Co-creation vs. Customization

Thanks to some very insightful comments on my recent Co-creation post by Drew, James and David, we've hashed out the difference between co-creation and customization.

We were discussing two scenarios: ordering a half-caf mocha latte at Starbucks versus creating a new Lego kit at LegoFactory. Which one is customization and which is co-creation? They both allow customers to combine pre-made 'parts' into a new creation. Yet the Starbucks customer is creating a concoction for personal enjoyment, while the new customer-created Lego kit is uploaded and made available to other Lego customers for purchase. In the Starbucks example, the customer remains a customer. In the LegoFactory example, the customer becomes the product designer... with no employee agreement... who may want credit for his creation. James mentioned intellectual-property issues with co-creation, and that's precisely the issue that divides co-creation and customization.

So that means that Google's API is actually an example of customization, not co-creation. Developers use Google's API to create tools for their own purposes; to my knowledge, these customer-created tools are not then "cycled back" to be made available to other customers.

OK, perhaps all this is semantic, but customization has been around for a long time. We've always been able to order eggs over-easy instead of scrambled. Co-creation is much deeper... it's about relinquishing control and turning buyers into partners who have a say in what gets produced and made available to everyone else. Which means that they should be rewarded in some way. Obviously this idea of co-creation will make a lot of companies rather uncomfortable.

For more on this subject, visit Trendwatching.com's overview of Customer-Made. It's a good read; thanks to Graham Hill for reminding me of it.

Comments

[chauhan priety]

I would too like to add a pinch of confusion here with this thought that
customisation gives us the company's pre determined products/services in a slightly seasoned way while in co creation the changes can be so radical that even the end product may be simply beyond company expectations!

[GrahamHill]

David

You may have hit the nail on the head!

My experience is that many organisations are preparing to jump on the co-creation bandwagon (once it gets going) to see if they can gain a competitive advantage, no matter how fleeting.

And many of them will find that working closely with customers is time-consuming, challenging and unsafe for their corporate egos. Then they will go back to their old ways and chalk co-creation up as another fad they tried but that didn't work.

On the other hand. A number of companies will walk the talk, will persevere, will put their egos back into their boxes and will get real benefits from co-creation. They will if you like, create "a company fit for customers".

I have a quesion too.

Can companies who make anything other than excellent products ever hope to be successful at customer co-creation?

[David Foster]

Here's an example of how not to do it. Yesterday, I got a call from Enterprise Rent-a-Car, following up on a recent rental. They asked me two "customer satisfaction" questions, but provided no way for me to mention either specific points of dissatisfaction or suggestions. When I pointed out that this wasn't very bright, the guy was quick to say that they were an outsourced market research service rather than Enterprise themselves.

I think very few consumer products & services companies have any serious interest in observations and ideas from customers. It's easier to spend money on "customer relations management" software than to actually related to customers....

[Idea, Execution, Profit!]

Interesting.
co-creation is a process of consultant elimination. By eliminating the mediator a lot of reality is injected into the process. Which is enjoyed by the passionate employee and the passionate customer. The key here is passion - without it you are much better off with the consultant - who will ensure his survival, thus your survival.

[Tim Sunderland]

From a business point of view, some of these are called VARs -- value added resellers. Open-source software is just one example. I have a client who is a value added reseller that sells security systems. His initial sale is the security system, but his second, and sometimes more profitable sale, it the application and installation -- the customization, if you will.

And every once in a while my client will come across an application or customization that is so unique that he might go back to the manufacturer and help him customize the product for an entirely new application. Now we are back to co-creation.

The question for my client is: As a Value Added Reseller, at what point does it become more profitable for him to take a new innovation -- such as a a new application in a new market -- back to the manufacturer as opposed to handling it himself.

[GrahamHill]

Chris

Just thinking out loud.

I agree. It would be interesting to identify what types of companies are involved in which types of co-creation, what made them start, how successful they have been to-date and what they intend to do next.

A quick scan of companies shows literally dozens, if not hundreds, involved in different types of co-creation. Just look at the variety of types of co-creation in the Open Source Movement as Tim points out!

Knowing how companies started would provide a foundation for thinking about the capabilities required to bootstrap co-creation, and how the capabilities must be developed and expanded to move to higher levels.

[Tim Sunderland]

Open-source software is a good example here. As I understand it, open-source software is such that anyone can propose additions to it, based on their experience. Whether the addition is accepted is up to the open-source police for that particular program. But this is co-creation.

On the other hand, if a programmer takes an open-source program and customizes it for a client's purposes, then you have customization. Of course, in a perfect world you can't charge for the open-source software, but you do charge for the customization.

[Chris Lawer]

Graham

Very funny - you know I am working on the capabilities framework!! If that is to get to me to reveal that to the world as well, then well... nice try!

But seriously I am interested in understanding why some firms decide to co-create value with their customers and some do not. Perhaps if we first understand the enablers and the context, then we could explore why and how to build the right capabilities for the right kind of co-creation.

Anyhow, I have now rapidly created a pdf version of the eight styles blog which available at www.theomcgroup.com/knowledgecentre.htm

I almost took the bait!

[GrahamHill]

Chris

A very interesting model.

You raise an interesting point about what capabilities a company requires to enable different forms of co-creation.

The "Resource Advantage" thinking which underlies capabilities describes a capability as a combination of various assets & resources, (for example systems, information, processes, work routines and individual skills & knowledge), which together create value for the company (and in a mutually value-adding transaction for the customer too). Examples of capabilities might include "Market Sensing" to identify new trends, "Customer Relating" to bring customers into co-creation or "Rapid Prototyping" to develop prototypes of the co-created products to test further, etc. Different combinations of capabilities are required to enable each of the different forms of co-creation.

But traditional capabilities do NOT typically include the customer in their definition as they have not thus-far been seen as value-creating resources available to the company.

It would be interesting to see if there are any capability frameworks which describe the capabilities co-creation in its different forms requires, how they enable the different forms of co-creation and what the role of the customer is as part of the capability.

[Chris Lawer]

Hi guys
hate to confuse matters but I have just posted my blog that defines 8 styles of co-creation along two dimensions:

The degree of adaptability or personalisation of the value created, and

The point (or “locus of innovation”) where the value creation occurs, within firms or within markets and communities

Using these two dimensions, I "think" it is possible to begin to detect differences in the nature of co-creation and the enablers and capabilities required to execute it effectively. After all, that is what we are all trying to achieve?!

[David Foster]

Here's an interesting story about what happened when Michael Schrage, a well-known consultant specializing in innovation, actually tried to do a little co-creation with a large financial services company....

http://www.cio.com/archive/081505/schrage.html

[Pete Cashmore]

Great post - I wholly agree.

BTW: why is it that despite being at the forefront of this stuff, Trendwatching still don't allow comments on their posts? Isn't it all about the conversation?

[GrahamHill]

There are a couple of additional questions we need to answer in this discussion.

Question 1: How do we fit PERSONALISATION into this classification?

In the olden days I used to think of (mass) customisation as how we assemble pre-developed components to meet a customer's wishes. An automobile, retail banking and Starbucks are examples of customised products, services & experiences.

And I used to think of personalisation as how we adapt the same pre-developed components to meet a customer's unique wishes. A custom paint job for the automobile, private banking and coffee that my local coffee house makes just for me are examples of personalised products, services & experiences.

Co-creation as Jennifer suggests involves the customer in the creation of the components that eventually become standardised for customisation and personalisation. Whether those components eventually become products, services or experiences, or something else like marketing materials (See James Cherkoff's Change This manifesto on "Open Source Marketing for more on this at http://www.changethis.com/14.OpenSourceMktg.

That leads us to Question 2: Where does all this take place and who is in charge?

Customisation generally takes place inside the company, e.g. configuring an automobile at a dealer or outside it, e.g. configuring an automobie on the internet before sending it to a dealer. The company is in charge.

Personalisation generally takes place inside the company, e.g. the custom paint job. The company is still largely in charge although the customer is more involved.

But co-creation can take place inside the company, e.g. lead customers co-designing new products, outside the company, e.g. designers creating Lego designs using downloaded software, on the borders of the company, e.g. at special design events run by the company, or even in special 3rd-parties, e.g. Eli Lilly's Innocentive or P&G's Connect & Develop. Who is in charge here? Well, it depends upon the circumstances. The company, customers or others can all be in charge.

Of course, the bigger question yet to be asked is how do companies organise themselves and others to enable co-creation to work effectively? Now that is a much tougher question.

I think we still have some way to go before we have bottomed out the discussion around "What is Co-creation?".

[Benjamin Kaplin]

I think you need to take a look at the spaces around the links in your XML files.