Co-Creation: Meaning, Definition and Value for Consumers
Co Creation: this article describes Co-Creation, popularized by C. K. Prahalad and Venkat Ramaswamy in a practical way. This article explains the meaning, definition, value, forms, benefits and fundamentals of co-creation with consumers. After reading you will understand the basics of this powerful strategy tool.
What is Co-Creation?
Consumers are gaining the upper hand, demanding that organisations work in a customer-orientated fashion and provide a high level customer satisfaction.
More and more producers see the benefit of this, giving consumers the opportunity to influence part of the production process and involve them by listening to their ideas. This way, consumers are able to print an individual stamp on the products/services they consume.
This is known as Co-Creation; an intimate form of cooperation with customers. The supplier/ producer listens to the customer and takes on their ideas and creative involvement. The consumer plays an active role in the final product by doing so. This productive cooperation leads to a rise in value.
The concept of involving consumers in the production process was first described in an academic paper in 1979. Later, more researchers followed this lead, such as John Czepiel. He suggested in a 1990 study that customer involvement and customer participation in production processes can lead to higher customer satisfaction.
In 1993, an article by R. Normann and R. Ramimez appeared, suggesting that successful companies do not focus on themselves or on the industry, but on the customer. In 1995, a disclaimer was made by Michael Schrage: not all customers have the ability to bring valuable knowledge to a company.
The term co-creation was eventually proposed in strategy form in 1996 and 1999. In Reinventing Value Propositions, Kambil, Ginsberg and Bloch presented co-creation as a practical strategy for transforming customer collaborations into something of value. Three years later, Co-Creation: a New Source of Value was published.
C. K. Prahalad and Venkat Ramaswamy developed the concept further and popularized it by publishing a scientific article in the Harvard Business Review (2000), which directly became a worldwide hit.
They developed this concept together with empiric research and published their further developed concept in the famous book The Future of Competition (2004).
Meaning of Co-Creation
Co-Creation is a form of collaboration, with all participants having influence on the production process and final product. The consumer is able to contribute in the development of a product.
Co-Creation adds extra economic value to businesses, especially young consumers have evolved new habits and want more involvement towards the final product. Continuous contact and dialogue between consumer and product is important. An element commonly found in co-creation is consumer dialogue, for example through social media.
In order for Co-Creation to be fruitful, there must be equivalence, reciprocity, openness and trust in the relationship between producer and consumer. Co-Creation is also very useful in solving complex issues and realising change.
Different forms of co creation can be distinguished, based on collaboration type and consumers participation:
The producer presents product ideas to the consumer from which a choice can be made. This way the consumer takes over parts of the production process. For example, uploading photos to create an individual photo album or online tickets for the theatre where you can book seats and print tickets yourself.
Tailoring: the producer offers a standard product and the consumer is able to customise certain components. This is often a matter of colour or style in which the consumer is able to personalise their product. Take Dell for example where consumers can assemble their own computer.
Creative innovation: by means of a contest, consumers can send their ideas/ designs to producers. The winning concept is then usually developed and taken to production. Examples include fashion chains that allow consumers to design their favourite cocktail dress.
Integration: the consumer is involved in several stages of the development process by the producer. Different producers are brought together on 1 website for the benefit of the consumer when making a choice. Consider a travel agency website for example; different locations, accommodations, flights and insurance possibilities are all shown so the consumer has a better overview and can easily put a package together.
Facilitating: the producer offers consumers a platform for developing their own products. The possibility then arises that the producer further develops, produces and markets certain products. The consumer is the co-creator of the product. The Joomla websites are great examples of this.
Co-Creation not only provides more support, but also a long-term collaboration with consumers. Manufacturers and producers hereby also gain a better understanding of the wishes and needs of consumers.
The snowball effect that happens as a result is that consumers then share their positive experiences of the company with others. When manufacturers/producers come into contact with consumers and enable them to influence the production process, it becomes a win-win situation for both parties.
When is something co-created?
In the years following the first publications, the term co-creation was often used incorrectly. Several researchers argue that co-creation today can therefore mean many different things, such as forms of market research or social media analyses. This is not enough to be able to put the sticker co-creation on it.
A production process like product development, or part of a production process, may only be called co-creation if the end user plays an active role in it.
Co-creation can occur in all sectors. For example, it is also applied in education, where it refers to obtaining and analysing feedback, opinions and other input from students. A condition is that the insights obtained are used in the (re)design of educational processes.
According to Prahalad and Ramaswamy, the two who popularised the concept, co-creation should be seen as a new way of thinking about ‘economic value’. They describe it as a consumer-oriented focus, as opposed to the traditional business-oriented focus of organisations.
In this traditional form of business, the consumer plays no or a very small role in the process of value creation. There are no organized value creation initiatives with customers. Co-creating companies with a consumer focus work closely with the consumer in value creation projects.
There are however four fundamentals to be taken into account if co creation is likely to succeed:
Producer and consumer must be equal partners, tackling problems and finding appropriate solutions together.
The producer, in essence, has more stake in the product compared to the consumer. The producer is the one who develops the co creation because he owns the product. For consumers, value is generated by having somewhat of a say in the production process. Should consumers have access to an information system or producer software for example, they will feel even more involved.
The decision making process in co creation is not entirely up to the producer, but rather shared between producer and consumer. The consumer can then better measure the potential risks themselves.
As knowledge and power is now not only in the hands of the producer, he has to ensure that this is also shared with the consumer.
Organisations that focus on Co-Creation will have to think differently. It is unwise and unrealistic to let consumers engage in a one-way adventure. There must also be ample opportunity for consumers to actively engage in the different stages of development.
As a result, external parties have a major influence on decisions and developments within the organisation. The ultimate decision making process is not required to be shared with the end user, the organisation is after all ultimately responsible.
Organisations do however have to be open in receiving critical information, ideas and advice. Co-Creation must be a continuous process involving the consumer and other relevant target groups in different production phases.
Co-creation or open innovation?
Co-creation is not the same as open innovation. As described, a co-creation process is a collective process of production and development. Each party represents their own perspective and an attempt is made to sustainably fulfil as many consumer interests as possible in the production process.
Open innovation is a business mentality that states that good ideas are not exclusively conceived within an organisation and therefore embraces external thinking. The consumer is not necessarily the focus here.
Now It’s Your Turn
What do you think? How can you apply Co-Creation in today’s modern business world? Do you recognize the practical explanation or do you have more additions? What are your success factors for good collaboration and value creation?
Share your experience and knowledge in the comments box below.
- Prahalad, C. K., & Ramaswamy, V. (2004). The Future of Competition: Co-Creating Unique Value with Customers. Harvard Business School Press.
- Prahalad, C. K., & Ramaswamy, V. (2000). Co-Opting Customer Competence. Harvard Business Review.
- Ramaswamy, V., & Gouillart, F. (2010). The Power of Co-Creation: Build It with Them to Boost Growth, Productivity, and Profits. Free Press.
- Vargo, S. L., Maglio, P. P., & Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European management journal, 26(3), 145-152.
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Published on: 01/05/2017 | Last update: 11/23/2022
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