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


The Co-Creation Connection

3. Risk Reduction. The obligations and responsibilities of the firm and consumers for risk management will always be debated. But it is safe to assume that as consumers become more involved in co-creating experiences with companies, they may be willing to take on more responsibility for managing risk exposures, if companies are willing to reveal more information about the risks associated with the products and services they produce. One key issue in the Firestone-Ford tire case centered on the amount of knowledge Ford and Firestone had about risks associated with the combination of vehicle, tire pressure, and driving conditions. How much should Firestone and Ford have shared with consumers?

In a world where good information is widely available, consumers, within the limits of their technical knowledge, should be able to make more informed choices about risks. Companies can be a part of that process by being both forthcoming in the discussions of risk with the general public, and by disseminating appropriate methods for assessing personal risk and societal risk. Labeling is one way of explicitly passing on to the consumer more responsibility for risk. But that is not enough. Companies will need to be more willing to engage in open dialogues with concerned people. Companies should not approach their communications defensively. On the contrary, proactive risk communication and management offers new opportunities for firms to differentiate themselves.

4. Transparency. In the wake of the Enron debacle, shareholders are demanding more transparent, or thorough, financial disclosure; but transparency is also necessary for consumers of goods and services to become co-creators of value. When companies make vital business-process information visible to consumers, companies, in effect, relinquish control of the value creation process before the traditional point of exchange.

The Federal Express Corporation has high levels of transparency in its logistics system. Customers can log on to its Web site and check the progress of packages in real time using the same information that FedEx employees use; large corporate customers can also reroute packages themselves. Individuals have choices they wouldn’t have if FedEx controlled all the information, and that improves the customer experience.

This same type of information transparency has created a revolution in the trading of securities. Global agency brokers like Instinet Group Inc. build transparency into their trading systems so that customers can monitor in real time how much the fund manager’s trading is costing them.

In June 2001, Eli Lilly and Company launched a new e-business research venture called InnoCentive LLC. It brings together, via its Web site, companies and researchers from around the world seeking solutions to scientific problems. Significant cash incentives are awarded to researchers who offer the solution judged “best” by the company that posted the problem. InnoCentive represents a bold open source approach to innovation for industries that in the past have been closed and private.

Sumerset Houseboats, the world’s largest houseboat manufacturer, based in rural Kentucky, shows how all the pieces of a co-creation model — dialogue, access, risk reduction, and transparency — can fit together. Imagine interactively codesigning the layout and configuration of your dream boat, negotiating specs and prices, connecting with the factory to participate in your boat’s construction, and monitoring its progress in real time. Now imagine a personal Web page where you can review drawings; access architectural, aesthetic, and structural expertise; and consult a customer representative. You can see pictures and read the biographies of the people who are crafting your boat. You can critique design elements and fully furnish your boat before it is delivered. You can have dialogues with other Sumerset customers and a wider community of avid sailors.

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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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