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Master thesis (in progress) Business Administration, Specialization: Strategy & Organization Supervisor: Prof. Dr. T. Elfring Joost de Boer Student number 1517597 Ramaswamy, 2004b). In addition to Kristensson et al., they add the section ‘(new) approach to value creation’: this appears to be the target of co-‐creation (i.e. why is it done). They managed to make a comparison between what, in their view, can be considered as co-‐creation and what cannot; the result is plotted in table 2.1. What co-creation is not Customer focus Customer is king or customer is always right Delivering good customer service or pampering the customer with lavish customer service Mass customization of offerings that suit the industry’s supply chain Transfer of activities from the firm to the customer as in self-‐service Customer as product manager or co-‐designing products and services Product variety Segment of one Meticulous Market research Staging experiences Demand-‐side innovation for new products and services Table 2.1 | The concept of co-creation (Prahalad & Ramaswamy, 2004c). What co-creation is Co-‐creation is about joint creation of value by the company and the customer. It is not the firm trying to please the customer Allowing the customer to co-‐construct the service experience to suit her context Joint problem definition and problem solving Creating an experience environment in which consumers can have active dialogue and co-‐construct personalized experiences; product may be the same (e.g., Lego Mindstorms) but customers can construct different experiences Experience variety Experience of one Experiencing the business as consumers do in real time Continuous dialogue Co-‐constructing personalized experiences Innovating experience environments for new co-‐creation experiences According to Prahalad & Ramaswamy, co-‐creation is the result of dissatisfied consumers that want to interact with firms and thereby co-‐create value. Potts et al. (2008) add to this that co-‐creation is not exactly a new thing, but rather an “evolution of economic and cultural order to ‘account for consumers’ greater access to the ‘means of production’ through information and communication technologies”. They link it to situated creativity, defining it as a feedback dynamic of creativity between production and consumption. The evolutionary approach and the dissatisfaction argument mentioned above, are supported by other writers such as Malcom Gladwell (The Tipping Point, (2000)) and Matt Mason (The Pirate’s Dilemma, (2008)) who recently published about the way how youth culture and increase of technological developments result in increasingly critical consumers that do not want to remain on the sideline: they want to participate. As for organizations, the first reason to involve customers in their processes is that customers, being the users of a product or service, have user experience. Therefore, they can have valuable insights and experiences that might improve existing products, or lead to the development of new ones (Prahalad and Ramaswamy 2004b). Second, as Payne et al. (2008) recall: ‘the suppliers’ motivation should be to improve these customer practices in order to build value for the customer and a more valuable role for itself in the customer’s activities’. More customer value would automatically lead to more satisfied consumers, which leads to more sales. After this defining section of the concept co-‐creation of value, it is useful to consider the purposes that co-creation is used for in organizations. This involves theories that are dominant in the fields where co-‐creation operates: mostly marketing and innovation. Therefore, the next paragraph provides an overview of the emerging paradigms in marketing and innovation and how they relate to co-‐creation. It appears that although 13
Master thesis (in progress) Business Administration, Specialization: Strategy & Organization Supervisor: Prof. Dr. T. Elfring Joost de Boer Student number 1517597 used by both marketing and innovation departments in organizations, there is still little known about the way that co-‐creation is used in a joined effort between the two. § 2.2 THE PURPOSE AND USE OF CO-CREATION § 2.2.1 | Co-‐creation in marketing: the service-‐dominant logic § 2.2.2 | Co-‐creation in innovation: the open innovation paradigm After the previous introductory paragraph, this section discusses the different purposes that co-‐creation is known to be used for. Nambisan & Nambisan (2009) argue that co-‐creation generally can result in two outcome categories. The first category relates to marketing and customer relationship management, where they mostly emphasize that ‘consumer involvement in innovation and value creation can lead to enhanced customer loyalty, customer satisfaction and customer quality perceptions’. Second, the outcomes of co-creation relate to the process of innovation: they provide examples of ‘enhancing innovativeness, appeal of products and services and reduce time to market by partnering with customers in product development or enhancement’. This paragraph therefore provides a discussion focusing on two fields of attention: marketing and innovation literature. An important paradigm in marketing literature is the service-‐dominant logic (S-‐D logic): one that breaks with the product-‐dominant focus of organizations and emphasizes the importance of involving customers in development and marketing processes (Vargo and Lusch 2004). The application of co-‐creation for innovation purposes is also subject to the attention of many scholars. One of the emerging paradigms in the field of innovation literature is that of open innovation, arguing that organizations should not only source for new ideas inside, but also outside the boundaries of their organizations (Chesbrough 2003). § 2.2.1 | Co-‐creation in marketing: the service-‐dominant logic Vargo & Lusch (2004) explore the possibilities for the S-‐D logic in their article ‘Evolving to a new dominant logic for marketing’. In their study on the evolvement of marketing literature during the past two centuries, they discover a growing importance for marketing, which has its glory days in a traditional sense during the 1950’s – 1980’s. After this, marketing emerges more and more towards a more holistic paradigm that unifies “disparate literature streams in major areas such as customer and market orientation, services marketing, relationship marketing, quality management, value and supply chain management, resource management and network analysis.” Originating from marketing literature, the service-‐dominant logic largely describes the transition from the traditional goods-‐dominant logic’s focus on ‘value in exchange’ towards a focus on ‘value in use’. This ‘value in use’ paradigm is not only modern in its view of customers (i.e. as an operant, intangible resource), but also stretches the idea of customer value creation by actually involving the customer in the process of creating value. (Enkel, Kausch et al. 2005) This kind of marketing asks for a different mind-‐set. Instead of looking at a product or service and considering it as ‘output’, the S-‐D logic tends to look at a product or service as a step in a process towards customer value. 14
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