Service-dominant logic and performance-based contracting: A systems thinking perspective

David Nowicki, Brian Sauser, Wesley Randall, Robert Lusch

Research output: Contribution to journalReview articlepeer-review

9 Scopus citations


This paper extends recent theoretical advances by merging service-dominant logic (S-D logic) and performance-based contracting (PBC). S-D logic is a conceptual frame of reference that defines supply chain knowledge and skill as its fundamental building blocks of strategic benefit. Cocreation of value between actors and beneficiaries is central to S-D logic and is measured through performance outcomes. PBC is a transformational departure from traditional supply chain strategies that focuses on delivering performance instead of goods and services. PBC has found increasing use in large-scale complex systems where the postproduction costs exceed the production cost, such as defense, transportation, and healthcare. These systems are commonly called sustainment-dominated systems (SDSs). We use systems theory and the Boardman Soft Systems Methodology to develop a systemigram that corresponds to the 11 foundational premises of S-D logic in the context of PBC. We also verify the use of the systemigram as an instrument to instantiate systems thinking and move S-D logic from an abstract framework to a more actionable framework. This paper provides managers and researchers a systematic insight into how investment into knowledge, skills, and the cocreation of value can drive improved SDS life-cycle affordability in the context of PBC.

Original languageEnglish (US)
Pages (from-to)12-24
Number of pages13
JournalService Science
Issue number1
StatePublished - Mar 2018


  • Language and modeling
  • Logic
  • Service systems and dynamics
  • Theory and principles

ASJC Scopus subject areas

  • Business and International Management
  • Modeling and Simulation
  • Management Science and Operations Research
  • Marketing


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