The Future of Competition: Co‐Creating Unique Value with Customers

Citation

Schneider, P.A. (2005), "The Future of Competition: Co‐Creating Unique Value with Customers", Journal of Product & Brand Management, Vol. 14 No. 5, pp. 348-348. https://doi.org/10.1108/10610420510616386

The authors describe a paradox whose solution lies at the heart of their analysis. They observe that: “consumers have more choices that yield less satisfaction” (p. 2), and they claim that this situation arose due to a number of factors, including the rise of the global economy, widespread access to the internet, and the evolution of the consumer from a state of passiveness to one of activism.

Anyone who buys a new television will sympathize with their observation of less satisfaction. In the past, the major issue in buying a new television was its size as measured along the diagonal. Now, a consumer has to figure out the differences between high definition TV, flat screens, plasma screens and a variety of other specifications that did not even exist ten years ago. The buyer will also have to fathom how the new television will mesh with the other electronic equipment in the house not to mention the cable service. The situation or “experience” becomes even more complicated in the healthcare field as it involves interactions between a patient and a variety of independent manufacturers and service providers.

The authors believe that the way to increase customer satisfaction and give managers strategic options that provide them with greater value is to move away from the premise that value is created only by a firm, to one where value is co‐created by the firm and the consumer.

In the traditional arrangement, a firm focuses on improving its own value chain as well as the overall exchange process in order to produce some product or service for a particular market segment that is better than the products or services offered by the competition, i.e. what a student would learn in a typical MBA program. In the new arrangement, the authors state (p. x) that:QUOTE … consumers and firms are intimately involved in jointly creating value that is unique to the individual consumer and sustainable to the firm.This comment may seem simple and straightforward, but it represents an entirely new way of conceptualizing the marketplace. The traditional economic concepts of supply and demand; the marketing concepts of exchange, targeting, and positioning; and perhaps even the strategic concept of sustainable competitive advantage are no longer sufficient and may even be obsolete. Now, the market resembles a forum organized around each individual.

What exactly do the authors mean by the co‐creation experience? They provide an example by imagining what it would be like to buy a brand new houseboat. Given the variety of houseboat configurations and marina settings, the transaction or co‐creation experience would involve extensive interactions between the buyer, the firm, and the community of houseboat owners at every stage of the manufacturing process. The building blocks of this co‐creation process consist of dialogue, access, risk assessment, and transparency (DART), which make collaboration between all the players possible. These building blocks suggest that the players will be spending a lot of time communicating with each other and therefore represent something more than just conducting a marketing research study. Also, the co‐creation process does not cease with the purchase because the experience continues. For example, one manufacturer redesigned its exhaust system after leaning that children playing on the fantails of houseboats tied up alongside each other might be exposed to carbon monoxide. That firm is also lobbying to incorporate these changes into law. The authors believe that all firms must behave in a similar fashion and treat each one of their customer's experiences as if it were unique in order to achieve customer satisfaction and be successful. Furthermore, they provide additional examples of how a number of firms (e.g. Sony's PlayStation 2, Lego Mindstorms.) are already successfully incorporating some elements of the DART model into their operations.

This new concept of value and creation presents tremendous opportunities and pitfalls for firms. In the new approach, the firm and the consumer become one and the same, thereby allowing the firm to earn value and the customer to achieve satisfaction. However, the burden lies on the manager to put aside the familiar concepts and practices of the past, beginning with those developed by Henry Ford, and redesign the entire production, marketing, and information infrastructures that will enable a true collaboration between the firm and the consumer. The situation becomes even more complicated for a firm whose customers may number in the thousands or even millions, each with their own sets of experiences. This will not be an easy task as the authors have provided us with a roadmap and not some cookbook with a recipe for the one best way to do things.

In the preface, the authors initially downplayed the notion that their work represented any sort of revolution. They are correct in the sense that it has always been true that the value of a product or service is ultimately determined by the consumer and not by the company's cost structure. What is revolutionary is to actually incorporate this basic premise into operations by allowing consumers to be actively involved in the co‐creation of value from the onset. At the very least, the authors do have something very different in mind than what you would find in the typical college textbook on business strategy.