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Forrester Case Study: Giffgaff uses co-creation to build a differentiated mobile service business

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In an empowered report by Forrester analyst, Doug Williams, giffgaff is highlighted for their vibrant community, run entirely by giffgaff customers using the Lithium community platform

In an empowered report by Forrester analyst, Doug Williams, giffgaff is highlighted for their vibrant community, run entirely by giffgaff customers using the Lithium community platform

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    Forrester Case Study: Giffgaff uses co-creation to build a differentiated mobile service business Forrester Case Study: Giffgaff uses co-creation to build a differentiated mobile service business Document Transcript

    • Making Leaders Successful Every DayFebruary 9, 2011Case Study: Giffgaff Uses Co-CreationTo Build A Differentiated MobileService Businessby Douglas S. Williamsfor Consumer Product Strategy Professionals
    • © 2011 Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRankings, and Total EconomicImpactaretrademarksofForresterResearch,Inc.Allothertrademarksarethepropertyoftheirrespectiveowners.Reproductionorsharingofthiscontent in any form without prior written permission is strictly prohibited. To purchase reprints of this document, please email clientsupport@forrester.com. For additional reproduction and usage information, see Forrester’s Citation Policy located at www.forrester.com. Information isbased on best available resources. Opinions reflect judgment at the time and are subject to change.For Consumer Product Strategy ProfessionalsExecutive SummaryJust a few years ago, mobile virtual network operators (MVNOs) were a dime a dozen. Big companieslike Disney and ESPN tried — yet failed — to create a mobile experience differentiated from the mainoperators in their markets. How have consumer product strategy (CPS) professionals at giffgaff, a smalloffshoot of UK mobile operator O2, succeeded where other prominent companies repeatedly failed? Theearly success of giffgaff hinges on its ability to deliver a radically differentiated service in an extremelymature market. By eschewing traditional service provider business models in favor of co-createdproducts and services, CPS professionals at giffgaff have created a distinct product experience that iscontinuously evolving via co-creation with public community members. Other CPS pros can take a pageout of giffgaff’s playbook and look for ways to leverage co-creation to launch new entrepreneurial linesof business either within or outside of their core markets.table of ContentsCo-Creation Is The Foundation Of The GiffgaffBusiness ModelGiffgaff Built The Community First And TheBusiness SecondThe Community Shapes OngoingDevelopment Of The ProductCo-Creation Allows Giffgaff To Deliver On ItsFour Key Business TenetsrecommendationsUnleash The Startup Within Your OwnCompanyAlternate ViewSupplement Or Supplant Innovation LabsWith Radical Co-CreationNOTES & RESOURCESForrester interviewed Robbie Hearn, head ofmember experience at giffgaff, and Katy Kiem,chief marketing officer and Dan Ziman, vicepresident — marketing at Lithium Technologies.Related Research Documents“Market Overview: Co-Creation Vendors 2011”January 24, 2011“How To Turn Social Media Assets Into Social Co-Creation Assets”December 1, 2010“Identify Participants And Engagements To DriveCo-Creation Efforts”October 5, 2010February 9, 2011Case Study: Giffgaff Uses Co-Creation To Build ADifferentiated Mobile Service BusinessAn Empowered Reportby Douglas S. Williamswith J. P. Gownder and Laura Wiramihardja2567
    • © 2011, Forrester Research, Inc. Reproduction ProhibitedFebruary 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals2Co-Creation Is The Foundation Of The Giffgaff Business ModelGiffgaff is a wireless mobile virtual network operator (MVNO) in the UK and is a wholly ownedsubsidiary of mobile operator O2.1Consumer product strategists at giffgaff believe that customersoften perceive traditional mobile operators as coming up short with regard to cost, billing,transparency, and customer service. To combat these shortcomings, product strategists at giffgaffdesigned a radical business model based on deep customer co-creation, which they believepromotes the core values of their company: honesty, simplicity, transparency, and mutuality.2How radical is giffgaff’s co-created business model? Product strategists designed the service with asimple tagline: “The mobile network run by you.” And they mean it: They’ve designed giffgaff to have:· No call centers. All customer-service-oriented questions are posed to the community, andgiffgaff relies upon the community to provide most answers.· No formal marketing. External marketing efforts are minimal. The community serves as themain customer acquisition channel, as members are incentivized to sign up new members.· Very few employees. As of December 2010, giffgaff employed just 14 people; this is a testamentto its ability to extract input and value from the co-creation community, thereby deliveringoperational savings to the bottom line.Giffgaff Built The Community First And The Business SecondCore to giffgaff’s success is the member community it has developed. Many companies recognizethe value of public and private communities for (among other things) developing new products thatsatisfy unmet customer needs.3In this situation, product strategists at giffgaff built the communityfirst, then co-created the service offering with the community’s help — all in a public forum.The reason giffgaff’s radical approach to co-creation works is because giffgaff is operating as anentrepreneurial business within a relatively mature market — and one the development team knowsis rife with consumer discontent. Product strategists developed the service by:· Creating and developing the plan for the business. The idea for launching a wireless servicethat was defined and largely run by its users came from Gav Thompson, head of brand strategyat O2, in the summer of 2008. O2 knows the UK wireless market inside out, so productstrategy professionals had little difficulty building a feasible business plan within the MVNO(i.e., wholesale) model. Over the next year, O2 developed and approved the business plan andregistered the company.· Selecting a vendor to host the public community. Product strategists at giffgaff began theirvendor selection process in the second quarter of 2009; they selected Lithium Technologiesas the community platform provider in August of that year. They chose Lithium based on its
    • © 2011, Forrester Research, Inc. Reproduction Prohibited February 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals3reputation in the market and its experience working with other prominent companies likeVerizon, as well as the flexibility of its technical architecture and its ability to integrate intogiffgaff’s knowledge base and eCommerce systems.· Developing and launching the site — with community engagement at the center. Lithiumcompleted development of the site within eight weeks. The community launched in October2009; upon launch, the company’s focus was not on growing the business but instead ongrowing the community, both in terms of numbers as well as level of engagement. Thecommunity began as a very “expert” group comprised largely of knowledgeable, tech-savvy men,yet over the past six months, giffgaff has seen its membership become more ethnically diverseand gain a greater number of women as well.· Launching the service and letting the community go to work. The MVNO service went liveon November 25, 2009, roughly two months after the launch of the community. To achieveoperational cost savings, giffgaff did not create a call center for customer service. Instead, itsimply hosted a “Help” section on the community, where members could post and reply toquestions. This was the biggest “unknown” in the business model, but the results have beenstrong, with response times averaging less than 3 minutes (and that’s 24 hours a day).4In thissense, the members are co-creating not just the product but also the overall product experience,which is one of the key selling points of the giffgaff service.5The Community Shapes Ongoing Development Of The ProductIt would be an understatement to say that the giffgaff community is active (see Figure 1).Membership currently numbers in the tens of thousands, yet about 220,000 posts have beensubmitted across all of the community forums. Members have been involved in: defining thecontents and prices for “goodybags” (bundles of text, voice, and data); choosing a new voicemaildial-in number (they selected 443, or GIF); independently developing giffgaff iPhone apps (whichhave been revised based on member feedback); and creating and distributing a micro SIM template,allowing members to physically alter a giffgaff SIM so that it works in an iPhone 4. Prominentgiffgaff community forums where co-creation takes place include:· Contribute. Here, giffgaff asks for ideas relating to small tweaks in service or new promotionsor other ways to generate interest in the company. Posts in this forum come from both giffgaffand members. More than 30,000 posts have been made in this part of the community.· Submit. This is the formal ideation site, with more than 13,000 posts to date. This is wheregiffgaff empowers members to share “fully fledged” ideas, as well as to vote for and commenton other members’ ideas (see Figure 2).6A total of 134 member ideas have been implementedin less than a year.7Robbie Hearn, head of member experience, considers the sheer volume ofideas (more than 200 per month) to be the biggest surprise in terms of how giffgaff has evolved.8
    • © 2011, Forrester Research, Inc. Reproduction ProhibitedFebruary 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals4· Help. The Help forum serves as the customer service department for giffgaff. With more than145,000 posts, this is where members ask questions and receive responses from one another,awarding kudos to members that provide helpful answers. While not thought of as a directforum for ideation, customer service centers can reveal shortcomings within a business thatsavvy product strategists can uncover and fix. Best Buy and Bosch Group have leveragedcustomer service channels in this way.9To validate these community-generated ideas, product strategists at giffgaff use a scorecard thatevaluates key factors such as implementation time, project cost, complexity, integration into existingsystems, commercial viability, strategic fit, and the impact of the idea on the product planning roadmap already in place.10Figure 1 Most Community Participation Lies In Helping, Contributing, And Submitting IdeasSource: Forrester Research, Inc.58657Source: giffgaff website
    • © 2011, Forrester Research, Inc. Reproduction Prohibited February 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals5Figure 2 A Distinct Ideation Site Exists Within The Giffgaff CommunitySource: Forrester Research, Inc.58657Source: giffgaff websiteCo-Creation Allows Giffgaff To Deliver On Its Four Key Business TenetsRemember those four key tenets to which product strategists at giffgaff wanted to adhere whendeveloping this new mobile service? It turns out that co-creation actually helps product strategists atgiffgaff deliver on those tenets in the following ways:· Honesty. Giffgaff creates a stronger bond between customer and provider by being honest withthe community and treating members with respect. For example, giffgaff tags submitted ideasso that the originator and the community know the status of the suggestion.11When ideassimply do not work or are too difficult to implement, giffgaff provides that honest feedback aswell. A further example: When explaining data rates to members in the community, giffgaffasks for feedback but also clearly states that if a lower price is demanded at one place in themodel, another price point must rise.12With giffgaff being honest about the tradeoffs in its
    • © 2011, Forrester Research, Inc. Reproduction ProhibitedFebruary 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals6pricing structure, the community can make informed and rational decisions, rather than simplydemanding something for nothing.· Simplicity. Giffgaff is a “bring your own phone” business, which keeps thing simple becausethe only physical product it distributes is SIM cards.13On launch, the only service plan availablewas a simple pay-as-you-go model, but engagement with the community quickly revealedpreferences for bundles of voice minutes, text usage, and data. These “goodybags” were co-created with the community and are purchased on a month-to-month basis. By keepingthings simple, product strategists at giffgaff have devised a service with easier marketing andadministration — and its members have a clear sense of what they are purchasing and theflexibility to change services as needed.· Transparency. The co-creation community has informed product strategists at giffgaff aboutjust how transparent it needs to be. The first time a network outage occurred, the communitylambasted giffgaff for taking 45 minutes to respond. The next time, giffgaff’s response was well-received, as it took just 15 minutes and accompanied it with detailed technical informationexplaining the cause. On another occasion, the community expressed its displeasure at giffgafffor removing one of several service offers that had been co-created with the community sixmonths earlier.14Product strategists at giffgaff have learned to share as much as possible withthe community, but they are also challenged to set expectations with the community aroundunreasonable levels of participation.· Mutuality. In the spirit of mutual giving, product strategists at giffgaff give members theopportunity to co-create the mobile service that best suits them. In return, members giveproduct ideas, customer service support, marketing services, and sales channels to giffgaff.Members earn points for participating in the community, providing accurate responses tocustomer service questions, encouraging friends to become members via activating giffgaff SIMcards, and generating new product ideas.15This sense of mutuality provides members with anincentive to participate.16Rec o mme n dat i o n sUnleash the StartUp Within Your OWN CompanyCPS professionals tasked with innovation or new product planning should be on the lookout forentrepreneurial startup opportunities within their own organizations. But be mindful that thesenew — sometimes radical — products or services need not emerge from entirely new markets. Inbuilding giffgaff, product strategists at O2 engaged in radical experimentation using co-creationto develop a new line of business within their own familiar product space: the UK wireless market.With this new investment, product strategists at O2 struck the right balance between risk andsafety — lessons from which other product strategists can learn.
    • © 2011, Forrester Research, Inc. Reproduction Prohibited February 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals7· Stay within your knowledge base and comfort zone . . . O2 is in the wireless business,so its product strategists knew a ton about the wireless market to begin with, includingthe terms and conditions, rates, and policies that would apply to giffgaff as an MVNO. Thisallowed product strategists designing giffgaff to leverage internal expertise to build abusiness plan that made sense.· . . . while pushing against conventional wisdom to create differentiation. Productstrategists at O2 also recognized the need to deliver a highly differentiated productexperience into the market. In this case, that meant ignoring the handset angle preferred bymany operators in favor of giving consumers what they found lacking in other operators inthe UK market. It was through co-creation via a public community that product strategistsat giffgaff were able to identify those unmet needs in the market and deliver a differentiatedproduct, while also holding true to the four key tenets of their business.A l te r n ate v i ewSupplement Or Supplant Innovation Labs With Radical Co-CreationSome companies like Google and HP provide opportunities to employees across the organizationto build out their own ideas for new products and services through a type of internal“innovationlab”process.17While these efforts can be successful for large multinational organizations, internal-driven innovation also has limitations because it focuses on what the company’s employees knowand believe. Instead, product strategy professionals at companies large and small should stepoutside the boundaries of internal conventions to explore robust new opportunities. In orderto use radical co-creation engagements to involve consumers early in the process of exploringcomplementary or substitute products, product strategists should:· Have some target areas mapped out. We aren’t suggesting that you blindly hand the officekeys to consumers. Conduct an internal brainstorming session to identify some targetedmarkets that could be explored, even at just a high level — such as mobility, outerwear, orautomotive accessories. No experience is necessary: This is an opportunity to move outsideyour comfort zone.· Engage a community. Outside-the-box thinkers or specialized experts can help you identifywhat opportunities or unmet needs may exist in those markets.18Co-creation vendors canhelp you identify and engage with those people in markets around the world by creatinga custom-built community or leveraging a vendor-cultivated community.19Communitymembers will help you find new business ideas — or provide quick feedback that thepastures you are beginning to explore are not fertile.· Worry about monetizing the idea later. Management will want to know what the ROI isbefore you even get started. Product strategists should be ready to demonstrate how radicalco-creation can help unveil new opportunities, shorten the exploration/ideation process, andreduce risk of failure moving forward. Once you are armed with a good idea, the businesscase will fall into line.
    • © 2011, Forrester Research, Inc. Reproduction ProhibitedFebruary 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals8Endnotes1 O2 itself is wholly owned by Telefónica.2 If you know your Scottish Gaelic, you’ll recognize that it’s all in the name: Giffgaff is an old term that means“mutual giving,” which is precisely how the company operates with its customers, or “members.” If you don’tknow your Scottish Gaelic, visit http://www.gaelic.com/ to bone up on it.3 Forrester has published two case studies exploring social co-creation via private online communities. Seethe December 17, 2010, “Case Study: IHG, Chase, And Consumers Co-Create A New Rewards Credit Card”report and see the January 21, 2011, “Case Study: Philips Achieves Consumer Proximity Using PrivateOnline Communities” report.4 Giffgaff recognizes that it can’t source 100% of customer service to the community, as the company has toaddress issues relating to account or credit.5 The Era of Experience is a new era of economics, where breakthrough product experiences will becomecommon, everyday events. Forrester prepares people to lead — rather than follow — in this era by adoptinga “total product experience approach” to product strategy, thus opening a Pandora’s box of compelling andconsistent digital experiences that extend the value of physical products into the realm of digital experience.See the October 18, 2010, “How To Prepare For The Era Of Experience” report.6 This site operates like other well-known ideation sites, such as Ford’s Your Ideas and Starbuck’s MyStarbucks Idea. See the September 24, 2010, “Case Study: Ford Pursues Co-Creation With An Ideation Site”report and see the September 22, 2010, “Case Study: Starbucks Uses Social Co-Creation To Drive GreenProduct Strategy” report.7 Source: vincent, “Giffgaff ideas are overwhelming,” giffgaff community, January 25, 2011 (http://community.giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413).8 The increase in volume has caused giffgaff to alter its policy of replying individually to every member whosubmits an idea in favor of replying only to those members whose ideas generate 10 “kudos” from othermembers. Giffgaff publicly announced this policy change on its blog in order to maintain transparency andwelcome any feedback. Source: vincent, “Giffgaff ideas are overwhelming,” giffgaff community, January 25,2011 (http://community.giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413).9 Source: Janelle Noble, “Video Case Study: Bosch,” Brightidea, January 26, 2011 (http://blog.brightidea.com/innovation_work/2011/01/video-case-study-bosch.html#tp) and see the June 30, 2010, “Case Study: BestBuy’s Retailer-Led Product Strategy” report.10 Source: vincent, “Giffgaff ideas are overwhelming,” giffgaff community, January 25, 2011 (http://community.giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413).11 Ideas are tagged into one of the following categories: Implemented, Accepted, Under Consideration, FutureReview, Need More Feedback, New Ideas, Duplicate (duplicates are marked, and a link to the original idea isprovided), or Not Suitable (giffgaff posts a response to inform the user why it decided that it was not suitable).
    • © 2011, Forrester Research, Inc. Reproduction Prohibited February 9, 2011Case Study: Giffgaff Uses Co-Creation To Build A Differentiated Mobile Service BusinessFor Consumer Product Strategy Professionals912 Source: “An update on data pricing,” giffgaff community, January 25, 2011 (http://community.giffgaff.com/t5/Welcome-and-News/An-update-on-data-pricing/td-p/355085).13 The lack of subsidized phones also eliminates the need for long-term service contracts.14 Source: gaffer, “£30 goodybag, a closer look,” giffgaff community, November 16, 2010 (http://community.giffgaff.com/t5/Blog/30-goodybag-a-closer-look/ba-p/157451).15 Giffgaff also has the ability to award additional points at its discretion, which it may do for a particularlyinspiring new idea. In addition, “paybacks” occur every six months, whereby active members are rewardedfor their participation in the community and for getting new members to join. In December 2010, a totalof £128,000 was awarded back to nearly 15,000 members of the community. Source: robbie28, “Christmascomes early for giffgaff community, with £128,000 bonus,” giffgaff community, December 17, 2010 (http://community.giffgaff.com/t5/Blog/Christmas-comes-early-for-giffgaff-community-with-128-000-bonus/ba-p/249535#comments); clairekav, “Spreading holiday cheer,” giffgaff community, December 3, 2010 (http://community.giffgaff.com/t5/Blog/Spreading-holiday-cheer/ba-p/208265).16 Not all participating members are involved just to earn billing credits for preloaded SIMs. In fact, at thebequest of the community, giffgaff now enables members to donate their earned credits to a charity that was —you guessed it — chosen by the community.17 In HP’s 70-year history, it has innovated in many new and established technology fields. But how doesthe firm cope with the inevitable slide — faced by most dominant global firms — into driving establishedproducts rather than innovative ones? Whether in personal computers (PCs), printers, or other consumerproducts, HP has shown a capacity for driving product innovation over a long period of time. HP hasestablished a strong core organization to drive rapid, near-term innovation via strong management, a seriesof documented processes — and a willingness to openly talk about these. See the September 21, 2009, “CaseStudy: How HP Drives World-Class Product Innovation” report.18 In order to pursue co-creation, CPS pros need to have a firm grasp of the participants they can engage andthe types of co-creation engagements they can leverage. To that end, Forrester has constructed taxonomiesof co-creation participants and engagements. See the October 5, 2010, “Identify Participants AndEngagements To Drive Co-Creation Efforts” report.19 Are you interested in implementing social co-creation engagements that move beyond Facebook, Twitter,and the occasional outreach to consumers via the corporate blog? If the answer is yes, a near-endless stringof questions will soon follow, all centered on a single word: how? Here, we offer CPS pros guidance aroundwhat social co-creation engagements require assistance from outside partners and the relative benefits ofeach type of engagement. See the January 24, 2011, “Market Overview: Co-Creation Vendors 2011” report.
    • Forrester Research, Inc. (Nasdaq: FORR)is an independent research companythat provides pragmatic and forward-thinking advice to global leaders inbusiness and technology. Forresterworks with professionals in 19 key rolesat major companies providingproprietary research, customer insight,consulting, events, and peer-to-peerexecutive programs. For more than 27years, Forrester has been making IT,marketing, and technology industryleaders successful every day. For moreinformation, visit www.forrester.com.HeadquartersForrester Research, Inc.400 Technology SquareCambridge, MA 02139 USATel: +1 617.613.6000Fax: +1 617.613.5000Email: forrester@forrester.comNasdaq symbol: FORRwww.forrester.comM a k i n g L e a d e r s S u c c e s s f u l E v e r y D a y58657For information on hard-copy or electronic reprints, please contact Client Supportat +1 866.367.7378, +1 617.613.5730, or clientsupport@forrester.com.We offer quantity discounts and special pricing for academic and nonprofit institutions.For a complete list of worldwide locationsvisit www.forrester.com/about.Research and Sales OfficesForrester has research centers and sales offices in more than 27 citiesinternationally, including Amsterdam; Cambridge, Mass.; Dallas; Dubai;Foster City, Calif.; Frankfurt; London; Madrid; Sydney; Tel Aviv; and Toronto.