From public service-dominant logic to public service logic: are public service organizations capable of co-production and value co-creation?

As has been argued elsewhere, the model of public service management (the New Public Management, or NPM) that dominated public service reform since the late 1970s to the recent past both has been a flawed model and has failed in practice. Its pre-occupation with linear and Fordist models of public service delivery, culled from the manufacturing and production literature, has lacked congruence with the reality of public service management in an increasingly complex, fragmented and interdependent world (Osborne, Radnor, and Nasi 2013).

This failure was un-necessary and avoidable. Again, as has been argued elsewhere, an alternative body of public management research and theory is available that addresses directly the nature of ‘service’ and ‘service management’ and which leads to very different approaches to public service management. This approach has become known as public service-dominant logic (PSDL) and the SERVICE framework (Osborne et al. 2015). The intention here is to argue both for a revised conceptualization of this approach and for a shift of emphasis within this emergent paradigm – both between co-production and value (co-)creation and between the respective roles of public service organizations (PSOs),¹ citizens and service users in these processes. Consequently, this brief essay therefore avers that ‘PSDL’ is no longer either a necessary or a sufficient term for this body of public management theory. To acknowledge its growth into a distinctive body of theoretical body, this paper therefore argues for the replacement of ‘PSDL’ by the crisper term, ‘public service logic’ (PSL). This term maintains the link to service, rather than product-based, theory but distances it from being simply an offshoot of SDL.² To make this point, this paper advances the need to consider co-production and value co-creation in a distinctive way that adds to public management theory.

Whilst the concept of co-creation has been considered in public management theory in recent years, the discourse has suffered from conceptual limitations. In some circumstances it has been offered as inter-changeable with co-production (Gebauer, Johnson, and Enquist 2010), whilst in others it has been limited solely to ‘the involvement of citizens in the initiation [or] design of public services’ (Voorberg et al. 2017, 366, my emphasis). However, this is not the case. Co-production assumes a process where the PSO is dominant and where the logic is linear and based upon product-dominant conceptions of production. Co-creation assumes an interactive and dynamic relationship where value is created at the nexus of interaction. Value for the service user and the PSO thus are created not by linear production but rather by this interaction occurring within the context of the service user’s wider life experience (Grönroos 2011). This has significant implications for how we understand the relationship between PSOs and service users in public services delivery – and for what this relationships means for the value that public services create in society.

From public service-dominant logic to public service logic

The original genesis of the term PSDL had two roots. On the one hand, it stressed the service-dominant, as opposed to product-dominant, nature of public services and their delivery (hence the connecting hyphen between ‘service’ and ‘dominant’). This emphasized both their intangible and process-based nature, and the role of the user as the co-producer of a service and the co-creator of its value, The necessity for this explicit articulation of ‘public-services-as-services’ has lessened over the past five years, as the critique and framework presented by PSDL has become more central to public management theory and practice. Second, it acknowledged an explicit link to the work of Lusch & Vargo (2006, 2014) in their development of service dominant logic (SDL) in the service management literature – and particularly to their discussion of value co-creation in service delivery. However, as PSDL has evolved within the public management literature (e.g. Radnor et al. 2014; Hardyman, Daunt, and Kitchner 2015; Alford 2016) its links to SDL have become less clear-cut for two reasons, discussed here.

The distinctive context and nature of public (compared to private) service and services

This distinctiveness has interacted with the service management perspective of PSDL to engender a new, contextualized body of public service theory. Four simple examples will make this point. First, for private sector service firms, the retention of customers and their repeat business is the essence of the profitability of such firms. Hence, an important element of SDL is to explore how the value creating activity of customers can be harnessed to create sustainable and profitable services firms – now and in the future. For public services and PSOs, though, the existence of such ‘repeat business’ is likely to be a sign of service failure rather than success (e.g. repeated visits to a doctor for the same condition, repeated educational experiences after failed learning, or repeated and on-going social work relationships where no personal development on new capacity has been engendered). This changes the dynamic of value creation. Second, the reality of unwilling or coerced customers is unfamiliar to the for-profit sector, whilst it is a marked element of public services (e.g. in the prison service or child protection services). This requires a re-consideration of the issue of the role of voluntary agency in value creation.

Third, for-profit firms are (usually) confident who their (sole) customer is. Public services, however, can often have multiple end-users (and stakeholders), some or all of whom may have different (and often conflictual) definitions of a successful outcome of a service. This can often be the case, for example, when considering definitions of ‘success’ as envisaged by vulnerable adults and their families/carers, whilst the premise of the stakeholder negotiation of variable outcomes is a central tenet of community planning systems). There is thus an element of value creation negotiation across the stakeholders for any particular public service that is unfamiliar to the majority of for-profit firms. To add another level of complexity, public service users might also be receiving services from a number of public services (such as elderly people receiving support from health and social care agencies). In this case the value creation relationship is not a simple dyadic one but is rather dependent upon relationships between the user, a network of PSOs, and possibly also their family and friends.

Finally, public service users also inhabit the dual role of being both the users of public services and citizens who may have a broader, societal interest, in the outcomes of public services. This is entirely unknown ground for-profit firms and is an issue that has been explored by Pestoff (2006) and Strokosch and Osborne (2016), amongst others. These differences do not negate the import of service theory and SDL for public management. However, they do require a critical and evolutionary approach to the implications of this body of theory for public management.

The limitations of SDL

One of the significant contributions of SDL to service management theory has been to shift the discourse from talking about ‘co-production’ to typify the relationship between private sector service firms and their customers. This term is argued to be rooted too much in the goods-dominant production logic of manufacturing and its linear Fordist models (Woodruff and Flint 2006). Increasingly, the argument has become focused around value co-creation within service encounters (Prahalad and Ramaswamy 2004; Payne, Storbacka, and Frow 2008). This formulation recognizes that service firms do not create value for customers. They can only make a ‘service offering’ that has the potential to create value for customers, captured by the concept ‘value proposition’ in SDL (Skålén et al. 2015). However, it is the use that the customer makes of this offering that creates value (‘value-in-use’). Increasingly this has also been seen in terms of how this offering interacts with the life experiences and societal context of a customer to construct this value (‘value-in-context’). Customers create value by acting as ‘resource integrators’, to incorporate value propositions from service firms (that are configurations of resources) with other resources, such as their life experiences. Within SDL, the firm (and hence arguably the PSO) is posited as a value co-creator who both facilitates the creation of value by service users and uses this interaction to create their own value, comprising both present-time profitability and future-time resources. (Vargo and Lusch 2008).

An alternative body of theory on value co-creation does exist in the service literature, though, and one that predates the advent of SPL. Originating in the 1980s, this is based around the work of Grönroos (Grönroos 1982; Grönroos 1984). Most recently, this work has evolved further as a repost to SDL. Under the rubric of ‘service logic’, it explores the interactive and dynamic relationship between service business and their consumers in the co-creation for value for all parties (Grönroos 2008; Grönroos 2011; Anker et al. 2015; Grönroos and Voima 2013; Grönroos, Strandvik, and Heinonen 2015). It is to this latter body of work that PSL relates. Grönroos argues that value can only ever be created by the service user. The service organization cannot ever deliver value, but only offer a value proposition for the user and/or resources for the creation of value by the service user.

This perspective has significant implications for public management theory. On the one hand, it shifts the focus away from the ‘performance’ (however measured) of PSOs as the key metric of successful public services, and instead articulates ‘value’ as the key metric – and indeed purpose of such services. Second, it shifts the locus of public service delivery from linear production processes instigated by the PSO, and which ideally should involve the service user (co-production), and to the way that service users create value by their interactions with the PSO and within the wider service system (co-creation). This is the basis of public service logic (PSL). The remainder of this brief paper now considers what the implications of this revised logic are for co-production and co-creation of value in public services.

From co-production to co-creation of value

To be sure, within public management theory, the co-production perspective is still clearly dominant and has produced some important insights (e.g. Needham 2007; Verscheure, Brandsen, and Pestoff 2012; Brandsen and Honingh 2016; Markkanen and Burgess 2016). Nonetheless, there is a growing strand of work that is arguing for a shift away from this perspective and towards value co-creation. Work has already emerged that explores ‘co-creation’ in public services. In some cases, this is explicitly in relation to service reform and innovation (e.g. Freire and Sangiorgi 2010; Elg et al. 2012; Alves 2013) but it has also emerged in relation to public management theory more generally (Vertinen and Stenvall 2014; Voorberg, Bekkers, and Tummers 2015). However, the definition of co-creation in this literature is broad: Voorberg et al (ibid. p. 1335), for example, denote it as ‘the active involvement of end users’ in public service delivery, which could comfortably pass for a definition of co-production in another context. Elsewhere they also link it simply to the design of public services (Voorberg et al. 2017). Research has also begun appearing that goes beyond this simple transformation and does link co-creation to the creation of value in public services. This nascent narrative draws explicitly on the strand of service management theory on the co-creation of value in service encounters discussed above, in order to develop novel public management theory This emergent literature is arguably more fruitful for the development of public management theory (e.g. Meynhardt 2009; Hardyman, Daunt, and Kitchner 2015; Osborne, Radnor, and Strokosch 2016). The argument here is that SDL provides a theoretical basis and framework for this shift of focus – from liner product-dominant production of public services and to interactive value co-creation and from the PSO to the service user as the central locus of value co-creation.

The elaboration of the PSL and its implications for public services is only beginning. Many important questions remain to be asked. The definition of what constitutes ‘value’ is still only embryonic in this literature, for example, and requires urgent consideration. For some it is a variant of Moore’s (1995) ‘public value’, for others it resides with individual citizens, whilst for yet others it can be both and where individual and public value may be congruent or dissonant. Work is on-going to synthesize a holistic framework to facilitate our understanding of value co-creation in public services (Osborne, Nasi, and Flemig 2017). Nonetheless, by shifting our focus from linear co-production to dynamic value co-creation, PSL reveals an essential truth often obscured in current management theory. PSOs do not create value for citizens – they can only make a public service offering. It is how the citizen uses this offering and how it interacts with his/her own life experiences that creates value. A teacher, for example, can make a service offering in terms of a course of lecture on mathematics. This offers the prospect of enhanced knowledge. However, it is how the student choses to engage with this offering and how s/he makes sense of it in terms of his/her life experience that will ultimately generate learning and value for that student.

Similarly, research has demonstrated that even in the apparently more clinical field of healthcare this is also the case. A doctor or medical team can only offer a course of treatment (involving various elements of surgery, medication, therapy, etc.) – but it is how the patient interacts with this treatment regime that creates value for them. Not only does this create value-in-context for this patient, by the creation of their ‘lived experience’ of that service, but it also has a demonstrable impact on their clinical outcomes (Martin et al. 2005, Trummer et al. 2006; Edvardsson et al. 2011).

To conclude, the consequence of this insight both for public management theory in general and co-production theory in particular is significant. For too long the assumption has been that it is the PSO that creates value through its performance. The discussion has thus been about how can public services ‘add in’ the citizen and/or service user to enhance this performance. Under PSL, public service is taken ‘through the looking glass’ and the question is reversed. It is the citizen and/or service user who creates the performance and value of a public service, with the PSO acting as a facilitator of this process. S/he does this by integrating the service offering of the PSO with their needs, personal abilities and experiences, and their societal context. The task for PSOs is to establish the service offering and to facilitate this value creation process. Thus, it is the PSO that must be added into the equation as a co-creator of value, not the service user. PSL therefore starts from the service user as its basic unit of analysis and explores how public services, and PSOs, might be designed to facilitate the co-creation of value by service users, not vice versa.

This insight has the potential to dramatically reconstruct how we conceptualize and govern the creation of value through the delivery of public services. It does of course contain many of its own conundrums that must be elucidated to unlock the full potential of this contribution. These conundrums include, inter alia:

• the nature and dimensions of ‘value’ in the context of public services,

• the balance between individual and social/public value in public services delivery,

• the impact of the multiple stakeholders involved in public services delivery upon the determination of value,

• the processes through which service users and citizens learn to create value and how these might be supported (and by whom), and

• the extent to which ‘value creation’ is a meaningful term in the context of unwilling and/or involuntary service users.

Similarly, the concepts of ‘resource integration’ and ‘value propositions’ need further exploration in a public service rather than for-profit context. However, these conundrums are only exposed when we go ‘through the looking glass’ and see public service delivery for what it is – a process about value not performance, and focused upon the actions of citizens and service users, rather than upon PSOs. The PSL research that this insight and these, and other, conundrums will promote can only refashion public management theory and have profound implications both for public management theory, for public policy and for the management and delivery of public services.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Needless to say, such PSOs can be located within the public, private and/or non-profit sectors.

2. It also links it more closely to the influential work of Grönroos discussed later.