Value co-creation: Integrating customers into the experience

Netflix represents a first mover in using big data.

Big data is impressive, rapidly growing, and offers huge opportunities. Each day, 2.5 quintillion bytes of data are generated worldwide (from social media, purchase transactions, cellular, sensors, and so on) with 90% being recent (i.e., in the last two years) as estimated by IBM (Jacobson, 2013). With such impressive growth, in 2020 approximately 40 trillion gigabytes of data will be ready to use (Domo, 2018). However, because the majority of these data are unstructured, only 3% of the potentially useful data are estimated as being tagged, and just under 0.5% are analysed (IDC, 2012). According to Gartner (2013), in 2020, there will be 25 billion connected objects (Internet ofThings), with an economic value of US $1.9 trillion, of which 80% originated from services related to connected objects; as such, every device will be connected. For instance, Greenough (2015) estimates that, by 2020, 75% of cars will be built with the necessary hardware to connect to the Internet.

Such a huge availability of data makes it possible to leverage customer knowledge. Despite several attractive promises, the use of big data in managing customer relationships is a difficult challenge for any companies, because three main unintended consequences migh emerge - namely, a short-term orientation, an intent to profit at the expense of customers, and a poor understanding of technologies (Kannan and Gu, 2019). One of the main fields in which these difficulties emerge, is value co-creation, the key approach to integrating customer knowledge into the managerial processes. Although it is popular nowadays, “co-creation” remains a confusing term, as it has been adopted in several contexts with slightly different meanings; e.g., new product development, retailing formats, open business-to- business platforms, technology-based interactions, collaborative exchange tools with lead users, and so forth (Alves, Fernandes, & Raposo, 2016; Ramaswamy & Ozcan, 2018). In co-creation, customers apply their knowledge and capacities to the daily use of specific products or services (Vargo, Maglio, & Akaka, 2008).

It is worthwhile to clarify some ofits key issues (Figure 6.1).

Any company might co-create its value with customers

The first point that must be addressed when talking about co-creation refers to the main character; i.e., companies that should be interested in co-creation. It is worth explaining from the outset that any type of company can benefit from cocreation -not just those operating in the service sector. Although there is no doubt

Value co-creation

FIGURE 6.1 Value co-creation: key elements

that the policies of consumer inclusion in business processes are classic elements of the service world, they can be usefully and profitably used even in distant sectors, as LEGO shows (Box 6.1).

BOX 6.1 LECO AND CO CREATION

Customer engagement is a key resource at LEGO: engaged consumers develop knowledge and ideas for the brand. The Future Lab, which has been adopted to obtain and develop new product ideas with low investments and high returns, is a commonly used policy. Specifically, nowadays it builds on LECO Ideas, an online crowd-sourcing platform that invites customers to share their new product ideas. Getting ideas is not the only goal, however: it also aims at predicting the market reactions. People are invited to vote for the presented ideas. Thus, the digital environment provides the proper area in which product tests are run on the sole basis of the minimum viable product. An initial version of LECO Ideas was LEGO CUUSOO, launched in 2008 in Japan to test the process of co-creating product ideas with customers. In CUUSOO, a few famous products were born such as Shinkai 6500, Ghostbusters, and Minecraft. The success of the crowd-funding platform has been so impressive that, in 2014, the process moved to the next level, LECO Ideas, thus enhancing the link with the umbrella brand.

The close link between services and active participation with the consumer has a long and consolidated tradition, being the distinctive characteristic of each service. Indeed, traditionally, services have been different from goods because of the simultaneous occurrence of production and consumption, giving customers an active and not purely passive role as a receiver of pre-packaged offers. As clearly pointed out by Bitner (1992), in the servicescape, the environment in which the service takes shape, the interaction between those who supply and those who consume plays a fundamental role in defining the consumption experience, both in terms of the variables of the physical atmosphere, and in relation to those of the social environment. In this environment, the interaction takes place, as on a theatrical stage (Grove & Fisk, 1992). In this sense, the servicescape becomes a theatre, in which the theatrical performance takes shape, involving actors in the first instance but also an audience that, as in the theatre, actively participates in the lived experience.

Over the years, such an element has distinguished a theoretical and managerial approach that has become a generalized reference point; i.e., the service-dominant logic, which became widespread at the beginning of the 2000s, thus stimulating managers to change their perspectives (Chandler & Vargo, 2011; Lusch & Vargo, 2014; Lusch, Vargo, & Maker, 2006; Lusch, Vargo, & O’Brien, 2007; Lusch & Webster, 2011; Michel, Brown, & Gallan, 2008;Vargo & Lusch, 2004a, 2004b, 2008, 2011). By contrasting with the most traditional goods in dominant logic, which focuses on a company and its internal processes, managers who adopt the service- dominant logic adopt the customers’ perspective and a more customer-centric approach to the managerial processes. In this new logic, the goal is to do the jobs that customers expect and desire. The jobs to be done represent the goals for any company (Bettencourt, Lusch, & Vargo, 2014).

Clearly, the increased attention gained by service-dominant logic has been pushed by the economic importance of the service sectors. In fact, worldwide, the service sector grows without major obstacles. According to the last World Bank data referring to 2016, services represent the largest sector worldwide, as they are the leading sector in more than 200 countries, which, together, generate more than 65% of GDP (The World Bank, 2019). As a consequence, thanks to the widespread and increasing relevance of services in which co-creation was first conceptualized (Prahalad & Ramaswamy, 2004a, 2004b), the first companies interested in designing effective processes to involve the consumer in the business model were precisely those operating in the services sector. However, this vision is only partial. Beyond the macroeconomic breakdown of economic estimates, it is clear that the competitive efforts in many sectors create even more offerings of the service component. This also occurs in sectors typically distant from these worlds, and all businesses can now enjoy the benefits of these practices. Indeed, the perspective adopted to manage the processes, whether it is service or goods related, is independent from the specific kind of offering of that company (Bettencourt, Lusch, & Vargo, 2014): the search for new mechanisms to allow customer participation in the companies’ business model processes has now become a strategic priority, as it contributes to achieving a strategic advantage. Such an approach has become the rule in many sectors. Indeed, customers have always been the key stakeholders that companies need to relate to.

 
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