Service Dominant Logic for Irrigation Service

Hajime Tanji and Hirohide KiriNational Institute for Rural Engineering, NARO, Japan

Toshiaki IidaThe University of Tokyo

ICID Asian Conference in Adelaide, June 2012

In developed countries, industrial structure is moved to service industry. Production of service is more important than production of goods.(Innovate America(2005))

What is service science?

What is service science?How to provide good service is key issue of many

industries. In many products, price of goods or quality of

goods are not main reason of high sales. The main reason of high sales may depends on quality of service.

Service science seeks conditions of client requested service.

Drinking water systemService providerWater company

Service clientInhabitantsSupply water as

good

Receive water fee on water volume

Facilities are funded, constructed, owned and managed by a water company

Irrigation water system?Service providerWater company

Service clientsFarmersSupply water as

good

Receive water fee on water volume　 or area

Facilities are funded, constructed, owned and managed by a water company

Irrigation water system?Service providerWater company

Service clientsFarmersSupply water as

good

Receive water fee on water volume　 or area

Facilities are funded, constructed, owned and managed by a water company

What is irrigation service?Irrigation benefit, not only water volume but also

utilization value.Water (as good) is only one component of

irrigation service. Good irrigation service should increasing benefit

of irrigation.Irrigation service should replay to any request by

farmers.Irrigation service should produce new benefit.Renaut et.al. (2007) says irrigation service is a

major problem second to modernization problem.

What is the purpose of service science of irrigation?Improving quality of irrigation service.

Improving yields of crops.Improving quality of crops.Improving working time and quality of water

management.Decreasing fertilizer input. Decreasing the risk of

On demand service of irrigation.Avoiding or minimize draught risk.Connecting the value of agricultural products to

consumer.

Vergo’s new paradigm; SDLIn former days, goods and service are

considered opposed terms(GDL: Good Dominant Logic). Many researchers suggested this scheme is not adequate.

Vergo (2004,2010) proposed new paradigm (SDL: Service Dominant Logic)in which good and service are connected and providers and clients are working together to create value.

The authors applied to used two paradigm (GDL and SDL) to express irrigation service.

SDL for irrigation

Service providerWater company

Service clientsFarmersSupply irrigation service

Co-value creation

Water fee is only a part of service cost.

Facilities are funded, constructed, owned and managed by a water company

Connecting points (or boder) of providers and clients

Tertiary canals and inside field.

Main and secondary canals.

Scheme Aichi North Yoshinogawa Inbanuma Mae Rao

Country Japan Japan Japan Thailand

Main canal Japan Water Agency Water user association Japan Water Agency Royal Irrigation DepartmentBorder Border

Secondary canal Water user association Farmers None FarmersBorder Border

Tertiary canal Farmers Farmers Farmers Farmers

Border location Secondary to tertiary Main to secondary Main to tertially Main to secondary

SDL application to four irrigation schemesEach scheme has border or connecting point.

Table 1 G- D logic vs. S- D logic on value creation

Oroginal partsOroginal parts Oroginal parts Added parts Added parts

G-D logic S-D logic GDL for irrigation SDL for Irrigation

Valuedriver

Value-in-exchange Value-in-use or value-in-context

Value in water supply Value in water use

Creator ofvalue

Firm, often with inputfrom firms in a supplychain

Firm, network partners,and customers

Supplier, often withinput from suppliers inthe irrigation scheme

Supplier, networkpartners (water managerin farmers) and farmers

Process ofvaluecreation

Firms embed value in‘‘goods’’ or‘‘services’’,value is ‘added’ byenhancing or increasingattributes

Firms propose valuethrough marketofferings, customerscontinue value-creationprocess through use

Supplier embed valuein water, values isadded by flexibility ofintake

Supplier proposes valuesthrough irrigation waterdistribution to secondarycanals, farmers continuevalue-creation processthrough irrigation waterdistribution and water useat plots

Purpose ofvalue

Increase wealth for thefirm

Increase adaptability,survivability, and systemwell-being throughservice (appliedknowledge and skills) ofothers

Increase wealth forwater supplier

Increase water useadaptability, survivability,and system well-beingthrough water distributionby farmers

Measurement ofvalue

The amount of nominalvalue, price received inexchange

The adaptability andsurvivability of thebeneficiary system

Full cost recovery ofwater supply and theamount of nominalvalue, price received inexchange

The adaptability andsurvivability of waterdistribution system

Resourcesused

Primarily operandresources

Primarily operantresources, sometimestransferred byembedding them inoperand resources-goods

Water as primaryoperand resources

Water as primary operandresources, sometimestransferred by embeddingthem in operation ofdistribution system asoperand resources-goods

Role offirm

Produce and distributevalue

Propose and co-createvalue, provide service

Produce and distributewater

Propose and co-create useof water as value, providewater distribution service

Role ofgoods

Units of output, operandresources that areembedded with value

Vehicle for operantresources, enablesaccess to benefits of firmcompetences

Units of water, deliveryresources that areembedded with value

Canal operation asvehicles for operandresources of water,enables access to benefitof supplier waterdistribution

Role ofcustomers

To ‘use up’ or ‘destroy’value created by the firm

Co-create value throughthe integration of firmprovided resources withother private and publicresources

To ‘use up’ value ofwater created bysupplier

Co-create value ofirrigation water throughrecycle use of waterresources with otherprivate and publicoperators of facilities

G-D logic S-D logic GDL for irrigation SDL for Irrigation

Valuedriver

Value-in-exchange Value-in-use or value-in-context

Value in water supply Value in water use

Creator ofvalue

Firm, often with inputfrom firms in a supplychain

Firm, network partners,and customers

Supplier, often withinput from suppliers inthe irrigation scheme

Supplier, networkpartners (water managerin farmers) and farmers

Process ofvaluecreation

Firms embed value in‘‘goods’’ or‘‘services’’,value is ‘added’ byenhancing or increasingattributes

Firms propose valuethrough marketofferings, customerscontinue value-creationprocess through use

Supplier embed valuein water, values isadded by flexibility ofintake

Supplier proposes valuesthrough irrigation waterdistribution to secondarycanals, farmers continuevalue-creation processthrough irrigation waterdistribution and water useat plots

Purpose ofvalue

Increase wealth for thefirm

Increase adaptability,survivability, and systemwell-being throughservice (appliedknowledge and skills) ofothers

Increase wealth forwater supplier

Increase water useadaptability, survivability,and system well-beingthrough water distributionby farmers

Vergo’s original paper Aothors’ application

G-D logic VS. S-D logic regarding value creation for irrigation service

G-D logic S-D logic GDL for irrigation SDL for Irrigation

Measurement ofvalue

The amount of nominalvalue, price received inexchange

The adaptability andsurvivability of thebeneficiary system

Full cost recovery ofwater supply and theamount of nominalvalue, price received inexchange

The adaptability andsurvivability of waterdistribution system

Resourcesused

Primarily operandresources

Primarily operantresources, sometimestransferred byembedding them inoperand resources-goods

Water as primaryoperand resources

Water as primary operandresources, sometimestransferred by embeddingthem in operation ofdistribution system asoperand resources-goods

Role offirm

Produce and distributevalue

Propose and co-createvalue, provide service

Produce and distributewater

Propose and co-create useof water as value, providewater distribution service

Role ofgoods

Units of output, operandresources that areembedded with value

Vehicle for operantresources, enablesaccess to benefits of firmcompetences

Units of water, deliveryresources that areembedded with value

Canal operation asvehicles for operandresources of water,enables access to benefitof supplier waterdistribution

Role ofcustomers

To ‘use up’ or ‘destroy’value created by the firm

Co-create value throughthe integration of firmprovided resources withother private and publicresources

To ‘use up’ value ofwater created bysupplier

Co-create value ofirrigation water throughrecycle use of waterresources with otherprivate and publicoperators of facilities

Case studyAichi irrigation scheme

Aichi irrigation scheme Kiso River

Nagoya City

Mikawa bay

Ise bay

Tomei ExpresswayTokaido Main

LineTokaido Shinkansen

Irrigated areaPaddy and Upland crops15,000 ha, Main canal 100 km

Main cropsRice, Onion, Butterbur, Orange, Fig, Tropical orchid, Carnation etc.

Irrigated area

Main canal

Aichi irrigation schemeConstructed in 1961. After 2000, Aichi irrigation

scheme was renewal. Conveyance efficiency of main canals are 100%. In near future, total intake volume may decrease

10 -20%, which should accomplished by improving efficiency at tertiary canal levels. Water in tertiary canals are managed by farmers groups.

How to improve water management by farmers group is an important issue.

Is there any good rule of water management or water fee system ?

Aichi irrigation scheme

Main canal Central control office

Farm pond Inside field part

Who pays fee for irrigation service?Co-creation value of irrigation.

Payment based on area sizePayment based on area size or water volume=alternative?

Survice Supplier Paymant for service by farmersOwner Water manager Farmers Water Farmers Remarks

Investment Fee WorksMain canal Government Water Resource

Agency Y Y N Multiporposeuse part

Main canal Government WUA Y Y N Agricuture onlyuse part

Secondary canal Government WUA Y Y NFarm ponds Farmers group Farmer group Y N YTertiary canal Farmers group Farmer group Y N YInside field part Farmer Farmer Y N Y

Constraint of water fee systemHarmonize to “Farmers Investment” and

“Farmers Works” for water management. That is, initial investment and farmers works based on area should be considered.

All farmers can pay water fee by income from crops. This means even highest water consumption can be allowed.

Improving irrigation efficiency can be strongly promoted.

Total income by water fee should be keep for maintaining WUA.

How to improve service quality?-Proposal of new water fee system-Water fee is firstly based on irrigated area.To promote improving irrigation efficiency, if farmers save some

volume of irrigation water, he or she can get some cash back of water fee depends on saved volume.　Drought function ?

For high consumption area, some countermeasure to reduce irrigation consumption, such as decreasing infiltration by topsoil brought from another place to mix with the soil, should be applied by cost of WUA.

Unit water fee ratio should be adjusted to keep total income to WUA.

Water Fee

Water feepar area

Cash backpervolume

Total fee

ConclusionIrrigation service can be expressed by Vergo’s SDL.Water fee is only a part of irrigation service cost.New allowable irrigation fee system can be proposed based on

SDL.

ReferencesCouncil of Competitiveness (2005) Innovate America: Thriving

in a World of Challenge and Change. National Innovation Initiative Summit and Report. 

Lusch RF, Vargo, SL, & Tanniru M, (2010) Service, value networks and learning. Journal of the Academic Marketing Science. 38,19-31.  

Renaut, D., Falcon, T, and Wahaji,R. (2007) Modernizing irrigation management – the MASSCOTE approach. FAO Irrigation and drainage paper No.63

Vargo, SL. & Lusch RF. (2004) Evolving to a New Dominant Logic of Marketing. Journal of Marketing 68, 1-17.