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Consumer-generated ads may have started off as a curiosity, as light-hearted fun.  But they have crossed the chasm and user-generated content (UGC), an umbrella term for all consumer-generated material, including ads, is serious business at a large number of companies today.  Its not just Frito Lay, and Pepsi; companies like Coke, HP, and Best Buy have also bought into their uncommon appeal and engagement potential. Across the board this buy-in is being supported by managerial commitment and dedicated resources; exactly how companies would support core business practices, like IT and Purchasing.

Two key factors lend credence to this point of view.

  • First, the amount of effort - structure, rigor, and resources - to create, select, and air ads has increased significantly, at some of the more established players like Frito Lay.
  • Second, intermediaries like MOFILM have grown in recent years, to enable implementation at companies that would like to leverage the power of consumer-created ads, but without making significant investments of their own.

Consider first the effort factor.  A brief description of the platforms and processes deployed by Doritos and Pepsi Max to create the commercials that were aired during Super Bowl XLV follows:

  • A dedicated website invited ad submissions from Doritos and Pepsi Max fans in the second half of 2010.
  • Details regarding the prize money and the airing of the commercials were explained and presented on the landing page itself.  Both Frito Lay and Pepsi recognized the power of prize money, and correctly so.  The 2011 edition promised $25,000 to the five finalists for each brand, and airing of the commercial for the top 3 for each brand (a total of six).
  • In addition, they also promised monetary incentives for winning the USA Today Ad Meter contest; $1 million to the winner, $600,000 for second place, $400,000 for third place, and an additional $1million to all three winners if the two sponsors swept the top 3 spots.
  • All contest rules were clearly explained, including the format of the submissions, the number of submissions per person, and the submission deadline.
  • Finally, judging criteria, selection of finalists, and voting procedures to determine which ads get aired were also painstakingly explained.

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In short, the two sponsors approached the contest exactly as they would any other formal business process.  Small-scale experiments, or novel indulgences, don't get this kind of management attention and/or support.

But, what if a company lacks, or is unwilling to invest in, a formal structure, resources, and/or knowledge to implement programs or contests for developing consumer-created ads?  That's where organizations like MOFILM come in; co-creation intermediaries.

MOFILM offers a platform for the co-creation of video content.  It helps large brands and social causes recruit the services of creative and passionate people from around the globe to create video and film content for a variety of applications and devices, including mobile devices.  The company usually stages its global competitions to coincide with world-renowned international film festivals, like New York, Cannes Lions, and London Film Festival.  The company carries the support of several marquee names from the world of cinema; heavyweights like Robert Redford and Spike Lee.

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Even a cursory look at their clients - Axe, Lego, Hindustan Times, Persil, OMO, Haagen-Dazs, Nokia, Surf - reinforces the principal thesis of this blog.  UGC has crossed the chasm and is not just the preserve of a few companies tinkering at the fringes.  Consumer-created ads are core business practice at a large number of companies.  And their numbers are growing every day.

A modicum of cynicism is healthy. So, it doesn't surprise me one bit when marketing and innovation executives ask whether collaborative innovation is here to stay, or whether it is a mere fad; here today, gone tomorrow. Personally, I don't like to read tealeaves, but being a betting man, I am putting my money on collaboration and co-creation having a healthy and prosperous decade ahead.

Why? Because whenever a management practice finds applications in non-traditional arenas, it augurs well for its future growth. We are all very familiar with traditional corporate examples of collaboration and co-creation:

  • Unilever co-creating Marmite XO with the brand's fanatical lovers
  • IBM co-creating action agendas through its Jams technology - like the recently held Service Jam
  • P&G's engagement of teen girls through beinggirl.com
  • Electrolux's annual appliance design innovation challenges conducted through Electrolux Design Labs, etc.

However, how often do we come across case studies demonstrating collaboration and co-creation in the government and non-profit sectors? Not too often. Fortunately there are. Two interesting examples follow, one just taking off and the other already generating interesting success stories.

Collaboration and India's 12th Five-year Plan

Bureaucracies are not known for experimenting with cutting edge thinking. But the Planning Commission of India seems serious about changing that, at least in its sphere of operation. Before the Planning Commission actually starts developing the Plan, it needs to develop what is called an Approach paper, which sets out plan priorities and targets, which subsequently guide resource allocation and later serve as performance measurement benchmarks; an activity typically performed by technocrats, bureaucrats, and politicians.

For the first time however, the Planning Commission is using the platforms of collaboration and co-creation; it is reaching out to the citizens of India to help shape the Plan's priorities and targets. Indian citizens will get to voice their opinions and ideas before the Planning Commission, concerning the contents of the Approach Paper. The Planning Commission is inviting ideas, comments, and suggestions on important themes and topics that are relevant and cut across several sectors, such as:

  • Innovation and Enterprise - Are we creating enough innovations and enterprise for inclusive and sustainable growth? If not, how can we do so?
  • Governance and Institutions - How do Government or Public Institutions affect us in different sectors? How can we make them work better?
  • Financing the Plan - What are the financial requirements, both public
    and private of achieving our targets? Can we meet them?
Commenting on this collaborative and inclusive process, Deputy Chairman of Planning Commission, Montek Singh Ahluwalia, said a special portal will be available on the Planning Commission's website where people can drop in their suggestions. "We plan to make the process more inclusive. We invite people to comment and post their approaches on the portal. People's suggestions will be discussed while finalizing the 12th plan."

This program is just taking off, so its too early to tell how the citizens, collaborators in this case, will respond. In my book on Collaboration and Co-Creation, I refer to this type of commitment as a Light-level implementation.

I call it Light for several reasons:

  1. The motivation and onus for collaborating lies with the ordinary citizen. Why should they, especially if they have no confidence or trust in the Planning Commission or its intent?
  2. There is no opportunity for the citizens to debate and discuss different points of view. The opportunity for brainstorming can significantly improve the quality of submissions.
  3. Most importantly, there is no transparency once the ideas have been submitted. To a person submitting an idea or ideas, it is not clear who will read what has been submitted, how the idea(s) will be evaluated, and whether or not they will be accepted or rejected. This will undoubtedly affect the motivation to participate.
  4. There are no rewards for participation monetary or psychological. Imagine the missed opportunity here. Even a small newspaper article or mention of winning ideas on TV, with the person's photo, would cause a huge amount of excitement and commitment.
So, yes, the Planning Commission and the Deputy Chairman need to be applauded for their enlightened thinking. However, much more can be done to transform the inclusiveness into a major creative and innovation force.

The UK Spending Review

Across the Arabian Sea and a continent away, earlier this summer, UK Prime Minister David Cameron kicked off a collaboration and consultation program, Spending Review, focused on ways to reduce government spending. The Prime Minister recognized openly that the biggest challenge UK faces is dealing with huge debts, which means reducing public spending. He also acknowledged that reducing public spending will require innovative and challenging ideas, best developed by those working on the frontline of public services, and not just by his army of economists and policy makers.

Together with Nick Clegg, the Deputy Prime Minister, his office broadcast an appeal to Britain's public service workers asking them to share their ideas on where to make spending cuts.


A Spending Challenge website was launched to solicit suggestions from Britain's 6 million public sector workers. The challenge states that "Every single idea will be considered and the best ones taken forward by departments, the Treasury and the Cabinet Office."  The invitation also described, in detail, the process by which ideas would be evaluated and analyzed. By all accounts the Spending Review was the most collaborative ever with an extended period of engagement over the summer between Government, experts, the public sector and the general public.

Response to the Spending Challenge was, as the Brits would say, bloody damn good! Over 100,000 ideas, including 63,000 from the Public Sector were submitted to shape the way Government works, cut the deficit, and eliminate waste. In addition to inviting suggestions, Ministers traveled the country to hear people's ideas and opinions first hand. Finally, The Treasury received several thousand pieces of direct correspondence on specific areas of Government policy - such as health, housing and education - that led to several rounds of
productive meetings with experts in these fields.

Ideas dealing with low hanging fruit dealt with issues such as reducing dependence on paper and migrating to digital media for routine communications, resulting in savings of several million British Pounds. Other ideas dug deeper. A few examples follow:

  • reforming the Educational Maintenance Allowance (EMA) grant and child benefit
  • spending money more effectively by introducing a more preventative focus across public services, especially in public health services
  • building closer links across health and social care
  • minimising tax fraud, evasion and avoidance; a potential spending of £900 million to combat tax fraud, avoidance and evasion, could raise an estimated £7billion of extra tax revenue by 2014 (no need to compute an ROI on that).

Various government departments will continue to review ideas to identify and implement those that could help deliver further efficiencies. In the interests of transparency and openness, the UK Govt. intends to publish all of the original suggestions that met their moderation policy as a data set on data.gov.uk.

Nothing light about this implementation, very impressive indeed! In fact, to use another British expression, it is as close as you can get to a Full Monty; it meets all the criteria of the Listen-Engage-Respond framework discussed in my new book.  I am betting that applications are likely to grow around the world, and in the coming decade we should expect to see some of the most engaging and productive applications of collaboration and co-creation in the government, public, and nonprofit sectors.


UPDATE: I've posted an entry on the $300 House on the Harvard Business Review site: The $300 House: The Co-creation Challenge >>

One of my professors, the late C.K. [Prahalad], used to say that "managers are so preoccupied with operating efficiently that they don't even think about value in terms of the consumer's experience."

Sadly, despite all the brouhaha about customer-centricity, most companies still operate in a highly product-centric manner.   The difference between the two approaches, using C.K.'s words follows:

The traditional company-centric view says: (1) the consumer is outside the domain of the value chain; (2) the enterprise controls where, when, and how value is added in the value chain; (3) value is created in a series of activities controlled by the enterprise before the point of purchase; (4) there is a single point of exchange where value is extracted from the customer for the enterprise.

The consumer-centric view says: (1) the consumer is an integral part of the system for value creation; (2) the consumer can influence where, when, and how value is generated; (3) the consumer need not respect industry boundaries in the search for value; (4) the consumer can compete with companies for value extraction; (5) there are multiple points of exchange where the consumer and the company can co-create value.


All is not dark and bleak of course.  Several countries, cities, companies, and nonprofit oranizations are beginning to take the initiative to collaborate with their customers to co-create value in fields as diverse as healthcare innovations (Norway), improving the quality of life of 50+ year olds (Scotland), Swasthaya Chetna; Hindi for creating health awareness (Hindustan Lever), and Crashing the Super Bowl (Frito-Lay).   

In my new book, I devote an entire chapter to co-creation beyond the business world.  I share case studies of how the new platforms of customer collaboration and co-creation can be applied equally effectively beyond the business world, to drive collaborative innovation efforts in fields such as education, health care, energy, alleviation of poverty, and sustainability. The consumer-centric view is gaining momentum in non-business environments as countries, regions, and cities experiment with collaboration to co-create more promising futures for their people and the environments in which they live.

One example of a project which will be using co-creation at the bottom of the pyramid is the $300 House (disclosure: I'm an advisor).

$300 House for the Poor


The project, which came to life based on the remarkable response to a blog entry in Harvard Business Review, will take into account customer needs in various countries - from Haiti to India and the Philippines.  I don't expect to see a single house design emerge, but rather a variety of local designs - each designed to meet local needs.

How do you engage the customer at the bottom of the pyramid?  By spending time with them, and understanding their experiences, challenges, and frustrations as they tackle everyday tasks and chores that so many of us take for granted. Or like A.G. Lafley was fond of saying - by doing your laundry in 25 countries! 

Let's just pause for a moment to acknowledge that your company's customer of the future may well be at the bottom of the pyramid.  You would be well advised to adopt a customer-centric mindset and develop a system of initiatives to engage her.
book_medium.gifCome October, Springer will launch my new book, Collaboration and Co-Creation: New Platforms for Marketing and Innovation.  In this blog post, I'd like to briefly introduce the book - what motivated it, its structure, and essence.  I'd also like to take this opportunity to recognize and celebrate my collaborators.


It's a rare day when some media personality or academic guru doesn't proclaim - this is not your father/grandfather's economy!  It isn't. The reason it isn't is because the ethos (defining characteristics) of today's world is different.  Several C's and a T; connectivity, creativity, collaboration, community, and technology, especially the Internet, best capture the ethos of the world we live, play, and work in.  At the center of this maelstrom lies a new and empowered customer that best exemplifies this ethos in motion.


Companies today are dealing with a new type of customer; one that is more educated, better connected, and infinitely more creative and resourceful than at any time in the past. Today's customers expect to be heard; they are unwilling to be mere consumers, passive and invisible at the end of a long value chain - instead they want to be collaborators and co-producers of the products and services they consume.  They don't want to merely watch TV reports on Haiti's earthquake, they also want to report on it and use their social media skills to mobilize aid.  They don't want to merely watch the Super Bowl game, they also want to win Frito Lay's "Crash the Super Bowl Ad Contest" by creating ads for Doritos.  They don't want to merely moan and groan about Dell's lousy customer service - been there, done that - they also want to shape Dell's customer service and product innovation priorities by participating in its IdeaStorm community.   


Consequently, customer collaboration and co-creation is a hot item on the strategic agenda of most companies.  They have been fired up by books like Wikinomics, Here Comes Everybody, Crowdsourcing, We-Think, etc., that applaud and celebrate the rise of the empowered customer.  They hear pundits urging them to rethink the way in which traditional firm-centric activities like marketing and innovation should be implemented to win the empowered customer's business.


But for most companies the key question is how?  There is little out there to help them migrate from applause to implementation.  What does a company do after it gets all excited and motivated about collaborating with customers?  How does it engage them in re-shaping its marketing and innovation efforts? A few market leaders, like Unilever, IBM, Hallmark, and Audi have figured it out.  But the majority of companies are still huddled at the starting line debating how best to implement collaborative innovation programs.


About the Book


Collaboration and Co-Creation helps bridge this gap.  Using a simple and easy-to-understand framework, Listen-Engage-Respond, and numerous case studies from around the world, the book helps readers shake hands with a core set of thinking and action tools for implementing collaborative innovation programs in their own companies.  It nudges readers to view collaborative innovation as a business process that can be systematically designed and implemented, not as some spontaneous, self-organizing outburst of periodic customer benevolence.  The book was written with a show, don't tell mindset.   Hence the emphasis on sharing, discussing, and guiding using a variety of business and non-business cases, examples, and stories, so as to make the content eminently readable and interesting.   


Collaboration and Co-creation is a compact eight-chapter book.    


  • Chapters 1 and 2 set the stage.  Using case studies like the creation of the Oxford English Dictionary, birth of mountain biking, open source software, and Hallmark, chapter 1 discusses the evolution and dissemination of collaborative innovation in contemporary businesses.  Chapter 2 presents the Listen-Engage-Respond framework and illustrates it with case studies involving the Phoenix Suns and Unilever's Marmite.
  • Chapters 3 through 6 provide an elaboration of the Listen-Engage-Respond framework.  They discuss each of the legs of the framework, once again liberally supported with a large number of short (a few paragraphs) and regular (a few pages) case studies.  A few examples being - Barak Obama's election campaign, International Flavors and Fragrances, Nike, Audi, Blizzard Entertainment, Nokia, P&G, Frito Lay, NASA, Ellen Degeneres, and the Susan G. Komen Race for the Cure.
  • Chapters 7 and 8 aim to end the book on an emotional high.  Chapter 7 discusses the implications of becoming more open and collaborative on traditional firm-centric activities like marketing and innovation.  Supporting examples and case studies drawing on the experience of Unilever, Crayola, IBM, Sun, and Ubuntu are provided to help support the discussion.  Chapter 8 takes the reader on an eclectic journey beyond the business world.  Using examples ranging from the country of Denmark, to a clinic of innovation in Norway, to IBM's innovation jams, the chapter discusses how the Listen-Engage-Respond framework is just as effective and relevant in co-creating value in the fields of education, healthcare, economic growth, and global welfare, as in co-creating advertising based on UGC (user-generated content).


The book's Foreword is by Mr. Paul Polman, CEO of Unilever.  Leading business executives and thought leaders from the academic and consulting worlds, like Vijay Govindrajan, Nicolas Mirzayantz, Jacob Buur, Vince Barabba, John Hagel III, and Steve Howe, who had a chance to review the content before it went to print, have provided their insights and frank assessment of the book's framework and ability to foster customer-centric transformation.  We hope you will find it just as useful in leading customer-centric transformations in your own companies.


Collaborators


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Writing a book is seldom a solo endeavor; it is always a team event.  Collaboration and Co-creation is no exception.  I would like to acknowledge and celebrate Deanna Lawrence and Gabriela Head's valuable contributions to researching the myriads of cases and examples that breathe life into the book's content and their participation in triggering and writing various chapter drafts.  



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This collaboration has a very compelling underlying story that deserves to be shared.  Deanna lives in Michigan, Gabriela in Arizona, and I in Virginia.  I have known and worked with Deanna for several years, so working remotely with her was not a big deal.  But till today, one book and hundreds of calls later, I have yet to meet Gabriela.  And barring a two-hour meeting over a cup of coffee while in Arizona to attend a wedding, well after approximately 70% of the book was written, neither does Deanna have any previous history of working with Gabriela.  Needless to add, we are working hard to synchronize intent and calendars so we can all be in one place and toast the launch of the book in October.     


As the famous line in the classic short story - Face on the Wall - states, truth is not only stranger than fiction, but also greatly more interesting.  Yes, it is true, honest and productive work relationships can flourish, despite time and distance barriers.  They merely need a steady and constant infusion of trust and commitment.  Make no mistake, though, it is difficult, but infinitely rewarding.  I was not surprised at all therefore to learn that the latest "Richard Beckhard Memorial Prize" for the best article published in 2008-2009 was awarded by the editors of Sloan Management Review to the article  - How to Manage Virtual Teams.  Folks, if anyone is looking to do more research on this subject and needs first hand experiential data, please talk to us.  We will be happy to tell all!


In the coming weeks, I intend to feature interviews with companies and individuals who shared their stories with us and also provide more details on selected aspects of the book.  Stay tuned!

In Rethinking Marketing: From Marketing Products to Cultivating Customers my co-authors and I wrote about how companies must make products and brands subservient to long-term customer relationships.  We also made the point that for ongoing customer value innovation to become a part of the DNA of the organization, it is important that the company move from an internally focused concept of customer value creation, to a more open, collaborative model of co-creating value with customers and other key stakeholders.

In much the same way, I'm more convinced than ever that we must rethink the purpose of modern businesses.  As the global financial crisis has so bluntly shown us, "maximizing shareholder value" is no longer a sustainable purpose for business.  We doubt it ever was.  But back then, Jack Welch was preaching the gospel and companies were lapping it up.  Interestingly, even Jack Welch is no longer singing the "maximize shareholder value" song. 

This is the age of consumer capitalism and the triple bottom line.  The new gospel is people, planet, and then profits.  Near term thinking that just does good for the company without consideration for the environment, or the social social systems that a company operates in, is not a responsible option!    

So where should we look for new role models? 

Across the border to the north, and across the Atlantic to the sub-continent.

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Recently I read an article describing Ratan Tata's visit to Canada to deliver the first Thomas Bata Lecture on Responsible Capitalism.

The late Thomas Bata and Ratan Tata, and their corporations have a lot in common.  They epitomize socially-conscious leadership

The Tata story has been well covered in this article, which sums up the vision as follows:

Since its founding in 1868, Tata has operated on the premise that a company thrives on social capital (the value created from investing in good community and human relationships) in the same way that it relies on hard assets for sustainable growth. With every generation, Tata's executives and managers say, they have nurtured and improved their capability for "stakeholder management": basing investments and operating decisions on the needs and interests of all who will be affected. For Tata, this means shareholders, employees, customers, and the people of the countries where Tata operates -- historically India, but potentially anywhere.
These are not platitudes. Tata has won the goodwill of the people not by talk, but through action. Key decisions are based on the impact on society.  The company's humanitarian actions, for both employees and non-employees, following the dastardly November 2008 terrorist attacks on the Taj hotel are well documented, and have won raging applause from even the most anodized critics of business. 

People first, business second.  Both Bata and Tata teach us that it is possible to be a global powerhouse without sacrificing one's soul.  It is not necessary to separate social good from business well being, as so many companies do.

Dartmouth's Professor Vijay Govindarajan explains the Tata Nano as a social innovation:

Through his actions in the Tata Nano project, Ratan Tata has demonstrated that capitalism can have a soul--the profit mission and the social mission do not conflict and can, in fact, be pursued simultaneously. 
Increasingly, we are going to see businesses doing well by doing good, a philosophy that guides thinking and decision making at Unilever. In a recent discussion, Harish Manwani - President Asia, Africa, Eastern and Central European Regions at Unilever - shared that for Unilever value co-creation was not just collaborating with customers, it is collaborating with the interlinked ecosystems that the company operates in.  According to him, this passion and commitment to doing well by doing good, is the reason why the Dow Jones Sustainability Index has rated Unilever as the best company in its category for ten years running. I intend featuring more of the Unilever social responsibility story in my forthcoming blogs.

Social good and company well being can co-exist, as the examples of Bata, Tata, and Unilever demonstrate.  They should not be divorced from each other any longer. The people and the social systems they live in are both customers of the company.  The paramount purpose of modern businesses should be more than just "Do No Harm."  Rather it must be "Do Long Term Good for All."

India's economy and its companies have been getting a lot of attention in the past decade.  A trend map of India at the annual Davos conference will attest to this.  A decade ago, India was invisible at Davos.  Today, to the uninformed observer, Davos may well be a Bollywood party.    


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The Tata Group, Mittal, Reliance, Infosys, Hindustan Computers Limited, Ranbaxy, ICICI, Hero-Honda, and Bharati Airtel are a few Indian companies that regularly garner media headlines.  The world knows a lot about these companies, and their products.  But what does the world know about the leadership of these companies?  The answer is very little.  Beyond a few names, like Naryan Murthy, Ratan Tata, Mukesh Ambani, and Laxmi Mittal, the West knows little about how Indian companies are managed.  The India Way, authored by Peter Capelli, Harbir Singh, Jitendra V. Singh, and Michael Useem intends to rectify that.  



Do Indian companies have their own way of managing and running their companies?  The answer is a most emphatic YES!  Instead of using management ideas and practices that dominate Western businesses, Indian companies are applying fresh practices of their own, to shape their strategy, leadership, talent, and organizational culture.


Here is a sampling:


  • The best Indian companies drive their performance by investing in people; motivating them, empowering them, and investing in their training
  • For them, the CEO's office and function is not as critical as in the West.  Many of these companies don't even have that title, and practice group decision-making at the top
  • Envisioning a path to the future, strategic thinking, and guiding change is very critical to the leadership of these companies
  • As is being inspirational, accountable, and entrepreneurial

 

Corporate Social Responsibility (CSR), is not an occasional, negotiable activity for most Indian companies.  Partly because most organizations in India tend to be surrounded by mass poverty, and partly because CSR is a reputational asset that helps negotiate deals with the government, companies are very serious about their obligations to the ecosystem they operate in.  40% of all Indian companies routinely monitor their progress on CSR goals, compared to just 17% in the U.S.  


Are these practices transferable to the West?  That all depends on the priorities of Western companies.  Consider the top priorities of Indian companies:


  • Looking beyond stockholders' interests to public mission and national purpose
  • Drawing on improvisation, adaptation, and resilience to overcome endless hurdles
  • Identifying products and services of compelling value to customers
  • Investing in talent and building a stirring culture. 


Perhaps the experience of dealing with obstructionist bureaucracies, crumbling and antiquated infrastructure, and growing up in hardship and scarcity can't be replicated.  But inspiration to do well by one's employees, and build lasting legacies, around entrepreneurship and long-term success, can certainly be imported, and emulated.   


There's always been an India Way.  Its just that its more palpable today.  Hunger can be a beautiful thing - especially the hunger of challenger companies not to be perceived as mere Xerox copies of front line Fortune 500 companies.  Let's hope, for their own sake, Indian companies don't forget this.  


The old adage - Fat Dogs Don't Fetch - applies to all companies in all countries!


Recently, I had the pleasure of being introduced to ICFAI University, one of India's leading educational institutions, recognized for its skills in developing innovative educational programs and writing insightful case studies.  It is also a leading publisher, 18 magazines and 46 journals, in areas such as marketing, finance, environment, and health care.

effectiveexecutive.gifEffective Executive is the flagship magazine of the University.  Started in 2000 and published monthly, it features articles on topics like marketing, strategy, sustainability, and innovation.  Every issue also features interviews on these topics with experts.  In the recent past, the magazine has interviewed globally renowned experts and intellectuals, like Philip Kotler, Michael Tracy, Pankaj Ghemawat, Vijay Govindarajan, and Dr.A.P.J.Abdul Kalam, a renowned nuclear scientist, and former President of India.

The magazine's latest issue is dedicated to the theme Co-Creation: the New Frontiers of Competitive Advantage.  The issue features an interview conducted with me on my HBR article and on co-creation

I would like to share two key topics covered by the interview.  The first deals with the nature of co-creation, and the second with the difference between customization and co-creation.

Understanding co-creation

Often, the more people use an expression, the less certain we are what they really mean by it.  It's as if usage guarantees understanding, and more frequent usage guarantees deeper understanding.  But that's not true.  Take expressions like Web 2.0, the new normal, or sustainability.  People don't often explain or use these terms the same way. 

In the interview, I explained co-creation not by defining it, but by decomposing it, to better explain its features and characteristics. 

Co-creation, as currently used in the business and marketing world, has a very specific meaning.  Rather than present a definition, my preference would be to explain co-creation by decomposing it, so we can better understand its characteristics.  First, co-creation, represents interaction, and takes place between one or more firms, and one or more actual or potential customers.  Second, this interaction is willing, purposive, and intentional.  Third, this interaction is managed, either by the firm, or jointly by the firm and its customers.  Fourth, the output of this interaction results in value for both the firm and for its customers.  Lastly, the value created for customers may or may not be unique, and is derived through a variety of experiences, such as suggesting ideas, refining current value, designing new products, improving current designs, fixing defects, and consuming new products and services.

Customization and Co-Creation

I've blogged on this topic before when I interviewed Page Moreau.  But its worth revisiting, since the two words are often used interchangeably, giving the impression that the two concepts are the same.

There is no doubt that in specific cases there is a blurring of boundaries, but customization and co-creation are not the same.

Let me answer the last part of the question first - do boundaries between customization and co-creation get blurred?  Yes, they do.  Part of the reason is that researchers and authors who introduce these terms are not always diligent in defining them, and differentiating them from other similar terms.  Let me illustrate this for you with an example.  Take a men's clothing company like Paul Fredrick, that sells its offerings through a catalog.  If you want to order dress shirts, you have two options.  You can either buy the color and pattern you prefer, in your size, based on all the shirts displayed in the catalog, or you can order a custom shirt.  Customization allows you to mix and match the fabric, collar and cuff styles, fit, pleat style, pocket, among other things!  But wait, there's more.  You can also have the shirt personalized, by having your initials monogrammed in several different styles, in different colors, on either the cuff, or the pocket.  Customization, personalization, or both! But is it co-creation?

What is important to realize is that customization and personalization are possible only within the boundaries of choices offered by the company.  To go back to the shirt example, the only way I can order a shirt with kurta sleeves (an Indian style shirt with tubular sleeves) is if the company offers that option.  If the company does not offer that option, then all that I can do is pick from the sleeve styles offered.  This is in sharp contrast to co-creation.  If the shirt were being co-created, then all options would be on the table, including kurta sleeves, because the starting point would be a blank canvas, not a menu of predetermined options and styles.

I am sure I'll blog again on the similarities and differences between customization and co-creation.  We owe it to ourselves to keep our thinking fresh and focused. 
Cogito ergo sum - one of Descartes's most famous legacies - loosely translated as, I think, therefore I am.

Peter Drucker had a similar way of introducing himself - I write - is how he used to introduce himself.  What Peter should have really said was - I think and I write, and I don't know which one comes first.  An interesting chicken and egg problem, but not one you lose sleep over, especially if your writing borders on the prolific, and your thinking can stand the test of time!

November 2009 marked the 100th anniversary of Peter Drucker's birth and we should celebrate it.  Universally acclaimed as a great management thinker and business guru, for over 50 years, from the early 1950's to the early 2000's his provocative and often controversial ideas dominated the business world. 

The management kingdom is rediscovering him and finding him to be just as relevant as he was all those years ago. 

druckersbrain.jpgHBR ran a special issue on Drucker in Nov. 2009 - asking What Would Peter Drucker Do?

Books like Inside Drucker's Brain are attempting to make him and his cutting edge thinking more accessible.  

Paradoxically, in the West, where he made his greatest contributions, he is all but forgotten, pushed aside by gurus du jour.  On the other side of the Atlantic, Drucker societies are still alive and flourishing.  They assemble routinely to discuss his work and learn from his teachings.

It is impossible to compress a sixty-year career comprising over thirty books that have sold over 5 million copies and scores of articles, including some HBR classics, in a page or two.  So, how about we take inspiration from Hollywood and present instead a 90 second trailer on the World according to Peter Drucker.

His signature idea - Management by Objectives; still relevant, especially as companies flounder with direction and purpose. 

His committed and unwavering focus - the long term health and well being of companies, not short-term hits.  He rarely blamed individuals, maintaining that it was always the underlying systems that were the root causes of failure.  He believed organizations should constantly challenge their design and operations; he saw this as the key to long-term well being.

His favorite questions - What is your company's ultimate purpose? Who is the customer? What is your mission?  What is it you should continue to do?  What is it you should stop doing? Where has the obsession with the short-term undermined long-term effectiveness? Why aren't some younger people in the company earning more than the Directors?  

His passions - writing, context-bound thinking, integrating ideas, processes not outcomes, urging companies to innovate and create the future, long-term corporate well being, nurturing future stars, and of course - the CUSTOMER!

What did A.G. Lafley, ex CEO of P&G, learn from Drucker?

In A.G.'s own words:

Over the years, I learned many things from Peter, but far and away the most important were the simplest:

  1. The purpose of company is to create a customer.
  2. A business is defined by the needs, wants, desires a customer satisfies when buying the company's product or service.
  3. To satisfy the customer is the most important mission and purpose of every business.

No presentation of Peter Drucker's work is complete without sharing some of his memorable quotes and brilliant observations.  A very brief, you might even say self-serving, sampling related to marketing, the customer, and innovation follow.   

  • Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. 
  • The customer rather than the manufacturer defines a market
  • Of course innovation is risky.  But so is stepping into the car to drive to the supermarket for a loaf of bread.  All economic activity is by definition 'high risk.' And defending yesterday - that is, not innovating - is far more risky than making tomorrow.
Paraphrasing Drucker and taking a few artistic liberties: since customers define markets, and market creation should be the fundamental focus of a company, and innovation is the primary fuel that drives this market creation - then what better world to be thinking, writing, and consulting in, than customer-driven innovation!

Happy 100th Peter!  You are not forgotten.

We are being constantly reminded, by scholars, practitioners, and journalists, that today's individuals and business organizations live in a highly networked, interactive, and collaborative world. 

This new reality has given rise to new customer behaviors, and to entirely new vocabularies.  The consumer is dead, long live Prosumers, Trysumers, and several other forms of  - - - sumers yet to be born.

  • Prosumers - today's customers are both producers and consumers; i.e., they are not just consumption machines, but also contributors and co-creators of unique value

  • Trysumers - consumers immune to most advertising, who enjoy full access to information, reviews, and navigation, who love to try out new products and services - appliances, artists, outfits, food, holiday destinations - new "anything", with post mass-market gusto
Despite this daily dose of revivalist thinking, several companies approach their customers and markets as if they were still stuck in the 1960s; an era of impersonal transactions with the customer, relying on everything "mass" - mass markets, mass media, and mass undifferentiated value.  For these companies, Marketing is still a one-way street, where companies do the talking and influencing through their advertising, and customers do the listening and consuming; passively at the end of a long invisible value chain.

There is something wrong with this picture and it needs fixing.  What is wrong is that most companies are still set up to market products.  That needs fixing.  Companies must transition from marketing products to cultivating customers! 

hb.gifIn the January-February Harvard Business Review article - Rethinking Marketing (download here) - my co-authors (Roland Rust, Christine Moorman) and I discuss how companies must shift their focus from driving product-centered transactions, to building long-term relationships with customers by offering whichever of the company's products the customer values most at any given time. 

This can only be done if companies make products and brands subservient to long-term customer relationships.  And that means - reinventing the marketing department altogether.

The essence of reconfiguring marketing as a customer department is captured in this diagram:

hb_dia.gifThe traditional marketing department must be reconfigured as a customer department that puts building customer relationships ahead of pushing specific products. To this end, product managers and customer-focused departments report to a Chief Customer Officer instead of a CMO, and support the strategies of customer or segment managers.

Two key implications of this reconfiguration need additional emphasis:

  • First, reconfiguration is not merely drawing a different looking organizational chart, with different sounding titles.  It is a fundamental shift in allocating, sharing, and managing resources - people, budgets, and information.  This has implications not only for which tasks get priority and how they are executed, but also for who is the best person to execute them.  For instance, since the role of the customer manager is the ultimate expression of what marketing should be - cocreating unique value with and for specific customers - we expect them to approach their task more like consumer anthropologists and behavioral scientists (see my post on A.G. Lafley), as opposed to advertising or promotion specialists.

  • Second, in this reconfigured world, being able to offer relevant consumer value at all times becomes a key driver of business success and profitable growth.  For ongoing customer value innovation to become a part of the DNA of the organization, it is important that the company move from an internally focused concept of customer value creation, to a more open, collaborative model of co-creating value with customers and other key stakeholders.  Integrating R&D into the customer department will go a long way to ensuring that the customer remains at the center of all value creation activities.
A migration from marketing products to cultivating customers will also require a shift in metrics to gauge the effectiveness of a company's customer-focused strategy.  We discuss four new ways of thinking about business success in this customer-led world of marketing:

  • Focus more on customer profitability, less on product profitability
  • Customer Lifetime Value (CLV) thinking should trump maximizing current sales thinking
  • Customer equity - the sum of all CLV's of a company's customer base - should replace a brand equity orientation  
  • Companies should pay more attention to customer equity share, and less attention to market share
I hope you find the article relevant, interesting, and useful.  If you're having similar discussions in your own organizations, please share them with me.  I'd love to start a conversation with you on how we need to rethink and reinvent the fundamental focus of marketing.

DOWNLOAD: Rethinking Marketing, by Roland Rust, Christine Moormon, Gaurav Bhalla, Harvard Business Review, January-February 2010.  

The American Marketing Association (AMA), Decision Strategies International, a global consultancy specializing in scenario planning, and a group of marketing leaders from industry and academics recently completed a project on the role of marketing in 2015 - Future of Marketing in 2015 - an American Marketing Association Special Report.


After nearly a year of secondary research, a survey of business and consumer marketers, and workshops with marketing leaders, the AMA developed four possible future states in 2015 and their potential impact on marketing in the organization.  These scenarios are presented below.  For each scenario, the project also created thumbnail sketches of key goals and objectives of professionals operating in each scenario.  


The four scenarios and the CMO archetypes for each scenario follow:


future1.gif


CMO Archetypes:

future2.gif

While the effort of the AMA to peer into the future is laudable, I am personally very troubled by the output, and the lack of emphasis on some fundamental game-changing trends like customer collaboration, value co-creation, customization, and open systems thinking.  

A useful tactic in evaluating the output of a future oriented undertaking is to study the inputs used.  The report states that the scenario building process began with an identification of forces that might shape the role of marketing between now and 2015.  The key issues and trends identified were:

  • Shrinking world, expanding relationships - increase in globalization and technology integration
  • Rise of new class, BRIC by BRIC - creation of new consumer markets
  • Innovation or Invasion - push back due to micro-profiling and and behavioral targeting
  • Command and Control becomes Cultivate and Create - two way conversations providing valuable information for new products/services offerings
  • Channel Convergence and Consequence - traditional media continues to be challenged
  • Talent Turmoil - increasing competition for valued skills and competencies
  • Pressure to Prove - Marketing is persistently challenged to prove strategic value and bottom line contribution.
Only one of the above inputs - "command and control becoming cultivate and create" - comes close to addressing how the concept and dynamics of value creation are changing.  What could be more fundamental than the identification, creation, delivery, and nurturing of customer value?  Yet not one of the archetypes presented above is obsessed with it.  

The Future of Marketing should be a paradigm shift, not a straight line extension of Marketing's current focus with selling, promoting, and packaging.  Even more disappointing is that the above scenarios and archetypes do little to move Marketing from its current inward product focus to a more outward customer orientation.  

Marketing needs a bolder different future, one that is obsessed with customer value creation.  This bolder future can't be achieved by a functional focus alone, no matter how cleverly worded - network integrator, sales facilitator, etc.  Because Marketing is not a function, it is a business orientation that shapes how a company creates long term, sustainable value for customers, for society, and for itself.

The Future of Marketing can't lie in peddling influence and shouting brand superiority.  It must lie in making investments in consumption ecosystems, of which the company is only one small part.  For the future of marketing to be viable, it must part ways with its incarnation of today.  The scenario that is personally most exciting to me is one where an obsession with customer value makes marketing as we know it today obsolete and unnecessary!

That indeed would be a bright new future.

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