My Personal Definition of Business with Customer Value Co-creation

Hi Wim

Nice article and thanks for your definition, which I think is very useful to add some much-needed clarity to this area.

Unfortunately the term co-creation has been hijacked by the business press and the blog-tweetosphere to mean anything that firms and customers do together! A bit like “Voice of the Customer” has been dumbed down to mean anything the customer says! This is a shame as co-creation is a very important business concept that can help firms discover new modes of competitive advantage in a world of decreasing differentiation…

Onto your definition, I like the emphasis of “if and when” and “is able to personalise” indicating that customers aren’t always interested in having, desiring or even capable of deriving personalised experiences from product-service interactions. Sometimes customers do want a simple transaction and not everything is a candidate for co-creation thinking.

I suggest that an “experience” is the embodiment of the outcomes the customer is achieving (or not) when getting a job done. If all an individual customer’s important outcomes are delivered well by the product-service, then a positive experience results; if some important outcomes are not realised, the experience is less positive. By defining the product-service in terms of the customer job-to-be-done and the full-set of different outcomes by which customers measure the performance of product-services to help them get a job done, there are opportunities not only to understand how to improve the product-service but also develop outcome-based service contracts, which can help understand a customer’s willingness to pay and to develop pricing models for co-creation.

I argue that loyalty to a brand is earned through repeated positive value-in-use experiences using a product-service to get a job done.

The firm-value perspective is important as I think there is too much emphasis on one half of the value-equation in co-creation thinking, it the customer. We forget that hard commercial realities and justifications must exist for firms to change long-held assumptions and attitudes towards customers and value-creation. So I think your definition can be strengthened by adding the important firm-value component derived from co-creation! In other words, co-creation of value also must include the value that is derived by the firm as well as the customer from repeated product-service interactions. This “value return” to the firm can be in a variety forms:

– higher revenues in the form of repeat purchases or related purchses due to brand loyalty
– New service / maintenance fees if these are added to the product-service platform
– greater customer lifetime value
– value of word of mouth recommendations
– value of knowledge shared by customer from service interactions or embedded information exchange. This learning can drive the development of new capabilities to inform subsequent product-service development efforts.
– brand value / reputation
– value in customer community if the firm invests in creating one

So I would suggest the following slight amendment to the definition

Value is co-created with customers if and when a customer is able to personalize his experiences through a product-service – in the lifetime of its use – to a level that is best suited to get his/her job(s) done and which allows the firm to derive greater value from the product-service investment in the form of new knowledge, higher revenues and/or superior brand value/loyalty.

Wim,
I stumbled into this post through Graham’s tweet and glad I did. You have made some great points in the article and I liked that you put out your definition of value co-creation (adds clarity). To me the key phrases in your definition were “personalize his experiences….to a level that is best suited to get his job(s) done”. In my mind, the single fundamental idea of co-creation is the firm working with their customers to co-construct the service experience to suit their CONTEXT. And as you allude to in your post, the same product can be taken and the customers allowed to create their own experiences. In other words, even a commoditized product can lend itself to value co-creation.

Having said that, I agree with Chris on his point too – that ‘experience’ is one aspect and that adding a firm-value component would strengthen the definition. I definitely think that there is a misunderstanding among many that value co-creation is a customer centric process. It is not — the firm is not out there trying to do everything the customer says just to please them. Neither is value co-creation customer self-service as some equate to. It is not crowd-sourcing or involving customers at a certain point in the product development. And lastly, value co-creation is not mass customization. (I guess the differences between these and why they are not truly value co-creation can be a post in itself). At the end of the day, value co-creation is a joint process where both the customers and the firm has to weigh in their risk-benefit and come to a mutual understanding to go forward.

With that in mind, I would like to extend the definition further. In my mind, experience and firm-value component are second-tier components. The primary component of any value co-creation is the relationship between the firm and the customer. Value co-creation is possible only if the customer decides to enter into a relationship with a firm and plans to pursue a co-creation process. Also, it is the customer who decides which point of the interaction he/she wants to co-create a value experience (could be at POS, could be in-use, could be repair etc.). Also, for a given customer the context can change over time – in other words, the co-created value is not immortal. So with this mind, here is my humble spin on the definition.

Value is co-created when a customer willingly enters and pursues a relationship with a firm with the intention of co-creation and is able to personalize his experiences through a product/service to best suit his contextual needs at the moment and which allows the firm to derive greater value from the product-service investment in the form of new knowledge, higher revenues and/or superior brand value/loyalty.

Wim,

This is a great post. I’m bookmarking it and forwarding the link to several people inside my own organization.

We have three good definitions as I write this comment. Yours, Chris’ and Ned’s. IMHO Chris refined yours. However, Ned’s definition brings in the importance of relationships. And you know how I feel about that:-) (For those of you who don’t, read my post here: http://bit.ly/aAF80I

So we have two categories of definition. One “relationshipless,” the other “relationship-centric,” if you will.

They may both be accurate depending upon the industry or customer segment they’re applied to. For example, Ned’s definition is more relevant to my organization where we use account managament strategies for larger customers and a mass-market approach for our smallest. In each case we must take care to respect those customers’ wishes when it comes to communicating with them. Ineffective communication results in broken relationships. Broken relationships result in no co-created value.

But in some industries, let’s say the hospitality industry, the experience is much more important than the relationship. If I’m planning a trip to Disneyworld, one or two extra emails from Disney is not going to deter me from becoming their customer. The same is true of destination restaurants and resorts.

Wim, just as you point out in your first paragraph, that customers are not the same, I maintain that what we have here is not one environment, but many. Therefore there is room for multiple definitions, each relevant for a different environment (industry or segment).

Glenn

Chris, Ned and Glenn,

First of all I have to thank you very much for sharing your insights and views here.. There is lots of value in all your comments and they all make me think..

My first thought is that it is, like Ned states, important to understand that “even a commoditized product can lend itself for value-co-creation”. I would even argue to extend that thought, like the literature by Vargo and Lush suggests: ALL value is co-created.

What does this mean?

For any value to be created all participants in the process of doing so, play a significant role. It is not the company that adds value (alone) through adding features, services, bundles or whatever in the value chain. Customers (and partners for that matter) play important roles, as does the context in which they create value.

An easy to understand example: when the car was just invented it had little value: people did not know how to use it, what to use it for and there was hardly any infrastructure to support using it. Only after teaching people how to use it, and after gas-stations were developed as well as the roads to drive on, there was a system in which real value could be created. The same goes for electric cars.. without the supporting infrastructure, there is an expensive product, but little value created.. Hence only few electric cars will be sold/used.

Thus: To co-create more value, allowing the firm to derive greater value [..], requires not only the ability to “personalize experiences – based on the contextual needs” and through “relationships”. It also requires an optimized system to support this.. What good is an IPhone without broad-band access to the internet? How well do you get the job of connecting to your friends where and when you want, done, if this important part is missing? How well can you get the job of surfing the internet done, if you have a MacBook and your provider does not support the Mac operating system? These are all elements of high importance to your Customers ability to create value in use.

Understanding these elements and the, relative, importance in allowing Customers to create value, is of vital importance to companies to create competitive advantage.. imho

If the firm understands what gets in their Customers way to do the job they need to do, they can fix it. Or seek collaboration with Customers and other participants to fix it together..

And this begets more and more true for all jobs we are trying to do in our lives these days..

@Ned: I like how you add relationships, but I think the willingness to enter into a relationship is not relevant to value co-creation, nor is the intention to co-create, if you agree with me that all value is co-created, some just more than others..

@Chris: We already agreed upon the definition at the end of your comment. I do think we may need to add a little more on “the system-side”& roles of context and relationships. I have to think a little though, how to do that exactly..

Suggestions from all are welcome.

@Glenn: I fully agree with you.. If context is an important driver of the Customer’s experience (to which I agree), the same must be true for definitions..

@all: Make any sense?

Wim,
Before I put forward my pov, I want to make it clear that this is a friendly debate :-), I have total respect for you, Chris & Glen and your expertise. At the end of the day, I am trying to clarify my own thoughts on this subject and get a better understanding of the various concepts. So if I am wrong or you feel I am way off the mark – definitely feel free to slap me down.

I totally understand where you are coming from when you say “all value is co-created”. The only question I would pose here is on the choice of words. Say company X makes cars, company Y makes roads, company Z sets up gas stations, consumer D buys the car — no doubt all of them are required to realize the value of the car; however, would you really say that Company X, Y, Z and D are co-creating?

Again, I am with you 100% that “Value cannot be created in vacuum”, and that you need multiple parties to fulfill the value of a product/service — it is only in the co-creation part I am not sure.

Part of this is also because in my mind co-creation means the invovled parties are in the value creation at the same time. In the previous example, that need not be the case. I can go to some place with no infrastructure and build roads there today. A year later someone comes along and announces they will open up a car dealership in 6 months and another 6 months later a couple of gas stations sprout up along the way. All these events help each in creating value – but I would argue that it is not co-creation.

Now to why I added the “willingness to enter into a relationship” and “intention to co-create” phrases in my view of the definition. The first reason for my addition was the fact that we were specifically talking about customer value co-creation. I felt that even though there are other factors that play a role in the value creation (technology, infrastructure etc.), the customer is more interested in his experience in the immediate short-term. In other words, if Apple released the IPHONE and there was no broadband service in the area where I lived, do you think I would buy an IPHONE in the first place? I would not – and as far as I am concerned there will not be any value co-creation taking place between Apple and me (because I am not even willing to get into a relationship with Apple). In other words, I feel (and the three of you can shoot me down) that just as Chris said that firms need a justification to enter into a co-creation relationship, customers also require some minimum criteria to be satisfied before they think of co-creation.

The other reason I added those phrases was to differentiate customer value co-creation from other sources of firm-customer engagements like crowdsourcing and mass customization. In most other cases, even though the firm and the customer work together, the firm calls the shots and manages how the experience plays out with the consumers. To me, customer value co-creation is one of those instances where there is a join-effort between the firm and the customer that looks at what is needed, what is possible, and what is the return for both.

At the end of the day, I do feel that we are pretty much on the same page excepting some semantic clarifications. Anyway, the doors are open — load your guns and go at it. Looking forward to you guys finding holes in my pov 🙂

Great debate all thanks!

I just wanted to add a few more friendly perspectives of my own on Ned’s and Glenn’s interesting contributions and Wim’s response.

I try and shape my thinking and therefore I guess, my definition of co-creation in terms of the practical ability of the concept for a firm to achieve its market goals through innovating a product or platform into something of more relevance and greater sustainable value to the customer. This in turn will help the firm achieve its growth goals and if executed correctly, deliver long-term returns in form of continuous learning of customer needs, faster iteration and path evolution towards repeated success at co-creation, which in reality is just a form of innovation.

I am not going to apologise for having a firm-centred view because after all, without the firm’s investment in platforms and infrastructure for customers to meet their value-in-use goals, and to meet them in different space-time contexts, then it’s unlikely that, well, customers will meet their value-in-use goals, or in other words, get their jobs done. So for me, the role of the firm is central to facilitate the genesis of the personalised, co-created experience opportunity for the users of its infrastructure.

So my view of CC, connected into SDL, is that firms exist to build the service and knowledge infrastructure and capability to make co-creation platforms, or value propositions for their customers.
These platforms consist of network partners, underlying technology, customer interaction mechanisms, learning mechanisms, brand drivers, value exchanges and human resources to support the heterogeneous derivation of unique value by its customers, who use the firm’s platforms to derive superior, value-in-use for themselves. We use Apple’s iTunes and iPod platforms because their combination as a platform and brand helps us derive superior value-in-use to get the manage a personalised music experience job done, and the emotions we deem important when getting that job done.

Therefore in terms of the relational perspectives on co-creation, the question for me is “what comes first?”. Customers cannot enter into a relationship with a firm unless the infrastructure or platform for co-creation exists beforehand, one that allows me to derive superior value-in-use. I couldn’t enter into a relationship with Apple before it created its personalised music experience platform. But then as it happens, although i use most of their services, I don’t actually feel I have a relationship with Apple. I may have a feeling of loyalty to Apple but only because it provides a very good platform or infrastructure for me to get my personal music experience jobs done pretty well. Sure, customers can self-organise into communities and derive co-created value from each other yet more often not, such communities sit on an infrastructure provided by firm that orchestrates and integrates network partners into an ecosystem for its users to derive personalised value. Facebook is a platform for co-creation to help us get our “stay in touch with friends” and related jobs done. But do I have a relationship with Facebook? Not really, they just facilitate me to maintain relationships with friends and family…. the relationship isn’t managed or designed actively by Facebook. Rather, it’s just a by-product of the co-creation platform, inherent in the value that is co-created.

In my view, a firm-centred perspective on co-creation is more practically useful as it illuminates the power of the co-creation concept as a new form of market and competitive strategy.

Wim, I would stop short of saying that “all value is co-created” because whilst true in the sense that all products are value propositions to get a job done, which is done t a greater or lesser degree by the customer, such a holistic perspective may blind us to the opportunistic and pragmatic aspects of co-creation as a new form of market strategy. Instead, I prefer to think of co-creation as a distinctive form of competition that requires new dynamic capabilities and deliberate firm investments in new resources to achieve greater value for customers and superior returns for the firm. In other words, we should focus on the distinctive aspects of co-creation that embody its practical usefulness now in an age of hyper-competition and diminishing returns from product-centred propositions.

My final point is to ask “do customers always intentionally enter into a co-creation relationship with firms”? I would suggest not. The long and short of it is that customers just want to get a job done. They (we) always have. The only reason firms have stopped short of delivering superior value-in-use (getting a job done) is because in the past they fixated on the efficiencies of a product – make – sell – buy – consume – break economic system. Now, by stepping into a co-creation frame of mind, which at long last is aligned with how customers actually perceive and seek value, firms can move closer to supporting the customer to achieve their ultimate goals. Co-Creation is therefore just a natural way for organisations to help their customers meet their goals in the lifetime of use of their products. But they can only do so if they embrace a different view of value and start building back from the customer’s view of value, not the firm’s.

Chris,
Agree with you on this being a good debate. To me it is not about being right or wrong – it is more about putting out your views, getting feedback on those, learning from others, and then improvising your mental model to match the new parameters. You and I might or might not agree with each other on everything, but that need not preclude us from having a conversation and learning from each other.

I am in agreement with your concept about a firm needing to achieve its market goals through product innovation etc. to create sustainable value to the customer. Now I might not fully subscribe to the firm-centered view you put forward 🙂 for a couple of reasons: (a) there are situations where the customers have raised the ‘value-in-use’ of a product/service by innovating themselves without the firm’s help; but that takes our discussion to the innovation arena, and (b) to my earlier comment, as soon as we mention co-creation I see the firm and customers on equal footing (just my view by the way).So from that perspective, if we make the role of the firm more important than the customer’s and make it firm-central, then it is not co-creation.

In other words, while I completely understand your rationale for saying “after all, without the firm’s investment in platforms and infrastructure for customers to meet their value-in-use goals, and to meet them in different space-time contexts, then it’s unlikely that, well, customers will meet their value-in-use goals, or in other words, get their jobs done”, I would counter that by saying that a firm would not exist if not for their customers. I have personally seen firms with deep pockets go down because they did not understand their customers and neglected the signals from their customers.

In the end, I really don’t see either of our views as wrong – I respect your firm-central thinking as I am sure that has been shaped by your thoughts and experiences. My thoughts are skewed towards the customers as my experience this past decade has been more around customer-focused strategies. At the end of the day, I do see the need for a balance between the two. The only reason I am debating at all is because of the word “co-creation”. In my book, we should not be using co-creation if the involved parties do not have joint responsibilities in creating the value.

Also, I agree with you that customers will not enter into a relationship with a firm unless certain conditions are met. I never said that — what I did say was that a firm cannot force a customer to co-create value. A firm can express a desire and the customer has to willingly agree to enter into a co-creation relationship (as there is a commitment involved). And the reverse is true too. A firm also has to willingly enter into that relationship after understanding the context and ROI.

As the definition of co-creation says the value can be created by the collaboration of the customers and the company, but according to the article it just says the customization of the personalized services leads to creation of the value which opposes the definition provided basically. An example which I think that can be used to better understand the value co-creation is the case with Android phones. A number of android applications are available which can be used by the users and get their jobs done. Also the users can modify the applications or create new applications which can be given back to the Android company people creating more value to the company. In this way value is created in both the ways. Any ways nice article. Please let me know if you have any comments.

Fascinating stuff….
As a qualitative consumer researcher clients ask me if I “Do Co-Creation” from time to time. It’s interested to get a definition and some discussion around this. Can anyone recommend and updated source for discussion around this topic?
Thanks!
Adam