Starbucks received over 70,000 tips and innovative suggestions in the first year after the launch of its website, My Starbucks Idea. According to Wikipedia, co-creation is:
“A form of marketing strategy or business strategy that emphasizes the generation and ongoing realization of mutual organization-stakeholder value. It views markets as forums for firms and active customers to share, combine and renew each other’s resources and capabilities to create value through new forms of interaction, service and learning mechanisms.”
Co-creation was first mentioned by the management thinkers Prahalad and Ramaswamy. Success factors are, according to these authors, captured in what they call the “DART Model”: dialogue, access, risks, benefits, and transparency.
Co-created value arises in the form of personalized, unique experiences for the customer and ongoing revenue, learning, and enhanced market performance drivers for the organization (loyalty, relationships, and customer word of mouth).
Collaborative customization is a word used to describe co-creation by many management thinkers such as Joe Pine in his book, Mass Customization. Organizations talk to individual customers to determine the precise product offering that best serves the customer’s needs (see personalized marketing and personal marketing orientation). This information is then used to specify and manufacture a product that suits that specific customer (e.g., some clothing companies will manufacture blue jeans to fit an individual customer and just rent the pants to the him or her). This development is also being taken into deeper customization via 3D printing with companies like Shapeways.
Classic example of co-creation is LEGO. LEGO is in continuous dialogue with six million fanatical little builders, who design LEGO models for, and on behalf of, LEGO. The new designs are displayed in the Club LEGO gallery, and visitors can vote for their favorites. The winning designs are taken into product production. And, as a member of the LEGO Club, you can order the model right away, so you can build the winning design at home. This intensive form of customer interaction saved the company after going through hard times. In an era when children are playing video games instead of building with toy bricks, survival was the ultimate challenge for LEGO. An additional advantage of this co-creation activity is that the company no longer needed to employ over 300 R&D staff as creative minds from all over the world were devoting their talents to the LEGO brand out of nothing but love for the brand. And so, LEGO got improved designs, lower development costs, and boosted sales.
The iPhone is a beautiful, cool smart phone. There are lots of handy tools for this device, called apps, which can be bought via the App Store. Some of them are free, and, for others, a modest fee needs to be paid. Apple allows external developers to create ‘apps’. The strength of this setup is that the phone improves a bit with each app; it offers a few more options. The app developers are endlessly creative in this area. Apple earns its share from the sale of the apps along with the developers with a 30:70 profit split. Meanwhile, there are over 100,000 apps available, amounting to about 2 billion downloads annually. The revenue is great, of course, but it’s the development cooperation that makes the iPhone stronger and stronger.
Co-creation does not always have to represent a conscious collaboration. The website geenfile.nl (“No Traffic Jam”) tries to detect traffic jams with help of cellular phone positions on freeways. In other words, they take positional data from cell phones and GPS systems. This data is then combined with a digital map, which can accurately display up-to-the-minute information on traffic jams. In this case, the motorist does not know that his data is used for services that others pay for. So, for me, this service touches on the boundaries of privacy.
Creating value through the co-creation of products and services is essential for creating the tailor-made stakeholder experience, the vital step in the process of stakeholder transformation – the ultimate goal in the progression of economic value. After all, the customer knows where the demand lies. Whether it’s about developing a new product, implementing a marginal improvement, or going through an entire new experience, the stakeholders love to work on it as soon as they feel connected to the brand or organization. And, they do this free of charge. The condition for successful commercial co-creation can be found in a simple principle: the better the balance between the monetary value and social capital, the more sustainable and stronger the organization or the business model becomes.