Difference between Conventional and Co-creative Organisations - Literature review Example

Contents Introduction 2 Difference between Conventional and Co-creative Organisations 2 Benefits of Co-creative Organisations 3 Service co-creation 4Pros and Cons of Consumer Co-creation 5 Effect of consumer co-creation on design and development of new services 7 Influences on service co-creation 9 Value in Service co-creation 10 Variations in value co-creation 11 Technological breakthroughs 12 Industry Logics 12 Changes in Customer Preferences 13 Evaluation and Analysis 13 Conclusions 16 References 20 If a service involves a high degree of consumer co-creation, what does this mean for the design and development of new services? Introduction Consumers are becoming savvy and are demanding organisations to offer what they actually need. To understand consumers better and to offer them what they need calls for involving consumers in the process of product and service development. This gave rise to the concept of co-creating products and services by taking into consideration the input of all stakeholders. This essay will look into the involvement of consumers in the process of service development and how this engagement does effect the design and development of new services. Co-creation, as defined by Ramaswamy and Gouillart (2010, p. 4), is “the practice of developing systems, products, or services through collaboration with customers, managers, employees, and other company stakeholders”. It is a concept introduced by Prahalad and Ramaswami (2000) in their Harvard Business Review article “Co-opting customers competence” where they emphasized that co-creation not only suggests creating the product or service jointly but also the value and experience which is unique in its own and boost company’s performance. Ramaswamy and Gouillart (2010) emphasized that organisations that believe in value creation with the involvement of the consumer are able to serve consumers better and show increased efficiency. The authors believe that this is the future of the organisations and though many organisations still rely on the conventional way of creating value, the advancement suggests that soon firm-centric way of creating value will become obsolete. Difference between Conventional and Co-creative Organisations There is a clear difference between conventional and co-creative organisations, whereas in the former type, the consumers are passive users of the value that is created without their input and the latter involves consumers at every stage of the value creation process. Conventional organisations do create value for the consumers but that value may or may not be required by the consumers and once created the value is pushed to the consumers through the touch points defined by the organisation. On the other hand, co-creative organisations uses the experience and feedback of the consumers as a starting point to engage consumers in the process of value creation and come up with solutions that are actually developed based on their feedback. Following figure clarifies the difference between the two types of the organisations. Figure I – Difference between traditional and co-creative organisations (Source: Ramaswamy and Gouillart (2010, p. 6) Hence co-creative organisations involves customers or any of the stakeholders, for that matter, in the value creation process unlike traditional organisations that has the customers at the end of the value chain as a receiver of the products or services created through enterprise value chain. Benefits of Co-creative Organisations There are several benefits of co-creating the products and services, both for the consumers as well as for the organisations. It not only enhances productivity of the firm but also leads to continuous improvement as it engages the users of the services, in the development process, who are in a better position to comment on the deficiencies and this leads to better approach to improve the experience. Ramaswamy and Gouillart (2010) highlighted that co-creation reduces business risk and results in low costs for the businesses. This is because once the user of the product or service is involved in the process of development there is reduced chances of rejection. Another advantage highlighted by the authors is that the firms that are co-creative get a better understanding of consumers’ needs and get to know their product and services better; by having more details about their offerings an organisation can work on the opportunities identified by the users which they might not have thought of. Ind, Fuller and Trevail (2012) highlighted benefits of co-creation as low cost, less risk, high profits, better quality, enhanced speed to market and increased customer satisfaction. Due to co-creation the user gets better products and services, and enhanced satisfaction whereas organisations build their capacity and can come up with enhanced productivity. Service co-creation Service co-creation is a perspective where the value is created by involving consumers in the process of output delivery. It is a fact that a service is requested in order to solve a problem or serve a need. Involving the party that is facing the problem is the best way to resolve it to the best of effort, this is where the concept of co-creation comes in. Seiringer (2013) explained that co-creating services calls for the involvement of a consumer and a provider. The author explained that unlike product co-creation, service co-creation requires more involvement of the consumers due to the fact that services are integrative in nature. The author stated that due to the heterogeneous, intangible and perishable nature of services the service co-creation process varies from product co-creation process. Since the production of services cannot be separated from its consumption, co-creation would require consumer immediate involvement. In addition to that, services are perishable and cannot be stored and are often produced only once hence planned resource allocation and standardisation of service delivery process is difficult whereas throughout the process consumer involvement is a must for co-creation. Seiringer (2013) outlined that the process of service co-creation has three facets; first facet is producing the service which involves all the factors that are mandatory for service delivery. Second facet is combining the factors to ensure service delivery as per consumer demand; these factors can come in different forms and has to take into account different aspects, for example, requests from the consumer, knowledge of the provider, requirements and any other external factors that might be involved in ensuring service delivery as per the requirements. Combining all these factors will create the desired experience and at all levels of factor combination, involvement of consumer is a must and input from consumer will enhance delivery. Last facet is the output which can be tangible or intangible depending upon the consumer; for example, it could be repair of a device or delivery of a product as per the service requests of the consumer (Seiringer, 2013). Hence the experience which the consumer gets in this whole process is co-created through the involvement of the consumer and the provider. Pros and Cons of Consumer Co-creation As stated by Chan et al (2010) the benefits of consumer co-creation is that it leads to customer satisfaction and the concept of co-creating service is quite appealing to the customers. Ostrom et al (2010) emphasised on the need of service co-creation by highlighting the fact that many a times unmet consumer needs are the reason for innovation. The authors are of view that whenever there is an unmet need the solution comes up in the form of innovation. Working on the similar lines, Payne et al (2008) mentioned that to better serve customers and to look for solutions to customer’s unmet need, companies always prefer to engage customers not only in the process of service consumption but also service production. Hence the process of consumer co-creation leads to enhanced customer satisfaction by identifying the solutions to the issues through customer engagement and participation in service production. Along with the benefits of consumer co-creation, there is a downside to it as well. This downside comes due to the fact that, by nature, services are susceptible to failure (Hart et al., 1990). Chan et al (2010) refers to the process of consumer co-creation as a double edged sword. This is because the process in itself is beneficial; however, due to the complex nature of services and requirements of varied inputs from different sources in the co-creation process sometimes service delivery on set lines becomes difficult. Seiringer (2013) highlighted that disposal, production and integration uncertainties may arise in the process of service co-creation. The author explained that disposal uncertainty is when the customer has the details on quality, time, quantity and location however service provider is unsure if the customer can provide an input in this regard. Production uncertainty arises when there is uncertainty regarding external factors whereas integration uncertainty pinpoints that problems that may arise in the process of integration of factors into the process of production. Hence all these types of uncertainties are side effects of service co-creation due to the very nature of services. To overcome these uncertainties and to ensure the process of consumer co-creation goes smoothly it is very important to ensure consumer understand the importance of their involvement and they take the ownership as service co-creators. Ostrom et al (2010) stated that service co-creation can only lead to added value when the whole process of co-creation is well knitted and all factors are well embedded with the service science. Discussing the role of consumers in the co-creation process, Bettencourt et al (2002) mentioned that the overall process quality can be improved if customers take ownership, if the communicate timely and openly and if they provoke questions and identify all the related bottlenecks while providing constructive feedback. Effect of consumer co-creation on design and development of new services From the above discussion it is clear that consumer interaction and information exchange at all levels of service co-creation is very important to deliver on the expectations of the consumers. It becomes even more important when the problem (service delivery situation) is not a standard one. Tether et al (2001) categorised service output in an organisation as standardised, partially standardised or individualised. As the name shows, standardised service output involves routine service delivery processes; contrary to this, individualised service output involves unstructured processes tailor-made as per the situation unique to each service delivery requirement. The author explained that practically all service delivery outputs, more or less, can be categorised as partially standardised as some of the parts are standard and the rest has to be tailored as per customers’ needs. To better understand how co-creation effects the design and development or the delivery of the service output, we need to study in depth the intensity of service co-creation. If the services are highly standardised, the involvement of the consumer in the co-creation process would be low due to the fact that the service doesn’t need to be changed and the solution required is mostly same as in every service delivery situation; on the contrary, if the service is highly tailored, the involvement of consumer in seeking solution as per their needs will be high which makes the process more complex and hence the intensity of co-creation would be high (Ritala et al., 2011). If the intensity of co-creation is high, the knowledge exchange between the consumer and the provider has to be frequent and timely. It also calls for looking into the intricate details so as to come up with a solution that is a perfect fit. This is where the information exchange is high and the output needs intense customer and provider interaction (Ritala et al., 2011). In such situations where co-creation intensity is low, the situation is mostly generic, whereas in situations where co-creation intensity is high mostly the services are individualised (Ritala et al., 2011). Services having low consumer co-creation intensity are those that are used in a similar manner every time and hence the instances of tailoring the services are per customer needs is rare; examples include transportation, and car repair and maintenance services. On the other hand, services whose consumer co-creation intensity is high are those that require individual attention and are mostly tailor-made; examples include technology-based services or interior design solutions that are highly customised in nature. Ritala et al (2011, p. 7) stated that “oftentimes in these situations, the customer has a unique need which needs to be communicated and solved case by case”. Besides, any services that are technologically advanced may also require high consumer involvement as their involvement in service delivery is higher than less technology based products (Jarvi & Pellinen, 2011). From the above discussion, it can be said that services involving high degree of consumer co-creation heavily effects the design and development of the services. This is because of two reasons; one is because of the innate integrative nature of services and the other is because high degree of co-creation calls for effective integration of provider’s and consumer’s knowledge in order to co-create value. Such situations may also result in a gap when the consumers have a solution in mind but doesn’t have the required technical knowledge on the delivery. In such a case provider may face the difficult due to lack support from consumer side. This is mainly the case when the services are technology based. This gap may also be there in instances where the consumer has the knowledge but information exchange is less frequent and is not timely. Another situation causing gap is when the consumer has the knowledge but provider assume that the consumer doesn’t have the knowledge this comes under the disposal uncertainty. Hence in such situations where there is high degree of consumer co-creation, design and development of new services becomes complex. Chesbrough and Spohrer (2006) elaborated on the complexity of such service co-creation situations and highlighted that in such scenarios effective integration and understanding of the resources with both parties (consumer and the provider) is very important to deliver new value through best utilisation of organisational knowledge and consumer expertise and feedback. In the research done by Gustafsson et al (2012), the authors clearly stated that consumer co-creation in service innovation is clearly a matter of communication and feedback. The more the consumer is communicative, the better results can be achieved. The authors emphasised on four communication dimensions and stated that the communication needs to be frequent, direct, have clear instructions and in the right context. The better the communication is established the more relevant results can be attained. Influences on service co-creation As explained above, the process of consumer co-creation cannot take place without the consumer or the provider. Hence the two parties are the major influencers of the process of co-creation. Though apparently it is consumer and the provider, however looking deeply reveals that it is not only the consumer or the provider but the associated networks and the environment that are the major influencers of the co-creation process. In the service system, the consumer and the provider are partners and they must have compatibility to go together well. This partnership increases even more when the consumer and the provider are in a B2B setting because then the end consumer also becomes partner in the economic systems. Elaborating more on the essential influences on co-creation process, it needs to be established that the consumer, the provider and the service environment are the influence categories having different factors that act as influences on the co-creation process. These different factors include the information (with consumer and with the provider), resources (with consumer and with the provider), and service technology details (with the consumer and the provider), personnel with provider and cooperation from the consumer. All of these factors when combined will result in shared information and shared resources hence utilisation and exchange of facilities to get best out of the co-creation process to reach a service solution (Spohrer et al, 2007). Following figure explains influence categories and influence factors for the better understanding of the essential influences on co-creation. Figure II – Essential Influences on Co-creation (Source: Spohrer et al, 2007) Value in Service co-creation As explained above, the influence factors play a major role in flawless delivery of the service solution as integration of these factors ensure value creation in the whole process. However, this requires not only the processes at consumer’s and provider’s end but there should be an encounter and information sharing and resource exchange for the processes to work towards best service output delivery. Following figure shows these encounter processes and how influence elements both at consumer’s end and the provider’s end can co-relate to result in a partnership for successful delivery of the value. Figure III – Value co-creation framework (Source: Payne et al., 2008, p. 86) Variations in value co-creation It has been established earlier that the involvement of consumers in value creation will depend upon the type of the service and the fact that how complex or easy the process is and how much involvement and input of consumer is required to create value. This section will discuss examples on co-creation opportunities that vary significantly from situation to situation. Co-creation opportunities as defined by Payne et al (2008, p. 88) “are strategic options for creating value”. The authors explained that each opportunity varies from the other depending upon the nature of the industry, the offer made by the provider to the consumer and the consumer base. The authors further elaborated that consumer feedback is a major driver of innovation and is used as a way to analyse the existing untapped opportunities. Three types of co-creation opportunities are identified by the authors and these types will throw light on how design and development of a service may get effected by consumer co-creation; Technological breakthroughs First type of co-creation opportunity comes through technological breakthroughs. Whenever there is a technological gap and the consumers require a technologically advanced solution, it gives an opportunity to the providers to come in contact with consumers, take their feedback and requirements and integrate the resources and knowledge to come up with a solution through design and development of a new service. For example, broadband services, or new and advanced digital media devices and mobile services. These technologically advanced solutions always result from the needs of consumers and the service come into shape by combining organisational learning, resources and cooperation from both sides. Since opportunities provided through technological breakthroughs are technical in nature and requires high degree of consumer involvement there could be disposal uncertainty or any other uncertainties for that matter where there is an actual or presumed lack of knowledge. Realising the co-creation opportunities in such a case may be a bit difficult and bound to take time unless there is an effective integration of provider’s and consumer’s knowledge and resources in order to co-create value. Industry Logics These types of co-creation opportunities arise when there is a significant change in the involvement of the consumer in the supply chain. There is a change in the industry logics and there is a transformation of the roles and activities performed by the members of the supply chain. Realising these co-creation opportunities, as highlighted by Payne et al (2008), would require significant combination of knowledge and competences of both providers and consumers. Examples of such co-creation opportunities may include Automated Teller Machine (ATM) which may fall under technological breakthrough, however it changes the mechanics of the industry and now people can withdraw cash directly from the machine rather than going to the bank each and every time they need cash. However, on the consumer end to create value they need to understand the use of machine and be knowledgeable about that to fully utilise the value created thereof. Similarly this co-creation opportunity aroused in the first place due to the service need by the consumers for plastic money as carrying cash all the time is not that feasible. Changes in Customer Preferences Another type of co-creation opportunity arises when customer lifestyle changes. Due to advancements, consumer preferences keeps on changing hence giving opportunity to the providers to capitalise on that. Payne et al (2008) gave example that in the recent decade people are becoming more individualised hence giving an opportunity to the providers to co-create more personalised and experiential services which can give an individualised feeling to consumer. For example, offering event management services for a special occasion with personalised theme is an example of a service based on consumer need and can be co-created with the consumer to create value. It will involve consumer’s learning, emotions, relationship experience and provider’s planning, resources and knowledge to co-create value. Evaluation and Analysis Reviewing the above discussion and analysing the involvement of consumers in service co-creation, it is obvious that the process cannot work unless the consumers are not involved and their experience and feedback is not taken into consideration. However, the complexity arising in high co-creation processes cannot be neglected and it needs streamlining the process of co-creation while integrating all the available resources. Upon reviewing it is clear that low consumer involvement process makes service delivery easier as compared to high consumer involvement process which makes service co-creation difficult. Uncertainty is also high when the process involves high consumer involvement as provider is not always sure that consumer has the right set of information and technical knowledge to support the service co-creation. Another point that is revealed in above discussion is that more the service is standardised less consumer involvement it will require and more it is individualised more consumer involvement is required in co-creating value. Hence this is another factor that decides how the low or high degree of consumer co-creation would affect the design and development of a service. Now if we look into the details of service design and development process, it can be established that how consumer co-creation affects the process. Service design and development involves four stages; first the problem or need is investigated, then the insights are collected, then the idea is developed and reflected and finally it is implemented. Now each stage involves a series of sub-stages. For example, while investigating and exploring the initial idea, environmental analysis is carried out to answer several questions as to what will be the service, how it will tackle the identified problem, who will be the beneficiary and the alternative ways to tackle the same problem. While insights on the problem are developed, consumer involvement is a must as their experience and input will decide the value of the service and what features it should have to answer all the questions in consumer mind. While developing the idea and reflecting on the initial and later thoughts interactions between the consumer and provider takes place to ensure they exchange information and the resources are utilised to its full to develop a solution that adds value. And finally upon implementation the consumer partners with the service provider in mutually deciding the touch points. In this whole process of service design and development, effective integration of consumer input at every stage is a must. Also well coordination among consumer experience and organisational learning also adds weight to the process. Though this point is noteworthy that if the service involves a high degree of consumer co-creation, it will have implications for the design and development of new services; these are enlisted as follows; The duration of service co-creation might increase if consumer involvement is high. Uncertainties might arise if any party assume about the knowledge and resources of the other party. If the service requires major consumer involvement and individualisation, the process may take long. If the provider has less resources in terms of technical staff or financial resources, the process of co-creation might not be up to the expectations of the consumer. If information exchange is weak or slow the process will not go as smooth to create value. If the encounter processes between the two parties, that is, the consumer and the provider is not well-established, again the process of service design and development will fail to co-create value. A fatal problem may also arise if the needs are not well understood by the provider or if there is miscalculation on the resources required to deliver the output. Correct analysis of the service environment is also very important to make sure value co-creation can start and well end. Last but not the least, the final service design should fulfil all the major criteria set for it in the first place; for instance, it should be as per consumer need, it should develop the same expected behaviour and the same expected facilitation (results) from that service must be delivered. For the service design to be as per the consumer need, service should not only have the service design per se but the emotional and persuasive designs as well. Conclusions Due to ever changing dynamics of the market and increased competition, it has become important for organisations to be co-creative rather than conventional. Co-creative organisations are in a better position to come with solutions that are as per the needs of the customers and it leads to enhance customer satisfaction. From organisations’ perspective they become more proactive to consumer needs and find themselves more resourceful if the consumer support and feedback is timely. Being co-creative allows organisations to involve in the reinvention process to co-create the value; they become more innovative. Different forces come into play during the co-creation process and to realise co-creation opportunities through design and development of services, there should be an effective integration. Reviewing the above discussions on variations in value creation and availing the co-creation opportunities it can be said that co-creation opportunities can only be realised when the service innovation is based on consumer need and when the provider has the right set of capabilities to work on a solution that fulfils the need. There should be a combination of resources, knowledge and service technologies to support the whole process and blend it well to reach the desired output. The most important aspect is integration and encounter process between the consumer and the provider. Good communication between both parties leave no doubts and the process can go smooth otherwise there could be a number of uncertainties with regards to the capabilities and deliveries capacity of each party which may lead to distress and not delivering up to the mark. It was noted that the more the service is customised the more time it needs to co-create value; this is because high involvement of the consumer in the service design and development process. On the other hand, if the service is standardised and there is a lesser degree of co-creation same service process is followed at each service delivery instance and hence the results are quick. It was seen throughout the essay that integrative nature of the services makes it important for service provider and consumer to work in close coordination in the process of service co-creation. It involves high degree of consumer involvement especially in cases where the services needs customisation. Moreover, it was noted that if the service is more of a technology breakthrough type then the involvement of the consumer may be high but at the same time the capability of the consumer to support the provider with technical details is doubtful. At the same time, if the technological breakthrough requires customisation based on case to case it worsen the situation and then only effective integration can fetch the desired results as Handrick et al (2012) pinpointed that customer co-creation has a downside as well along with its many advantages. Co-creations requiring high consumer involvement, as discussed above have serval implications for the design and development of new services; such as delivery of service may be prolonged in case when the consumer fail to respond quickly to the queries of the provider or where the service is too individualised; uncertainties might arise leaving provider unsure of consumer capacity and process integration opportunities; less resources with providers might affect the quality of the co-creation process as well as might not deliver results be up to the expectations of the consumer; lesser integration instances might leave the process slow and weak; inability to understand needs and delivery outputs well may lead to poor delivery; and miscalculating the influence of external factors in the service environment might also affect the value co-creation process. Concluding the discussion it can be said that the design and development of the new service may be effected based on the fact that how involve the consumer is in the process of co-creation. If the consumer involvement is high the process will require excellent communication and integration from both parties so that the encounter processes can be developed and information exchange is smoothened to achieve results. On the contrary, if the service is more standardised much consumer involvement might not be required in co-creation. However, irrespective of the level of the involvement of the consumer, the process of co-creation is effected by the influence of the customer, influence of the provider and influence of the service environment. There must be a well-integration of resources, information exchange and encounter processes where each party may understand well the resources (informational, technological, and financial) available at other’s end and how best it can be utilised to co-create value. The experience of the consumer and the implementation and planning skills of the provider combines with relationship of both parties can lead to value co-creation. This essay has clarified the benefits of co-creative organisations and has emphasised on the fact that future lies with co-creative organisations as the conventional way of value creation is one-sided where the value is created and then pushed into the market for acceptance whereas co-creation is when the service output is developed based on the needs of the consumer and hence it is worked on and developed mutually. Future lies with co-creative organisations as the firm-centric way of creating value will soon become obsolete. References Betterncourt, L. 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