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Emerald Group Publishing Limited
Article Type: Quick takes From: Strategy & Leadership, Volume 42, Issue 1
These brief summaries highlight the key points and action steps in the feature articles in this issue of Strategy & Leadership.
The race to implement co-creation of value with stakeholders: five approaches to competitive advantage
Francis J. Gouillart
Leading theorists are now predicting that in the foreseeable future the co-creation model will become, in many markets, a primary source of a firms competitive advantage:
* Instead of trying to encapsulate and defend unique capabilities within their walls, firms will compete by opening up their value chain of traditional functions and processes, from R&D through marketing and selling, offering docking points that attract a dynamic ecosystem of customers and other stakeholders.
* If firms increasingly compete on the basis of how much value their network produces, then expect a race to co-creation, as every firm tries to connect each function and process to the relevant ecosystem and attract the best external players as partners.
* The company that proves most able both at linking its key functions or processes to a growing and energized ecosystem of players and at managing the continuous innovation opportunities that the ecosystem affords will win the competitive game.
Corporations now need to learn how to be outstanding networkers.
Five approaches to co-creation with stakeholders are analyzed to show managers the strengths or weaknesses of various forms of co-creation and make judgments about where they are best applied:
1. Community or social marketing – also called social media marketing, user communities in B2B. Implementation case is Nike pathway.
2. Design thinking – also called user-centric design, experience design, open design, user-led innovation. Implementation case is the Mayo Clinic.
3. Co-creative transformation – using co-creation as the process of change. Implementation case is the French postal system, La Poste.
4. Crowd-sourcing – also called mass collaboration or open source. Implementation case is Wikipedia.
5. Open innovation – also called crowd-sourcing R&D or product development. Implementation case is Procter & Gambles idea network.
What path should leaders take?
All of these approaches offer a practical starting point, and probably each approach will play a significant role in the further development of co-creation. Each already does some things well, and each has room to evolve as a means of generating value with stakeholders. So the adoption of any of these methods is a step in the right direction. What leaders can do now is encourage more experimentation on the path to developing a co-creation ecosystem appropriate for their firms.
Ideal plan toward ecosystem co-creation
Unfortunately, none of the five approaches as currently practiced offers a perfect transformational path to co-creation for large, complex opportunities. Instead, an ideal transformation plan with six components is presented.
Venkat Ramaswamy – how value co-creation with stakeholders is transformative for producers, consumers and society - Brian Leavy
Co-creation with customers and other stakeholders is a fundamental transformation of the nature and means of economic value creation. As stakeholders collaborate in the co-creation of value they individually and collectively become both the means and end of their own value creation process.
Many insights about the nature of co-creation and its influence on the future of competition are offered, including:
* Leaders in most established organizations should not attempt to re-invent their companies, but instead identify “wellsprings of co-creation opportunities that make strategic sense to them, and build the requisite capabilities to evolve over time towards a co-creative enterprise. The key is the capacity to experiment, learn and execute with supportive co-creative management processes.
* How to start? Ten questions are offered to begin the discernment process of how to elevate their firms to a higher orbit of value creation.
* The case of Mahindra & Mahindra (M&M), one of Indias largest vehicle manufacturers, is offered to illustrate how the evolutionary co-creation adoption journey tends to play out.
* The role of technology is to make social-civic-business-ecosystems more generative and linkable, and to make them more and more inclusive. Ultimately, interactive technology holds the key to the ability to scale participation.
* What are co-creation economic implications for traditional economic theory? The world of co-creation could not be more different. At its very core, it challenges the view of value as a relational property and recognizes that, for most people, value has emotional as well as utilitarian connotations, and involves developmental-spiritual-relational as well as material benefits. This “humanization of value is accentuated through co-creative engagement. The co-creative paradigm is also a dynamic perspective that sees the interaction of customers, employees and other stakeholders as forums for reflexive learning and ever-expanding capability building. It is essentially a positive sum “disequilibrium perspective in which jointly growing the value of the market takes precedence over concerns about its division.
Enterprises must be seen as a “nexus of engagement platforms. Value innovation becomes the central focus of strategy and competition. Strategy shifts to making choices of where and how to co-create, and then designing and managing ecosystems of capabilities together with partnering stakeholders.
A leaders guide to innovation in the experience economy
B. Joseph Pine II and James H. Gilmore
In the past two decades, much of business innovation in consumer offerings has come in the form of “experiences. Experiences – commercial offerings that engage customers in memorable ways – are a distinct form of co-creative economic output, and as such hold the key to promoting future opportunities for business growth. As evidence of this trend, experiences have supplanted services as the predominant economic offering in terms of US GDP, employment and actual value. Innovation to create high-quality experiences that customers will pay for is now just as important as product or service innovation.
Thinking differently about how to create economic value for customers is essential. Target value-creating opportunities to drive further progress:
* Customizing goods and services means producing exactly what customers want, when they want it, in a memorable encounter (think Dell vs US auto makers).
* Charging for experiences begins with asking a fundamental question: what would we do differently if we charged admission?
* Anticipate the next competitive fact: experiences should yield transformations, thus changing the customer. By providing experiences that deliver lasting benefits, companies can avoid becoming the purveyors of rapidly diminishing thrills. Customers will pay a premium for a transformative desired change. If the experiences are not designed in such a way as to create their desired change, then the experiences either become passé or commoditized.
1. Understand that mass customization is the route up the progression of economic value (see Exhibit 1, “Progression of economic value), as customizing a good turns it into a service, customizing a service turns it into an experience and customizing an experience turns it into a transformation.
2. Business enterprises would gain an invaluable perspective simply by declaring their work to be theatre. With theatre furnishing the operating model, even the most mundane of tasks can engage customers in a memorable way.
3. Authenticity is the new consumer sensibility. As well as delivering quality, companies need to get good at managing the customer perception of the authenticity of their offerings, their places and their company, lest they invalidate themselves in the minds of customers as fake, contrived, disingenuous, phony or inauthentic.
4. The experience is the marketing. This means it needs to become placemaking, where companies create a portfolio of places, both real and virtual, to simultaneously render authenticity and generate demand.
5. Charging admission is the economic key: aligning “what is charged with “what their customers value means charging for time. An offering is only an experience, economically speaking, when customers pay for the time they spend with the company.
Recognizing the ecosystem phase-change: a guide to four types
What is the distinction between innovations that alter market position and those that give rise to entirely new industry ecosystems?
* The distinction is important because it offers a different way of weighing how management perceives opportunities in the light of potentially disruptive innovation, an approach that can look forward to anticipate potential “phase-changes in industry development.
* The answer explains why Kodaks early investment in digital camera technology failed to prevent its eventual bankruptcy.
Phase-changes are historical transitions, ones that create a new industry and consumer ecosystem. They are not merely disruptive technologies. A phase-change is marked by a complex transformation in human behavior produced by a new way to satisfy consumption needs:
* For example, the transition to a digital economy is a phase-change, but the invention of a high-resolution display for smartphones and cameras, essential to the growth of the digital economy, is not.
* Kodak failed to create a product and an ecosystem that altered the behavior of their customers, supported by a new community of suppliers and partners.
The ecosystem era
A current phase-change sweeping many business sectors is driven by the growing search for competitive advantage through connected ecosystems of stakeholders that co-create value – customers, innovators, partners and communities. Co-creative ecosystems are a phase-change that requires a new set of executive and management skills, a different culture, a new approach to information, as well as new forms of leadership:
* Kodak was disrupted by its lack of understanding of ecosystems management.
* Modern ecosystems come in four major types: scale ecosystems, creative commons/open source ecosystems, customer ecosystems and systemic ecosystems.
Ecosystems are part of a phase-change to a new type of economy, in effect a new wealth creation system. Here are the eight traits common to all four types:
1. Goodwill before ROI.
2. Movement instead of arguing a case for your product.
3. Peers before generals with the target communities.
4. Partnership not competition.
5. Patent smarts.
6. Information generation. The capacity to create new information layers around the movement or product.
7. Good long-tail or narrow innovation capabilities.
8. Easy to use business relationships.
Key strategy needs:
* An externalization strategy.
* A seamless platform.
* Strategic agility or “fluid core management.
By learning to understand industry phase-changes a company can gain insight into where it is on its development trajectory and make better judgments of how to invest and to manage transition.
Aligning the co-creation project portfolio with company strategy
Robert DeFillippi and Thorsten Roser
Increasingly over the past decade many firms have employed the concept of co-creation of unique value to engage communities of consumers and other stakeholders in their search for continuous innovation. The benefits are numerous:
* Increased speed to market.
* Lower risk of market failure.
* Better communication of customer needs and interests.
* Higher rates of positive word-of-mouth/ recommendation.
* Increased adaptiveness of company business model.
* Early identification of weak signals in the marketplace.
* Better focus on customer experience and journey.
* Focus on value creation, rather than offering particular solutions.
In practice, companies tend to either outsource co-creation to external agencies or invest in so-called co-creation communities that engage users online. There is, however, no one-size-fits-all approach to co-creation:
* Organizations need to make strategic decisions as to how they will design, implement and manage their specific co-creation activities.
* Organizations need frameworks allowing them to govern their choices of co-creation design features appropriate to their strategic needs and capabilities.
* Typical questions that practitioners ask are:
* Which co-creation initiative or project best fits our companys needs?
* Where to begin?
* How to implement a co-creation initiative or project?
Assessing co-creation design choices
A six-question assessment framework offers the strategically important choices involved in designing co-creation ventures:
* Purpose: co-creating for what purpose?
* Co-creator type: who will be involved?
* Locus: where in the innovation process should it occur?
*Intimacy: how much involvement should there be?
* Time: how long should co-creators be involved?
*Incentives: how should co-creators be motivated?
Exhibit 1 summarizes some of the typical co-creation design choices associated with co-creation projects that vary in their strategic importance.
Co-creation design implementation
A firms co-creation approach is as unique as the value creating business processes of a company. The many forms and many design differences reflect the diversity and the aspects/service elements that make a company/service offering unique and different. However, co-creation is also a means to make companies do things differently, and be more competitively successful.
Ultimately, any decisions made in the design stages of a co-creation project will impact the strategic priorities that can be realized by co-creation.
Leading in the connected era
Saul Berman and Peter Korsten
Based upon face-to-face interviews with 1,700 CEOs and senior public sector leaders from around the globe, this IBM survey produced three suggested initiatives that will promote superior performance:
1. Embrace connectivity and openness. It is the trend toward openness that CEOs believe will have the greatest impact on their organizations. They anticipate demands for even more transparency, and the competitive need to open up their organizations to collaborate more internally and externally. This emphasis on openness is 30 percent higher among outperformers.
2. Engage customers as individuals. This will mean weaving together insights about the whole person from sources not consulted in the past. Stronger analytics will be needed to uncover patterns and answer questions not asked before. Client-facing staff and channels must be equipped to act on those insights. And since customers are increasingly mobile, organizations must develop the skills and technology to engage in the context of the moment.
3. Amplify innovation with partnerships. Rising complexity and escalating competition have made partnering a core innovation strategy for many organizations. But to enable sustained, fruitful innovation partnerships, organizations will need more collaborative, integrated relationships. Partnering organizations will have to share collaborative environments, data and control. And even when the organization is performing well, CEOs must occasionally break from the status quo and introduce new external catalysts, unexpected partners and some intentionally disruptive thinking.
Technology is the enabler
Technology is reinventing connections with and among employees, customers, and partners. CEOs now see technology as an enabler of collaboration and relationships, those essential connections that fuel creativity and innovation. Technology is creating entirely new ways of connecting innovators inside and outside organizations, altering organizational composition, structure and span of control. It is allowing organizations to understand and engage customers on a more personal level, precisely when, where and how they want. It is providing novel ways of inspiring employees individual and collective creativity, and revolutionizing how teams collaborate, make decisions and get work done.
Leading in the connected era
By erasing the constraints of time and distance, digital technology is freeing people to do what comes naturally – explore, engage, expand personal and professional circles and knowledge. To create greater value, CEOs will need to assemble networks like portfolios – with generational, geographic, institutional diversity.
Individually, their choices will dictate the success of their organizations. Collectively, they will inspire the future.
President of Formac, Inc., a strategy consulting organization (email@example.com) based in Portland, Oregon and a contributing editor ofStrategy & Leadership.