Co-creation

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Co-creation is a management initiative, or form of economic strategy, that brings different parties together (for instance, a company and a group of customers), in order to jointly produce a mutually valued outcome.[1]

Co-created value arises in the form of personalized, unique experiences for the customer (value-in-use) and ongoing revenue, learning and enhanced market performance drivers for the firm (loyalty, relationships, customer word of mouth). Value is co-created with customers if and when a customer is able to personalize his or her experience using a firm's product-service proposition – in the lifetime of its use – to a level that is best suited to get his or her job(s) or tasks done and which allows the firm to derive greater value from its product-service investment in the form of new knowledge, higher revenues/profitability and/or superior brand value/loyalty.[2]

Scholars C. K. Prahalad and Venkat Ramaswamy popularized the concept in their 2000 Harvard Business Review article, "Co-Opting Customer Competence".[3] They developed their arguments further in their book, published by the Harvard Business School Press, The Future of Competition, where they offered examples including Napster and Netflix showing that customers would no longer be satisfied with making yes or no decisions on what a company offers.[4]

From co-production to co-creation

In their review of the literature on "customer participation in production", Neeli Bendapudi and Robert P. Leone found that the first academic work dates back to 1979.[5]

From 1990 onwards, new themes are emerging: John Czepiel suggests that customer's participation may lead to greater customer's satisfaction.[6] Scott Kelley, James Donnelly and Steven J. Skinner are dealing with productivity but suggest other ways to look at customer participation: quality, employee's performance, and emotional responses.[7]

Although not reviewed by Bendapuli and Leone, the groundbreaking article by R. Normann and R. Ramirez suggests that successful companies do not focus on themselves or even on the industry but on the value-creating system.[8]

Michel, Vargo and Lusch recognize the influence of Normann on their own work and acknowledge similarity between the concepts of co-production and co-creation: "his customer co-production mirrors the similar concept found in FP6".[9] The authors suggest that Normann enriched the S-D Logic particularly through his idea of "density" of offerings.

In a letter sent to the editor of the Harvard Business Review in reaction to an article by Pine, Peppers and Roger ("Do you want to keep your customers forever"), Michael Schrage argues that not all customers are alike in their capacity to bring some kind of knowledge to the firm.[10]

Wikström sees the role of consumers changing.[11]

Firat, Fuat, Dholakia, and Venkatesh introduced the concept of customerization (which is a buyer-centric evolution of the mass-customization process) and stated that it enables consumers to serve as "the co-producer of the product and service offering".[12] However, Bendapudi and Leone (2003) concluded in an empirical paper that "the assumption of greater customization under co-production may hold only when the customer has the expertise to craft a good or service to his or her liking".[5]

At the turn of the century, Prahalad and Ramaswamy (2000) produced another important piece of work and built further on Normann and Ramirez's ideas.[3]

In 2004, Prahalad and Ramaswamy kept working on their original idea published four years earlier.[13] At the same time, Vargo and Lush (2004) published on the service-dominant logic of marketing. The process of value creation is dealt with in FP6. Opposing the goods-dominant logic and the service-dominant logic, the authors state: "the customer is always a coproducer". FP6 will be later (Vargo and Lush, 2006) altered in "the customer is always a co-creator".

Prahalad commented in an issue of the Journal of Marketing on Vargo and Lusch's FP6 and found that the authors did not go far enough.[14]

In the same book, Kalaignanam and Varadarajan (2006) also follow Prahalad's comments and elaborate on the IT implications on coproduction. As the authors put it "developments in information technology […] enable customers to create value by collaborating with the firm". The main contribution of the authors in this article is a conceptual model of the intensity of customer participation as function of product characteristics, market and customer characteristics, firm characteristics. In their conclusions and directions for future research the authors deal with three promising topics. First they propose to study supply-side issues and how increasing communication, participation from the customers and the emergence of communities enable customers to interact between them, sometimes leading to new creations. Second they see the "locus of innovation" as of interest and in particular how the shift of firm-centric networks to user-centric networks can lead to increased innovation capabilities. Third they wonder whether demand-side issues may not result in negative consequences on satisfaction. The third issue is already mentioned by Bendapuli and Leone: "A customer who believes he or she has the expertise and chooses to co-produce may be more likely to make self-attributions for success and failure than a customer who lacks the expertise. A customer who lacks the expertise but feels forced to co-produce […] may make more negative attributions about co-production".[5]

Early applications of co-creation

In the early 2000s, consultants and companies deployed co-creation as a tool for engaging customers in product design. Examples include Nike giving customers online tools to design their own sneakers. At a MacWorld conference in 2007, Sam Lucente, the legendary design and innovation guru at Hewlett-Packard, described his epiphany that designers can no longer design products alone, using their brilliance and magic. They are no longer in the business of product and service design, he stated; they are really in the business of customer co-creation.[15]

During the mid-2000s, co-creation became a driving concept in social media and marketing techniques, where companies such as Converse persuaded large numbers of its most passionate customers to create their own video advertisements for the product. The Web 2.0 phenomenon encompassed many forms of co-creation marketing, as social and consumer communities became "ambassadors", "buzz agents", "smart mobs", and "participants" transforming the product experience. Other examples of co-creation can be found in arts.[16]

Co-creation and corporate management

During the mid-2000s, these innovations in customer engagement and collaboration expanded and morphed into global economic trends including the co-created development of products and services. Authors published bestselling books developing theories influenced by "co-creation" and customer collaboration. Major concepts included crowdsourcing, coined by Jeff Howe in a June 2006 Wired magazine article,[17] open innovation, promoted by Henry Chesbrough,[18] a professor and executive director at the Garwood Center for Corporate Innovation at Berkeley, and consultant Don Tapscott's and Anthony D. Williams's Wikinomics: How Mass Collaboration Changes Everything,[19] a book that popularized the concept of corporations using mass collaboration and open source innovation.

Of this rapid morphing of co-creation, Ramaswamy and his co-author Francis Gouillart wrote: "Through their interactions with thousands of managers globally who had begun experimenting with co-creation, they discovered that enterprises were building platforms that engaged not only the firm and its customers but also the entire network of suppliers, partners, and employees, in a continuous development of new experiences with individuals."[20]

The Rise of Customer Co-Creation

The rise of cocreation could be attributed to three distinct issues as suggested by O’hern & Rindfleisch (2010).[21]

  • The information asymmetry between customer demands and manufacturer capability

Traditionally, firms have attempted to manage this asymmetry by engaging in various forms of marketing research to obtain better information about their customers’ needs.

  • Customer empowerment: Consumers are seeking a more active role beyond consumption

Growing customer empowerment appears to be rapidly promoting customer co-creation by motivating consumers to play a more active role in the new product development (NPD) process, enhancing their NPD knowledge and skills, and connecting them with proactive communities of like-minded individuals.

  • The advent and widespread application of digital technology

The Internet has increased access to knowledge that can enhance consumers’ ability to engage in creative pursuits and to apply their knowledge by providing access to a variety of online design tools. The Internet also enhances collective co-creation by connecting individual consumers with others (both consumers and manufacturers) in a manner that allows them to participate effectively in a co-creation community.

Process of co-creation

Successful co-creation requires two key steps.[21]

Contribution of ideas: A firm must convince its customers to submit their ideas (i.e., to contribute). However, receiving contribution is actually quite hard because most customers are quite busy and hardly care about the company's call. Unless customers are incentivized in an attractive way they are reluctant to participate and benefit the company. As a result, most co-creation efforts fail because they don't get many submissions.

Selecting the viable ideas: After receiving the contributions, the firm must then select the most profitable, viable and implementable ones. The challenge of the selection process is that most submissions are not very useful, impractical and difficult to implement. Firms have to deal the submitted ideas in a very subtle way as throughout the process they don’t want to reject customer submissions and risk of alienating them which may eventually lead to customer disengagement.

See also

References

  1. ↑ Prahalad, C.K.; Ramaswamy, V. (2004) "Co-Creation Experiences: The Next Practice in Value Creation". Journal of Interactive Marketing. Volume 18, Number 3.
  2. ↑ Wim Rampen - My Personal Definition of Business with Customer Value Co-Creation and comments by Chris Lawer.
  3. ↑ 3.0 3.1 Prahalad, C.K.; Ramaswamy, V. (January–February 2000) "Co-Opting Customer Competence". Harvard Business Review.
  4. ↑ Prahalad, C.K.; Ramaswamy, Venkat (2004) The Future of Competition. Harvard Business School Press. ISBN 1-57851-953-5.
  5. ↑ 5.0 5.1 5.2 Bendapudi, Neeli; Leone, Robert P. (January 2003). "Psychological Implications of Customer Participation in Co-Production" Journal of Marketing. Vol. 67, No. 1.
  6. ↑ Czepiel, John A. (1990), "Service Encounters and Service Relationships: Implications for Research". Journal of Business Research. 20 (1), 13-21.
  7. ↑ Kelley, Scott W.; Donnelly Jr., James H.; Skinner, Steven J. (1990), "Customer Participation in Service Production and Delivery". Journal of Retailing. 66 (3), 315–35.
  8. ↑ Normann, R.; Ramirez, R. (July–August 1993) "From Value Chain to Value Constellation: Designing Interactive Strategy". Harvard Business Review. pp. 65–77.
  9. ↑ Michel, S.; Vargo, S. L.; Lusch, R. F. (2008). "Reconfiguration of the Conceptual Landscape: A Tribute to the Service Logic of Richard Normann". Journal of the Academy of Marketing Science. 36:152–155.
  10. ↑ Schrage, M. (July–August 1995). "Customer Relations". Harvard Business Review. pp. 154–156.
  11. ↑ Wikström, S. (1996). "Value Creation by Company-Consumer Interaction". Journal of Marketing Management. 12, 359–374.
  12. ↑ Firat, A. Fuat; Dholakia, Nikhilesh; Venkatesh, Alladi (1995). "Liberatory Postmodernism and the Reenchantment of Consumption". Journal of Consumer Research, 22 (3), 239–67.
  13. ↑ Prahalad, C.K.; Ramaswamy, V. (2004) "Co-Creation Experiences: The Next Practice In Value Creation". Journal Of Interactive Marketing. Volume 18; Number 3.
  14. ↑ Prahalad, C.K. (January 2004). "The Cocreation of Value in 'Invited Commentaries' on 'Evolving to a New Dominant Logic for Marketing'". Journal of Marketing. Vol. 68. pp. 18–27.
  15. ↑ "Nussbaum on Design". BusinessWeek.
  16. ↑ Chaney, D. (2012). The Music Industry in the Digital Age: Consumer Participation in Value Creation. International Journal of Arts Management, 15(1), 42-52.
  17. ↑ Howe, Jeff (June 2006). "The Rise of Crowdsourcing". Wired . Retrieved March 17, 2007.
  18. ↑ Chesbrough, H.W. (2003). Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston: Harvard Business School Press.
  19. ↑ Tapscott, Don; Williams, Anthony D. (2006, 2008). Wikinomics: How Mass Collaboration Changes Everything. Portfolio.
  20. ↑ Ramaswamy, Venkat; Gouillart, Francis (2010). The Power of Co-Creation: Build It with Them To Boost Growth, Productivity, and Profits. Free Press.
  21. ↑ 21.0 21.1 O’hern, M., & Rindfleisch, A. (2010). Customer co-creation. Review of marketing research, 84-116.

Further reading

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  • Andersson, P.; Rosenqvist, C. (2007). "Mobile Innovations in Healthcare: Customer Involvement and the Co-Creation of Value". International Journal of Mobile Communications. Volume 5, No. 4.
  • Auh, S.; et al. (2007). "Co-Production and Customer Loyalty in Financial Services". Journal of Retailing. Volume 83, Issue 3. pp. 359–370.
  • Ballantyne, D. (2004). "Dialogue and Its Role in the Development of Relationship Specific Knowledge". Journal of Business & Industrial Marketing. Volume 19, Issue 2. p. 114.
  • Becker, Gary (September 1965). "A Theory of the Allocation of Time". The Economic Journal. Volume LXXV, Issue 299. pp. 493–517.
  • Bilgram, V.; Brem, A.; Voigt, K.I. (2008). "User-Centric Innovations in New Product Development – Systematic Identification of Lead Users Harnessing Interactive and Collaborative Online-Tools". International Journal of Innovation Management. Volume 12, No. 3. pp. 419–458.
  • Diwon, D. (1990). "Marketing as Production: The Development of a Concept". Journal of the Academy of Marketing Science. Volume 18, Number 4. pp. 337–343.
  • Edvardsson, B.; Enquist B.; Johnston, R. (2005). "Cocreating Customer Value through Hyperreality in the Prepurchase Service Experience". Journal of Service Research. Volume X, Number X, Month 2003 1-.
  • Firat, F.A.; Venkatesh, A. (December 1995) "Liberatory Postmodernism and the Reenchantment of Consumption". Journal of Consumer Research. Volume 22, Number 3. pp. 239–267.
  • Fodness, Dale; Pitegoftf, Barry E.; Sautter, Elise Truly (1993), "From Customer to Competitor: Consumer Co-Option in the Service". The Journal of Services Marketing. 7 (3). pp. 18–25.
  • Forsström, F. (September 2003). "A Conceptual Exploration into 'Value Co-Creation' in the Context of Industrial Buyer-Seller Relationships, Work-in-Progress Paper". 19th Annual IMP Conference; September 4–6, 2003; Lugano, Switzerland (International Marketing and Purchasing Group)
  • Füller, J.; Mühlbacher, H.; Matzler, K.; Jawecki, G. (Winter 2009–10). "Consumer Empowerment through Internet-Based Co-Creation". Journal of Management Information Systems. Volume 26, Number 3. pp. 71–102.
  • Füller, J. (Winter 2010). "Refining Virtual Co-Creation from a Consumer Perspective". California Management Review. Volume 52, Number 2. pp. 98–122.
  • Grönroos, C.; Ravald, A. (2009) "Marketing and the Logic of Service: Value Facilitation, Value Creation and Co-Creation, and Their Marketing Implications – Working Paper". Hanken School of Economics.
  • Gummesson, E. (2004) "Return on Relationships (ROR): The Value of Relationship Marketing and CRM in Business-to-Business Contexts". Journal of Business & Industrial Marketing. 19, 2. p. 136.
  • Holbrook, M.B. (June 1987). "What Is Consumer Research?". Journal of Consumer Research. Volume 14, Number 1. pp. 128–132.
  • Lindsay, K. (July 28, 2009). "The Power of Collaboration". Computer Weekly. pp. 14–15.
  • Nambisan, S.; Baron, R.A. (July 2009). "Virtual Customer Environments: Testing a Model of Voluntary Participation in Value Co-Creation Activities". Journal of Product Innovation Management. Volume 26, Issue 4. pp. 388–406.
  • Ordanini, A.; Pasini, P. (2008). "Service Co-Production and Value Co-Creation: The Case for a Service-Oriented Architecture (SOA)". European Management Journal. 26, pp. 289–297.
  • Payne, A.; Holt., S. (2001). "Diagnosing Customer Value: Integrating the Value Process and Relationship Marketing". British Journal of Management. Volume 12. pp. 159–182.
  • Payne, A.F.; Storbacka, K.; Frow, P.; Knox, S. (2009). "Co-Creating Brands: Diagnosing and Designing the Relationship Experience". Journal of Business Research. 62. pp. 379–389.
  • Potts, J.; et al. (October 2008) "Consumer Co-creation and Situated Creativity" Industry and Innovation. Volume 15, Number 5. pp. 459–474.
  • Prahalad, C.K.; Ramaswamy, V. (2004) "Co-Creation Experiences: The Next Practice in Value Creation". Journal of Interactive Marketing. Volume 18, Number 3.
  • Ramaswamy, V. (2009) "Leading the Transformation to Co-Creation of Value. Strategy and Leadership. Volume 37, Number 2. pp. 32–37.
  • Roseira, C.; Brito, C. (2009) "Value Co-Creation With Suppliers, FEP working papers, n°342".
  • Shah, D.; Rust, R.; Parasuraman, A.; Staelin, R.; Day, G. (November 2006). "The Path to Customer Centricity". Journal of Service Research. 9, 2.
  • Simonson, A.; Schmitt, B. (1997). Marketing Aesthetics – Identity and Image. New York: Free Press.
  • Spohrer, J.; Maglio, P.P. (2008). "The Emergence of Service Science: Toward Systematic Service Innovations To Accelerate Co-Creation of Value".
  • Tanev, S.; Seppä, M.; Chowaniec, A. (2013). "Value Co-Creation". Best of TIM Review. Book 3. Talent First Network.
  • Tynan, C.; McKechnie, S.; Chhuon, C. (2009). "Co-Creating Value for Luxury Brands". Journal of Business Research. doi:10.1016/j.jbusres.2009.10.012.
  • Vandermerwe, S. (Summer 1993). "Jumping into the Customer's Activity Cycle – A New Role for Customer Services in the 1990s". Columbia Journal of World Business. pp. 46–65.
  • Weigand, H. (2009). "Value Encounters – Modeling and Analyzing Co-creation of Value – Working Paper".
  • Wind, J.; Rangaswamy, A. (2000). "Customerization: The Next Revolution in Mass Customization – Marketing Science Institute Working Paper No. 00-108". Cambridge, Massachusetts: Marketing Science Institute
  • Wong, V. (2010). "Co-Creation: Not Just Another Focus Group". BusinessWeek. Retrieved April 28, 2010.
  • Xiang, Z.; Rongqiu, C. (2008). "Examining the Mechanism of the Value Co-Creation with Customers". International Journal of Production Economics. 116. pp. 242–250.
  • Zwass, V. (Fall 2010). "Co-Creation: Toward a Taxonomy and an Integrated Research Perspective". International Journal of Electronic Commerce. pp. 11–48. http://www.ijec-web.org/v15n1/p011full.pdf

External links

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