What is Co-Creation? Description
According 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:
- Defining clear objectives for the project.
- 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.
- Working with customers to find out what they really want to include
in a product or service.
- Designing products or systems jointly to meet those customers' needs.
This includes selecting the partners to be included in your network.
- Deciding how to share the value.
- 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 Special Interest Group
 Visit the Special Interest Group
Recent User Comments
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Samir Randive - Australia
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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." |
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Charles Cheng - China
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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?" |
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Charles Cheng - China
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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 enforce our strategy?" |
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Pertti Ollila - Finland
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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 survive but it will take some time, of course. Luckily we have not ceased development but we are striving for a new strategy for innovation activities. And this is where the co-creation comes to the picture. As to previous experiences, there are some but they cannot really be defined as "co-crewation". They have rather been focus group / customer panel type of approaches, in which selected, active customer have had their say for or against a new service and/or its details.
Personally I view co-creation as more of strategic value, also for service industry." |
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Rohit Kuttappan - India
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Co-creation in Service Sector |
"How does co-creation apply to the service sector? Any examples?" |
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 Comment on this Page
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Compare with Co-Creation: Kraljic
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