Capturing Value in the Service Economy

Abstract

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 and social capital including service climate as a framework for a typology of service assets. We identified 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.