Later this year, Wiley will be publishing several reference volumes covering topics such as marketing strategy, innovation, and marketing research. I have been invited to contribute an essay on Value Co-Creation for the Innovation volume and two chapters for the Marketing Research volume. A brief excerpt from the value co-creation essay highlighting its key aspects follows.
The primary purpose of value co-creation is to create unique and specific value for individual consumers. Contrast this with traditional marketing approaches, where value is created for average consumers, either in the total market, or in particular market segments. A simple case study will help illustrate the dynamics of co-creation.
Imagine it's the early 1990s. A lady, let's call her Ishee, experiences an increase in acidity and stomach pain each time she eats a major meal. She visits a gastrointestinal specialist (GI), who diagnoses her condition as GERD (Gastroesophageal Reflux Disease), and prescribes her Zantac. Ishee accepts the specialist's diagnosis, does not contest his expertise, asks a few clarifying questions and leaves.
Now fast forward to 2008. There is another lady, let's call her Nushee, who also experiences an increase in acidity and stomach pain, following each major meal. She too visits a GI, who also diagnose her condition as GERD, but prescribes a stronger medicine, an acid suppressant called Prilosec.
However, Nushee is not willing to merely be handed a diagnosis and a prescription. She has many questions, wants answers, and proactively engages the specialist in a conversation about her condition.
- She informs the specialist of friends who have similar symptoms, but were diagnosed instead with IBS (irritable bowel syndrome)
- She refers to an article discussing common stomach ailments she has printed from WebMD in preparation for her visit
- Wikipedia informs her that proper amounts of stomach acid help digestion; she wonders whether taking a drug that suppresses stomach acid is a smart idea
- What about alternative remedies - like natural cures and home remedies, shouldn't she try them first?
The brief case study
illustrates the DNA of value co-creation.
Nushee is accepting of the specialist's expertise, but not to the total
subordination of her own opinions and knowledge. For her value does not merely lie in receiving a diagnosis
and a prescription. Her concept of
value is broader. It encompasses
information, knowledge, and the assurance that the specialist is treating her
as a unique patient. What's more,
she is willing to work with the specialist to this end!
The rise of the internet-connected, well informed, globally aware consumer, has significantly altered the balance of power between manufacturers and consumers. Today's consumers are unwilling to be passive recipients of mass-merchandised value. Instead, through a blend of assertion, activism, and participation in web conversations, today's consumers are demanding that companies shape their offerings to uniquely meet their specific needs, in specific situations, at specific points in time.
This shift in power, with consumers no longer merely being a source of demand at the end of a value chain has fundamentally altered the way in which marketing is practiced and value is created. In today's world, value is created jointly by a company and its many customers/non-customers. The consumer is a fundamental resource and input in the value identification, creation, and delivery process, and the co-creation experience is an integral part of the total value offering.
The key building blocks of
co-creation of value are:
- Listening - learning about consumers' experiences; their angst, frustrations, desires, and aspirations
- Sustaining value co-creation conversations - meaningful conversations that yield the raw material for co-creation
- Experimenting and rapid prototyping - to manage risk, improvise, and enable speedy value co-creation
- Execution - only when co-created value is delivered can the next round of value co-creation be initiated
- Nike + iPod allows gym fitness enthusiasts and runners to co-create their own fitness experiences and share it with similar others
- You dream it, ASUS builds it, Intel inside - ASUS and Intel are combining forces to build the first community-designed laptop
- Can innovation lead to evolution? Toyota believes it can. It is engaging millions of people to co-create value in domains like water, air, and energy
Your point about consumers no longer accepting a passive role is right on target. But the question for me is how do companies go about building their DNA to embrace customer driven innovation? Most companies don't embrace their customers' suggestions.... so how does an executive go about the transformation process?
Thanks for a great blog!
Thanks Peter. You are spot on with companies resisting embracing customers' suggestions. One of my earlier blogs spoke about a shift in mindset. This has to happen before a company becomes a believer. Two forces will influence this transformation - shortfalls in performance and tempered radicals acting from within. There is enough evidence out there to show that companies that have embraced customer-driven innovation outperform their competitors. I am also writing a book on this subject - a blue print for executing value co-creation programs. Hopefully, that will contribute to the transformation as well.
Speak to you on your next visit.