Co-creation

Co-creation, in the context of a business, refers to a product or service design process in which input from consumers plays a central role from beginning to end. Less specifically, the term can also be used for any way in which a business allows consumers to submit ideas, designs or content.

History of the term

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.[1]

In 1990, John Czepiel suggests that customer's participation may lead to greater customer's satisfaction.[2] Also in 1990, Scott Kelley, James Donnelly and Steven J. Skinner suggest other ways to look at customer participation: quality, employee's performance, and emotional responses.[3]

An article by R. Normann and R. Ramirez written in 1993 suggests that successful companies do not focus on themselves or even on the industry but on the value-creating system.[4] Michel, Vargo and Lusch acknowledged that something similar to their concept of co-creation can be found in Normann's work - particularly, they consider his idea of "density of offerings" to be valuable.[5]

In 1995, Michael Schrage argues that not all customers are alike in their capacity to bring some kind of knowledge to the firm.[6]

In 1995, Firat, Fuat, Dholakia, and Venkatesh introduce the concept "customerization" as a form of buyer-centric mass-customization and state that it would enable consumers to act as a co-producer.[7] However, Bendapudi and Leone (2003) conclude that "the assumption of greater customization under co-production may hold only when the customer has the expertise".[1]

The term "co-creation" was initially framed as a strategy by Kambil and coauthors in two articles in 1996 and 1999.[8] In "Reinventing Value Propositions" (1996), Kambil, Ginsberg and Bloch present co-creation as a strategy to transform value propositions working with customers or complementary resources.[9] In "Co-creation: A new source of value" (1999), Kambil, Friesen and Sundaram present co-creation as an important source of value enabled by the Internet and analyse what risks companies must consider in utilizing this strategy.[10]

In 2000, C. K. Prahalad and Venkat Ramaswamy popularized the concept in their article "Co-Opting Customer Competence". In their book The future of competition (2004), they defined co-creation as the "joint creation of value by the company and the customer; allowing the customer to co-construct the service experience to suit their context".[11]

Also in 2004, Vargo and Lush introduce their "service-dominant logic" of marketing. One of its "foundational premises" was "the customer is always a coproducer". Prahalad commented that the authors did not go far enough.[12]

In 2006, Kalaignanam and Varadarajan analyse the implications of information technology for co-creation. They state that developments in IT will support co-creation. They introduce a conceptual model of customer participation as a function of the characteristics of the product, the market, the customer and the firm. They suggest demand-side issues may have a negative effect on satisfaction.

Jansen and Pieters (2013) say co-creation is often used as a buzzword and can mean many different things. According to them, the term is used incorrectly to refer to forms of market research, such as focus groups or social media analysis. They say simply working together with or collecting input from customers is also not enough to be called co-creation - it should only be called co-creation if "the end user plays an active role and it is a continuous process".[13] They introduced the term "complete co-creation" for this, with the following definition: "a transparent process of value creation in ongoing, productive collaboration with, and supported by all relevant parties, with end-users playing a central role" (Jansen and Pieters, 2017, p. 15).[14] Complete co-creation is regarded as a practical answer to the predominantly academic and holistic understanding of co-creation.

Types of co-creation

According to Aric Rindfleisch and Matt O'Hearn, co-creation can be categorized based on two key steps in the process:

  1. Contribution: Submission of contributions by the public to the firm
  2. Selection: Selection of the most promising and appealing contributions/submissions

According to Rindfleisch and O'Hearn, contribution can either be fixed or open, and selection can be either firm-led or customer-led. This leads to the categorisation into four types:

  1. Submitting: fixed contribution, firm-led selection
  2. Tinkering: open contribution, firm-led selection
  3. Co-designing: fixed contribution, customer-led selection
  4. Collaborating: open contribution, customer-led selection

Submitting

In the case of submitting, the firm exercises control over the contribution activity by placing constraints on the basic design, contribution size etc. and also the selection activity by selecting the winning contributions. This form of customer co-creation is employed in those cases where the firm is looking to further research in its field.

Tinkering

Tinkering is a customer co-creation model that involves procurement of contributions from the public by the firm, a comprehensive and scrupulous examination of the contributions, selection of the most promising and enterprising contributions by the firm and finally implementation of the contributions. In tinkering, the firm usually releases a final product. Although the users create the platform, the firm decides which ones get published and distributed.

An example is Little Big Planet, a video game that allows the gamers to create their own levels, that can be shared with others and submitted to Sony. The most promising contributions are incorporated into the final game and the contributors are rewarded.

Co-designing

Co-designing involves placement of constraints by the firm on the contribution activity and selection of the winning contributions by the contributors themselves. This includes any community forum where customers have to give ideas into defined areas, whereas the final idea is selected by the community forum by liking/disliking the proposed idea.

One example is Local Motors, a car manufacturer that uses designs submitted by an online community. Another example is Threadless, a website selling T-shirts designed by an online community which are selected by staff based on votes.

Collaborating

Also known as open sourcing, collaborating involves releasing the source code of the product and making it accessible to the general public. The released source code is then open to modification as per the requirement of the users.

For example, Mozilla Firefox, Apache and Linux are all based on collaborating.

Co-creation as a way of thinking about value

Co-creation can be seen as a new way of thinking about the economical concept of "value". Prahalad & Ramaswamy describe it as a "consumer-centric" view in opposition to the traditional "company-centric" view.[15] In the traditional view, the consumer is not part of the value creation process, while in the consumer-centric view the consumer plays a key role in it. In the traditional view, the company decides on the methods and structure of the process, while in the consumer-centric view the consumer can influence those. In the traditional view, the goal is to extract value money from consumers in the form of money, while in the consumer-centric view, the goal is to create value together for both consumer and company. In the traditional view, there is one point of exchange controlled by the company, while in the consumer-centric view, there are multiple points of exchange where company and consumers come together[16].

The four building blocks of interaction

Prahalad and Ramaswamy[17] suggested that in order to apply co-creation, the following fundamental requirements should be prepared in advance.

Terms Definition Managerial Implication
Dialogue Interaction between customer Two-way connection instead of one-way selling strategy
Access Allow customer to access the data Create value with customer; beyond traditional value chain process
Risk-benefit To monitor risk and gaps between customer and firm Share the risk of product development with guest through communication (In later work of Ramaswamy,[18] this is replaced by "reflexivity")
Transparency Information among business is accessible Information barriers should be eliminated to certain degree in order to gain trust from guest

Early applications

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.[19]

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 the arts.[20]

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,[21] open innovation, promoted by Henry Chesbrough,[22] 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,[23] 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."[24]

The rise of customer co-creation

The rise of co-creation could be attributed to three distinct issues as suggested by O'hern & Rindfleisch (2010).[25]

  • The information asymmetry between customer demands and manufacturer capability
  • Customer empowerment
  • The advent and widespread application of digital technology

Advantages of co-creation

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.[26]

Unexplored ideas emerge because of open conversations. Everyone who contributes their idea feels that their contribution is heard out and hence, the morale increases.

Customers co-create content marketing, it help to make the marketing content of the company towards "speaking in the language of customers"

Challenges

Although co-creation is an excellent activity to gather unique and various ideas from customers, it also brings a lot of challenges to the table.

If the ideas highlight more on the negative scenarios of the firm's products or services, there might be a risk in losing out on the brand image.

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.

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 may be reluctant to participate and benefit the company.

See also

References

  1. Bendapudi, Neeli; Leone, Robert P. (January 2003). "Psychological Implications of Customer Participation in Co-Production" Journal of Marketing. Vol. 67, No. 1.
  2. Czepiel, John A. (1990), "Service Encounters and Service Relationships: Implications for Research". Journal of Business Research. 20 (1), 13-21.
  3. Kelley, Scott W.; Donnelly Jr., James H.; Skinner, Steven J. (1990), "Customer Participation in Service Production and Delivery". Journal of Retailing. 66 (3), 31535.
  4. Normann, R.; Ramirez, R. (July–August 1993) "From Value Chain to Value Constellation: Designing Interactive Strategy". Harvard Business Review. pp. 6577.
  5. 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. 36:152155.
  6. Schrage, M. (July–August 1995). "Customer Relations". Harvard Business Review. pp. 154156.
  7. Firat, A. Fuat; Dholakia, Nikhilesh; Venkatesh, Alladi (1995). "Liberatory Postmodernism and the Reenchantment of Consumption". Journal of Consumer Research, 22 (3), 23967.
  8. 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
  9. Kambil, A.; Ginsberg, A.; and Bloch, M. Re-inventing value propositions. Stern Working Paper IS-96–21, New York University, 1996. http://kambil.com/wp-content/uploads/PDF/Value_paper.pdf
  10. Kambil, A; Friesen G.B; and Sundaram A. Co-creation: A New Source of Value. Accenture Outlook, 2 (1999) at http://kambil.com/wp-content/uploads/PDF/accenture/cocreation2.pdf
  11. Prahalad, C.K.; Ramaswamy, V. (2004). The Future of Competition. Harvard Business School Press. pp. 8. ISBN 1-57851-953-5.
  12. 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. 1827.
  13. Pieters, Maarten; Jansen, Stefanie (2013). "Orde in de chaos: 6 voordelen van complete cocreatie" [Order in the chaos: 6 advantages of complete co-creation]. FrankWatching (in Dutch). Er is pas sprake van cocreatie wanneer de eindgebruiker een actieve rol speelt en wanneer sprake is van een continu proces.
  14. Pieters, Maarten; Jansen, Stefanie (2017). The 7 Principles of Complete Co-creation. Amsterdam: BIS Publishers. p. 15. ISBN 978-90-6369-473-9.
  15. Prahalad, C.K.; Ramaswamy, V. (2009) "Co-Creation Connection".
  16. Kostakis, V. 2019. How to Reap the Benefits of the “Digital Revolution”? Modularity and the Commons. Halduskultuur: The Estonian Journal of Administrative Culture and Digital Governance, Vol 20(1):4–19.
  17. Prahalad, K. C.; Ramaswamy, V (2004). The Future of Competition: Co-creating Unique Value with Customers. Boston: Harvard Business School Press.
  18. Ramaswamy, Venkat; Ozcan, Kerimcan (2014). "The co-creation paradigm". Stanford University Press. ISBN 9780804790758. Retrieved 28 May 2017.
  19. "Nussbaum on Design". BusinessWeek.
  20. Chaney, D. (2012). The Music Industry in the Digital Age: Consumer Participation in Value Creation. International Journal of Arts Management, 15(1), 42-52.
  21. Howe, Jeff (June 2006). "The Rise of Crowdsourcing". Wired . Retrieved March 17, 2007.
  22. Chesbrough, H.W. (2003). Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston: Harvard Business School Press.
  23. Tapscott, Don; Williams, Anthony D. (2006, 2008). Wikinomics: How Mass Collaboration Changes Everything. Portfolio.
  24. Ramaswamy, Venkat; Gouillart, Francis (2010). The Power of Co-Creation: Build It with Them To Boost Growth, Productivity, and Profits. Free Press.
  25. O'hern, M., & Rindfleisch, A. (2010). Customer co-creation. Review of marketing research, 84-116.
  26. Wim Rampen - My Personal Definition of Business with Customer Value Co-Creation and comments by Chris Lawer.

Further reading

  • 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. 359370.
  • 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. 493517.
  • 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. 419458.
  • Diwon, D. (1990). "Marketing as Production: The Development of a Concept". Journal of the Academy of Marketing Science. Volume 18, Number 4. pp. 337343.
  • 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. 239267.
  • 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. 1825.
  • 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 46, 2003; Lugano, Switzerland (International Marketing and Purchasing Group)
  • Füller, J.; Mühlbacher, H.; Matzler, K.; Jawecki, G. (Winter 200910). "Consumer Empowerment through Internet-Based Co-Creation". Journal of Management Information Systems. Volume 26, Number 3. pp. 71102.
  • Füller, J. (Winter 2010). "Refining Virtual Co-Creation from a Consumer Perspective". California Management Review. Volume 52, Number 2. pp. 98122.
  • 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. 128132.
  • Lindsay, K. (July 28, 2009). "The Power of Collaboration". Computer Weekly. pp. 1415.
  • 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. 388406.
  • 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. 289297.
  • Payne, A.; Holt., S. (2001). "Diagnosing Customer Value: Integrating the Value Process and Relationship Marketing". British Journal of Management. Volume 12. pp. 159182.
  • 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. 379389.
  • Potts, J.; et al. (October 2008) "Consumer Co-creation and Situated Creativity" Industry and Innovation. Volume 15, Number 5. pp. 459474.
  • Prahalad, C.K.; Ramaswamy, V. (2004) "Co-Creation Experiences: The Next Practice in Value Creation". Journal of Interactive Marketing. Volume 18, Number 3.
  • Prahalad, C.K.; Ramaswamy, V. (2009) "Co-Creation Connection".
  • Prahalad, C.K.; Ramaswamy, V. (2000) "Co-opting customer competence". Harvard Business Review, January-Februari.
  • 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. 3237.
  • Rindfleisch, A.; O'Hearn, M. (2008) ."Customer Co‐creation: A Typology and Research Agenda" Working Paper 4 publications on ResearchGate
  • 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. 4665.
  • 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
  • Wikström, S. (1996). "Value Creation by Company-Consumer Interaction". Journal of Marketing Management. 12, 359–374.
  • 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. 242250.
  • Zwass, V. (Fall 2010). "Co-Creation: Toward a Taxonomy and an Integrated Research Perspective". International Journal of Electronic Commerce. pp. 1148. http://www.ijec-web.org/v15n1/p011full.pdf
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