7                                                                                       Co-creation:                      ...
Contents                                                                            0102   Introduction / 03 Summary: new ...
Introduction                                                      02What if we truly believed that...1 we are all creative...
Summary: new pathways to value                                                                               03Co-creation...
Contexts: the drivers of co-creation                                                                                      ...
Contexts: the drivers of co-creation                                                                                      ...
Contexts: the drivers of co-creation                                                                                      ...
Definitions: the co-creation space                                                                                        ...
Definitions: the co-creation space                                                                                        ...
Definitions: the co-creation space                                                  09Carving out a space for co-creationA...
Origins: the intellectual roots of co-creation                                                                            ...
Origins: the intellectual roots of co-creation                                                                            ...
Origins: the intellectual roots of co-creation                                                                            ...
Benefits: the impact of co-creation                                                                                       ...
Benefits: the impact of co-creation                                                                                       ...
Benefits: the impact of co-creation                                                                                       ...
Success: managing co-creation                                                                                             ...
Success: managing co-creation                                                                                             ...
Future challenges                                                      18Whenever products are developed in collaboration ...
Appendix                                                                                                                  ...
References                                                                                                                ...
References                                                                                                                ...
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Co creation: new pathways to value


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Via G Hill

Text found at http://www.promisecorp.com/newpathways/

At Promise we are excited about co-creation as a new approach to innovation and customer involvement. We think that co-creation is hard to ignore because, under the right conditions, it helps companies build value and reduce risk, in areas including strategy, innovation and new product development. But we've noticed that co-creation as a term is used fairly indiscriminately and that, if anything, there's a strong whiff of scepticism in the air.

Last Autumn, Promise commissioned LSE Enterprise to conduct a review of what the peer-reviewed journal sources have to say about co-creation (and its sister concepts). We've focused on articles with evaluative content and case studies. We think it's the first time anyone's done this in a systematic way and we're keen to share our findings. We hope this report will add to the debate and go some way to making the case for a co-created future for businesses.

The research has led us to generate a new, more focused, definition that highlights creativity, collaboration and the social dimensions necessary for co-creation to flourish. For us "co-creation is an active, creative and social process, based on collaboration between producers and users, that is initiated by the firm to generate value for customers."

Our report covers the following key areas:

Contexts: the drivers for co-creation
Definitions: the co-creation space
Origins: the intellectual roots of co-creation
Benefits: the impact of co-creation
Success: managing co-creation

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  • Wonderful..very detailed insight. But Co creation of value in usage( & not exchange) is still a mystery which needs a detailed strategy development
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Co creation: new pathways to value

  1. 1. 7 Co-creation: 14 New pathways to value 5 An overview 5 5 5 4 9 9 9 4 7 4 4 9 4 18 11 11 18 11 18 18 2 10 3 7 43 8 8 3 8 3 6 6 4 6 22 22
  2. 2. Contents 0102 Introduction / 03 Summary: new pathways to value04 Contexts: the drivers of co-creation / 07 Definitions: the co-creation space10 Origins: the intellectual roots of co-creation13 Benefits: the impact of co-creation / 16 Success: managing co-creation18 Future challenges / 19 Appendix / 20 References 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56
  3. 3. Introduction 02What if we truly believed that...1 we are all creative2 breakthroughs come from unreasonable requests3 the real source of results is relationshipsAt Promise we do. We also think that these axioms support theemergence of co-creation as a new approach to innovation andcustomer involvement.But we’ve noticed that co-creation as a term is used fairlyindiscriminately and that, if anything, there’s a strong whiffof scepticism in the air. That’s why we asked LSE Enterprise totake a look at what’s been written on the subject and helptrace the origins and future of co-creation.We think that co-creation is hard to ignore because,under the right conditions, it helps companies build valueand reduce risk, in areas including strategy, innovationand new product development.We hope this report will add to the debate and go some wayto making the case for a co-created future for businesses.Dr Nick CoatesResearch Director, Promise.The report you’re reading is a summarybuilding on research undertaken by theLSE Enterprise team. You can downloadthe full report from our website at:www.promisecorp.com/newpathways
  4. 4. Summary: new pathways to value 03Co-creation is a new discipline. In the sources we’ve reviewed,we’ve found a wealth of applications, but a lack of conceptualclarity. This report aims to disentangle some of the knots.We think this report is important because it stresses thevalue of co-creation as...1 Creative: co-creation is a form of collaborative creativity,that’s initiated by firms to enable innovation with, ratherthan simply for their customers2 A rich mix: co-creation draws on a combination ofmanagement and marketing approaches, the psychoanalytictradition, and processes related to innovation, knowledgeand group decision-making3 A facilitated process: co-creation thrives on fantasy,play and creativity, but the role of the facilitator orfacilitating organisation is often overlooked4 All about relationships: we stress the importance offocusing on the quality of the interactions between peoplerather than on technologies per se5 A learning process: we need to intertwine knowledgeand processes in an overall co-creation framework, ratherthan just enabling co-creativity, if we want to achieve widerorganisational impactA brief note on the report: LSE Enterprise, based on a review 2008 to February 2009 by a teamthe document you’re reading is a of articles published in the top consisting of Patrick Humphreys,summary of the full research report business, management and social Alain Samson, Thorsten Roserpublished separately. The content sciences journals. The research and Eidi Cruz-Valdivieso.has been produced by a team from was undertaken from September
  5. 5. Contexts: the drivers of co-creation 04Businesses in today’s economy have to continuously reinventthemselves in order to adapt to increasingly complex and dynamicmarket realities. Standardisation makes it difficult for companiesto differentiate themselves from competitors. Markets are morefragmented than they used to be; and consumers have unprecedentedaccess to information and networks. At the same time technologieshave created new modes of production and innovation that enableand encourage greater degrees of participation and collaboration.The challenge for brands The co-creation revolution A trend that’s hard to ignoreConsumers are both demanding The aim of co-creation is to enhance While the strategic benefits ofgreater levels of personalisation in their organisational knowledge processes co-creation may be evident, we needconsumption experience and placing by involving the customer in the creation an understanding of how co-creationbusinesses under increasing pressure of meaning and value. Co-creation practices differ from other forms ofto co-create value with them. This is blurs the boundaries of the firm by customer involvement. What we canreinforced by consumers ‘outsourcing’ innovation and value say is that co-creation offers a highly creation to the customer. Co-creation promising and more holistic, approach> seeking and accessing information transforms the consumer into an active to value creation. Despite the fact that online, across geographic boundaries partner for the creation of future value. some of the theoretical and empirical> providing unsolicited feedback to foundations of co-creation still have to companies This mutual relationship affects both be developed, co-creation cannot be> engaging in thematic consumer consumer and company. It re-shapes safely ignored by companies who want communities, including those the way in which we think, interact and to succeed in today’s marketplace. fostering consumer word-of-mouth innovate. Customers are increasingly> ‘Experimenting’ or co-creating with becoming change agents of the firm, other consumers to find their own as well as the actual owners of solutions to problemsi organisations’ main means of production: knowledge. For the firm, involving consumers in the value-chain leads to a blurring of boundaries between research and development, marketing and consumer research. Co-creation cannot be safely ignored by companies who want to succeed in today’s marketplace.
  6. 6. Contexts: the drivers of co-creation 05Invention for the Blink generationInnovation is starting to recognise the value of intuitionand implicit knowledge, opening up products to reshapingprocesses, and creating active dialogues with consumers.1 Forethought and intuition 3 The dominanceThe way we understand inventionis changing. For social scientist Nigel of ‘value co-creation’ Invention or innovation, however, Full spectrumThriftii, the shift can be epitomised is just one aspect of co-creation. customerby 3 trends: (1) the mobilisationof forethought (2) the co-creation of In fact, co-creation has been associated with a rather mixed bag of thinking in involvement:commodities with consumersby activating their ingenuity, and the business and marketing literature, ranging from innovation with the Nike(3) the construction of a space that customers to the ‘experience economy.’ approachivfosters innovation. Forethought, The concept of ‘co-creation of value’according to Thrift, can be viewed as has become a dominant idea. > Involving customers in dialogue,a form of tacit knowledge rather than It occurs whenever consumers interact both individually or as part ofexplicit, formal knowledge derived with companies or products and thematic communitiesfrom cognitive processes. Increasingly, thereby have an active role in > Generating ideas from consumersbusinesses have come to value intuition the shaping of their experience and about product improvements,or implicit thought (see for example ultimately value perception. including options for theMalcolm Gladwell’s bestselling book customisation of Nike productsBlink) as a source of expertise. This is This understanding builds on forms of > A competition for a select groupespecially true for large companies. dialogue that are on the rise and evident of customers to design a new in a range of situations. For example, Nike shoe2 The collective increasing numbers of patients bring in > Co-design and customisation ofintelligence of consumers their own knowledge when discussing shoes on ‘Nike ID’ web siteAt the same time, consumer diagnoses and treatment options > Creating a social networkingknowledge, derived from experience, with healthcare providers. In software site, Joga.com, which included useris increasingly being viewed as a development, beta testing with users generated content that allowedkey asset. Companies are designing has been practised for a number of the upload of videos showing offand marketing products in ways that years, and has become easier with the individuals’ soccer skillsappeal more to the emotional side internet. If infrastructures for an ongoing > Sponsoring experiences likeof consumers. dialogue with customers are in place, soccer competitions managers can add value by harnessing > iPod sport kit and sensor thatAccording to this view, co-creation consumer competence, managing can be placed in Nike shoes andbetween firms and customers, as well personalised experiences and shaping connected to an iPod, whichas production and consumption, is expectations.iii then provides workout-basedabout tapping successfully into the voice feedback or particular songscollective intelligence of consumers. to keep the runner goingAided by information technology, which > Helping customers developmakes interaction spaces like online good training methods thatuser communities possible, co-creation reduce the risk of injuryallows for a continuous process inwhich products are tuned or recast. Identifying the co-creative elements in this wide range of customer involvement activities is one aim of this report.
  7. 7. Contexts: the drivers of co-creation 06The way this new age of invention engages consumersrecognises a shift in marketing thinking towards service-dominant logic and the experience economy.The Experience Economy Service-Dominant Logic From ToBoth dialogue and experience are Instead of value or utility embedded Passive buyers > Active agentskey ingredients of consumer-brand in goods, the new Service-Dominant Listening > Dialoguerelationships. Some have argued that (S-D) logic focuses on the co-creation Consumers as buyers > Consumersthe product is now ‘no more than of values and relationships. People are as resourcesan artefact around which customers no longer seen as buying either goods Researching need > Understandinghave experiences’,vi a view which took or services, but products that provide experiencescentre-stage in Pine & Gilmore’s The a service and value that depends on Reliance on experts > ConsumerExperience Economy (1999).vii However, customer experience. This means far- knowledgePrahalad and Ramaswamy argue that reaching implications for companies’we need a deeper, more integrated understanding of customers:approach that goes beyond ‘stagingexperiences’, outsourcing activities ormarginal customisation. Throughout ‘The customerthe supplier-customer relationship,consumer-company interactions mustprovide compelling experiences withdifferent dimensions of choice. From the is alwaysperspective of innovation, this meansthat companies have to abandon thetraditional mindset of ‘company think’ a co-creator(e.g. R&D, manufacturing, marketing andsales, etc.) leading to the developmentof ‘feature rich’ and ‘experience poor’products, in favour of ‘customer think’ of value’(e.g. lifestyle, expectations, needs &desires, etc.).viii Online turning it into managed or facilitated sales. Today, the LEGO company offers communities: co-creativity and mass customisation. both personalisation and co-creation opportunities to its target customers co-creating In the late 1990s, the LEGO company started listening to the adult LEGO of 4-12 year-olds. Customers can engage in virtual design and LEGO communities of practice LUGNET (the building with the option of buying a LEGO Users Group Network) and the manufactured version. Virtual models The creation of (online) communities newsgroup rec.toys.lego. LUGNET can be shared with other LEGO by consumers centred around a then created a forum specifically for community members. In some cases, particular product category or direct communication between its designs are appropriated by LEGO brand can provide both a problem members and LEGO Direct employees. for mass production, with design and opportunity to companies. Within the LUGNET community, users recognition given to the creator.xii The key for some companies is to create virtual and real worlds out of become participants themselves or LEGO blocks, by use of a CAD-based facilitators of otherwise naturally- configuration system. occurring customer communities. The sportkiting community is one Not surprisingly, the LEGO company example where this has happened began to look into possibilities of , while LEGO is one of the most harnessing the potential of this frequently mentioned cases of a community and its processes to support company that successfully harnessed LEGO product usability among younger consumers’ independent creativity by audiences, as well as marketing and
  8. 8. Definitions: the co-creation space 07Towards a definition of co-creationCurrently views and definitions of co-creation differ from contextto context and according to disciplinary outlook. For example...1 Marketing theory has used 2 Innovation management has 3 The internet communityco-creation quite broadly as any form highlighted the type of co-creation appears to have been more interestedcustomer involvement in the construction between companies and consumers in not only consumer empowermentof product or brand experience and that may occur in the beginning of through co-innovation, but alsoconsequently perceived value. the value chain, namely early product the democratic potential of mass development stages. collaboration tools like Wikipedia.The table below illustrates some of the ranges of applications discussed under the co-creation banner Selected co-creation examples mentioned by commentatorsxiii Company Name Co-creation example Source BMW ‘M division’ for customisation of cars, also leading to Gloor and Cooper, 2007 general product improvements; engineering challenges: collaboration between customers and BMW engineers Ducati Tech Café Virtual Customer Environment for Nambisan and Nambisan, product conceptualisation 2008 / Sawhney et al, 2005 Eli Lilly Internet-based platform to support collaborative Sawhney et al, 2005 innovation involving pharma customers (patients doctors, clinicians, researchers, health care providers) IBM Worldwide partner innovation centres to facilitate Blazevic & Lievens, 2008 collaborative innovation IKEA Customers can design their own kitchens in interaction Wikström, 1996 with a trained sales representative LEGO LEGO Factory for personalised LEGO models and sharing/ Zwick et al., 2008 co-creation of virtual LEGO models with other consumers P&G P&G Advisor programme where consumers contribute Blazevic & Lievens, 2008 / to product development (try new items and provide Sawhney, 2002 qualitative feedback) Philips Electronics Collaborated with software ‘hackers’ for re-programming Prahalad & Ramaswamy, 2004 of ‘Pronto’ universal remote control by providing access to programme files, codes and other information PSK (‘Centre for Creative Art’) Co-creation as a strategic tool for organisation Chung, 2009 learning and innovation Samsung Virtual Product Launch Center’ to enlist customers’ Nambisan and Nambisan, help in diffusion of new product information; 2008 shaping peer customers’ purchase behaviour Starbucks Business model where value is in experience Lusch et al, 2006 (determined by the customer) Threadless.com Customers that submit, inspect, and approve t-shirt Elofson & Robinson, 2007 graphic designs Unilever Involving consumers in co-creation of concepts, Medeiros and Needham, packaging, advertising and activation 2008
  9. 9. Definitions: the co-creation space 08The co-creation family of conceptsAssociated concepts and approaches, such as open innovation(e.g. Linux operating system), mass customisation (e.g. NikeID), user-generated content (e.g. youtube.com), co-production(e.g. Ikea), mass-collaboration (e.g. Wikipedia) and collaborativeinnovation (e.g. Airbus) all contain an element of either(1) purpose-driven innovation (2) consumer involvementor (3) cross-boundary collaboration.So what do we think 2 The type of value created: is itco-creation really means? standardised value (benefiting allOne way of answering this question customers), customised valueis by introducing two dimensions: (e.g. mass customisation of goods or services) or personalised value1 The role of the firm: is the process (e.g. as in co-produced services)?more consumer-led or producer-led?While mass collaboration may be By applying these two filters we canmainly user-driven, other approaches start to see how co-creation can betend to be initiated and orchestrated distinguished from related concepts.by the firm. The map below illustrates where co-creation sits and how all concepts depart from mass production: Co-creation matrix Consumer led Mass collaboration (Wikinomics) User generated content Product Product type (value): type (value): Standard Personalised Co-creation (co-innovation) Co-production Personalisation (’Tailor made’) Mass Mass customisation production Producer led
  10. 10. Definitions: the co-creation space 09Carving out a space for co-creationAll co-creation approaches share two main features:a) the expansion of product or organisational boundariesand b) the involvement of the consumer. Co-creationas collaborative innovation with customers adds a thirddimension c) a focus on co-creating new values withcustomers that is initiated by the firm.A new definition for co-creation According to our stricter definition,Co-creation of value in the business co-creation as an active, creative andand marketing literature has been social process entails:discussed as an interaction betweeneither consumers only, consumers and 1 Connections: interactionsproducts, or customers and businesses, between people, such as companiesstressing different levels of creativity and customers, not interactionsor impact at different points in the between consumers and products onlyvalue chain. We agree with Prahalad 2 Collaboration, rather than justand Ramaswamy’s more stringent involvementdefinition of co-creation, but also 3 Co-creativity, not simplymore popular conceptions that stress co-construction or co-productioncollaboration, indicating a need fornot only compelling experiences,but a truly creative involvementof customers. We also stress the needfor social structures to support thequality of interactions necessary forco-creation to succeed. Co-creation is an active, creative and social process, based on collaboration between producers and users, that is initiated by the firm to generate value for customers.
  11. 11. Origins: the intellectual roots of co-creation 10Co-creation can be seen as a coming-together of aspectsof marketing and management theory, psychologyand techniques derived from group decision-making,innovation and knowledge processes.1 Co-creation and the Ultimately, decision-making ispsychoanalytic tradition a key process relating to howAt the heart of co-creation are perceptions are formed and howtechniques for creative play which experience is rendered by and amongresemble both group-decision making customers. These decisions result notand psychotherapy. Co-creation in just in experiences, but representationsbusiness environments eliminates the of information and knowledge re-boundary between the firm and its produced and ‘owned’ by the consumer.customers; just as in psychotherapy How co-creation can create decisionanalyst and analysand are able to be markets involving vast numbers ofboth subject and object as they reflect networked consumers needs furtheron their desires, identities and wishes. exploration.Co-creation also acknowledgesconsumers’ subjectivity, which isinherently idiosyncratic, contextualand experience-based.Co-creation facilitates the relationshipbetween customer and company, whilecreating shared meaning and a commonsense of purpose. Since the free, ‘safe’and unhindered space is not normally Co-creation inavailable in social environments, such as innovation practiceformal organisations, co-creation is drivenby facilitation. By staging encounters(both off- and online), facilitators fosterthe transitional space necessary for co-creativity to unfold and succeed. Co-creation of Value2 Co-creation as Value= personalised meaningdecision-making processes Marketing & BusinessCo-creation can also be understoodas a decision-making support system in Cross-disciplinary Co-creationwhich the customer becomes involved processesin decision-making geared towards Co-creativitythe co-creation of (future) value. Decision makingThe customer has to be provided with Co-creation Co-creation supporta space in which he can make his/her of Value of Meaning Innovation & Changeown decisions. At the same time, Marketing Psychology managementthe firm has to learn from naturally & R&D Sociology Leadershipoccurring group decision-makingprocesses, as well as from the contextsin which these occur. Intellectual Lineage of Co-creation as Collaborative Innovation between Firm and Customers
  12. 12. Origins: the intellectual roots of co-creation 11Co-creation as knowledge process Making the customer a co-producer Consequently, it is not just theCo-creation also represents a new or co-creator aims to generate frequency of interaction, but thetrend in innovation practice, marketing more value than through traditional quality of the relationship thatinnovation and customer relationship transactions. This implies a longer companies form with and facilitatemanagement. In a technology-enabled process of relationship-building and it is among their customers, whichworld of connected consumers, the generally assumed that a breakthrough will determine how knowledge isconsumer holds increasing know- is more likely to occur with more created, shared and transferred.how.xiv Consumers are no longer passive frequent and intense conversationsrecipients of brand offers, but able to between collaborators from diverseaccept or reject company claims backgrounds.xvi Co-creation also allowsbased on their own experience and for the formation of a more intimateknowledge.xv This is especially evident relationship between the technologyin the context of product reviews, originator and the customer, as a jointbrand identification and loyalty, as development project where bothwell as corporate reputation and contribute their expertise.xviisocial responsibility.It is not just the frequency of interaction,but the quality of the relationship thatcompanies form with and facilitate amongtheir customers, which will determine howknowledge is created, shared and transferred. Co-creativity: Although the competition includes an online forum and possible Though it may be an effective form of purpose-driven innovation, more than just interaction between the company crowdsourcing of this kind is and consumers, while there are many often a heavily controlled process crowdsourcing teams made up of collaborating involving a relatively one-sided flow individuals, the Netflix Prize is less of information from customers to Our definition sees co-creation about creating a product based on companies. Co-creativity, on the other as more than the kind of tightly- firm-customer collaboration than it hand, is more fully engaged, departing staged processes of which is about the competitive ‘sourcing’ from the idea that people are vessels firm-initiated ‘crowdsourcing’ of a solution to a specific problem. of knowledge that can simply be competitions are a good example. tapped into by a company in the form of downloadable information. For example, the world’s first DVD-by-mail service, Netflix, has staged a competition (www. netflixprize.com) ‘to substantially improve the accuracy of predictions about how much someone is going to love a movie based on their movie preferences.’ To win the grand prize, contestants have to improve Netflix’s existing algorithm’s predictive power by at least 10%.
  13. 13. Origins: the intellectual roots of co-creation 12An iterative processIn the context of co-creation, knowledge creationand transfer have to be understood as an iterativeprocess involving the construction and de-constructionof experience. As such, co-creation processesgo through various cycles of value development.An adaptive framework A developmental toolCo-creation can lead to future pathways Co-creation can also help organisationsof value from which both customer and re-develop themselves by fosteringfirm can benefit. Rather than viewing inventive communities internally andit as a tool for the creation of ideas, externally. As such, co-creation is aco-creation should thus be seen as an process that can facilitate changeadaptive framework that facilitates by intertwining organisationalinnovation in a ‘boundary-spanning’ knowledge and learning processesway by connecting customers and other with relationship building and themembers of the organisation. creation of new value and meaning. Tacit Product (in -u se) knowledg E x p l i c it k n ow e Tacit dg le e Experience Improvement / innovation Product (in -u se) knowledg E x p l i c i t k n ow e Tacit dg le (in e Experience Product -u se) knowledg E x p l i c it k n ow Knowledge flow between e dg product and experience: le e Experience Continuous collaborative innovation with consumers Time
  14. 14. Benefits: the impact of co-creation 13The benefits of co-creation cut both ways. While consumersbenefit from greater personalisation and value as a resultof co-creation processes, the motivation for companiesis about building competitive advantage by turningjust-in-time knowledge from customers into just-in-timelearning for their organisation.Access to wider, richer experiences > Increased attitudinal loyalty inWhile the literature on co-creationoften fails to raise critical issues, processes of customer-supplier co-production (‘constructive customer Proctor & Gamble’sdiscussions of benefits are abundant. participation in the service creation Connect + DevelopIn new concept development,collaboration increases the number and delivery process’)xviii programmeof sources of new ideas in innovation. > Higher perceived value of futureIt enables cross-fertilisation and idea co-creation, satisfaction with service ‘Connect + Develop’ is P&G’s versiongeneration through shared knowledge recovery, and intention to co-create of open innovation that encouragesand experiences. By giving R&D value in the future as a result of and enables partners and otherpersonnel greater access to a richer stock customer participation in a self-service stakeholders to contribute andof experiences and stories, collaboration service recovery process.xix assess new ideas. The programmecreates a greater potential for recognising was a response to what P&G saw aspossible technology applications. > Greater satisfaction and commitment a defunct innovation model: due to participation or co-operationCollaborative teams bring a greater body with a service provider.xx “By 2000, it was clear to us that ourof knowledge to bear, enabling more invent-it-ourselves model was notrapid and numerous design iterations. > Increased likelihood of positive capable of sustaining high levels word-of-mouth with higher of top-line growth. The explosion ofBetter, quicker, less risky innovations levels of customer participation in new technologies was putting everSpecific innovation benefits for service delivery.xxi more pressure on our innovation”xxiicompanies that are credited to customerinvolvement in the literature (particularly Online collaboration: In a 2004 interview with Businesswhen assisted by technologies such as more than just innovation outcomes Week, P&G’s Chief Technology Officerthe internet) have included: Research on the effect of customer declared: ‘we estimated when we involvement in innovation is a not started about three years ago, we had> Increased speed to market common. In addition, companies about 20% of our ideas, products, and> Lower cost; higher profitability often take the beneficial effect of technologies that came from totally> Better product quality and greater collaborative innovation with consumers outside P&G. Today, we’ve got about satisfaction for granted, thereby overlooking the 35%, and our target is to get to 50%.> Reduced risk broader impact that this process has It’s also a tremendous productivity on customer experience. enhancer. This has actuallyFrom experience to advocacy occurred with a 20%In addition to more direct innovation Given that much co-creation with reduction in the R&Doutcomes, there are also numerous consumers occurs online, the impact investment we make.’xxiiiintangible benefits that can spring from of Virtual Customer Environment (VCE)customers’ involvement in co-creation participation is a good starting point. P&G claim that theprocesses. Studies have cited, among One study based on a sample of initiative has ledother things: consumers participating in IBM and to over 1,000 active Microsoft VCEs showed that positive agreements.xxiv customer interaction experiences and attitudes generated in such settings are associated with both future participation and attitudes towards the host firm (based on perceived reputation, quality consciousness, customer friendliness, etc.).
  15. 15. Benefits: the impact of co-creation 14Evaluating the success of co-creation strategies calls for amulti-dimensional approach to impact assessment. Measurescan focus either on macro, meso or micro levels of performance, e.g.number of service improvements vs the quality of the co-creationprocess vs the amount of ideas generated through co-creation.Measuring impact: Example: In an experiment on Example: Two concept cars previouslyfrom subjective to objective mobile phone service innovation featured on Volvo’s virtual customerMany KPIs focus on the success or it was found that service innovations environment (VCE) have gone intofailure of generated products.xxv We have suggested by users were considered production. The ‘Adventure’ concept caralready referred to benefits related to to be significantly more innovative became the XC90, and the ‘Performance’improved speed, volume and quality than those generated by professional concept cars later became the S60Rof co-created products and services. service developers.xxvi and V70R models.xxviiEarlier on in the innovation process, Further down the line a company’s Co-created innovation can leadsubjective measures include ‘perceived co-creation outcomes may be to spill-over effects such as spin-offusefulness’ or ‘innovativeness’. assessed by the number of successful products or more general cross- products that have benefited from pollination of product ideas. Once we consumer input as opposed to reach the in-use stage, success can be purely in-house NPD. measured through customer satisfaction and loyalty (including word of mouth) as well as through financial indicators such as increased market share.Measuring impact: co-creation KPIsProduct-focused Measures and KPIsof Innovation/Co-creation Success Measures & KPIs of innovation/co-creation success Objective Cost reductions New/improved product Number of > Revenue new patents > Pro tability > Market share Time to Time to market for Time to break-even development new products or for new product Assessment of new ideas improvements introductions Customer Number of new > loyalty product ideas > WOM Perceived innovativeness: Technological acceptance: originality/value/ Customer - Perceived usefulness realisability of product ideas satisfaction - Perceived ease-of-use, etc. Subjective Ideation Evaluation stages Market/in-use
  16. 16. Benefits: the impact of co-creation 15Impacts on the organisation itselfCo-creation success can also be evaluated from anorganisational point of view. Prahalad and Ramaswamyclaim that organisations in the co-creation age will haveto become increasingly flexible, while managers trained innegotiation and collaboration, along with cross-boundaryknowledge transfer skills, will become essential.There are general areas we can Since co-creation can be regarded At an organisational level,expect to be affected by co-creation: as a new way of practising innovation customer involvement may within firms, especially when ultimately increase overall flexibility1 Co-creation has a direct impact employees interact with external and adaptiveness. By speeding on traditional innovation practices stakeholders, this will also have an up innovation processes and processes. effect on how innovation is practised themselves, co-creation has thus and lived within a company. the potential to systematise and2 Co-creation can affect the quality enable change through innovation. and speed at which decisions are As implied previously, co-creation Finally, co-creation may also make made in relation to the development may also increase customer companies more attractive for and filtering of ideas. identification with products and the employees, as participating in brand through active involvement, direct value creation (independent3 Co-creation will enable creativity while sensitising managers towards of their actual work position) at individual and group level supporting new ideas and a may trigger identification and and potentially enable customer more participatory leadership style attract future talent. knowledge development and to help foster innovation and transfer across the organisation. creativity at team level.4 Co-creation will increasingly be used as a way of creating strategy collaboratively. In order to trigger change by innovation co-creation needs to be implemented as disruptively as necessary and as non-disruptively as possible.
  17. 17. Success: managing co-creation 16Questions to considerCo-creation, according to our definition, stands for creativecollaboration processes between an organisation and itscustomers. Depending on the size and market positioningof the firm, the ways in which this collaboration takes placemay vary. Any company considering a co-creation strategyneeds to consider the following 6 questions:1 Who will be e.g. standardised value (benefiting all customers), customised value Online customerinvolved? (e.g. mass customisation of goods or involvement services) or personalised valueThe ‘locus of co-creation control’ – (e.g. as in co-produced services). A 2006 article by Prandelli andi.e. who’s in the driving seat - differs colleaguesxxxi has given somefor different product developmentor innovation regimes. Companies 3 Where does indications of where in the NPDmay want to involve existing it occur? process companies tend to involve customers the most. The studycustomers, customers of competitors looked at online tools to support(latent customers) and non-users One of the core questions of collaboration with customers at each(latent users). Some have suggested consumer involvement is not only for stage of the innovation process, asthat particular types of customers what purpose the consumer will be used by a sample of companies from(e.g. early adopters) may be more involved, but where in the innovation automobile, motorcycle, consumersuitable for certain types of process participation should take electronics, food and toiletriesco-creation objectives, such as place. As outlined previously, industries (hereafter, ‘food’), andbreakthrough innovation. However, potential customer involvement in toiletries industries.specific co-creation contexts and the new product development (NPD)purposes are the only reliable gauge process have generally included the Results showed that the use ofof who to involve. following stages: (1) Idea generation collaborative internet tools was and selection; (2) Design (3) Testing/ particularly widespread at the idea2 What’s the refinement (4) Support (5) Marketing/ commercialization. However, it seems generation stage in the form of traditional ‘contact the firm’ optionspurpose? that there are currently very few (90%) or feedback sessions/surveys forms of customer involvement that (37%), but they were rare for the ideaCo-creation raises important can cover the whole range of phases selection stage. Only 4% of companiesquestions about innovation focus. in the new product development in the sample allowed individual usersIt may be used to develop a specific (NPD) process.xxviii As Dahlstenxxix has to review other customers’ evaluationssolution to a problem or to develop a pointed out, NPD projects are typically and none allowed for a directspecific product – we would call this directed by stage-gate modelsxxx in interaction among those customers.purpose driven co-creation. which different types of customer inputOn the other hand, co-creation may are needed during different phases and At the product design stage, massnot be driven by any purpose at all and stages of the innovation process. customisation of functional attributespractised simply in order to produce was not uncommon (30%), but lackingnew ideas that allow for an opening at more innovative levels (one of theof entirely new opportunities. better-known exceptions to this isIn addition, the objective may be to P&G, which allows customers to sendeither continuously improve existing in their independently developedproducts or create radically new patented ideas and technologies).ones. Finally, a question of purposeand customer value may be what formof customer value should be created,
  18. 18. Success: managing co-creation 17 Collaborating eliciting views more particularly about the XC90. Meetings followed The XC90 project involved 24 participants, the majority (16) of which along the whenever the Volvo management were involved at all stages. According team had something to discuss. A to Dahlsten, the $50 compensation innovation process: third focus group emphasized interior received for each meeting by the Volvo XC90 and exterior design, involving the display of a full-scale plastic model in high-earning professional participants in the XC90 project were less of an a hotel ballroom. A final meeting was incentive than the social value they A good example of ongoing held two years into the project, giving derived from the sessions and the co-creation with the same customer participants the opportunity to drive opportunity to be heard. group along all stages of the the final version of the XC90. innovation process was the Volvo XC90 NPD project, reported by Fredrik Dahlsten,xxxiv which started with a trial meeting with a group of female customers (affluent professionals) in California, complementing traditional market research that was going on at the same time. The purpose of the first informal meeting was to extract expectations and opinions regarding SUVs in general to be used in the concept development phase. After a successful first meeting, a second meeting was set up half a year later, as a more formal focus group4 How much 5 For how long? fewer interactions and thus keep customers willing and happy to furtherinvolvement? Organisations may engage customers engage in the co-creation process. in one-off co-creation workshops, onAt an organisational level, consumerinvolvement for the purpose of co- an ad hoc project-by-project basis, in regular intervals or even continuously. 6 How do youcreation should be as non-disruptiveas necessary, while creating maximum Merely keeping a channel open for incentivise? customer feedback is not enough.benefits and value for both the As markets are constantly co-evolving, Research suggests that intrinsicallycompany and its customers. The extent frequent (and constructive) interaction motivated participants are best suitedto which innovation is open in turn has been suggested as a sensible for sustained interest and creativity,flags issues about transparency, access, form of customer involvement.xxxii although stamina may also be affectedtrust and risks occurring in collaborative The length of consumer involvement by extrinsic incentives like monetaryinnovation with customers. Strong can be both a strategic and project- rewards. Future research shouldinvolvement (including consumer based question. As noted by Lundkvist investigate aspects of participantaccess to information and corporate and Yakhlef,xxxiii significant motivation selection, incentives and motivationtransparency) is necessary for may be needed to get customers further by focusing on dimensionsmeaningful open co-innovation. cognitively mobilized, but may not be like self-selection, co-creationDisclosure has generally become an able to secure their active/sustained objectives (e.g. product type), degreesimportant corporate practice to build participation over a longer period of co-operativeness or competitiveness,trust among consumers. On the of time. However, the quality of the customer perceptions and trust, asother hand, access and transparency interaction may compensate for well as co-creation settings.in the co-creation process has leadto delicate issues about intellectualproperty: who owns the ideas Four dimensions of participant motivesgenerated when customers andorganisations co-create? Self-orientation Other orientation Extrinsic Material rewards, such as Image, status, recognition money, goods, etc. ‘showing ideas’ Intrinsic Interest, learning, Helping others, belonging enjoyment, etc. to a group
  19. 19. Future challenges 18Whenever products are developed in collaboration with playersoutside of an organisation, potential problems may also include:xxxv> Increased dependency on outside collaborators (e.g. customers)> Cost of co-ordinating the co-creation process> The need for new management skills (most notably the ‘boundary spanner’)> Different personnel management styles> Customers gaining access to confidential information and proprietary skillsCo-created value also produces new challenges, because experienceof co-creation changes consumer expectations. Personalised productsmay reduce customers’ pain threshold for dissatisfaction, for example.By giving consumers greater control, then, co-creation bringsabout new challenges that have to be dealt with throughout theorganisation, including a re-orientation of Customer RelationshipManagement in association with R&D and marketing.Either way, it’s unlikely that most businesses will be able toignore the co-creation trend in the future.
  20. 20. Appendix 19Concept Description ExamplesCollaborative innovation Gaining competitive advantage by expanding the Boeing 787:[see also Open Innovation] borders of an organization through widespread The development of the Boeing involvement and interdependence between actors at 787, ranging from concept to all levels, daily based information exchange, integration production, was done by Boeing of business processes and joint work and activities. and its global partners. For radical or discontinuous innovation, joint development and co-design are the most typical forms of networking. In the case of continuous innovation and improvement processes, the most common form of inter-company interaction is mutually-beneficial customer-supplier collaboration over an extended period of time.Consumer / customer The concept of consumer/customer involvement has beeninvolvement used in two different ways: A) Psychological: a consumer’s perceived importance, risk, symbolic value or emotional appeal of a product or product category.xxxvi B) Behavioural: When firms engage consumers/customers in some way, leading to a benefit for the firm, customer or both (e.g. as resource in product innovation or co-producer of products).xxxviiCo-production In co-production, the customer is an active participant ‘U-Scan’; Ikea in the production and delivery of a service, giving the Self-service checkouts at participant a potential to customize his or her world. supermarkets or self-assembly A broader perspective of co-production is found in the furniture interpretive marketing literature, suggesting that a fundamental characteristic of the postmodern era is the reversal of production and consumption, requiring marketers to increasingly open up their processes and systems.xxxviiiMass Collaboration A kind of collaboration model based on collective actions, Wikipedia(‘Wikinomics’): which occur while large numbers of contributors or Articles on the world’s largest participants work independently but in collaboration on a online encyclopedia, written single modular project. Projects typically take place on the entirely by internet users. internet by means of web-based collaboration tools.xxxixMass Customisation Mass customisation refers to firms applying technology Dell; Nike ID and management methods to provide product variety and Dell computers allow customers customisation through flexibility and quick responsiveness. to configure the specifications While the goal of mass production is to produce an affordable of the computers that they standardized product, mass customisation produces enough purchase variety in products and/or services so that nearly everyone finds exactly what he or she wants at a reasonable price.xxxxOpen Innovation Open innovation occurs when a company commercializes Linux; Procter & Gamble[See also Collaborative its own ideas and innovations from other firms, and seeks P&G’s ‘Connect + Develop’Innovation] ways to bring its in-house ideas to market by deploying programme enables a two-way pathways outside its businesses. External R&D can create sharing of innovation between significant value; internal R&D is needed to claim some P&G and external individuals portion of that value.xxxxi or organisations.User Generated Content User generated content can be defined as content made Youtube(UGC) publicly available through technologies like the internet, Youtube, the online video sharing reflecting a certain amount of creative input or effort that service, allows users to upload is created outside of professional practices or routines.xxxxii their own and view content generated by other users.User Involvement User involvement occurs when representatives of a target user group participate in the system [software, etc.] development process.xxxxiii
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  22. 22. References 21About the authors Patrick Humphreys (PhD), is the main scientific supervisor of the Contact research undertaken by the LSEThorsten Roser (Dipl.-Psych.) is the Dr Nick Coates Enterprise team. He is the formerfounder and current director of the Research Director director of the Institute of SocialLondon Research and Consulting ncoates@promisecorp.com Psychology at the LSE. He is a ProfessorGroup (LRCG) a network of knowledge in Organisational Social Psychologyentrepreneurs emanating from the Promise and currently the Co-Director ofLSE. Thorsten graduated in Psychology 75 Wells Street the London Multimedia Lab forfrom the University of Heidelberg and London W1T 3QH Audiovisual Composition andis a qualified business psychologist United Kingdom Communication (LML). Patrick hasspecialising on knowledge, networks Tel: +44 (0) 207 290 0290 expertise in innovative and creativeand innovation. As innovation consultant, Fax: +44 (0) 207 290 0280 decision-making, decision supporthe worked extensively with large and systems, and enhancement of resourcesmedium-sized enterprises, particularly One Thomas Circle, NW for health, culture, development,in Germany. He is currently affiliated with 10th Floor and networking. He currently leads avarious research groups at the Institute Washington, DC 20005 RTD team for the European Unionof Social Psychology at the LSE, including Tel: +1 (202)772 5019/+1 (202)870 1234 framework Project “InCaS: Intellectualthe Organisational Research Group Fax: +1 (202)955 5328 Capital Statement, Europe”, and is(ORG), the Knowledge Organisations also responsible for the LML’s jointand Development Network (KODE), as www.promisecorp.com initiative with ZenZone Media Lab,well as the London Multimedia Lab for Beijing on “Spritivity Workshops”.Audio Visual Composition (LML). Author contacts Thorsten Roser: t.roser@lse.ac.uk He has been involved in initiatives Alain Samson: a.samson@lse.ac.uk involving organisational transformationAlain Samson (PhD), is a psychologist and sector development in manyand quantitative market research © 2009 Promise Corporation countries. He is chair of IFIP WG8.3.consultant with a history of both In 2006 he was programme chair forcommercial and academic work. the IFIP WG8.3 conference onHe is best known for his contributions Creativity and Innovation in Decisionto the areas of consumer word of making and Decision Support andmouth, influence and cynicism. was a sponsor of the workshop “LiveAlain has been involved in strategic dialogues between different individualsresearch for clients in various sectors, and alternative urban models in theincluding media, finance, FMCG and Pearl River Delta” coordinated bythe public sector. His approach to Vitamin Creative Space, Guangzhou.market research is frequently informed He is a founding partner of the Ludicby theories and methodologies Group, LLP and director of Spritivity(mainly experiments and surveys) from Worldwide Ltd and Papertronic Ltd.social psychology and the emergingfield of behavioural economics. Eidi Cruz-Valdivieso (MSc), has a About PromiseHe holds a PhD from the London background in clinical and community Promise is a customer-centredSchool of Economics (Social psychology and holds an MSc in consultancy. We work in the areas ofPsychology), an MA from the University Organisational and Social Psychology insight, innovation and brand strategy,of Michigan and a BA from UC Berkeley. from the LSE. Eidi has worked where we apply our unique mix ofHe has published articles related to extensively in the areas of change, marketing, psychology, research &both academic and commercial leadership, community development branding expertise to generate deepconsumer research. Alain has lived and creativity, primarily in Mexico and and lasting solutions for our clients.and worked in Switzerland, the United the US. She currently works at theStates and the UK. LSE’s Multimedia Lab for Audiovisual We pioneered co-creation techniques Composition and Communication through the 1990s. Since then, we’ve (LML). Her current research interest worked with 27 major corporations focuses on aspects of flow in relation across 51 countries on a string of to creativity and innovation, as well as winning strategies and programmes on Cross-Organisational Assessment that have driven revenues, profits, and Development of Intellectual customer and staff engagement. Capital (CADIC). Further, she is providing consultancy relating to the European Most recently we have worked with Intellectual Capital Statement (InCaS) McDonalds, Kraft Foods, Visa, Etihad and is involved in extending consulting Airlines, Prudential, Astra Zeneca, the capabilities of the InCaS consortium Dubai Government, HMRC and the to Latin America. Ministry of Justice.