Editor's Note: Take a look at our featured best practice, Service 4.0 Transformation (52-slide PowerPoint presentation). Services companies are changing the way they offer and deliver services, driven by customer demands for a more customized, proactive, omnichannel, integrated, and data-driven service and enabled by emerging Digital Technologies. This is known as Service 4.0 Transformation.
By undergoing Service [read more]
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Organizations still anchored in goods-centric thinking are missing the plot. The old playbook—build it, ship it, bill it—is barely holding up in a service-led economy where value is fluid, dynamic, and negotiated through use. Enter the Service-Dominant Logic (SDL) Framework.
At its core, SDL flips the conventional logic of Value Creation. It’s not about delivering stuff. It’s about enabling outcomes. Originating from the work of Stephen Vargo and Robert Lusch in 2004, SDL redefines service as the application of competencies for the benefit of others. All exchange—whether you are selling SaaS or sneakers—is service exchange.
Goods-Dominant Logic (GDL) made sense in the industrial age. You built a product, embedded value in it, handed it to the customer, and moved on. SDL calls that fiction. The customer doesn’t care about your product. They care about what it lets them do now, and over time. Value is not delivered. It is co-created.
SDL introduces this worldview as a strategic lens—one that interprets the modern economy through service, relationships, and resource integration. It’s less about transactions and more about touchpoints. Less product, more participation. Less control, more collaboration.
This framework hits home today, in a world of platforms, subscriptions, ecosystems, and experience-driven organizations. Think Salesforce, Spotify, John Deere, Airbnb. These are not product companies. They are value orchestrators embedded in evolving networks. SDL helps decode how they work and how others can follow.
(Axiom 1) Service is the fundamental basis of exchange
Indirect exchange masks the fundamental basis of exchange
Goods are distribution mechanisms for service provision
Operant resources are the fundamental source of strategic benefit
All economies are service economies
(Axiom 2) Value is co-created by multiple actors, always including the beneficiary
Actors cannot deliver value but can offer value propositions
The service-centered view is inherently beneficiary oriented and relational
(Axiom 3) All social and economic actors are resource integrators
(Axiom 4) Value is always uniquely and phenomenologically determined by the beneficiary
(Axiom 5) Value co-creation is coordinated through actor-generated institutions and institutional arrangements
Why This Framework Actually Works
Most frameworks tell you what you already know, dressed up in four-box models. SDL reframes everything from the ground up. It is not about tweaking the funnel or adding touchpoints. It’s a wholesale reorientation of how value happens.
For organizations trying to build stickier relationships, SDL makes you rethink your role. You are not a value generator. You are a value enabler. That subtle distinction forces a different kind of organizational design—more agile, more porous, more aligned with customer contexts.
For platform players, SDL is rocket fuel. It formalizes the logic of ecosystems—how Airbnb hosts, guests, app features, and review systems all co-create experiences. For manufacturers? It’s the blueprint for Servitization—moving from selling boxes to selling outcomes. The frameworks and templates born out of SDL thinking lead to recurring revenue, deeper engagement, and future-proof Business Models.
Let’s cut into the first two premises that set the tone of the SDL model.
FP1: Service is the Fundamental Basis of Exchange
This is the mother premise. Products are just vessels for delivering service. Spotify does not sell music—it delivers on-demand emotional regulation through personalized playlists. A drill is not a product—it is a means of creating holes. All economic exchange boils down to this: you apply your skills to help someone else. Whether you use your hands, your code, or your data, it is service.
FP2: Indirect Exchange Masks the Fundamental Basis of Exchange
Most exchanges are not face-to-face anymore. We pay with credit cards, get things delivered through logistics networks, and interact through platforms. All of that distance creates the illusion that we are buying things. We are not. We are participating in extended, layered service exchanges that just happen to be mediated by goods or money. Your Amazon Prime membership? That’s 12 layers of service abstraction in one click.
Case Study
Spotify streaming as a service platform, not a product provider. Spotify exemplifies Service-Dominant Logic by transforming music consumption into an ongoing, personalized service experience. It does not sell tracks—it curates moods, moments, and discovery through AI-driven playlists, social sharing, and cross-device continuity. The service evolves with each user’s behavior, making the listener a co-creator of their own musical journey.
The real value is co-produced in context—during a workout, commute, or study session—where the platform adapts in real time. Algorithms, user inputs, artist content, and interface design all integrate to deliver a unique value-in-use for every subscriber. The app is not the value—it’s the enabler.
FAQs
Is SDL just for services organizations?
Absolutely not. SDL reframes all organizations as service providers—goods are merely service delivery tools.
How do we shift toward SDL without blowing up our organizational structure?
Start by changing how you frame offerings. Stop thinking in terms of products. Recast them as value propositions. Then build feedback mechanisms to learn how customers actually use them.
Is this compatible with Digital Transformation?
It’s the fuel for it. Platforms, ecosystems, data networks—all fit like a glove under SDL.
What metrics make sense under SDL?
Look beyond output Key Performance Indicators (KPIs). Focus on usage, engagement, retention, time-to-value, and NPS. The game is not what is delivered—it is what is experienced.
What about sectors like mining or manufacturing?
Even there, SDL applies. Safety, uptime, environmental compliance, efficiency—those are services enabled through goods. SDL does not eliminate the product. It elevates its purpose.
Concluding Thoughts
If your organization still believes customers buy things instead of outcomes, you are mistaken.
Service-Dominant Logic does not just offer a sharper lens, it gives you the tools to rewrite how Strategy, Marketing, operations, and product all work together.
You do not need to overhaul everything at once. Start with your value propositions. Are they static deliverables or dynamic enablers? Then look at your customer interactions. Are they episodic or evolving? Finally, audit your organization’s view of customers. Are they targets, or partners? If they are not helping shape what you build next, you are doing it wrong.
If you are interested in learning more about the details of the core premises and axioms of the SDL Model? You can download 2 presentations on Service-Dominant Logic on the Flevy documents marketplace:
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