Doron Meyassed, Philip Burgess and Priscilla Daniel argue that co-creation is one of the most powerful, modern-day sources of competitive advantage. It’s also one of the most misunderstood
The major trends affecting the business environment – globalisation, the necessity of speed, the importance of innovation, the empowerment of consumers, aided by technological innovation – all support the increasingly strategic use of co-creation activities.
A recent IBM survey of 1,500 global CEOs concluded that ‘the most successful organisations are those that co-create products and services with consumers and integrate customers into the core processes’. Last year, Business Week, 2 November 2010, proclaimed that cocreation is ‘the second largest innovation trend happening today, right behind sustainability’. If you type co-creation into Google you get 27.5 million hits.
Pull up Michael Porter’s recent Harvard Business Review study and find him arguing passionately that the concept of shared value has the power to unleash the next wave of global growth.
Demonstrable success stories of co-creation are emerging left, right and centre. Organisations that are embracing the approach are outperforming the market, getting better products onto shelves, doing so faster and building deeper, more loyal bonds with their customers.
However, all co-creation is not the same. The catch-all term has meant that everything from crowd-sourced marketing ideas through to general collaboration has been labelled co-creation. This has led many executives to believe that they have experienced co-creation, when in effect they have experienced a tactical (and often far less value adding) interpretation of the practice. Co-creation is not a tactical marketing technique nor is it just a synonym for collaboration. It is a way of doing business that can truly revolutionise how you and your organisation work.
So what is co-creation? Co-creation, defined by Promise Corporation, is ‘the active, creative and social process, based on collaboration between producers and users, that is initiated by the firm to generate value for customers’. In essence it is the idea that organisations can be more successful by innovating ‘with consumers’ rather than ‘for consumers’. In its purest form, co-creation proclaims that consumers are no longer at the end of the value chain, but rather, assume a central importance in the process of value creation.
What’s driving the trend towards co-creation? Cap Gemini’s 2010 Global Co-creation survey proclaims: ‘Co-creation is the result of a broad and irreversible shift in society and corporate culture.’ We’ve observed three inter-related trends that have combined to accelerate the trend towards a co-creative approach to value-creation.
1 Technological advances are facilitating cost-effective ways of bringing together diverse groups of consumers and stakeholders. To truly co-create value with customers, you need them to contribute to your decision-making process regularly, sometimes even daily. Doing so without technology, in an ongoing fashion, becomes prohibitively expensive and slow. Furthermore, getting consumers to meet physically every couple of days would be unrealistic: consumers aren’t willing to give up their daily lives to help organisations co-create. But consumers are willing to give up 30 minutes a week, even a couple of hours a week. Digital technologies make this possible. Individuals can collaborate from wherever they are, at the time that suits them.
2 The rise of the participative, proactive consumer. Clay Shirky, a prominent thinker on the social and economic effects of internet technologies, argues that we are now experiencing a ‘cognitive surplus’. In America the amount of time the average person spends online is greater than the average time spent watching TV. In this ‘post-TV’ era, Shirky argues, consumers now have more free time to do or create things rather than passively consume things. Furthermore, as media guru Charles Leadbeater argues, a culture is emerging where our status is increasingly defined by what we create and share, rather than by what we own.
"You are no longer creating for consumers and then testing it with them. You are creating it with them. Their thinking, needs and desires are expressed in every detail"
Everywhere we look, we see this trend manifesting itself. Almost 13 million hours of video were uploaded to YouTube in 2010. That translates to 48 hours of video every minute and eight years of content uploaded every day. Roughly half of this content is consumer created (emarketer and YouTube statistics). A recent study by 360i found that 77% of YouTube, Twitter and Facebook listings that appeared for brand searches were controlled by a party other than the marketer.
Relatively easy access to information, combined with the widespread usage of social media, has changed the way that consumers want to interact with corporations and brands. Organisations with the foresight to leverage this ‘cognitive surplus’ are yielding significant benefits as they discover that consumers have become both generous and creative with their free time.
They want to engage, interact and influence brands, seeking to ‘exercise their influence in every part of the business system’ (Prahalad & Ramaswamy, 2004).
3 A new mode of value creation. Michael Porter’s recent paper in the Harvard Business Review (Creating Shared Value, 1 January 2011) highlighted that business is being viewed as a major cause of social, economic and environmental issues. Companies are being blamed for society’s failures. They are perceived to be prospering at the expense of the broader community, optimising short-term financial performance, missing the most important consumer needs and ignoring ‘the broader influences that determine their longer-term success’.
In this new paradigm, organisations are increasingly seeing the practice of co-creation as the most appropriate tool for problem solving: it brings all these diverse stakeholder groups together and ensures the result genuinely adds value to all parties.
Furthermore, there is a growing acceptance that consumers and partners are an excellent source of ideas, solutions and creativity. As organisations look at the sheer success of (not for profit) co-creative initiatives such as Wikipedia and Linux, there is an increasing acknowledgement that no matter how much talent there is inside your organisation, there are always more bright people outside of it. And these bright people are willing to help, sometimes even for free.
Why are organisations embracing co-creation? The above three trends have created an environment where co-creative approaches start to bring game-changing benefits. In our years of working with organisations to implement co-creation programmes, we’ve seen four core reasons mentioned again and again as to why organisations are embracing the approach:
1 Increased innovation effectiveness. Perhaps one of the most famous co-creation programmes is Procter & Gamble’s Connect and Develop. In 2000, former P&G CEO, AG Lafley, set the goal to acquire 50% of the company’s innovations from outside the company. Systems and structures where set up to bring ideas and collaboration from consumers, fans, scientists, academics and engineers.
The success that followed has been phenomenal. Writing in the Harvard Business Review (March 2006), Lafley said: ‘Through Connect and Develop our R&D productivity has increased by nearly 60%. Our innovation success rate has more than doubled, while the cost of innovation has fallen. R&D investment as a percentage of sales is down from 4.8% in 2000 to 3.4% today. And, in the last two years, we’ve launched more than 100 new products for which some aspect of execution came from outside the company. Five years after the company’s stock collapse in 2000, we have doubled our share price and have a portfolio of twenty-two billion-dollar brands.’
So why does co-creation lead to such dramatic improvements in innovation effectiveness? While there are a dozen complex and interlinked reasons, in our view, there are two core drivers:
Diversity breeds creativity. As Professor Scott Page from the University of Michigan explains: ‘The more vantage points from which a challenge is tackled, the more likely you are to hit a breakthrough solution.’ Diversity breeds creativity. And co-creation is all about diversity. By bringing together staff, consumers, suppliers and experts we can arrive at new and previously undiscovered solutions.
True consumer centricity. In theory, innovation is simple: understand what consumers want and deliver it better than the competition. And yet, 80% of innovations fail. Most traditional innovation processes make it very hard to truly understand what consumers want and hardwire that understanding into every detail of the innovation.
Co-creation makes that possible. You are no longer creating for consumers and then testing it with them.
are creating it with them. Their thinking, needs and desires are expressed in every detail.
2 Increased communication effectiveness. In 2009 Danone launched its first co-creative venture in the UK together with Promise, by inviting consumers to help it co-create its communication strategies. The concept was simple: build a private community of engaged, dedicated and passionate consumers to act as an advisory board to the communication development process. The results were staggering.
Danone has a standard test for measuring the effectiveness of communication platforms. And the communication platforms generated from the co-creative approach were 84% more effective than those generated through traditional methods (IPSOS study).
In truth, this increased communication effectiveness is driven predominantly by the same two reasons highlighted for increased innovation effectiveness: the diversity of participation and the high level of consumer centricity. But there is one other reason that is of particular importance when developing communications: the up-skilling of consumers. Consumers inputting into Danone’s communication development process were not coming to the process cold. They had spent several months talking about yogurt, their eating habits, their drivers, their barriers and Danone’s business. By the time we worked with them to develop marketing strategies that would increase (say) frequency of consumption, we were talking to a cluedup audience. An audience that understood its own behaviours, the competition and general marketing concepts. The level of the debate and ideation was of a particularly high standard.
3 Speed to market. Kraft recently undertook a mission, vision and values exercise, in collaboration with ad agency Nitro and co-creation consultancy Promise. The organisation went from blank canvas to a new mission, vision and values being launched to shareholders in under five months. As far as we know, for a company of 120,000 people, that is unheard of.
The process was truly co-creative in nature. Consumers worked with management to co-create potential mission and vision territories in large co-creation events around the world; 5,000 handpicked employees collaborated on an online platform daily over the five-month period. Their input helped shape every decision, from blank canvas to final wording.
So how did this happen? How did an organisation as large and complex as Kraft align around a new higher purpose so quickly?
The reality is that co-creation generates alignment and buy-in very quickly. The final solution ‘belonged to everyone’. Everyone had invented it and felt a sense of ownership over it. Furthermore, you get a sense of what is right and what is wrong quickly. In a co-creative environment consumers, suppliers, marketers, researchers, manufacturing, taste makers and HR all come together. This means that bad or unfeasible ideas are dropped quickly and quick wins are fast tracked.
"InnoCentive, an ‘open innovation’ company, takes research and development problems in a range of domains and frames them as cashincentivised challenges for anyone to solve"
Finally, the distance between the boardroom and the consumer is often way too great. With a lack of closeness, there is often a lack of alignment. People align around their personal opinions. With the consumer at the centre, inputting sometimes daily, the core teams align far more quickly.
4 Staying relevant. The world is increasingly changing faster outside organisations than inside. If you are managing a brand, that’s a tricky landscape to operate in. It means you must constantly and obsessively monitor the world, and tweak what you do, in order to stay relevant. Those who fail to do so pay a high price. Kodak’s slow response to the growth of digital photography has almost brought the organisation to its knees. The music industry is no different.
So, as the world changes faster outside organisations than inside, co-creation can be a powerful way of internalising that speed of change. Having learned the hard way, the music industry today employs some of the most innovative practices in ensuring they stay close to the changing consumer.
Sony Music set up a private co-creation community of music consumers – Sony Music Back Stage. The community works on lots of Sony Music’s strategic and creative challenges. However, the community also has a zone where consumers talk about the things at the top of their agenda. Working with Promise, Sony carefully listens, monitors and probes the conversations. The lessons are then taken and hardwired into the business on a weekly basis, ensuring that the organisation has got its finger on the pulse.
Not all co-creation is made equal The term ‘co-creation’ has been both misunderstood and misused – collaboration, mass customisation, open innovation, crowd-sourcing – are used interchangeably to explain the process by which companies collaborate with consumers (see diagram, p38). However, not all yield the benefits of a truly co-creative approach. As such, many marketing departments have experimented with small tactical co-creative experiments, and drawn the wrong conclusions about the approach.
So what now? Co-creation has evolved enormously over the past five years. It ‘has mutated from a niche phenomenon to a prevalent approach of collaborative innovation taken by innovation leaders such as P&G, BMW, Siemens, Nokia or Beiersdorf’ (Bilgram V, Bartl M, Biel, S, 2011). We think that in the next ten years, co-creative practices will further evolve with new techniques, theories and ways of applying it.
We genuinely believe that the most successful organisations will be those that get good at using co-creative practices to solve their brand, marketing and innovation challenges. It will be they who remain the most relevant and launch the most successful innovations.
Doron Meyassed, founder and managing director of Promise Corporation.
Philip Burgess, consultancy director.
Priscilla Daniel, consultant.