of the people in the world are ignored not only as a market but also as active resources (Prahalad, 2013). This huge low-income segment of 5 billion people, often called “the base of the pyramid” (BoP), are usually seen as passive consumers who receive services. This perspective is rooted in a conventional goods-dominant logic that is increasingly being challenged (Vargo and Lusch, 2004). Hence, marketing and management practice and literature acknowledge a growing dominant logic of co-creative users or consumers, seen as “competent customers” (Prahalad and Ramaswamy, 2000), “co-creative customers” (Vargo and Lusch, 2008) or “working consumers” (Cova and Dalli, 2009). Some scholars propose a new service-dominant logic (SDL) for business (Vargo and Lusch, 2004) or a service logic for marketing (Grönroos, 2011) in a dynamic ecosystem of interactions and relationships (Moore, 2006). Whereas service-dominant logic recognizes the co-creation role of the customer, service logic admits that interactions between firms and customers enable firms to better know their customers and to become co-creators of value with them (Grönroos, 2011). In both perspectives, value-creation processes occur in a context of ecosystems in which multiple business and non-business relationships influence service production or innovation. Thus, BoP research and management should catch up with current inclusive approaches to service innovation and transformation. As most BoP activities involve services (Gebauer and Reynoso, 2013), there is a need to utilize service research to better understand the BoP market (Bitner and Brown, 2008). A service ecosystems approach provides an original articulation between service research and communities’ contexts (Akaka, Vargo, and Lusch, 2013). A service ecosystem approach is rooted in service research and aims at better tackling the complexity of BoP markets and contexts. It builds on the “service imperative” – a concept coined by Bitner and Brown (2008) to address BoP service ecosystems.
BoP research and management need new insights. We believe that adopting an ecosystem framework with a focus on the latest service logic would enable more sustainable management of BoP services. Many top-down BoP initiatives failed to solve the social problems they wanted to address (Hammond, 2013). Indeed, purely top-down venture creation is often disconnected from local contexts and does not involve the true beneficiaries. Even if top-down BoP initiatives are motivated by good will, the value-creation process may be disconnected from local users’ expectations and the institutional context (local culture, norms, and practice). This institutional distance impedes the generation of substantial value, defined as value-in-use (Korkman, 2006). An asymmetric value-creation process does not lead to true value capture by the intended users.
New business models should provide a more inclusive and comprehensive framework within which services are socially co-created in and for specific users and contexts (Gummerus et al., 2013). Thus, a new ecosystem-dominant logic (EDL) approach is required to build sustainable service innovations. The EDL would be rooted in service logic (Grönroos, 2011) and service-dominant logic (Vargo and Lusch, 2004) and would refer to a new BoP mindset in which local and global resources and actors are involved in the innovation process. The network context to which EDL refers is neither bottom-up nor top-down. It is a balanced collaborative ecosystem driven by different socioeconomic actors that build on their complementary competencies to create ecosystemic value, which is defined as
multidimensional (social, economic, ecological, and cultural) and multi-actor, instead of venture- or user-centric (Ben Letaifa, Gratacap, and Isckia, 2013). The co-creation process will allow different contributors to take on different social roles. Firms and institutions at the local and global levels would be the enablers of value creation by providing funding, information, and all types of resources required, whereas the customers or users would be the true value creators (Grönroos, 2011).
Therefore, the purpose of this presentation and paper is twofold. First, we draw on current service and service-dominant logic literature to propose a new service logic for the BoP. Second, we build on service ecosystems research and cases to identify the fundamental premises for implementing sustainable service ecosystems. Then, in the discussion and conclusion we examine implications and new avenues of research for BoP services. VALUE CO-CREATION IN BOP CONTEXTS Value is context embedded (Chandler and Vargo, 2011). The role of resources is becoming more and more important in the value-creation process. Value co-creation is no longer restricted to a dyad, as it involves interaction between at least two socioeconomic networks to which the supplier and the customer belong (Cova and Salle, 2008; Mele and Polese, 2011). This evolution shifts value creation in BoP services from a top-down approach to a more networked, open, and emergent process involving multiple actors, including individuals and public and private members at the local and global levels. The SDL ecosystem challenges the underlying assumptions of venture creation by firms, MNEs, and social entrepreneurs. In this goods-dominant perspective (Vargo and Lusch, 2008), value, value creation, and value capture are asymmetrically defined by one actor for the benefit of consumers.
A new BoP perspective rooted in SDL (table 1) suggests that value creation needs the involvement of local communities, actors, and users, as they would enhance the service co-creation process. Indeed, social embeddedness of resources and actors are means for grasping local concerns, perceptions, needs, and expectations. Connectedness with specific cultures, traditions, and institutional logics would make for more efficient co-design and more accurate social innovations that would be then welcomed and successfully implemented by users. This would increase the viability and sustainability of the service ecosystem created. Indeed, contexts are heterogeneous, and value needs to be defined in context (Chandler and Vargo, 2011). On the one hand, contexts will provide deep insights on social rules and social roles to be followed to fulfil local cognitive and sociocultural frameworks. On the other hand, the adoption of certain social roles, such as promoter, facilitator, and co-creator, by the beneficiaries would positively affect the service co-creation process (Akaka and Chandler, 2011).
In the consumer research literature, the evolving role of “working consumers” (Cova and Dalli, 2009) refers to end users’ intrinsic motivation to be part of the solution. This trend should also be emphasized in the social entrepreneurship and BoP literature. Indeed, local entrepreneurs need to be active contributors in their communities. Engaging local operant resources in the service-innovation process would enhance those resources’ social role and group membership (Akaka and Chandler, 2011). From a BoP perspective, the focus should not be on a single actor (local or global; supplier or customer; firm or individual). The shift to a more co-creative framework is an evolution to an inclusive ecosystem where all the socio-
economic actors can draw on their social roles to build sustainable service innovations.
Some scholars would even suggest that firms and institutions should have smaller roles than customers and users in the co-creation process (Grönroos, 2011). Because the value created is captured by users, they are indeed co-creators, and they give sense to the value-creation process. If the customers do not appreciate or cannot afford the services rendered, the value creation is worthless. Thus, the suppliers of service activities should adopt a “value facilitator” role in the co-creation process (Grönroos, 2008: 308). Table 1: The axioms of service-dominant logic
FP1 Service is the fundamental basis of exchange.
FP6 The customer is always a co-creator of value.
FP9 All social and economic actors are resource integrators.
FP10 Value is always uniquely and phenomenologically determined by the beneficiary.
Source: Vargo and Lusch (2013), Highlights in Service Research, VTT Research Highlights, 6, VTT Technical Research Centre of Finland.
TOWARD A SERVICE ECOSYSTEM PERSPECTIVE FOR BoP RESEARCH Many marketing and management scholars have discussed the limitations of unbalanced perspectives (customer- or user-centric) in building a comprehensive view of how value is created and shared (Gummesson, 2008). As the concepts of “value” and “resources” are increasingly evoked in ecosystems, an exploration of how these can provide a sustainable perspective for value creation at the BoP is required. Business and non-business actors´ interactions at the local and the global levels can co-create better services for the BoP. Several authors have recommended the multi-actor and multidimensional approach to ecosystems (Prahalad, 2009; Moore, 2006; Hammond, 2013; Ben Letaifa, Gratacap, and Isckia, 2013). The ecosystem perspective proposes to connect the micro level (local service provided) to the mezzo level (local network involved, families, friends, etc.) and the macro level (global network and local public and private socioeconomic actors indirectly influencing the ecosystem). The integration of micro, mezzo, and macro levels of analysis is quite innovative and responds to the new BoP research agenda (Gebauer and Reynoso, 2013).
The ecosystem framework is a dynamic and inclusive network in which all resources, actors, and institutions are mapped and interconnected. Every context can be illustrated according to its three distinct levels, allowing for socio-cultural dimensions to be highlighted and understood. This exhaustive network grasps complexity and temporality. Indeed, the mapping of all actors and resources aims at developing a roadmap for long-term service innovation, followed by the process of service design.
Figure 1: the BoP ecosystem: Linking the local and the global (adapted from Moore, 1996)
In today’s interconnected ecosystems (Iyer and Davenport, 2008), dynamic
interactions among the micro, mezzo, and macro levels (see figure 1) allows BoP organizations to be more effective in designing services. The ecosystem framework overturns the conventional innovation pipeline by transforming top-down BoP venture creation into an open and emergent process. The ecosystem perspective leverages a participatory and democratized approach to services. There is a need for more collaboration and co-creation with different socioeconomic actors and a new “BoP 2.0 mindset” (BoP Summit, 2013), which can be fully addressed by an ecosystemic perspective.
This leads to the following questions: how can we move to a new SDL ecosystem for the BoP? And what would be the main FPs? COMBINING SDL AND ECOSYSTEMS TO INFORM BoP RESEARCH
Many promising empirical fields, such as food, mobile, financial, health, and social services, can be used to illustrate how the wellbeing of low-income consumers can be enhanced (Anderson et al., 2012). Many case studies that are highly socially embedded (see, for example, the cases of energy, mobile telephony, food, and water in London and Hart, 2013) advance our knowledge in service research because they provide granularity and concreteness. “Despite significant regional and country differences, emerging economies have enough common underlying logic to justify developing an alternative business model based on price/value trade-offs different from those in developed economies” (Wright, Filatotchev, Hoskisson, and Peng, 2005).
Many studies analyzing BoP initiatives have pointed to the same issues: either services provide address critical needs but are unprofitable or they are accessible but
are not beneficial (Karnani, 2007). An extensive survey of 250 Indian BoP initiatives highlights that only a few well-known social initiatives, such as Grameen Bank and Aravind Eye Care, were able to scale to become sustainable ecosystems and fulfil the promise of delivering critical services for BoP segments (Monitor Group, 2009). Moreover, many of the services that greatly transform the lives of low-income consumers are driven by non-profit organizations. It is thus important to understand these initiatives’ business model in order to replicate them in private or multinational-driven BoP projects.
According to London and Hant (2013), non-profit organizations focus on critical services, adopt a multi-actor perspective, and are inclusive and socially embedded. These practices fit perfectly within the service ecosystems framework. Indeed, service ecosystems literature is about tackling value in context (Vargo, Maglio, and Akaka, 2008), co-creating value-in-use at the micro, mezzo, and macro levels (Akaka, Vargo and Lusch, 2013), and leveraging different capabilities to expand the scope of the ecosystem (London and Hart, 2013). Ecosystems are, by definition, dynamic and evolving communities of actors who share the same vision, are interdependent and heterogeneous, and seek to develop ecosystemic value for users (Moore, 2006; Ben Letaifa, Gratacap, and Isckia, 2013). Thus, the ecosystem is a network and community perspective that allows the service dominant logic to take place for the BoP.
From a managerial point of view, planners of BoP projects should first craft a common ecosystemic vision of what the BoP market needs as service, be socially embedded, and engage ecosystem members who would take on different roles; finally, value should be created and experienced by users. These dimensions can be illustrated through the example of a Tunisian eco-neighbourhood ecosystem that successfully attracted local and global resources and actors to enhance the quality of life in many Tunisian suburbs thanks to adoption of the service ecosystemic perspective. HOW TO SCALE SERVICE BoP ECOSYSTEMS The eco-neighbourhood example is used here to illustrate the service ecosystem perspective – specifically, how resources are leveraged to successfully bring together local and global socioeconomic actors and how value is co-created and captured. Before illustrating how the initiative scaled, the social context needs to be explained. The eco-neighbourhood initiative formed right after the 2011 Jasmine Revolution, during which some public services had been occasionally interrupted leading to a fluctuating and incongruent public service experience. Different neighbourhoods and cities were seeing accumulation of garbage and sanitary and health issues (including the emergence of malaria). The implications of the decline of public services spurred some citizens to take on social entrepreneur roles and to co-create new services with other citizens.
The critical problem (cleanliness of the neighbourhood) was first identified in a specific place (Tunisian suburb) by a citizen who mobilized his neighbours, and a national eco-neighbourhood system was then created and grew quickly. First, multiple actors (public and private, local and global) shared an ecosystemic vision to make the initiative grow and scale. Second, the ecosystem created was locally embedded, emergent, and followed an incremental life cycle that cast relevant local and global contributors at different stages. Finally, value was experienced and captured by the intended users: the citizens who played different roles in the value co-creation process. These four dimensions are developed below.
Multiple actors should share a common vision of their ecosystem The ecosystem is based on the diversity of its members (Iansiti and Levien, 2004). Indeed, a healthy ecosystem should respect the biodiversity dimension be able to nurture different capabilities (Moore, 1996). From the first phase of its life cycle, the ecosystem’s members must engage different resources to meet different social or economic issues. Once the members agree on the service proposition, they have to identify which public and private resources should be integrated. For example, different public decision makers were mobilized in the above example (health, environment, and tourism ministries; different committees; municipalities; associations). The private sector was also involved (mainly social entrepreneurs convinced of the urgency of solving the national social problem). Finally, international partners (experts, embassies, NGOs) joined the ecosystem and provided either technology (high-tech recycling containers) or competencies (know-how). This local initiative was able to move from an issue of suburban cleanliness to a national federation that is now trying to institute and develop best eco-neighbourhood practices to be replicated elsewhere. So the ecosystem follows a life cycle of pioneering, expansion, authority, and rebirth (Moore, 1996). For BoP initiatives, pioneering is about proposing a service that would address critical needs. Expansion allows the service to be enhanced and different inputs, from mainly local actors, to be integrated. Authority is the capacity to standardize the service and have it thrive in different regional and global contexts. Finally, rebirth is about the ability to maintain the effectiveness and relevance of the service provided. Local embeddedness of the ecosystem Social and local embeddedness of ecosystems is required to address all of the context specificities and identify the key resources, issues, and actors in the service proposition. Local embeddedness makes it possible to pay attention to socio-cultural and institutional logics. On the one hand, the outputs of the service innovation for the BoP have to have a traditional flavour and identity (local lifestyle, cultural habits, and so on). On the other hand, institutional proximity helps to create efficient communication and knowledge sharing and to build sustainable relationships and congruent visions (Boschma, 2005). Indeed, sociocultural embeddness is required to better serve BoP customers (Viswanathan, 2013).
Value co-creators take on different social roles in their interactions Actors should take on a variety of roles in ecosystems (Iansiti and Levien, 2004). The heterogeneity of resources and actors leads to productivity and innovation. Each actor can play different roles depending on the activity that he or she is involved in. Some social roles allow value co-creation to be more effective (Akaka and Chandler, 2011). Each context favours different positions and roles. Social embeddedness enlightens the choice of social roles required for each situation and context. Indeed, in the above case, the first actor who wanted to remedy the social problem of dirtiness of the neighbourhood took on multiple roles and drew on different social roles as the initiative evolved. He launched the cleanliness campaign as a citizen who wanted to contribute to the quality of his neighbourhood. He contacted his local network of neighbours to define the scope and implications of a conjoint social initiative. Then, he took on the social role of urban planner to provide expertise and
mobilize his network of competent resources in order to define the value chain that had to be involved for a sustainable service innovation. Finally, he mobilized his international network as a consultant in state-of-the-art bio-architecture to raise funding and draw the participation of international contributors.
This individual had different social positions (citizen, consultant, urban planner, architect) and chose to play a variety of social roles when interacting with different groups of actors. His multifaceted social roles (neighbour, citizen, social entrepreneur, facilitator) helped him to convince different local and global actors. Taking different social roles at various stages legitimizes actors’ intentions and actions and provides congruent results. Value is created by the users and also experienced by the users This dimension is the fundamental premise of both ecosystems and SDL (Vargo and Lusch, 2004). The ecosystem is able to thrive thanks to the intrinsic motivation of multiple local actors who become active in leveraging their resources, networks, and competencies. The sense of ownership increases the service-creation commitment and service adoption (Simanis, 2013). The voices of BoP consumers allow for an emic understanding of local issues and effective service co-creation (Simanis, 2013). Finally, when the value creators are also the value capturers, the process of value creation is efficient and the outputs are well defined. DISCUSSION A service ecosystem perspective allows us to highlight theoretical and managerial implications for BoP research. At first glance, some examples might seem exceptional and highly socially embedded, and thus not easily “generalizable”. However, many studies well documented in London and Hart (2013) and Gebauer and Reynoso (2013) concur on the theoretical implications.
From a theoretical point of view, a new SDL ecosystem is suggested to bolster a virtuous circle of value co-creation (table 2). Value co-creation is the goal of the BoP ecosystem, and it occurs through interactions and relationships and measured by value in use or the value captured by the different actors. Value co-created should be an ecosystemic value (multidimensional and multi-actor) to ensure that the value-creation process fulfils the ecosystem members’ expectations and specificities.
In the context of the BoP environment, having an ecosystem framework, in which all the actors collaborate to co-create value, is relevant in several ways. For organizations that seek to enter these markets, an ecosystem view will allow them to compensate for the lack of local knowledge and connections (Hammond, 2013: 10) and leverage the strengths of the existing environment (London and Hart, 2004). For local ventures, this view provides enough knowledge to face the local circumstances to reach their goals and the scale that will enable them to survive.
To provide a meaningful framework for both scholars and managers, four foundational premises inspired by the ecosystem perspective are suggested (table 2). In this vein, FP1 is about shifting from a top-down to a multi-actor BoP approach to include local operant resources. FP1 enables multidimensional co-creation by suggesting that a new ecosystemic approach, rather than a stand-alone venture, is required to build on complementary competencies. Value co-creation is the integration of multiple resources (Akaka and Chandler, 2011). Indeed, SDL ecosystems rely on the building of local and global connections. FP2 argues that social embeddedness is required to perform BoP initiatives. Micro-level challenges can be met only when the local context is understood. Institutional and social
knowledge would enhance the service innovation design and facilitate its social adoption and success. FP3 builds on SDL co-creation and states that services are co-created for and with local communities and that actors have multiple social roles. This premise draws on the importance of associating multifaceted social roles to local actors (co-creator/co-producer and user/consumer). In the ecosystem perspective, resources and actors are not trapped in linear and unique roles but nurture multiple interactions and relationships. FP3 thus affirms the dynamic and evolutionary nature of resources and actors. Finally, FP4 measures the output of service innovation or co-creation by suggesting a multidimensional and multi-actor ecosystemic value. Whereas FP1 offers an open network approach to SDL ecosystems, FP2 highlights the sociocultural and local focus required. FP3 pinpoints the multifaceted social roles of actors, including beneficiaries, and FP4 describes the output (the multidimensional value co-created). These premises are not directly derived from the four SDL premises (table 1). However, they are inspired by them, specifically FP6 (the customer as a co-creator), FP9 (actors are resource integrators), and FP10 (value is determined by the beneficiary) (see table 1). The propositions were tailored based on critical analyses of SDL literature (see Grönroos, 2011). They were designed to fit BoP ecosystems and to fully address the multi-actor perspective.
Table 2: Goods-dominant logic versus service dominant- logic ecosystems
Goods-dominant logic ecosystem
Service-dominant logic ecosytem
FP1 Top-down approach to BoP enterprises in which individuals are passive consumers
A multi-actor approach to the social problem in which individuals are active operant resources
FP2 Venture creation follows a macro perspective
Social embeddedness is required to design relevant services (local focus)
FP3 Each actor has a specific social role: The beneficiaries receive services.
Actors play different social roles as services are co-created with and for local communities
FP4
The value is determined for one actor and is one-dimensional (social or economic)
The value is determined as multilevel and multidimensional: the ecosystemic value (for all beneficiaries; social, economic, ecological, and cultural)
In the conventional BoP perspective, stand-alone ventures, social
entrepreneurs, or multinationals are responsible for creating value for consumers. Even if some users are invited to participate in some service-production activities, value created can never equal the potential ecosystemic value.
The fundamental role of local people, local associations, and local institutions in facilitating the value co-creation is often underestimated. From a business and marketing practice point of view, building open interaction platforms is fundamental to the value-creation process. Indeed, interactions are one merged process in which flows of communication, knowledge exchange, and collaboration are simultaneous and multilateral among involved parties (Grönroos, 2011). When used frequently and in a timely fashion, interactions help to enhance customer and user knowledge, and create social and emotional proximities. A healthy ecosystem is one that nurtures
interactions and relationships and creates a collective vision of what service should be created and how it should be co-created. CONCLUSION Some scholars are urging creation of a new roadmap that would help to move research forward (for example, London and Hart, 2013). A number of research opportunities have been highlighted. Gebauer and Reynoso (2013), for instance, have identified six relevant research issues: the need to broaden technology and innovation focus far beyond use of information and communications technologies and product development; more inclusiveness in research studies with a greater SDL focus; more interaction among service innovation, CSR, and innovation in specific institutional contexts; more complex-systems research to understand BoP services and the inefficiency issues of commodity services for BoP segments; more focus on value creation and resource integration; and more insights from entrepreneurship and service innovation studies. These recommendations call for inclusive, sustainable, and disruptive business models. This might seem impossible to achieve through a single framework. Yet, the power and intelligence of the ecosystemic perspective resides in its completeness and comprehensiveness. We believe that the SDL ecosystem perspective fills the current gap in the above-mentioned BoP research quite well. The fragmented streams could be leveraged and interconnected within this systemic and multilevel perspective.
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