In a previous blog entry, Armin explained why Customer-centricity is at the core of business strategy for successful transformation. In this article, we would like to focus on tactics to co-create value with customers.
Companies have long seen consumers as passive target audiences for what they create. Porter’s value chain is a model for the Industrial Age. It describes a linear chain of where value is added by the different business functions.
Under this model, value is created through a series of activities before the point of purchase. Because of it, the consumer or final user is outside the value chain domain. There is a single point of exchange where the enterprise gets value from the customer.
But consumers are anything but passive spectators; they actively define and understand value in the shape of experiences, and push companies to see it the same way. Digital technology has only boosted consumers’ involvement.
In this context, where change has sped up, organisations need to adopt a new approach to value creation, one in which the basis for value is experience-based and not only product-based.
Regardless of whether the consumer is a company or an individual, it is an integral part of the value creation system.
Value creation starts with the customers
Today’s businesses recognise that the consumer largely influences where, when and how value is generated, and multiple points of exchange exist where both can co-create it.
With co-creation, the traditional model where marketing departments research and R&D units develop solutions in isolation becomes outdated.
The most conspicuous examples are how designers at well-known big technology companies such as Amazon and Apple tackle customers demands: they’re constantly focusing on the friction that customers encounter to upgrade and innovate their products and services.
To them, friction is an opportunity for improvement.
Amazon’s 1-Click Ordering is a famous game-changer that removed a key friction point for completing an online purchase. Apple’s designers did not create a telephone with some extra features, but rather a full-fledged hand-held computer that could also make calls and browse the internet: “your life in your pocket”.
Putting customers at the heart of the value creation process
There’s a famous quote attributed to Henry Ford: “If I had asked people what they wanted, they would have said faster horses.” In 1908, Ford understood that people needed to travel faster. They just didn’t know how to go about it.
You have to look beyond what people are saying to identify the problems they are facing and understand where to create value.
We don’t want that to be another smart statement written on your screen. We are lucky enough to have written this article based on our own experience, successes and failures.
For instance, our Experience Center uses human-centered design methodologies as we believe that your team can arrive at solutions that fit market needs only if they learn from the people facing the problems to be solved.
Below are examples of how companies can involve customers in the value-creation process along the three main phases of human-centered design.
Fase 1: Getting inspired from your customers
People ignore design that ignores people.— Frank Chimero, Designer
In this phase, you need to learn from your customers and understand their challenges, hopes and desires. This phase can take many forms e.g. field observations, interviews and focus groups but some companies have institutionalised it.
Haier, the Chinese home appliances and consumer electronics company, has adapted his management model so that everyone is directly accountable to customers. At the heart of it is a “Zero-distance” policy described here in a funny video to show that their engineers are constantly listening to best respond to their needs.
IKEA, the Swedish furniture and home goods retailer, has launched a digital platform Co-create IKEA to involve their customers in co-creation activities. The platform allows them to engage people at the problem level to understand their emotional and functional needs and to test potential solutions.
Gathering all these insights on customers will allow you to frame a clear customer-centric problem that you aim to solve.
Fase 2: Unleashing ideas
Creativity is the elimination of options.MG Taylor’s Axiom
In this second phase, you want to make sense of everything that you have learnt, generate ideas and identify opportunities. This is where the so-called “co-creation sessions” generally take place. Unlike interview or focus groups, your objective here is to get your customers on your team: they should feel like designers creating solutions alongside you.
Many companies have developed open innovation platforms to source ideas from their customers but also from suppliers, academia and startups.
On top of its digital open-innovation portal to collect ideas, Unilever also opened a 18,000m2 Innovation center—Hive—in the Netherlands with collaboration spaces, kitchen and laboratories to develop future-proof, nourishing and good for the planet products and experiences. They offer ideation sessions, quick prototyping and MVP testing to anyone interested.
At this stage, building rough prototypes (e.g. storyboards, models, mock-up) will help you show tangible outcomes. These prototypes are only meant to convey your ideas, not to be perfect. You will keep iterating and refining them until your solution is bound to be adopted.
Fase 3: Testing and Implementing
Usability answers the question, “Can the user accomplish their goal?Dr. Joyce Lee
In this third phase, you want to bring your solution to life and pilot your ideas with customers. At this stage, you may also consider building partnerships with suppliers, researchers and start-ups to accelerate the development and launch of your solutions.
This example illustrates how partnerships bring new opportunities. Some years ago, Standard Chartered partnered with fintech TradeIX to develop together with DHL and Siemens Financial Services—that were among their large clients—an innovative trade finance solution. With it, they could extend payment terms for their key clients and optimise working capital. This resulted in the first blockchain-enabled trade finance transaction.
The likelihood of bringing about a solution that will be a success is significantly higher when you have kept the people you’re looking to delight at the heart of the creation process.
The key takeaways on the art of co-creation
- Co-creation is a shift away from the traditional value creation model in which there is a single point of exchange where value is extracted from the customer for the enterprise. Under this approach, the risk of developing solutions that may not fit for market requirements is too high.
- Co-creation with customers is not solely intended for the B2C (Business-to-Customers) world but also applies to the B2B (Business-to-Business) realm.
- Co-creation starts with a customer-centric problem and ends with a desirable solution. First, engage with your customers to learn and understand their challenges, hopes and desires; then, build prototypes to test the desirability of your solution and iterate on the feedback.
- Co-creation keeps your customers at the heart of the value creation process but it can also involve other key stakeholders (i.e. suppliers, partners, academia) in the making.
- Co-creation acts as a catalyst for unrestricted free-wheeling imagination, and provides a grounded context as well as a workflow to help focus said creativity on a specific target.
- Co-creation requires a dedicated set of skills, behaviours (e.g. empathy, Can Do attitude), methods and tools (e.g. physical and virtual workspace for visual collaboration).
- Co-creation and multi-collaboration have already become a standard in many sectors to innovate.
- Co-creation requires a shift away from the silo mentality and may conflict with current companies’ habits and managers’ behaviours.
Co-creation should not be seen as a one-off innovation initiative, but rather as a key capability-a combination of processes, systems and tools, skills, knowledge, behaviors, and organisational structures-to unleash the ingenuity of your organisation and tackle your customers’ biggest challenges.
By putting customers at the heart of the value creation process, one can develop solutions that are fit for market requirements and better balance value creation objectives.
With it, you can manage both your bottom line (cost and investments) and top line (growth and revenues).
What we think
Co-creation acts as a catalyst for unrestricted free-wheeling imagination, and provides a grounded context as well as a workflow to help focus said creativity on a specific target.