Reconceptualizing Service Productivity: A Holistic Measurement Framework

Abstract

Service industries, which dominate advanced economies, display a productivity paradox: Despite quick adoption of digital and self-service technologies, measured productivity growth remains slow. We reinterpret service productivity using a Holistic Service Productivity (HSP) framework that includes customer surplus and effort in measuring productivity. We define productivity as the ratio of total value created—producer surplus plus consumer surplus—to total input, which includes both firm resources and customer time, effort, and data. Based on service-dominant logic and welfare economics, HSP addresses mismeasurement by capturing co-created value that traditional firm-focused metrics miss. A typology based on service separability and customer involvement shows the framework’s versatility, and examples and simulations demonstrate how HSP reveals hidden efficiency improvements and highlights cost-shifting. We finish with managerial and policy implications, showing how HSP can guide decision-making and enhance official productivity statistics. For managers, HSP helps distinguish real efficiency gains from cost-shifting and directs investments toward mutually beneficial solutions. By highlighting the co-created value of modern services for both firms and customers, HSP offers a new perspective for understanding and boosting productivity and presents a transformative method for measuring service productivity.