For any business, the quality of customer experience they provide and the relevance of their products and services is a key concern. Even Fortune 100 companies are bound to run out of fresh ideas at some point in time and can rely on their previous successes only to an extent. What companies need are new angles by which to approach their offerings and create products that their customers need. Innovation is key, but with inspiration potentially coming from outside the company.
What is Co-Creation?
An academic definition would go like this – Co-creation is a concept that involves collaborative development in creating something of new value. Ideas are shared in a collaborative process, thereby creating new concepts, solutions, services and products. The collaborative efforts are with a range of experts within the company and stakeholders related to the process, like customers (primarily), suppliers, and others important to the process.
In general, most companies mandate that the development processes remain strictly internal. This secrecy is to ensure the safety of intellectual and business property. However, co-creation turns this idea on its head and encourages outside collaboration to bring in fresh ideas and approaches.
The idea of co-creation came up in 2000, when the consumer’s role and its importance in ‘companies competing as a family’ was first mentioned in the Harvard Business Review article – Co-opting Customer Competence by C.K Prahalad and Venkatram Ramaswamy. Interestingly, while co-creation often refers to consumers, it can also include other stakeholders (remember – competing as a family). These can be:
- Prospective clients who may be interested in investing in a service or product.
- Suppliers who are keenly aware of how materials can be used in advanced ways.
- Competitors – market research is a great teacher.
- Industry influencers who are close to on-ground realities and can give you clearer views on what is needed from your business to excel in a constantly evolving market.
How can Co-Creation Benefit Your Business?
Co-creation has shown immense benefits for organizations. Take how Anheuser-Busch brought its popular Budweiser Black Crown to the market. In 2012, despite outselling their four closest competitors, they were still selling much less beer than when they first hit the market in 1988. The brand ran an internal competition with their 12 brewmasters asking each one of them to develop a new flavor. The winning flavor was to debut in the Super Bowl ad of 2013. The co-creation part came, not during the recipe development stage, but at the testing stage – where the company had 25,000 Americans (customers) across the country to sample and vote for their favorite flavor. When the Black Crown debuted, it was already well known and sales skyrocketed because it was a product made in consultation with the people. This case study is an example of bringing the end consumer into the creation stage.
The benefits of co-creation are at multiple levels:
New Products Based on Customer Needs: The simplest reason to invest in co-creation is that it will lead to something new. Businesses need new USPs, a trailblazer product or service at regular intervals to stay in the game. Brainstorming with the same teams can often lead to a stagnation of ideas and all you may end up is with iterations of the same idea. Co-creation changes that, bringing in new voices and ideas that can be disruptive in nature. With co-creation, the market tells you what it wants.
Improved Financial Trajectories: Co-creation is good for any company’s bottom line. To cite an example – take DHL. By 2016, DHL had already been privatized for 15 years, with a $57 billion turnover. However, they found that their customers were looking for newer ways to make supply chains work better for them. This meant overhauling complex global supply systems. The company hesitated initially to crowdsource ways to change. But in 2016, Forbes reported that the co-creation efforts paid off well. CSAT scores were over 80%, timely delivery was at 97% and upwards. Customer churn rates had reduced and revenues from the new services and products that were implemented were at an all-time high.
Unexpected New Ideas: It may sound contrary but an inhibitor of innovation in the corporate space is specialization. Having expert staff is great for any company looking to create specialized products. However, innovation often is limited to the realm of specialization, leading to complacency. Co-creation ensures this does not happen. Some of the best ideas often emerge from ancillary industries or even from experts on completely different but relevant subjects.
Joining Hands Creatively with the Consumer: The creativity that comes with including a consumer in your creative process is a huge benefit. But companies often look at it from a financial perspective. Does joining hands with co-creators mean a huge dent in your bottom line? Interestingly, not really. Take what P&G did with the development of their several lines of products. Some of their co-creators were incentivized monetarily or with prizes; others came on board to simply be part of the process and for entertainment; few other loyal customers were keen on being heard and be a part of the process. In most cases, the co-creator becomes a valued workforce asset without requiring massive investment.
Co-creation with the consumer at its heart is a simple means to enduring customer loyalty as well. Seeing their ideas come to fruition gives them the feeling of being taken seriously by a brand they have been loyal to. This helps a business achieve the goal of being customer-centric.
Knocking Down Barriers Between Industries: Barriers are not just within the teams in your company. For instance, software is an integral part of retail, yet the software industry may have no ideas or inputs on the trends that their customers in the retail industry need to stay top of. The experts hired by the software company are often limited to the IT knowledge needed. Working with co-creators can change this completely, bringing in skills that have not been used in a sector before. A material supply expert may help you design the next eco-friendly handbag and simplify its delivery too. Access to these new skill sets is risk-free – simply because if the idea does not work, you can move on.
The Process of Co-Creation
There are many approaches to co-creation and your choice as a business will depend on what your final objective is. There are two key aspects defining the kinds of co-creation approaches:
- How open are you? Is this going to be a collaborative process where anyone can join in or is there a selection process?
- Who has the ownership of the end-results? Will the end-result, and all the challenges along the way, belong to your business, the initiator, or jointly owned by the collaborators?
Based on this, there can be four main kinds of co-creation approaches:
An Experts’ Club: This is ideally suited for businesses that are on a time crunch and have a specific challenge that needs to be addressed by experts. All the contributors to this form of co-creation meet qualifying criteria based on a selection process. Such people bring in a quality of input and often share mutually compatible chemistry, which is integral to bringing out breakthrough ideas.
Crowdsourcing: As the name suggests, this is about big numbers. For every creative challenge a company faces, there is potentially someone out there with a brilliant solution. This can be done by harnessing the power of online platforms. Usually, this approach has a marketing component as well. The process can be a little long-drawn and the one disadvantage is that you may not get the best people to participate.
Coalition: Sometimes, the challenge a company faces requires them to team up with other organizations – sharing both ideas and investments. Co-branding is an example of such coalitions. Each party to the coalition brings a skillset to the table and a breakthrough, technical or standards-based, happens when they collaborate. The key to success is knowledge sharing and a common competitive edge.
Communities: This is especially when a product or service is being developed for the larger good of society. Groups that share similar interests and have common goals collaborate in this form of co-creation. This model is often seen in software development and leverages the combined potential of a large group of people with complementary skill sets.
Facilitating Fruitful Co-Creation
Co-creation can be quite an innovative force when implemented in the Industry 4.0 environment. However, like any other process, its success is largely dependent on the facilitation of the appropriate environment. There are five key factors to keep in mind to ensure fruitful co-creation:
Establish Equity and Ownership: In the co-creative work process, informal collaborations and resource sharing are often acceptable and work on building camaraderie. However, it is important to discuss and formalize equity sharing and ownership right at the beginning. This is especially important when collaborators are working with each other for the first time or there are multiple partners or co-creators involved. Clarifying ownership rights, down to the final detail, is important.
Clarify Benefits for Each Co-Creator: With each collaboration, the goal is to go to market and reap a profit. Clarify the monetary benefits for each partner of the co-creator circle from the get-go. There is a range of monetization models to choose from that cover everything from revenue share to commissions and long-term royalties as well. When there are multiple shareholders involved, identifying specific customer segments to target will reduce any potential conflicts.
Reduce Red-Tape: To ensure that a co-creation initiative does not lose steam, it is important that clear milestones are created and maintained. Teams must not be burdened with unnecessary paperwork work and tracking requirements. Well-laid out milestones ensure that progress is on track. Clearly outline all aspects related to expectations, progression, decision-making, the scope of decisions and processes at the beginning of the project. It is also important to define all conditions related to ownership, termination of collaboration, and related risks.
A Change in Organization Work Culture: Implementing co-creation is also about a change in the working culture of an organization. Bringing in external resources can be met with resistance and the onus is on the management to ensure that models and processes brought into place ensure smooth collaboration.
There are six main challenges that co-creation projects face. They are:
Challenges to Co-Creation Projects
- The cost of implementation
- The time needed for the collaborative process
- The resources needed for the project
- Capacity for co-creation
- Resistance to change
Of all of these challenges, time is the biggest one. Co-creation projects is about getting a number of tangentially related resources together to work on something. Time management becomes key and is quite a challenge in itself.
Making a Case for Co-Creation
The benefits of co-creation are manifold for a business. However, there is often resistance from your employees about them being redundant or not good enough for the task on hand. Management needs to convince the team that co-creation is a collaborative process that combines a range of skills, internal and external, to come up with something path breaking.
By harnessing the power of co-creation, you will be able to provide consumers with thoughtful user-friendly products that are relatable. Positive experiences will ensure that consumers will return and advocate for your brand.
The idea of co-creation is simply that of working with the end-user to create products and services that are the need of the hour. Rather than create a product, release it into the market and await feedback, co-creation ensures that you send out a product that is already based on market and consumer feedback.