The Future of Competition
By C.K. Prahalad and Venkat Ramaswamy,
Harvard Business School Press,
257 pages, $47.95
Much has been written about putting the customer at the centre of an organization's activities. But the reality is that most companies have a narrow, stimulus-response view of their operations: the company designs products, develops production processes and controls the sales process while consumers are there merely to buy.
In The Future of Competition, University of Michigan professors C.K. Prahalad and Venkat Ramaswamy argue that model is starting to fade as informed consumers demand a role in helping to co-create products and services with companies. "The consumer and the firm are intimately involved in jointly creating value that is unique to the individual consumer and sustainable to the firm," they write.
Of course, that has always happened in some fields. Somebody having a home built or remodelled, for example, expects to be intimately involved in the decision-making, using the expertise of the builder to shape possibilities into reality. It is also occurring frequently in health care, where doctors are no longer on a pedestal, announcing treatment to a passive patient, but outlining options and often finding the patient armed with alternative paths and mounds of information the physician may not have seen.
The authors believe that dynamic is about to become widespread, and that managers will have to change their thinking -- not just concerning themselves with the quality of the firm's products and processes but also the quality of the interaction with customers in co-creation. They must come up with innovative "experience environments" in which the customer and company meet, to shape the desired offering.
Examples are the Reflect.com website, where women can concoct their own beauty products; iTunes, where music lovers create their own CDs from downloaded music; and Prada's fashion outlet in New York, where customers can change the lighting in the dressing room from daylight to an evening glow and use technology to gauge how clothes would look on them in different colours, sizes or fabrics.
Co-creation, the authors stress, is not the marginal mass customization of products we have been seeing, where the company still maintains control but offers more choice of products according to its sense of customer needs. That no longer is sufficient to satisfy consumers. "The change that we are describing is much more fundamental. It involves the co-creation of value through personalized interactions that are meaningful and sensitive to a specific consumer. The co-creation experience [not the offering]is the basis of unique value for each individual," they write.
They outline four building blocks for co-creation:
Dialogue: Both sides must become deeply engaged, together, in discussing possibilities. "Dialogue is more than listening to customers; it entails empathetic understanding built around experiencing what consumers experience, and recognizing the emotional, social and cultural context of experiences," they note.
Access: The traditional focus of firms has been to transfer ownership of products to consumers. But one need not own something to have access to an experience, as automobile leasing has shown. Companies must therefore uncouple the notion of access from ownership.
Risk Assessment: Managers have traditionally assumed that companies can better manage risk than consumers can, so marketers focus almost entirely on benefits, ignoring risks. But consumers, as we have seen in health care or with genetically modified goods, want to know the risks and make their own assessments. And that won't always mean demanding no risk; for example, irritable bowel sufferers demanded access to the drug Lotronex after the U.S. Food and Drug Administration pulled it off the market because of significant side effects.
Transparency: In a world of co-creation, companies can no longer assume opaqueness of prices, costs, and profit margins.
The book's many examples cast a convincing spell that co-creation is the wave of the future, although that is debatable. But for those intrigued, the authors offer useful if not exhaustive guidance on how to apply the principles in your company, from boardroom strategy and corporate capabilities to the points of interaction with consumers.
In Addition: In the early day of electric lighting, when Thomas Edison, who developed direct current, was fighting for market supremacy against George Westinghouse, who developed alternating current, he began a publicity campaign that would put many of today's corporate battles to shame -- inviting reporters to watch animals electrocuted by alternating current to accentuate its dangers. That's one of 10 epic battles that Hal Hellman writes about in Great Feuds of Technology (John Wiley, 248 pages, $35.99). Among them, he offers a different perspective on the Luddites, and recounts the squabbles over who invented the miner's safety lamp, the telegraph, the first flying machine and television. Although some of the storytelling is dry, the writing on technological matters is clear and the disputes absorbing.
Just In: Canadian consultant Roberta Cava's Dealing With Difficult People (Key Porter, 224 pages, $22.95) is out in a revised edition with advice for dealing with annoying customers, bosses or co-workers.
The Support Economy (Penguin, 458 pages, $24.00) by Shoshana Zuboff and James Maxmin looks at how today's managerial capitalism is failing people, and how the next wave of wealth creation can be obtained by a radical new approach.
Allan Schweyer, executive director of the Human Capital Institute, looks at best practices in technology solutions for recruitment, retention and work-force planning in Talent Management Systems (John Wiley, 253 pages, $64.99)
Correction: Nicole Williams' Wildly Sophisticated is aimed at a broader market than I indicated last week in a typo: 18- to 34-year-old women.
Harvey Schachter