Co-Creation
(Prahalad Ramaswamy)

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Creating value jointly with customers. Explanation of Co-Creation of Prahalad Ramaswamy. ('03)

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  1. Summary
  2. Forum
  3. Best Practices
  4. Expert Tips
  5. Resources

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What is Co-Creation? Description

Co-CreationAccording to C.K. Prahalad and Venkatram Ramaswamy, deregulation, emerging markets, new forms of regulation, convergence of technologies and industries, and ubiquitous connectivity have changed many facets of the business world. And are still causing further changes.
 

These factors have changed the nature of consumers. Today consumers are informed, networked, active and global.
These factors have also changed the nature of companies. Today firms can fragment their value chain in ways that were not possible before. Both the physical and the non-physical part of corporations (business and management processes) can be split up.

The above trends are enabling a new form of value creation: Co-Creation, in which value is not created in the firm and then exchanged with the customer, but in which value is co-created by the firm and the consumer. Value will have to be jointly created by both the firm and the consumer. In the traditional system, where firms decide on the products and services they will manufacture, by implication they decide what is of value to the customer. In this system, consumers have little or no role in value creation. During the last two decades, managers have found ways to partition part of the work done by the firm and pass it on to their consumers. Be it self-checkout, involvement of a subset of customers in product development, or a range of variants in between. Note that Co-Creation goes far beyond being merely customer oriented.
 

Connected to this trend of jointly creating products, according to Prahalad, we are also moving away from a company- and product-centric view of value creation towards an experience-centric view of Co-Creation of value. High-quality interactions that enable an individual customer to co-create unique experiences with the company are the key to unlocking new sources of competitive advantage. Products are but an artifact around which compelling individual experiences are created.
 

Origin of Co-Creation. History

Back in the 1990s, Prahalad and co-guru Gary Hamel published an influential management theory: "Core Competence". Core Competences are the unique capabilities and know-how that give a company its competitive edge.


Steps in Co-Creation. Process

Typical steps involved in co-creating value include:

  1. Defining clear objectives for the project.
  2. Figuring out who are the right customers to involve in the process. Compare: Kraljic Model. The customers of today might be different than the customers of tomorrow.
  3. Working with customers to find out what they really want to include in a product or service.
  4. Designing products or systems jointly to meet those customers' needs. This includes selecting the partners to be included in your network.
  5. Deciding how to share the value.
  6. Overcoming internal resistance to change - within seller, buyer and partner organizations. This is a critical step in ensuring that you control the channel.

Limitations of Co-Creation. Disadvantages

  • Markets and industries and companies and systems and people do not change quickly. So it may take quite some time before the whole world is co-creating.
  • Collaboration is a lot harder than competition.
  • The concept challenges many of the habits of managers. To change the mind-set of people within a company into the way that an external customer thinks, is not easy.
  • Accounting rules that are based on what a company "owns", are also challenged. Accounting laws are also notoriously hard to change.

A final note on Co-Creation: Try it out. Here and now!

  • Want to experience Co-Creation yourself? Try it out on 12manage. Click the "Submit a Method" option in the Actions menu at the top of this page.

Book: C.K. Prahalad and Venkatram Ramaswamy - The Future of Competition -


Co-Creation Forum
  Open Innovation Strategy
According to Johan Saunders of Sara Lee (in 'Handboek Communities', 2009, p 32-34), companies can use an 'open innovation' strategy to interact with both customers and other relations (e.g. suppliers) in order to discover ideas or solutions for impor...
     
 
  Value Co-creation in FMCG
Dear ladies and gentlemen, I am writing a research paper on 'Value co-creation in fast moving consumer goods (FMCG) and its impact in reducing product cannibalization'. Your contribution to this topic will be of value to this paper and will be...
     
 
  Some Technical Tools for Co-creation
Using artificial intelligence languages like Lisp, Prolog one can build a database of an expert system in which users of service enter the problem to start a chain.
The others to add on to it would be other users and technical expe...
     
 
  Internal and External Views and Values of Co-creation
Because the term creation is involved, it invokes parenthood or patent hood. Depending on the view and value of the perceived creator. If an organization were to ask their customers what product or service they would like to see or have in the forese...
     
 
  Implementing Co-creation Internally?
What would possibly happen if co-creation were implemented within the firm, looking at management as the provider of "products" - business directions, empowerment, etc. And the employees as the users of these "products" - designing how directi...
     
 
  Co-creation also in Health Care!
In services sector like health care, the patient's values and choice of treatment desired by him should be given due regard. The treatment plan should be discussed with him to ensure compliance and successful outcome....
     
 
  Combination of Inside-out and Outside -in
Co-creation is the combination of inside-out and outside-in strategy. Good, but not easy in the real world....
     
 
  How to Figure Out the Right Custormers?
Refering to the above steps in the Co-creation process, how should we select customers under Kraljic model, how should we define the factor of matrix?...
     
 
  How to Start with Co-Creation?
We are a flour mill focused on high-end customers who use wheat flour. Our main strategy is tailor-made flour for the companies that have some particular requirement and are willing to pay for the requirement. How should we start co-creation to enfor...
     
 
  Co-creation in Services has Strategic Value
I work for a company in the service business. Only early last year we started to implement CEM (Customer Experience Management) methods. However the recession has hit us extremely hard and the company is fighting for its life now.
We will survi...
     
 
  Co-creation in Service Sector
How does co-creation apply to the service sector? Any examples?...
     
 

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Best Practices - Co-Creation Premium
  Co-creation is Real: Facebook Example
Co-creation is real and here now. Take Facebook: infrastructure supplied by company, content supplied by market. The key to successful co-creation is identifying and engaging the right customer group. Every product and service has a group of h...
     
 

Expert Tips - Co-Creation Premium
 

Four Principles for Co-Creation

In their article “Building the Co-Creative Enterprise” (Harvard Business Review, October 2010), Venkat Ramaswamy and Francis Gouillart argue that all ...
Usage (application): Building a Co-Creative Enterprise
 
 
 

Ways of Collaborating with Customers

In Prahalad’s two recent books, The New Age of Innovation (2008) and The Future of Competition: Co-creating Unique Value with Customers (2004), he sho...
Usage (application): Value Co-Creation, DART Model
 
 
 

Recent Innovation Trends | New Innovation Types

Roland Bel (2012) outlines and explains four types of innovations that have become more and more important since the last decade. These recent inno...
Usage (application): Open innovation, User Innovation, Value Innovation, Bottom-up Innovation
 
 
 

Approaches to Understand your Customer's Needs

In order to transform your customer’s experience and to better understand your customer’s needs, it is helpful to construct a hypothetical c...
Usage (application): Customer Targeting, Customer Needs Identification, Customer Behavior
 
 
 

DART Model Example: Nike/Apple

In the article “Co-Creating Value Through Customers’ Experiences: the Nike Case” by Venkat Ramaswamy (Strategy & Leadership, Vol. 36, No. 5, 2008), th...
Usage (application): Co-Creating Value
 
 
 

Classes of Innovation | Sources of Innovation

TWO CLASSES OF INNOVATION
Innovation can be triggered or enabled by two broad classes:
  1. KNOWLEDGE PUSH: Innovation triggered...
    Usage (application): Innovation, Creativity, Organizational Innovativeness, Lateral Thinking, Out of the Box Thinking, Blue Ocean Strategy
 
 
 

Designing Complex Products or Systems Through Iterative Rapid-cycle Prototyping

Today, organizations are increasingly developing and designing new and complex products or systems. In other words, the complexity of the design proce...
Usage (application): Design Thinking, Disruptive Innovation, Blue Ocean Strategy, Introducing Complex Systems, Co-Creation
 
 

Resources - Co-Creation Premium

A Service-Oriented View on Marketing

Presentation about a service-dominant logic mindset in marketing, including the following sections:
1. Getting the logic right
2. Goods-Domi...
Usage (application): Service-Dominant Logic, Perspectives on Marketing
 

Perspective: Biography Prahalad (1941-2010)

A short biography on C.K. Prahalad's career and ideas....
Usage (application): Developing a Broader Perspective towards the Ideas of Prahalad
 
 

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Compare with Co-Creation: Kraljic Model  |  Customer Relationship Management  |  Positioning  |  Product Life Cycle  |  Outsourcing  |  3C's  |  Marketing Mix  |  Extended Marketing Mix  |  Relationship Marketing  |  Bottom of the Pyramid  |  Core Competence  |  Strategic Intent  |  Disruptive Innovation


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