NEW PATHWAYS TO VALUE Co-creating Products by Collaborating with Customers

A Report for

February 2009 By

Roser, Samson, Humphreys & Cruz-Valdivieso

About the authors

Thorsten Roser (Dipl.-Psych.) is the founder and current director of the London Research and Consulting Group (LRCG) a network of knowledge entrepreneurs emanating from the LSE. Thorsten graduated in Psychology from the University of Heidelberg and is a qualified business psychologist specialising on knowledge, networks and innovation. As innovation consultant, he worked extensively with large and medium-sized enterprises, particularly in Germany. He is currently affiliated with various research groups at the Institute of Social Psychology at the LSE, including the Organizational Research Group (ORG), the Knowledge Organizations and Development Network (KODE), as well as the London Multimedia Lab for Audio Visual Composition (LML). Alain Samson (PhD), is a psychologist and quantitative market research consultant with a history of both commercial and academic work. He is best known for his contributions to the areas of consumer word of mouth, influence and cynicism. Alain has been involved in strategic research for clients in various sectors, including media, finance, FMCG and the public sector. His approach to market research is frequently informed by theories and methodologies (mainly experiments and surveys) from social psychology and the emerging field of behavioural economics. He holds a PhD from the London School of Economics (Social Psychology), an MA from the University of Michigan and a BA from UC Berkeley. He has published articles related to both academic and commercial consumer research. Alain has lived and worked in Switzerland, the United States and the UK. Patrick Humphreys (PhD), is the former director of the Institute of Social Psychology at the LSE. He is a Professor in Organisational Social Psychology and currently the Co-Director of the London Multimedia Lab for Audiovisual Composition and Communication (LML). Patrick has expertise in innovative and creative decision-making, decision support systems, and enhancement of resources for health, culture, development, and networking. He currently leads a RTD team for the European Union framework Project InCaS: Intellectual Capital Statement, Europe, and is also responsible for the LMLs joint initiative with ZenZone Media Lab, Beijing on Spritivity Workshops. He has been involved in initiatives involving organizational transformation and sector development in many countries. He is chair of IFIP WG8.3. In 2006 he was programme chair for the IFIP WG8.3 conference on Creativity and Innovation in Decision making and Decision Support and was a sponsor of the workshop Live dialogues between different individuals and alternative urban models in the Pearl River Delta coordinated by Vitamin Creative Space, Guangzhou. He is a founding partner of the Ludic Group, LLP and director of Spritivity Worldwide Ltd and Papertronic Ltd. Eidi Cruz-Valdivieso (MSc), has a background in clinical and community psychology and holds an MSc in Organizational and Social Psychology from the LSE. Eidi has worked extensively in the areas of change, leadership, community development and creativity, primarily in Mexico and the US. She currently works at the LSEs Multimedia Lab for Audiovisual Composition and Communication (LML). Her current research interest focuses on aspects of flow in relation to creativity and innovation, as well as on CrossOrganizational Assessment and Development of Intellectual Capital (CADIC). Further, she is providing consultancy relating to the European Intellectual Capital Statement (InCaS) and is involved in extending consulting capabilities of the InCaS consortium to Latin America.

CONTENTS 1. Introduction ............................................................................................................................................ 5 2. Changes in Marketing Theory: The Context of Co-creation .................................................................... 6 2.1 The Logic Behind Co-creation .......................................................................................................... 6 2.2 Perspectives and Applications of Co-creation .................................................................................. 8 3. Mapping Co-creation and Related Concepts: Towards a Definition of Co-creation............................... 11 4. On the Nature of Co-creation Processes.............................................................................................. 20 4.1 Psychoanalysis and Co-creation .................................................................................................... 21 4.1.1 Transference and Countertransference ................................................................................... 21 4.1.2 The Co-creation of Fantasy ..................................................................................................... 22 4.1.3 Implications ............................................................................................................................. 23 4.2 Co-creation and Organizational Decision Making: Theory, Practice, Support ................................. 24 4.2.1 Five Levels of Co-creation Activity in the Decision Problem-Solving Process .......................... 26 4.2.2 Co-creation within the Decision-Spine ..................................................................................... 28 4.2.3 The Decision Hedgehog .......................................................................................................... 29 4.2.4 Co-creation Activity Nurturing the Decision-Hedgehog Rhizome ............................................. 30 4.2.5 Group Decision Authoring and Communication Support (GDACS) .......................................... 31 4.2.6 Implications ............................................................................................................................. 32 4.3 Co-creation and Organizational Knowledge Processes .................................................................. 33 4.3.1 Approaches to the Co-creation of Organizational Knowledge .................................................. 33 4.3.2 Co-creation as Relational Practice of Customer Knowledge .................................................... 34 4.3.3 Implications and Challenges for Co-creation in Enabling Knowledge Processes ..................... 36 4.3.4 Practical Approaches to Customer Knowledge Development and Co-creation ........................ 37 4.3.5 Implications for Enabling Knowledge Creation and Transfer through Co-creation.................... 40 4.4 Enabling Knowledge: Using Co-creation as a Research Tool......................................................... 42 5. Managing Co-creation .......................................................................................................................... 44 5.1 Co-creating Value with the Consumer: Dimensions to Consider..................................................... 44 5.1.1 Who will be involved? .............................................................................................................. 46 5.1.2 For what purpose? .................................................................................................................. 49 5.1.3 Where in the innovation process? ........................................................................................... 49 5.1.4 How much involvement should there be? ................................................................................ 50 5.1.5 How long should customers be involved? ................................................................................ 53 5.1.6 How should customers be motivated or incentivized? ............................................................. 53 5.2 Critical Issues Produced by Co-creation ......................................................................................... 55 5.3 Benefits of Co-creation ................................................................................................................... 56 5.4 Measuring Co-creation Outcomes: Impact Factors and KPIs ......................................................... 58 5.4.1 Customer Participation Variables ............................................................................................ 58 5.4.2 Product Performance Variables ............................................................................................... 58 5.4.2 Organizational Impact Variables .............................................................................................. 59 5.4.3 Implications ............................................................................................................................. 61 6. Summary and Conclusions .................................................................................................................. 62 APPENDIX .............................................................................................................................................. 66

FIGURES Figure 1: Co-creation Terms in Different Domains ................................................................................... 18 Figure 2: Subject Areas of Co-creation Articles ..................................................................................... 20 Figure 3: The Transitional Space ............................................................................................................. 22 Figure 4: Five levels of Constraint Setting along the Decision Spine ........................................................ 26 Figure 5: Co-Creation Activity at Level 2: Exploring What if in a Decision Conferencing Environment .... 27 Figure 6: Decision-spine .......................................................................................................................... 28 Figure 7: Decision Hedgehog: Open for Exploration and Nurturance in the Plane of the Symbolic/Imaginary .......................................................................................................................... 29 Figure 8: Decision-Hedgehog Cross-section: Decision-spines Rooted in the Rhizome ............................ 30 Figure 9: Converging Co-creation Processes in GDACS.......................................................................... 31 Figure 10: Knowledge and Co-creation: A Continuous Process ............................................................... 41 Figure 11: Who will be involved?.............................................................................................................. 47 Figure 12: Product-focused Measures and KPIs of Innovation/Co-creation Success ............................... 59 Figure 13: Organizational Impact Factors ................................................................................................ 60 Figure 14: Co-creation Concepts in Scholarly Literature over Time.......................................................... 66 TABLES Table 1: The Changing Logic in Marketing *............................................................................................... 7 Table 2: Perspectives on Co-creation - Examples from the literature ......................................................... 9 Table 3: Definitions of Concepts Related to Co-creation from the Literature ............................................ 12 Table 4: Examples of Co-creating Companies ......................................................................................... 14 Table 5: Capturing Consumer Feedback through Customer Requirement Statements ............................ 38 Table 6: Useful Questions to Elucidate Customer Needs *....................................................................... 40 Table 7: Requirements for consumer involvement in innovation * ............................................................ 48 Table 8: Customer-Driven Innovation vs Older Paradigms of Customer-Centred and Customer-Focused Innovation ................................................................................................................................................ 51 Table 9: Four Dimensions of Participant Motives ..................................................................................... 54 Table 10: Co-occurrence Analysis Co-creation and Related Concepts * ............................................... 66 Table 11: Co-creation Concepts in Scholarly Literature: Dominant Subject Areas * ................................. 67

1. Introduction Businesses in todays economy have to continuously reinvent themselves in order to adapt to increasingly complex and dynamic market realities. Standardization makes it difficult for companies to differentiate themselves from competitors. Markets are more fragmented than they used to be, while consumers have unprecedented access to information and networks. New technologies and the globalization of markets have led to new modes of production and innovation that involve the consumer. Customers are demanding greater levels of personalization in their consumption experience. In response, more and more companies are adopting strategies that allow them to co-create value with consumers by providing products (referring to goods or services in this report) that enable experiences with utility or meaning on a personal level, rather than that of the mass consumer or consumer segment. This may include an active involvement of consumers as agents in the design of products. As a result, the information economy of the 21st century has been taken to the next stage, where consumers knowledge has become more valued than ever before. For the firm, involving consumers in the value-chain leads to a blurring of boundaries between research and development, marketing and consumer research, while turning customers into active partners for knowledge and value creation. It represents an expansion of a companys borders by engaging consumers, employees, distributors, suppliers and other stakeholders in processes related to ideation, as well as new product development or enhancement. This report provides an overview and mapping of ideas, theories and research on co-creation emerging from the scholarly and business/management literature. It discusses the concept of co-creation mainly as a form of collaborative innovation (or co-creativity) between companies and their customers. We begin our tour de force by describing the idea of co-creation of value in the marketing and management literature, followed by a definition and explanation of terms related to co-creation. We then focus more exclusively on co-creation as form of firm-led collaborative innovation between companies and consumers and describe different strands or perspectives of co-creation as a process, including psychoanalysis, decision making and knowledge processes. Finally, we address questions related to cocreation management, namely: What companies have to consider when involving consumers The benefits and challenges associated with co-creation How co-creation impact can be evaluated Our discussion implies that co-creation is a new innovation practice beyond a mere outsourcing of innovation to customers. Its a new way of engaging customers in value creation. However, questions about the exact nature of co-creation benefits and avenues to co-creation success have yet to be addressed by systematic research. Most research on organizational innovation and creativity either focuses on the macro or micro level of organizations (i.e. strategy and organizational forms or cognitive tools related to creativity and decision making). Even though the strategic reasons for engaging in cocreation with customers and resulting benefits seem obvious from a practical and strategic point of view, processes at a meso-level (processes of organizing) need to be studied in order to gain a better understanding of both how and why co-creation works. Due to a lack of scholarly case studies allowing us to look into these types of organizational processes, this report reviews, discusses and contrasts various concepts and processes related to co-creation with the final aim of drawing implications for organizations and outlining requirements and suggestions for future research.

2. Changes in Marketing Theory: The Context of Co-creation

2.1 The Logic Behind Co-creation The social scientist Nigel Thrifti argues that our economy has experienced a shift in the understanding of invention, which is evident in three developments: the mobilization of forethought, the co-creation of commodities with consumers by activating their ingenuity, and the construction of a space that fosters innovation. Forethought, according to Thrift, can be viewed as a form of tacit knowledge rather than explicit, formal knowledge derived from cognitive processes. Increasingly, businesses have come to value intuition or implicit thought (see for example Malcolm Gladwells bestselling book Blink) as a source of expertise. This is especially true for large companies. At the same time, knowledge drawn from consumer practice or experience has become an asset, while emotions or affect have developed into a key target in the design and marketing of products. Consumer enthusiasm and passions are engaged by not only making goods that resonate, but also by opening up those products themselves to reshaping processes. According to this view, co-creation between firms and customers, as well as production and consumption, is about tapping successfully into the collective intelligence of consumers.1 Aided by information technology, which makes interaction spaces like online user communities possible, co-creation allows for a continuous process in which products are tuned or recast. Invention or innovation, however, is just one aspect of co-creation. In fact, co-creation has been associated with a rather mixed bag of thinking in the business and marketing literature, ranging from innovation with customers to the experience economy. The concept of co-creation of value has become a dominant idea. It occurs whenever consumers interact with companies or products and thereby have an active role in the shaping of their experience and ultimately value perception. Co-creation in the sense of co-innovation expands this form of interaction by aiming to provide a multi-level framework for enabling interaction and communication in order to enhance ideation and innovation across the value chain. Around the turn of the century, the marketing literature has noted a shift from relationship to collaboration-focused views of customers.ii The marketplaces changing dynamics were recognized, with product and market orientations of the past turning into a customer orientation.iii The relationship marketing approach of the 1990s, including two-way communication between customers and businesses, is now seen as an active dialogue that shapes expectations.iv In the process, customers increasingly bring in their own competence through dialogue with companies. Along with consumers growing access to information, dialogue has become one of equals between companies and discerning consumers who know what they want. Value creation often occurs in collaboration with active customers. This is evident in different industries, ranging from medicine to software. For example, access to information means that increasing numbers of patients bring in their own knowledge when discussing diagnoses and treatment options with healthcare providers. In software development, beta testing with users has been practiced for a number of years, and has become easier with the internet. If infrastructures for an ongoing dialogue with customers are in place, managers can add value by harnessing consumer competence, managing personalized experiences and shaping expectations.v

The idea of being able to simply tap into the collective wisdom of consumers is motivated by the fact that there is no secure market data and aims to improve the way in which companies generate customer knowledge. However, as many aspects of a customers experience represent hidden, embodied or tacit knowledge, this functional view on organizational knowledge is not unproblematic, as discussed later in this report.

Both dialogue and experience are key ingredients of consumer-brand relationships. The product is now no more than an artefact around which customers have experiences.vi This focus on consumer experience took centre-stage in the 1999 book The Experience Economyvii, which describes company offerings that provide memorable events based on active participation and personalization that go beyond mere services. From a more global conceptual perspective, the shift in the view of consumers is part of a new logic for marketing outlined by Vargo and Luschviii, which is based not on the old logic of tangible goods exchanged in the marketplace, but that of intangible services. As Prahalad and Ramaswamy argue, managers have always thought of their products as vessels of value, based on efficient production and a feature rich product, largely disregarding actual customer experiences. The marketplace has been full of products that are feature rich and experience poor, because company think (e.g. R&D, manufacturing, marketing and sales, etc.) has been disjoint from customer think (e,g, lifestyle, expectations, needs & desires, etc.).ix Instead of value or utility embedded in goods, the new ServiceDominant (S-D) logic focuses on the co-creation of values and relationships. People are no longer seen as buying either goods or services, but products that provide a service and value that depends on customer experience.
Thought leaders in marketing [have continually moved away] from tangible output with embedded value in which the focus was on activities directed at discrete or static transactions. In turn, they move toward dynamic exchange relationships that involve performing processes and exchanging skills and/or services in which value is co-created with the consumer. The worldview changes from a focus on resources on which an x operation or act is performed (operand resources) to resources that produce effects (operant resources).

Goods are no longer end products, but also transmitters of knowledge (an operant resource) or intermediate products that are used by customers (another operant resource) in a value creation process. Vargo and Lusch note that, in using a product, the customer is continuing the marketing, consumption, and value-creation and delivery processes.xi Even for tangible goods, the customer must often still learn to use or maintain the product, and sometimes adapt it to personal requirements or situations. One of the basic premises of S-D logic is that knowledge is a fundamental source of competitive advantage (we will look at the principles of knowledge at a later stage in this paper). Value is perceived and determined by the customer as value in use. Another fundamental premise of S-D logic, then, becomes The customer is always a co-creator of value.xii Customers are participants in coproduction and relational exchanges. The service-centred view suggests that the goal is the customization of products, the recognition of the customers as co-producer or co-creator, and to involve consumers in the customization process to better fit their need.

Table 1: The Changing Logic in Marketing * Goods Dominant Logic Goods Tangible Operand Resources Asymmetric Information Propaganda Value Added Transactional Profit Maximization
* Reproduced from Lusch et al. (2006)xiii

Service-Dominant Logic Service(s) Intangible Operant Resources Symmetric Information Conversation Value Proposition Relational Financial Feedback

Around the publication year of the seminal article on S-D logic, the American Marketing Associations official definition of marketing captured the importance of customer relationships marketing as a process (2004):
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

Although the focus on processes and relationships was welcomed, it still implied that value was embedded in the product.xiv The latest (2007) AMA definition takes S-D logic into account, where value is not what goes into goods or services, but what customers get out of them:
Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

The changing dominant logic in marketing and associated business practices, such as co-creation, have far-reaching implications for companies understanding of customers, including shifts from a view of the consumer as passive buyers to consumers as active agents from consumers as segments of many to segments of one from listening to consumers to dialogue with consumers from consumers as buyers to consumers as resources or products from researching consumer needs to understanding consumer experiences and practices from a reliance on experts to an appreciation of consumer knowledge 2.2 Perspectives and Applications of Co-creation Although the field of marketing has been a driving force behind the popularity of co-creation, the cocreation interaction space has been conceptualized from many different perspectives, including Customer Relationship, Quality and Innovation Management (see Table 2). Co-creation of value is one of these perspectives. Broadly conceived, value can be created at different stages in the value-added process, including innovation or the co-design of products (e.g. helping your favourite restaurant come up with a new selection of dishes on their menu), customization based on pre-determined features or modules (e.g. buying a computer based on your choice of hard drive, processor type, display, etc.), co-production of service (e.g. using a companys online self-help tool rather than calling customer service), co-production of a tangible good (e.g. self-assembly furniture) or any emotional/experiential engagement (e.g. going to a childrens birthday party hosted by/at a fast food restaurant), where value is produced in the experience of a good or service. But there are other relevant views on co-creation. An encounter-based logic has been applied to any kind of firm-customer interaction or touchpoints initiated either by customers or the supplier, where cocreation can occur on the basis of communication, usage or service encounters.xv For example, as a mobile phone network customer, you may interact with the company or brand when you interact with your handset, are dealing with an aspect of their service, such as reading your monthly bill, or communicating with customer service representative to discuss a service problem you have encountered.

In addition, customer roles in (usually tangible) product innovation more specifically have been identified as taking place at conceptual, design, testing, support or marketing stages.xvi As a consumer, you could help your favourite breakfast cereal company come up with new product ideas (e.g. broccoli flavoured wheat cereal), give input about its look and texture (green and crunchy!), give feedback once its been produced for testing, and even help naming the product (brocco-munch!) or spread the word as an customer-advocate. In many cases, of course, co-creative product innovation may itself lead to mass customized solutions (design your own cereals based on a choice of ingredients) or products that are designed to be co-produced with the customer. In quality management, by contrast, the customer roles of co-producer (i.e. worker) and resource (e.g. in co-innovation or design) are both at the input side of organizational activity, while customers as buyers or users are at the output side of firm activity. According to the logic of value co-creation, value can be created at either the input or output side of organizational activity. On the output side, customers may experience two critical moments, the first when a product is purchased (where price and perceived value are important) and the second when product performance is experienced.xvii This could be expanded even further, as consumers also experience products differently across cultural settings and communities. Ultimately, usage of a product can be associated with a view of the customer as product if the goal of consumption is about a change in the customers behaviour or state.xviii Take textbooks, for instance, where the learning outcomes (a change in the customers knowledge) as a result of product consumption are vital. Similarly, the ideal outcome for a running shoe manufacturer would include turning its customers into better athletes. Nike, for example, have helped their customers learn proper training methods. As a result, they have added value for the customer beyond the use of a tangible sporting good, while reducing their own risk of losing customers.xix Table 2: Perspectives on Co-creation - Examples from the literature Co-creation through Encountersxx 1. Communication encounters 2. Usage encounters 3. Service encounters Customer Involvement in Quality Creationxxi 1. 2. 3. 4. 5. As Resource As Co-producer As Buyer As User As Product Customer Role in Product Innovationxxii 1. Conceptualization / idea generation 2. Design 3. Testing/refinement 4. Support 5. Marketing /commercialization

Co-creation of Value 1. Co-design /innovation 2. Mass customization /personalization 3. Co-production 4. Emotional & experiential engagement

These perspectives on co-creation highlight the following questions that companies have to ask themselves when they design their co-creation strategy: What are the brandcustomer touch-points (or encounters) at which value is perceived by our customers? What are some of the existing roles played by our customers (e.g. consumer as product, resource, etc, including those beyond customers immediate interaction with the company or product) where they contribute to quality and hence value? How can our existing offerings be modified or expanded to provide a more personalized experience (e.g. customization or co-production) to customers?

At what points in our product development process can we involve customers to actively shape new or improved products and thereby enhance future product experience? By already having answered questions like these, the case of Nikexxiii is illustrative of the successful use of multiple engagement platforms in order to enhance consumer experience of the brand, which has included: Involving customers in dialogue, both individually or as part of thematic communities Generating ideas from consumers about product improvements, including options for the customization of Nike products A competition for a select group of customers to design a new Nike shoe Co-design and customization of shoes on Nike ID web site Creating a social networking site, Joga.com, which included user generated content that allowed the upload of videos showing off individuals soccer skills Sponsoring experiences like soccer competitions iPod sport kit and sensor that can be placed in Nike shoes and connected to an iPod, which then provides workout-based voice feedback or particular songs to keep the runner going Helping customers develop good training methods that reduce the risk of injury

The example of a far smaller and local company with a very different product, the car-sharing club City Car Club in Helsinkixxiv, provides a broader angle on the spectrum of co-created value in different experiential domains. In this case, co-creation of value is evident in: Personalized mobility by allowing customers access to a car on an as-needed basis Co-production of the car-sharing service through self-service (including online tutorial about the rental system) and flexibility in accessing the service (through mobile phone and internet channels) Involving customers in service improvements or innovation by encouraging feedback to improve the service and conducting regular surveys Encounters with the service that are an easy and fun experience. For example, the car unlocks for the first time as a result of calling a service number and entering a PIN Enhancing customer experience by allowing them to learn from each other, i.e. about how other customers use the service (online member profiles) Engaging customers emotionally by appealing to environmental concerns (reducing pollution by reducing car ownership is part of the business proposition) Building a sense of community, exclusivity, joint ownership and shared identity by calling customers members The cases of Nike and the City Car Club illustrate that co-creation of value is an approach that tends to permeate different aspects of customer experience. As a result, co-creation has been associated with a variety of related concepts, which are discussed in the next section.

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3. Mapping Co-creation and Related Concepts: Towards a Definition of Co-creation

Given the wide conceptual scope of co-creation, it comes as no surprise that some authors have defined co-creation practice as one that
involves both the [business] and the customer who interact in aspects of the design, production, and consumption of the product or service.xxv

or activities such as xxvi 1. 2. 3. 4. 5. The emotional engagement of customers (e.g., through advertising and promotions) Self-service Engaging the customer in an experience Using processes to allow customers to solve their own problems Actively engaging customers to help design a product

In this section, we would like to develop a more narrow definition of co-creation that captures the core of its meaning as collaborative creativity. We will do this by first mapping co-creation related concepts and their definition, as well as illustrating differences between the scholarly and public domains understandings of co-creation. In the academic and management literature, co-creation is associated with different terms indicating customer/user involvement or participation, such as collaborative innovation, mass customization (now increasingly also mass personalization), co-production and user-generated content, as well as mass collaboration and open innovation (see definitions in Table 3).

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Table 3: Definitions of Concepts Related to Co-creation from the Literature Concept Description
Gaining competitive advantages by also looking outside an organizations borders through widespread involvement and interdependence between actors at all levels, daily based information exchange, integration of business processes and joint work and activities. For radical or discontinuous innovation, joint development and co-design are the most typical forms of networking. Unlike intra-organizational R&D, collaboration-based initiatives for discontinuous innovation lower risks and allow for faster access to critical competencies. In the case of continuous innovation and improvement processes, the most common form of inter-company interaction is mutually-beneficial customer-supplier collaboration over an extended period of time.xxvii

Examples
Boeing 787: The development of the Boeing 787, ranging from concept to production, was done by Boeing and its global partners. Tasks were not simply outsourced to those companies, but partners were active stakeholders who shared both in the risks and rewards.

Collaborative innovation [see also Open Innovation]

Consumer / customer involvement

The concept of consumer/customer involvement has been used in two different ways: A) Psychological: A consumers perceived importance, risk, symbolic value or emotional appeal of a product or product category.xxviii B) Behavioural: When firms engage consumers/customers in some way, leading to a benefit for the firm, customer or both (e.g. as resource in product innovation or co-producer xxix of products).

Co-production

In co-production, the customer is an active participant in the production and delivery of a service, giving the participant a potential to customize his or her world. A broader perspective of co-production is found in the interpretive marketing literature, suggesting that a fundamental characteristic of the postmodern era is the reversal of production and consumption, requiring marketers to increasingly open up their processes and systems.xxx

U-Scan; Ikea Self-service checkouts at supermarkets or selfassembly furniture

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Mass Collaboration (Wikinomics):

A kind of collaboration model based on collective actions, which occur while large numbers of contributors or participants work independently but in collaboration on a single modular project. Projects typically take place on the internet by means of webbased collaboration tools.xxxi

Wikipedia Articles on the worlds largest online encyclopedia, written entirely by internet users. Dell; Nike ID Dell computers allow customers to configure the specifications of the computers that they purchase

Mass Customization

Mass customization refers to firms applying technology and management methods to provide product variety and customization through flexibility and quick responsiveness. While the goal of mass production is to produce an affordable standardized product, mass customization produces enough variety in products and/or services so that nearly everyone finds exactly what he or she wants at a reasonable price.xxxii Open innovation occurs when a company commercializes its own ideas and innovations from other firms, and seeks ways to bring its in-house ideas to market by deploying pathways outside its businesses. External R&D can create significant value; internal R&D is needed to claim some portion of that value. xxxiii

Open Innovation [See also Collaborative Innovation]

Linux; Gamble

Procter

&

P&Gs connect + develop programme enables a two-way sharing of innovation (ranging from engineering to business services) between P&G and external individuals or organizations. Youtube Youtube, the online video sharing service, allows users to upload their own and view content generated by other users.

User Generated Content (UGC)

User generated content can be defined as content made publicly available through technologies like the internet, reflecting a certain amount of creative input or effort that is created outside of professional practices or routines. xxxiv

User Involvement

User involvement occurs when representatives of a target user group participate in the system [software, xxxv etc.] development process.

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A number of companies have been mentioned as practitioners of co-creation in the academic and business literature. In many instances, however, detailed information about their specific co-creation approaches is missing. This includes data about the tools used to facilitate and enable co-creation, qualities and critical issues related to co-creation processes, types of customers involved, as well as mid and long-term outcomes of co-creation initiatives. Further, as publications dedicated to full case studies are rare, a systematic categorization and comparison of cases is not possible. The following (Table 4) represents an attempt to map the landscape related to co-creation based on a non-exhaustive list of companies (taken from various sources) that have been used as examples of different types of cocreation practices.

Table 4: Examples of Co-creating Companies Company Name

AKP Electric

Co-creation Example
Co-creation of electrical modernization of factory with B2B customer Product reviews by customers and personalized product suggestions sent to customers Customers can contribute ideas for products (prepackaged ice cream) and services (packaging, distribution, etc.) on B&J website Online Customer Innovation Lab' for product design; Specification of new product design, inputs on product features and design trade-offs M division for customization of cars, also leading to general product improvements; engineering challenges: collaboration between customers and BMW engineers Co-creation of localized solutions with B2B customers Children and store employees create a personalized teddy bear together Personalization of mobility; brand co-creation through relationship and experience (encounter) design Product configurators that allow mass-customized version of standard product IdeaStorm.com to allow consumers post and promote/demote ideas about Dell products, discuss concerns with Dell and other users, as well as gain insights into planned developments at Dell

Source
Cova et al, 2008

Amazon.com

Gloor and Cooper, 2007

Ben & Jerrys

Prandelli et al., 2006

BMW

Nambisan and Nambisan, 2000

BMW

Gloor and Cooper, 2007

BOC Defense Build-A-Bear Workshop

Cova et al, 2008 Honebein & Cammarano, 2006 Payne et al, in press

City Car Club

Dell

Dahlsten, 2004.

Dell

http://www.ideastorm.com/

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Ducati Ebay

Tech Caf' Virtual Customer Environment for product conceptualization Auction house where buyer catalog is created by sellers, buyers and sellers co-create security by policing each other Internet-based platform to support collaborative innovation involving pharma customers (patients, doctors, clinicians, researchers, health care providers) Co-creation through community creation in domain of sportkiting by including both consumers and sellers; implication in product innovation, distribution and promotion Personalized and interactive online digital photo sharing Customers co-produce applications for new technologies and services, such as global mapping software Do-it-yourself store that shows the customer how to fix things rather than replace them Worldwide partner innovation centres to facilitate collaborative innovation Participatory Web for internal collaborative innovation to leverage employee talent Customers can design their own kitchens in interaction with a trained sales representative My recipe section of website allows customers to send in their own recipe Online multimedia co-creation platform with algorithm to compile and sort ideas LEGO Factory' for personalized LEGO models and sharing/co-creation of virtual LEGO models with other consumers MVP Program, where 'expert' customers provide tech support to other customers Personalization of online identities and social networking; co-creation of content (e.g. software applications) and translations

Nambisan and Nambisan, 2000 / Sawhney et al, 2005 Friesen, 2001

Eli Lilly

Sawhney et al, 2005

Flexifoil

Rowley, Kupiec-Teahan & Leeming, 2007

Flickr

Gloor and Cooper, 2007

Google

Lusch et al, 2006

Home Depot IBM

Sheth & Uslay, 2007 Blazevic & Lievens, 2008

IBM

Newbold and Azua, 2007

IKEA

Wikstrm, 1996

Kashi Kluster.com

Prandelli et al., 2006 http://www.kluster.com/

LEGO

Zwick et al., 2008

Microsoft MySpace/Facebook

Nambisan and Nambisan, 2000 Gloor and Cooper, 2007

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New Line Cinema

Connected to hundreds of unofficial Tolkien websites, giving insider tips, seeking feedback regarding details of Lord of the Rings movie and offering access to production team. Software tools for customization of products online; design competitions, etc P&G Advisor programme where consumers contribute to product development (try new items and provide qualitative feedback) Connect and Develop' strategy, an open innovation system allowing connection and interaction across organizational boundaries Collaborated with software hackers for reprogramming of Pronto universal remote control by providing access to programme files, codes and other information Co-creation as a strategic tool for organization learning and innovation Virtual Product Launch Center' to enlist customers help in diffusion of new product information; shaping peer customers purchase behaviour Online Clip It Covers section, where users can design their own mobile phone covers; a contest designed to advance the development of Java technology applied to mobile phones Business model where value is in experience (determined by the customer) My Starbucks Idea website where consumers discuss and vote on others ideas, as well as get informed about the implementation of their ideas Face-to-face discussions with customers to determine public service problems and solutions Customers can access information on manufacturing process, design and fabrication libraries, as well as quality processes. Customers that submit, inspect, and approve t-shirt graphic designs Involving consumers in co-creation of concepts, packaging, advertising and activation

Prahalad & Ramaswamy (2004)

Nike P&G

Ramaswamy, 2008 Blazevic & Lievens, 2008 / Sawhney, 2002

P&G

Dodgson, Gann and Salter, 2006

Philips Electronics

Prahalad & Ramaswamy, 2004

PSK (Centre for Creative Art) Samsung

Chung, 2009

Nambisan and Nambisan, 2000

Siemens

Prandelli et al., 2006

Starbucks

Lusch et al, 2006

Starbucks

http://mystarbucksidea.forc e.com

Swedish Post Office Taiwan Semiconductor Manufacturing Company

Lundkvist & Yakhlef, 2004 Prahalad & Ramaswamy, 2004

Threadless.com

Elofson & Robinson, 2007

Unilever

Medeiros and Needham, 2008

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Virgin Atlantic

V-Jam' innovation workshop with customers, web developers and social media experts; consumers share insights and develop new ideas to improve the travel experience through social media Concept Lab' for online virtual product concept testing; identification of product design flaws; input on product prototypes Female customer groups in consistent discussions with Volvo team for 3 years during development process Use of 'double-loop learning' for marketing (action research with customers)

http://www.nesta.org.uk/vjam/

Volvo

Nambisan and Nambisan, 2000 Dahlsten, 2004

Volvo - XC90

Wage.com

Maklan, Knox and Ryals, 2008

If we contrast degrees to which different ideas connected with co-creation overlap with the concept of co-creation in the public domain and scholarly literature, different focal points emerge. The public domain is more clearly interested in co-creation with a community-based component, sometimes leading to social benefits (e.g. mass collaboration and user-generated content). The scholarly literature, by contrast, conceptualizes co-creation more in terms of co-production and mass customization, usually leading to commercial benefits (Figure 1 and Appendix Table 10), where value is added towards the end of the production chain. These differences in the co-occurrence of co-creation and related terms may be indicative of the public spheres expression of relatively literal interpretations of co-creativity, leading to more fundamental ways of consumer empowerment or community building, as well as greater interest in deeper forms of involvement. In response, companies may increasingly have to integrate consumers in earlier stages of product development, while tapping into naturally occurring (or building their own) online consumer communities.

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Figure 1: Co-creation Terms in Different Domains

This is consistent with relevant content found on the internet, where the concept of co-creation by itself is perceived more in terms of collaboration between firms and consumers than co-created value through co-production or mass customization. Popular definitions of co-creation include:

The direct and active involvement of users in the design of products and servicesxxxvi Bringing together all stakeholders as equal partners and blurring the lines between the organization and the community.xxxvii An open, ongoing collaboration between employees and customers to define and create products, services, experiences, ideas and information.xxxviii The practice of product or service development that is collaboratively executed by developers and stakeholders together.xxxix The voices found on the internet appear to more closely agree with Prahalad and Ramaswamyxl who have noted that co-creation should not be seen as a transfer or simple outsourcing of activities to customers, a scripting or staging of customer events, or a marginal level of customization. Companies must provide compelling experiences with different dimensions of choice in consumer-company interaction throughout the supplier-customer relationship.

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In sum, co-creation of value in the business and marketing literature has been discussed as an interaction between either consumers only, consumers and products, or customers and businesses, stressing different levels of creativity or impact at different points in a products value chain. We agree with Prahalad and Ramaswamys more stringent definition of co-creation and more popular conceptions that stress collaboration, indicating a need for not only compelling experiences, but a truly creative involvement of customers. According to our stricter definition, co-creation as an active, creative and social process entails: 1. Interactions between people, such as companies and customers, not interactions between consumers and products only 2. Collaboration, rather than just involvement 3. Co-creativity, not simply co-construction or co-production The remaining sections of this report will shift some of the emphasis from the content to the processes of co-creation and we will discuss ideas that more closely fit this definition of co-creation. As a result, the focus will be on practices closer to the beginning of the value chain, such as co-creation as a form of collaborative innovation between businesses and customers.

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4. On the Nature of Co-creation Processes Business practices related to a broad definition of co-creation predate the past decade, especially forms of co-production of services (e.g. ATMs), product testing (e.g. software), experiential marketing and degrees of product customization. However, interest in these practices has risen tremendously in recent years, as indicated by the growing use of co-creation related concepts in the literature. While the term user involvement has had a long history mainly in computer science since the 1980s, articles about mass customization /personalization have been introduced in the 1990s and grown almost exponentially after the turn of the century. The more newly coined concepts of mass collaboration, open innovation and user generated content have been mentioned with more frequency in recent years (Appendix Figure 14). Overall, both IT and business/marketing subject areas dominate as the hosts of articles on cocreation and related areas. The generic concepts of consumer or customer involvement (referring to either a form of behavioural engagement of consumers by companies or psychological engagement of customers with products) have a somewhat longer record in the domains of business as well as health care (see Appendix Table 11). The concept of co-creation itself, however, has crept into the business and economics domain relatively recently and has historically been used more often in psychology and the behavioural sciences. It is still a concept used in the domains of psychotherapy, psychiatry or psychoanalysis, which is one of the intellectual origins of co-creation described next.
Top 3 Subject Areas of 'Co-creation' Articles*
50% 45% 40% 35% 30% 25% 20%

46%

33%

21%
15% 10% 5% 0%

Business & Economics

Psychology & Psychiatry

Behavioural Sciences

* based on occurrence of co-creation/cocreation as topical keyw ord in ISI Web of Science (excluding science & technology; February 23, 2009)

Figure 2: Subject Areas of Co-creation Articles

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4.1 Psychoanalysis and Co-creation 4.1.1 Transference and Countertransference The concepts of transference and countertransference, originally developed by Sigmund Freud, are an essential part of co-creation processes psychodynamic roots. In recent years, literature on innovation has adopted some of these ideas, but has focused on the creative outputs that can be realized through these processes. Psychoanalytical theoretical developments, such as transitional spaces and their influence on organizational creativity and learning, show us the re-framed relevance of the participation of others in the creative processes of co-construction. The co-creation of fantasy and meaning in the context of the analytic relationship has been an area of interest in recent developments of psychoanalytical theory and practice. In the process, there has been a departure from the Freudian interpretative/insightxli approach based on a positivist paradigm (an effort to use observational data alone to arrive at knowledge), to an emphasis on relational experience, influenced by relativistic science and the shift from objectivism to constructivism, mainly referred to as Relational Psychoanalysis.xlii Theories about transference (a patient or analysands redirection of feelings from a significant person to the therapist) and countertransference (a therapist or analysts transfer of his/her own unconscious feelings to the patient) have evolved alongside these changes. They essentially indicate that analyst and analysand are able to be both subject and object, and reflect on their own experiences, identities and wishes distinguishing what they are (and have been) from what they wish to be. The Relational Psychoanalysis school of thought holds that the transference and countertransference relationship is always co-constructedxliii. It challenges the belief in the analysts objectivity, and emphasizes two fundamental pathways: 1. The need to acknowledge the participation of the analyst in a co-creation of the analytic relationshipxliv, and the subjectivity inherent in the construction of interpretations and emergent meanings. 2. Countertransference as a process of co-creation that involves contributions from both analyst and analysand (known as combined countertransference) and an essential source of information about the analysand.xlv Group transference and countertransference also gained importance in the understanding of the cocreation process. In Ezriels work, the patterns of group transference can be analyzed to elucidate the contribution that each individual makes to the group. Looking at individual processes, he argued that central group tensions can be co-created in terms of different levels of relationships.xlvi Hopperxlvii also argued that people create groups and are simultaneously created by them. Various kinds of transferences are formed within groups, and groups form different kinds of transference to the leaders or group conductors. The leader, conductor or facilitator of a group becomes the groups common object, which serves as the vehicle of a co-created transference process that would develop through the evolving dynamic of a group.

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4.1.2 The Co-creation of Fantasy Child psychoanalytical theory addresses the importance of the co-creation of fantasy through play as a process of therapeutic value.xlviii For some authorsxlix, the creation of fantasy is regarded as crucial for the introduction of objective realities. Fantasy does not only create a link with reality, but also generates a space of multiple realities and creative potential.l Traditional psychoanalytical theory considers fantasy as a realm that is independent from reality, where illusion and unfulfilled wishes are satisfied and become a substitute for the prohibitive external world. In Freudian terms, fantasy offered itself as an enclave where satisfaction of sexual and aggressive drive-based wishes could be achieved.li Winnicottslii theoretical developments, however, focusing on the co-creation of fantasy and the bridge that this constituted with realityliii, established that the interplay and the space between the inner and the outer worlds (between reality and fantasy, the subjective and the objective) are an overlapping area of experience,liv calling this the Transitional Spacelv (Figure 3).

Figure 3: The Transitional Space Co-creation takes place in this space emerging between the internal fantasy world of the person and the external reality world with others. For Winnicott, creativity gives a persons life meaning, and is an entity in itself present in all individuals and expressed through play: in play, and perhaps only in playing, the child and adult is free to be creative and to use the whole personality, and it is only in being creative that the individual discovers the self.lvi This creative experience takes into account the environment that the person is responding to and takes place not within an individual, but between two or

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more people. The process integrates the cognitive, affective and social dimensionslvii that contribute to the creation of identity among those involved. The co-creation of fantasy through play and the value of this process began to be key for the understanding of other co-creation processes outside the therapeutic arena. In organizational learning, the transitional space is regarded as a promoter of change and innovation, [the] episodes of change, innovation, conflict and the like, where different parties meet and share perspectives, can be this sort of [transitional] space.lviii Fantasy allows a transformational process to take place in these environments, creating and preserving a sense of hope, possibility and creative livinglix. A re-conceptualization of experience, through play as vehiclelx, within the psychoanalytic scene and the wider cultural spherelxi was also related to the co-creation of fantasy, addressing the understanding of emergent meanings. Play as an inherently interactional processlxii allows fantasy and reality to be constructed by each other and jointly create meaning through this interaction. Play has significant implications in the organizational context in conjunction with creativity.lxiii It enhances the exploration of a shared world, which then leads to a closer relationship with the organizational environment and others. Within a Transitional Space play allows: The practice of physical and mental skills as they develop The exploration of fantasy in a safe context A free and unhindered activity in which fantasy finds expression The discovery of self and not self as well as self-understanding of identity Groups to socialize The opportunity to learn, adjust, allow, assert, and interact in a contained and safely controlled situation The co-creation of shared meaning in the developing relationship with others 4.1.3 Implications In its core, co-creation builds on techniques for creative play similar to forms of group-decision making, as well as approaches from psychotherapy. From a more practical view, co-creation in business environments eliminates the boundary between the firm and its customers, just as in psychotherapy, where analyst and analysand are able to be both subject and object to reflect on their desires, identities and wishes. Co-creation also acknowledges consumers subjectivity, which is inherently idiosyncratic, contextual and experience-based. Co-creation facilitates the relationship between customer and company, while creating shared meaning and a common sense of purpose. In co-creation practices between organizations and customers, one of the key questions is, of course, who creates the transitional space for co-creation, as well as where and how is it created? Provided that the free, safe and unhindered space is not normally available in social environments like formal organizations, co-creation is driven by facilitation. By staging encounters, facilitators foster the transitional space necessary for cocreativity to unfold and succeed. Our definition of co-creation, as outlined previously, should not be seen as synonymous with tightlystaged processes, exemplified by practices sometimes referred to as firm-initiated crowdsourcing competitions. For example, the worlds first DVD-by-mail service, Netflix, has staged a competition (www.netflixprize.com) to substantially improve the accuracy of predictions about how much someone is going to love a movie based on their movie preferences. To win the grand prize, contestants have to improve Netflixs existing algorithms predictive power by at least 10%. Although the competition includes

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an online forum and possible interaction between the company and consumers, while there are many teams made up of collaborating individuals, the Netflix Prize is less about creating a product based on firm-customer collaboration than it is about the competitive sourcing of a solution to a specific problem. Though it may be an effective form of purpose-driven innovation, crowdsourcing of this kind is often a heavily controlled process involving a relatively one-sided flow of information from customers to companies. Co-creativity, on the other hand, is more fully engaged, departing from the idea that people are vessels of knowledge that can simply be tapped into by a company in the form of downloadable information. 4.2 Co-creation and Organizational Decision Making: Theory, Practice, Support Textbook accounts and case studies of decision making in the social and organizational contexts of decision support typically concentrate on modelling the representation of the decision problem, and/or of information which may be relevant in its solution and/or the motivations of interested parties, etc.lxiv The problem situation comes neatly packaged as a problem statement that appears to suggest naturally the way the decision problem is to be framed and how the structure might be developed within the frame. In fact, the whole enterprise of decision theory is based upon model construction and exploration within a structure that is assumed to be pre-definedlxv and the history of how those structures came to be created is, generally, ignored. Under this process-free view of decision-making, co-creation cannot be addressed. However, possibilities for considering, designing and implementing co-creation in organizational decision making processes arose within the attention-based view of the firmlxvi, which has its origins in the work of Herbert Simon.lxvii Simon conceptualized decision-making processes as linear, moving through three stages: 1) intelligence, 2) design, and 3) choice. Intelligence involves a search for the conditions that call for decisions. Design focuses on inventing, developing and analysing possible courses of action through the construction of a model of an existing or proposed real-world system. Decision-making is thus cast as problem solving, the model provides a representation of the problem which can be solved by implementing a prescribed course of action identified as preferred or optimal within this representation. In the 1970s and 1980s, a split emerged about the best ways to implement and support the processes involved in the decision-making stages identified by Simon. One side of the split, founded in knowledge engineering shut out any possibility of co-creation, without placing through giving all the agency in model development and population to the knowledge engineer, who took the responsibility, on the basis of knowledge regarding the problem obtained from sources of his or her choice, to develop a hegemonic representation of the problem on the basis of knowledge gained (or data mined) form sources of his or her choice, and to specify the optimal course of action , justified by and within the problem representation. This approach did not find much favour in practice among decision makers occupying senior position in organizations, particularly as Paprika and Kisslxviii point out, the principal result was to divorce the decision maker from the decision problem On the other side of the split, the focus was on keeping the creative linkage between the decision maker and the problem as close as possible, and also to bring into this linkage the views of others people

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in key stakeholder roles in the decision making process. The definitive set of roles here has been identifiedlxix as decision maker, (or 'problem ownerlxx), proposer (who does not have the agency in his or her own, to take the decision, expert (supposed to advise impartially, but usually has his or her own motivation`), consultant (decision making facilitator, etc,) and client. Organizational decision-making thus became a group process, with group members occupying the various stakeholder roles. This opened the way for the two main approaches to Group Decision Support prevalent during the 1990s. The first followed from the view that the most fundamental activity of group decision-making is interpersonal communication and the primary purpose of a GDSS is to improve group communication activities.lxxi Consultants following this approach generally focused on facilitating communication by providing appropriate IT-based infrastructures with names computer-based workbench environment. While the decision making group may de-facto be involved in co-creation processes, this approach had little intention of informing them, or being informed by them in designing and implementing decision support systems (DSS). Phillipslxxii has provided resolute and sustained criticism of this approach, claiming that it is inferior to a decision-conferencing approach that provides a problem solving environment that is group centred and is primarily intended to help managers consider uncertainty, form preferences, make judgments and take decisions. The outputs from a decision conference are explicitly understood to result from a sequence of co-creation processes leading to the solution of the problem, expressed as prescriptions for action with all members of the group commit to, according to the distribution of their individual future responsibilities in implementing the decision taken. Under this approach, decision-making is cast as group problem solving, where the process model aims at co-creation, by the decision making group, of a representation of the problem which can then be solved by implementing a prescribed course of action identified as preferred or optimal within this representation. Yet, for the participants in the group decision-making process, the representation of the problem is cast within the plane of the symbolic/imaginarylxxiii, as are the prescriptions for action that emanate from its consideration within the group. So the solution to the decision problem is chosen on the basis of a collective fantasy by participants who do not always have sufficient resources for adequate reality testing before committing to a prescription for action.lxxiv The co-creation process aimed a developing a representation of the problem and choosing a course of action designed to solve the problem process is rooted in participants issues of concern and spirals within what Nappelbaumlxxv called the circular logic of choice the decision-making group progressively sharpens the description of the problem by cycling through option descriptions, value judgments and instrumental instructions, reducing discretion in how these may be defined in spiralling towards the prescribed choice.lxxvi At the outset, all imaginable courses of action are candidates for implementation. The decision-making groups co-creation activities, aimed at developing a single, collectively agreed, representation of the problem then progressively employ problem expressing, framing and fixing processes to strengthen the constraints on how the problem is represented until only one course of action is prescribed: the one which should be actually embarked upon in the real.

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4.2.1 Five Levels of Co-creation Activity in the Decision Problem-Solving Process Five qualitatively different levels of constraint setting may be identified, each associated with a qualitatively different kind of co-creation activity on how to structure the constraints at that level (Humphreys, 1998). The nature of the knowledge represented at each level, and the cognitive operations involved in generating these knowledge representations, has been discussed in detail elsewhere.lxxvii These levels have been presented in a point-down triangle as shown in Figure 3, indicating the progressive decrease in discretion involved within the co-creation activities as the decision making group moves downward from level 5 (exploring fantasy scenarios and dreams with conjecturality beyond formalization or structure) towards a fixed problem representation structure, and zero discretion in the cocreation activities for participants at level 1 (making best assessments). At this point in the process, the problem-representation model is developed to the extent that the best course of action is inevitably prescribed. In the actual decision making process, the sequence movement through the levels is not linear, but corresponds to a spiral through the circular logic of choice to the point where a particular course of action is prescribed as the true solution to the decision problem. Decision conferencing methodologies essentially provide process designs to enable the decision making group to move efficiently and effectively through these levels within a general process which Phillipslxxviii called conferencing to consensus.

Figure 4: Five levels of Constraint Setting along the Decision Spine

At the top level (level 5 in Figure 3), the roots of the decision problem are imagined through co-creation activity involving exploration within a small worldlxxix whose bounds are defined by what the participants in decision-making within the spine are prepared to think about. Explorations within these bounds are made within what has been referred to as the background of safety.lxxx The results of what is encountered in this exploration constitutes the contextual knowledge which is available in forming the content elements of problem representations that are manipulated in problem structuring at lower levels. At the next level down, (level 4 in Figure 3), co-creation activity articulates problem-expressing discourse as participants claims that particular elements of what was explored should (or should not) be included in the representation of the decision problem.lxxxi This discourse is usually argumentative; involving claims about what aspects of context should be explicitly proceduralized. These are expressed by their advocates, who support them with warrants and backingslxxxii in order to gain their acceptance by

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all participants in the decision making process. Thus co-creation activities at this level serves both to develop the proceduralized context and to define the constraints on what claims can be linked into frames, so that their collective implications for potential prescriptions for action can be explored.lxxxiii At level 3, co-creation activity employs framing discourse to develop the structure of the problem within a frame. Within soft systems methodologylxxxiv this process is described as conceptual model building and is located within proceduralized context. The frames generally employed here are (i) those that structure future scenarios, for example, through modelling act-event- sequences with decision trees, (ii) those that structure preferences between alternatives, for example, through decomposition and recomposition within multi-attribute utility hierarchies, and (iii) rule-based structures aimed at reducing the problem-solution search space. Framing discourse is also employed in co-creation activities that police the coherence of the material drawn from the proceduralized context into the frame until sufficient coherence is reached where it is possible to explore the structure so developed using what-if? discourse. At level 2 co-creation activity focuses on What-if explorations, used to investigate to see the impact of changing the assessment of an element located at one node within the structure on the values of other nodes of interest to the decision making group (see Figure 4)

Figure 5: Co-Creation Activity at Level 2: Exploring What if in a Decision Conferencing Environment At the stage in the decision-making process where level 1 is reached, sufficient constraints will have been set for the co-creation activity at this level to focus only on how to make best assessments of the most likely value at those points in the represented problem that have been represented as uncertain within the constructed decision-making frames, such that a particular course of action is prescribed. Figure 3 is not intended to indicate a prescriptive process model for decision-making (i.e., start at level 5, establish constraints, then go down, one by one through the levels until action is prescribed at level 1). All that can be established, in general, is that the outputs of the co-creation activities currently employed at each level in Figure 5 serve to constrain what can be explicitly considered, at the levels below, in establishing the truth about the decision situationlxxxv. In practice, co-creation decision-making processes founded in the circular logic of choice spiral within five levels of increasing constraint in problem representation, though a decision-spine, located in the symbolic-imaginary, capable of pricking the real at its point.

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4.2.2 Co-creation within the Decision-Spine The decision-spine is named by analogy with the structure and characteristics, in the real world, of an uprooted spine from a hedgehog, as illustrated in Figure 5.

Figure 6: Decision-spine According to the conventional decision-theoretic logic, the act of choice within a single decision spine (i.e., gaining commitment of the participating group to implement the course of action prescribed within the spine as preferred or optimal) solves the problem and therefore terminates the decision-making and the co-creation activities that resulted in the prescription of this choice.lxxxvi Narrative accounts of the decision making process that led to the chosen action tend to be justificatory, rather than creative.lxxxvii These justificatory stories trace back along paths framed, as a result of previous co-creation activities within the decision spine, starting from the point of choice. Now divorced from creativity, these justificatory narratives ignore (as irrelevant or confusing) any narratives that traverse pathways that were not constrained within the spine. This has been shown to be a major contributor to the failures of effort to support decision-making, predicated on this logic. In a survey of attempts to implement, in a wide range of organizational contexts, courses of action prescribed as true solutions through decision conferencing and related group decision support techniques, Humphreys and Nappelbaumlxxxviii found that the process of proceduralizing context was frequently too limited and narrowly driven by what could be structured within the decision-analytic model employed, resulting in failure to identify important side effects of the modelled effects and innovative pathways to goals. Moreover the co-creation activities involved in trawling knowledge external to the decision spine was often too narrowly focused, resulting in underestimation of the value of (or even the existence of) a variety of sources of potentially relevant knowledge. In general, interaction contextlxxxix from the decision-making

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groups co-creation activities too narrow: resulting in missing of opportunities and creation of problems for decision implementation management. 4.2.3 The Decision Hedgehog The decision spine is located in the subject matter of co-creation activities at level 5 exploring what needs to be thought about. Such explorations are not necessarily bounded within the spine, but can extend throughout the unbounded body of an imaginary and symbolic decision-hedgehogxc a body without organs in the language of Deleuze and Guattarixci.

Figure 7: Decision Hedgehog: Open for Exploration and Nurturance in the Plane of the Symbolic/Imaginary Conceptualizing decision making as learningxcii requires gaining feed back from the effects of embarking on chosen courses of action (pricking the real to gain information) that is not treated in isolation, like a diagnosis. Instead, this process, to allow learning through generating new knowledge relevant to decision making, must extend the rhizome that constitutes the body-without-organs of the decision-hedgehog in which the roots of the decision spines are located, enriching the contextual knowledge for subsequent decision making along a plethora of other spines rooted in this rhizome (Figure 7).

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Figure 8: Decision-Hedgehog Cross-section: Decision-spines Rooted in the Rhizome The decision-hedgehog rhizome is not simply a reference structure or high-level frame informing the selection of decision spines. Deleuze and Guattarixciii point out:
The rhizome is altogether different. Make a map, not a tracing. What distinguishes the map from the tracing is that it is entirely oriented toward an experimentation in contact with the realIt is itself part of the rhizome. The map is open and connectable in all of its dimensions; it is detachable, reversible, and susceptible to constant modifications. It can be torn, reversed, adapted to any kind of mounting, reworked by an individual, group or social formation.

At the personal level, in co-creative decision-making activities extending beyond a specific decision spine, the decision hedgehog rhizome is experienced as a map formed through exploring potential pathways to develop contextual knowledge, rather than as a tracing of reality. Resources for conceptualization of collaborative outcomes may be innovatively accessed and their transformation imagined through voyages along these pathways, doubled in imagination and in reality. At the social level, in co-creative decision making activities extending beyond a specific decision spine, the rhizome is activated, extended and revised by the participants in the group, through making and exchanging stories about discovery and innovation in the conceptualization, utilization and transformation of resources for living.xciv 4.2.4 Co-creation Activity Nurturing the Decision-Hedgehog Rhizome In co- creative decision making activities, freed for the hegemony of the decision spine imposed by conventional decision theoretic logic, the fundamental dilemma about how to proceed, at least at the outset is: whether to aim for immediate decision taking (action) by spiralling down a decision spine, with the aim to prick the real or whether to nurture the decision hedgehogs body-without-organs by telling and exchanging stories which nurtures the decision hedgehogs rhizome: increasing its semantic diversity

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and intensity of connections. Thus two kinds of story telling are intertwined in co-creative decision-making activities: Telling and exchanging stories that support the process of spiralling down a spine to prick the real, and the interpretation of the subsequent impact of the decision on local reality, and Telling and exchanging stories that nurture the decision-hedgehog, as collaborating groups construct maps of potential possibilities and opportunities, thus enriching contextual knowledge. Co-creative decision-making activities should not presume the hegemony of either type of outcome in directing the design of decision-making processes and support for these processes. Rather, co-creative activities should aim for a dynamic balance between them, through the manner in which the processes supporting their generation are designed. The fundamental aim of co-creation activities that nurture the decision hedgehog is to enrich contextual knowledge for decision making through co-authoring of narratives within the rhizome. These activities can be linked with the localized co-creation activities involved in proceduralizing parts of this contextual knowledge, on a conditional basis, in constructing and exploring decision-spines. All these activities are doubled in the parallel planes of the imaginary/symbolic and the real.xcv Participants engage in real co-creation activities in attempting to move through the decision process, working with imaginary ideas and developing a variety of open symbolic representations within a rhizome rather than a frame.xcvi When we communicate these, we engage in real co-creation activities using our imagination to create symbolic content and our production skills to communicate this content as mediated narrative.

Figure 9: Converging Co-creation Processes in GDACS

4.2.5 Group Decision Authoring and Communication Support (GDACS) Group Communication and communication support GDACS, as described by Humphreys and Jonesxcvii aims to provide comprehensive support for co-creation activities that can both inform and improve the process of developing proceduralized context at levels 5 and 4 within a decision spine and also nurture the rhizome wherein decision-spines are rooted in the Decision-Hedgehogs body-without organs.

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GDACS provides this comprehensive support through the convergence of the co-creation processes shown in Figure 8. Facilitating Environments for GDACS range from purpose built decision conferencing rooms and Podsxcviii, Accelerated Solutions Environmentsxcix and Flexible Learning Environmentsc to wireless hotspots and public infrastructure designed by architects to enable group work in the internet-enabled laptop age. Such environments typically create knowledge-rich arenas; involve interactive technology, and feedback systems (visual and data). Event design and production support may be provided, together with spatial facilitation of group, private and interpersonal co-creation activities.ci In most cases the idea of the proscenium exists: incorporating a back stage and a front stage, where participants co-creation activities are enabled, and mediated, by facilitators and support teams. The use of participatory multimedia and authoring in rich language enables us to create a stage on which the players, actors, authors, stagehands and audience are all present in co-creation activities and where the proscenium shifts to the interface with the screen. The collaborative interactions that elicit conditions of coming to know within the framework of the proscenium, the interaction with the physical environment in constructing the rhizome that provides the pathways leading through the proscenium background (the scene of mise-en-scene), the actors and improvisation on the stage and the crafts associated with production of signifying artefacts in the proscenium foreground (or arena; theatre-in theround), combine to enable sense-making and contingent encounters with the real. The language of the design process has emerged as a means by which groups co-create outcomes at every level of GDACS. Such language is used to enable the design of procedures for decision-making as well as providing frames within which the decisions may be manifest supporting rapid iterative cycles of decision-making, anchored within artefacts leading in turn to rapid cycles of reflection and reaction in cocreation activities This convergence also raises new challenges for how we design, organize and support co-creative decision making in groups, the physical environments we construct for ourselves to work in, the organization of our knowledge systems, and how we organize ourselves to achieve desired outcomes. 4.2.6 Implications Group decisionmaking, support and controlling for collaborative outcomes are complex processes that need to be conceptually understood at both macro (in terms of implications and outcomes) and micro levels (in terms of individual decision-making involved). The purpose of this section was to take the reader through various levels of the decision-making process and draw implications from this process, while stressing that group decision making and support needs to be understood and enabled at the meso level, in the form of collaborative authoring at group and community levels. We have presented some approaches that can be adopted to enable group decision-making in the context of co-creation. However, group decision-making theory has not yet adequately answered questions about decision making at community and network levels: when co-creation creates decision markets that involve vast amounts of networked consumers. As co-creation represents a shift in paradigmatic thinking, this next level practice and layer of the group decision making process can only be understood by studying the communities in which (facilitated) group decision-making occurs. Since co-creation expands the boundaries of organizations, it also increases the complexity of group decision-making processes. Making the customer a partner in the value creation process cannot result in the firm making the crucial decisions. Rather, the customer has to be provided with a space (such as a market place) in which he can make his/her own decisions. At the same time, the firm has to learn from naturally occurring group decision-making processes, as well as from the contexts in which these occur

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(e.g. bargaining, shifts in value perception depending on context and presentation of products, cultural differences etc.). Ultimately, decision-making is a key process relating to how perceptions are formed and how experience is rendered by and among customers. These decisions result not just in experiences, but representations of information and knowledge owned by the consumer. In order to better understand these knowledge processes we will now have a closer look at the development of customer knowledge, as well as approaches to create and transfer such organizational knowledge in the context of co-creation. 4.3 Co-creation and Organizational Knowledge Processes In the 21st century knowledge has become a key factor in economic life and an indispensable asset for corporations as we are facing shifts in the sources of wealth creation. In a knowledge economy productivity depends largely on the ways in which knowledge is applied to itself in order to create new knowledge and valuecii. Thus, knowledge has become the main source for competitive advantage and the chief ingredient of what we buy and sell; it represents the new raw material we work with.ciii For organizations this means that knowledge work and the knowledge workers have become a central component of value creation and that people as the source of all creativity and organizational knowledge are being rediscovered. From a knowledge perspective, co-creation enhances the processes related to creativity and knowledge work by turning customers into active partners for the creation of value, rather than using customer feedback as a passive resource of organizational knowledge. This holds important implications for managing key processes like knowledge creation and transfer that will have to be taken into account when implementing co-creation approaches. We will outline the consequences of co-creation as collaborative innovation with customers initiated and led by the firm at a later stage (see section 5) and first look into practical accounts of enabling organizational knowledge processes and customer knowledge creation. 4.3.1 Approaches to the Co-creation of Organizational Knowledge In the co-creation literature reviewed by us, we have identified two recent approaches involving and potentially enhancing organizational knowledge processes. a) Customer Value Chain Involvement (CVCI)civ b) Customer Knowledge Development (CKD)cv Both approaches can be seen as an attempt to incorporate important customer knowledge, feedback and experience in order to enhance value creation. This can happen either by involving the customer in the companys innovation processes or by triggering interaction and engagement with (and among) consumers. CKD aims to better incorporate customer knowledge based on experience with a product, while developing customer knowledge and experiencing itself. CVCI, on the other hand, is described as a means to enable better innovation and value creation across the value chain by involving customers across various stages of the innovation process.cvi CKD and CVCI both try to overcome the problems associated with conventional approaches that take a more linear perspective on innovation processes and have be problematized in the pastcvii. Standard innovation processes are characterized by traditional R&D followed by market research, product launch and advertising. This traditional value-chain view is that value creation is synchronic and

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linear, rather than transitive and interactive.cviii As a consequence, most R&D activities remain detached from other value creating processes and are lacking in focus on the development of customer oriented products and services. Moreover, critical knowledge from employees, as well as customer expertise, is not exhaustively transferred and applied across the value chain and thus not sufficiently inherent in a companys product offerings.cix Since organizations mainly innovate through internal and/or external communities of practice, cx organizations need to make use of innovation practices complementing R&D, as well as market research activities. Communities of practice (COPs) have been described as the sources of knowledge creation and transfer in organizations. They also have to be understood as collectives (here: of customers or employees) that jointly create and share knowledge through shared practice and social interaction.cxi In COPs people informally gather around a shared purpose or common interest in order to solve problems, learn or develop new ideas and solutions. Hence, newer innovation approaches aim to create usergenerated markets by involving consumers in alternative modes of knowledge production and product development such as, user communities, crowdsourcing and open innovation. The two approaches identified by us share some of the aims and aspects of such knowledge communities. While CVCI tends to involve smaller groups of target customers and actively engages them in innovation or value improvement, CKD seems to be oriented towards the use of ICTs, such as customer engagement platforms, Virtual Customer Environments (VCEs)cxii and other Innovation Technologies (IVTs).cxiii By means of technology, organizations can create larger (virtual) innovation and practice communities, as well as decision markets and more dispersed and diversified innovation networks. In these communities, a wide range of consumers interact, solve problems and create new ideas. Considering the intrinsic and social nature of knowledge, however, we believe that the use of ICTs has its limitations and is not free from challenges. ICTs can be seen as a promising means to enhance and expand on the benefits and possibilities of customer value chain involvement. However, the problem with focusing primarily on ICT for enabling organizational knowledge is that in facilitating communication, as well as information capture and transfer, the technology also reduces organizational knowledge to an object that can be captured, stored and applied. In order to better understand the challenges related to enabling customer knowledge creation and transfer, let us take a brief look at the nature of knowledge itself. 4.3.2 Co-creation as Relational Practice of Customer Knowledge There is little research on knowledge processes in the context of co-creation. At present, we can find manifold writings in the organizational literature announcing the advent of new forms of organizing with the potential of improving organizational innovation and performance.cxiv How this is achieved, however, is not yet fully understood. While customer knowledge as the main source of competitive advantage has been widely acknowledged, particularly in relational marketing, the understanding of what knowledge is and how it can be enabled, remains underdeveloped.cxv Knowledge has been described as an important operant resource that can potentiate service and thus enable competitive advantage.cxvi However, the problem of most approaches is that knowledge is treated as an object that can be managed, codified and easily applied (i.e. transferred into new products). Co-creation approaches, in particular those focusing primarily on the use of ICTs, tend to refer to customer knowledge as a static object that can be downloaded and applied in order to enrich the qualities of a product (and thus the experiences and values associated with

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it). We argue however, that the most important qualities of knowledge are embodied and emerge from inuse experience. They are thus difficult to codify and even more difficult to capture. Recent research addresses the problems associated with looking as knowledge as an object.cxvii While the functional view assumes that knowledge is a discrete cognitive entity that people and organizations can possess, the processual perspective treats knowledge as a relational practice, emphasizing that knowledge is rooted in practice and emerging from action and social relationships.cxviii As knowledge is transferred through the participation in social networks2, it should not be viewed as a static object that can be codified, such as text through use of ICTs. focus on the tools meant to support knowledge processes diverts attention from the inherent qualities of the relationships built in inventive communities, as well as the quality of the knowledge emerging from peoples interactions and communication. Innovation technologies simply store data, which we can use as information for improving innovation by applying specific syntactical rules. How information, data and symbols are turned into new knowledge and ultimately value, however, entirely depends on our subjective interpretation and anticipation of the context in which we innovate and receive feedback from others. This is also evident in collective decision-making processes. Our more processual view on organizational knowledge implies that, enabling knowledge processes, such as creativity and innovation, cannot be achieved by merely codifying and capturing knowledge stemming from customer feedback or engagement platforms. Instead we agree with authors who stress that we should focus on the relationship between co-creation and knowledge transfer in organizations)cxix, as well as how co-creation can foster different forms of organizational learning.cxx Research furthermore suggests that breakthrough innovation is likely to be rooted in peoples tacit knowledge. Tacit knowing stems from personal experience and is not easily expressed. It is also difficult and costly to transfercxxi. Knowledge transfer, however, builds the basis for competitive advantage in firms and we have to focus on enabling it within and across organizationscxxii. Co-creation holds the potential of enabling knowledge transfer by facilitating social interaction, group decision-making, learning and communication. Moreover, transfer of knowledge is likely to be the most important knowledge process, as the creation of knowledge emerges from knowledge transferred between individuals through socialization, triggering the creation of new and the (re-)use of available knowledge. Within this spiral of knowledge creationcxxiii, knowledge transfer can be viewed as the trigger and most important activity in customer knowledge development. Instead of focusing on task orientated customer involvement with the aim of producing numerous new ideas, then, we should focus more on the way in which people interact and collaborate when innovating, while also paying more attention to the quality (and feasibility) of ideas produced. Consequently, the question of which technology to use should not be seen as the most critical success factor for co-creation initiatives. The question that matters most is that of how technology is able to support the formation of genuine and generative relationships, enabling, accelerating meaningful dialogue and the production of knowledge, as well as the development of ideas that have direct market value for organizations (as well as internal value). Consequently, the managerial focus of co-creation becomes not the codification and capture of customer knowledge or the implementation of customer engagement and innovation platforms. Instead, co-creation management should be more about the ability to build motivation and trust among the

Naturally occurring social networks are fundamentally different from social networking platforms and other tools built to stimulate and increase peoples connectivity/networking.

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collaborators, as well as to trigger good collaboration within the co-creating communities and among the various stakeholders of the firm. In sum, knowledge should be considered as an intrinsically social process and relational practice. This means it cannot be possessed or managed; it needs to be enabled. Knowledge, furthermore, is cultural, situational and subjective. Hence, the experience or delight associated with the consumption of a product will also vary across contexts and cultures (and so will the practice of engagement and meaning associated with it). As knowledge results from the interplay between the individual and the community, narratives and action have to be seen as the vehicles that allow us to transfer information and ideas in a way in which new knowledge is created.cxxiv New communication technologies can undoubtedly enhance the way in which we solve problems, make decisions and communicate. However, the lack multi-sensory feedback and other qualities of face-to-face interaction are yet difficult to substitute with the means of technology. 4.3.3 Implications and Challenges for Co-creation in Enabling Knowledge Processes Although customer knowledge has been described as a form of strategic capital on which most future growth of firms depends,cxxv organizational knowledge is still not understood well enough in the field of business and marketing to get the most out of co-creation processes. We believe that strategic capital is more than just the sum of the accumulated knowledge and skills gained by the firm through continuous iterative interactions with customers. Organizations have to develop their understanding of knowledge itself. Knowledge is not a static object that can be captured and managed. It is a relational process, culturally rooted in practice, which can be facilitated and enabled. As such, facilitating communication and engagement (i.e. customer and customer-firm dialogue) are at the core of knowledge production through co-creation. Information technologies can only assist with the formation of meaningful relationships on which the outcome of co-creation depends. Knowledge has been described as a process that represents peoples justified true beliefs, evolving through the interplay of cognitive and social processes such as socialization, externalization, combination and internalization.cxxvi However, knowledge cannot simply be reduced to information, norms, recipes or handbooks. When it comes to understanding engagement, social interaction and experience, we need to make sense of the cultural dimension of knowledge. We have to distinguish between important qualities of knowledge such as tacit and implicit knowledgecxxvii and need to acknowledge the cultural differences in the construction of meaning and knowledge.cxxviii Explicit knowledge can be easily communicated and codified, as well as based on standards, norms and regulations (e.g. customer dissatisfactions collected in a database). Tacit or embodied knowledge, on the other hand, is difficult to verbalize, since it is expressed through skills based on practices and (inter-) actions (how to ride a bicycle, for example). As codification ultimately limits the form and quality of knowledge, we argue that the most important aspects of customer knowledge are experience-based, emerging from knowledge in-use within a specific culture. Cultural knowledge represents the assumptions and beliefs shared by a (customer) community regarding its objectives, norms, capabilities, etc., and these beliefs are used to assign value, weight and significance to new information and knowledge. In other words, cultural knowledge is responsible for the creation of meaning an the value(s) associated with an activity or product. Ultimately, customer experiences, insights, meaning and delight differ across cultures. Examples could include the meaning associated with flying an airplane or belonging to a specific community, such as that of soccer players or online gamers. For companies this means that learning and knowledge transfer emerging from

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experienced value in use, is the single most important aspect of co-creation. Research does yet have to address how this can be best achieved. As co-creation expands the boundaries of the organization, cross-boundary translations and boundaryspanning people and practices are becoming increasingly important (networking and knowledge transfer). The customer becomes not just a resource for knowledge and innovation, but a partner of the co-creation process itself. This shift in customer relationship management and innovation practice may potentially turn core management processes upside down and result in enormous challenges in managing customer participation. As customer knowledge becomes the organizations main means of production, firms have to create spaces (or better market places) for new knowledge to emerge. This is best done by enabling knowledge processes with an adaptive co-creation framework. Co-creation is a new way of organizing that brings together the most important aspects of the knowledge work process, namely theoretical knowledge, creativity, experience, as well as the use of analytical and social skills. These build on the social interaction of various stakeholders of the firm, such as employees, suppliers, distributors and customers. From this perspective, co-creation is realized by establishing (informal) communities of practice in which people gather around a shared purpose or interest with the aim to learn an innovate.cxxix Such communities can be very fragile and temporary configurations, as peoples participation and engagement is limited unless some kind of permanent identification with a subject or issue (or indeed the community itself) occurs. Considering ever shortening product lifecycles, diversification of markets and global competition, businesses need to respond to customer demands quickly and constantly develop new and innovative products in order to create a strong brand image that increases their market share and recognition among competitors. The strategic achievement of competitive advantage requires organizations to build cumulative knowledge bases (such as customer knowledge) and to learn from past experiences (e.g. market failure). As there is no reliable way of generating secure market data, organizations need to focus on establishing long-term customer communication and knowledge sharing within and across the boundaries of the firm. Enabling a suitable co-creation context, a shared language for co-creativity and appropriate cross-boundary interchanges between the firm, customers and other stakeholders of the organization, are becoming more pertinent. A range of new organizational processes is emerging due to co-creation. This includes collaborative work and innovation with customers or customer communities that make continuous networking and meaningful interaction with various stakeholders the new imperative for businesses. 4.3.4 Practical Approaches to Customer Knowledge Development and Co-creation As organizations strive to turn implicit knowledge held by their customers into explicit knowledge that can be codified and managed, research needs to support businesses by providing a better understanding of the nature of the processes relate to organizational knowledge, such as collaboration, identification and engagement, creativity, as well as innovation itself. As a recent survey among companies confirms there seems to be a broad agreement that innovation is the key to growth, as well as that understanding customer need is a key aspect to better innovation.cxxx However, the same study reports that less than 5% of companies seem to have an internal understanding and organization-wide agreement on what a customer need actually is.

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There is little doubt that firms have to learn what customer needs are in order to be able to consistently and systematically uncover the hidden opportunities for value creation and growth by innovation. Most importantly, it seems to be essential for companies to uncover what jobs customers are actually trying to get done and derive hidden opportunities for the firm from developing a better understanding of customer needs.cxxxi While more traditional approaches to customer feedback focus on a one-way flow of customer feedback back into the organization, co-creation makes use of multiple ways of knowledge creation and sharing. Knowledge is mutually produced and shared among customer, employees, as well as between customers and the firm. We have identified two approaches for the elicitation and transfer of customer knowledge: customer requirement statements and co-creation as a strategy or knowledge transfer and innovation. While the first represents the more traditional (nonetheless very valuable) way of capturing customer feedback, the latter focuses more on the benefits achieved through collaborative knowledge creation. Ulwick and Bettencourtcxxxii outline a set of requirements and rules for developing customer requirement statements (see Table 5). Such statements aim to help companies who have vague customer inputs (about their unmet needs), don't have a comprehensive and shared understanding of what a customer need is and have difficulty in standardizing customer input. The core of the approach is consistent in the logic of cocreation in the sense of an outside-in, inductive approach to customer need assessment: value has to be measured from a user's not companys perspective.

Table 5: Capturing Consumer Feedback through Customer Requirement Statements Six characteristics of customer requirement statements 1. 2. 3. 4. 5. 6. The statement must reflect the customers definition of value The statement must have universal acceptance The statement must be relevant now and in the future The statement must prompt a course of action The statements meaning must not be open to interpretation The statement itself must not confound the way it or other statements are prioritized

Rules for creating customer requirement statements Rule 1: Rule 2: Rule 3: Rule 4: Rule 5: Rule 6: When capturing customer requirements, the unit of analysis must be the job the customer is trying to get done The requirement statement must not include or make mention of a technology, solution or product feature The requirement statement must not include ambiguous terms The requirement statement must be brief The terminology used in the requirement statements must be consistent The requirement statements must have a consistent structure, content and format

* from Ulwick and Bettencourt (2008)

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The second approach, outlined by Chungcxxxiii, develops co-creation processes in order to uncover customer needs by facilitating customer-firm interaction. Based on a case study with a consultancy firm offering knowledge intensive services, it stresses the value of co-creation as a strategy for organizational learning and innovation. Through intense communication and interaction with their customers, firms are able to better understand their customers and transfer customer knowledge across the organization (spread it among employees). This process also allows them to create new information channels between customers and employees, leverage customer knowledge (in particular tacit knowledge and experience) as well as create new knowledge, insight and ideas by using brainstorming and group interaction techniques. Co-creation processes form a loop across the following domains: 1. Understanding the Customer Enable continuous dialogue Create a shared understanding with the customer Build trust 2. Creating Information Channels Establish new information channels and joint interaction (in Chungs case consulting service & art classes) 3. Leveraging Knowledge Enable mutual learning btw. customers and firm by letting customers share their personal experiences and perceptions Allow internal dialogue among employees dealing with customers with those who don't deal with customers Facilitate customers interaction and the sharing of experience with other customers 4. Learning and Creating Knowledge: translate/transfer customer (tacit) knowledge by use of Brainstorming to determine relevance of information Dissemination of resulting filtered (essential) knowledge internally for in-house discussions and workshops Find solutions to problems, but also learn communication and interpersonal skills in workshops and discussions Apply learned skills in interaction with customers to facilitate co-creation/learning from customers 5. Iterative feedback Conduct iterative circles of the co-creation loop Feed back learning and insight into the co-creation process; trigger further reflection and dialogue in order to develop enhanced services and new pathways to value creation for the firm

This case study of the service-centric firm PSK (a centre for creative art) supports the notion that cocreation can help to establish a new process for the creation and transfer of knowledge, including customer-to-firm and firm-to-customer, as well as across the firm and among customers. In other words, customers interact with a company to learn from each other and the company captures customer knowledge. Co-creation further turns the customer form a passive service recipient and knowledge source into an active developer and owner of firm knowledge. The study also finds that companies need to invest in continuous, sincere and long term relationships with their customers, as co-creation involves factors

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such as shared understanding, trust and personal views, which are difficult to understand and manage. Finally, the study concludes that co-creation is very valuable strategic tool for service-centered companies to improve organizational learning and innovation. More focus on tangible outcomes, including quantitative measures, is needed to make the value of co-creation for companies more explicit. Taken together, both of the outlined approaches aim to uncover customer needs in order to make hidden opportunities explicit by elucidating customer knowledge and finally grow through innovation. Although facilitating different knowledge processes relating to customer knowledge, these perspectives are not mutually exclusive and have the potential to complement each other in actual practice. In addition, we believe that Ulwick and Bettencourtcxxxiv pose useful questions to elucidate customer needs that can enhance both traditional, as well as more collaborative forms of customer knowledge elicitation (see Table 6). Table 6: Useful Questions to Elucidate Customer Needs * Question What job does the customer want to get done? What makes this job or parts of it frustrating? What makes the job time consuming? Aim Identify customer requirements/needs Identify pitfalls that need to be addressed in NPD Identify where the (new) product enhances the experience and/or speeds up the process Identify new opportunities by reducing instabilities /deficiencies in the existing product Find ways to boost efficiency and create a new value innovation

What causes this job to go off track?

What aspects of this job are wasteful?

* Adapted from Ulwick and Bettencourt (2008)

4.3.5 Implications for Enabling Knowledge Creation and Transfer through Co-creation Co-creation represents a new trend in innovation practice, marketing innovation and customer relationship management. In a technology-enabled world of connected consumers, the consumer holds increasing know-how.cxxxv Consumers are no longer passive recipients of brand offers, but able to accept or reject company claims based on their own experience and knowledge.cxxxvi This is especially evident in the context of product reviews, brand identification and loyalty, as well corporate reputation and social responsibility. Co-creation aims to enhance organizational knowledge processes by involving the customer in the creation of meaning and value. Two approaches identified by us are about either engaging the customer along the value chaincxxxvii or expanding the organization by implementing customer engagement and knowledge development platforms.cxxxviii As such, co-creation blurs the boundaries of the firm by outsourcing innovation and value creation to the customer. In fact, it is turning the consumer into an

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active partner for the creation of future value. This mutual relationship affects both consumer and company. It re-shapes the way in which we think, interact and innovate. Most notably, customers are increasingly becoming change agents of the firm, as well as the actual owners of organizations main means of production: knowledge. Making the customer a co-producer or co-creator seeks to generate more value than traditional transactions. Such interaction implies a longer relationship and the possibility to attain more knowledge through a more refined role distributioncxxxix and it is generally assumed that a breakthrough is more likely to occur with more frequent and intense conversations between collaborators from diverse backgroundscxl Co-creation also allows for the formation of a more intimate relationship between the technology originator and the customer, as a joint development project where both contribute their expertise.cxli Consequently, it is not just the frequency of interaction, but the quality of the relationship that companies form with and facilitate among their customers, which will determine how knowledge is created, shared and transferred. In the context of co-creation, knowledge creation and transfer have to be understood as an iterative process involving the construction and de-construction of experience. As such, co-creation processes go through various iterative circles of value development (see Figure 10).

Figure 10: Knowledge and Co-creation: A Continuous Process Over time, co-creation can lead to what we might call gradual rather than radical breakthrough by engaging customers and other stakeholders in experiencing and re-creating existing products. According

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to this view, co-creation initiatives have to go through various stages in order to achieve real value enhancement of a product. The number of iterations needed to increase the likelihood of real breakthrough is still an under-researched area. Our review, however, stresses that co-creation holds the potential of enabling organizational learning by continuously involving various actors, including their knowledge production, in a circular flow between product and experience. A suggestion of how this facilitation can be achieved is discussed in the next section of this report.

4.4 Enabling Knowledge: Using Co-creation as a Research Tool How customer co-produced knowledge contributes to various innovation tasks is yet not fully understood.cxlii Customer input during the innovation process is complex, as innovation, uncertainty and customer behaviour have to be linked in a service provision context. Recent literature stresses the need for new and more participatory methods in market research.cxliii To this end, qualitative research seems to be the most promising and effective method of developing a conceptual framework for co-creation processes. Although it has been argued that the case study approach allows for the empirical investigation of a contemporary phenomenon within its real-life context,cxliv experimentscxlv and ethnography have been identified as a research technique that may provide us with better insights than traditional marketing research.cxlvi While ethnography is increasingly popular for researching users of technology products, experiments seem to be a better means to understand, identify and predict variables involved in complex decision making processes, such as purchasing, voting and engaging. However, cocreativity is a dynamic and situational process and isolating it from its real-life context brings with it fundamental risks. In order to make co-creation work, it is particularly important to understand the quality of the cocreation (research) process, as well as the tools that can enable an adequate understanding and management of knowledge processes and value development within the co-creation context. Some firms have created special consumer panels to help assess their innovation and communications. Market researchers are thus compelled to adapt to a more interactive world and research in a participatory manner. Action research, initially practiced as a form of collaborative research, shares some of cocreations main objectives. Maklan and colleaguescxlvii have described collaborative research as follows:
The research is conducted with the commitment of the researched and is conducted in their interest, as opposed to the interest of the researcher (or the researchers organisation). The researched wish to improve their day-to-day performance in a matter of immediate importance to them. Research is not conducted to produce shelfware or justification for decisions already taken. The focal researcher is, in fact, a co-researcher, a peer-member of the research team. The focal researcher provides expertise to the process, but is conscious of his or her role and seeks to ensure that her/his coresearchers lead the research. In a business context of AR, coresearchers are normally managers who face important decisions affecting their day-to-day operational performance. The research process is iterative. Knowledge is created through cycles of reflection upon practice, experimentation, further reflection, sharing reflections, further experimentation, and so forth. Research is a learning process rather than a discrete project, and co-researchers determine the length of the process and its outputs. The validity and the success of the research are judged by the extent to which co-researchers act upon the learning they generate action based upon informed and committed action (Clark 1972). It is not essential that the knowledge generated is generalisable or repeatable, only that the co-researchers improve their day-to-day practice through committed action, and that the process of creating knowledge is

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transparent and observable. The extent to which managers commit to action, based upon the information and the outcomes of collaboration generated through the AR project, is therefore a critical test of the validity of the method. Arguably, it is precisely because managers design both the research objectives and its methods, which generate the capabilities to improve their day-to-day performance, that informed commitment to action arises (Argyris 1973).

As outlined above, action research has the ability to blend and integrate the features of traditional and more advanced research methods, such as focused group discussions with ethnographic methods and experimental settings. Some scholars predict that market researchers will increasingly use participatory research methods to support co-creation efforts in the future and stress that AR can be a critical test for any research tool itself.cxlviii Looking at co-creation as a research tool (or better as the co-creation of a research instrument) that can help us understand co-creativity while enabling the process itself is a new and interesting perspective. However, we also have to accept the complex and situational nature of cocreation, which makes the involvement of highly skilled researchers and facilitators paramount to achieve the benefits and insights possible by involving consumers.

4.4.1 Implications of using Co-creation as a Research Tool In particular, market researchers need to adopt new and collaborative research methodologies in order to understand the processes related to the co-creation of value. We agree with contemporary authors who indicate that the process of value identification must be an iterative process between the company and its customers. Due to the need for iterative learning and development, action research can presently be regarded as one of the most suited participative research methods available.cxlix As such, action research can be a tool or method used by market researchers to assist and enhance the process of co-creation. Hence, it has been used in a wide range of fields, from health care professions, IT managers, police officers, educators and disadvantaged communities in the developing world.cl Maklan and colleagues have identified the following work cycles at Wage.com. Each cycle began with an understanding of the problem and ended with insights that could feed into the next cycle, thereby ensuring learning over time:
1) Problem understanding Research team Agree project Gather initial data Analyze data 2) Problem understanding Agree next steps Gather data Analyze data Problem understanding Agree next steps Gather data Analyze data

3)

By engaging in cycles of social construction focused around peoples informed and committed action, co-creativity is based on the co-created knowing of its participants.cli Co-creation can thus be

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regarded a form of action research. Through the cycles of assessment and reflection triggered by it, managers have been reported to better understand current capabilities, such as brand, customer insight and customer base.clii Nevertheless, we believe that the search for new and more participatory research techniques to both enable and understand co-creation is still in its infancy. One possible approach would be to create real world environments in which we can simulate co-creation processes in a way that comes as close as possible to real world experiencing. Audio-visual composition and analysis are very promising means to capture and understand co-creativity. Enabling the co-creation process itself in such a setting would allow us to visualize what actually happens when consumers engage and interact in innovation processes across the value chain. This is important, as the value chain does not finish with the final delivery of a good or service to the customer. The engagement and experience of the customer starts with experiencing and sharing a product with others. At that point a product develops a life of its own and new value associated with the product are co-created by the user community (and the community of which the use is part of). Co-creation has thus to be a continuous and ongoing process, which is centred around the creation of new pathways to value trough experiencing and developing new worlds of engagement and reflectivity.

5. Managing Co-creation Building on our review of co-creation as a process relating to psychoanalysis, group decision making, knowledge processes and action research, we will summarize and outline some questions that need to be considered when implementing co-creation frameworks and approaches. Since co-creation of value is still a very young and practically motivated discipline, we identify some generic questions (though not necessarily lacking in complexity) that have to be addressed when implementing co-creation. We see these dimensions as essential in order to understand enablers of good co-creation and its benefits. These questions also point to important areas for future research that can help in the development of new practices and pathways for the creation of value in our economy.

5.1 Co-creating Value with the Consumer: Dimensions to Consider In the course of reviewing different bodies of literature related to the co-creation of value, we have identified various dimensions that should be considered when implementing co-creation frameworks. Associated (and hence not necessarily mutually exclusive) concepts and approaches, such as open innovation (e.g. Linux operating system), mass customization (e.g. Nike sneaker portal), user generated content (e.g. youtube.com), co-production (e.g. Ikea), mass-collaboration (e.g. Wikipedia) and collaborative innovation (e.g. Airbus) all share some elements of purpose-driven innovation, consumer involvement and/or cross-boundary collaboration to some degree. While mass collaboration may be mainly user-driven, other approaches tend to be initiated and orchestrated by the firm. In addition, innovation may occur between firms (inter-organizational cocreation), within the organization (intra-organizational co-creation), as well as in the market place or specific communities (extra-organizational co-creation). As human actors cluster around certain purposes/issues in order to innovate, collaboration processes often include tools and technologies facilitating the social interactions necessary for co-creation to occur. Consumer involvement, more particularly, centres around the idea of creating some form of consumer community, which brings together

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various stakeholders, such as customers with developers and marketers, or even suppliers and distributors.

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All co-creation approaches share two main features: a) the expansion of organizational boundaries and b) the involvement of the consumer. Co creation as collaborative innovation with customers adds a third dimension c) focus on co-creating new value(s) with customers initiated by the firm. The latter mainly builds on existing goods or services and aims to iteratively improve those in order to strengthen existing or to identify and build new business and service models. The way in which these features unfold, however, differs from context to context. While initially cocreation seems to have focused mainly on personalized value, newer approaches (especially those involving ICTs) have expanded their meaning and practice to what in more general terms could be described as customer value-chain involvement (CVCI).cliii Co-creation, as defined in this report, stands for creative collaboration processes between an organization and its customers. Depending on the size and market positioning of the firm, the ways in which this collaboration takes place may vary. We have identified some generic questions related to consumer involvement, which companies have to systematically answer when thinking about co-creation strategies: Who will be involved? For what purpose? Where in the innovation process does it occur? How much involvement should there be? How long should people be involved? How should consumers be motivated or incentivized?

5.1.1 Who will be involved? The locus of co-creation control differs for different product development or innovation regimes. Traditional methods imply co-creation of value for the consumer, while newer forms of value creation are done either by consumers only (e.g. mass collaboration) or jointly with the consumer. Depending on cocreation objectives and practical constraints, the latter may involve existing customers or customers of competing products and non-users, making up latent customer and latent user groups (Figure 11). As Mohanbir Sawhney has noted:
Most efforts at customer understanding are focused on current customers and currently served markets. To increase the chances of creating breakthrough insights, you need to escape the tyranny of the served market by looking beyond the customers in your customer base and the products in your portfolio. To expand the peripheral vision, you should try to understand the customers who dont do business with you, and non-users who dont do business with anybody in the category.cliv

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Figure 11: Who will be involved? Although involving actual customers is needed in order to consolidate existing markets and further saturate customer segments, the creation of value outside existing markets may benefit from addressing latent needs and requirements of non-users, latent customers and latent users. In addition, competitors customers can be included in order to develop better market intelligence and know-how in relation to competing strategies and positioning. A definition of the ideal combination of participants for a co-creation initiative is an ambitious task, especially if it entails a continuous involvement of various stakeholders. In a globalized and networked economy, the range of potential stakeholders to be included is widening. Ultimately, the co-creation context, including practical constraints, will determine whom to include and for what reason. The value of involving stakeholders other than existing customers and company representatives can be gradually tested and expanded over time.

In the context of complex product innovation, such as technology, users themselves (usually customers) have been divided into early adopter, early majority and innovator groups, who will co-create with either marketing representatives, R&D experts, or both (Table 7). Who will be involved then depends on a configuration of innovation objective (degree of radicalness of innovation and discovery vs incubation). Genuine breakthrough innovations, which are generally considered rare in firm-consumer cocreation, for example, are best achieved by involving both R&D and marketing representatives, along with consumers who have been profiled as Innovators.clv The degree to which such schemas can be applied to less tangible products, such as services, is unclear. Overall, the general tenet that diversity breeds creativity may be the only consensus that holds across sectors, consumer groups and insight/innovation objectives.

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Table 7: Requirements for consumer involvement in innovation *

Technologically really new Discovery Participants Company Consumers Stimulus Type Familiarity Interaction Type Level Deriving of info Unstructured For Directly Structured For Directly and/or indirectly Need-driven Familiar Product-driven Unfamiliar Mainly R&D Early adopters Mainly R&D Early majority Incubation

Trend-break really new Discovery Incubation

Breakthrough Discovery Incubation

Mainly marketing Early majority

Mainly marketing Early majority

Both R&D and marketing Innovators

Both R&D and marketing Innovators

Product-driven Familiar

Product-driven Familiar

Need-driven Unfamiliar

Product-driven Unfamiliar

Unstructured With Indirectly

Structured With Directly and/or indirectly

Unstructured By Indirectly

Unstructured By Directly and/or indirectly

Outcome Type of info Addresses Explorative Mainly R&D Experimental Mainly marketing Explorative Mainly marketing Experimental Mainly R&D Explorative Both R&D and marketing Experimental Both R&D and marketing

* Reproduced from Janssen and Dankbaar (2008)

5.1.2 For what purpose? Co-creation raises important questions about innovation focus. On the one hand, it may be used to develop a specific solution to a problem or to develop a specific product, innovating for or within a specific innovation search-field. We would call this purpose driven co-creation. On the other hand, co-creation may not be driven by any purpose at all and practiced simply in order to produce new ideas that allow for an opening of entirely new opportunities. In addition, the objective may be to either continuously improve existing products or create radically new ones. Finally, a question of purpose and customer value may be what form of customer value should be created, e.g. standardized value (benefiting all customers), customized value (e.g. mass customization of goods or services) or personalized value (e.g. as in coproduced services). Context of innovation: driven by a specific problem (purpose driven) or more explorative (opportunity driven)? Nature of the product: improvement or radically new? Value to be created: standard (mass production), customized (mass customization) or personalized? Generally, the first point informs the aims of the second and third points. For example, purpose driven cocreation is often associated with continuous improvement rather than breakthrough or setting new trends, but the value to be created may not be known until consumer practices and needs have been fully explored. Some companies may have specific innovation needs and others may be more interested in either consolidating existing business areas or focus entirely on developing future pathways to value. The question of co-creation purpose and innovation focus, then, is useful to elucidate the actual innovation requirements of the firm. It may best be asked at the beginning of a co-creation initiative, addressing the question whether innovation is more specific (e.g. to solve problems, improve business routines and processes, etc) or more general (e.g. developing ideas that may be valuable for an entire market segment or any future business). Market research may help to trigger and inform this question, for example by providing data showing where consumers have unmet needs or where they are dissatisfied with existing services. In any case, organizations should allow for the emergence of new ideas, as co-creation aims to not only adapt to existing market requirements, but to fill an organizations innovation pipeline and establish future revenue streams.

5.1.3 Where in the innovation process? One of the core questions of consumer involvement is not only for what purpose the consumer will be involved, but where in the innovation process participation should take place. As outlined previously, potential customer involvement in the new product development (NPD) process have generally included the following stages: 1. 2. 3. 4. 5. Idea generation and selection Design Testing/refinement Support Marketing/commercialization

However, it seems that there are currently very few forms of customer involvement that can cover the whole range of phases in the new product development (NPD) process.clvi While many innovation-centred co-creation approaches appear to be focusing on involving existing customers in R&D and pre-use of a

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product, others focus on co-creation to improve existing products. As Dahlstenclvii has pointed out, NPD projects are typically directed by stage-gate modelsclviii in which different types of customer input are needed during different phases and stages of the innovation process. According to Reinertsenclix, customers are best involved in the front-end of innovation in order to reveal their latent needs. A 2006 article by Prandelli and colleaguesclx has given some indications of where in the NPD process companies tend to involve customers the most. The study looked at online tools to support collaboration with customers at each stage of the innovation process, as used by a sample of companies from automobile, motorcycle, consumer electronics, food and toiletries industries (hereafter, food), and toiletries industries. Results showed that the use of collaborative internet tools was particularly widespread at the idea generation stage in the form of traditional contact the firm options (90%) or feedback sessions/surveys (37%), but they were rare for the idea selection stage. Only 4% of companies in the sample allowed individual users to review other customers evaluations and none allowed for a direct interaction among those customers. At the product design stage, mass customization of functional attributes was not uncommon (30%), but lacking at more innovative levels (one of the better-known exceptions to this is P&G, which allows customers to send in their independently developed patented ideas and technologies). In sum, the study found that most of the sample companies use consumer input online to generate ideas and involve customers at the new product launch stage, especially in the form of having a New Product Area on their website. However, only the largest and relatively diversified businesses (many of them multinationals and established brand-names) tend to use online support in more than one stage of the development process, while adopting particularly innovative tools. 5.1.4 How much involvement should there be? Degrees of customer involvement have been an important aspect on the continuum of customerfocused, customer-centred and customer-driven innovation (see Table 8).clxi Co-creation between firms and customers is customer-centred innovation, where innovation occurs with customers rather than for customers (traditional innovation) or by customers (e.g. mass collaboration). In customer-centred cocreation, the organizations role is mainly that of a communicator. Intensity of involvement might be one of the more difficult questions for organizations to answer and may hence benefit most from external facilitation. Integrating customer feedback is already a big challenge for many companies. The active involvement of customers in various stages of value creation processes may be perceived as a challenge and thus create tensions that hinder the development of potential co-creation benefits. Co-creating value with the consumer means actively listening to customers and iteratively integrating suggestions and solutions. Consumer involvement may be perceived as a potentially disruptive element to organizational processes and result in limited outcomes for both parties involved. Organization, change and innovation are all social processes, which are difficult to measure and control.

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Table 8: Customer-Driven Innovation vs Older Paradigms of Customer-Centred and CustomerFocused Innovation

Customer-Driven Innovation Central entity Customer Innovation by customers Coordinator Dynamic innovation Impossible to control Emergent coordination Commercialization (Ideas are overgenerated and developed, but difficult to commercialize) for proper analysis Products and services, output interaction; interaction with products and services Sticky and tacit knowledge transfer requires high levels of human interaction Customers must be segmented Customer-Centred Innovation Customer and organization Innovation with customers Communicator Open innovation Difficult to control Difficult to coordinate Idea development (Ideas are abundant, but difficult to develop) Customer-Focused Innovation Organization Innovation for customers Innovator Closed innovation Easy to control Easy to coordinate Idea generation (Ideas are scarce)

Degree of customer involvement Role of organization Type of innovation Degree of control Degree of coordination Critical innovation stage

Types of innovation to focus on

Communication with customers: customer interaction with organization Investment in infrastructure High-quality communication needed Risk of copycats

Customer segmentation and customer analysis

Critical issues with innovation types

Analysis must be ongoing Systems must be integrated Information overload possible

* Reproduced from Desouza et al (2008)

Clearly, the issue of degrees of consumer involvement is a difficult question and needs to be carefully reflected upon within each co-creation context. At an organizational level, consumer involvement for the purpose of co-creation should be as non-disruptive as necessary, while creating maximum benefits and value for both the company and its customers. Degrees of involvement are related to questions of access, transparency, risk and dialogue, as argued by the co-creation advocates Prahalad and Ramaswamy.clxii On the one hand, strong involvement (including consumer access to information and corporate transparency) is necessary for meaningful open co-innovation. Disclosure has generally become an important corporate practice to build trust among consumers. Since access to information is expected from consumers in order to generate insights for companies, trust has become largely co-created. On the

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other hand, access and transparency in the co-creation process has lead to delicate issues about intellectual property: who owns the ideas generated when customers and organizations co-create?

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5.1.5 How long should customers be involved? Implementing co-creation not only brings up questions about the purpose and form of consumer involvement, but also how long this involvement should last. Organizations may engage customers in one-off co-creation workshops, on an ad hoc project-by-project basis, in regular intervals or even continuously. Merely keeping a channel open for customer feedback is not enough. As markets are constantly co-evolving, frequent (and constructive) interaction has been suggested as a sensible form of customer involvement (Ramaswamy, 2008). The length of consumer involvement can be both a strategic and project-based question. Strategically, advocates of co-creation of course argue that companies can no longer afford not to have continuous programmes in place to co-create value with customers. On a tactical, ad hoc or project-based level, length of involvement can be both about the distance of involvement in the product development chain (related to the question of where customers are involved) and the duration of involvement or frequency of interaction. As noted by Lundkvist and Yakhlef (2004), significant motivation may be needed to get customers cognitively mobilized, but may not be able to secure their active/sustained participation over a longer period of time. However, the quality of the interaction may compensate for fewer interactions and thus keep customers willing and happy to further engage in the co-creation process. A good example of ongoing co-creation with the same customer group along all stages of the innovation process was the Volvo XC90 NPD project, reported by Fredrik Dahlstenclxiii, which started with a trial meeting with a group of female customers (affluent professionals) in California, complementing traditional market research that was going on at the same time. Participants represented a snowball sample of the moderators acquaintances and their selection focused on qualitative aspects (rather than random selection) of target customers in the form of female professionals who owned cars, made independent decisions about car purchases and had distinct views on cars. The purpose of the first informal meeting was to extract expectations and opinions regarding SUVs in general to be used in the concept development phase. After a successful first meeting, a second meeting was set up half a year later, as a more formal focus group eliciting views more particularly about the XC90. Meetings followed whenever the Volvo management team had something to discuss. A third focus group emphasized interior and exterior design, involving the display of a full-scale plastic model in a hotel ballroom. A final meeting was held two years into the project, giving participants the opportunity to drive the final version of the XC90. The XC90 project involved 24 participants, the majority (16) of which were involved at all stages. According to Dahlsten, the $50 compensation received for each meeting by the high-earning professional participants in the XC90 project were less of an incentive than the social value they derived from the sessions and the opportunity to be heard. Given that the same managers were present in all meetings in the course of the two years, it was possible to create rapport and a shared understanding between customers and managers, as well as a common picture of the customer for managers.

5.1.6 How should customers be motivated or incentivized? Motivational issues are a key psychological aspect of co-creation, relevant also to questions like participant selection and continuous involvement of customers. Although there has been some research on consumer motivations, particularly for online communities, questions about participant motives relevant to co-creation and the best use of incentives need further empirical development. In the space of cocreation, we can think of a range of motivations for customer participation in collaboration with others or the firm that lie on a continuum between selfless (i.e. altruistic helping others) and selfish motivation (e.g. monetary rewards). Somewhere in the middle we may find intrinsic rewards like interest, fun and

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learning, or social rewards, such as social recognition or status, which are arguably a common motivation for many forms of co-creation (see Table 9). More intrinsic social rewards may be about the enjoyment of social relationships, communication and creating things together. Motivational differences may be evident in forms of crowdsourcing, which can include competitive types of events, as evident in the $1M prize given to a consumer (or group) able to solve a particular problem, or more collaborative types, such as Wikipedia, where motivations to contribute are more likely to be intrinsic. Reality is of course not as clear-cut, as less self-interested factors may play a significant role even in relatively competitive settings. One piece of research, for example, looked at the willingness of online e-group participants to help rivals in a 10,000 prize challenge to find a mathematical solution to a problem. The findings showed that the initial reason for members to join the e-group was to find out information for personal benefit. However, online interactions over time fostered an individual desire to reciprocate the help received from other group members.clxiv Research on motivations to participate in online virtual communities assigns particular importance to intrinsic motivations. A study by Fllerclxv looked at reasons for consumer engagement in virtual new product developments initiated by producers by testing the effect of several possible reasons: curiosity, dissatisfaction with existing products, intrinsic interest in innovation, to gain knowledge, to show ideas, or to get monetary rewards. The study found that intrinsic innovation interest, curiosity, and showing ideas were main determinants of consumers stated interest in future engagement for (virtual) product developments. Interestingly, expected monetary rewards had a negative effect on further participation interest, but they were positively associated with the frequency at which consumers said they would participate in the future. Because virtual engagement is a kind of work, it appears that financial rewards become important for those willing to spend more time and effort. In the study, curiosity and showing ideas motivated to participate, but did not create this kind of endurance. The only consistent positive effect on both interest and frequency of future participation was an intrinsic innovation interest.

Table 9: Four Dimensions of Participant Motives Self-orientation Extrinsic Intrinsic Material rewards, such as money, goods, etc. Interest, learning, enjoyment, etc. Other- orientation Image, status, recognition; showing ideas Helping others; belonging to a group

Naturally, motivations for participation vary a great deal between participant groups and product categories. As such, questions of motives are already implicit in participant selection criteria. For example, a brand advocate, product enthusiast or early adopter is more likely to find some intrinsic reward in collaborative innovation with a company than the average consumer. Partly as a result of the interest generated by certain products, particular types of industries (such as electronics or automotive) may also benefit more than others from the availability of highly motivated consumers. To complicate things further, co-creation objectives and settings should also matter a great deal. Consider a recent study in behavioural economicsclxvi, which tested hypotheses about private versus public generosity (prosocial behaviour). One experiment supported the idea that people give more (in the form of a charity donation depending on the number of clicks made on a computer keyboard) when their actions are public than when they are private, because image matters. Since image matters in a public setting, the question then

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is whether adding a monetary incentive to doing good (measured again as Click for Charity) would make a difference in public versus private settings. As expected, the researchers found that a monetary incentive in a private, but not public, condition motivated people more, because looking good is not relevant in private. Although co-creation participation shouldnt be confused with public generosity, research highlights the fact that both collaboration objectives (e.g. helping a company versus other consumers) and different cocreation settings are likely to have different effects. Whether or not incentives are used and how people should be motivated is a decision that has to be made carefully by companies wishing to co-create with consumers. The decision would be helped by more research testing motivational and behavioural differences of co-creation settings by taking into account variables like collaboration objectives (which may include public services versus commercial products or helping companies versus helping other consumers), self-selection, online vs offline (face-to-face) settings, and degrees of interactivity between customers as well as customers and firms. In addition, consumer perceptions of organizations or other consumers motivations to co-create are themselves important factors influencing peoples trustclxvii and choices related to co-creation. Considering also existing research on the positive effect of intrinsic motivation in creativityclxviii, a greater emphasis on (quantitative and qualitative) co-creation outcomes may be needed in future empirical work. 5.2 Critical Issues Produced by Co-creation Whom to involve, where in the innovation process and to what degree, as well as for what purpose and for how long, are all generic questions that can determine some of the most difficult strategic and managerial issues brought about by co-creating with consumers. As far as motivations by both consumers and companies are concerned, consumer trust or cynicism may be one of the challenges faced by companies. Whenever products are developed in collaboration with players outside of an organization, potential problems may also include:clxix Increased dependency on outside collaborators (e.g. customers) Cost of co-creation co-ordination Requirements of new management skills (most notably the boundary spanner) Changed management of personnel Access of customers to confidential information and proprietary skills Co-created value also produces new challenges, because experience of co-creation changes consumer expectations. Personalized products may reduce customers pain threshold for dissatisfaction, for example. As noted by a business consultant after a dissatisfying experience with his mobile phone provider:
When it works, co-creating value with customers leads to highly desirable customization, a potent way of developing loyal customers and building profitability. But when the customer/company relationship hits a snag, clxx the resulting dissatisfaction needs special handling.

By giving consumers greater control, then, co-creation brings about new challenges that have to be dealt with throughout a company, including a re-orientation of Customer Relationship Management in association with R&D and marketing. Without a doubt, however, co-creation seems to be an inescapable trend and strategy that most businesses cannot ignore. Viewed in the larger context in which it has evolved, co-creation activities and general consumer activism and communities of practice are mutually

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reinforcing trends, which put businesses under increasing pressure to co-create value with customers. These trends include consumers clxxi seeking and accessing product and company information online, across geographic boundaries providing unsolicited (customer-initiated) feedback to companies engaging in thematic consumer communities, including those fostering consumer word-ofmouth Experimenting or co-creating with other consumers to find their own solutions to problems The creation of (online) communities by consumers centred around a particular product category or brand can provide both a problem and opportunity to companies. The key for some companies is to become participants themselves or facilitators of otherwise naturally-occurring customer communities. The sportkiting community is one example where this has happenedclxxii, while LEGO is one of the most frequently mentioned cases of a company that successfully harnessed consumers independent creativity by turning it into managed or facilitated co-creativity and mass customization. In the late 1990s, the LEGO company started listening to the adult LEGO communities of practice LUGNET (the LEGO Users Group Network) and the newsgroup rec.toys.lego. LUGNET then created a forum specifically for direct communication between its members and LEGO Direct employees.clxxiii Within the LUGNET community, users create virtual and real worlds out of LEGO blocks, by use of a CAD-based configuration system. Not surprisingly, the LEGO company began to look into possibilities of harnessing the potential of this community and its processes to support LEGO product usability among younger audiences, as well as marketing and sales.clxxiv Today, the LEGO company offers both personalization and co-creation opportunities to its target customers of 4-12 year-olds. Customers can engage in virtual design and building with the option of buying a manufactured version. Virtual models can be shared with other LEGO community members. In some cases, designs are appropriated by LEGO for mass production, with design recognition given to the creator.clxxv

5.3 Benefits of Co-creation The management and marketing literature on co-creation often fails to address critical or problematic aspects of consumer involvement, but discussions of its benefits are more abundant. While consumers benefit from greater personalization and value as a result of co-creation processes, the motivation for companies to engage in co-creation is about building competitive advantage by turning just-in-time knowledge from customers into just-in-time learning for organizations. More specific innovation benefits for companies that are credited to customer involvement in product design or improvements (particularly when assisted by technologies such as the internet) have includedclxxvi: Increased speed to market Lower cost; higher profitability Better product quality and greater satisfaction Reduced risk If consumer knowledge is captured and applied successfully, co-creation with customers may also have some of the benefits evident in collaborative innovation between firms:
In new concept development, collaboration increases the number of sources of new ideas in innovation. It enables cross-fertilization and stimulation of ideas through shared knowledge and experiences. By giving

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R&D personnel greater access to a richer stock of experiences and stories, collaboration creates a greater potential for recognition of possible technology applicationsIn NPPD, greater collaboration reduces timeto-market through several means [including NPPD teams finding] better solutions faster. They draw from a wider range of knowledge sources, thereby reducing search time by bringing a greater body of knowledge to bear, and enabling more rapid and numerous design iterations.clxxvii

In a 2004 interview with Business Week, P&Gs Chief Technology Officer declared We estimated when we started about three years ago, we had about 20% of our ideas, products, and technologies that came from totally outside P&G. Today, we've got about 35%, and our target is to get to 50%. It's also a tremendous productivity enhancer. This has actually occurred with a 20% reduction in the R&D investment we make.clxxviii In business-to-consumer environments, the experience of value in co-creative processes is often evident in the delivery or usage process, potentially leading to higher levels of satisfaction. There have been examples of studies concerned with the effect of co-production of service, such as: Increasing attitudinal loyalty in processes of customer-supplier co-production (constructive customer participation in the service creation and delivery process)clxxix Higher perceived value of future co-creation, satisfaction with service recovery, and intention to co-create value in the future as a result of customer participation in a self-service service recovery process.clxxx Greater satisfaction and commitment (value congruence, intention to continue in the relationship, interest in the welfare of the other party) due to participation or cooperation with a service provider.clxxxi Increased likelihood of positive word-of-mouth with higher levels of customer participation in service delivery.clxxxii Research on the effect of customer involvement in innovation processes that can shape future product or service quality itself is less common. In addition, companies often take the beneficial effect of collaborative innovation with consumer for granted, thereby overlooking the broader impact that this process has on customer experience.clxxxiii Given that most co-creation with consumers occurs online, the impact of Virtual Customer Environment (VCE) participation may be particularly pertinent. A study based on a sample of consumers participating in IBM and Microsoft VCEs showed that positive customer interaction experiences and attitudes generated in such settings are associated with both future participation and attitudes towards the host firm (based on perceived reputation, quality consciousness, customer friendliness, etc.).clxxxiv Since co-creation occurring earlier in the value-chain can affect consumer attitudes in both the cocreation (e.g. satisfaction as a result of involvement in co-design) and consumption experience (e.g. greater satisfaction as a result of improved or innovative products), customer satisfaction may have to be viewed more holistically. Indeed, it has been argued that a full Customer Value Chain Involvement strategy, ranging from ideation stages to product bundling and customer service feedback, can build the satisfaction and delight necessary to develop generations of loyal customers.clxxxv As a result, evaluating the success of co-creation strategies calls for a multi-dimensional approach to impact assessment.

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5.4 Measuring Co-creation Outcomes: Impact Factors and KPIs Performance indicators and impact factors for co-creation outcomes are an under-researched area and there is a lack of approaches assessing innovation performance and inventive capacity over time. In general, existing measures can focus either on macro, meso or micro levels of performance (e.g. number of service improvements vs the quality of the co-creation process vs amount of ideas generated through co-creation). A distinction can furthermore be made between input and output related measurers (e.g. amount of capital annually invested in innovation vs achieved percentage of sales due to an initiative or new product release). Considering the complexity of organizational processes, as well as the dynamics of markets, the main challenges for developing Key Performance Indicators (KPIs) is twofold: a) developing context specific and meaningful sets of measures and b) establishing cause and effect relationships between input and output, as well as macro, meso and micro level measures. The measures outlined below are a selection of variables that can be taken into consideration when evaluating co-creation. As research is lacking in this area, they should be regarded as exploratory impact variables, which could be further validated as KPIs and used in a wider co-creation assessment scheme.

5.4.1 Customer Participation Variables Once a company has a consumer involvement strategy in place, the question becomes whether it actually produces the desired outcomes. As discussed in the previous section, one dimension to consider is the direct impact of participation on consumers, which could include measures like Attitudes: satisfaction with the co-creation experience, perceived efficacy/impact of personal involvement, willingness to participate in the future, etc.; identification with the brand, attitudinal loyalty and commitment to the brand, recommendation likelihood, etc Behaviours: actual future participation; behavioural loyalty (re-purchasing), word-of-mouth, etc.

5.4.2 Product Performance Variables Other measures or KPIs focus on the success or failure of generated products (Figure 11).clxxxvi One of the most basic (and subjective) measures that can be used early on in the innovation process in order to filter ideas is perceived usefulness or innovativeness. In an experiment on mobile phone service innovation, for example, it was found that service innovations suggested by users were considered to be significantly more innovative than those generated by professional service developers.clxxxvii Unfortunately, customer ideas can be highly innovate but fail to turn into actual products due to constraints like technical feasibility or lack of consumer demand. Further down the line, then, a companys co-creation outcomes may be assessed by the number of successful products that have benefited from consumer input as opposed to purely in-house NPD. Two concept cars previously featured on Volvos VCE, for example, have actually gone into production. The Adventure concept car became the XC90, and the Performance concept cars later became the S60 R and V70R models.clxxxviii Moreover, co-created innovation can lead to spill-over effects such as spin-off products or more general cross-pollination of product ideas (not depicted in the figure). Innovation success is ultimately also based on customer satisfaction with new or improved products or financial indicators.

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Figure 12: Product-focused Measures and KPIs of Innovation/Co-creation Success

5.4.2 Organizational Impact Variables Co-creation success can also be evaluated from an organizational point of view. The management and marketing authors Prahalad and Ramaswamy note that organizations in the co-creation age will have to become increasingly flexible, while managers trained in negotiation and collaboration, along with crossboundary knowledge transfer skills, will become essential. Wang and Loclxxxix mention additional sources for the development of company performance dimensions consisting not only of customer-focused performance, but also employee-based performance (e.g. personal development, empowered teams, employee satisfaction, etc.) and shareholder-based performance (e.g. revenue growth, return on assets etc.). Since co-creation also aims to improve organizational knowledge process, it may be sensible to use performance measure in relation to effective knowledge management.cxc The impact of co-creation on organizational practices, processes and performance, however, will to large extend depend on the nature of the businesses in which co-creation is applied. As shown in Figure 13, there are general areas that we can expect to be affected by co-creation. Cocreation, first of all, directly changes existing innovation practices and processes. Secondly, it can affect the quality and speed at which decisions are made in relation to the development and filtering of ideas. Thirdly, co-creation will enable creativity at individual and group level and potentially enable customer knowledge development and transfer across the organization. Since co-creation can be regarded as a new way of practicing innovation within firms, especially when employees interact with external stakeholders, this will also have an effect on how innovation is practiced and lived within a company. As implied previously, co-creation may also increase customer identification with products and the brand through active involvement, while sensitizing managers towards supporting new ideas and a more

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participatory leadership style to help foster innovation and creativity at team level. At an organizational level, customer involvement may ultimately increase overall flexibility and adaptiveness. By speeding up innovation processes themselves, co-creation has thus the potential to systematize and enable change through innovation. Finally, co-creation may also make companies more attractive for employees, as participating in direct value creation (independent of their actual work position) may trigger identification and attract future talent.

Figure 13: Organizational Impact Factors

In general, we would suggest greater focus on measuring the quality of the co-creation process itself (e.g. effect on customer and employee participants), as well as how well co-creation is integrating and systematizing other innovation and value creating business processes (e.g. R&D, marketing and sales). Measurement can be based on tangible or intangible outcomes of innovation or co-creation initiatives, including the overall innovation culture and inventive capacity of the firm. More objective and hard measures, such as return on investment (ROI) and speed to market, should be contrasted with softer factors such as organizational adaptiveness and dealing with change, as well as learning capability and effectiveness of cross-boundary knowledge transfers. These dimensions will not just be affected by cocreation, however, they will also provide useful information on how co-creation is best implemented and where change needs to be achieved. In order to find relevant impact factors and KPIs, more research is needed to establish the wider organizational impact of co-creation processes.

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5.4.3 Implications We believe KPIs for innovation and continuous improvement are an essential ingredient for the successful implementation of co-creation and innovation processes. Unfortunately, many organizations still do not have any innovation related indicators in place or they are lacking in the ability to identify meaningful measures that can help them make sense of their innovation processes, practices and outcomes. As a consequence, many key decision makers are short of information about the innovativeness of their firms, as well as how overall innovation success is actually achieved over time. One the of the challenges with developing innovation related performance indicators is that innovation activities are generally directed towards the future and most improvements build on knowledge and other intangibles which are difficult to quantify and measure. Moreover, KPIs have to be put in context in order to be interpreted in a meaningful way. While some measures may be essential and meaningful in some contexts, they may lead to a distorted picture of innovation success in others. For example, the use of discounted cash flow (DCF) and net present value (NPV) to evaluate investment opportunities may cause managers to underestimate the real returns and benefits of proceeding with investments in innovation.cxci Considering the nature of intangibles and their contribution to innovation, KPIs should at best be considered meaningful points of reference that can help practitioners reflect and understand how innovation can be improved. Furthermore, they need to be viewed within the wider picture of an organizations overall strategy and performance. We believe that process quality is a particularly neglected area in innovation measurement and would stress a need to focus more on understanding innovation practices in context while gradually developing a set of organization or industry specific indicators (e.g. benchmarks) that can be considered as valid and useful for organizations. This also relates to the question of the purpose for which innovation KPIs should be developed: internal assessment or external reporting. While internal KPIs need to be coherent in relation to what they aim to measure in context and harmonized in relation to additional (innovation) measures. Externally reported measures to clients and shareholders on the other hand need to be plausible and regarded objectively. At present, it is ultimately the practitioners choice to develop and use a meaningful mix of indicators and to sensibly interpret them in their specific organizational, innovation and industry context. Nonetheless, innovation measurement is an essential task of innovation management. Developing appropriate measures and implementing these in order to measure the short, mid and long-term impact of co-creation represent key challenges for researchers and practitioners of co-creation in the near future.

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6. Summary and Conclusions Co-creation has been a hot topic in management and marketing circles in recent years. Two related developments appear to have contributed to (or mutually reinforced) the rise of the co-creation age: changes in the mode of production sparked by the internet (most co-creation examples are technologyenabled or technology product focused), as well as re-conceptualizations of management and marketing ideas, as evident in the service-dominant logic of marketing. The latter holds that value is no longer embedded solely in the product, but (partly) created in use. However, co-creation has been defined and applied differently in different domains. The concepts multiple intellectual roots, ranging from psychoanalysis to marketing, has contributed to a lack of clarity about the meaning of co-creation. Cocreation has been defined quite broadly in marketing theory, where it has become synonymous with any customer involvement in the construction of product or brand experience and consequently perceived value. Key dimensions companies have to examine when re-thinking existing business practices with a new lens of value co-creation include customer touch-points, customer roles, personalization options as well as points in the product development process in which customers could be involved. Co-creation of value through customer experience may include anything from customer feedback to self-service. In new product development, mass customization has been an emerging theme, allowing companies to offer a range of choices to consumers who can then assemble products according to their needs. Innovation management, on the other hand, highlights the type of co-creation between companies and consumers that may occur in the beginning of the value chain, namely early product development stages. The internet community appears to have been more interested in not only consumer empowerment through co-innovation, but also the democratic potential of mass collaboration tools like Wikipedia. For companies, one of the key questions is how to either harness the benefits of existing consumer communities revolving around their product or build communities for their own customers. After giving an overview of co-creation of value, this report focused more narrowly on co-creation defined as process of collaborative creativity between organizations and consumers. We have identified three areas that have discussed co-creation processes, namely psychoanalysis, organizational decisionmaking and knowledge processes. Similar to ideas rooted in psychoanalysis, co-creation eliminates the boundary between a company and consumers and acknowledges consumers subjectivity, which is inherently idiosyncratic, contextual and experience-based. Co-creation facilitates the relationship between customer and company, while creating shared meaning and a common sense of purpose. In its core, cocreation can build on techniques for creative play similar to some group-decision making, as well as psychotherapy approaches. Creative play can be seen at the heart of co-creation with the aim of simulating new customer environments and experiences. Co-creation is thus a tool to trigger fantasy and creativity in order to invent the new. As with group dynamics, co-creating can be seen as taking place in a transitional space that is created and facilitated in order to bring various stakeholders of the firm together and involve them in value creation processes and invention. Facilitators foster the transitional space necessary for co-creativity to unfold and succeed. Co-creation can also be understood as a decision-making support system in which the customer becomes involved in decision-making related to the co-creation of (future) value inherent in new services or goods. The customer has to be provided with a space (such as a market place) in which he can make his/her own decisions. At the same time, the firm has to learn from naturally occurring group decisionmaking processes, as well as from the contexts in which these occur. How co-creation can create decision markets involving vast amounts of networked consumers needs further exploration. Ultimately, decision-making is a key process relating to how perceptions are formed and how experience is rendered by and among customers. These decisions result not just in experiences, but representations of information and knowledge re-produced and owned by the consumer.

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In order to better understand these knowledge processes we discussed the nature of organizational knowledge by looking into practical approaches to the creation and transfer of (customer) knowledge, in particular Customer Value Chain Involvement (CVCI) and Customer Knowledge Development (CKD). From a knowledge orientated point of view, we have defined co-creation as relational practice for the development and transfer of customer and organization knowledge. Building on the social and intrinsic nature of knowledge, we have stressed that technology supporting co-creation practices should not be seen as the most critical success factor for managing co-creation initiatives. Instead, we should focus more on the way in which people interact and collaborate when innovating. In other words, greater attention should be paid to the quality of the co-creation process itself, as well as the quality and feasibility of ideas produced. Co-creation also needs to intertwine knowledge and value creating business process in an overall co-creation framework, rather than just enabling co-creativity, if the strategy aims to achieve wider organizational impact. Considering that the strategic achievement of competitive advantage requires organizations to build cumulative knowledge bases (such as customer knowledge) and learn from past experiences (e.g. market failure), organizations need to focus on establishing long-term customer communication and knowledge sharing within and across the boundaries of the firm. This requires an enabling of a suitable co-creation context, a shared language for co-creativity and appropriate cross-boundary interchanges between the firm, customers and other stakeholders of the organization. In order to increase possibilities of generating more reliable market data, practical approaches to Customer Knowledge Development (CKD), such as customer requirement statements and co-creation as a strategy for organizational learning and innovation, should be further integrated in a complementary way. While more advanced traditional forms of market research aim to focus on the job the customer is trying to get done, newer approaches, such as co-creation, aim to trigger more intense and interactive communication between firm and customers, as well as among consumers. In doing so, firms are able to better understand their customers and transfer customer knowledge across the organization (spread it among employees). This also allows for the creation of new information channels between customers and employees, a leveraging of customer knowledge (in particular tacit knowledge and experience), as well as the creation of new knowledge, insight and ideas by using brainstorming and group interaction techniques. In the context of co-creation, knowledge creation and transfer have to be understood as an iterative process involving the construction and de-construction of experience. As such, co-creation processes go through various iterative circles of value development. Co-creation potentially enables organizational learning by increasing the connectivity with and among customers and by involving the consumer actively in the value chain. This can lead to future pathways of value from which both customer and firm can benefit. Rather than viewing it as a tool for the creation of ideas, co-creation should thus be seen as an adaptive framework that facilitates innovation in a boundary spanning way connecting customers and other members of the organization. Moreover, co-creation can be a tool that enables innovation and knowledge, while re-developing organizations themselves by fostering inventive communities internally and externally. As such, co-creation is a process that potentially systematizes change by innovation by intertwining organizational knowledge and learning processes with relationship building and the creation of new value and meaning. We identified some generic questions that companies have to answer when thinking about co-creation strategies. The first question pertains to who will be involved in co-creation. While it is often practical to simply involve customers, it has been argued that non-customers or even non-users of a product should be considered to widen the innovation perspective. There have been attempts in the innovation literature,

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more specifically, to point out particular types of customers (e.g. early adopters, etc.) that could be involved for certain types of co-creation objectives (e.g. breakthrough innovation). Whether involving stakeholders other than existing customers and company representatives is useful should be gradually tested and expanded over time. Ultimately, specific co-creation contexts and purposes, as well as past experience and practical constraints, will have to determine who will be involved. The question of cocreation purpose is mainly about co-creation driven either by specific problems to be solved versus opportunities, the nature of the aimed-for product, as well as the value to be created for customers. For purpose (specific problem) driven objectives, the key question is where in the innovation process (e.g. idea generation, design, etc.) consumers can and should be involved. Different types of involvement also raise questions about degrees of customer involvement. The extent to which innovation is open in turn flags issues about transparency, access, trust and risks occurring in collaborative innovation with customers. In addition to the extent of customer involvement, the next question naturally becomes one of duration of involvement (is it ad hoc or continous?), which depends not only on the purpose and specific context of a co-creation initiative, but also participant motivation. Research suggests that intrinsically motivated participants are best suited for sustained interest and creativity, although stamina may also be affected by extrinsic incentives like monetary rewards. Future research should investigate aspects of participant selection, incentives and motivation further by focusing on dimensions like self-selection, co-creation objectives (e.g. product type), degrees of cooperativeness or competitiveness, customer perceptions and trust, as well as co-creation settings. We agree with contemporary authors that uncovering and understanding customer needs requires a combination of methods. The use of co-creation as a research tool for action research in organizations and the markets in which they are operating is one suggested way forward. Co-creation as collaborative innovation with customers needs to be a holistic framework, which brings together a variety of customer knowledge elicitation and transfer methods. Such a framework systematizes the way in which new insight is utilized to create new value for customers and other stakeholders of the firm (such as increasing customer delight and employee identification). In addition, this requires more focus on the organizational benefits that co-creation yields, namely triggering organization learning, knowledge transfer and strategic development of the firm. Action research, as a participative research method, has the ability to integrate features of traditional and more advanced research methods. As an approach allowing for iterative learning and development, it can become a method used by market researchers to assist and enhance the process of co-creation. By engaging in cycles of social construction focused around peoples informed and committed action, cocreativity is based on the co-created knowing of its participants. Action research, then, can be a natural kind of co-creation processes. The marketing and business literature on co-creation has so far mainly highlighted assumed or explicit benefits of co-creation, such as the ability to obtain just-in-time knowledge from customers, potentially lower R&D costs, increased speed-to-market, and ultimately better products leading to enhanced customer experience. Involving consumers early in the value chain can enhance customer experience both as the direct result of collaboration and through new or improved products. Some of the challenges faced by companies engaged in co-innovating with customers, however, remain largely unexamined. These may include increased dependency on outside collaborators, the cost of co-creation coordination, the need for new management skills and risks associated with transparency, disclosure and customer access. Co-creation also increases customer expectations, potentially lowering the threshold for dissatisfaction. However, the active and discerning consumer of the 21st century also provides opportunities if the tendency for consumers to organize and create communities can be tapped into and turned into a productive or creative force for companies.

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Unfortunately, the quality and quantity of available case studies on co-creation remains insufficient to address crucial questions related to co-creation processes. In fact, in-depth research on multidimensional aspects of the co-creation process and its effects across time is still completely absent from the literature. As a result, it is difficult to understand from a research perspective how and why co-creation works, how organizational knowledge can be enabled, as well as how its benefits can best be achieved and its challenges overcome (unless one studies the process itself, e.g. by doing action research). Such research would be essential to build both a sound theory on co-creation, as well as guidelines for practitioners on how to enable sustainable co-creation, both for the purpose of strategic development of the firm and to establish short and long-term benefits. As a result, organizations engaging in co-creation with customers may increasingly look for ways of assessing co-creation successes or failures. The main challenges for developing impact measures or key performance indicators (KPIs) probably lie in the development of context specific and meaningful indicators, along with establishing cause and effect relationships between input and output, as well as macro, meso and micro level measures. We have identified three main assessment areas, based on either product performance (e.g. perceived innovativeness, number of new products brought to market, customer satisfaction with new products, etc.), customer participant centred measures (attitudes and behaviours resulting from the co-creation experience), as well as employee participant effects (e.g. satisfaction, creativity, collaborative and cross-boundary skills, etc) and organizational impacts (ultimately leading to greater flexibility and adaptiveness). While these are some interesting areas that could be explored, it is ultimately the practitioners choice to develop and apply a meaningful mix of indicators and to sensibly interpret them in their specific organizational, innovation and industry context. Developing appropriate measures the short, mid and long-term impact of co-creation represents one of the key challenges for researchers and practitioners in the near future. In sum, co-creation is a new way of organizing that aims to bring together traditionally disjoint functions of the firm, particularly innovation, customer relationship management and marketing. Changes associated with this trend have implications not only for relationships within and outside of organizations, but also for theories and research on co-creation. The traditional logic dominated by complex goods in the field of innovation may have to be increasingly reconciled with the emergence of the service dominant logic in marketing. While the strategic benefits of co-creation may be evident, it has yet to be fully understood how it can be more than just a new innovation practice involving the customers of the firm (with or without the enhancement of ICTs). We would like to stress, however, that considering the need for increased innovation caused by the fragmentation and dynamics of todays markets, co-creation is a very promising and more holistic approach to value creation. Despite the fact that some of the theoretical and empirical foundations of co-creation still have to be developed, co-creation cannot be safely ignored by companies who want to succeed in todays marketplace.

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APPENDIX Table 10: Co-occurrence Analysis Co-creation and Related Concepts * Google Rank Rank 1 CC & Open innovation 2 CC & User generated content 3 CC & Mass collaboration 4 CC & Co-production 5 CC & Mass customization 6 CC & Collaborative innovation * Google results on September 30, 2008 Google Scholar Rank CC & Open innovation CC & Co-production CC & Mass customization CC & User generated content CC & Collaborative innovation CC & Mass collaboration

Figure 14: Co-creation Concepts in Scholarly Literature over Time

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Table 11: Co-creation Concepts in Scholarly Literature: Dominant Subject Areas *

Concept Co-creation Collaborative innovation Co-production (customer/consumer) Rank 1 Psychology Business & Economics Business & Economics Business & Economics Computer Science 2 Behavioral Sciences Computer Science Engineering 3 Business & Economics Engineering Environmental Sciences & Ecology Behavioral Sciences

Customer/consumer involvement

Health Care Sci & Services Business & Economics Computer Science Engineering

Mass collaboration

Information Science & Library Science Business & Economics Operations Research & Management Sci Telecommunications Business & Economics

Mass customization /personalization Open innovation

Engineering Business & Economics Computer Science Computer Science

User generated content User involvement

Engineering Health Care Sci & Services

* Based on ISI Web of Knowledge search by topic (November 12, 2008).

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Argyris, C., & Schon, D. (1996). Organisational learning II: Theory, Method, and Practice. Reading, MA: AddisonWesley Longman Senge, P. (2003). The fifth discipline fieldbook. London: Nicholas Brealey Publishing
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Deleuze & Guattari (1988), op. cit., p. 12

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Humphreys, P. C., Lorac, C., & Ramella, M. (2001). Creative Support for Innovative Decision Making. Journal of Decision Systems, 10, 241-264.
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Deleuze & Guattari (1988), op. cit.

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Kaufman, E. (1998). Madness and repetition: the absence of work in Deleuze, Foucault and Jacques Martin. In E. Kaufman and K. Heller (Eds.) Deleuze and Guattari., New Mappings in Politics, Philosophy and Culture. Minneapolis: University of Minnesota Free Press. Humphreys & Jones (2006), op. cit.
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Deleuze & Guattari (1988), op. cit. Humphreys & Jones (2006), op. cit. Phillips (1989), op. cit.

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Jones, G. A., & Lyden-Cowan, C. (2002). The Bridge: Activating Potent Decision Making in Organisations. In F. Adam, P. Brezillon, P. Humphreys and J-C Pomerol (Eds.) Decision making and decision support in the internet age. Cork, Ireland: Oaktree Press.
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Humphreys & Jones (2006), op. cit. Castells, M. (1996). The raise of the network society. Oxford: Blackwell. Stewart, T.A. (1997). Intellectual Capital: The New Wealth of Organizations. New York: Doubleday. Mascarenhas et al. (2004), op. cit. Rowley et al. (2007), op. cit.

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Dahlsten, F. (2004). Hollywood wives revisited: a study of customer involvement in the XC90 project at Volvo Cars. European Journal of Innovation Management, 7(2), 141-149.
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see Love, J. A. (2001): Patterns of Networking in the Innovation Process: A comparative study of the UK, Germany and Ireland, in: Social Interaction and Organisational Change, Aston Perspective on innovation Networks, Editors O Jones, S Conway & F. Steward, Series of technology management, Vol. 6, Chapter 5, Imperial College Press: London.
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Ramirez, R. (1999), Value co-production: intellectual origins and implications for practice and research, Strategic Management Journal, Vol. 20 pp.49-65.
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Roser,T., Rettler, R. & v. Held, F. (2006). Enabling the Inventive Enterprise through Networked and Systematic Inventive Thinking. Proceedings of the the International Conference on Creativity and Innovation in Decision Making and Decision Support (CIDMDS). Workshop of the European Working Group on Decision Support Systems. London School of Economics.
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Hilthred, P. & Kimble, C. (2004). Knowledge Networks: Innovation through communities of practice. Hershey: Idea Group Publishing.
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Wenger, E. (1998) Communities of Practice. Learning, meaning and identity, Cambridge: Cambridge University Press.
cxii

See Nambisan & Nambisan (2008), op. cit.

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cxiii

See Dodgson et al. (2006) op. cit. Pettigrew, A. & Fenton, E (2001). The Innovating Organization. London: Sage.

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Blacker, F. (1995). Knowledge, knowledge work and organizations: an overview and interpretation. Organization Studies. 16 (6). pp. 1021-1046.
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Lusch et al (2007), op. cit. Newell, S.; Robertson, M.; Scarbrough, H. & Swan, J. (2002). Managing knowledge work. London: Palgrave.

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cxviii

Orlikowski, W. (2002) Knowing in practice: Enacting a collective capability in distributed organising. Organizational Science Vol. 13. No 3, pp 249-273.
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Dahlsten (2004), op. cit.

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Argyris, C., & Schn, D. (1978) Organizational learning: A theory of action perspective, Reading, Mass: Addison Wesley.
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Mascitelli, R. (2000), From experience: harnessing tacit knowledge to achieve breakthrough innovation, Journal of Product Innovation Management, Vol. 17 No. 3, pp. 179-93.
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Argote, L. & Ingram, P. (2000). Knowledge transfer: A basis for competitive advantage in firms. Organizational Behavior and Human Decision Processes, 82(1), 150-169. See Nonaka, I. and Takeuchi, H. (1995), The Knowledge-Creating Company, Oxford University Press, New York, NY.
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see Sawhney and Prandelli (2000) op. cit; Nabisan (2002) op. cit.; Lundvist & Yakalef (2004) op. cit. Ramaswamy (2008), op. cit. Nonaka & Takeuchi (1995), op. cit. Polanyi, M. (1966). The Tacit Dimension. New York: Doubleday Anchor. See Blackler (1995), op. cit.

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Wenger (1998), op. cit.

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Ulwick, A., & Bettencourt, L. (2008). Giving Customers a Fair Hearing. MIT Sloan Management Review, 49(3), 62-68.
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Ulwick & Bettencourt (2008), op. cit. Ulwick & Bettencourt (2008), op. cit.

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Chung, Y.M. (2009). Co-creation with the customer: a strategy for organisation learning and innovation. International Journal of Learning and Intellectual Capital 2009 - Vol. 6, No.1/2 pp. 19 30
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Ulwick & Bettencourt (2008), op. cit. Maklan et al. (2008), op. cit.

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cxxxvi

Ind, N. & Riondino, M. (2001) Branding on the web: a real revolution? Journal of Brand Management, 9, 1, pp. 820.
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Mascarenhas et al. (2004), op. cit. Rowley et al. (2007), op. cit.

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Wikstrm, S. (1995). The customer as co-producer. European Journal of Marketing. 30(4): 6-19

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Dahlsten (2004), op. cit.

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Neale, M. and Corkindale, D.R. (1998), Co-developing products: involving customers earlier and more deeply, Long Range Planning, Vol. 31 No. 3, pp. 418-25. Blazevic, V., & Lievens, A. (2008). Managing innovation through customer coproduced knowledge in electronic services: An exploratory study. Journal of the Academy of Marketing Science, 36(1), 138-151.
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Maklan, S., Knox, S., & Ryals, L. (2008). New trends in innovation and customer relationship management. International Journal of Market Research, 50(2), 221-240.
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see Blazevic & Lievens (2008), op. cit.; Yin (1994) see Ryals & Wilson (2005) Maklan et al. (2008), op. cit. Maklan et al. (2008), op. cit., pp. 224-225 Maklan et al. (2008), op. cit.

cxlv

cxlvi

cxlvii

cxlviii

cxlix

Maklan et. al. (2008), op. cit.

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see Checkland 2000; Reason & Bradbury, 2001; Breu & Peppard, 2003 see Berger & Luckmann (1966); Aygris, (1973) Makalan et al (2008), op. cit. see Mascarenhas et al. (2004), op. cit. Sawhney, M. (2004). Insights Into Customer Insights. CRM Project, Volume 5.

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clii

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clv

Janssen, K., & Dankbaar, B. (2008). Proactive Involvement of Consumerws In Innovation: Selecting Appropriate Techniques. International Journal of Innovation Management, 12(3), 511-541.
clvi

Dahlsten (2004), op. cit. Dahlsten (2004), op. cit.

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clviii

See Cooper, R.G. (1993). Winning at New Products: Accelerating the Process from Idea to Launch. Reading: Addison-Wesley.

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clix

Reinertsen, D.G. ( 1999). Taking the fuzziness out of the fuzzy front-end. Research Technology Management, 42 (6), pp. 2531.

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Prandelli, E., Verona, G., & Raccagni, D. (2006). Diffusion of Web-Based Product Innovation. California Management Review, 48(4), 109-135.
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Desouza, K., Awazu, Y., Jha, S., Dombrowski, C., Papagari, S., Baloh, P. (2008). Customer-Driven Innovation. Research Technology Management, 51(3), 35-44.
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Prahalad, C., & Ramaswamy, V. (2004). Co-creating unique value with customers. Strategy & Leadership, 32(3), 4-9.
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Dahlsten (2004), op. cit.

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Hall,, H., & Graham, D. (2004). Creation and recreation: motivating collaboration to generate knowledge capital in online communities. International Journal of Information Management, 24, 235246. For more on the role of social influence and motivations to participate in virtual communities see for example: Dholakia, U.M., Bagozzia, R.P., & Klein Pearo, L. (2004). A social influence model of consumer participation in network- and small-group-based virtual communities. International Journal of Research in Marketing, 21, 241263.
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Fller, J. (2006). Why consumers engage in virtual new product developments initiated by producers. Advances in Consumer Research, 33, 639-646.
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Ariely, D., Bracha, A., & Meier, S. (2007). Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially. Discussion Paper, IZA, Bonn.
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Casal, L.V. , Flavin, C., & Guinalu, M. (2008). Promoting Consumers Participation in Virtual Brand Communities: A New Paradigm in Branding Strategy. Journal of Marketing Communications, 14, 19-36 Dewett, T. (2007). Linking intrinsic motivation, risk taking, and employee creativity in an R&D environment. R&D Management, 37, 197-208.
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Biemans, W. G. (1995). Internal and External Networks in Product Development: a Case for Integration, in Product Development: Meeting the Challenge of the Design-Marketing Interface. In Bruce, M. & Biemans, W. G., 137-159, Wiley.
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Davidson, A. (2004, May). When co-creating value with a customer goes wrong. Strategy & Leadership, 32(3), 14-15.
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Prahalad, C., & Ramaswamy, V. (2004), op. cit.

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Moon, J. Y., & Sproull, L. (2001). Turning love into money: How some firms may profit from voluntary electronic customer communities. Unpublished manuscript, Stern School of Business, http://userinnovation.mit.edu/papers/VolCustomers.pdf.
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Piller, F., Schubert, P., Koch, M., & Mslein, K. (2005). Overcoming Mass Confusion: Collaborative Customer Co-Design in Online Communities. Journal of Computer-Mediated Communication, 10(4).

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clxxv

Zwick, D., Bonsu, S. K., & Darmody, A. (2008). Putting Consumers to Work: Co-creation and new marketing govern-mentality. Journal of Consumer Culture, 8(2), 163-196.
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Sawhney, M., Verona, G., & Prandelli, E. (2005). Collaborating to create: The Internet as a platform for customer engagement in product innovation. Journal of Interactive Marketing, 19(4), 4-17. Chapman, R., & Corso, M. (2005). From continuous improvement to collaborative innovation: the next challenge in supply chain management. Production Planning & Control, 16(4), 339-344.
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p. 38, Swink, M. (2006). Building Collaborative Innovation Capability. Research Technology Management, 49(2), 37-47.
clxxviii

At P&G, It's 360-Degree Innovation, Business Week, October 11, 2004, http://www.businessweek.com/magazine/content/04_41/b3903463.htm Auh, S., Bell, S., McLeod, C., & Shih, E. (2007, August). Co-production and customer loyalty in financial services. Journal of Retailing, 83(3), 359-370.
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Dong, B., Evans, K., & Zou, S. (2008). The effects of customer participation in co-created service recovery. Journal of the Academy of Marketing Science, 36(1), 123-137.
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Bettencourt, L. (1997). Customer voluntary performance: Customers as partners in service delivery. Journal of Retailing, 73(3), 383-406.
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File, K., Judd, B., & Prince, R. (1992). INTERACTIVE MARKETING: The Influence of Participation on Positive Word-of-Mouth and Referrals. Journal of Services Marketing, 6(4), 514.
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Nambisan, S., & Nambisan, P. (2008). How to Profit From a Better 'Virtual Customer Environment.'. MIT Sloan Management Review, 49(3), 53-61.
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Nambisan & Baron (2007), op. cit.

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Mascarenhas, O. A., Kesavan, R. & Bernacchi, M. (2004). Customer value-chain involvement for co-creating customer delight. Journal of Consumer Marketing, 21(7), 486-496.
clxxxvi

Matthing, J., Sandn, B., & Edvardsson, B. (2004). New service development learning from and with customers. International Journal of Service Industry Management, 15(5), 479-498. Kristensson, P., Gustafsson, A., & Archer, T. (2004). Harnessing the Creative Potential among Users. Journal of Product Innovation Management, 21(1), 4-14. Sheth, J., Sisodia, R., & Sharma, A. (2000). The Antecedents and Consequences of Customer-Centric Marketing. Journal of the Academy of Marketing Science, 28(1), 55-66. Joshi, A., & Sharma, S. (2004). Customer Knowledge Development: Antecedents and Impact on New Product Performance. Journal of Marketing, 68(4), 47-59. Swink, M. (2006). Building Collaborative Innovation Capability. Research Technology Management, 49(2), 37-47
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Matthing et al (2004), op. cit. Nambisan, S., & Nambisan, P. (2008), op. cit.

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Wang, Y., & Lo, H. (2003). Customer-focused performance and the dynamic model for competence building and leveraging. Journal of Management Development, 22(6), 483.
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King, W. (2006). The Critical Role of Information Processing in Creating an Effective Knowledge Organisation. Journal of Database Management, 17(1), 1-15. Christensen, Clayton M., Stephen P. Kaufman & Willy C. Shih. (2008). Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things. Special Issue on HBS Centennial. Harvard Business Review 86 (1).
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