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Introduction: Value Co-creation
VALUE CO-CREATION
Dr. Dhananjay A. Jolhe
Department of Mechanical Engineering,
Visvesvaraya National Institute of Technology, Nagpur
Value Co-creation: Genesis
• Late 1970’s: Self-service model
• Customer’s participation in production (Lovelock and
Young, 1979).
• Concept of value chain (Porter, 1985)
• Model of client involvement stages (Mills and Morris,
1986)
• Definitions of ‘customer’s participation’ (Dabholkar,
1990; Goodwin and Radford, 1993; Cermak et al.,
1994)
• Connection between customer’s participation and
customer’s satisfaction (Czpiel, 1990)
© Dr. Dhananjay A. Jolhe Value Co-Creation
• Origin of VCC lies in the seminal work by Prahalad and
Ramaswamy (2000) where in they mentioned that ‘customer
today seems to be dissatisfied inspite of the variety he has due
to the failure of product differentiation by the manufacturers’
• ‘Offering’ for product/service’ and ‘experience’ for
‘use/consumption’
• The term ‘VCC’ was used by Prahalad and Ramaswamy (2004)
• VCC stands for active participation of the customers in
developing product/ service using specific platform. The
customer actively participate in creating the desired product
attributes by involving in the design/manufacturing process of
the product. Thus, customer becomes the ‘partner’ with
company in developing the product of his ‘taste and style’.
• DART (Dialogue, Access, Risk-benefits, and Transparency)
model for VCC
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Value Co-creation: Genesis…
• Participatory role of the customer in service quality (Kelley et
al. 1990)
• Levels of customer participation behaviour (File et al., 1992)
• Customer participation as an opportunity to differentiate (Song
and Adams , 1993)
• ‘Successful companies focus on the value-creating system’
(Normann and Ramirez, 1993)
• Concept of ‘customerization’ (Wind and Ramaswamy, 2000)
• Use of customer’s resources for service production (Rodie and
Kleine, 2000)
• Service-Dominant (S-D) logic (Vargo and Lusch, 2004)
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Service-Dominant Logic (S-D Logic) Good-Dominant (G-D) Logic vs S-D Logic

• Service is the common denominator in exchange. G-D logic S-D logic
Value-in-exchange Value-in-use
• 10 fundamental principles (FPs), 4 of them are foundational
Customer is at the end of supply chain Customer is everywhere in the supply chain
axioms of S-D logic. Producer creates value, customer destroys it Both producer and customer create values (‘prosumer’)
Production ends with the manufacturing process Production is an intermediary process
Premise number Foundational premise
FP1 Service is the fundamental basis of exchange. • Shift from S-D logic to G-D logic
FP2 Indirect exchange masks the fundamental basis of exchange.
FP3 Goods are a distribution mechanism for service provision. S.N. Focus in G-D logic Transitional element Focus in S-D logic
1 Operand Resources Active customer* Operant Resources
FP4 Operant resources are the fundamental source of competitive advantage.
2 Tangible S-D logic Intangible
FP5 All economies are service economies.
3 Value Added Co-production Co-creation of value
FP6 The customer is always a co-creator of value.
4 Goods Services Service
FP7 The enterprise cannot deliver value, but only offer value propositions. 5 Products Offerings Experiences
FP8 A service-centered view is inherently customer oriented and relational. 6 Transactional Collaboration* Relational
FP9 All social and economic actors are resource integrators. 7 Units of Output Qualitative view* Processes

FP10 Value is always uniquely and phenomenologically determined by the beneficiary. 8 Promotion Integrated Marketing Communications Conversation/Dialog
9 Brand Equity Value propositions* Customer Equity
10 Profit Maximization Financial Engineering Financial Feedback
© Dr. Dhananjay A. Jolhe Value Co-Creation 5 *identified during the present study. 6

DART Model VCC: Examples

1. Tanishq: Tata Group

2. Coca-Cola
3. Linux
4. Amazon
5. Nike
6. YouTube
7. IKEA
8. Lego
9. Proctor & Gamble
10.Volvo

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Co-Creation Space Co-Creation Space…

The co-creation is based on the family of concepts:

• open innovation (e.g. Linux operating system,
P&G),
• mass customisation (e.g. Nike ID, Dell),
• user-generated content (e.g. youtube.com),
• co-production (e.g. IKEA),
• mass-collaboration (Wikinomics)
(e.g. Wikipedia),
• collaborative innovation (e.g. Airbus).

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Key Issues of VCC Key Issues of VCC…

• Successful companies focus on value creation (and not on
themselves or industry)
• Customer: passive audience to active player
• ‘Customer is the most competent resource for the business’ -
harness the competencies of the customers.
• Today’s customer: informed, networked, empowered, and
active ‘he can co-create’
• ‘Experience’ is more important than ‘use’ or ‘consumption’
• Present business scenario: pitfalls
• Customers not seem to be happy even though they have
more choices & variety.
• Firms are producing varieties without proper thought to
product differentiation.
• Meaning of ‘Co’ in Co-creation:
• Anybody outside your entity, typically the user.
• Meaning of ‘Creation’ in Co-creation:
• Action that generates or produce something, typically by humans.
• ‘Co’ and ‘Creation’ together:
• All partners have to contribute in one or another way.
• Object of ‘Co-creation’:
• Objective can be ‘value’, ‘experience’, or ‘innovation’.
• Objective will decide the ‘specifications’ of ‘co’ and ‘creation’.
• VCC vs Co-production:
• Co-production focuses on value-in-exchange (customer’s role in
value propositions)
• VCC focuses on value-in-use (customers add skills, knowledge
and processes)

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Key Issues of VCC…

• Imperatives of VCC:
• VCC is initiated by customers who are ‘dissatisfied’
• DART model
• Value-in-use is superior to value-in-exchange
• New product and service ideas come from lead users
• Production does not end with the manufacturing process;
production is an intermediary process.
• Three core components
• Customer value-creating processes
• Supplier value-creation processes
• The encounter processes

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