The more complex the product, the more the value from co-creation

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The more complex the product, the more the value from co-creation

At its best, the relationship between a company and its customers is one where customers have a genuine, active role in the value creation process.

“Give all your stakeholders a bigger say, and they’ll lead you to bigger insights, revenues, and profits,” says Venkat Ramaswamy, professor of marketing at the Ross School of Business Marketing, University of Michigan. In the late 1990’s, a few pioneering companies began to let customers participate in product development. They began to think about what will happen, if more people have access to the web and can contact in social media. One of these pioneers was Lego, who invited customers to create designs of toy robots and construction models, write applications for the robots, and offer them to other consumers on its website. However, co-creation is not only for companies selling consumer goods. “The more complex the products or services, the more the need for co-creation”, says Ramaswamy. Together with C.K.Pralahad Ramaswamy coined the term co-creation to describe this emerging relationship between customers and companies. During the past decade, dozens of other international companies have implemented co-creative actions and have discovered that not only is it important to involve customers in the creative process, but also employees and other stakeholders. “Customers, employees, suppliers, partners, and investors should all be working together. It is important to create platforms where all parties can participate and engage in the designing of products and services”, says Ramaswamy. “I would start by engaging employees with internal co-creation so they experience its value firsthand. Then employees can be invited to a dialogue on customer experience. In other words, change the environment of the employee before you engage the customer.” The pioneering companies quickly discovered that stakeholders will not whole-heartedly participate in co-creation unless they are allowed to create value for themselves in the process. That requires giving them the opportunity to design and manage their own work experiences and to help identify and solve problems. Most organizations focus on creating economic value. Successful co-creators, in contrast, explicitly focus on providing rewarding experiences for customers, employees, suppliers, and other stakeholders. The key to improving experiences is letting stakeholders play a central role in designing how they work with one another. The rewards are greater than the risks In Ramaswamy’s opinion the best way to learn co-creation is to try it. It is important that company leaders understand the process and by doing so realize that they will not lose control by engaging their employees. When first exposed to co-creation, people often think allowing stakeholders to create their own experiences sounds like a recipe for anarchy and economic destruction. In fact, the opposite is true. Co-creation is not a free-for-all. The management of the company sets the overall strategic direction and defines the boundaries between what can and cannot be co-created. “The rewards are definitely larger than the risks and co-creation does not require flat organizations”, he describes. “It requires that people take a mental leap and realize that a shared learning process will in the end bring more value for everybody.” Ramaswamy uses the idea of a shared learning process in his work as a teacher. Before a lecture, he often asks students to blog in the Internet with questions they wish to be answered. Students then read and answer each other’s questions as well, and Ramaswamy gains valuable information on what the students are thinking about and interested in. “The students become teachers and the teacher a student”, he explains. “I need to learn as well. Together we can create something larger than originally planned.” It’s a YES for Elematic Companies producing technically complex products and services have much to gain from co-creative activities. “So it’s a yes for Elematic”, says Ramaswamy. “The question is in what part of the value chain should we co-create? What we are talking about is interaction – where ever there’s interaction, there exists a possibility for co-creation. It is also important to consider which stakeholders should be involved and on what level on both the customer side as well as within Elematic.” According to Ramaswany, open innovation can be co-creative or not co-creative: “If you pay attention to people’s experiences on open innovation, it’s co-creative. There should be dialogue on different levels within the organizations and then the way in which people actually work together is co-creation.” Tuija Aro, Editor ______________________________________________________________  

Venkat  Ramaswamy

Professor of Marketing and Computer and Information Systems Ph.D., University Of Pennsylvania B. Tech, Indian Institute Of Technology, Chennai  
Venkat Ramaswamy is Hallman Fellow of Electronic Business and Professor of Marketing at the Ross School of Business, University of Michigan, Ann Arbor, USA. He is a globally recognized thought leader, idea practitioner, and eclectic scholar with wide-ranging interests in innovation, strategy, marketing, branding, IT, operations, and the human side of the organization.He is a prolific author of numerous articles-including the popular 2000 Harvard Business Review article "Co-opting Customer Competence" and the 2003 MIT-PricewaterhouseCoopers award-winning Sloan Management Review article "The New Frontier of Experience Innovation" (both coauthored with C. K. Prahalad) as well as the 2009 Emerald Literati award-winning Strategy & Leadership article "Leading the Transformation to Co-Creation of Value", and the 2010 article in the Harvard Business Review on "Building the Co-Creative Enterprise, based on his new book The Power of Co-Creation: Build It With Them to Boost Growth, Productivity, and Profits (Free Press, October 2010; co-authored with Francis Gouillart). His previous award-winning book in 2004, The Future of Competition (with C. K. Prahalad), introduced co‑creation as a revolutionary business concept. Venkat is also a sought-after speaker and a mentor to global firms seeking to become a co-creative enterprise. He has helped several organizations across the United States, Europe, Asia, and Latin America conceive and execute new business ideas through co‑creation, and build management capabilities for co‑creation inside their organizations. www.venkatramaswamy.com    

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