Co-Creation Experiences: The next Practice in Value Creation

{{Summary
 * title=Co-Creation Experiences: The next Practice in Value Creation
 * authors=C. K.Prahalad, Venkat Ramaswamy
 * url=http://deepblue.lib.umich.edu/bitstream/handle/2027.42/35225/20015_ftp.pdf
 * tags=NatematiasGenerals,co-creation,marketing,auctions,digital labor
 * summary=Is online behavior a market to be capitalized? In this 2004 article in the Journal of Interactive Marketing, C.K. Prahalad and Venkat Ramaswamy argued that "as value shifts to experiences, the market is becoming a forum for conversations between consumers, consumer communities, and firms."

The Traditional View of Markets, Firms, and Value Creation
The authors start out by describing the typical relationship between consumers, who are aggregated into market segments, and firms, who typically "act autonomously" (without involvement of consumers) to design products, market them, and sell them to consumers. Thy put this in contrast with "the emergence of connected, informed, empowered, and active consumers" who "seek to exercise their influence in every part of the business system" (6).

In the traditional view, consumers are "outside the firm" while value creation "occurred inside the firm." Firms create. Consumers, well, consume. In this model, the market is the "target" for the products and services created by the firm. In targeted marketing, the firm sets out to seek the consumers with the demand for their offerings.

Online, many things traditionally done by firms get moved outside, to the people formerly known as the consumers. For example, one change introduced by auction sites like eBay or other sites focused on accomodation or transportation booking, according to the authors, is that the act of pricing goods is moved to consumers. The prices may not be lower; rather, "the customer pays according to her utility rather than according to the company's cost of production."

The authors argue that auctions are just one form of this growing negotiation between firms and consumers, which extends across the entire value creation process of a firm. According to the authors, the risk to firms is price erosion, where they are no longer able to price their offerings to match the costs of production.

Co-Creation Experiences as the Basis for Value Creation
The authors argue that by focusing on the experience of customers, inviting them to "co-create unique experiences with the company" are the answer to the dilemma of growing power of consumers online. In this model, "value will have to be jointly created by both the firm and the consumer." The notion of "jointly created value" is broad, including:
 * self-service gas pumps
 * self-checkout supermarket machines
 * self-serve ATMs
 * involvement of customers in product development
 * "experience economy" offerings like Disney World.

After showing a table for what co-creation is and is not, the authors also offer Internet use by patients as another example of co-creation of value. Patients use communications technologies to talk on chat forums and messageboards, use search engines to look up conditions, and then expect dialogue with their doctors over diagnosis and treatment that is "jointly developed."

Dialogue, Access, Risk-Benefits, and Transparency
The authors argue that the qualities of co-creation can be described with a four-party model:

Dialog involves "conversations between the customer and the firm." This dialog requires consumers to have "access and transparency to information," with firms avoiding former habits of "exploiting the information asymmetry between them and the individual consumer." Using this information, the consumer can assess the personalized risk-benefits of a particular transaction.

The authors identify a range of industries where co-creation is a necessity. They cite videogames as an industry relying on substantial consumer co-creation. They also cite work by John Deere to connect their consumers to share innovation ideas. The OnStar network by GM is cited as an example of a customized news and recommendations system that is customized by consumers.

Demanding Things From Companies
The authors argue that online spaces can be constructed to become "co-creation space" where managers have partial control over the experience environment, but consumers have agency in co-creation. In this context, consumers are less "targets" or "prey," instead pooling their interests and labor, "investigating companies, products, and potential experiences in a systematic way," demanding things of companies rather than waiting for companies to "sense and respond" to their interests.

The Market As a Forum for Co-Creation Experiences
The authors argue that in order to take advantage of this kind of market, "managers need to invest in buildingnew infrastructure capabilities, as well as new functional and governance capabilities" focused on responding to consumer involvement in value creation and their demands of companies. By developing these infrastructures, companies can participate in "a co-extraction of economic value by informed, connceted, empowered, and active communities of consumers." "at the same time, the article offers extremely broad claims that aren't strongly supported. As an anchor point for an idea, the article is useful. Natematias (talk) 03:07, 14 March 2015 (UTC)"
 * relevance=This highly cited paper was an early article pointing out ways that Internet platform infrastructure can be designed to shift more of the work of creating value towards users, and outside a firm, through a co-creation of experiences. While it predates the creation of contemporary social networks and the widespread popularity of crowdfunding or peer economy platforms, it does raise questions that continue to be important.

References of Note
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 * journal=Journal of Interactive Marketing
 * pub_date=2004
 * doi=10.1002/dir.20015
 * subject=Business