The Future of Competition: Co-Creating Unique Value with Customersby C. K. Prahalad
In this visionary book, C. K. Prahalad and Venkat Ramaswamy explore why, despite unbounded opportunities for innovation, companies still can't satisfy customers and sustain profitable growth. The explanation for this apparent paradox lies in recognizing the structural changes brought about by the convergence of industries and technologies; ubiquitous connectivity… See more details below
In this visionary book, C. K. Prahalad and Venkat Ramaswamy explore why, despite unbounded opportunities for innovation, companies still can't satisfy customers and sustain profitable growth. The explanation for this apparent paradox lies in recognizing the structural changes brought about by the convergence of industries and technologies; ubiquitous connectivity and globalization; and, as a consequence, the evolving role of the consumer from passive recipient to active co-creator of value. Managers need a new framework for value creation. Increasingly, individual customers interact with a network of firms and consumer communities to co-create value. No longer can firms autonomously create value. Neither is value embedded in products and services per se. Products are but an artifact around which compelling individual experiences are created. As a result, the focus of innovation will shift from products and services to experience environments that individuals can interact with to co-construct their own experiences. These personalized co-creation experiences are the source of unique value for consumers and companies alike.
In this emerging opportunity space, companies must build new strategic capital--a new theory on how to compete. This book presents a detailed view of the new functional, organizational, infrastructure, and governance capabilities that will be required for competing on experiences and co-creating unique value. C. K. Prahalad is the Harvey C. Fruehauf Professor of Business Administration at the University of Michigan Business School and co-author of the landmark best seller, Competing for the Future. His research, for over twenty years, has consistently focused on "next" practices. Venkat Ramaswamy is the Michael R. and Mary Kay Hallman Fellow of Electronic Business and Professor of Marketing at the University of Michigan Business School. His research focuses on new frontiers in co-creating value.
March 1, 2004
The answer lies in the evolving role of the customer in the value creation process. No longer do customers receive value through the purchase of products and services alone. Instead, individual customers are interacting with a network of firms and consumer communities in order to satisfy their unique preferences - and the value they obtain comes from the sum total of those personal experiences.
To compete in this developing marketplace, the authors write, companies must fundamentally alter their value creation infrastructures. They make information and operations transparent and accessible to all collaborators, and transform their interactions with customers from transactions to meaningful dialogues. For their part, customers must be able to understand and assess all the risks, as well as the rewards, of the choices they make.
Exploring the issues that will shape strategy for years to come, the authors reveal what organizations must do to co-create value in the future.
In 1999 and again in 2000, one of the authors taught an M.B.A. course called "Emerging Issues in Strategy." Its basic premise was straightforward: The old, established corporations ("A-type" firms) would not disappear. The new, energetic dot-coms ("B-type" firms) would not necessarily survive. A new class of firms ("C-type") would emerge, the authors write, signifying a morphing and evolving of both the A-type incumbents and B-type startups.
In the conventional realm of A-type and B-type firms, they explain, almost all of the work has centered on the firm. But, the authors ask, what if the individual consumer were at the center, and not the firm? What if we spoke of "consumer-to-business-to-consumer" patterns of economic activity?
The authors challenge the traditional notion of value and its creation, namely that firms create and exchange value with consumers. They write that they believe that, increasingly, the joint efforts of the consumer and the firm - the firm's extended network and consumer communities together - are co-creating value through personalized experiences that are unique to each individual consumer.
The Changing Role of the Consumer
The authors explain that the emerging reality is forcing us to re-examine the traditional system of company-centric value creation that has served us so well over the past hundred years. We now need a new frame of reference for value creation. The answer, the authors believe, lies in a different premise centered on co-creation of value. It begins with the changing role of the consumer in the industrial system - from isolated to connected, from unaware to informed, from passive to active. The impact of this new consumer role is manifest in many ways:
- Information Access: With access to unprecedented amounts of information, knowledgeable consumers can make more informed decisions.
- Global View: Consumers can also access information on firms, products, technologies, performance, prices and consumer actions and reactions from around the world.
- Networking: "Thematic consumer communities," in which individuals share ideas and feelings without regard for geographic or social barriers, are revolutionizing emerging markets and transforming established ones. The power of consumer communities comes from their independence from the firm. Thus, the authors explain, consumer networking inverts the traditional top-down patterns of marketing communications.
- Experimentation: Consumers can also use the Internet to experiment with and develop products, especially digital ones.
- Activism: As people learn, they can better discriminate when making choices; as they network, they embolden each other to act and speak out.
What is the net result of the changing role of consumers? The authors write that companies can no longer act autonomously, designing products, developing production processes, crafting marketing messages, and controlling sales channels with little or no interference from consumers. The use of interaction as a basis for co-creation, they explain, is at the crux of our emerging reality. Copyright © 2004 Soundview Executive Book Summaries
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