Co-creation - From Co-production To Co-creation

From Co-production To Co-creation

In their review of the literature on "customer participation in production", Neeli Bendapudi and Robert P. Leone found that the first academic work dates back to 1979. From 1979 to 1990, papers and studies focused on a firm-centric approach, examining customer participation as a source of increased productivity.

In the late 1970s and early 1980s, scholars were mostly concerned with productivity gains through passing on tasks from the firm to the consumer. The self-service model was at that time popular. We observe, however, a slow shift starting in the mid-1980s: the participation of the customers begins also to be understood under the perspective of less-accounting-type metrics. Mills and Morris (1986) see the customers as partial employees and Goodwin (1988) realizes that customer's participation may help increase quality.

From 1990 onwards, new themes are emerging: John Czepiel suggests that customer's participation may lead to greater customer's satisfaction. Scott Kelley, James Donnelly and Steven J. Skinner are dealing with productivity but suggest other ways to look at customer participation: quality, employee's performance, and emotional responses. Song and Adams (1993) suggest that customer participation should not be examined under the aspect of cost-minimization. Instead it can be seen as an opportunity to differentiate.

Although not reviewed by Bendapuli and Leone, the groundbreaking article by R. Normann and R. Ramirez suggests that successful companies do not focus on themselves or even on the industry but on the value-creating system. This idea is actually pretty close to that developed by Vargo, Maglio, Akaka (2008), i.e., that of "service systems". As already mentioned earlier in this paper, Normann and Ramirez disagreed with Porter's ideas and proposed that the linearity of the value chain be replaced by "value constellation". In this context, the authors define the task of companies as the "reconfiguration of roles and relationships among this constellation".

Michel, Vargo and Lusch recognize the influence of Normann on their own work and acknowledge similarity between the concepts of co-production and co-creation: "his customer co-production mirrors the similar concept found in FP6". The authors suggest that Normann enriched the S-D Logic particularly through his idea of "density" of offerings.

Schrage in a letter sent to the editor of the Harvard Business Review in reaction to an article by Pine, Peppers and Roger ("Do you want to keep your customers forever") argues that not all customers are alike in their capacity to bring some kind of knowledge to the firm. In his letter, he uses the word "co-creation" and states "at the core of collaboration is co-creation: customers aren't just customizing; they're collaborating with vendors to create unique value".

Wikström sees the role of consumers changing. When he writes "the customer is no longer regarded as a passive receiver but is coming to be seen as an active and knowledgeable participant in a common process", he echoes Normann's and Ramirez's metaphor on theater and their saying that the customers are coming "on stage". He is also one of the first researchers to define co-production: "I define co-production (collaboration, consumer co-operation, etc.) as company-consumer interaction (social exchange) and adaptation for the purpose of attaining value".

Firat, Fuat, Dholakia, and Venkatesh introduced the concept of customerization (which is a buyer-centric evolution of the mass-customization process) and stated that it enables consumers to serve as "the co-producer of the product and service offering". However, Bendapudi and Leone (2003) concluded in an empirical paper that "the assumption of greater customization under co-production may hold only when the customer has the expertise to craft a good or service to his or her liking". Particularly interesting within the framework of customer-perceived value is the conclusion that "a customer who believes he or she has the expertise and chooses to co-produce may be more likely to make self-attributions for success and failure than a customer who lacks the expertise. A customer who lacks the expertise but feels forced to co-produce may make more negative attributions about co-production".

At the turn of the century, Prahalad and Ramaswamy (2000) produced another important piece of work and built further on Normann and Ramirez's ideas. They see the roles between firms and consumers shifting and the relationship changing. Using again the metaphor of a theater, they wrote that customers are taking active roles. Although the authors do not identify its origin, they suggest that changes in the business environment accompany the transformation of customers from a passive audience to active players. They ask companies to harness the competencies of the consumer and suggest that this be done along four axes: engage in dialogue with customers, mobilize communities, manage customer diversity and co-create personalize experiences with customers. In particular they write that "personalization is about the customer becoming a cocreator of the content of their experiences".

In 2004, Prahalad and Ramaswamy kept working on their original idea published four years earlier. In this other groundbreaking paper, they use extensively the wording "value co-creation". Once used sporadically by other authors (for instance Schrage in 1995), we can therefore say that the official debut of "value co-creation" takes place 2004. The authors recognize that the unilaterality of the marketing offer can not be sustained. According to them the origin of this shift is to be seen in the increasing bargaining power of buyers due to the emergence of communication between customers.

The authors see the co-creation of value as an initiative of the customers who are "dissatisfied with available choices want to co-create value and thereby co-create value". The co-creation of value is conceptualized thanks to a model called DART (for dialogue, access, risk-benefits, transparency).

At the same time, Vargo and Lush (2004) published on the service-dominant logic of marketing. The process of value creation is dealt with in FP6. Opposing the goods-dominant logic and the service-dominant logic, the authors state: "the customer is always a coproducer". FP6 will be later (Vargo and Lush, 2006) altered in "the customer is always a co-creator".

At the base of the shift that Vargo and Lusch's groundbreaking created, is the opposition between the Goods-Dominant Logic (GD Logic) and the Service-Dominant Logic (SD-Logic). The customer is seen as separated from the value offering process in the GD Logic because it requires maximum "efficiency" (which means maximum output in this logic) and thus makes no "space" for customer interactions before the sale actually happens. The authors stress that "the consumer is always involved in the production of value. Even with tangible goods, production does not end with the manufacturing process; production is an intermediary process".

Prahalad commented in the same issue of the Journal of Marketing on Vargo and Lusch's FP6 and found that the authors did not go far enough. He associated customer engagement to coproduction and found five ways leading to coproduction. However, he wrote that "although work and risks increasingly are shared, the firm decides how it will engage the customer", which is for him a piece of evidence that this coproduction process stays firm-centric. Prahalad identifies increased connectivity, convergence of technologies and globalization of information as opportunities to "escape the firm and product-/service-centric view of value creation".

From 2004 onwards, publications on value co-creation tend to flourish because of the resonance of Vargo's and Lush's ideas. The next wave of research was concentrated in Vargo's and Lusch's book "the service-dominant logic of marketing: dialog, debates and directions" published in 2006 which was a collection of papers. Jaworski and Kohli somewhat answer Prahalad's critics of 2004 and propose guidelines to "co-create the voice of the customer". The assumptions made by the authors are seducing and the context rightly chosen, but the model proposed ends up in being a series of very theoretical guidelines which may be difficult to apply in B2C markets. One of the major assumptions made is indeed that the customer is looking for a dialog with the firm. Although this may be true in B2B (because it is made necessary by the procedures), one may doubt that the majority of the B2C customers will see dialogs with firms as a priority in their lives. Moreover, following the authors' statement that "a common premise underlying many approaches to uncovering needs/wants of customers is that they know what they need or want", one may wonder whether focusing the dialog on those consumers who seek it may not result in a bias. The purpose of the firm should indeed be to fulfill the needs of a majority of consumers and not dialoging with the silent majority may result in biased conclusion as far as needs and wants are concerned.

In the same book, Kalaignanam and Varadarajan (2006) also follow Prahalad's comments and elaborate on the IT implications on coproduction. As the authors put it "developments in information technology enable customers to create value by collaborating with the firm". The main contribution of the authors in this article is a conceptual model of the intensity of customer participation as function of product characteristics, market and customer characteristics, firm characteristics. In their conclusions and directions for future research the authors deal with three promising topics. First they propose to study supply-side issues and how increasing communication, participation from the customers and the emergence of communities enable customers to interact between them, sometimes leading to new creations. Second they see the "locus of innovation" as of interest and in particular how the shift of firm-centric networks to user-centric networks can lead to increased innovation capabilities. Third they wonder whether demand-side issues may not result in negative consequences on satisfaction. The third issue is already mentioned by Bendapuli and Leone: "A customer who believes he or she has the expertise and chooses to co-produce may be more likely to make self-attributions for success and failure than a customer who lacks the expertise. A customer who lacks the expertise but feels forced to co-produce may make more negative attributions about co-production".

Last but not least, Oliver (2006) also proposes his view on V&L's FP6 and suggest that customer's expectations on the firm should be counterbalanced by firm's expectations on the customer. The underlying idea is of course that consumers should be seen as a co-creative part of the firm and the latter should therefore get something in return and set expectations. Although nicely put, Oliver's idea is not really revolutionary. It says basically that the firm should monitor the customer co-creation and therefore set KPI's on it.

Further important developments were published in 2008. Grönroos (2008), after more than two decades of co-production and co-creation debates, asks "if customers are co-creators of value, what is the role of the firm? Are firms the main creator of value, or what are they?". The important underlying question is that the debate around co-creation has somewhat blurred the "entity" at the origin of value. Following the ideas of V&L, Grönroos thinks that value-in-use is superior to value-in-exchange because customers add skills, knowledge, processes when using a good and therefore transforming it into a service. For him "if value is created in customers' value-generating processes and should be understood as value-in-use, and if value-in-exchange for the suppliers is dependent on whether value is emerging or not, the customers have to be the value creators". The view that customers are co-creators only (and not creators) results from the confusion between the customer and a production resource (the idea of the customer as a co-producer).

After Schrage (1995) stressed the need for "tools to analyze co-creation" Payne, Storbacka, and Frow proposed a framework around value co-creation in the context of S-D logic. The framework is based on processes which the authors see as central in value co-creation. It consists of three components. First are customer value-creating processes where the value relies on "practices", i.e., routinized actions, the value of which can be enhanced by the supplier. Second are supplier value-creation processes based on co-creation opportunities (through technological breakthrough, changes in industry logics, changes in customers preferences and lifestyles), planning, implementation and metrics. Third are encounter processes.