“Co-creation” – The Key to Business Success

Up to now, anyone somewhat involved in the business circle must be familiar with ‘Customer Is King’, in the sense that a smart operator will always do its best to accommodate the customer in light of retaining loyalty. The flip side of it, though, is the insightful wisdom that ‘A Customer-Centric Perspective is the Catalyst to Success’.  In this day and age, customer behavior changes with the ever changing economic, social and cultural dynamics prompted primarily by technology and innovations that emerge on a daily basis, worth noting, one that allows for more options and demands on the part of customers. This new platform, in and of itself, is the very Game-Changing Innovation of our time. Dubbed by the Professor that scientifically prophesized the IoT – the inconspicuous, yet ubiquitous, “Third Industrial Revolution”. Simply put, the market has become so dynamic to the point that what we conclude based on data today may or may not be and accurate source in determining how to respond to customer needs tomorrow.

In the past, value creation was an internal process, i.e. it derived from within the business.  In other words, every business tried to valuably come up with products or services that were different and ahead of their time while targeting on customers outside the business circle – a process which, in the end, seemed more like value exchange and extraction rather than value creation.  However, given the fact that customers have now learned and/or are able to obtain more information from various sources and know more about the products and services, the bargaining power has swung to the customer rather than business side.Thus, goods and services have become commodities rather than goods with value and difference. 

What, then, is the key to once again create a competitive advantage for the business side?  The answer is the customer’s larger share than ever in the creation of novel experience unique in that particular business because value can derive only from a joint effort between both the business and customers to create it.  It may seem like customers were offered a chance to create what they need but what the business side really wants to focus on is to create a connection between what it wants to provide or offer and its customers regardless of whether they are common or major customers.  But if and when the customer feels assured that the business side has provided the kind of services as promised, he will be ready to share and/or be a part of that business.  This was the starting point of customer loyalty.

Co-creation is a collaborative value-based creativity between the company and the customer “allowing the customer to co-construct the service experience to suit their context.” (Prahalad, C.K. and Ramaswamy, Venkat in “Co-creation Experiences: The Next Practice in Value Creation”)  Co-creation does not mean the customer plays the role of operations advisor but entails a company-customer collaboration to co-create value, whereby the company is also to allow and stimulate mutual information sharing.   Let’s have a look at a company that adopts the co-creation approach in value creation for its customers.

A company that provides logistics services found that its customers needed the company to help devise new supply chain to enhance their business operations.  The challenge lay in the complication of factors affecting the process and the company’s service provision.   This made it focus on the suitability of the customer with whom the company would collaborate for the desired mutual outcome.  Concurrently, it had to rely on personnel’s potential and made sure they understood that the service quality had direct bearing on customers.  The key to success in this case lay in the company’s own personnel development which had to concur with the customer’s business operations.  (Understanding that customer’s business is subject to change.)  Such potential is crucial as it is not enough to be able to respond to customer needs.  The company must also be able to demonstrate the value it accords the highly valued customer in his status as its business partner.

Innovations must stem from a “customer hindsight”.  To fundamentally understand the customer, the company invites his participation (interaction) in its operations by working at its Innovation Center and having a virtual experience of an intensive workshop which involves knowledge, experience and best practice sharing; searching for and understanding technology, economy or various factors affecting value creation and/or new methods of supply chain and logistics management.  In certain cases, the workshop starts out with a business outlook in the next 10 or 20 years as if to plan on how to handle a series of scenarios/predictions designed to stimulate new thoughts.  From there, factors are defined along with mode of operation and potential problems which have to be addressed and solved.  In other words, this is the brainstorming stage. An example of innovations which derived from the Innovation Center is the use of parcelcopter or drone in the transport of goods which might lead to the enhancement of transport in the future.  The use of smart glass or augmented reality, mentioned in our previous presentation, is to enhance the customer’s warehouse management. Any change brings about doubt and uncertainty in operations.  Likewise, in the first days of co-creation concept, the customer took it as a clever sale technique by the business circle.  Hence, the company was obliged to communicate and generate understanding on the part of the customer by pointing out the value and advantage of co-creation on the customer which exceed the company’s effective operations.

A further example is Phononics Company, the manufacturer of solid state laser? for customers in the refrigerated case (chiller and cooler) manufacturing industry.  Phononics focuses on customer understanding while applying its customers’ knowledge and experience to working process and organizational culture and adhering to the principle that B2B customers’ engagement is based on the sentiments on engineering technology.  As such, co-creation induces the customer to create differing future imaginations.  Phononics products are mostly the outcome of co-creation that is diverse and complicated and yet can generate huge income.  It goes without saying that, before this could take shape, many teams were required to collaborate, be they the teams of engineers, supply chain experts or the sales and marketing team, while coordinating with the customer so as to determine and design product specifications prior to production.  Hence, co-creation is the core concept as far as Phononics’ organizational culture is concerned as this causes its products to fundamentally differ from those of its rivals.  What Phononics has learned from the co-creation process (partially speaking) is this: Never think of co-creation as just a concept in problem solving or defining the form or pattern of new products.  Co-creation should, instead, be applied in defining new markets for business expansion and/or growth and in the creation of new organizational culture essential for the company to have the courage to progress beyond the ‘comfort zone’ and at the same time stand up to the fear of committing errors by decentralizing and empowering employees with the decision-making authority.

As it turned out, strategic customers normally expected the products or services to respond to their needs or solve various problems and not every one of them was ready to support or collaborate in the initiation of co-creation.  Therefore, the company had to selectively engage customers with high potential in the co-creation process as they would perceive the advantage of it and simultaneously be open-minded and give the company a chance to be informed about their experiences and valuable knowledge which would be used to effectively .produce future valuable outcome for both themselves and the company.  It’s not too late to get started today! 

Compiled by BLOG.SCGLogistics
Reference and picture credits: forbes.com, deepblue.lib.umich.edu, pixabay.com (account : Hans)  

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