How to increase value by co-creating with customers?

Pierre Dal Zotto is an assistant professor of information systems management and an expert on information and innovation management at Grenoble Ecole de Management. His research focuses on creating value through goods and services with the support of new technology. He’s also a member of the Lego Ideas community and a facilitator for Lego Serious Play at the GEM Playground.

“Co-creating value means producing a product or service with the cooperation of customers thanks to collaborative resources. This process is hardly new, but it has taken on a new dimension in the years after 2000 thanks to the advent of new information technology, which facilitates the process of uniting individuals into thematic communities. Co-creating value through digital resources has caused a disruptive change in classic innovation and marketing approaches. As a result, customers can more easily act as both users and contributors. The digitalized process has broken down barriers and facilitated interaction,” explains Pierre.

Two customer categories  

There are two type of customer categories: contributors who co-create the design, applications, etc., and consumers who benefit from products and services offered by a company. “These categories offer different perspectives. The contributing customer will offer for example an evaluation. A consumer customer is one who doesn’t contribute. Both categories play different roles in the co-creation process,” adds Pierre. These categories offer companies various approaches to co-creation which can be explained through the four strategic initiatives for digital value co-creation:

• Customization initiatives: e.g., personalizing your Nike sneakers
• Reputation initiatives: relies on community evaluation and discussion tools. For example, Décathlon has committed to re-designing a product if it receives an overall negative evaluation from customers.
• Sensing initiatives: based on data analysis tools to propose recommendations for products and services. “We can cite initiatives by Netflix and Amazon whose offers are based on profiling. In 2003, Amazon estimated that 25-35% of its turnover was generated simply through its recommendation tool which relied on consumption analysis. That’s an enormous statistic.”
• Community initiatives: using open source or co-development tools that integrate customer contributors to the development process for goods and services.

Why co-create?

“Customers are more motivated to pay for a product or service that they helped create. These products are a better match for customer needs.” Companies like ebay, Airbnb or Blablacar are examples of success built on a savvy combination of community, reputation and sensing initiatives. Depending on how you mix and match them, these initiatives are not mutually exclusive and can work quite well together.