Creative Innovation thanks to the wisdom of crowds

In this blog I would like to return to one of my earlier central themes: business models, co-creation and collaboration. As the Business Canvas of Osterwalder shows, there are two linkages between the value proposition and the customers: the customer relationships and distribution channels.

One of my students, Rick op den Brouw, wrote a Msc-thesis on critical success factors of co-creation. Based on nine case studies, he concluded that -among others- the chosen strategy of co-creation and the actual business model not always coincide (4 of 9). However, most of the theoretical expected results of co-creation, as an increase in sales and a reduction in risks, were realized.

©Business Model Generation by Alex Osterwalder & Yves Pigneur

Romero en Molina (2011) try to describe co-creation on a more concrete level. The role of the customers changes in this approach. No longer are they seen as the destroyers of the value produced by the firms. Instead, the act of consumption is seen as the ultimate contribution to the creation of value. A product or service not consumed is without value.

In this process of co-creation of value are several possible partnerships of the consumers.

  • Co-designers, in which customers are used as partners to generate, develop and test new ideas.
  • Innovators, where organizations give so-called toolkits to make their own products and services; the knowledge gathered in this process is used to improve the original product or service.
  • Marketeer/Branders, customers become marketeers, for example for event marketing or lifestyle marketing. Viral marketing, on-line word-of-mouth commercials is mentioned as one of the most effective instruments.
  • Social Corporate Responsibility, by entering a dialog with the customers as stakeholders, the organization can reach a common perspective with respect to the effects of a product or service on the environment. Customers are not only involved with the CSR of an organization as passive clients, they participate actively by using the products or services.

Technical and social developments facilitate collaborative networked environments, in which organizations collaborate with so-called con-colleagues. Romero en Molina (2011) call these networks collaborative network organizations (CNO). Although these play a central role in Prahalad and Krishnan’s co-creation, Romero en Molina (2011) do not go into the role of the CNO’s in co-creation.

Next to the organizations do customers organize themselves in on-line communities; Romero en Molina (2011) call these Virtual Customer Communities (VCC’s). The VCC’s are aimed at discussing shared experiences with products and services.

These communities can be used to realize eight different kinds of co-creation:

1. Adjusting Products (IKEA);
2. developing new products (Procter & Gamble);
3. Feedback and evaluation (Microsoft Knowledge Base);
4. Mass-customisation (NIKE);
5. Using customer creativity (LEGO);
6. Developing new services using old services (TeliaSonera);
7. Real-time marketing and adjustments to services (FEDEX);
8. Personified value and knowledge creation (IPod/Itunes).

The examples above require new core-competences. To realize the diversity of demands, to react to the increase agility and the increasing complexity, an organization has to be flexible, agible and adaptive.

In the contacts with (potential) customers and co-creators, the Virtual Consumers Communities play a central role. To stimulate the creation of the VCC around your products or services, Romero and Molina (2011) give ten tips:

  1. Invite the right customers, keep the community private and be familiar with the essential characteristics of the customers (which is more than the geographic or demographic facts).
  2. See members of the community as advisers, not as simple marketing instruments.
  3. Focus on the interests of the members, not necessary on those of the organization.
  4. Create common activities and rituals.
  5. Be open and honest, even as the facilitator of the community.
  6. If you want information, ask for it.
  7. Listening is better than talking.
  8. Don’t ignore the negative, learn from these comments.
  9. Don’t ask to much.
  10. Communities are about people, not about technics.

Romero en Molina (2011) concentrate their analyze at the customer side of the organization by describing the success factors of the VCC’s, giving less attention to the collaborative network organizations (CNO).

The research of Bengtsson en Kock (2000) concentrates on collaboration, especially on those firms which are both competitors as collaborators. They analyzed several companies in three different industries. For example, Skega Ltd. and Trellex Ltd. worked together developing new materials, whereas they are competitors in the field of lining materials. In the deary industry, companies work together in developing means of transport, but simultaneously protecting their geographical markets. In the beer industry, bottles are standardized so the collection of empty bottles can be done in cooperation  whereas they compete through lifestyle – marketing and brand loyalty.

The conclusions of Bengtsson en Kock (2000) are:

  • heterogeneity of resources stimulates collaboration;
  • firms collaborate on the input side of the organisation, whereas they compete on the output side;
  • – the decision to collaborate or compete is a strategic decision, it involves the position of the organization within the network;
  • individuals can not be responsible for both collaboration and competition;
  • the combination of collaboration and competition within the same organization will give rise to internal conflicts and stress, which should be addressed by the top management.

Combining Bengtsson and Kock (2000) with Romero and Molina (2011) we can state that with respect to the development of a N=1/R=G strategy, involving co-creation and networks, organisations have developed good practices with respect to the consumer side  but the development of virtual network-organizations lags behind. The rise of the Organization 3.0 (Marco Derksen) might be predicted, but not yet realized.

Literature:

Cover of "Business Model Generation: A Ha...

Bengtsson, M., S. Kock (2000), “Coopetition” in Business Networks—to Cooperate and Compete Simultaneously, Industrial Marketing Management, Volume 29, Issue 5, September, Pages 411-426

Romero, D., A. Molina (2011), Collaborative networked organisations and customer communities: value co-creation and co-innovation in the network era, Production Planning and Control: The Management of Operations, 22: 5-6, 447 -472

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