by: Chris Lawer

It is possible to identify a number of antecedents for both the customer and the firm to participate in co-creation through knowledge sharing. These are, firstly from the customer’s point of view:

Customers must be able to speak the same language as the firm. To be able to contribute their own knowledge, customers first need to absorb the firm’s specific knowledge and to understand its meaning. Not all customers are knowledgeable or competent enough to co-create value.

Customers must deeply trust in the firm. Any information they share must not be used against their own interests. Marketing has a fundamental role in managing customer risk.

Customers must be motivated to take part in the knowledge creation process. Such motivation can derive from an awareness of the relevance of their knowledge contribution or from incentives in the form of early access to new products, special events, discounts and so on.

Second, from the firm’s perspective of utilising customer knowledge:

Firms need to develop absorptive capacity with dialogue for their customers’ knowledge; that is an ability to recognise the value of customer knowledge, sense and incorporate it within the firm. The first step in doing this is to select the best knowledge assets on the market. As well as scanning, it includes dialogue.

Organisational sharing capacity for co-creation emphasises mechanisms for integrating customer and organisational knowledge assets and then reproducing them internally. As strategy becomes interactive, involving more dialogue and collaboration with customers, there must be wider dispersion of information and decision-making throughout the organisation.

Deployment capacity concerns how firms act upon customer knowledge. Firms need to overcome the bias that “R&D knows best” when moving from passive involvement of customers to active co-development with customers. However, as an incentive for knowledge contributions, firms must recognise individual customer rights in the outputs created with their knowledge. This calls for new capabilities in intellectual property rights management.

Below I list a selection of capabilities that firms can develop to harness knowledge from their customers and co-create superior innovations and value:

Capabilities for customer knowledge co-creation

Firm antecedents
- Enable employee flexibility to engage in dialogue with a diverse and evolving customer base
- Develop long-term stable relationships with “learning partners” that benefits both parties
- Rework employee compensation plans and promotion decisions to incentivise co-creation
- Create superior transparency for effective collaboration

Customer antecedents
- Customers must be able to speak the same language as the firm.
- Customers must deeply trust in the firm and have a sense of belonging
- Customers must be motivated with regular reminders of the benefits of co-creation
- Keep customers excited and actively involved in co-creation

Customer Knowledge Acquisition
- Choose the right customers through smarter market-sensing
- Develop a user-friendly tool-kit for customers and evolve it continuously to satisfy leading-edge customers
- Accommodate a wide base of heterogeneous customers to create a diversity of perspectives
- Build communities of creation. Develop a capability of putting together customer groups of expert knowledge that interact not only with the company, but also importantly with each other.

Customer Information Distribution
- Maintain a balance between high internal variety and flexibility, and chaos
- Build a platform for ongoing, active multiparty dialogue between the firm and its communities of consumers
- Activate knowledge-sharing at the point of customer contact
- Interact effectively with competent customers who will increasingly recognise and leverage their own value to the company
- Create new relationships or new ways to combine and manage existing relationships
- Develop an environment where knowledge can be co-created and shared continuously
- Make customers more intelligent as well as firm offerings

(Customer) Knowledge Use
- Build new capabilities in intellectual property rights management. As an incentive for knowledge contributions, firms must recognise individual customer rights in the outputs created with their knowledge.

Outcomes from customer knowledge co-creation

Finally I list some potential benefits and outcomes for the firm that becomes an effective customer knowledge co-creator:

- A greater ability to sense emerging market opportunities before the competition
- More effective “unlearning” of established assumptions and practices through open-mindedness, shared vision and an enhanced commitment to market experimentation and organisational learning.
- Higher innovation potential, effectiveness and predictability; creating more innovative new products
- Validate the knowledge already accumulated in the organisation
- Better and faster response to latent customer needs
- Shorter loop of learning errors
- Faster customer access to knowledge about, and resolution of, customer service problems
- Higher perceived customer switching costs arising from the customer’s ongoing knowledge investments in the firm.
- An enhanced ability to co-create mutual value on an ongoing basis; value in the form of personalised, unique experiences for the customer and higher profitability and growth through higher levels of customer loyalty for the firm
- Creative stretching of existing products, services and skills to generate additional revenue and efficiency
- Expanded market share

I have written an academic paper on the above if anyone is interested. Email me to get a copy.

Original Post: http://chrislawer.blogs.com/chris_lawer/2005/07/capabilities_fo.html

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