Experience Co-Creation
Venkat Ramaswamy
Professor, Ross School of Business
Founder, ECC Partnership
Sepember, 19. 2007
Buenos Aires
Agenda
ƒ What is experience co-creation?
ƒ Experience co-creation at the strategic level
ƒ Co-creating at the process level
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Experience Co-Creation is the Emerging Next Practices of
Value Creation
Top Ten Book of the Year
December 13, 2004
Best Ideas of 2005
Best business books: Strategy
Winter 2004
Excellent new book
January 12, 2004
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Historically, Business Has Been About Designing, Making and Selling
Competitive Products and Services …
Company
The
Firm
Suppliers
Customers
Marketing
Channels
as
Passive
Recipients
of Value
Propositions
… and Most Business Processes and Functions Have Largely Been
Focused on Creating an “Inside-Out” Efficiency for the Firm
SCM
Customers
ERP
CRM
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as
Passive
Recipients
of Value
Propositions
My Starting Point
“Consumerization”
of Communications &
Information Technology
is enabling
“the Individual”
to be Engaged
in Value Creation
in ways, and on a scale,
as never before…
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Today, Individuals are Highly Informed, Connected, and Networked,
and are no longer Passive Recipients
Product & Service Offerings
The
Firm
Suppliers
Marketing
Channels
SCM
ERP
CRM
Company
Customer
(Individual)
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The New Paradigm of Value Creation: Experience Co-Creation
Business
Processes
INTERACTIONS
as the Locus
of
Value
Product-Service Creation
Offerings
Customer
Company
Network
Resources
Customer
Communities
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Agenda
ƒ What is experience co-creation?
ƒ Experience co-creation at the strategic level
ƒ Co-creating at the process level
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Nike
Let us take Nike as an example
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Nike has enjoyed solid growth and strong profits
Revenues
$13.7B
Net profits $1.2B
8.7% of revenues
$9.5B
Net profits $0.6B
6.3% of revenues
2001
2005
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This Is Particularly True in the Soccer Market
ƒ Nike achieved dramatic growth in the soccer market in just over a
decade:
— from roughly a $40 million business in 1994 to one that is approaching
$1.6 billion today
ƒ Nike has caught up with Adidas in soccer in Europe and in the US, the
only sport in which Adidas has had an edge over Nike :
Market shares
2006 est.
Europe
US
Nike
32%
32%
Adidas
36%
48%
(Source: NPD group Sporting Goods Intelligence, in BW)
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Film Your Best Moves and Upload Your Video
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The Community Is the Judge of the Contest, Not Nike
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The Community Promoted or Relegated
Adidas from
head to
toe…
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In March 2006 Nike launched Joga.Com, a joint initiative with
Google
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The Concept of Thematic Communities
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Members Could Search the Site by Users, Videos, Communities,
Team…
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Starting 11:
build your
dream team
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Nike also Engaged the Community through a Soccer Blog they
sponsored…
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…But that was Independent in Spirit
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JogaTV
ƒ Joga TV: Nike also engaged individuals in the football/soccer experience
through a series a humorous video clips starring Eric Cantona. They made
the soccer experience come alive.
— The fun of playing, tricks and moves (make the ball happy)
— The joy of winning; just move forward (4-4-2 or 1-1-8)
— Team spirit (“alone you are just a vine”)
— The need to reestablish the sport’s reputation (Is soccer loosing its soul? joga
bonito)
ƒ Only 2 clips out of 10 talked about the shoe. Instead they focused on the
experience of wearing a Nike shoe: a player physically puts the shoes on
and plays amazing tricks
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Nike also spread these videos through various community
web sites
ƒ Example: Nike is a registered user of YouTube.com, where they posted the
Joga TV videos
ƒ A “Joga” video of Ronaldinho was viewed over 3 million times there
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Joga 3
ƒ A game inspired by the traditional
futsal, played indoors or outdoors on
small courts with an emphasis on skill
over power (usually 5 on 5)
ƒ Nike’s version was 3 on 3. Teams
competed in 3 minute games
– Street players assembled a team of 3 and registered their team through
the www.nikesoccer.com web site
– Teams competed locally, then regionally, then nationally for a final in LA
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The Product as an Interaction Platform
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The Nike+ Experience
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Nike+ Apple
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Thematic Communities of Runners
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Local web sites enable sharing of local content
(ex RunLondon by Nike UK)
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Nike
ƒ More than 200,000 runners are using the Nike Plus website; more than
half visit the site at least 4 times a week
ƒ Company has goal of having 15% of the world’s estimated 100m+
runners using the system
ƒ Twice a week, people gather at the Nike store in Portland and go for a
run; Nike’s staff keep track of their performances and hail members who
have logged more than 100 miles
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Experience Co-Creation (ECC)
Value Outcomes
to Company
Value Outcomes
to Individuals (e.g., Customer)
Strategic Capital
and Economic Returns:
Experiences of Value
and Economic Returns:
• Generating new ideas rapidly
• Refining new ideas rapidly
• Brand collateral
• Accumulated learning
and soft knowledge
• Building deeper relationships
and trust with community
• Becoming a Nodal
company
• Increased revenues per customer
ECC
Interaction
Platforms
Cost and Risk:
• Reduced marketing costs thru
word of mouth by community
• Reduced risk of offerings
• Mitigating business risk and
better return on investment in
new product development
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• Influencing the design process
• Being a part of creating the
product or service
• Emotional satisfaction
• Access to new ideas
• Developing peer relationships
• Increased productivity
• Increased margins (if applicable)
Cost and Risk:
• Reduced risk of dissatisfaction
• Reduced cost of networking
and socializing with other
individuals
Agenda
ƒ What is experience co-creation?
ƒ Experience co-creation at the strategic level
ƒ Co-creating at the process level
2007 © Symnetics y Balanced Scorecard Collaborative Inc.
Our processes have traditionally been company-centric
Processes
Suppliers
to the
process
The
Firm
Interface
to customer
process
• Research and development
• Product development and pricing
• Marketing Communication
• Sales
• Customer Service
• Manufacturing
• Information Technology
• Human Resources
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Passive
Process
Customers
Could we open up some of the processes in our
business to experience-centric co-creation?
Back room
Points of customer
interaction
EXPERIENCE
Customer
Company
Research and development
Network
Resources
Product development and pricing
Marketing Communication
Sales
Customer Service
Manufacturing
Information Technology
Human Resources
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Customer
Communities
Opening up product development and design
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Choose:
• Base color
• Tip color
• Heel color
• Swoosh color
• Tongue top
color
• Lining color
• Lace color
• Sidewall color
• Outsole color
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Choose a country Flag …
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ƒ Your Icons
ƒ Your Mascot
ƒ Your Name
ƒ Your Team
Colors
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The Nike iD Design Contest
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Nike has trained store associates to provide a better interaction
ƒ Nike started a web based training program to provide store associates
with better tools to interact with customers
ƒ The system is called “Sports Knowledge Underground”
ƒ “One of Nike SKU’s central goals is to positively affect the dialogue
between retail sales associates and customers at the point of sale,”
said Michael Donahue, e-learning manager and program manager for
Sports Knowledge Undergound. “Increasing sales associates’ comfort
level with the technical performance aspects of Nike products
motivates them to proactively share that knowledge with customers.
The end result of more positive customer interactions like these is
increased sell-through.”
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SKU Web Site
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Nike’s “Sports Knowledge Underground”
ƒ “One of Nike SKU’s central goals is to positively affect the dialogue
between retail sales associates and customers at the point of sale,” said
Michael Donahue, e-learning manager and program manager for Sports
Knowledge Undergound. “Increasing sales associates’ comfort level with
the technical performance aspects of Nike products motivates them to
proactively share that knowledge with customers. The end result of more
positive customer interactions like these is increased sell-through.”
2007 © Symnetics y Balanced Scorecard Collaborative Inc.
Nike In-store kiosk
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Retailers relayed Nike’s Joga 3 Campaign, thus providing linkage between the
retail and the community environments
ƒ Example of Academy sporting goods, a southern retailer
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The New Paradigm of Value Creation: Experience Co-Creation
Experience Environments of Individuals
as the Basis of Value Creation
Business
Processes
INTERACTIONS
as the Locus
of
Value
Product-Service
Offerings
Creation
Customer
Company
Network
Resources
Co-creation with Individuals
as the Process of Value Creation
2007 © Symnetics y Balanced Scorecard Collaborative Inc.
Customer
Communities
For more examples of companies that are discovering and practicing ECC,
you can visit:
www.eccpartnership.com
2007 © Symnetics y Balanced Scorecard Collaborative Inc.
Experience Co-Creation can generate new opportunities for value creation and
new sources of competitive advantage, anywhere in the eco system
EXPERIENCE
CO-CREATION
EXPERIENCE
CO-CREATION
EXPERIENCE
CO-CREATION
EXPERIENCE
CO-CREATION
Firm
Network
stakeholder
Thematic
Community
of
individuals
Customer
Where value is created
Thematic Community of Individuals
Thematic
Community
of
Individuals
The customer is not the only potential co-creator.
The company can also co-create with its own employees, suppliers, or any other
stakeholder.
2007 © Symnetics y Balanced Scorecard Collaborative Inc.
ECC and Strategy Formulation-Execution
ƒ ECC provides a new frame of reference for the “Customer perspective”
— Think about “Interactions”
— Think about “Experience Environments”
ƒ ECC provides a new frame of reference for the “Process perspective”
— Think about Value “Outcomes” through Experiences
— Think about “Co-Creative” Processes
ƒ ECC provides a new frame of reference for the “Learning & Growth”
perspective
— Think about “Co-Creating Human Capabilities” to support value creation
through ECC
— Think about “IT as an Enabler of Interaction Platforms” to support value
creation through ECC
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Best Wishes in Co-Creating the
Future…
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Appendix
Venkat Ramaswamy
Professor, Ross School of Business
Founder, ECC Partnership
September, 19. 2007
Buenos Aires
Let us take Progressive as an example
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Opening up the pricing process
ƒ “Progressive Direct” gives online quotes and allows prospective customers to quickly
compare them to competitor prices – before buying.
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As a Result, The Customer Gets Greater Fairness of Pricing, While
Progressive Reduces Its Claims Losses
Progressive Insurance
DIFFERENTIATED EXPERIENCE
FOR CUSTOMER
INCREASED KNOWLEDGE FOR
PROGRESSIVE
Progressive:
• By having access to detailed
driving records of many drivers,
we learn what truly drives
accidents and claims costs.
• This allows to improve our
underwriting and pricing criteria
continuously.
LOWER COST AND RISK
FOR PROGRESSIVE
ECC
Interaction
Platforms
Progressive:
• We tap into a larger pool of applicants, which allows
us to select our risk better and lower our loss ratio.
We also dramatically reduce the cost of our market
research and the cost of attracting customers to
come get a quote with us
• We reduce our claims cost by understanding the
driver’s driving habits and we increase the likelihood
of attracting good drivers to Progressive
Customer:
• I save money if I am a safe driver.
• I can get direct quotes from
Progressive on-line, and I can
compare the Progressive price to
competitor quotes, which gives me
peace of mind.
• I control whether I want to share my
data or not, based on whether I know I
will benefit from sharing.
• I derive a sense of better fairness than
when I was subsidizing bad drivers in
the old model.
LOWER COST AND RISK
FOR CUSTOMER
Customer:
• I do not have to spend a lot of time
chasing information. I avoid over-paying
out of ignorance
• I pay less if I am a good driver (up to
25% discount).
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