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 is also used for any way in which a business allows consumers to submit ideas, designs or content. This way, the firm will not run out of ideas regarding the design to be created and at the same time, it will further strengthen the business relationship between the firm and its customers. Another meaning is the creation of value by ordinary people, whether for a company or not.[1]

Types

Aric Rindfleisch and Matt O'Hern define customer co-creation as "a collaborative NPD (new product development) activity in which customers actively contribute and/or select the content of a new product offering" and state that, like all NPD processes, it consists of two steps, namely contribution (of content) and selection (of the best contributions).[2]

Rindfleisch and O'Hern categorise different types of co-creation based on how strict the requirements on submissions are (fixed vs. open) and if the selection is done by the customers themselves or by the firm (firm-led vs. customer-led). They distinguish four types of co-creation, which roughly correspond to the four possible combinations of the contribution and selection styles, like this:

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

Collaborating

According to O'Hern and Rindfleisch (2010), the best example of open contribution and customer-led selection is open-source software. They note that while open-source software is not typically commercial, some firms use it as part of their strategy; the examples they give are of Sun Microsystems with NetBeans and of IBM paying people to improve Linux. According to Aric Rindfleisch, Collaboration is a form in which companies have the least control, while submission is the form that provides companies with the most control.[3]

Tinkering

O'Hern and Rindfleisch describe what they call "tinkering" as having less open contributions than "collaborating". Customers are allowed to tinker with the product, but only in certain ways, and to make their creations available to others, but only under certain conditions. They give the examples of mods for video games and public APIs. Whether or not the user creations are incorporated into the official product is decided by the firm, so selection is firm-led.

Co-designing

"Co-designing", as described by O'Hern and Rindfleisch, is a type of co-creation process in which a number of customers, the "co-designers", submit product designs to the firm, with a larger group of customers selecting which designs the firm will produce. With co-designing, there are often relatively strict submission requirements, so it is categorised as having fixed contribution. They give the example of Threadless, a website selling user-designed T-shirts, which typically accepted two percent of customer submissions for product designs. Another example can be Lego which has introduced the "Lego Ideas" platform to rope in the users to contribute a newer design. And once the design garners 10,000 followers, Lego actually brings it on their Lego store shelves which is also an ideal example for co-creation

Submitting

O'Hern's and Rindfleisch's concept of "submitting" is closest to traditional NPD in that the selection of ideas is entirely done by the firm and there are often strict criteria contributions must follow. "Submitting"-type co-creation is different from traditional market research in that the firm asks people to come up with their own detailed solutions or designs, rather than just answering pre-determined questions. According to O'Hern and Rindfleisch, typical examples of this type of co-creation are a firm organising a competition or using a crowdsourcing platform like InnoCentive. Selected ideas are often rewarded with money.

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.[4]

In 1990, John Czepiel suggests that customer's participation may lead to greater customer satisfaction.[5] 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.[6]

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.[7] 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.[8]

In 1995, Michael Schrage argues that not all customers are alike in their capacity to bring some kind of knowledge to the firm.[9]

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.[10] However, Bendapudi and Leone (2003) conclude that "the assumption of greater customization under co-production may hold only when the customer has the expertise".[4]

The term "co-creation" was initially framed as a strategy by Kambil and coauthors in two articles in 1996 and 1999.[11] 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.[12] 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.[13]

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".[14]

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.[15]

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.

In the mid-2000s, co-creation and similar concepts such as crowdsourcing and open innovation were popularised greatly, for instance by the book Wikinomics.

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".[16] 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).[17] Complete co-creation is regarded as a practical answer to the predominantly academic and holistic understanding of co-creation.

The concept of value co-creation has been also applied to the educational field[18][19] where Dolinger, Lodge & Coates define it as the "process of students' feedback, opinions, and other resources such as their intellectual capabilities and personalities, integrated alongside institutional resources".[20]

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.[21] 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.[22]

The four building blocks of interaction

Prahalad and Ramaswamy[23] 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,[24] 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

Advantages

Co-created value arises in the form of personalized experiences for the customer and ongoing revenue, learning and customer loyalty and word of mouth for the firm. Co-creation also enable customers to come up with their own idea which might help the firm.

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."[25]

STEPS INVOLVED IN CO-CREATION

There are just two steps involved in co-creation and they are: 1. SUBMISSIONS- customers must submit contributions. 2. SELECTION- firm must select a few valuable contributions from a larger set.

Challenges

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

A design contest or other co-creation event may backfire and lead to negative word of mouth if the expectations of the participants are not met.[26]

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.

Unless customers are incentivized in an attractive way, they may be reluctant to participate and benefit the company.

See also

References
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  2. O'Hern, M.S. & Rindfleisch, A. (2010). Customer Co-Creation: A Typology and Research Agenda. In: Review of Marketing Research, vol. 6, p. 84-106. Retrieved on the 10th of February, 2020.
  3. https://www.coursera.org/learn/marketing-digital/lecture/GULT7/customer-co-creation-part-1
  4. Bendapudi, N. & Leone, R. P. (2003). Psychological Implications of Customer Participation in Co-Production. Journal of Marketing. Vol. 67, No. 1.
  5. Czepiel, John A. (1990), "Service Encounters and Service Relationships: Implications for Research". Journal of Business Research. 20 (1), 13-21.
  6. 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.
  7. Normann, R.; Ramirez, R. (July–August 1993) "From Value Chain to Value Constellation: Designing Interactive Strategy". Harvard Business Review. pp. 65–77.
  8. 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.
  9. Schrage, M. (July–August 1995). "Customer Relations". Harvard Business Review. pp. 154–156.
  10. Firat, A. Fuat; Dholakia, Nikhilesh; Venkatesh, Alladi (1995). "Liberatory Postmodernism and the Reenchantment of Consumption". Journal of Consumer Research, 22 (3), 239–67.
  11. Zwass, V. (2010). "Co-Creation: Toward a Taxonomy and an Integrated Research Perspective". International Journal of Electronic Commerce. Volume 15, number 1. pp. 11–48.
  12. 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
  13. 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
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  17. Pieters, Maarten; Jansen, Stefanie (2017). The 7 Principles of Complete Co-creation. Amsterdam: BIS Publishers. p. 15. ISBN 978-90-6369-473-9.
  18. Akhilesh, K. B. (2017), "Co-Creation and Learning", SpringerBriefs in Business, Springer India, pp. 45–54, doi:10.1007/978-81-322-3679-5_2, ISBN 978-81-322-3677-1 Missing or empty |title= (help)
  19. Ferri, F., D'Andrea, A., D'Ulizia, A., Grifoni, P. (2020). "Co-Creation of e-Learning Content: The Case Study of a MOOC on Health and Cyber-Bullying". Journal of Universal Computer Science: 200–219.CS1 maint: multiple names: authors list (link)
  20. Dollinger, Mollie; Lodge, Jason; Coates, Hamish (2018-04-27). "Co-creation in higher education: towards a conceptual model". Journal of Marketing for Higher Education. 28 (2): 210–231. doi:10.1080/08841241.2018.1466756. ISSN 0884-1241. S2CID 169408029.
  21. Prahalad, C.K.; Ramaswamy, V. (2009) "Co-Creation Connection".
  22. 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.
  23. Prahalad, K. C.; Ramaswamy, V. (2004). The Future of Competition: Co-creating Unique Value with Customers. Boston: Harvard Business School Press.
  24. Ramaswamy, Venkat; Ozcan, Kerimcan (2014). "The co-creation paradigm". Stanford University Press. ISBN 9780804790758. Retrieved 28 May 2017.
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  26. Schwab, P (2010). The dark side of cocreation. Into the minds. Archived from the original on 2019/05/08.

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. 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.
  • Chaney, D. (2012). The Music Industry in the Digital Age: Consumer Participation in Value Creation. International Journal of Arts Management, 15(1), 42–52.
  • 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 8, issue 2, pp. 149–161.
  • 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, B. (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.
  • Holbrook, M.B. (June 1987). "What Is Consumer Research?". Journal of Consumer Research. Volume 14, Number 1. pp. 128–132.
  • Howe, Jeff (June 2006). "The Rise of Crowdsourcing". Wired. Retrieved March 17, 2007.
  • 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. (2000) "Co-opting customer competence". Harvard Business Review, January–February.
  • 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.
  • 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.
  • Stern, S. (2011). A co-creation primer. Harvard Business Review.
  • 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
  • Wikström, S. (1996). "Value Creation by Company-Consumer Interaction". Journal of Marketing Management. 12, 359–374.
  • Xiang, Z.; Rongqiu, C. (2008). "Examining the Mechanism of the Value Co-Creation with Customers". International Journal of Production Economics. 116. pp. 242–250.


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