How do value co-creation activities relate to the perception of firms' innovativeness?

Abstract

THE VALUE CO-CREATION PARADIGM Value co-creation is an emerging business, marketing and innovation para- digm describing how customers and end users could be involved as active participants in the design and development of personalized products, ser- vices and experiences (Prahalad, Ramaswamy, 2004; Etgar, 2008; Payne, Storbacka, Frow, 2008). It is based on the design and development of cus- tomer participation platforms providing firms with the technological and human resources, tools and mechanisms to benefit from the engagement experiences of individuals and communities as a new basis of value creation. The active participation of customers and end users is enabled through mul- tiple interaction channels, very often by means of specifically designed tech- nological platforms through the Internet (Sawhney, Gianmario, Prandelli, 2005; Nambisan, Nambisan, 2008; Nambisan, Baron, 2009). Indeed, it is the advances in Information and Communications Technologies (ICT) that has enabled customers to be much more active, knowledgeable, globally aware and willing to use interactive virtual environments to personalize the existing and shape new products and services. The ability of value co-creation plat- forms to enable the personalization of new products services challenges the operational presuppositions of traditional marketing segmentation tech- niques by promoting a new service-dominant logic (Vargo, Lusch, 2004; von Hippel, 2006a). The new dominant marketing logic enables firms to address broader heterogeneous markets aiming at a better fit between what a cus- tomer needs and what the firm does and offers. It entails a new vision of the topology and the dynamics of the entire value creation system including i) a shift from thinking about consumers to thinking about co-creators of value, ii) a shift from thinking about value chains to thinking about value networks, iii) a shift from thinking about product value to thinking about network value, iv) a shift from thinking about simple co-operation or competition to thinking about complex co-opetition, and v) a shift from thinking about indi- vidual firm strategy to thinking about strategy in relation to the entire value ecosystem (Hearn, Pace, 2006). Such vision promotes a new understanding of the customer centricity of the traditional value network concept which is now considered dynamically, as a people-driven web of potential value con- figurations that could be actualized on the basis of specific customer demands (Norman, Ramirez, 1993; Flint, Mentzer, 2006; Prahalad, Krishnan, 2008). The adoption of value creation practices leads to the need of “changing the very nature of engagement and relationship between the institution of management and its employees, and between them and co-creators of value – customers, stakeholders, partners or other employees” (Ramaswamy, 2009). This ongoing change challenges the management of innovations by promot- ing a new vision of the nature of innovation itself (Prahalad, Krishnan, 2008; Kristensson, Matthing, Johansson, 2008; Tanev, Knudsen, Gerstlberger, 2009). The new co-creative vision of innovation builds on two key distinctive features. The first one is the truly user-driven aspect of the value co-creation activities between firms and customers. In this sense, value co-creation plat- forms represent a natural extension of some of the key aspects of the user- driven innovation paradigm (von Hippel, 2006) by focusing on the develop- ment of participation platforms to, literally, multiply the effect of user-driven innovation methods such as the design of innovation toolkits (von Hippel, 2001; Nambisan, Nambisan, 2008; Nambisan, Baron, 2009) and searching for lead users (von Hippel, 2006b; Bilgram, Brem, Voigt, 2008; Droge, Stanko, Pollitte, 2009). Another distinctive feature is the focus on the co-opetitive (from co-opeti- tion) nature of the interactions between the different stakeholders, including the customers and end users, participating in the value co-creation process. Before competing and negotiating to capture value, the different players in a value co-creation network need to compete and negotiate in order to be able to participate and to contribute value (Tanev, Knudsen, Gerstlberger, 2009). The co-opetitive dimension of value co-creation platforms leads to a more dynamic type of economic mechanisms as underlying driver of the innovation processes. These mechanisms operate on the basis of multiple transactions between customers, partners and suppliers at multiple access points across the value net- work. They enable customers and end users to control the relationship between price and user experience (Prahalad, Ramaswamy, 2004; Etgar, 2006) by pro- viding them with the opportunity to actualize (i.e., create) specific value chain configurations that would fit their proper need, context and preferences. It is in this context that we could talk about customer value co-creation. Although focusing on the proactive role of the customer, such understanding is generi- cally holistic in nature; it embraces all the actors involved in the value creation process providing an opportunity for firms to broaden the boundaries of their open innovation processes.