by: Chris Lawer
I have been working on a new framework that will help me to scope down my research into how firms can co-create knowledge with their customers.
To do so, I began to identify different styles of co-creation based on a number of distinguishing criteria such as:
- THE NATURE OF THE VALUE CREATED – What form of value the co-creation primarily creates – products, services or experiences
- WHO IS PRIMARY BENEFICIARY - Who benefits from the involvement of the customer and the exchange of their knowledge?
- THE EXPLICITNESS OF THE CUSTOMER BENEFIT – Whether the customer value benefit is explicitly stated or rather is an inherent part of the value-exchange process (e.g. expressed through lower prices or more convenience), it is simply part of the “contract” between the firm and the customer
- THE TIMING OF VALUE CREATION – When the value created is used, whether in the design phase pre-market, when in the market in “beta” mode or when in context to an individual customer’s consumption-in-use.
- THE DEGREE OF CUSTOMER COMPETENCE – The degree of end-user competence and skill required
- THE INTENSITY OF FIRM-CUSTOMER INTERACTION / CUSTOMER INVOLVEMENT – The frequency and intensity of knowledge exchange between the firm and the customer
- THE NUMBER AND TYPES OF CUSTOMERS INVOLVED– Whether value co-creation is limited to lead users, a single customer at a given point in time or all customers possessing knowledge or seeking some kind of value
- THE CUSTOMER’S ROLE IN THE PROCESS – Whether customers are performing an active or passive role, i.e. they are aware they are contributing value to the firm
- THE NATURE OF CUSTOMER KNOWLEDGE EXCHANGED – Expressed or latent, or a combination of both
- THE DEGREE OF CUSTOMER-CUSTOMER INTERACTION – Whether co-creation occurs in distributed environments away from direct firm involvement and amongst peer users.
- WHO OWNS THE INTELLECTUAL PROPERTY CREATED - Whether there is no ownership of any IP or the firm takes ownership for its own purposes (relates to Point 2 - the Primary Beneficiary).
In the end, I settled on two factors which distinguished different styles of co-creation. These are:
The degree of adaptability or personalisation of the value created, with standard, fixed products at one end of the scale and unique, personalised, adaptable experiences at the other
The point (or “locus of innovation”) where the value creation occurs, within firms or within markets, ranging on a scale from occurring wholly within the firm with limited invited lead user involvement at one end (here value is created and embedded in new products before they are released to the market) or at the other end, where value creation occurs at the point of use by an individual consumer in the market or a community (here value is co-created according the individual’s context, event or preferences in time and space – these define personalised experiences).
Therefore, using these two factors, I am able to identify eight different styles of customer-company co-creation, which I show (with examples) in the powerpoint chart below (click on the chart to blow-up a bigger version – apologies the typeface is so small).
To open the powerpoint version of the model (much more readable), click here
The eight different styles of co-creation shown in the model are:
- Product “Finishing”. The customer completes the product or service and is the final co-creator of value or actor in the business system or value chain, e.g. IKEA
- New Product Design and Development (Lead User). Here a limited number of expert customers are invited “into the firm” to share their knowledge and contribute to the development of new products and services. There is a good description of the Lego Mindstorms lead user project in February 2006’s Wired magazine. Other examples include Harley Davidson HOG events, Saturn Cars, Proctor and Gamble’s Connect & Develop programme and Silicon Graphics.
- Existing Product Adaptation (Customer Feedback). Here the company actively solicits expressed customer needs or feedback to improve its products, e.g. Cisco and Microsoft Knowledgebase
- Mass Customisation, This is the provision to the customer of a limited set of company-determined choices or options with which the customer can personalise a standard product or service template. Examples include Adidas custom shoes, Dell PC’s and BMW cars (plus most other car manufacturers)
- Open Community Ideation and Product Design and Development. I differentiate the open-source movement because a) it is more distributed and b) firms cede more control to the community of users and creators. Also, open source tends to bias in digital environments, creating mods to games software for example as well as the well-known examples of Linux, Firefox and Sugar CRM. I also include Innocentive here because of its community basis for creating solutions to R&D problems.
- New Service Design, I distinguish new service design from new product design and development (Lead User) (3 above) because services tend to involve more consumers in the innovation process and are also easier to test in markets than products through experimentation, probe and learn approaches. Also, of course, service value is inherently more adaptable than tangible product value, involving more knowledge-rich interaction. Examples include Teliasonera’s testing and piloting of new mobile phone services and Alaris Medical Systems constant dialogue with customers to improve its advocacy offering.
- Real-Time Marketing & Service Adaptation, Moving more to within markets and value-in-use with higher adaptability, this style of co-creation is characterised by high levels of customer dialogue and interaction, enabled by digital technology. This allows individual customers to change the value presented by the firm in real-time, so for example, Cemex allows its customers to modify the delivery time and quantity of cement to fit with their regularly changing (hourly) requirements, Fedex allows large corporate customers to change package transit times and destinations in real-time. These are enabled via an intelligent knowledge interface between the firm and the individual customer.
- Personalised Experience Value and Knowledge Co-Creation. Finally, this is where the firm and the customer interact within an experience environment to realise unique co-created value. The unit of value is not the product or the service but the individual experience and its interaction with a host or experience network partners. Examples here include those such as iPod / iTunes (facilitates a personalised music experience, it is less about the white box and more about the experience gateway it provides), Medtronics pacemakers (less about the pacemaker technology, more about the intelligent care network ), John Deere (less about the heavy agricultural machinery, more about the remote sensing capability and adapt-to-farm conditions value) and Amazon (especially in the US which is experimenting with all kinds of personalised interfaces and content).
So those are my 8 styles of co-creation. I now have to choose which one or area of the model I must focus on. What is interesting is that each style requires different capabilities for strategy, learning and marketing.
Each also demands a number of different pre-conditions and enablers for firms to be effective co-creators. If I can identify these, then I can help firms understand what to change in order to embrace the opportunities afforded from collaborating with customers.
Natrually, some of the co-creation styles overlap. Also, any one company may combine the different styles to realise different forms of product, service and experience value.
As they currently stand, I don’t claim the styles to be accurate or highly robust in their differences (that is the job of my research) so I am really keen to explore and discuss your views as to whether they are valid or can be improved. After all, that is what co-creation of value is all about!