Co-creation redefines relationships between companies and their customers. Passive consumers become active participants. When does it work? And where does it end?
by Tobias Hürter
Anyone who goes to the theatre knows what to expect. The audience sits in silence, listens, applauds. The actors act and bow to the crowd when they’re done. If a spectator jumped up on the stage mid-play and tried to join the troupe, it would cause an uproar. The evening would be ruined.
Industry does theatre as well. Developers, manufacturers, suppliers and buyers – they’re all actors, but their roles are changing. The theatre is not what it once was. The line between the stage and the seats is disintegrating as the internet connects the actors in new ways. Customers, who previously could only pay for and receive the products, are suddenly in the spotlight. No one in this theatre should be surprised if the audience now wishes to join the action as well.
The keyword in this new theatre of business is co-creation: active participation in the development of products and services with the aim of creating shared values that benefit all involved.
It’s the great trend toward open innovation, a concept elaborated all the way down to the customer by the American organisational theorist Henry Chesbrough back in 2003.
Together, we achieve more: it sounds like the oldest platitude. And even the insight
that one should listen more to customers is anything but revolutionary. As early as 1982, McKinsey thought leaders Tom Peters and Robert Waterman implored their customers to get “close to the customer” in their best selling book In Search of Excellence. But what do you do when you get there? Listen to them? Allow them an active role? Peters and Waterman talked about placing the customer at the centre of every single decision in the company – but not about letting them take part in the decision.
Viewed in relation to the speed with which management hype comes and goes, however, co-creation is old news by now. Coined in 2000 by the Indian-American economists Coimbatore Krishnarao Prahalad and Venkat Ramaswamy in their Harvard Business Review piece titled “Co-opting Customer Competence”, the concept was framed as a new paradigm, but soon underwent the boom-bust cycle typical of management trends. As was to be expected, just a few years later the same publication published a piece warning of the dangers of co-creation.
But then Prahalad and Ramaswamy’s prophecy came true: the broad socialization of the internet fundamentally changed the scenery and gave co-creation the decisive push it needed. Co-creation is no longer a vision, but a reality. There is scarcely a coach or consultant who doesn’t carry the concept in their armoury. Many large companies implement co-creation processes, plan with it or talk about it.
From basic research to interface design: nowadays, consumer viewpoints and desires drive much of the product development process. Some companies operate virtual labs where customers suggest designs for products or have the chance to vote on components. Others outsource entire development steps, holding public competitions in which anyone can participate. Customers are brought into the development of hardware and services, and even advertising campaigns. They design sports shoes, furniture and the plot lines of video games. They decide on new types of beer and coffee aromas.
Prahalad and Ramaswamy, the founders of the term co-creation, described the relationship story of the companies and their customers thus: well into the 1980s, communication be tween consumers and companies was a one way street. In short, the former attempted to persuade the latter. Starting in the mid1980s, the era of help desks, call centres, showrooms and customer service programs began. Monologues became dialogues – communication now went in the other direction as well, i.e. from the customer to the manufacturer. Companies recognized the importance of ongoing personal relationships. “Relationship marketing” was the catchphrase of the day, which lasted into the 2000s. Yet the customers remained mere buyers and consumers. Now the times are changing dramatically: they are now involved in the creation process. And sometimes they are actually in control of it.
So what does co-creation mean exactly? The term is not sharply defined. One can read the “co” as a nod to the concept of cooperation. Co-creation as a form of working together. But the type of collaboration that truly deserves the name necessarily involves the participants developing what philosophers refer to as “collective intentionality”: shared intentions and objectives that go beyond those of the indi vidual participants.
Cooperation is predicated on a certain degree of communication, trust and understanding. It is something that one might call “good, old-fashioned co-creation”.
But one can also read the “co” in co-creation differently. At this point, much of what goes by the name co-creation operates without collective intentionality. Providers of search engines, online navigation systems and music streaming services no longer require any relationship to their users in order to improve their services through observation of user behaviour. In this context, co-creation generally happens involuntarily, not intentionally – virtually on its own.
Prahalad and Ramaswamy saw the internet as the strongest technological driver. But the internet is not the only place where co-creation takes place – and perhaps not always the best one. Some companies are moving towards creating physical spaces for co-creation, studios equipped with all manner of design tools, from post-its to 3D printers. They are intended to create a particularly creative atmosphere. What the company does in that space is no longer to present completed products for appraisal and improvement, but rather to demonstrate its capability to create goods with added value. It is the opposite of the digital, non-intentional form of co-creation: analogue and relationshiporiented.
One special market segment in which co creation flourishes is high-end sports watches. Highly complex devices with a mindboggling array of sensors and antennas, with functions for GPS, acceleration, the earth’s magnetic field, temperature, optical pulse measurement and Bluetooth. Their development is accordingly elaborate.
The initial time after the market launch of a new watch is something like a public beta phase, and the initial product descriptions are like roadmaps. The watch’s software is at a level which, while it does make the device usable, still does not accomplish some of the announced functions, and the sensors still require finetuning. Manufacturers therefore open up the final phase of development: users tell the manufacturer about their experiences with the device, problems and desired features via customer support or social media. Recommendations then frequently find their way into the next software update. The watch providers, in turn, receive user data and feedback on a scale that would not be possible in conventional beta tests.
It is interesting to observe how differently users in forums and on social media react to the manufacturers’ new strategy. Some enjoy the chance to be involved while others make no secret of their dismay concerning the “unfinished” product. They feel misused.
Observations show that co-creation is not just a question of process design. It rests on the ability to guide and shape relationships with customers and partners. Co-creation does, however, require a new attitude in the company: in development, in marketing and sales, and in the corporate strategy.
For their part, customers must understand the idea behind intentional co-creation. Above all, they have to be ready for it. It is, among other things, a generational question. Younger people who have grown up with social media, are more amenable to it. But it’s also a question of expectations.
Does one wish to participate in developing the razor one uses daily? Probably not. They’re simply supposed to work. But the fragrance of aftershave? More likely.
One time-tested concept of management theory is enjoying a bit of a revival: the concept of the lead user, introduced in 1986 by economist Eric von Hippel of MIT’s Sloan School of Management. Even back then, long before the internet era, von Hippel recognized that important innovations often come from users rather than the manufacturers.
The first mountain bikes were built and ridden by a couple of young hippies in the mountains of California. Bicycle manufacturers caught wind of it and developed commercial models together with the mountain bike pioneers. In a representative customer survey, demand for all-terrain bikes with fat tyres, powerful brakes and small gears had not been captured.
Of particular interest is co-creation between OEMs and suppliers. Their relationship to each other has traditionally been a competitive one. In many cases the parties are not just partners, but also competitors – or they collaborate with each others’ competitors. They fiercely negotiate prices and delivery schedules. But that relationship is in transition. In Prahalad’s original conception of co-creation, manufacturers and suppliers were still “close partners”. Now they share development processes and knowhow, loan out personnel or develop joint standards for the training
of technical specialists.
In the automotive industry particularly, this transformation represents both an opportunity and a challenge. Companies are shifting from being pure vehicle manufacturers to mobility service providers. Engineering and design traditions painstakingly shaped over decades meet the enormous, challenging, promising, welcome and threatening potential of digital technology. Old and new, sometimes unfamiliar and often completely distinct capabilities collide. Co-creation can be the mediator. In addition to capabilities, three additional C-factors play an important role:
Complexity: calls for a broader distribution of tasks.
Convergence: technologies and solutions from different companies force them to come together.
Customer focus: consumers are increasingly demanding customisation of products. Porsche, for example, mass produces one-offs. Due to the numerous customisation options, no two Porsches leaving the plant are identical.
Active participation on the part of customers is scarcely necessary: networked digital systems continuously provide data that can be used to improve products and services – good conditions for nonintentional co-creation. The more deeply the systems are integrated into the everyday life of the users, the better the insights that can be gained from the data. The software of the systems can be more precisely and quickly adapted to the customer requirements.
While co-creation has proven useful in many cases, it is no panacea.
One difficulty resides in the nature of creativity. Many creative processes require the very opposite of togetherness: they call for quiet, concentration and focus.
American writer Jonathan Franzen closes himself off to write, with the curtains drawn and without the internet or a telephone. It would ill-serve his novels to have each paragraph discussed to death. He could perhaps write congenial books that way, but not great literature.
And what is true for authors holds true for companies in some ways as well. In his theory of “disruptive innovation”, Harvard professor and consultant Clayton Christensen argues that companies that wish to create something groundbreakingly new should do more than just listen to their customers.
If companies had only ever taken their cues from customer wishes, there would be no such thing as smartphones and we might very well be travel ling about the country in steam-powered cars.
Tobias Hürter studied philosophy and mathematics in Munich and Berkeley. He was an editor with Die ZEIT and is the cofounder of the philosophy magazine HOHE LUFT.
Jonathan Calugi is an Italian artist and illustrator. As a young man, he dreamt of a career as a rapper; today, art is his greatest passion. His work has appeared in Wired magazine, The New York Times and The Washington Post.