Co-Creating Value With Customers

Here's an excerpt of the book, "The Future Of Competition: Co-Creating Unique Value with Customers".

Haven't read the book, but I probably would have noticed it earlier had the title been "Co-Creating Value with Customers" and not "The Future of Competition". It jibes with my customer-centric marketing views. An intriguing concept is presented: the book asserts that the experience of co-creating value itself is part of the value. And the book also validates my firm conviction that leveraging networks and 'platform plays' (that's technology industry jargon, it'd be another post to explain it but essentially it leverages a network too).

The emerging reality forces us to reexamine the traditional system of company-centric value creation that has served us so well over the past 100 years. We now need a new frame of reference for value creation. The answer, we believe, lies in a different premise centered on cocreation of value. It begins with the changing role of the consumer in the industrial system.

...And don't mistake self-service for customer involvement. Cocreation, the authors maintain, is not the transfer or outsourcing of activities to customers or a marginal customization of products and services. It isn't scripting or staging of customer events around the company's offerings. Those kinds of company-customer interactions no longer satisfy most consumers today. It's the cocreation experience (not the offering) that is the basis of value for each individual.

The excerpt is worth reading. Here's more:

What is the net result of the changing role of consumers? Companies can no longer act autonomously—designing products, developing production processes, crafting marketing messages and controlling sales channels—with little or no interference from consumers. Consumers now seek to exercise their influence in every part of the business system. Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby cocreate value. The use of interaction as a basis for cocreation is at the crux of our emerging reality.

On the case study on the pacemaker by Medtronic, here's part of the conclusion:

The pacemaker story illustrates the new value creation space: A competitive space centered on personalized cocreation experiences developed through purposeful interactions between the consumer and a network of companies and consumer communities.

Value does not stem from the physical product (the pacemaker), or from the communications and IT network that supports the system, and not even from the social and skill network that includes doctors, hospitals, the family and the broader consumer community. Value lies in the cocreation experience of a specific patient, at a specific point in time, in a specific location, in the context of a specific event.

The cocreation experience cannot occur without a network of firms collaborating to create the environment that allows the patient to undergo that unique cocreation experience. The network, not owned by any single firm, multiplies the value of the pacemaker to the patient, his family and his doctors. The patient, by cocreating with the network, is an active stakeholder in defining the interaction and the context of the event. The total cocreation experience with the network results in value that is more personal and unique for each individual.

To see and take advantage of these opportunities, we must suspend the traditional distinction between B2B and B2C customers. In the world of cocreation, we have to imagine every individual who interacts with the company as a "consumer," whether that individual is a forklift operator, a pilot, a design engineer, a beautician, a clinical researcher, an instructor, a contractor, a paralegal or a civic worker. This perspective forces us to discard the artificial distinctions among enterprises and households. Furthermore, historically we have started with "B"—our business—and not the individual consumer. This company-centric view of value creation is deep-rooted, as it has been the very foundation of competition in the industrial era.

Reading the excerpt, it reminded me of the book The Support Economy and its message...

"Distributed capitalism [book’s vision of distributed value] is a total inversion of managerial capitalism [management since Henry Ford's day], in which organizations create value through the production and distribution of goods and services. Under managerial capitalism, the company and its top management are at the center of the commercial solar system and the individual consumer is the last rock from the sun. Under distributed capitalism, the customer is at the center of the solar system. Once you locate the source of value in the individual rather than the company, the entire way we think about wealth creation, ownership, and control changes. " -- from an interview with co-author Jim Maxmin

In the same interview, Maxmin states:

The distribution of value leads to what we call the distributed imperative, which means new ways of distributing ownership and control, which in turn leads to federated support networks that are the new competitors.

It also clicks with Robert Kiyosaki's message about leverage (includes leveraging money - investors, banks; leveraging time - employees; leveraging networks - multiple types, but above is perfect example) in his book about becoming independently wealthy through leverage (retiring is entirely optional): Rich Dad's Retire Rich, Retire Young.

Ah, looks like The Future of Competition: Co-Creating Unique Value with Customers is another one for the to-be-read-soon stack.

Comments

[Johnnie Moore]

Good posting. I think the point that "that the experience of co-creating value itself is part of the value" gets to the heart of it. So many businesses frame "creating customer experiences" as something they do TO customers. This leads to an obsession with control that often undermines success.

I have to say that I'm not sure I'm going to buy Prahalad's book though! It's tone sounds highly prescriptive and I suspect that it is, itself, an example of an old, expert pardigm. Whereas this blog, where I comment, is more co-creative!

[Evelyn Rodriguez]

Interesting points. Hmmm, maybe the concept of what a book "is" needs to expand and become more co-creative rather than a one-way street? I've been having second thoughts about my book (of course, that could be plain old resistance) as I'd like to see a more interactive relationship between the writer/reader.

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