Tuesday, 6 May 2014


C.K.Prahalad, the venerable management guru, and Venkat Ramaswamy wrote volumes on co-creation. They asserted that co-creation was the future model of business, providing firms a definite competitive advantage. A decade since, has co-creation brought about a paradigm shift in the market place?

For Prahalad and Ramaswamy the prevalent view of the market meant:
a.      an aggregation of consumers, and
b.     the mechanism of trading goods and services with the consumer.
This idea of market assumes that business firms “can act autonomously in designing products, developing processes, crafting marketing messages and controlling sales”. Consumers are external to the process; they are the audience but not participants in the performance. They are expected to passively accept what is on offer without suffering anxiety about its value to their unique needs.

Limits to Co-Creation Has Co-Creation Lost Steam Management Masala V K Talithaya
But, this firm-centric view of business is changing. Prahalad and Ramaswamy believe that consumers are changing. With the advantage of greater access to information and better avenues of communication consumers “now seek to exercise their influence in every part of business system. Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby co-create value”. Value creation is no more the sole prerogative of the firm. “We are moving toward a world in which value is the result of an implicit negotiation between the individual consumer and the firm. Therefore, value creation, for an automaker, for example, is the result of individualized negotiations with millions of consumers”.

The essence of co-creation is the serendipity of creation - the unique experience of the consumers in participating in the creation of the product or service they need. The high-quality interactions with the firm that enable an individual customer to co-create provide the unique experiences with the company. This experience unlocks new sources of competitive advantage.

According to them the different variants of consumer involvement like self-checkout, participation in staged experience are different from co-creation because the customer is not delighted by the unique experience. The center-stage is still occupied by the firm and the consumer is still passive at the receiving end.

The building blocks of co-creation are
a.      Dialogue is the deep engagement between the consumer and the firm in co-creation.
b.     Transparency in making information available to the consumer by the firm.
c.      Access to the firm for negotiating the product features between the firm and the consumer.
d.   Risk-benefits appropriated between the firm and the consumer, with the consumer also having to accept responsibility for the product design.

Limits to Co-Creation Has Co-Creation Lost Steam Management Masala V K TalithayaWhat are the practical implications of co-creation? Prahalad and Venkat Ramaswamy give examples of health care - How access to information on health and treatment processes etc. result in patient’s assertion influencing health-care services by hospitals. They also give examples of how GE co-creates with its consumers some of the industrial products.. These are fine by way of examples. What about the assertion by the authors that millions of consumers will change the way business is done? One can appreciate that a Lamborghini can be co-created by the firm and the consumer. Even a BMW or a Jaguar can be. What about a mass produced car like Honda City or Ford Fiesta? Can we see a day when millions of Wal-Mart consumers will co-create the beautiful candles they sell on their shelves?   

When Mahatma Gandhi was asked what he thought of the Western Civilization, he is reported to have said, “It is a good idea.” That may not be far from the truth about co-creation.

By V.K.Talithaya (vktalithaya@managementmasala.com)
Limits to Co-Creation Has Co-Creation Lost Steam Management Masala V K Talithaya
On 5/06/2014


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