As the ideas and ideals supporting this group are developing, we began with a look into sustainability and how this concept impacts on traditional models of business. One of the things that immediately becomes clear, is that sustainability introduces a new, unique value, or measure of value which to understand and design for, requires some changes in business thinking. Sustainability is naturally a value for business, if it can secure longer-term operation, longer-term profitability.
Sustainability, however, seems to represent very different value propositions for consumers, and in some ways, wholesale change in business practices will be driven not by declining reserves of resources or increasing unavailability of raw materials, but by changing social values. As consumers begin to hold sustainability in higher regard, companies will respond and turn more and more to sustainable practices. As consumers agitate, and activism for sustainable practices reaches deeper into government, regulator bodies will respond, and force companies to engage in sustainability. To some extent, this is already happenning.
In this article, we begin to look into these changing ideas of value, and the other main aspect of this group, value co-creation. The paper we take as a starting point is
C.K. Prahalad, Venkat Ramaswamy, (2004) "Co‐creating unique value with customers", Strategy & Leadership, Vol. 32 Issue: 3, pp.4-9, https://doi.org/10.1108/10878570410699249
It is difficult to read this without keeping in mind that these ideas were emerging in 2004, in the framework of interactive marketting. The ideas seem naiv, utopian, radically optimistic, in the light of all that has happened, and that has not happened in the past 15 years. And so we're, looking at what is co-creation, where did this idea come from?
Prahalad and Ramaswamy start with the idea that "Consumers have more choices that yield less satisfaction. Top management has more strategic options that yield less value." and that at the time, there seemed to be an impending shift in consumer-producer relationships. A potential shift. The authors wanted to see a transformation in the industrial system, whereby consumers were becoming less isolated and more connected, less unaware and more informed, less passive, more active, and this was going to change everything.
Though not specifically written into the article, we can see from our computer science perspectives, that the big change was in large part, going to come from communications technology. The authors suggested that because of information availability, consumers would become more aware. They would be able to understand business practices, capabilities, intentions and changes world wide. They would begin to form consumer communities, sharing information and creating new knowledge, and eventually engaging in consumer activism. Companies were going to realize this, and change their perspectives on the consumer as a target, to the consumer as a partner, an individual to involve in the process of value co-creation. While some of this has indeed happened, co-creation did not become the norm.
In the old way of thinking, the value creation process was strictly ruled by fixed roles, producer and consumer. Products and services had value, this value was exchanged in the market, from the producer to the consumer, and the activities outside of the market in fact created the value. Enabled with the new consumer connectivity and information availability, consumers in the new model would agitate to be included in the development and decision-making processes, an equal to communities of professionals, service providers, of other consumers. Companies could, and would do nothing without involving the consumers in this new space, where value was in fact, created in the experience of exchange.
For this new market system, a new paradigm was suggested, DART. This stands for the four principles of Dialogue, Access, Risk Assessment and Transparency.
Dialogue was the first key part of the new relationship, interactivity between producer and consumer, a two way relation and engagement "shared learning and communication between two equal problem solvers."
Access refers to the availability of information and tools to the consumer, that would empower them as equals. And with which they would perform the Risk Assessment, that is the investigation of harm/benefit to the consumer. This also draws out the question, if consumers are party to the value co-creation, then they may also shoulder some of the risk and responsibility.
The final point is Transparency, something that is anathema to many business practices that jealously guards information and operating procedures. Business has typically only been open about prices, costs and profit when forced to, or when such openness is legislated for. Yet in the new age of information accessibility, where consumers are increasingly aware of products, technologies, and business systems, new forms of transparency will become necessary and desirable.
Taking the DART concept from the perspective of many businesses, it is not difficult to see why many companies do not wholeheartedly adopt the co-creation framework. Co-creation challenges the traditional role of the producer, and "tension manifests itself at points of interaction between the consumer and the company where the co-creation experience occurs, where individuals exercise choice, and where value is co-created. "
And here the authors of the paper get really optimistic, stating that many companies recognise that the traditional system is becoming obsolete, and are testing new business strategies. "In the emergent economy, competition will center on personalized co-creation experiences, resulting in value that is truly unique to each individual." That was in 2004.
Another complementary article more grounded in research on this topic came in the same time,
Prahalad, C.K. and Ramaswamy, V., 2004. Co-creation experiences: The next practice in value creation. Journal of interactive marketing, 18(3), pp.5-14.
This continues the optimism in it's introduction with:
"Consumers today have more choices of products and services than ever before, but they seem dissatisfied. Firms invest in greater product variety but are less able to differentiate themselves. Growth and value creation have become the dominant themes for managers. In this paper, we explain this paradox. The meaning of value and the process of value creation are rapidly shifting from a product- and firm-centric view to personalized consumer experiences. Informed, networked, empowered, and active consumers are increasingly co-creating value with the firm. The interaction between the firm and the consumer is becoming the locus of value creation and value extrac- tion. As value shifts to experiences, the market is becoming a forum for conversation and interactions between consumers, consumer communities, and firms. It is this dialogue, access, transparency, and understanding of risk- benefits that is central to the next practice in value creation."
Here the authors continue to imagine a potential shift in business practices, with a vision of changed dynamics between producer and consumer, even empowerment. But in the interim 15 years, has this really come to pass? We argue that it has not. Business and industry are slow to change, in fact, only moving when profit margins are affected. And if we think about it, how many things have you and I actually co-created, of all the products and services we use every day?
OK, a very few of us who have actually taken part in building out systems like Ubuntu can say we co-created the operating system we use every day. And contributors to the editorial process on wikipedia, perhaps have engaged in co-creation. But really, the producer - consumer relationship continues largely unchanged. The market is not being challenged so radically by the emergence of "connected, informed, empowered, and active consumers" seeking to exercise their influence in every part of the business system. "Armed with new tools and dissatisfied with available choices, consumers wanting to interact with firms and thereby “co-create” value" are simply not the norm that is driving change.
One of the examples used in this article is the auctioning of vacation rentals, and the ebay online auction site. Yes, these were something along the lines of co-creation, where goods and services would be exchanged in a very different propositions of value. Back then, part of the enthusiasm for ebay was indeed, the action of bidding and the auction, the social activity that may or may not result in receiving the goods in question. There the value was in the interaction, and an individual peer-to-peer engagement. The same might be said for early ride-sharing websites, and of course, Napster that exploded when consumers were empowered with P2P sharing and Mp3 technology. Even the initial community phase of airbnb could be seen as a co-creation activity. Now amazon has overcome ebay with the intensity of capitalism never seen before, and airbnb is a practice gotten out of hand, that is very much driven by property market forces and new consumer practices, much more than is is a co-creation by an information aware, empowered consumer community. 2019 is a very different story than 2004.
Back then, the authors wrote "Meanwhile, globalization, deregulation, outsourcing, and the convergence of industries and technologies are making it much harder for managers to differentiate their offerings. Products and services are facing commoditization as never before. Companies can certainly not escape being super efficient. However, if consumers do not see any differen- tiation they will buy smart and cheap."
And we have to ask, has anything really changed?
We like to think that it has, but not how the original authors thought it would. We see co-creation is changing our world in very different ways, in very different places, and in diverse practices that will shape our world in the future. And we see how co-creation is transforming value itself, into a very different proposition. These are things we will investigate, as this group develops further.
Thanks for tuning in, and look forward to your thoughts on these matters in the comments.