Following my talk at LIFT06, I have been thinking a lot about how to build up a simplified logic for explaining co-creation, as distinct from open-source product innovation (von Hippel etc).
Here is where I have gotten to in my logic, building upon each statement and justification as I go:
Tradtionally, customer value has been defined and differentiated by product quality (Features, Attributes and Benefits - the old Kotlerist FAB of 1950-1990s marketing textbooks)
Open source product innovation emphasises the technical co-production of new and improved products, their features and attributes (e.g. Lego Mindstorms, Linux, Sugar CRM) with customer's direct involvement in the innovation process; it is limited to the design, development and testing of enhanced functional “things” or “technologies” with individuals or in communities of users.
Increasingly though, value is migrating from products to experiences as customers seek out personalised value to satisfy their situational needs. (Drivers: demand for better experiences, technology enablers, emotional desired outcomes, increased socialisation, product functional similarity etc.)
Customers therefore place increasing value on the quality of the experiences they have when they interact with firms and their products (and services);
The quality of an experience is determined by how relevant or personalised the experience is for an individual customer; Experience quality is a combination of functional and emotional elements specific to the situational and temporal context of each customer
The locus of value-creation therefore shifts from product quality and design innovation to experience design and quality innovation
As value-creation is innovation, traditional firm-centric innovation processes are becoming distributed in order to provide the means to deliver ongoing, adaptable, personalised, unique experiences for individual customers
The locus of innovation is shifting towards the individual in distributed experience environments
In distributed experience environments, the firm and customers come together to create value; value in the form of personalised unique experiences for customers and revenues and profits for the firm;
Therefore, co-creation defines the processes of distributed value-creation between firms and customers or between customers directly, to create personalised experience value.
Markets becomes forums for the co-creation of personalised experiences; value is differentiated according to the quality of the personalised experience; firms focus on building a capability for the delivery of heterogeneous experiences. This defines competitive advantage.
OK that is the conceptual logic, next post - examples and practicalities