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Dominant Logic Shifting from Customer Service to Sustainability, Paper Says
January 15th, 2013
Environmental concerns are compelling businesses to shift their primary focus from serving customers to addressing sustainability, according to a new paper published last month as part of the Thirty Third International Conference on Information Systems.
The paper, co-authored by Richard Watson, a professor of Management Information Systems at the University of Georgia's Terry College of Business, alongside Mikael Lind and Sandra Haraldson of the Viktoria Institute in Göteborg, Sweden, asserts that throughout history, information systems (IS) have helped societies and civilizations to structure themselves based on a dominant logic, or collective response to an epoch’s most pressing question.
The authors suggest that for early humans, there existed a dominant logic of sheer survival, and the need to coordinate complex activities such as hunting, building shelter and organizing defense encouraged cooperative information exchange, leading to the development of speech and gestures as one of the first forms of IS.
Around 12,000 years ago, nomadic bands began to establish permanent settlements, marking the beginning of the Neolithic Revolution and the shift from foraging to farming. During this period, the dominant logic became centered on agriculture, leading to food surpluses that gave rise to primitive commerce. A newfound need for recording and processing ever more complicated trade transactions led to two major breakthroughs in IS — writing and mathematics.
By the early 19th century, advances in manufacturing sparked the Industrial Revolution, heralding in a new dominant logic of production. The challenges of determining how to best manage resources to maximize output and to record, report and convert resources into revenue necessitated mathematical methods well beyond that required for simple agriculture, leading to IS innovations in operations research and applying the scientific method to business problems and decision-making.
The paper explains that during the 1980s, with society thoroughly industrialized, a customer service dominant logic emerged, characterized by the exchange of intangibles such as specialized knowledge, skills or processes. Under this paradigm, firms constantly sought to create greater value for their customers than competitors, and the need to process increasingly complex data prompted the evolution of even more advanced IS, aided by the rise of computer technology. In their book Energy Informatics, excerpted on Sustainable Brands last year, Watson and colleague Maric Boudreau contend that many mistakenly consider computers, a form of information technology (IT), to be the same as IS, when in reality IT has little value if not embedded in a successful IS.
Having set the historical stage, Watson et al argue that the makings of a new sustainability dominant logic are presently taking shape as society moves beyond customer service towards an environmental focus. Although initially viewed as a means of reducing the risk of lawsuits and cleanup costs from environmental damage, a growing number of business leaders are recognizing the potential benefits of adopting sustainability strategies ahead of the pack.
“More forward-looking executives see both a threat and an opportunity arising as they scan the information horizon and detect signals indicating that environmental changes threaten their existing modus operandi,” Watson said. “They recognize that starting to solve these issues now will strategically position them for the longer-term as governments and consumers take action to mitigate environmental degradation.”
The paper claims that most firms currently ignoring sustainability do so because they generally are not responsible for covering the costs of their operations’ negative environmental impact — costs often externalized as poor air quality, pollution or deforestation. As a sustainability dominant logic settles in, firms will begin to be held responsible for their unsustainable practices, resulting in devastating consequences for those that fail to take early action; the authors quote research by KPMG that estimates that covering the full environmental cost of production could amount to 41% of average earnings.
According to the paper, the dominant logic concept can also be applied to the lifecycle of firms in the present day. Economic players exist at different stages of business development.
Some struggle for profitability, and survival dominates their thinking; others compete in markets with low margins and focus on operational efficiency; customer-facing firms emphasize service; and another, at this point still minor, group is concerned with environmental impact. But this does not mean that firms wishing to embrace sustainability can simply ignore the lower orders of dominant logic.
“A firm’s adoption of a higher layer in the dominant logic hierarchy does not mean it can neglect the lower levels,” said Watson. “The ecologically motivated firm still needs to serve customers well, manage resources efficiently and create sufficient profits to remain a thriving concern.”
The authors state that just as in each preceding era, the transition to a new sustainability dominant logic will require innovations in IS to meet the challenge of gathering, processing and interpreting more complex data.
“The role of IS is to provide information to support decision-making related to a given dominant logic,” Watson said. “When a firm shifts to a sustainability dominant logic it will expect IS to provide information that will enable the enterprise to make high-quality decisions that increase their sustainability impact.”
Energy Informatics is distinguishing itself as a useful IS for measuring energy flows to maximize efficiency and reduce carbon emissions. However, according to Watson, “This is only a fix to existing systems. In the future, we need to design better flow systems that are designed for efficiency and operated dynamically in an optimal manner.”
The Georgia Energy Informatics Cluster, of which Watson is the board chair, is developing such an IS, called Consumer Energy Management, which would link and manage all of the future energy needs, products and machine-to-machine interactions of an individual or small business with the goal of reducing overall energy consumption.
The paper concludes claiming that although much of the IS and management literature ignores the natural environment, focusing instead on socio-technical systems, the sustainability dominant logic will require managers to consider the intersection of society, technology and the environment in decision making. Developments in IT could help bridge the information gap, such as real-time data streams fed by sensor networks and digital imaging. When integrated with a sustainability-focused IS, this could supply the massive amounts of data needed to optimize energy flow networks and provide firms, government and consumers with the knowledge needed to make more sustainable decisions.
“For thousands of years, IS has evolved alongside civilization to support the day’s dominant logic,” Watson said. “As more and more scholars, business leaders and governments embrace the dominant logic of sustainability lingering on the horizon, IS will be there to see it through.”
@mikehower is a freelance writer interested in telling the stories of companies and organizations engaged in sustainability, clean technology and social entrepreneurship. He also blogs about sustainable business and politics at SustySavvy.com.