Those who fund want to get more from research. What if we start thinking about the funders of our research as customers? And not as just any customer, but customers of a service business? A logical consequence of the change of mindset would be for research entities in general to apply the understanding and methods of those who have been carrying out research specifically on services.
The research community especially in Finland lives in challenging times. After several decades of increased R&D funding, the last few years have seen cuts both to public and private R&D funding. The justification for these cuts has all too often been the claim that we as a research community have not produced enough benefit to society or to industry. From the research side there is a tendency to see value in research in terms of ever increasing opportunities for knowledge, that is, further research is seen as a key output.
What if we change our mindset and explicitly treat research as a service for specific customers or to society at large? This is not a new way of thinking as, for example, within the European Commission, research has been mentioned as a typical Knowledge Intensive Service Business. In the NACE -classification of economic activities, research is also included as a business service. With this mindset it is relevant to start applying what scholars have developed in regard to services in recent years.
One of the hot topics in service research for more than a decade has been the concept of Service-Dominant Logic, originally presented by Stephen Vargo and Robert Lusch in their seminal study in 2004 (instead of the Goods-Dominant Logic typical of product markets). Although work in the study was based on earlier work by several scholars, the article was a real breakthrough and launched an exceptionally strong interest in studying what service is really about. The S-D Logic concept has been further developed by hundreds of researchers and already more than 10 000 papers have made reference to that seminal work. We at VTT had the pleasure of having Stephen Vargo as our Visiting Professor in 2012. A useful summary of the developments is the follow-up study published by Vargo and Lusch this year (2016).
According to Vargo and Lush (2004), the S-D Logic can be characterized as aiming to:
- Identify or develop core competences, the fundamental knowledge and skills of an economic entity that represent potential competitive advantage.
- Identify other entities (potential customers) that could benefit from these competences.
- Cultivate relationships that involve the customers in developing customized, competitively compelling value propositions to meet specific needs.
- Gauge marketplace feedback by analyzing financial performance from exchange to learn how to improve the firm’s offering to customers and improve firm performance.
These are all highly valid to a typical research organization. A research group or thematic area can often be taken as an economic entity (irrespective of accounting practices), since the continuation of the work depends on its capability to draw new funding. Even public funding organizations seek societal or economic benefit (cf. in Finland, these discussions led to the establishment of the STN – Strategic Research Council). When writing a research proposal one needs to understand not only the call text, but also the reasoning behind the call. In the case of contracted industrial research, the joint elaboration of the offering with the customer is a must. An ongoing assessment of the financial health of the research group is also needed, as no organization can afford in the long term any entity that is continuously spending more than it is earning.
In the Service-Dominant Logic, the customer is the co-creator of value. One of the foundational premises of the S-D Logic states that “value is co-created by multiple actors, always including the beneficiary”. A research project, by definition, provides a unique solution to the customer or other beneficiaries. The value of the results depends on how they will be used. In basic research, the beneficiary is the relevant research community. There is no value in the work if there is no impact on the work of other researchers. A research project aiming to contribute to the solution of a societal challenge is of value only if it will be used to solve the challenge. A research project is relevant to business only if the results are used by the stakeholders in product, process or service development. Pre-determined research services are also needed, because specified operations like measurements, tests, interviews etc. are also important for, e.g., product development and performance confirmation.
The conclusion from the discussions referred to above is that research can and should be treated more explicitly as service to beneficiaries, that is, to other researchers, to industry, and to society at large.
In practice the change of mindset means that we as researchers need to increase our understanding of the mechanisms of government decision-making as well as the business logic of various industrial ecosystems. Only by properly fitting emerging knowledge and technologies to the realities of existing business and government ecosystems can we get permission to address the challenges, which help our sponsors to create value in their operations. The typical jointly funded public projects need to be seen as service to society or to business ecosystems. The EU, Tekes etc. are not funding research only to support researchers in the research performing organizations. Funding programs exist to have a positive impact on industry and society at large.
Matti Kokkala is currently Senior Advisor, Smart Cities at CTO’s Office of VTT. From 2006 to 2013 he was Vice President, Strategic Research in charge of e.g. VTT’s publicly funded research portfolio on service business and services.
Vargo, S. L. & Lusch, R. F. 2004. Evolving to a new dominant logic for marketing. Journal of Marketing, 68(January), 1–17.
Vargo, S. L. & Lusch, R. F. 2016. Institutions and axioms: an extension and update of service-dominant logic. J. of the Acad. Mark. Sci., 44, 5–23.