Insights&Trends
I39/2014

Brand

The boom of co-creation:
brand management that
listens to stakeholders and
involves them ...
The boom of
co-creation: brand
management that
listens to stakeholders
and involves them
in its processes

the link, the “...
beginnings. Currently, the company employs more
than 7,000 people around the world and has the
turnover of more than 2,000...
Leading by

reputation

©2014, Corporate Excellence - Centre for Reputation Leadership
A foundation established by major c...
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The boom of co-creation: brand management that listens to stakeholders and involves them in its processes.

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Brand Management is becoming an increasingly multi-actor discipline that encourages customers to cooperate with companies on the individual and collective basis in the process of creating value, designing and developing innovative products and services, and even leading communication campaigns.
The idea of brand traditionally originated in the field of marketing. Only in the last few years this concept crossed the boundaries of commercial disciplines and came to be used for describing business, institutional, regional, social, professional or personal issues. At this second stage of its development, it became clear that brand is an interesting and relevant concept not only in its application to consumers. It is relevant for a broad and diverse universe of stakeholders.

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The boom of co-creation: brand management that listens to stakeholders and involves them in its processes.

  1. 1. Insights&Trends I39/2014 Brand The boom of co-creation: brand management that listens to stakeholders and involves them in its processes Brand Management is becoming an increasingly multi-actor discipline that encourages customers to cooperate with companies on the individual and collective basis in the process of creating value, designing and developing innovative products and services, and even leading communication campaigns The idea of brand traditionally originated in the field of marketing. Only in the last few years this concept crossed the boundaries of commercial disciplines and came to be used for describing business, institutional, regional, social, professional or personal issues. At this second stage of its development, it became clear that brand is an interesting and relevant concept not only in its application to consumers. It is relevant for a broad and diverse universe of stakeholders. Majken Schultz, Professor of Management and Organisation at the Copenhagen Business School (Denmark) believes that not only the boundaries between the commercial and business fields have become transparent: the boundaries that separated companies from their stakeholders have also became minimal and almost non-existent. New virtual communities of consumers encourage and drive more transparent, open and direct relations between a brand and stakeholders because the latter become increasingly active and do not passively wait for brands to initiate communication, as was common before. A Mutually Beneficial Exchange In 2004, Prahalad analysed the co-creation trends and predicted that this process will become critical for successful development of companies, for their innovations and competitiveness. Schultz notes that today, 9 years on, this prediction is turning into reality: companies in different countries and sectors (e.g. Procter & Gamble in the consumer sector, Lego in the toy production sector, Linux in the IT, Tesco in distribution or Skype in Internet communications) stake on co-creation and demonstrate positive results. The feature that best describes this new model of relationship between brands and stakeholders is the mutually beneficial exchange of ideas, products and services that results from ongoing dialogue, where relations between the parties are much closer, and This document was prepared by Corporate Excellence – Centre for Reputation Leadership and contains references to the book ‘Brand Together’ by Nicholas Ind, published by Kogan Page in 2012.
  2. 2. The boom of co-creation: brand management that listens to stakeholders and involves them in its processes the link, the “engagement” becomes the foundation for the new structure of brand management. Organizations turned into brands whose central identity is defined through support of a cause, an idea and social values that aim to improve the life standard and conditions for people. Thus, business brands are closely linked to society, its problems and solutions for these problems. Stakeholders, especially customers, know that they are an important source of influence in brand management and management of organizations, and affect the way organizations act, what they say and how they develop. Companies such as Apple in the sector of technologies, Harley Davidson in the sector of motor vehicles or Saab in the automotive sector are good examples of brands that break the moulds and venture to co-create with the consumers. The Promise of Co-creation Before putting co-creation into practice, two elements should be considered and evaluated: 1. The level of sharing information by the organization: such variables as transparency 2. The level of the company’s engagement with its stakeholders, defined through such variables as dialogue and access. Low level of information disclosure and engagement with the stakeholders is characteristic of traditional organizations. High levels of information sharing and stakeholder engagement point to organizations that are less traditional and make an emphasis on co-creation. Between these two extremes, are those organizations that are on the way to co-creation, or those that are adjusting their risks and strategies. User communities provide certain advantages to the stakeholders. The elements and benefits of these communities are presented below: • Meaning: awareness of their actions and the meaning of their life. • Self-realisation: the opportunity to follow one’s interests. • Satisfaction: the gratifying feeling of achievement. • Incentive: for maintaining an active relationship with the brand. • Reward: social recognition of the contribution. • Participation: on the individual or collective level, participation in something important. • Expression: liberation of one’s capacities and inner talent. • Fun: a happy, joyful and fun experience. The Case of Lego This Danish producer of toys was founded in 1932 and is still owned by the same family that stood at its Graph 1: Toward a theory of brand co-creation with implications for brand governance high low Organizational Self-Disclosure (Transparency + Risk) Traditional arms length approach to engaging consumer while ignoring other stakeholders, transparency restricted to providing performance data, takes on risks of secrecy (e.g., inauthentic, untrustworthy) Organization takes risks by exposing its culture and management practices but does not manage these through dialogue and access and thus risks looking foolish or being “robbed” or “hacked” by competitors high low Company/Stakeholder Engagement (Dialogue + Access) “New virtual communities of consumers encourage and drive more transparent, open and direct relations between the brand and stakeholders” Without a doubt, being a member of a community gives different advantages that users and consumers take into account when they decide to join these communities and contribute to their growth. For companies, this may mean certain risk – associated with high level of access to corporate management that these communities may achieve – especially for the company’s reputation. This risk has to be accepted, evaluated and compared to the opportunities that these activities provide. and risk should be monitored and managed. Company effort to get employees to live the brand results in greater dialogue and access with stakeholders and transparency of organizational culture and management practices, risks hypocrisy if company does not live up to brand promise Total organizational involvement and full stakeholder model; likely to engage some stakeholders in core work of organization, with reputation risk of exploiting stakeholders Source: Mary Jo Hatch and Majken Schultz, Journal of Brand Management, 2010. Insights&Trends 2
  3. 3. beginnings. Currently, the company employs more than 7,000 people around the world and has the turnover of more than 2,000 mn dollars. In the last few years, Lego has shifted its focus from production of toys through construction games, to, currently, development of child’s creativity. 2. The brand enjoyed a good level of recognition and a good reputation on the international level, but did not have a clear focus or vision of the future. “Many companies are arrogant and believe that they know better what users really want without listening to their demands, needs and expectations” 3. The brand was generally healthy, but contained an important gap between the promise and the actual culture in the company. Lego thus moved from the mass market to a premium niche market, from shadow market to the market led by innovations and users, from the closed and userhostile market to an open market that encourages user participation. From arrogance characteristic of many companies who believe that they know better what users really want, to listening and addressing the demands, needs and expectations of consumers. Currently, this Danish company is supported by a strong Internet community, which enables it to communicate and co-create with its customers. The company successfully takes advantage of the systematic and thought-out process of joint creativity, where members of its community become true ambassadors of the brand throughout the world. Conclusion: the Brand Belongs to Stakeholders The journey towards co-creation undertaken by large and modern companies shows that brand From mass market to premium niche to ile ost d h ng an nagi sed ma clo and m Fro open This became possible because in 1998 the company identified important gaps between perception of the brand and the company, and their actual reality, which may be summarized in the following three points: 1. The company achieved a high commitment level on the part of its employees, but did not have a goal or direction that all employees could identify themselves with. Graph 2: Lego engaging in co-creation as part of strategic transformation Lego Fro m inn sha ov dow ati ve mar lea ket du ser to s The boom of co-creation: brand management that listens to stakeholders and involves them in its processes Source: Taking Brand Initiative, 2008. belongs not only to the company. It is equally owned by the company’s stakeholders, especially the employees and users or customers. Co-creation is not a marketing strategy aiming to achieve customer loyalty or a tool for managing conversations on the Internet. Instead, it is a mechanism that triggers transformations of a brand, making it more open and innovative. It encourages employees to leave their comfort zone and face the dialogue with the users. In order to be successful and useful for the brand, the process of co-creation and the opportunities that it holds for the stakeholders should be clear to all parties (that is why co-creation should not be understood as just another sales mechanism). This is achieved by taking into account stakeholders’ needs (without trying to manage the community that unites them) and by fostering dialogue that serves as the basis of trust thanks to the fact that stakeholders are independent and do not report to anyone. In short, co-creation is not a business model that may be copied or transferred from one company to another. According to Schultz, co-creation should be understood as a way of doing things, the capacity to understand that a brand belongs not only to the company but is shared with the company’s stakeholders. Insights&Trends 3
  4. 4. Leading by reputation ©2014, Corporate Excellence - Centre for Reputation Leadership A foundation established by major companies aiming to excel in the management of intangible assets and facilitate promotion of strong brands with a good reputation and a capacity to compete on the global markets. Our objective is to become the driving force, which would lead and consolidate professional reputation management as a strategic asset, fundamental for building value of companies around the world. Disclaimer This document is a property of Corporate Excellence – Centre for Reputation Leadership developed with an objective to share business knowledge about management of reputation, brand, communication and public affairs. Corporate Excellence - Centre for Reputation Leadership is the owner of all rights related to the intellectual property on images, texts, drawings or any other content or elements of this product. Corporate Excellence - Centre for Reputation Leadership is the holder of all necessary permissions for the use of the document and therefore any reproduction, distribution, publishing or modification of the document without its express permission is prohibited.

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