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 / Second Quarter 2002 / Issue 27(originally published by Booz & Company)


The Co-Creation Connection

1. Dialogue. Dialogue is creating shared meaning. In dialogues, people listen and learn from each other; in the most productive dialogues, people communicate and debate as equals. Dialogue helps companies to understand the emotional, social, and cultural contexts that shape consumer experiences and provides knowledge companies can use to innovate. Dialogue with consumers is central to Harley-Davidson Inc.’s being able to co-create a multigenerational “way of life.” Building a forum for dialogue was how, early on, America Online Inc. created a community — a group of enthusiasts whose shared interests bonded them to the service at the same time that it gave the company insights into service improvements. Dialogue was what kept a loyal community of Macintosh users together when Apple Computer Inc.’s product development began to wane. And it is dialogue that is helping the personal-computer manufacturer to recover with the introduction of the new iMac.

Dialogue involves more than listening and reacting. It requires deep engagement, lively interactivity, empathetic understanding, and a willingness by both parties to act, especially when they’re at odds. What is happening in the music industry today is the antithesis of dialogue. If the record labels were listening, they would hear that consumers don’t object to paying for music. They just want to create their own musical experiences once they’ve paid for it. People have been packaging their own music for years (in the 1970s, parents of Napster and MP3 player fans made custom cassette tapes by copying songs from long-playing records). Why, with even better technology available today to duplicate and mix their own music, would consumers want anything else?

While recording companies fight the battle against “illegal downloading” and resist changing their business models, music sales are declining and sales of blank CDs are soaring. “If the industry doesn’t change the way we do business, we’re going to be bankrupt,” Val Azzoli, cochairman of Atlantic Records, told the New York Times in February 2002. The Sony Corporation shows just what’s at stake. Its music sales are currently about $4.6 billion, compared to about $40 billion in sales from consumer electronics, including CD burners and MP3 players.

2. Access. Ownership is the traditional way to look at the transfer of value from the company to the customer. But you don’t need to own something to experience its value. Indeed, access without ownership is desirable for consumers and can be very profitable for businesses. Thinking in terms of access expands a company’s view of potential markets.

Over the past decade, numerous companies serving European and U.S. cities have begun to offer a novel service for people who want more than just a rental car; they want the convenience of having a car they don’t own at their disposal all the time. For example, in Switzerland, people who join Mobility CarSharing receive a personal access device that unlocks a dedicated pool of cars, which are rented on a pay-as-you-drive basis, making the service ideal for running short errands, visiting friends in the suburbs in the evening, and the like. What do Mobility CarSharing and similar companies sell? A new urban lifestyle that is not only economical and convenient, but also reduces pollution and parking problems.

In the music industry, consumers are not fighting for all music to be free; they just want more freedom to choose how they access music once they’ve paid a fair price. This is a classic instance of the consumer being shut out of the value creation process.

The successful coupling of access with dialogue in the computer community’s Open Source movement has had a significant influence on traditional players in the industry as they see its benefits. For example, to promote the use of Linux, the open source operating system, IBM is putting $40 million of its software tools in the public domain. More important, in 2001, IBM made the largest commitment of any computer maker — about 20 percent of its R&D budget ($1 billion) — to Linux and Apache Web servers.

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  1. J. Philip Lathrop, Gary D. Ahlquist, and David G. Knott, “Health Care’s New Electronic Marketplace,” s+b, Second Quarter 2000 Click here.
  2. C.K. Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” s+b, First Quarter 2002 Click here.
  3. C.K. Prahalad and Venkatram Ramaswamy, “Co-Opting Customer Competence,” Harvard Business Review, January–February 2000 Click here.
  4. Neil Strauss, “Behind the Grammys, Revolt in the Industry,” New York Times, February 24, 2002
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