No matter the industry, co-creation of value is a hot topic. Marketing specialists swear by it; manufacturers and service providers try to integrate it in their innovation practices; researchers study it. Value co-creation happens within networks and enable individuals, groups and organisations to connect, collaborate, solve problems and satisfy heterogeneous needs and expectations together.
In practice, value co-creation involves a variety of collaborative activities during which diverse stakeholders contribute to an organisation’s innovation process.
The process of innovation and the co-creation [...] Source: Mobach, Nardelli, Kok, Konkol, & Alexander (2014); Nardelli, Konkol, Kok, & Mobach (2014)
Value co-creation is a specific type of collaboration considered to be an innovative and interactive process between customers and organisations that aims to increase the value of a product or service. What differentiates value co-creation from other implications of open innovation management is that all of the stakeholders typically aim to ensure that each party benefits from the relationship.
Why innovate through value co-creation?
Value can no longer be solely produced by innovators, but rather is jointly created by supply and demand. The former offer the frame and resources for the co-creation of value, and the latter make their needs and expectations explicit and share their knowledge on how to satisfy them. Furthermore, supply is not only the one organisation that eventually launches the innovation on the market, but the whole network of stakeholders that contribute to the development and implementation of the innovation itself.
Procter & Gamble, for instance, has made value co-creation the core element of its innovation strategy and management practice, by implementing an open innovation approach that involves most of its stakeholders, including customers, in its innovation chain:
Procter & Gamble Develop + Connect. Source: https://www.pgconnectdevelop.com/
Nevertheless, while value co-creation is potentially beneficial for all its members, bringing together diverse stakeholders leads to potential divergent goals and interests, communication difficulties, distrust among stakeholders and conflicts over value appropriation.
So how can a network of innovation stakeholders use value co-creation to manage innovation ensuring that all parties involved benefit from the relationship?
When applying value co-creation to manage innovation, the engagement of individual actors over time is key. Stakeholder interactions increase in reach and richness as the stakeholders in the network get to know each other, develop inter-organisational trust and learn how to best uncover the needs and expectations of all parties as well as how to balance these via optimal solutions.
To achieve this, the original network leader should identify and actively involve potential stakeholders from the earliest steps of the platform development. In other words, stakeholders should be invited to help shape the network in order to contribute to its characteristics, values, vision and mission. For instance, this can be achieved by actively involving frontline employees of service providers in the innovation process.
In a recent study on a Dutch innovation platform for facility management services, I saw how having monthly innovation meetings with frontline employees, such as cleaners and caterers, allowed to uncover the actual day-to-day practices. In turn, better understanding of operational tasks and processes implied a better understanding of the needs and understanding of the demand, which is crucial to develop innovations that can better serve their demand.
Moreover, the ongoing interactions with front-line employees created empowerment and a sense of belonging that pushed them towards contributing to innovation with new ideas and increased their loyalty to their organisations, but also to the other stakeholders in the FM innovation platform.
Timeline of FM Innovation platform development (2010 to 2012). Source: Nardelli and Broumels, 2017
At the same time, diverse stakeholders can have different expectations and attitudes toward the network; the network leader should encourage stakeholders to be transparent about these differences, as they can be used to create sub-groups of actors. Eventually, the network as a whole can select, apply and modify tools and methods to facilitate the interaction and contribution of stakeholders depending on the circumstances and the platform’s development over time.
Another way to engage stakeholders in the innovation and value co-creation processes is to provide resources and build structure and processes that allow all parties to integrate these resources with their own. This includes, for example, working together with suppliers and distributors to develop an appropriate infrastructure for the network.
Research shows that within a network that connects diverse stakeholders aiming for open service innovation, value co-creation does not happen right away – rather, it emerges during the expansion of the network when the network owner uses it to stimulate stakeholder interaction. In this context, innovation in the network starts with building the support infrastructure. Then the focus is on building relationships among stakeholders. Finally, trusting and empowered stakeholders alternate themselves as network facilitators across the development of the network by launching and guiding value co-creation activities.
In the Dutch innovation platform, co-creation consisted of a combination of activities and progressions that allowed the network and its individual participants to co-create through progressive learning and stakeholder relation development. On top of the monthly meetings with the front-line facility management employees, all participants ran the platform collaboratively. Management representatives of each stakeholder involved in the platform met four times a year for strategic evaluation and planning. The agenda for these meetings included in plenum discussions and group work, and was simply yet effective: “What have we achieved since last meeting? Where is the potential for innovation given the current circumstances? Who will be in charge of the different innovation initiatives?”
Timeline of FM Innovation platform development (2013 to 2014). Source: Nardelli and Broumels, 2017
Three ways to achieve shared benefits through value co-creation:
Overall, a network of stakeholders collaborating to manage innovation openly can co-create value over time through:
- Adaptable structure for the network to organise innovation activities and establish support routines
- Facilitated interactions to support stakeholder relation development;
- Participants’ self-empowerment.
1. Adaptable structure
Adopting a structure and set of routines that all actors agree upon uncovers the needs, expectations and backgrounds of the different stakeholders. This reduces complexity in the relationships across the network, as the different parties learned how to interact with each other over time.
At the same time, using participatory and open-ended innovation activities and support routines allows the network to keep the structure flexible. In doing so, the network can easily adapt the structure of the platform when circumstances change.
2. Facilitated interactions
Through the organisation of innovation activities, the network can ensure that stakeholders interact on a regular basis by establishing opportunities for stakeholders to meet, share knowledge and cooperate. While these activities should aim at value co-creation, the recurrent interactions also create the ground on which to build-up inter-organisational trust on mutual commitment, common goals, dialogue and shared interests.
However, differences in needs and expectations of the difference parties can sometimes lead to a lack of transparency, information asymmetry, power games and opportunistic behaviour. In these situations, recognising the potential downsides and acting upon them through openness can actually support fruitful interactions.
While the initiative of one or more parties can facilitate the emergence of value co-creation activities and result in these actors assuming a role of network leaders, their contribution can evolve over time.
As stakeholders interact and start co-managing the network, leaders will go from being a critical function (without which value co-creation cannot happen) to being supportive figures. Other actors will show themselves as driving figures and motivators, as inter-organisational trust increases and participants at all level feel more and more self-empowered.
Timeline of FM Innovation platform development (2014 to 2015). Source: Nardelli and Broumels, 2017