Value Co-Creation

Romero, D. and Molina, A. (2011). Collaborative Networked Organisations and Customer Communities: Value Co-Creation and Co-Innovation in the Networking Era, in Journal of Production Planning & Control, Volume 22, Issue 4, Special Issue on “Co-Innovation and Collaborative Networks". Taylor & Francis, ISSN: 0953-7287 (Print) 1366-5871 (Online), Impact Factor 0.561 (2008) DOI: 10.1080/09537287.2010.536619

Collaborative Networked Organisations and Customer Communities: Value Co-Creation and Co-Innovation in the Networking Era David Romero*, Arturo Molina Tecnológico de Monterrey, Ciudad de México, México Abstract. Strategic networks such as Collaborative Networked Organisations (CNOs) and Virtual Customer Communities (VCCs) show a high potential as drivers of value co-creation and co-innovation. Both look at the network structures as a source of jointly value creation and open-innovation through access to new skills, knowledge, markets and technologies by sharing risk and integrating complementary competencies. This collaborative endeavour is able to enhance the adaptability and flexibility of CNOs and VCCs value creating systems in order to react in response to external drivers such as collaborative (business) opportunities. Strategic business networks are active entities continuously adapting to their environment in order to enhance their capabilities to respond to short-term business opportunities, and therefore allow their business ecosystems to follow the rhythm of industry dynamics, and customers changing needs and preferences. Value co-creation is the new trend in open-business models trying to integrate organisations‟ competencies and involve customers‟ individual preferences into network and community formations for the co-creation of the next level of value for products, services and experiences to be launched into the market. This paper presents a literature review on value co-creation and co-innovation concepts and styles, and proposes a reference framework for creating interface networks, also known as „experience-centric networks‟, as enablers for linking networked organisations and customer communities in order to support the establishment of sustainable user-driven and collaborative innovation networks. Keywords: Collaborative Networked Organisations, Customer Communities, Interactive Marketing, Co-Innovation, Open-Innovation, Value Co-Creation, Value Systems, Virtual Breeding Environments, Virtual Organisations.

1. Introduction In today‟s global economy, organisations are collaborating more and more. Thus organisations are engaging in new forms of highly collaborative mechanisms and networked structures capable of providing a competitive advantage by combining the best skills or core competencies and resources of two or more organisations, as well as customer1 knowledge of a product or a service to co-create a value proposition more compelling and relevant to the consumers‟ needs and expectations. In this sense, collaborative networks represent a promising paradigm together with customer communities to emphasis on core competencies, personalisation and innovation, supported by collaborative mechanisms. This allows the consumer to stamp a product or a service with his/her own applications, preferences and configurations, and therefore co-create value in a collaborative endeavour (Romero & Molina, 2009). Collaborative Networked Organisations (CNOs) show a high potential as drivers of value co-creation, allowing organisations access to new knowledge, sharing risk and resources, joining complementary skills and capacities, which allow them to focus on their core competencies. In addition, collaborative networks induce innovation, and thus co-create new sources of value by confrontation of ideas and practices, combination of resources and technologies, and creation of synergies (Camarinha-Matos & Afsarmanesh, 2006). On the other hand, Virtual Customer Communities (VCCs) show a promising (business) value as “online social networks” capable to leverage all aspects of a product or a service, from product design and marketing communication to creating the overall brand experience. VCCs can support mass-customisation strategies by allowing customers to become co-designers of their products and services (Sawhney et al, 2003; Foray, 2004; Fiore et al, 2004; Piller et al, 2005); sales and marketing initiatives through viral marketing strategies (Anderson, 1998; Subramani & Rajagopalan, 2003); and branding strategies through connecting customers around the lifestyles associated with their products (McWilliam, 2000; Andersen, 2005). 1

The terms “consumer” and “customer” are used interchangeably throughout this paper.

*

Corresponding Author: Tecnológico de Monterrey, Campus Mexico City, Del Puente 222, Col. Ejidos de Huipulco, Tlalpan, 14380, México, D.F. E-mail: [email protected] Phone +52 55-54831605 Fax +52 55-54831606

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In this context, CNOs working together with VCCs can be seen as a cooperative process of value co-creation and co-innovation/open-innovation, through which a group of entities enhance the capabilities of each other by sharing risk, resources, responsibilities, and rewards to co-produce a unique value proposition for each consumer and stakeholder (Romero & Molina, 2009).

2. Value Co-Creation as a Cooperative Process A cooperative process is a formal relationship between two or more entities involving substantial time, commitments, high levels of trust and significant access to each other‟s resources to achieve a common purpose. Cooperation may involve moderate to extensive mutual sharing of resources and some sharing of risk, responsibilities and rewards in order to co-create value (Himmelman, 2001). Furthermore, co-creation can be understood as a cooperative process involving customers and organisations interactions in all creative activities. The potential of value co-creation is achieved through developing and exploiting these interactions with the ultimate aim of co-designing and co-producing the next level of value for a product or a service, exceeding in this way customers‟ greatest expectations with an entire experience around their favourite products and services. In this matter, value co-creation can be defined as: “corporations processes for co-creating goods, services and experiences in close cooperation with experienced and creative consumers, tapping into their intellectual capital, and in exchange rewarding them for what actually gets co-produced, co-manufactured, co-developed, co-designed, co-serviced, and/or co-processed” (Trendwatching, 2006). Value co-creation has shift the traditional idea of value creation, in where customers were seen as “destroying the value which organisations create for them”, while in alternative the new value creation paradigm views customers “actively co-creating and re-creating value with organisations” (Ramirez, 1999). Thus, all these changes are setting the stage for an expanded role for customers, in new co-creation environments, where customers are no longer passive recipients of goods and services; instead customers are now active partners co-creating value with organisations. As mentioned by Prahalad & Ramaswamy (2004), in today‟s competitive landscape, organisations as producers of goods and services cannot exclusively create added-value for customers. Increasingly, value propositions have to be jointly created by both corporations and consumers as co-producers. In other words, added-value has to be co-created in successful interactions between customers and corporations - in what we may call the co-create event - through the personalisation of a product or a service based-on customer‟s specific needs, conditions and personal taste. Following this new value co-creation approach, organisations are trying to re-invent their strategies by participating in collaborative networks in order to maintain their competitive advantages through the emergence of new value creation practices (e.g. value co-creation, co-innovation/open-innovation) based-on a continuum of collaboration together with their customer communities.

3. Value Co-Creation Actors Recent years have seen an unprecedented growth in a large variety of collaborative networks and customer communities thanks to the advances in information and communication technologies (e.g. Internet, Web 2.0, Online Social Networking), allowing consumers to enter into a worldwide e-marketplace of options, and organisation into a global competition. Hence, organisations are increasingly starting to operate in collaborative networked environments seeking for complementarities that allow them to offer integral and personal experiences around their products and services for a specific customer at any specific time, location and context. Furthermore, customers are coming together in online communities where they are publishing and sharing (e.g. blogging, podcasting) their experiences with products and services, and therefore evaluating the effectiveness of their producers, vendors and service providers. Customers are comparing each other‟s experiences, giving feedback to each other, and as a result customer communities are becoming an important influence in purchase decisions and brand loyalty. In this scenario, collaborative networks can enable the infrastructures for handling heterogeneity of experiences and recognising customers‟ individuality across multiple interactive channels (points-ofinteraction). The whole experience will be then co-created around personal added-value products and services that will be co-produced by experience-centric networks integrated and supported by collaborative networked organisations and customer communities.

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3.1 Collaborative Networked Organisations as Value Networks Global competition, market dynamism, and advances in information and communication technologies are opening and challenging new ways of creating value. As a result, the fundamental logic of value creation based-on sequential value chains (Porter, 1985) is changing into value networks (Haglind & Helander, 1998; Mariotti, 2002) capable of redesigning their value and therefore reshuffle their structural, technological, financial and human assets “on-demand” in order to respond to the needs of a short-term business opportunities (Katzy & Obozinski, 1998; Allee, 2000; Fine et al, 2002). Organisations nowadays must continually disintegrate and reintegrate themselves in order to quickly and continually assess their value-chain capabilities for a fast response to the rapidly evolving industry dynamics (Fine et al, 2002) and customers‟ preferences (Prahalad & Ramaswamy, 2000; 2004). In this sense, collaborative networked organisations can provide the basis for agility in dynamic and turbulent market conditions (CamarinhaMatos & Afsarmanesh, 2005; 2006). A collaborative networked organisation, or simply collaborative network, represents “an association of largely autonomous, geographically distributed, and heterogeneous organisations in terms of their: operating environment, culture, social capital, and goals that have come together to collaborate in order to better achieve common or compatibles goals, and whose interactions are supported by computer networks” (Camarinha-Matos & Afsarmanesh, 2005; 2006). Furthermore, a value network is defined as “a virtual web of relationships between two or more organisations that work together to co-create different forms of value such as goods, services, knowledge and revenue” (Allee, 2005). In this belief, collaborative networks can be seen as value networks in where a group of organisational entities have developed a rich web of value co-creation relationships, under a shared belief that they can achieve goals together that would not be possible, or would have higher cost, if attempted individually (Borys & Jemison, 1989). Collaborative networks allow the leverage and rapid configuration of resources in order to integrate the intellectual and technical leaderships of different organisations‟ competencies needed to establish an effective and reconfigurable value system to build and sustain an experience-centric network. The understanding of a value system (Romero et al, 2007a) is based on Parolini‟s notion (1999) that “each product and service offered requires a set of value creation activities that are performed by a number of actors forming a value creating system”. These value creation activities, with the involvement of customers, can lead to a continuous enhancement of existing products and services or the co-creation of new ones to meet as much as possible the needs of an individual customer who would like to have a set of particular features in his/her products or would like to use a group services with a set of particular characteristics. Therefore, value creation is no longer considered as a linear function, but a collaborative and co-evolutionary process with partners, allies, suppliers and customers that come together in close relationships within collaborative networks that aggregate knowledge, resources and activities in “value constellations” to co-produce value. The key strategic task in these new collaborative networked environments is the reconfiguration of roles and relationship among the constellations of actors in order to mobilise the creation of value in new forms and by new players. In other words, the underlying strategic goal is to create an ever-improving fit between organisations‟ competencies and customers‟ needs (Normann & Ramirez, 1993). 3.2 Customer Communities as Value Co-Creators Online communication technologies are enhancing the emergence of novel forms of social communities, often referred as virtual communities, with the ability to engage customers in an on-going dialogue with other customers and also with the firm. Thus leveraging a customer-based value creation system by providing a way to interact, learn, conduct transactions, and share valuable knowledge with all the parties involved in the development and usage of products and services (e.g. e-commerce). Virtual communities are “groups of people who use communication technologies for repeated social interaction to meet certain needs” (Preece, 2000). Furthermore, virtual customer communities are “virtual communities composed mainly of customers who had experience in using products and/or services” (Tzu-Ying & Jen-Fan, 2004). Most of the virtual customer community members possess the same interests and experiences. They get together in order to chat online, exchange personal experiences, and post news about their products and services, so they can learn from others experiences and acquire information for buying decision-making (Tzu-Ying & Jen-Fan, 2004). In this scenario, organisations have realised the tremendous business value and benefits (e.g. insights), that discussion contents in virtual customer communities bring to business processes such as: product design, marketing and branding, innovation process, etc. 3


Next paragraphs will introduce some of the different roles that customer communities can play as co-creators, since customer communities‟ truly revealed themselves with continuous creation of new knowledge that serves as a new outstanding model of co-innovation/open-innovation and value co-creation (e.g. open source innovation). Customers as Co-Designers: Customer‟s participation in both the front-end (idea generation, conceptualisation) and the back-end (design and testing) phases of - new - product development enhances the innovation process and thus co-creates more value (Nambisan, 2002). In this sense, customers‟ collaboration can take two particular forms: firstly, it can support continuous - existing - product developments by allowing those customers that seek particular outcomes in their products and services to engage in the activities to co-produce them (Sawhner et al, 2003). Thus, customers will be able to make adjustments and co-develop their products and services according to their personal preferences (Foray, 2004). And secondly, customers‟ participation in a collaborative innovation process by voluntarily sharing their ideas and experiences for the co-development of the next generation of products and services in the market (Foray, 2004). At this point of freely exchange of ideas and experiences, it is important to remark the intellectual property rights issues that could arise. At some point of the collaboration, customers as collaborators could start asking: “What‟s in it for me?”, so companies should payoff/reward those customers that succeed to co-create value with the company in order to avoid having dissatisfied customers, or worse, public battles (Von Krogh, 2006). Therefore, companies shall engage those customers motivated by the passion for a product in the process of new product ideation and concept development in interaction with their business allies (e.g. suppliers) in order to add a new dynamic to the producer-customer relationship by engaging customers directly in the co-creation of value, in other words, involving the customer at any stage of the value chain. In summary, virtual customer communities can provide three advantages on companies that want to enhance their relationship with their customers based-on a co-creation process: First, they give R&D deeper insights into the customer behaviour and preferences. Second, they reduce the cost of concocting ideas for new and improved products and services. And third, they enhance loyalty as customers become emotionally invested in the products they help nurture (Von Krogh, 2006). Customers as Innovators: In many companies, product development departments can not keep pace with the need to understand and respond to customers‟ changing needs on an individual level. Therefore, a successful solution for companies nowadays has become to stop trying to deduce customers‟ desires (e.g. market research), since R&D has been a costly and inexact process, and instead give customers toolkits (e.g. modelling, prototyping) to design and develop their own products and services. In this way, companies may tighten the feedback loop between consumption and production cycles (Thomke & Von Hippel, 2002). The new “co-innovation/open-innovation” model is now integrating customers into active roles in all innovation activities, from idea generation to prototyping, seeking in this way a positive impact in the degree of innovativeness in the next generation of products and services to be launched into the market (Nambisan, 2002; Salomo et al, 2003). In this context, users that actively seek innovation are called “lead-users” and their orientation in innovation projects can enhance product concept effectiveness through capitalising users‟ knowledge (Ulwick, 2002; Lilien et al, 2002; Prahalad & Ramaswamy, 2003; Von Hippel, 2005; Hsieh & Chen, 2005). As mentioned previously, customers‟ collaboration in innovation activities provide organisations with surprising innovative capabilities. These capabilities can be maximised by the development of virtual customer communities, which allows lead-users to freely suggest new product ideas that in most of the cases are significantly more original and valuable than professional developers‟ ideas, since customers know best what they want, and how, where and when they want it (Kristensson et al, 2004). Thus, online customer communities‟ participation in product development facilitates proactive learning about the customer, and leads to better understanding and anticipation of latent customer needs. In this interaction the value of customer involvement arises (Matthing et al, 2004). As a conclusion, combining internal sources of information provided by traditional R&D approaches with lead-users knowledge, provided by their virtual communities, can guide to uncovering tacit and latent customers‟ needs (e.g. feelings, emotions) that can drive to new products and services to satisfy customers‟ desires that have not been previously considered (Schubert & Ginsburg, 2000).

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Customers as Marketers/Branders: While word-of-mouth marketing has always been an important factor in consumer decision-making, consumer-accessible technology (e.g. Internet, blogging, podcasting, online social networks) is nowadays empowering more than ever the word-of-mouth delivery mechanism. In today‟s networking era, social networking is making professionals rethink the current marketing and advertising strategies, and therefore calling for new strategies such as alternative communication channels (e.g. interactive Websites) and innovative marketing strategies like: “viral marketing” - e.g. online word-of-mouth (Anderson, 1998; Wilson, 2000; Subramani & Rajagopalan, 2003), “event marketing” e.g. promotion of interactive conventions (Melnick & Wamm, 2004; Aiken & Campbell, 2005), “lifestyle marketing” - e.g. fans lifestyle (Kozinets, 2001; Belk et al, 2005) and other “interactive marketing” strategies (File et al, 1992; Quinton & Harridge-March, 2003). Furthermore, virtual customer communities represent one of the social network forms with the power to support interactive marketing strategies and merely create the undreamed customer loyalty. Online customer communities offer companies a chance to get to know better their customers, through giving them the ability to easily interact with each other and with the company itself (Armstrong & Hegel, 1997). The idea in this sense is: “give customers the opportunity to participate” (e.g. Web 2.0). Success in this new world order requires marketers to develop a new perspective, a new skill-set, and a new role in consumers‟ lives where “customer-generated content” and companies provide the knowledge, tools and resources to create and manage interactive experience-sharing communities. Whose purpose is aimed at informing customers about the quality of products, services, brands, or sellers prior to making a purchase and after it, allowing customers to share their experiences about it. The phenomenon of customer-generated content is helpful in the areas of spreading reputation, customer support, discovery of users‟ hidden behaviour, understanding demands and trustable advertisement. Therefore, managing this type of virtual customer communities is beneficial for marketing, branding and advertisement activities (Armstrong & Hegel, 1997). Finally, experience-sharing communities can give consumers a “greater voice”, and consequently create positives effects in brand equity by providing an important source of information from the brand and its products, but more particularly from other customers, and so enabling social benefits such as promoting brand legitimacy. In short words: “the brand is the experience and the experience is the brand” (Dayal et al, 2000; Muñiz & O‟Guinn, 2001). Customers as Socially Responsible Actors: One topic that has gained a strong presence in the last years is “social responsibility”. Social responsibility does not have a universally accepted definition, but it can be understood as a concept which encourages all actors in society (e.g. organisations, governments, citizens) to consider the interests of their local community and society at large by taking responsibility for the impact of their activities in their surrounding districts and the environment in all aspects of their daily-life. Based on this philosophy, a new generation of “conscious consumers” has emerged, considering healthy and sustainable lifestyles, and worried about the sustainable development. This trend has been translated in major restrictions of ecological character for organisations, becoming an important factor in customers‟ buying habits (choices) the corporate social responsible activities exercised by organisations (Aburdene, 2005). Examples like Greenpeace.org or other NGOs, with their corresponding world wide social communities, most of them supported by computer networks, can be viewed as networks of conscious consumers that represent an opportunity to involve them in the co-creation of new products and services that meet customers‟ expectations on economic, environmental and social performance. The essence of this dialogue is the co-creation of a shared understanding by all actors in society, mainly organisations and customers, about their commitment to the creation of sustainable value (OECD, 2000; EC, 2002; OE SMEs, 2002). In the end of the day, customers‟ and organisations‟ social responsibility can be abbreviated to a set of duties and responsibilities for planning, implementing and monitoring corporate social responsibility programmes. As a result, customers can become real judges responsible for determining the effectiveness of corporate social responsible activities, and in coalition with the organisations, help them with their duties of periodic reporting “annual reports” to the society about sustainable creation of wealth (value) for all stakeholders in the business ecosystem.

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4. Value Co-Creation / Co-Innovation Activities After reviewing some of the different roles that customers can play as co-creators of value, now it is time to approach the different principles of co-creation that companies are currently pursuing. In this trend, one important aspect to state is the nature of the value co-created, since value can be delivered to the customer in the form of tangible goods, with a fixed set of features and attributes, or in the form of intangible services and experiences, with high knowledge content. In both cases, what is important to remark is that the “locus of value co-creation” will be at the degree of personalisation of a good or a service, along with the quality of the overall experience (interactions) in the journey to reach the expected outcome by the customer. Therefore, considering this and other factors involved in the value co-creation process, the OMC Group Insight (Lawer, 2006) was able to propose a kind of typology describing eight styles of value co-creation that organisations are practising nowadays with different levels of firm-customer interaction and customer involvement. (1) Product “Finishing”: This mode of value co-creation represents one of the first organisational intents to provide customers with an active role in the value creation process by allowing them to customise a set of pre-defined features in the appearance of a product design with their own personal taste (e.g. decoration). In this sense, consumers appear to be motivated by the idea of creating a product that could help to generate a unique fashion style (Stanforth, 1995). The appearance (the look) of a product comprises aspects such as colours, shapes, patterns, layouts, and typefaces. Therefore, “appearance customisation” requires extensive capabilities in organisations, and perhaps also in consumers, for quickly and easily customise the appearance of a group of pre-defined custom designs that can be applied to a few products based-on customer‟s choice (Fiore et al, 2004). Furthermore, this style of value co-creation can also include the “self-service” models that allow customers to complete the value creation process by assembling their own a product or serving themselves in a service (Howard & Worboys, 2003). To conclude, this approach for value co-creation offers low transaction costs (e.g. do-it-yourself), a very tempting carrot, but in opposition it can erode customer satisfaction and loyalty because of the weak interaction firm-customer, since there is just one single contact at the last link of the value chain: product delivery (Alcock & Millard, 2006) (e.g. IKEA). Table 1 Product Finishing: IKEA Example Strategy Product Finishing

Description Actors The customer is PROducer + the last link in IKEA ConSUMER value chain with an = active role finishing PROSUMER the product.

Interaction self-service do-it-yourself

Value Activities Customer: - Product Assembly - Product Delivery Producer: - Make-to-Order

Producer Value IKEA outsource some labour to the customer saving costs in manufacturing, storage and distribution.

Customer Value IKEA cost savings allow offering more attractive prices to the customer in return of its labour.

(2) New Product Design and Development (Lead-Users): This style of value co-creation refers to the incorporation of “lead-users” into product design and testing (Nambisan, 2002). Lead-users are consumers of products or services currently experience needs still unknown to the firm, and even to the society. Lead-users are those pushing the boundaries of current solutions available in the market, using their inventive to adapt what they use to better fit what they need, becoming in this way a real source of innovation motivated by the strong necessity to satisfy their needs (Von Hippel, 2005). Therefore, organisations should work closely and continuously with their lead-users in order to keep-up with customers changing needs and potential requirements in the near future. In this way, organisations will have the opportunity to co-develop products and services that will provide a solution for customers‟ current and prospect needs. This mode of value co-creation can provide engineers and also sellers with good insights about what the customers are currently demanding and will demand in the near future, allowing the organisation to anticipate to these requirements and offer real added-value products and services that try to achieve customer satisfaction in the short- and long-term. Additionally to lead-users, in recent years, companies have also utilised “early-adopters”, as consumers who embrace new products or services before most people do, and “beta-testers”, as consumers with a commitment to test and provide ongoing enhancement to a product or a service before its release to the market, ensuring a high quality in final version. Both groups of consumers can enhance the reputation of a product or a service, and serve as social leaders promoting innovation by using/testing a product, service or technology that is trying to gain momentum. As a final point, lead-users, early-adaptors, and beta-testers receive from organisations a position to intensively interact with the company during new product development period (design and testing) and benefit significantly by obtaining a solution to their needs, and at the same time help organisations with their innovation process. Both, organisations and customers can get a head on what is coming and together co-create the next generation of products and services be release into the market (e.g. Procter &Gamble, Silicon Graphics, Volvo XC90, Harley Davison, Saturn Cars). 6


Table 2 New Product Design & Development (Lead-Users): P&G‟s Connect & Develop Program Example Strategy

Description

New Product Design and Development (Lead-Users)

Lead-users and creative minds are invited into P&G to joint the new product development team to share its ideas, needs and desires, and also to test some new product developments.

Actors

Engineers + Marketers + Lead-Users = Innovation Team

Interaction

Value Activities Customer: - Discover latent needs in the market. - Provide fresh insights Brainstorming about existing products. Producer: Focus-Groups - Design and develop new products based-on Open-Innovation lead-user insights. Platforms - Bring to the market products conceived by their potential consumers.

Producer Value

Customer Value

P&G ideas sourcing tool (named: connect & develop program) results in highly innovative products foreseen by leadusers, and helps to increase revenues in niche or new markets.

Lead-users ideas and fresh insights help P&G to innovative faster with new products that comply with the customers emerging needs.

(3) Existing Product Adaptation (Customer Feedback): This mode of value co-creation involves bridging customer relationship best practices (e.g. Customer Relationship Management tools) with product lifecycle strategies (e.g. Product Lifecycle Management tools) to involve customers into product feedback process, also known as product requirements planning or prioritisation. Customer feedback refers to an organisational commitment to continual improvement. Customer feedback also refers to an active dialogue with consumers for listening what they want to say, and react based-on their opinions, observations, concerns and suggestions to improve products, processes and services. Furthermore, customers‟ feedback can be in the form of information requested to the customer (e.g. customer surveys, customer-service reports, focus groups), but also be in the form of there unsolicited comments or complaints, in both forms paying attention to what the consumer want to say is the key for customer satisfaction and retention. Listening the customer‟s voice has been always a good way to obtain ideas and insights for successful product adaptation, but a much better way has been putting in the hands of a limited number of consumers prototypes/products to observe and gain feedback on how the design and features of a product can be improved. Therefore, successful organisations today are those capable to quickly adapt different versions of their products and services according to instant consumer feedback with a real agile product adaptation model competent to support short product release cycles based-on frequent feedback (Boztepe, 2005). Lastly, existing product adaptation is a process of continuous value offer improvement aimed at guarantee that customers are receiving what they really want and that organisations are performing at the level of consumers‟ expectations (e.g. Sony Antenna Shops, Cisco Knowledge Centre, and Microsoft Knowledge Base). Table 3 Existing Product Adaptation: Microsoft Knowledge Base Example Strategy

Existing Product Adaptation (Customer Feedback)

Description Actors Interaction Microsoft strategy to develop new service packs for continuously improve its software applications based-on Customer Engineers + its community of users Service Expert Users + using/testing different Normal Users programs & identifying Knowledge Base = bugs on them, so Platforms New engineers and expert Customer users can solve these Updates Service Team problems and post their Services solutions in a knowledge base so other users can search for solutions for their problems.

Value Activities

Producer Value

Customer Value

Customer: - Post new bugs identified in different programs. - Search & find solutions for software application problems. Producer: - Post solutions to different programs problems. - Develop new service packs as part of softwares updates services.

Microsoft continuously receives feedback from the users to repair bugs in its software applications in order to improve them.

Customers continuously receive from Microsoft solutions and updates to fix their problems and improve their software applications.

(4) Mass-Customisation: This style of value co-creation obeys to a growing market demand in the personalisation of products and services. Mass-customisation represents ones of the organisational attempts to provide unique value to the customer in an efficient manner, in other words, offer low-cost, high quality and variety of value offers to satisfy customer‟s individual needs. From consumer‟s perspective, mass-customisation refers to a customer co-design process, limited to a set of choices or options regarding a certain features to be personalised in a standard product or service template. From organisational perspective, mass-customisation refers to a flexible and responsive value creation system (e.g. manufacturing system) capable of producing or offering products and/or services tailored by the customer‟s specifications. Therefore, the challenges for organisations in this mode of value co-creation are to embrace a closer interaction with the customer, in order to acquire information that can be used in the production process to meet certain specific requirements; to empower customers to become collaborators in the process of designing products or services to meet their specific needs regarding certain product features; and to develop organisational capability to transfer customers needs and desires into concrete product specifications (Piller et al, 2005; Zhelka, 2005). 7


In conclusion, mass-customisation seeks the establishment of an outgoing interaction firm-customer to build up a lasting relationship for customers‟ deep involvement in the adequacies of products and services features to fulfil each particular demand by offering individually customised products and services (Fiore et al, 2004) (e.g. My Adidas, Nike iD, DELL, Car Manufacturers). Table 4 Mass-Customisation: Nike iD Example Strategy

MassCustomisation

Description

Actors

Nike offers preManufacture determined options + Users as to the customer to Co-designers customise its shoes, = letting him/her to Custom participate in the Shoes design process.

Interaction

Customisation Tools

Value Activities

Customer: - Product Co-design Producer: - Mass Customisation

Producer Value Nike facilitates a product and the tools that allow those customers willing to pay a premium price to design their own shoes, increasing Nike value offer (utility).

Customer Value Customers can customise certain elements of their Nike shoes to meet their personal taste with regard to buying a shoe with a standard design.

(5) Open Community Ideation and Product Design & Development: This mode of value co-creation refers to “creative innovation thanks to the wisdom of crowds”. Open community ideation expression describes a collaborative and pro-active behaviour within social innovation networks encouraging and harvesting the creativity of all its members to conceive fresh ideas for the design and development of new products, processes and services, or the improvement of existing ones. Therefore, customer collaboration innovation communities represent social network environments with promising opportunities to capture a greater number of profitable ideas, through the incorporation of customers‟ thoughts (ideas) in a more quick and efficient way than using the traditional R&D approaches, into product design and development processes. Additionally, organisations can demonstrate by following this approach a greater commitment to serve to the specific and changing customers‟ needs by include them into the value creation process (Piller et al, 2005). Summarising, the openness in this type of community model represents an enabling factor for unlocking creativity and innovation in customers and engineers, allowing them to share their wildest ideas without restrictions, hopping that in this may any member in the community can get inspired to come up with a set of workable ideas that can really contribute to the development of a more rich knowledge base about needs and applications which should be translated sooner or later into concrete production specifications to craft products, solutions, and services for the customers. An open community of ideation is build upon users in a collaborative endeavour with organisations, and the second ones should be responsible for capturing the largest number of contributions (ideas) from their engineers and customers for the design and development of a high valuable offer (product, service, or both) using the power of networks around a common interest or need. Finally, an open community of ideation represents a space without boundaries to free customers and engineers minds for the co-creation of innovative value offers (Piller et al, 2005) (e.g. Computer Games, Linux, LEGO Mindstorms, Firefox, and Sugar CRM). Table 5 Open Community Ideation and Product Design & Development: LEGO Mindstroms Example Strategy Open Community Ideation and Product Design & Development

Description

Actors

LEGO strategy for Manufacturer developing and & Users as marketing new Designers interactive products = in a collaborative Lego Factory process with users. Team

Interaction

Creative Tool-Kit

Value Activities Customer: - Products Co-design - Products Animation Producer: - Tool-Kit Provider

Producer Value LEGO integrates the customer into the innovation and marketing processes in order to design, develop and sale the best products.

Customer Value Customers can virtually design their own products and order the customised set of blocks to build them and also they can program them to be animated.

(6) New Service Design: This style of value co-creation is similar to the “New Product Design and Development” approach, but with some differences regarding the value offer design implications, since the process of new service design is distinguished from new product design for its intangible nature, difficult standardisation, and impossibility to be stocked because service production and consumption are inseparable (Bateson, 1977). Current practices in service design are challenging because formalisation of service innovation process is difficult, since in general is required a knowledge pre-requisite about the specific aspects of services design. In other words, in order to design a new service it its required to create a short life-cycle channel to interact with the customer for feedback about a given set of service requirements, even so the design and development of a new service is often a result of customer feedback, but in case that feedback is requested, the typical service design process involves establishing contact with the customer and start by setting objectives, generating ideas, and analysing them to test a service to see if it may meet customer needs.

8


In few words, service design process requires a concept development phase (identification and specification of customers‟ needs and requirements) to provide detailed service information required to design a process with the balance of service quality versus costs to deliver services that satisfy the needs, desires, or aspirations of customers. Last but not least, the service design process starts to present some elements of the “Personalised Experience Value and Knowledge Co-creation” mode of value co-creation by considering that a service is assembled from multiple interaction-points with the customer that come together to co-create a consistent and compelling perception about the quality of a service towards real customer satisfaction (Sawhner et al, 2003; Matthing et al, 2004) (e.g. TeliaSonera Mobile Phone Network, Alaris Medical Systems). Table 6 New Service Design: TeliaSonera Mobile Phone Network Example Strategy

Description

TeliaSonera strategy allows the customer to test most of its mobile services with New certain limitations so Service Design the customer can get familiar with them and choose those services that satisfy its personal needs.

Actors

Service Provider + User as Service Designer & Configurator = New Service Configurations

Interaction

Value Activities

Customer: Service - Servicer Designer Configuration - Service Configuration Tools Producer: - Service Provider

Producer Value TeliaSonera provides mobile services (telephony, text and multimedia messaging, Internet access, etc.) that are configured by the customer according its personal needs, allowing TeliaSonera to create revenues streams based-on a pay-for-service model.

Customer Value

Customers receive and pay just for those services that better suit their communication service needs.

(7) Real-Time Marketing and Service Adaptation: The valuation of products and services will always depend strongly on customer perspective, according to his/her specific needs in certain time, location and context. Thus, service adaptation and on-demand customisation are required nowadays to satisfy customers‟ needs in the right moment, place and way. Hence, with higher adaptability in a value creation system to enhance service features through incorporating interactivity into the configuration of service components, the higher service value (and profitability), since the value creation system is capable of satisfying the specific current needs of a customer with a tailored service. In today‟s business world, reducing time-to-market is the only way to address customer needs at runtime, and this ability is the key factor to respond successfully to the existing business opportunities, strongly related to the present customers needs (Tien and Berg, 2003). This style of value co-creation tries to provide a more direct interaction between the customer and the service provider, allowing the customer to play a more active role in the service adaptation process, and therefore in a real-time value co-creation process. Thus, higher levels of customer interaction are required to facilitate dialogue (communication) between the firm and the individual customer, and in this sense ICT-infrastructures plays a key factor as enablers of intelligent customer interaction platforms that represent a service creation environment in which service adaptation is tailored by the customer on the concept of context of use and related to a service level agreement negotiated with the service provider. In order to conclude, service adaptation frequently falls on the shoulders of frontline customer contact employees, meaning that real-time marketing and service adaptation depends more on employees‟ ability to perform the complex customisation task through an interpersonal interaction with the customer, that on technology that just represents a tool that helps to facilitate a communication channel during the process of service customisation (Gwinner, 2005) (e.g. Contact Centre Dialogue, CEMEX, FEDEX Tracking Systems). Table 7 Real-Time Marketing and Service Adaptation: FEDEX Example Strategy

Description

Real-Time Marketing and Service Adaptation

FEDEX service strategy offers a catalogue of services to be selected by the customer according to its needs and preferences, together with some optional adding value services such as: package insurance, tracking, delivering confirmation, etc.

Actors

Servicer Provider + User as Servicer Selector = Service Adaptation

Interaction

Service Provision Platforms

Value Activities

Producer Value

FEDEX adapts its service based-on a catalogue from which the customer can select different Customer: mailing features - Service Features Selection such as: traditional Producer: or express deliver, - Service Provider based-on insurance amount a catalogue, including some for its package, etc. added-value services. and complements it value offer with some free additional added-value services to win the customer preference.

Customer Value Customers will receive more than a typical mailing service including some other addedvalue services that guarantee the safe package delivery: e.g. Insured in case of lost or damage, package tracking during the mailing process, and confirmation of who received and at what time and date the package.

9


(8) Personalised Experience Value and Knowledge Co-Creation: Finally, this is the new value co-creation style promoted by Prahalad & Ramaswamy (2004) where the firm and the customer interact within an experience environment to co-create unique experiences of value, or an “experience of one”. The personalised experience of a value co-creation process is about high-quality interactions with individual customers with the aim of engaging consumers and organisations in an on-going dialogue about the pros and cons of tailoring a product or a service, allowing them to make joint decisions about the principles of informed choices, and recognising the cost, quality and risk/safety implications of the choices made. By engaging in an on-going dialogue consumers and organisation both can evaluate jointly their choices as they go along in the value co-creation process of a product or a service that serve as facilitator to deliver the co-creation experience. The value co-creation process gives the customer an experience of greater level of knowledge and expertise about the product or the service that he/she helps to co-construct, and of course a greater level of self-esteem that could be translated into customer satisfaction; and on the other hand, organisations (engineers) feel that they have more insights about customers‟ individual desires to serve better to their specific needs. The basis of value therefore shifts from physical products/services (outputs) to a total co-creation experience, which includes the whole product/service lifecycle from its co-design to its delivery. As well as other interactions with the customer that enhance consumers‟ trust in company‟s capabilities to co-construct unique value, which implies personal meaning to customers knowledge, insight, enjoyment, satisfaction, and excitement during their individual involvement in the value co-creation process and its derivation on an on-demand experience in a specific context of space and time, and for a specific event or need (Ramaswamy, 2006). In this new value co-creation mode, managers must attend to the quality of co-creation experiences (e.g. experience quality management), and not just the quality of the firms products, processes and services (e.g. total quality management), considering that quality depends on the infrastructure for interaction (the experience environment) and the quality of service attendance (dialogue/interaction) between company‟s employees and the consumer. Therefore, the organisational challenge relies on understanding how customers differ in their perceptions of experience attributes (e.g. convenience factors) in order to create the organisational capabilities to be able to grant customer wishes and aspirations and solve its frustrations in different experience-based forms of value that rely on a combination of sensory and rational judgement of value, because products or services could be the same but the customer co-constructs different and unique experiences of value (Ramaswamy, 2006) (e.g. iPod/iTunes, AMAZON, MEDTRONICS, JOHN DEERE, ON STAR). Table 8 Personalised Experience Value and Knowledge Co-Creation: iPod/iTunes by Apple Example Strategy

Description

Personalised Experience Value and Knowledge Co-Creation

Apple offers multiple experiences to their customers when they buy an iPOD, through iTunes interactive platform, allowing them to personalise and add content to their devices and evolve them by acquiring and installing new gadgets on them.

Actors

Experiences Providers + Users = Unique Experiences

Interaction

Interactive Platforms

Value Activities

Customer: - Interact - Experience Producer: - Experiences Providers

Producer Value

Apple using iTunes platform creates an open dialogue channel with the iPod owners, through which can help the customer to evolve and live new experiences with its product by personalising it with new gadgets that are sale or some of them provided for free in the iTunes store.

Customer Value Apple iTunes platform allows the iPod owners to reproduce their music and videos, organise their playing-lists, buy music and videos over the Internet, receive music news according to their preferences (new releases, concerts, etc.), keep statistics of the music listen and videos watched, listen to Internet radio stations, etc. living multiple experiences.

In summary, what can be concluded of this section is that each style of value co-creation requires different capabilities in organisations to get effectively involved in the value co-creation process together with their customers, and of course that some of the co-creation modes can be overlapped in a combined strategy for value co-creation. Following section will present a reference framework as a first intent towards the formalisation of a methodology for building and sustaining experience-centric networks conformed by collaborative networked organisations and customer communities.

10


5. A Experience-Centric Network Reference Framework Conventional ways of gaining competitive advantages like cost, quality and response-time will not go away, but in order to compete successfully in the future companies will require building new capabilities to create value through experiences 2 together with their customers, rather than based-on the traditional product-centric approach (Prahalad & Ramaswamy, 2004). Building new capabilities to compete in the future implies the design and development of innovative experience environments supported by collaborative ICT-infrastructures. This enables the interaction between customers‟ communities and networked organisations participating in experience-centric networks that promote/allow the co-creation of value. Therefore shifting the bases of competition from products and services to experiences (Romero & Molina, 2009). Creating experience-centric networks (interface networks)3 requires crafting highly interactive and collaborative experience environments (e-platforms), and multiple experience gateways, that work as communication spaces and channels for firm-customer interaction allowing the consumer to shape his/her own personal experiences in a ubiquitous context in a fast, simple, opportune, and secure way. Following paragraphs will depict a reference framework (see Fig. 1) as a synthetic structure of guidelines for describing a set of concepts, methods and technologies necessary for creating successful experience-centric networks and their supporting experience environments (Romero & Molina, 2009). Value Co-Creation Strategy Definition



Co-Creators Targeting  (Business Allies)

Co-Creators Targeting (Customers)



Experience-Centric Network

 Collaborative Networked Organisations

Trust Building





Experience Environments Interaction Channels

 Capabilities Provisioning



Customer Communities

Rewarding Mechanisms



Fig. 1 Experience-Centric Network Reference Framework (Romero & Molina, 2009) (1) Value Co-Creation Strategy Definition. Strategy helps organisations to be prepared for competing in the future. A strategy definition allows organisations to identify new opportunities to bring value to their customers and stakeholders. A value co-creation strategy refers to the description of the manner in which a network of organisation intents to gain competitive advantage by involving their customers and business allies in a jointly value creation process. A value co-creation strategy describes the actions aimed at configuring a value co-creation system as a set of people, organisations and technology acting as a symbiotic business ecosystem in which organisations and customers interact in dynamic and reciprocal relations towards their commitment in the process of co-producing offerings: products, services and experiences, in a mutually beneficial producer/customer relationship (Normman & Ramirez, 1993). In this sense, value should be understood as the benefits created from helping customers to achieve their desires and aspirations with their products and services (experiences), and as a result of the revenue created from tailoring customer individual requirements (Romero & Molina, 2009).

2

Experience(s) – Interactions between customer and producer for personalising/shaping a product or service based upon the customer‟s specific needs and situations (e.g. context). 3 Interface Network – A meta-network compromising a network of enterprises (designers, manufactures, brokers, etc.) merged with a network of (lead) customers, which is supported by an adequate collaboration platform and infrastructure, creating a synergetic innovation ecosystem. 11


Furthermore, a strategy is adaptable by nature rather than a rigid set of instructions of how to create value. Hence, business models as definers of the value creation priorities in an organisation should be continuously reviewed in response to actual and possible changes in perceived market conditions (e.g. business intelligence) and evolve the enterprise strategy as the business environment and customers‟ needs change (Romero & Molina, 2009). In a value co-creation context, strategies and business models are continuously shaped over time in a discovering process of new sources of value and new opportunities and ways for co-creating it by/for the customers and organisations in a short- and long-term. Therefore, strategy definition will be a process of continuous discovery, active learning and adaptation within an agile business ecosystem capable of accessing new competencies, rapidly re-allocating resources and leveraging the organisational capabilities and capacities to compete based-on experiences (Romero & Molina, 2009). (2) Co-Creators Targeting. Selecting the right criteria to target the right co-creators is a major task in the process of constructing effective co-creation partnerships with customers and business allies. Therefore when selecting the most suitable co-creators two things are important to bear in mind: Not all customers can be good co-creators. This role depends on their complementary competencies understood as their knowledge, skills, expertise and behaviours (Vakola et al, 2007) in the experience co-creation domain, added to their enthusiastic attitudes to enhance existing products (features) or services (characteristics) to match customers‟ requirements or co-create new ones that will serve to the new consumers‟ necessities. Furthermore, also not all business allies can be good co-creators. This role also depends on the organisations‟ complementary competencies understood as their processes capabilities and resources capacities (Ermilova & Afsarmanesh, 2006) that are required to co-produce products and services that serve as recipients to deliver co-creation experiences (Romero & Molina, 2009). Some aspects to keep in mind when targeting the right co-creators include defining the kind of partnership to be established, making clear its aims as a set of common interests and understandings of the joint goals and the requirements for working together in a trustable cognitive, normative and affective collaborative environment based-on dialogue and common values to integrate complementary expertises to co-create value (Ståhle & Laento, 2000). After targeting the right co-creators, then it is time to obtain their commitment to act jointly to cocreate value in collaboration (business) opportunities. The next two elements of the reference framework will focus on this challenge by suggesting the creation of collaborative networked organisations as dynamic organisational forms able to rapidly establish and adapt to changing market conditions such as customers‟ needs and preferences (Camarinha-Matos & Afsarmanesh, 2005; 2006); and the creation of virtual customer communities as experience-sharing and user communities aimed to inform and allow consumers to discuss about the quality and drawbacks of products and services prior to making a purchase, and after the purchase is made, help them to use at best their products and services by making them aware of all their potentialities and if necessary assisting them to solve their problems (Curien et al, 2007). (3) Collaborative Networked Organisation Creation. In today‟s society, value creation has become far more dependent on intangibles such as knowledge, relationships and branding, and very soon on experiences. Thus, characteristics such as flexibility, agility and adaptability have become the new key organisational success factors to deliver customer value, which has also become increasingly complex, dynamic, and dependent upon consumers‟ expectations. Therefore, the possibility of rapidly configuring a group of organisations into a goal-oriented network, like the “classical” virtual organisation, triggered by a value co-creation opportunity and specially tailored to satisfy customer‟s specific requirements is frequently mentioned as an expression of agility in customer value delivery (Romero & Molina, 2009). Virtual Organisations (VOs) represent temporary alliances of organisations driven by the objective of grasping a single collaboration opportunity and dissolve once their mission/goal has been accomplished. Its temporary nature has proven to better fit the market dynamics and the variable duration of today‟s business opportunities (e.g. time-to-market), and its VO partners‟ competencies integration to better respond to customers‟ specific needs and requirements. Nevertheless, the effective creation of truly dynamic VOs, which are appropriate for catching-up with customers‟ continues changing preferences, since customer value is contextual, requires the pre-existence of suitable VO Breeding Environments (VBEs) meant for preparing organisations to rapidly get involved in collaboration opportunity-based VOs (Camarinha-Matos & Afsarmanesh, 2006; 2007).

12


VBEs are aimed at adhering a group of organisations and their support institutions into a base long-term cooperation agreement, and the adoption of common operating principles and infrastructures, with the main goal of increasing both their chances and their preparedness towards collaboration in potential VOs. Furthermore, VBEs guarantee the readiness of its members to quickly get engaged in dynamic VOs by reducing the set-up times in contrast of selecting organisations from an “open universe” of companies that have never collaborated before (Camarinha-Matos & Afsarmanesh, 2006; 2007). Once a collaborative network has the conditions provided by a VBE to support the rapid and fluid configuration of VOs when a co-creation opportunity arises, the possibility of creating or redesigning a value creation system on-demand as a co-operative venture among business allies will emerge from the breeding environment with the capability and capacity to address each co-creation opportunity with a tailored value creation system that fits exactly with customer specific requirements (See Fig. 2). In this sense, each co-creation opportunity will denote a VO creation process with its corresponding custommade value creation system within the VBE, integrating the skills or core competencies and resources of the business allies (VO partners) involved for adequately supporting a co-creation opportunity together with the customer involvement and its specific needs. Under these conditions and according to VO lifecycle (creation/operation-evolution/dissolution) each value creation system will be organisationally and technically integrated to co-create value for a specific customer and just for the period of existence of the co-creation opportunity which is being responded at the moment (Katzy & Obozinski, 1998; Allee, 2000; Fine et al, 2002; Camarinha-Matos & Afsarmanesh, 2006; 2007; Romero & Molina, 2009). Finally, the possibility of systematically integrating VO partners‟ skills and resources in short-term coalition to serve customers‟ specific requirements represents a new source of sustainable competitive advantage in a changing global market of evolving and emerging customer needs (Katzy & Obozinski, 1998; Camarinha-Matos & Afsarmanesh, 2006; 2007).

VO

Co-Creation driven VOs

Collaborative Networked Organisations

Value System Redesign On-demand

VBE

Open Industry

Fig. 2 VO Creation within VO Breeding Environments driven by Co-Creation Opportunities (Adapted from Camarinha-Matos & Afsarmanesh, 2007) (4) Customer Communities Creation. Promoting the creation of virtual customer communities provides companies with new interaction channels to co-create value through customer relationship, by incorporating enthusiastic consumers that would be difficult to reach without the support of information and communities technologies (Tzu-Ying & Jen-Fan, 2004). Virtual customer communities represent valuable forums in which organisation‟s products and services, together with customer service, can be discussed, analysed, criticised and potentially improved. Customer communities stand for real living laboratories in where multiple users (consumers) of the same or different products or services can come together to discuss the quality and satisfaction level of their current products and services, or comment about ideas for new ones, outside of the commercial negotiation. The social interaction among customers in this kind of virtual communities represents potentially insightful exchange of business intelligence, and a great possibility to foster companies‟ inter-relationships with their consumers (Manville, 2004).

13


10 best practices for building and facilitating online customer communities according to Communispace Corporation (2004) are: (1) Invite the right customers, keep the communities private & small, and categorise customers to uncover interests, passions and willingness to participate - avoiding using simply demographic and geographic criteria. (2) View community members as advisors to the company, not as a market research panel. (3) Find the “social glue” by focusing on topics of shared interest and relevance for the community, rather on just company‟s interests. (4) Work at building the community by creating activities/rituals that help customers to feel comfortable in participating. (5) Be a genuine, open and encourage community‟s facilitator by reinforcing proactive behaviour. (6) “Just plain ask”, the best way is to just ask, simply and straightforwardly. (7) Pay even more attention to what members initiate, the best insights often come from discussions started by members - “listen more than ask”. (8) Don‟t squelch the negative, the best lessons come from hearing about those things that annoy, disappoint or outrage customers, so encourage members to give the good, bad and the ugly. (9) Don‟t ask members for too much too often or they will become fatigued. (10) Make sure the community is built on multiple underlying technologies and methodologies so that people aren‟t stuck just answering surveys or posting to message boards (e.g. live-chats, visual profiles, upload advertisements, video-diaries, etc.). Furthermore, virtual customer communities represent part of the knowledge revolution in where vast complement of knowledge and understanding can be tapped from customers, and combined with skilled and experienced knowledge workers (engineers as co-creators) in a greater customer intimacy and synergetic win-win situations (co-creation opportunities) to improve products and services by collaborating in a jointly value creation process to co-create products and services specially tailored to fit customers‟ desires. Therefore, any company capable of creating and sustaining customer communities related to its products, services and overall strategy can expect to drive higher revenues, deeper customer loyalty and a real competitive advantage in today‟s economy (Manville, 2004). As a final remark, managing value co-creation in customer communities remains as one of the key research areas requiring that value managers, on both consumer and producer side, understand the value co-creation strategies that drive, sustain and support experience environments, and thus comprehend more what are the process and competencies that customers employ to render value according to their necessities, so companies will be able to create the capabilities to support those value co-creation processes in experience-centric networks (Möller et al, 2007).

Open Market Customer Communities

Fig. 3 Customer Communities Creation (5) Trust Building. Stability and success of experience-centric networks requires the right balance of trust among organisations and customers (Msanjila & Afsarmanesh, 2007). Trust is the glue that holds and links organisations and customers together, making possible the process of value co-creation. Trust is the atmosphere and the medium in which customers and organisations are dialoguing. It is also the base of cooperation among customers and organisations, and it is the main requirement in experience-centric networks in order for them to exist (Mezgár, 2006). Thus, trust represents a bilateral process that requires mutual commitment and endeavour of organisations and customers when attempting to keep their promises (e.g. building credibility). Some strategies identified by Jarvenpaa et al (1998) suggests that trust building in virtual environments could be facilitated with: (1) proactive style of actions, (2) workfocused interactions, (3) optimistic team-spirit, (4) dynamic leadership, clear roles and objectives, (5) frequent interactions, and (6) immediate feedback. Hence, trust in virtual environments relies on virtual interaction and meeting to commitments (Latane et al, 1995).

14


In the co-creation paradigm, trust building can be supported through Prahalad‟s & Ramaswamy‟s (2004) DART building blocks: Dialogue, Access, Risk-assessment and Transparency. Therefore, in a value co-creation it is clear that engaging customers directly in the co-creation of value involves risks for both customer and producer, so keeping this in mind, dialogue will be the element that encourages not just knowledge sharing, but even more importantly, shared understanding between companies‟ and customers‟ concerns. Additionally, dialogue also gives consumers an opportunity to interject their view of the outcomes of value into the process of value co-creation. Moreover, giving customers access to knowledge, tools and expertise helps them to construct their own experience outcomes, and this also challenges the notion that ownership is the only way for consumers to experience value by focusing on access to experiences at multiple experience gateways (interaction points), as opposed to mere ownership (Prahalad & Ramaswamy, 2004; Ramaswamy, 2006). Furthermore, since risks are involved for both sides, risk assessment assumes that if consumers become co-creators of value, they will demand more information about potential risks of goods and services, but they will also have to bear more responsibility for dealing with those risks. Thus, transparency of information in the interaction processes will be necessary for customers to participate effectively in a co-creation mode, and to build trust between organisations and consumers. Concluding, DART building blocks must be enabled by technical and social infrastructures (e-platforms and virtual communities) that allow consumers to co-construct experiences they value, and represent business value for organisations (Prahalad & Ramaswamy, 2004; Ramaswamy, 2006). (6) Interaction Channels Building. Experience gateways construction represents the creation of multiple customer interaction channels (e.g. Web-based and traditional ones: Web-chat, e-mail, phone, fax, letter, Face-to-Face, etc.), including experience rooms (e.g. sand-boxes)4 aimed at providing consumers with an end-to-end experience across all the systems, people and organisations in a value network, and through all interaction points (channels) that customers use to create and shape their own personal experiences with their product/service providers by having access to a co-creation toolkit to construct their own experience outcomes by co-designing and co-developing their own products and services. Moreover, it is important to recall at this point that „value co-creation‟ is contextual, and therefore customers‟ interactions are the key essentials in the value co-creation process with their product/service providers (Romero & Molina, 2009). Furthermore, supporting multiple interaction channels, and at the same time avoid losing customers‟ value co-creation context when he/she moves from one interaction channel to another, will require a new generation of customer contact centers (e.g. call-centers, help-desks) known as customer interaction hubs capable of processing distributed and heterogeneous sources of information, regardless of the multiple communication channels available to manage a customer unified and contextual profile to deliver unique customer experiences of value (eGain, 2007). Customer interaction hubs are emerging ICT-infrastructures able to support customer interactions across multiple channels and provide a uniform response to customer demands at any point of the value co-creation process; allowing organisations to choose the right approach and method for responding to a customer requirement based-on a common view of his/her experience context. The end-result will be the right response with the right information for the customer, achieving customer satisfaction (eGain, 2007). Some recommendations when building and managing customer interaction channels are: (1) Provide multiple interaction channels to customers to allow them to choose which channel(s) is/are more convenient for customer value creation process; (2) Design each experience gateway considering DART building blocks; (3) Manage experience quality management across all interaction channels - “it is about an integral experience”; (4) Ensure best practices to standardise the quality of customer service across all interactions channels and co-creator agents; (5) Enable intelligent cross-communication to turn the customer hub into a real experience environment; and (6) Consider multiple customers‟ choices from a simple transaction process (e.g. a purchase) to the overall co-creation experience through the interactive personalisation of products and services (Prahalad & Ramawasmamy, 2004; eGain, 2007).

4

Experience Room - An interactive environment where customers “play” with products and shape them. 15


One question that could arise when building interaction channels for the customers is where should an organisation create these experience gateways, and a possible response to this strategic question is suggested by Ramaswamy & Gouillart (2007), who recommend the use of “interaction maps” aimed at discovering key interaction points where companies can devise new or better interactions for improving dialogue, access to knowledge, mutual understanding of risks and transparency in the value co-creation process with their customers. These interaction maps can be represented in a formal way by using UML 2.0 interactive diagrams such as a sequence diagram displaying the time sequence of the entities participating in an interactive process, or even better, collaboration diagrams displaying an interaction process organised around the entities and their links to one another. Using this kind of UML interaction diagrams could allow organisations to capture the behaviour of a single co-creation case by visualising the collaboration between entities in a value system to accomplish their value co-creation goal (Romero & Molina, 2009). Another formal approach to map firm-customer interactions could be through a Business Process Modelling (BPM) approach as a way of providing organisations with the capability to understand their interactive/collaborative business procedures in a graphical notation and comprehend better the organisational collaborative performance in each co-creation process with the customers and business partners (Romero & Molina, 2009). Another possibility could be the use of simple cross-functional diagrams that can also serve to the process of mapping firm-customer interactions (Romero & Molina, 2009). In summary, experience environments will require the integration of multiple experience gateways as enablers of customer interaction with the node organisation and its network to co-create unique and personalised experiences of value (Prahalad & Ramawasmamy, 2004). (7) Capabilities Provisioning. An experience-centric network can be understood as a solution generator capable of associating organisations core-competencies and resources into collaborative networks on one side, and on the other side collect enough consumers‟ knowledge from customer communities to understand how to satisfy personal consumers‟ requirements. Therefore, collaborative networked organisations and customer communities‟ creation represent one of the most suitable ways for providing a group of organisations and consumers with the right capabilities and training to efficiently co-create value within experience environments (Romero & Molina, 2009). Collaborative networks allow the integration or organisations in networked structures (e.g. Virtual Organisations) that represent tailored on-demand value creation systems with the capabilities to adapt and rapidly reconfigure resources and accommodate them to satisfy consumers‟ demands within experience environments, which can deliver personalised products and services that complain with customers‟ specific needs. Property designed value creation systems will allow collaborative networked organisations to perform value co-creation processes for satisfying consumers‟ specific requirements in a fast and efficient way thanks to the advantages and benefits of collaboration (Romero & Molina, 2009). On the other hand, customer communities can provide organisations with the information to recognise with enough time which will be the new required capabilities to satisfy consumers‟ needs and aspirations in the near future, so networked organisations (e.g. a VO Breeding Environment) can recruit new business allies that can contribute to the emergence of new competencies to support proactive interaction between consumers and producers in the conjoined personalisation of products and services (Romero & Molina, 2009). By integrating collaborative networks and customer communities into experience-centric networks, both entities will be able to actively select the competencies required for co-creating personalised experiences in experience environments. This, with the technical and social infrastructures to align different business and consumer value co-creation processes with the agility and flexibility required to capture the time frame of business co-creation opportunities (e.g. collaboration // business // opportunity) (Romero & Molina, 2009). Lastly, sustainable competitive advantages and business success in the emerging experience economy will depend on organisational networks capability to speed-up, innovate and focus on core competencies of their business allies to meet consumers‟ specific requirements and demands, capture new markets and beat the competition by creating unique experiences with profitable business grow. Furthermore, value will no longer be developed inside organisations, but from the interaction with consumers in experience gateways allowing the co-design and delivering of personalised product and service offerings. Thus, innovation and commercialisation of technologies, products and services will not be an organisational process, rather a value co-creation process with customers and business allies in the rising experience economy (Prahalad & Ramaswamy, 2000; 2003; 2004).

16


Experience Environments

Value Co-Creation

Value Co-Creation

Value Co-Creation

Fig. 4 Experience Environments (8) Rewarding Mechanisms. Co-creation may tap into the intellectual capital of customers; therefore companies should acknowledge their consumers and incentive them for their contributions, especially for those ideas that represent a real economic benefit for the organisation. Companies should also keep in mind that rewarding consumers (e.g. free trials, samples of products, prizes for the best customer innovations) is one of the best mechanisms to keep alive proactive behaviour during co-creation processes (Von Krogh, 2006; Trendwatching, 2006). Considering the above, if companies want to keep the ideas flowing from their customers and their communities, they should show pre-emptive generosity, taking into consideration consumers contributions that are more significant for value co-creation, and reward customers by exchanging intellectual property with them when they engage in a value co-creation processes (e.g. co-development, co-design, etc.) or simply share royalties in exchange for their ideas (Von Krogh, 2006; Trendwatching, 2006). Ultimately, a value co-creation process moves along to a joint product/service development, where individual contributions to value co-creation become more difficult to determine, and for this reason, ownership of intellectual property (e.g. intellectual capital) becomes quite troublesome. Therefore, new research in intellectual property management is required; especially in the field of customer involvement in value co-creation processes (Romero & Molina, 2009). The result of following the set of guidelines described in the reference framework presented in this paper represents the first steps towards formalising a methodology for the creation of experiencecentric networks (see Fig. 5) (Romero & Molina, 2009).

Customer Communities

Value Co-Creation

Value Co-Creation

Value Co-Creation

Experience Environments

VOs

Open Market

Value Co-Creation

Value Co-Creation

Value Co-Creation

VOs Co-Creation driven VOs


Co-Creation driven VOs


VBE VBE

Collaborative Networked Organisations

Open Industry

Fig. 5 Experience-Centric Networks Scenario (Adapted from Romero & Molina, 2009).

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As a complement to the framework proposed in this paper, the following section will present a brief perspective on how value co-creation can drive the appearance of new evolutionary and collaborative business models for the emerging reality of value co-creation systems based-on customers-company‟s interactions.

6. Designing Collaborative Business Models for Value Co-creation In a World of e-consumers, information systems and tremendous e-commerce opportunities a wide-range of business co-creation strategies are emerging (e.g. user-centric, on-demand based, context aware). Moreover, the increasing market dynamics, in addition to the rapid evolution of information and communication technologies, are allowing the integration of different technological capabilities to offer “dialogue, transparency, access and risk-benefits driven by ubiquitous connectivity” as a novel customer-centric approach supported by virtual environments that facilitate the co-construction of fresh and valuable customer‟s experiences, and create genuine competitive advantages for organisations. Therefore, in this momentum of emerging business co-creation strategies and e-platforms, new business models are required to conceptualise and design successful collaborative and trustable experience environments that best suit with the new dynamics of producer/customer relationship in the co-creation and distribution of value (Prahalad & Ramaswamy, 2004; Galli et al, 2005). In this context, business models should be understood as “conceptual tools containing a set of objects, concepts and their relationships to express the business logic of a firm” (Osterwalder, 2004), or a collaborative network. A business model can help to describe the value proposition that a collaborative network wants to co-create with its customers, and also the infrastructure/technological architecture needed to co-create, market, and deliver this value proposition, within a set of organisational arrangements concerning the governance model of cooperation to deliver such value proposition (Romero et al, 2007b), and making clear which are the costs, investments, and risks required to generate profitable and sustainable revenue streams (Osterwalder, 2004; Romero et al, 2006). Furthermore, business models ontology can be used to capture, analyse, understand, and communicate the business logic behind value co-creation in the context of collaborative networks and customer communities. Using Osterwalder‟s (2004) business model ontological approach, adapted by Romero et al (2006), the following paragraphs will describe a skeleton for the design of new business models for value co-creation systems. By capturing the essential elements and their relationships that should be identified and described to create sustainable value systems that provide wealth to all parties involved and the same time underline the rationality of the value co-creation opportunities. Two important characteristics identified by Romero et al (2006) in collaborative business models are: 1) a multi-value system perspective, including the identification of different types of value: economical, social and knowledge; and 2) a multi-stakeholder approach, identifying each stakeholder‟s participation in the value creation process. Both characteristics were used to adapt the four pillars and nine building blocks of Osterwalder‟s ontology in the sense of collaborative business environments. A graphical representation of collaborative business model components is shown in Fig. 6. (1) Product Pillar. This pillar engages the multi-value proposition building block definition, which focuses on the identification of new business opportunities for creating “experience environments” that could generate both customer‟s and stakeholders‟ value using Prahalad‟s & Ramaswamy‟s (2004) building blocks for value co-creation: “dialogue, access, risk management and transparency”, which can be referred by the acronym DART. In a co-creation process, value propositions should emerge from the space of interaction (the experience environment) where individual consumers interact with customer communities, as well as with the extended networks of companies to co-create their own experiences of value, making the business ecosystem sustainable because of its creation of wealth for all parties involved. (2) Multi-Stakeholder Interface Product. In this pillar, the definition of three building blocks is addressed. First, the target stakeholders’ building block which refers to the recognition of potential motivated customers that better fit as candidates for participating in value co-creation strategies. As well as the value offered to different stakeholders as remuneration for enabling organisational capabilities to rapidly develop and change products and services depending on customer requirements and satisfaction levels. Second, distribution channel building block which illustrates the range of experience gateways (points-of-interaction) as the different choices that a consumer has to interact with the firm to shape its co-creation experience. In this building block technology plays a key role as the enabler for building experience co-creation platforms that enhance on a quick, easy, convenient, and safely way consumers‟ value co-creation experiences (Ramaswamy, 2006). Lastly, stakeholders’ relationship building block depicts the kind of interactions and transactions that customers and organisations establish to co-construct profitable and personalised value co-creation experiences.

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(3) Infrastructure Management Pillar. In this pillar, the definition of three building blocks is also attended. First, multi-value configuration building block addresses the arrangement of activities, resources and knowledge which are necessary to co-create value for all stakeholders, especially for the customers. One way to assess the multi-value configuration of an experience environment is through the identification of the value balance for each stakeholder (value offered vs. value received). Second, capabilities building block refers to the set of resources and skills required in organisations to create and sustain experience environments that could attend to the dimensions of choice in consumer-company interaction to provide experience-centric options that reflect customers‟ desires. Finally, partnership building block describes the agreements concerning the cooperation between organisations and customers to collaborate in order to co-create value for all parties involved in the value creation process: a. partnerships among organisations in the form of collaborative networks to share skills or core-competencies and resources in order to better respond to collaborative business opportunities; b. partnerships among customers to share their experiences with products and services to become more “informed, networked, empowered and active consumers” (Prahalad & Ramaswamy, 2004); and c. partnership among collaborative networks and customer communities to co-create value. (4) Financial Aspects Pillar. This pillar includes the definition of two building blocks, the cost structure building block as the representation in money of all the means used for creating and sustaining the experience environments: ICT, staff, billing, marketing, administrative and operational costs; and the revenue model building block describing how the experience environments make money and achieve their sustainability through a variety of revenue flows, proving in this way the success of the collaborative business model.

Distribution Channel

MultiValue Proposition

Product

Stakeholders Relationship

Target Stakeholders

MultiStakeholder Interface

Capabilities

Multi-Value Configuration

Infrastructure Management

Partnership

Cost Structure

Revenue Model

Financial Aspects

Fig. 6 Guidelines for CNO Business Model Definition (Osterwalder, 2004; adapted by Romero et al, 2006) To close this section what is important to keep in mind is that in collaborative endeavours, and therefore co-creation environments, value propositions are common ground between collaborative networked organisations and customer communities. Collaborative networks should combine the capabilities of their members to create new abilities to better support the personalisation of experiences and with customer knowledge synergies co-create real personal value propositions where the consumer is starting to play an increasingly important role in the co-construction of value offers.

7. Conclusions The current trend of customer involvement will continue maturing in the following years, changing customer‟s role from a pure consumer of products and services to a partner in the value creation process, and as a result organisational structures and business models will migrate into new strategic alliances and collaborative models based-on open business models that will support the creation and operation of adequate collaboration e-platforms for value co-creation. A lot of research remains to be done towards closing the interaction gaps that represent big obstacles for an effective involvement of customers in communities and organisations in collaborative networks to create the synergy necessary to integrate both sides in experience-centric networks capable of satisfying customers‟ needs, wants, and aspirations, and at the same time organisations revenue goals. Mass-customisation, personalisation, customer integration and open-innovation trends will continue as early-strategies of value co-creation between organisations and customers, but as mentioned by Prahalad and Ramaswamy (2004): “The future will belong to those companies that continuously generate new knowledge from customers‟ experiences, and identify and enable new co-creation opportunities to support compelling experience environments”.

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In this sense, this paper may be concluded by mentioning that the effectiveness of co-creation will depend on how much value can be jointly created for customers and organisations in experience environments, and also on how much the ability of single or networked organisation is developed to select, invest and exploit co-creation opportunities with the highest potential to improve customers satisfaction, business revenue streams and perhaps create a new source of competitive advantage in today‟s emerging experience economy.

8. Acknowledgement The research presented in this document is a contribution for the ECOLEAD Project, funded by the European Community, FP6 IP 506958, for the “Rapid Product Realisation for Developing Markets Using Emerging Technologies” Research Chair, ITESM, Campus Monterrey, and for the “New Business Models for the Knowledge Economy” Research Chair, ITESM, Campus Ciudad de México. This paper is an extended version of the original article published in the 10th IFIP Working Conference on Virtual Enterprises (PRO-VE‟10) (Romero & Molina, 2009).

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