B2B Co-Creation Article


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Using Enterprise Co-Creation to take B2B collaboration to a whole new level. PRTM's Mark Deck and ECCP's Francis Gouillart present examples that include Texas Coaters, EZ Printer and Best Bottler.

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B2B Co-Creation Article

  1. 1. reprinted from PRTM Insight | Second Quarter 2011 The Craft of Co-Creation Taking B2B collaboration to a whole new level Francis Gouillart and Mark Deck ARTICLE
  2. 2. ARTICLE Business-to-consumer (B2C) co-creation is a big trend these days, as consumers increasingly participate in the designing of products and services that better meet their needs—and that bolster companies’ reve- nues. Less familiar, but potentially just as powerful, is business-to-business (B2B) co-creation, where companies selectively open up and design their operational processes with each other. For those brought up with the belief that the B2B customer/supplier balance of power can only be managed by closed processes and tight-lipped negotiation, this may seem counterintui- tive. But as the case example described below shows, such B2B co-creation can offer significant opportunities to enhance revenues and profits on both sides—and, potentially, across the entire value chain. C ustomer-supplier relationships are tradi- for innovation and value creation. The primary tionally built on the assumption that the reason is that it’s very difficult to predict which processes of each player are separate, and interactions will offer the biggest opportuni- are connected only through structured interface ties—as label manufacturer Texas Coater and its points that pass specifications one-way. Price value chain partners learned. negotiation, on-time delivery, and quality checks In co-creating a production process, Texas serve as static checkpoints, but basically it’s like Coater and its partners jointly mapped their two tennis players hitting the ball back and forth interactions across this mini-ecosystem, uncov- across the net. ered new interactions that had previously not This “tennis court” approach works—up to a been apparent to one another, and started point. If a supplier lacks insight into the custom- connecting their operations in new ways. This er’s production processes, or the customer is initiative—far from giving away intellectual unaware that its specs require extra time and property, a concern companies often have when expense for the supplier, margins suffer on both discussing co-creation—led to all-around reduc- sides. Some companies make a point of sharing tion of time to market and gains in market share. processes for critical value chain activities—for example, automotive original equipment manu- Understanding the Beverage Value Chain: The facturers (OEMs) that locate development staff Case of Texas Coater from their Tier 1 suppliers in their manufac- Texas Coater makes giant rolls of pressure- turing plants to make sure that vehicle compo- sensitive adhesive (PSA) laminates destined to nents integrate properly. Some OEMs even share become printed labels used in the production of their product road maps to ensure that major beverage bottles. The global company is one of suppliers can meet their needs. Yet this process the key players in what is universally considered sharing is selective at best: Invariably, most a commodity industry. Its immediate customer, of the companies’ operational processes still EZ Printer, prints the labels and sells them to remain closed to their partners. Best Beverage Co., a leading beverage maker. As long as suppliers and customers keep Best Beverage, in turn, affixes the printed labels most operational processes cordoned off from to its 12-ounce bottles in the course of produc- each other, they will miss out on opportunities tion (Figure 1).1|
  3. 3. The Craft of Co-Creation reprinted from PRTM Insight, Q2 2011 Figure 1: Three Links in the Beverage Value Chain (Supplier) (Intermediate Customer) (End Customer) Texas Coater EZ Printer Best Bottler Produces labels Prints labels Bottles beverages Although it sits several steps from the end certain operational processes to the company’s consumer, Texas Coater nonetheless plays a crit- customer and allow EZ Printer to do the same. ical role in the final look and feel of the bottle— The idea was that this mutual sharing would no small consideration given how ferociously enable new ways to interact and solve problems beverage companies compete for shelf space in together to make margins attractive all around. grocery stores. Equally important are the label Although some colleagues were worried internal company’s production costs, since they greatly production data would be used against them, influence the total cost of the finished product in Texas Coater gave the go-ahead—it was the only a highly price-sensitive market. way to save the deal. In a recent sales coup, Texas Coater secured Setting Up Interaction Maps an agreement from Best Beverage to switch from paper to PSA labels—a superior laminate Texas Coater’s first step was to clarify its own both functionally and aesthetically. EZ Printer, processes and interactions. A series of discus- however, immediately threw up a roadblock: sions involving the marketing, sales, purchasing, Given Best Beverage’s cost targets, the printer R&D, and production teams resulted in the could not meet Texas Coater’s price demands creation of an interaction map that detailed and still realize any profits. the firm’s performance objectives and metrics Texas Coater prided itself on its internal around critical inter-functional interactions. For “Six Sigma” process discipline and professional example, the main objective for purchasing was approach to managing its accounts. Repeated to drive down raw material costs and for produc- attempts to negotiate a viable solution with EZ tion to minimize coating costs, whereas R&D Printer led to an impasse. A Six Sigma team sought to drive revenue through differentiation tried to diagnose the problem from the Texas and marketing tried to create new sources of Coater side but could demand. Arriving at an internal understanding on what drove the behavior and experiencesAs long as suppliers and find no way of improving margins enough to make around key interactions was a valuable exercise incustomers keep most itself; most employees usually have only a generaloperational processes the deal feasible. To break the stalemate, a senior idea of how other functions and departmentscordoned off from each within their companies really work. account manager atother, they will miss out Texas Coater suggested Texas Coater shared the interaction mapon opportunities for co-creating a solution with EZ Printer. Since labels accounted for 70innovation and value with EZ Printer. This percent of the printer’s total cost, the companycreation. would involve opening up naturally pushed hard on Texas Coater’s prices. |2
  4. 4. ARTICLE But without a deep understanding of the other’s program to co-create a single integrated production processes, each was still generating significant schedule that maximized the size of runs at both charges for the other. facilities. Managers at the two companies esti- mated that the program would reduce changeover To shed more light on the subject, EZ time by a factor of two (Figure 2). Printer created its own interaction map. The printing process, it turned out, was often forced The second engagement platform consisted to come to a complete standstill because of of face-to-face dialogue between operators at the imperfections in the way Texas Coater’s lami- Texas Coater and EZ Printer factories, which are nate rolls were wound. The printer would also only 60 miles apart. This dialogue proved illu- encounter delays during set-up periods if a minating on both sides. For example, EZ Printer sufficient supply of laminates was not available operators explained how wrinkles in Texas Coater’s large laminate rolls could create jams for the next run. in the high-speed printing presses, reducing Making Co-Creation Operational with Engage- productivity and even creating a fire hazard. ment Platforms The operators now provide constant feedback on what they find while unwinding the rolls in To solve these two problems, Texas Coater and front of the printing presses—input that allows EZ Printer decided to create two engagement plat- coating operators to watch for defects in Texas forms that would allow new interactions around Coater’s own production processes. The tech- scheduling and prototyping. Essentially, they nical dialogue has been important, but equally agreed to co-create these two processes. The first important is the empathy that has developed engagement platform was a simple scheduling between the two production staffs. Figure 2: The Challenges of Building a Better Bottle Could not produce a distinctive-looking bottle at BEST BOTTLER an affordable cost Could not get reliable volume runs Could not meet end customer specs at an EZ PRINTER acceptable margin Could not resolve manufacturing process problems Could not sell new film with new capabilities to printer at acceptable margins TEXAS COATER Could not intervene in process between EZ Printer and Best Bottle3|
  5. 5. The Craft of Co-Creation reprinted from PRTM Insight, Q2 2011 In just six months, the Texas Coater and would order super-thin label stock from TexasEZ Printer pilot went to full-scale production, Coater to minimize material costs. Thesewith both companies seeing significant gains in labels, however, would jam in Best Beverage’sproductivity and cost savings. The total cost of bottling production line, or they would produceprinted PSA labels dropped significantly. And visible wrinkles in the finished product’s label,the Texas Coater Six Sigma team was a big help reducing productivity and sales for the beveragein making this happen, now that the co-creation company. What was optimal for Texas Coatereffort had opened up new transparency between and EZ Printer was decidedly not optimal forthe two companies. Best Beverage. Emboldened by their success, the companies It did not take much urging to convince Bestturned their attention to an even more ambitious Beverage that a more thorough understandingco-creation effort. of its partners’ processes and their collective interaction would help everyone. The beverageExtending Co-Creation through the Value Chain company agreed to contribute to an extended interaction map encompassing all three parties. Texas Coater and EZ Printer had opened up Best Beverage also used its sway to overcometheir processes to each other, but so far had not legal concerns that could haveengaged their ultimate customer, Best Beverage, torpedoed the co-creation In just six months,beyond standard business practices. Yet bottle effort. When in-house attor- the pilot went tolabels, and PSA labels in particular, are known neys for Texas Coater and EZ full-scale production,to have a major impact on beverage sales. Printer attempted to claim all with both companiesPSA labels allow the use of more vivid colors intellectual property for their seeing significantthan paper-and-glue labels. They even make it own companies, Best Beverage gains in productivitypossible to do wraparound designs where the orchestrated an agreement thatbottle appears engraved—a unique look that and cost savings. preserved value for everyone.differentiates the product from competing This co-created legal accord gave each companybrands on the crowded store shelf. the IP that was most valuable to it—each partner The current process for designing labels retained the use of the engagement platforms,was highly sequential and full of headaches for but was able to pitch them to its clients after aall parties. Typically, the beverage manufacturer certain period of time.would hire an ad agency to design the labels. The key to making the new co-creationPackaging engineers at the beverage company’s effort work was a new engagement platform: abottling plant would translate the design into prototyping tool that would allow joint designa detailed specifications document. The specs of the label across all dimensions, includingwould then be sent to EZ Printer for price quotes. aesthetics, material, fit, manufacturability,This process was full of costly inefficiencies for and cost. Conceivably, the tool would promotethe printing company: The label design often kept a dialogue between the artistically inclinedchanging long after the first set of specs had been designers and the cost- and process-drivencommunicated, forcing the printer to repeatedly manufacturing people, allowing them to exploredevelop new solutions and prototypes. the various options and trade-offs. Marketing EZ Printer would pass on the pain. As and design staff could understand what featuresco-creation discussions revealed, the printer created big problems for production (and test |4
  6. 6. ARTICLE minor design changes that could ease produc- Amplifying Results for All Parties tion schedules), while the production staff at As a result of these co-creation initiatives, both Texas Coater and EZ Printer would be able Texas Coater now provides its partners with to turn around prototypes more quickly. a dramatically differentiated experience. The After developing a robust visualization tool, results have been impressive all around (Figure 3). Texas Coater, EZ Printer, and Best Beverage After just two years, Texas Coater’s time to market began co-creating label prototypes rather than for new labels has fallen 20 percent, production handing off portions of the process sequen- volume has increased 50 percent, and profitability tially. Today, using freehand designs from as a percentage of sales has risen three points. EZ marketing, the company is able to simulate the Printer’s business with Best Beverage has grown look and feel of the label on various bottle types, 25 percent. Best Beverage has seen time to market provide the technical specs, and estimate the for new labels drop six months to two, while cost of manufacturing the label under various uptime on the shop floor has increased from 86 to production scenarios. There have been several 91 percent. And bottles with wrinkled labels have new label launches using the new prototyping become a thing of the past. technology, and the meetings between the three companies have yielded many new insights. The As a next step, the three companies are label designers have learned a lot about manu- considering introducing consumer-designed facturing constraints, and plant-floor people labels, which would open up a whole new set of are able to suggest design changes that would possibilities. They are even discussing setting up improve manufacturability of the label. remote monitoring of shop floor conditions, such Figure 3: Benefits Times Three COMPANY RESULTS Better designs Best Bottler Reduced breakdown time in manufacturing Greater consumer involvement Better laminated labels EZ Printer Less scrap Greater loyalty from Best Bottler Faster label development time Texas Coater Reduced number of reworks Ability to capture new trends faster5|
  7. 7. The Craft of Co-Creation reprinted from PRTM Insight, Q2 2011as temperature and speed—signifying a high 4. Give governance to co-creation. As you andlevel of trust, indeed. your B2B partner(s) progress in co-creation, establish a formal governance system forEnterprise Co-Creation for the B2B Network the effort. This governance structure has to straddle the boundaries of the companies Texas Coater executives learned that, despite involved—a new experience for business-well defined and executed processes, perfor- people accustomed to negotiating rathermance may not be able to improve appreciably than co-creating.when these processes are closed to the outside.How can you bring Texas Coater’s success to 5. Create engagement platforms. As early asyour own operations and those of your partners? possible in the co-creation process, startHere are five practices to apply: developing a co-creation idea manage- ment platform that allows stakeholders on 1. Be willing to take the first step. If you want all sides to start suggesting new ideas and to co-create, take the risk of making one or avenues for co-creation. This platform will more of your processes transparent to your allow partner companies to expand the business partner. This creates vulnerability, scope of the co-creation effort wider and but it’s the price you have to pay to initiate wider, involving more and more strategic co-creation. The good news is that B2B interactions. Additionally, create targeted customers nearly always reciprocate when operational engagement platforms to enable approached in this fashion. specific working interactions that add value. 2. Co-create inside first. Make sure your own people are ready for co-creation. In Strategic partnering of B2B firms doesn’t go particular, make sure they know how to far enough in many cases. Customers increas- describe their own functional interactions ingly want to be more involved in ensuring and experiences in transparent fashion (this outcomes, while suppliers increasingly focus on is known as the “glass house” method). end customer outcomes instead of functional inputs. Meanwhile, today’s collaboration and 3. Use a common language and analytical interaction technologies can help suppliers and structure. Words such as experience, customers engage in co-creation at scale. B2B interaction, and engagement platform have co-creation offers all parties willing to engage specific meanings in a co-creation initia- with one another a new way to win together. tive. Also, co-creation business cases need to quantify benefits for all parties involved, not only one company. For more information, please contact: Francis Gouillart, President, ECC Partnership fgouillart@eccpartnership.com, +1 978.369.4074 Mark Deck, PRTM Director mdeck@prtm.com, +1 781.434.1200 |6
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