My personal definition of Business with Customer Value Co-creation

I’ve been working in the area of Customer Services, CRM/BPM/Multi Channel Interaction Management for 15 years now. One of the most important understandings I get from my experiences in different roles in B2B and B2C environments, is that no one Customer is the same. Every single Customer has its own drivers to work with you, buy from you, collaborate with you and spend time with you. Customer needs, wants and desires are different because every one Customer comes from a different background, has a different set of values, beliefs, goals in life, challenges and jobs to be done.

A Customer’s Experience is personal by definition

Specifically from my background at Center Parcs I learned that the Customer Experience cannot be generic. Experiences, by definition are personal. You can have ten people watch the same sports-game and each individual will have had a different experience. There will be something of a shared experience, which will contribute to the personal experience, yet the experience, from the individual point of view, remains a personal one.

For me, this is an important understanding. It means that we will always fail to design or create the experience as we see it ourselves. From this understanding I derive the understanding that it is best for companies to allow Customers to design their own experiences rather than pre-define in all detail the experience Customers should have with their products or services. Designing products, services and experiences with Customers will improve them, but it will never beat empowering Customers to personalize the experiences themselves.

Customer “Jobs” & different shades of Value Co-creation

More recently I have been introduced to the theory of Customer Jobs and Value Co-creation. A simplistic example (but a great one to start understanding the concept) of Customer Jobs is that people are not seeking for a drill, but need to get a hole in wall. When you think of making a hole in the wall and all the things one needs to do, before this hole is in the wall, one should have a completely different picture of what a drill should look like and how it, in the entire experience of getting the job done, should enable, take away obstacles or facilitate this job.

Value Co-creation, on the other hand, has numerous different shades and is rather a concept at this point in time than a well rounded theory with substantial academic evidence to support it. Nevertheless I believe co-creation of value is THE way of thinking for the future. You can read this article by Graham Hill as to how come. I also like this great visual presentation (power point) of the different Styles of Value Co-creation by Chris Lawer, from Strategyn. You can read the full article that contains the presentation here.

When value is co-created with Customers

Both articles have a lot in common and some major differences. Also both do not provide a short, one sentence explanation, or definition if you prefer, of Value Co-creation.  Therefore I decided to give it a try myself. Basically because I have a personal need to better grasp the concept of value co-creation and furthermore because I feel the need to be able to explain it in as few words as possible to anyone who is newly introduced to the concept. So here it is:

Value is Co-created with Customers if and when a Customer is able to personalize his Experiences through a product or service – in the lifetime of its use –  to a level that is best suited to get his  job(s) done.

And now I invite you to shoot it in a thousand pieces, rephrase, scramble the words, their sequence or whatever else you can think of to get the best possible definition (for now ;-). This is not my definition, in the spirit of co-creation, at the end, and whatever the result, it could be ours.

Also, do not hesitate to ask any questions you might have! I’m convinced we’ll get the answers out here together, in the spirit of co-creation.

Thanks in advance!

Reblog this post [with Zemanta]
Advertisements

22 thoughts on “My personal definition of Business with Customer Value Co-creation

  1. Pingback: And the All Time Winner is… « Wim Rampen's Blog

  2. Pingback: Measuring Customer Performance – The Value Co-Creation Way « Wim Rampen's Blog

  3. Organisations are striving to generate more value from their customers. Focus traditionally is on up-sell, high spenders and account management, with KPI’s such as product penetration and profit per customer being common place. But what is really meant by “Value” and how do you create it? Customer management is a well understood activity within our organisations. The technology and tools used to drive it are mature and a level of consolidation and commoditisation is occurring (e.g. Oracle and Salesforce.com). The processes are well established and a reasonable level of maturity is common place within most B2C and B2B organisation.

    So what next? How can you drive more value from your customers?

    The key question is how to generate value with your customers rather than how do you optimise and simplify the operations of customer management. For example; gold, silver, bronzing your customer base only goes so far as to focus attention but does it really drive value? Optimising the handling processes makes life easier and cheaper but does it really create value? Having a nice website may enthral customers and increase new sales leads but does it really create value?

    So what do we mean by Value?

    In a world where substitution is easy value has to be reciprocal and driven from a customer perspective rather than from that of the organisation:

    Organisations Value Perception:
    * – Revenue Growth
    * – Low cost handling
    * – Improve retention
    * – Simplify and standardise
    * – Automate
    * – Apply low cost sustainable technologies

    Customers Value Perception
    * – Right product, right time
    * – Solve my requests first time
    * – Exceed my expectations
    * – Make it easy for me
    * – Provide me with the right information at the right time
    * – Be a nice organisation – high CSR

    Lowering cost or promoting product is no longer sufficient to drive true value. You need to establish and solve two simultaneous equations:

    Value to the Organisation = Delivering revenue and profit growth, whilst lowering the risks of losing future revenue streams, through exciting and retaining your customers

    Vs.

    Value to the Customer = minimal contact to deliver the most appropriate and fresh product, at the right price, using my preferred channel whilst exceeding my expectations with every interaction.

    To further complicate the picture customers and their habits are changing, the global credit crisis has introduced new regulations and the Internet has created a one-time, systemic shift which has changed the global power game. Around half the world’s people and therefore your customers will imminently be connected via the Internet and the pace of connectivity is rising exponentially.

    Recent research by the Carl Bate (Chair of the British Computer Societies Futures Committee) states that today’s companies are organisations which at their heart are sensors, collectors, analysers, processors, producers and distributors of information. They are both consumers and producers of information, or information prosumers.

    Even worse for established organisations, the technology and global information available to customers, in the public domain, tends today to be far cheaper, and far more powerful, than that of our organisations. that the connectivity is driving a “new norm” creating new trends that organisations should be aware of when considering operational improvement:

    1. Everyone and everything is becoming connected
    2. People and machines are becoming inter-dependent
    3. Economies are shifting from being product, to service, to experience oriented
    4. Business models are shifting from organisation-centric to people-centric, where the individual, rather than the corporate, has a prime role to ‘sense, influence, socialise and commercialise’

    Together, these four trends challenge the very notion of how we interact and mange our customers. But what does the shift toward people-centric business really mean? How will this help drive value with and from our customers?

    To generate Value you need to establish an experienced based, people oriented engagement through which you can satisfy the simultaneous organisational and customer value equations.

    So it’s about engagement: When to engage; how to engage; which channel to use; how to create value added experiences; how to “prosume” information; how to allow customers to “prosume” for mutual benefit.

    My top questions consider would be:

    1. How and when do you interact with your customers?
    2. How can you change or improve the points in the customer engagement cycle to enable more organisational and customer value to be created?
    3. How can you cut down or stop non-value adding interactions?
    4. How can you support and enable your customers become prosumers of information to enrich their experience of your products and services, and contribute to other customers experiences?
    5. How do you determine the correct channels and provide channel agility when facilitating a customer experience?
    6. How do create innovative experiences to drive stickiness?

    The world has changed, customer needs are continually shifting, new ways of working are emerging, and driving customer loyalty is increasingly difficult. With the world economies emerging from credit crisis I have witnessed and believe now is the time for us as managers to move our focus from pure cost management through to value generation. Our Shareholders are now looking for us to articulate our route to growth rather than our approach to maintaining profit margins and protecting cash.

    Like

    • Hi Andy,

      Thx for your extensive comment. This is just a note to tell you that I’ve noticed, but do not have time to read, think & comment on it. Will so soon though.

      Can you leave me your twitter-handle here please. Would like to connect there if you like. Mine is @wimrampen.

      Like

  4. Pingback: What A Social CRM Strategy is all about.. «

  5. Wim,

    Great post and discussion —

    I might suggest that we place value co-creation in the larger context of “creating customers,” in the Peter Drucker sense. The goal of any business is to create the customers who drive the business forward. Co-creating value with customers is a key ingredient in this process.

    I’d be in favor of defining a strategic context for value co-creation. The goal is to co-create new forms of value that competitors can’t match, and that sustain the business going forward. This is an open-ended process based on the formula: company potential X customer potential, where companies employ a platform approach that places company and customer on the same page, writing it together. This is a shared creative context that transcends the traditional vendor/consumer relationship.

    In my view the only discipline that can deliver these results is brands, with their programmatic power to produce outcomes ranging from the practical, to creative, to emotional to sublime. (Not traditional brands of course, but a new form of brands as modes of innovation.)

    Further thoughts:

    — A company’s master strategy to create customers will include its value co-creation strategies.

    — Value co-creation means that the customer (in some context) re-creates himself or herself through the process.

    — Properly designed, a program of value co-creation will create customers who are beyond the reach of competitors.

    — Strategically, the new forms of co-created value should be the groundwork for new business models.

    — A platform approach is the best way to co-create value with customers.

    — In value co-creation, context is king—hence the importance of brands, as they are engines of context creation.

    — To co-create optimum value with customers, a company must take the role of visionary enabler.

    As an example for all the above we could use Apple + iTunes + iPod + customers. Together they “reinvented music” and disrupted the existing music industry.

    Brian

    @brandstrat

    Like

  6. Reading Graham’s comment i was trying to relate with a real life scenario of the end to end CEX. The one that came to mind was Nivea, I have noticed that Nivea has been creating value with the products they offer for men, for example, a new product is shampoo and body wash in the same bottle, this obviously gets the job done when not needing to use two bottles (shampoo and body wash) to get the jobe done, but what is interesting is that they are complimenting these products with other complimentary products for men, so it seems the CEX end to end is following that man through his daily routine.

    Even Nivea’s shaving cream has a variety of features they offer, for all types of jobs to get done based on the need, ex. sensitive skin, rough bear and so forth…. this may be the smart customization.

    but the added value is keeping the consumer flowing with jobs, thus i use one bottle to shampoo/body wash, i shave with their sensitive cream gel, and even more added value they provide is little product knowledge notes offering information on what to use.

    So co-creation seems to be working with Nivea.

    Like

  7. Hi Wim

    Great blog. Great question. Great comments.

    Customer co-creation is about providing value throughout the end-to-end CEX. Value for the customer is co-created when a company helps them to get a job done and achieve their desired outcomes. Jobs obviously include functional ones like cleaning your teeth (Crest) and ‘managing’ a cold (Kleenex) but they can also be personal ones like enjoying happy memories (Kodak) and social ones like hanging-out with your peers (Starbucks). For most products and many services, the majority of value for customers is co-created over the long period of usage after the initial sale as it helps them do functional, personal and social jobs.

    Value for the company is typically co-created when they get paid. This usually happens at the point of purchase. But that isn’t all. Part of co-creation’s challenge to companies is to identify how they can also get paid over the longer-term as products co-create value for customers during usage. And not all the value is co-created as hard cash. It may also be created in other valuable assets such as the product knowledge that Caterpillar gathers automatically using satellite communications whilst its heavy earthmoving machinery is used. Or the customer calling community insights Vodafone gathers as customers use their mobile phones to contact each other. And we shouldn’t forget that it is product knowledge and customer insights that drive the virtuous cycle of customer-centric innovation.

    Clearly, pre-sale touchpoints are an important part of the CEX, particularly, when customers smart-customise their own products. Many companies are getting in on the act like banks, clothing, watchmakers andshoemakers to name but a few. All these smart-customisation examples are courtesy of Frank Piller’s excellent Mass Customisation & Open Innovation News blog. Take a look at it if you want to learn about many more.

    We should be careful in too closely aligning co-creation with smart-customisation. Smart-customising a pair of shoes does allow customers to co-create value, but it is the long-period of wearing them after customisation where the real value is created. As it is applied in many cases today, smart-customisation is largely an addition to goods-dominant logic thinking. The customer smart-customises (and thus co-creates) the product then pays for it. Value is co-created during the exchange and that is it. No further value is co-created as the product is used over its lifecycle. We have to adopt service-dominant logic thinking if we are to see the myriad of opportunities to co-create value together with customers over the entire end-to-end CEX. Smart-customisation as it is usually applied is a great step forward, but it is still ‘co-creation lite’. But just think how it could turbo-charge co-creation if you could smart-customise the product and its associated services continuously throughout the product’s lifecycle. Now that is something customers would be willing to pay for over a lifetime of product usage.

    Graham Hill
    Customer-centric Innovator
    @grahamhill

    Like

  8. Don,

    Consider also the following two cases:

    Value Exchange (zero-sum game): The company and the customer are redistributing a fixed amount of value, via a Value Exchange Process, essentially a cost and revenue sharing process.

    Value Co-Creation (non-zero-sum game): The customer is collaborating with the company on co-creating new value.

    Is mass-customization more similar to the one or the other or both?

    Arie.

    Like

  9. I haven’t seen any writing on this issue, but my guess would be that if the customer has to interact or participate in some way to ensure a customized product or service, then THAT is co-creation of value. But for transparent and cosmetic mass customization, the customer doesn’t really participate (at least not in an overt sense that the customer would really notice).

    So I guess – no, not all co-creation is customization, and not all customization is co-creation, but there is a great deal of overlap, right?

    Like

  10. Don,

    This framework is very instructive.

    I am still not clear however on the following: Is mass-customization essentially the same as customer value co-creation? Does value co-creation include one more elements of co-production of value, over and above the more “traditional” mass-customization sense? See for example:

    http://tinyurl.com/lc69hs

    “Customers do not merely purchase services; they are also often actively involved in their design and delivery. In this respect they are co-producers, which means that they not only have an impact on the quality of their own experiences but also influence the satisfaction of other customers, and they can help or hinder the productivity of front-line employees and the company. Customers also frequently fail in their co-production role.1 Research indicates that about one-third of all service problems are caused by the customer.”

    Is this co-creation or mass-customization, or are they one and the same? Looking forward to your perspective.

    Arie.

    Like

  11. Arie:
    Your problem, with how co-creation can relate to brands like Crest or Kleenex is exactly the problem described in the Pine and Gilmore model of four types of mass customization. This is, by the way, a model that Martha Rogers and I wholeheartedly agree with. Basically, the four types of customization (i.e. co-creation) are:
    * Collaborative customization – a firm interacts with a customer to determine the exact product or service that best serves the customer’s needs and then specifies a service or manufactures a product for that specific customer (for example, some clothing companies will manufacture blue jeans to fit an individual customer, and online businesses “remember” all their customers’ settings).
    * Adaptive customization – a standardized product is being produced, but it has the quality of being customizable in the hands of the end-user (for instance, when you save your driver’s seat settings into the car’s memory).
    * Transparent customization – unique products are provided for individual customers, without making them aware that the products are customized. In this case there is a need to accurately assess customer needs (when the hotel remembers that YOU like red pepper flakes with your room-service pizza)
    * Cosmetic customization – a standardized physical product is being marketed to different customers in unique ways (when Kleenex is sold for household use to one set of customers, but for art studios it is sold differently).

    Kleenex and Crest and other highly commoditized products can still be “cosmetically customized,” and often they can even be “adaptively customized.” Plus, the services that surround these products (e.g., automatic replenishment of your Crest) can also serve as mechanisms for customization and customer value co-creation.

    Like

  12. Wim,

    Again I do have more questions than answers:

    With respect to the first part of you note, I was also very intrigued by the Ted Levitt concept “People don’t want a quarter-inch drill–they want a quarter-inch hole.” See particularly Scott Cook’s perspective on this issue:

    http://tinyurl.com/lfvpp8

    “The structure of a market, as seen from customers’ point of view, is very simple. When people need to get a job done, they hire a product or service to do it for them. The marketer’s task is to understand what jobs periodically arise in customers’ lives for which they might hire products the company could make. One job, the “I-need-to-send-this-from-here-to-there-with-perfect-certainty-as-fast-as-possible” job, has existed practically forever. Federal Express designed a service to do precisely that–and do it wonderfully again and again. The FedEx brand began popping into people’s minds whenever they needed to get that job done. Most of today’s great brands–Crest, Starbucks, Kleenex, eBay, and Kodak, to name a few–started out as just this kind of purpose brand.”

    However, I am less clear on how this concept relates to Value Co-creation. I am particularly uncertain about how this concept applies to brands like Crest, Starbucks, Kleenex, or Kodak (film). I can see more clearly how it could relate to eBay. Also, can the customer elect to reserve or limit participation in Value Co-creation? Is it also possible that some brands lend themselves better to Value Co-creation than others? If so, where do we draw the line?

    I have many more questions, but will stop at this point…

    I hope the above helps advance the conversation.

    Arie.

    @ariegoldshlager

    Like

    • Hi Tom,

      I’m not familiar with a Zen koan. I do like your post (http://tinyurl.com/lw6af9).

      I quote here a small part of it that clearly fits into the thoughts of value co-creation:

      “What a brand is involves what the customer is. A brand doesn’t know what it is unless it knows what its customer is. That’s why smart organizations focus on strengthening relationships with actual customers, and not on the independent creation of content and attention.”

      Thx again!

      Like

  13. I think this recalls Joe Pine and Jim Gilmore’s definition of the “four types of mass customization” http://www.gb3group.com/mass-customization.php

    Your definition of customer value co-creation is useful, in that it will likely get more companies thinking about the issue of paying attention to their customers’ experiences, but don’ t forget that ALL of a company’s value is actually created by customers. NO value can be created without a customer’s participation, at some level anyway, by any for-profit business. It is in the very definition of a business.

    The problem is that the value customers create has a short-term component (current sales and costs) and a long-term component (loyalty, recommendations, etc). This is the stumbling block for companies, because the short-term component is easily tracked, but the long-term piece is not

    Like

    • Hello Don,

      Thanks for stopping by and taking time to comment. I also agree fully with you that value cannot be created without customers.

      You touch the essence of my definition attempt when you mention the short-term / long term component. In my definition I try to capture the importance of understanding long-term value creation through stating that value is co-created through experienceS in the Lifetime of its (the product/service) use..

      I do agree that the long term piece is more difficult to track, causing companies to focus on short term metrics and goals. If we understand that value for the Customer is not created at the moment of sale, but that most of value is created at the moment(s) of use, we might take another approach towards tracking (We need to actually).

      Maybe we need to align better the moments of value creation (for both company and Customer) to have value co-creation? This could be an opportunity too. When experiencing the value Customers could be willing to pay more for it, compared to paying before they can experience the value..

      Let me know what you think. And how does this effect the definition. Your suggestions are welcome.

      Like

    • Thanx Tom,

      A true statement. Co-creating experiences does, on the other hand, not always mean co-creation of value..

      As a consequence I might need to add to the definition something about value for the company too..

      I need to think about that. Any suggestions maybe?

      Like

  14. Graham said this to me today so i thought i’ll add it,
    Company’s job is to provide experience platform that allows value co-creation. Focus on outcome = value co-creation and the economics underlying the touchpoints where value is co-created.

    let’s add your definition…

    Value is Co-created with Customers if and when a Customer is able to personalize his Experiences through a product or service – in the lifetime of its use – to a level that is best suited to get his job(s) done.

    Value, Co-creation, customer, company, experience, platform, lifetime, jobs, products/services, touchpoints

    These seem to be the same words used, so then i will define it as such. the exersise now is in what order do they go?

    Like

    • Hi Spiro,

      As mentioned through our Twitter conversation, you left out one very important word: Personalization. I think this is essential for Customer Value Co-creation as I state in the first paragraph of my post.

      Second, the words “in use” cannot be left out either. It is also essential that companies understand that value (for the Customer) is not created at the moment of sale, but through the experiences of using the product/service.

      Now, with those added, I invite you to think about the order and leave a suggestion here.

      Thnx!

      Like

Comments are closed.