What is co-creation?

Co-creation is a business philosophy  and strategy aimed at putting the customer at the heart of the company, mainly in the product development. Specifically, companies behind the co-creation emphasize the generation and ongoing realization of mutual firm-customer value. Co-creation allows and encourages a more active involvement from the customer to create a value rich experience. The co-creation is a powerful approach to reduce  the gap between companies and customers. The customers are seen as a key resource of knowledge that goes much beyond the normal customer researches, as they provide ideas, suggestions on how to improve products/services or to generate the development of them.

Co-created value arises in the form of personalized, unique experiences for the customer (value-in-use) and ongoing revenue, learning and enhanced market performance drivers for the firm (loyalty, relationships, customer word of mouth). Value is co-created with customers if and when a customer is able to personalize his/her experience using a firm's product-service proposition – in the lifetime of its use – to a level that is best suited to get his/her job(s) or tasks done and which allows the firm to derive greater value from its product-service investment in the form of new knowledge, higher revenues/profitability and/or superior brand value/loyalty.

Co-creation is a powerful trend in product development that has been around for quite some time, but has recently started to gain traction.  Scholars C K Prahalad and Venkat Ramaswamy introduced the concept in their 2000 Harvard Business Review article, “Co-Opting Customer Competence”.  Value will be increasingly co-created by the firm and the customer, they argued, rather than being created entirely inside the firm. Co-creation in their view not only describes a trend of jointly creating products. It also describes a movement away from customers buying products and services as transactions, to those purchases being made as part of an experience. The authors held that consumers seek freedom of choice to interact with the firm through a range of experiences. Customers want to define choices in a manner that reflects their view of value, and they want to interact and transact in their preferred language and style.

Co-Creation emphasises the increasing co-operation between firm and consumer and this co-operation results in individual and unique experiences for the consumer and continuing revenue, development and enhanced market performance drivers for the firm (brand-loyalty and word of mouth advertising especially). From a company standpoint a captivating co-creation experience may increase consumers’ engagement and the way consumers perceive a brand. Co-creating with consumers offers you a bundle of positive effects coinciding with your actual goals. Due to hundreds of highly involved consumers becoming partners in co-creation this is a great opportunity to purposively leverage those spillover effects.

Companies are increasingly using co-creation approaches as a means for collaborative new product and business development. After the publication of The Future of Competition, companies applied the principles of the Prahalad-Ramaswamy research to a broader range of business activities. Companies engaged customers in the delivery of their experience, including Harley Davidson (bikers riding together and customizing their motorcycles), Scion car dealerships (customization of cars at the dealer and dealer events) or Apple Inc. (exchange of play lists through iTunes). Co-creation played an even bigger role in at companies such as Cisco and Goldcorp where executives involved outside resources, such as researchers, academics, and customers, to actually change and redesign the ways things are done inside the firm. Customer-facing functions such as sales or customer service were also opened up to co-creation at companies including Starbucks and Dell Computer. But this is just the begins, possibilities are endless.