Co-creation is now a commonly used term, particularly in fields such as digital transformation, ever since it was originally proposed by Prahalad & Ramaswamy.
Here, lets break this concept down to the grassroots, see what kind of drivers work best for co-creation and also look at the barriers to co-creation, particularly in Industry 4.0.
Co-creation vs customization or personalization.
Let me quickly draw clear lines between the concepts of co-creation as opposed to customization as these two terms are sometimes used interchangeably and are often quite confusing.
Customization — In customization, or personalization, the customer is only drawn into the process towards the end of the product life cycle. The customers role mainly involves making suggestions towards an incremental change in the product or prototype that is almost complete.
This is quite often seen in the luxury car segment. Consider Rolls Royce for example. As a Rolls Royce phantom customer, you get to personalize various things ranging from the interior wood and leather trims to even having optical fiber based interior cabin lights mimic galactic constellation movements at any given point of time.
Yet another interesting example of customization is the startup Hawthorne which raised over 5 Million in funding recently. Their business model revolves around selling personalized perfumes for men. Their fragrance range is tailor made based on the customers diet, body temperature, work environment and a host of other factors.
There are also some other related concepts in this context such as “super personalization” or “hyper personalization” but in the interest of time we will not discuss them here.
To sum it up, customization or personalization involves the customer only at the fag end of the innovation life cycle with an almost complete product in hand.
Co-creation — Co-creation on the other hand is something much deeper. The customer is intimately involved as an active contributor right from the beginning of the product life cycle and is an active part of product development.
I would like to phrase it this more like this -
“True co-creation is when the customer does not remain only a customer anymore. The value add that a customer brings is cycled back into the product or service in such a way that it is now available to other customers”
The customer has changed from being only a consumer to a producer.
The Apple app store or the Google play store is an excellent example of this approach where customers initially buy something from the manufacturer, add value by developing applications and are now being able to cycle it back into the system to market these applications to other prospects or customers.
Drivers for co-creation
The explosion of the internet, social media and availability of online collaborative platforms have greatly increased the ability and availability of diverse stakeholders to come together to create revolutionary products.
Similarly technologies such as IOT, IIOT and availability of big data at the customers end has made it possible for the customer to be an integral part of the value chain. It is no longer possible for companies to ignore the importance of resources that the customer holds in his hands, particularly data.
Yes, organizations are taking this seriously. In this excellent study by Hitachi, we can see that the automobile sector leads the pack when it comes to implementing a collaborative approach to innovation.
Barriers to co-creation
As interesting as this concept of co-creation is, there are certain barriers that require mutual effort to work around, both by the enterprise as well as the stakeholders.
- Requires availability of passionate customers
Co-creation is best enjoyed when you have a passionate customer and a passionate enterprise.
Participation by the customer in things like refinement of product requirements etc., involves a significant investment in time and effort by the customer which is not always seen. This is why I believe that the key here is a passionate customer.
2. Mutual trust.
Concerns over data privacy and data security are very valid in digitalization. As a customer, you are handing over your valuable data to the enterprise with the expectation that they handle it as carefully as you would do.
For co-creation to be successful, the enterprise must be as transparent as possible with the customer to ensure that trust is not lost.
3. Requires rework in business models
Traditional business models available today are not often the best choice in the co-creation approach.
For example, how would you handle IP (Intellectual property) in a co-creation approach ? After the product is created, how would you define pricing models to ensure a win-win solution for all stakeholders involved ? There is still a lot of work to be done in these areas.
Most of the examples of customer co-creation seen today mainly revolve around products.
The more you think about it though the more you feel why can’t co-creation be extended to services and business models particularly in digitalization and Industry 4.0 ?
That could very well be part 2 of this blog. Stay tuned !😊