Co-creation
Co-creation is a shared process by which customers, suppliers, retailers, designers and other relevant third-parties work together with the company to generate ideas towards a mutually valued endpoint. Each party represents their unique perspective in the product relationship ranging from buyer to developer and, via the process, is encouraged to communicate their thoughts around things that work, things that don’t, areas of need, opportunities for improvement and more. These discussions continue from product inception through launch. Co-creation sessions are typically lively with each party fully engaged as each party is regarded as equally invested and equally important. This is a hallmark of co-creation.
While open innovation suggests active collaboration between different organisations and the sharing of intellectual property, co-creation relates more specifically to the relationship between an organisation and a defined group of its stakeholders, usually its customers. The most common definition is: “An active, creative and social process, based on collaboration between producers and users that is initiated by the firm to generate value for customers.” (C.K. Prahalad and Venkat Ramaswamy, Co-Opting Customer Competence, 2000). Co-creation means working with the end users of your product or service to exchange knowledge and resources, in order to deliver a personalised experience using the company’s value proposition. While crowdsourcing is people creating a great idea for you, co-creation is about people working with you to make a good idea even better. Co-creation is also a way of enhancing customer engagement by directly involving them in the company’s value creation and product development processes.
Co-creation can be executed as a simple process of gathering around a table for a discussion with a group of internal and external experts, including customers, who have an opinion on the product or product need being discussed. Co-creation can be as elaborate as having product designers and marketers do double-duty as furniture delivery people so that they can go into consumers’ homes. For IKEA, this clever process allowed them to make observations and engage homeowners to understand why they purchased and what product they wish they could buy but can’t yet find. In a similar fashion, Lego® encourages its customers to engage and develop new designs and upload them to the website where customers vote on the designs. Once a design gets 10,000 votes, Lego® brings the design, and designer, internally through its stage-gate co-creation product development process.
Corporations with successful product track records, such as Siemens™, Apple®, GE®, P&G®, J&J® and so many others, apply open innovation daily, in every aspect of product development. At J&J, the philosophy/process is so entrenched that it is actually called out in the company’s credo which is the essence of the brand. GE literally hangs a sign in every building lobby professing open innovation as its manifesto, “We believe openness leads to inventiveness and usefulness”. Today, companies commercialize combinations of internal and external ideas together with in-house and third-party pathways to the market.
Open innovation
As the name implies, open innovation is about letting everyone in, whether they’re a twenty-year employee or somebody who just wonders why your industry does things this way when this other way seems so much easier. The boundaries are much broader and it’s often a public process think the difference between an internal pitch of a project to the board versus taking that project to Kickstarter.
Open innovation means creating and innovating with external stakeholders: customers, suppliers, partners and your wider community. Companies are increasingly seeking to work and source knowledge beyond their boundaries. Henry Chesbrough defines open innovation as “the use of purposive inflows and outflows of knowledge to accelerate innovation. With knowledge now widely distributed, companies cannot rely entirely on their own research, but should acquire inventions or intellectual property from other companies when it advances the business model. Competitive advantage now often comes from leveraging the discoveries of others. An “open” approach to innovation leverages internal and external source of ideas.”
Open innovation creates an environment where individuals and organisations can actively get involved in the creation of mutually beneficial solutions. Through open innovation decision making is becoming a truly democratic process. It allows for a bolder, wider approach to problem solving. It suggests interacting with broader groups of stakeholders and it builds collaborative community engagement around specific challenges and issues: ideas and input flow into organisations from outside and smart, innovative solutions are easily generated and processed using idea management software. Open innovation is an inclusive, social way of solving complex issues and improving processes.