How Customer Co-Creation is the Future of Business

Take a look at the Wikipedia definition of customer co-creation and it will tell you that:

"Co-creation is the practice of product or service development that is collaboratively executed by developers and stakeholders together".

The Wikipedia definition, whilst not wrong, isn't right either. Let's just call it a fluffy 'co-creation lite' rather than the real McCoy. Strictly speaking, co-creation as designing products or services together with customers hardly counts as co-creation at all. Why, because it still tacitly assumes that value will primarily be created at the point of exchange ("great looking new camera, here's my credit card") rather than in a lifetime of camera usage ("stop the car! I must take at picture of that fantastic sunset over Point Lobos"). That doesn't mean that we shouldn't design products (services and experiences) together with customers, far from it, just that it doesn't count as co-creation.

If you read some of the growing number of papers on service-dominant logic, service science and even design thinking, you will see co-creation set out as a series of principles that guide our thinking about what co-creation is, how to do it and the benefits of adopting customer co-creation:

1. Competitive advantage comes from applying knowledge, skills & resources
- Competitive advantage is a result of how well a company uses its knowledge, skills and resources to help customers get important jobs done. Jobs-to-be-done is currently the best way we have to understand what customers really value. It is the foundation for customer co-creation, social CRM and so much more.
2. Bring together an ecosystem of co-creation partners - A company may need to bring together a variety of additional partners to provide the right knowledge, skills and resources to help customers get the most important jobs done really well. The more customers focus on getting jobs done well, the greater the advantage in bringing together an ecosystem of partners to help them get them done.
3. Use just enough collaborative social technologies - Technologies, particularly those that support ‘social networks’, provide the backbone for collaboration between a companies and increasingly, with customers. This doesn’t mean a technology-first approach. But it does mean selecting the right technologies (and only the right ones) to enable effortless collaboration.
4. Co-create value together with customers - A company creates the most advantage by bringing itself, the right partners and customers together in the co-creation of value. Enough value must be co-created to satisfy all involved. Customer co-creation should not be played out as a zero-sum game. That was yesterday’s CRM and today’s branded CEM game.
5. Understand what jobs customers are trying to do? - Understanding how customers combine knowledge, skills and resources to deliver the outcomes they want (from the jobs they do) is critical if companies are to co-create value with customers. The most value for customers is created over the lifetime of product usage. This is where co-creation needs to concentrate, not just on the traditional marketing, sales and post-purchase touchpoints.
6. Create a co-creation platform for customers - By providing a ‘platform’ with the right knowledge, skills and resources on which customers can co-create value, the company provides customers with a superior experience that improves their satisfaction, loyalty and profitability. Most companies are only focused on the sale. Co-creation companies focus on the sale AND the many subsequent value creating opportunities that the sale creates.
7. Bring knowledge, skills and resources to where co-creation takes place - If applying knowledge, skills and resources is the key to succesful co-creation, it makes sense to bring them to where co-creation actually takes place. This means embedding them in the design of products so that more value can be co-created at critical touchpoints. Design thinking provides a powerful toolset to do this already. It also means educating customers and other co-creation partners so that they can co-create more value together.
8. Earn profits over a lifetime of product usage - If customers co-create value over the lifetime of product usage, companies can earn more value for themselves by adopting a collaborative, shared-risk based approach to pricing, as customers create value during usage. That doesn’t mean they don’t earn value from the initial sale, but it does mean they don’t have to resort to ineffective up-sell and cross-sell tricks to continue to earn value. Just think what that means for how you should manage customer service!
9. Integrate partners from the centre - The best position for a company to be in is the central integrator of partners’ knowledge, skills and resources that enable the co-creation of value with customers. Particularly the company that sells, services and supports the customers throughout their lifecycle of usage. The companies that prosper from co-creation are those that are at the centre of it.
10. Invest in customer-facing staff - Staff are a critical source of knowledge, skills and resources for companies, particularly front-line staff. They know customers and what jobs they are trying to do much better than anyone else. Along with customers, they are a great source of innovation through new combinations of knowledge, skills & resources that provide more value to customers. Particularly if you continually invest in their development.
11. The customer ultimately decides what creates value and what doesn’t - Period.

This is quite an agenda for companies to think about. But the best already are: Companies like Rolls Royce, BAE Systems and Vodafone. As you can see, this a lot more than just designing new products together with customers. Real co-creation is all about what happens AFTER the product has been designed, sold and is in everyday use.

Oh, and maybe somebody will apply their own knowledge, skills and resources to help Wikipedia get the important job of providing encyclopaedic knowledge to the world done better.

Tip of the hat to @ariegoldshlager for starting me thinking.

Graham Hill
Customer-centric Innovator
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Further Reading:

Lusch et al, Competing through service: Insights from service-dominant logic