November 2009

"The crowd gives the leader new strength."

Evenius (Greek Mythology)

The participation of people in online communities is rapidly increasing and the shared data, information and knowledge in these communities is becoming greater and more diverse. The social community Facebook.com has over 300 million active members and over 40 billion photos uploaded to the site each month. Wikipedia.org has more than 75,000 active contributors, who are working on 10 million articles in more than 260 languages.

The opportunities of these large sources of information gathered in communities are being discovered by companies. Harley Davidson has established a large community where motorbikes and accessories are presented and discussed by members. Moreover, members interact about user- and maintenance tips. Participation in this community has been found to increase the commitment and affection for the Harley Davidson brand. The toy-manufacturer LEGO has over 2.5 million participants in their community, 40% are adults, and 3,000 new designs are uploaded to this community weekly. The best designs are produced and sold in stores.

The use of co-creation communities seems promising. However, the main business model elements that strengthen successful co-creation communities have not been defined yet. The elements of these communities that create value, that require resources, and that incur costs have not been explored in detail. The objective of this article is to provide insights into three main business model elements of co-creation communities: the value proposition, the value network, and the revenue model. These elements will be specified for distinctive new product development phases. The insights are obtained from our in-depth study of seven co-creation communities. We will conclude with some recommendations for creating successful co-creation communities.

Co-creation Communities

Co-creation refers to "the practice of product or service creation that is collaboratively executed by developers and customers together". The term community is derived from the Latin "communitas" and means "a group of interacting people in the same environment". Kozinets defines community as a group of people who share social interaction, social ties, and a common (cyber) space.

The purpose of the co-creation community is to collaboratively create products. These communities are mainly based upon shared enthusiasm and knowledge concerning specific product domains and are often virtual meeting places for innovative users to discuss opportunities and ideas for new products and product improvements. Corporate co-creation communities refer to co-creation communities, initiated by companies, where company owned products or services are presented and discussed.

The New Product Development Process

A corporate co-creation community is a possible tool to gather customers' knowledge. A corporate co-creation community can be defined as "an online webspace where customers are involved in the new product development (NPD) process of the company". Consumers have valuable product know-how and when they share their knowledge in an online corporate community, companies can strengthen their innovation projects. Customer integration into the NPD process can lead to the identification of customer needs which can be translated into new products or services. Customer integration in the innovation process is a method that aims at reducing the risk of failure of the new product.

Co-creation can be employed into several stages of the NPD process. NPD is the term used to describe the complete process of bringing a new product or service to market. As seen in Figure 1, the NPD process can be divided into four stages:

  1. Concept: in this phase, ideas for new products are generated and selected.

  2. Development: in this phase, the design and engineering specifications for the new product are developed and specified.

  3. Testing: in this phase, the product design is tested and potential product issues are solved.

  4. Commercialization: in the last phase the product is commercialized. The product is launched on the market and used by customers. Customers have the possibility to provide feedback or to support other customers.

Customers can participate in all these stages of the NPD process.

Figure 1: NPD Cycle

Figure 1

Business Models

A business model is useful in identifying the activities of a firm that have economic implications. The business model can be used to describe new businesses or new services.

In general, business models are constituted by three main elements:

  1. The value proposition: what are the benefits for the user when they use a service or buy a product?

  2. The value network: how is value created by a new service or product?

  3. The revenue model: which costs and revenues are involved?

Based on these three main elements, corporate co-creation communities in different NPD phases will be discussed following these research questions:

  1. Which benefits are the main drivers for users to participate in co-creation communities?

  2. How does the company create value in the community?

  3. Which cost and revenues are involved to maintain the corporate community?

Our insights are based on in-depth investigation of seven corporate co-creation communities. The corresponding community managers have been interviewed and behaviours of users have been investigated.

Which Benefits are the Main Drivers for Participation?

The study showed that in the four NPD phases, the main driver for customers to participate in a corporate co-creation community is that they want to improve the product or service. However, the underlying needs differ per phase. In the concept and use phase, customers contribute to product improvement or new product ideas because they have a specific product need or a product frustration. Users benefit when they are able to solve their needs or frustrations. As a Dell representative stated: "The user has an idea about the product and would like to see that idea converted in a new product".

Customers in the development and test phase participate because they benefit by gaining new product knowledge or product features. In the user study within Nokia Betalabs, two important drivers were identified: "I get to see what's out there and am able to follow the latest developments on the mobile front, and "I get to use the newest mobile applications before others do".

The second group of drivers to participation is the community related benefits, including recognition, sense of efficacy, and sense of community. These drivers are relevant in all NPD phases. Customers want to be recognized by the company and other users. As a KLM interviewee stated: "The user feels that KLM is listening and is recognizing its users and their comments".

The availability of monetary related benefits seemed to be unimportant. The majority of the studied communities had small monetary incentives available. Customers, however, appeared not to be interested in these incentives.

How Does the Company Create Value in the Community?

The study showed that employees fulfill an important role in the success of a community. If the user is participating to solve a need or to express a frustration, employees should efficiently validate the input generated by the customer. This means that feedback on an idea should be provided to the users in the community. As a Starbucks manager explains: "Users want to see action." Ideas need to be reviewed and commented within a certain time period. Employees should provide reasonable arguments, explaining why or why not ideas are under consideration. The status of ideas, suggestions or innovative applications should be presented clearly on the site. Arguments explaining why ideas are implemented or not can be published in a blog.

If users want to benefit from new knowledge, supplying new product or technology information is important. Employees should ensure a constant flow of new beta applications, protocols, software or other information. For instance, Nokia provides new beta applications and updates of beta applications to the user community regularly. Users are informed about new applications, and when possible, known product issues are communicated. Table 1 provides some examples of how a company can provide value to users at various stages of the NPD process.

Table 1: Value Creation in Corporate Co-creation Communities

Figure 2

To strengthen the community benefits, engagement of the company in the community seems to be required. Engagement requires that dedicated employees take part in the community to listen to the users and enable a human dialogue. Even when users have critical comments, it is important that the company listens and responds. This enhances the community related benefits for the users, since users feel that they have been heard.

To effectively supply feedback and new information to the community, two important aspects should be taken into account. First, community employees should be closely cooperating with development teams. This is important because these teams are responsible for the development and the implementation of any suggestion, idea or design. Tight cooperation enhances the implementation of ideas, knowledge supply and validation of ideas.

Second, executive support is required to enhance overall cooperation among departments and the community and for the availability of financial resources. The company should be prepared to change existing development programs to incorporate suggestions of users. Executive support is particularly critical when the responsibility for the community and idea implementation is dealt with by different departments. Management support implicates the importance of the community and enhances the cooperation between departments.

Which Costs and Revenues are Involved in Running a Corporate Co-creation Community?

The major costs of online communities, irrespective of the NPD phase, are related to employee costs and platform costs. Additionally, money may be spent on promotion, like advertising or user rewards. Community managers indicate that promotion costs are negligible compared to the employee and platform costs.

A number of types of revenues, or value returns, have been identified. First, improvements or ideas for new products represent a major value return. In the concept and use phase, this is achieved by implementing suggestions and responding to needs communicated by users. In the development phase, this is achieved by sharing best practices for new designs. In the test phase, this is achieved by fixing bugs or usability aspects.

Second, community is an important instrument for communicating with customers. The company can create understanding among users by explaining why some approaches have been chosen. By engaging their employees, companies appear to be able to increase customer loyalty.

Third, customer knowledge can be obtained by giving the user the opportunity to rate or review ideas or applications. With this information, the company can investigate which suggestions are well received and which products are ready for commercialization. This approach seems to be a useful tactic, in addition to traditional market research.

The fourth benefit is the enhancement of knowledge. Companies can experiment with Web 2.0 and they can improve the level of internal knowledge of and experience with innovative Internet-based solutions. This knowledge and experience can be utilized for adopting other Web 2.0 applications.

Finally, companies can benefit from online communities by improving their company reputation. This benefit is two-fold. First, some cases indicate that the company's reputation can be strengthened by using Web 2.0 technologies. Web 2.0 can be associated with innovativeness of the firm, which in turn can enhance the reputation of the firm. Second, the company's reputation can be strengthed by trying to decrease negative word-of-mouth. If users are unable to express their frustrations on a company platform, they may initiate their own community or website and create harmful negative publicity. Offering a company-owned platform creates transparency about an organization`s problems, but it also shows that an organization is taking unsatisfied customers seriously and is not afraid to show the current state of customer satisfaction. Providing an open and mostly transparent channel for customers is a way to both collect customer feedback and to, at least partially, keep negative word-of-mouth in control. Table 2 compares some of these community costs to community revenues.

Table 2: Cost & Revenue Corporate Co-creation Communities

Figure 3

All studied cases indicate that the gained value return is worth the expense. The value return exceeded expectations in almost all cases. Some companies even argue that co-creation communities are an inexpensive alternative to traditional approaches like extensive market research and focus groups. However, there is evidence that a community can extinguish, especially when only one service or product is discussed. Only offering information on one service or product appears to be a pitfall in practice. Such a community may be lively at the start, but after a while the flow of new suggestions dries up and discussions fade out. When users are finished giving their input, the risk appears that the expenses are not worth the value return. The expenses are only worthwhile when there is a constant flow of value return in terms of user feedback.

Recommendations

The findings of this study provide meaningful guidance for managers who want to establish a corporate co-creation community.

First, be aware of the needs of the audience and offer services that fit their desired benefits in order to enhance participation of customers. Customers in the use and concept phase have different information needs than customers participating in the development or test phase. The company should actively cope with these differences by providing the right benefits and information. In the use and concept phase, users are most interested in how their ideas are used. In the development and test phase, users gain benefits from new product information.

Second, engagement of the company is a key element in the success of the community. Engagement implies committed and dedicated employees who participate actively in the community and speak with a human voice. With their participation, they show their appreciation towards the contribution of the users, even when the contribution is negative in the form of complaints. This engagement appears to increase the community related benefits of the users and thus improves the activity of users.

Thirdly, the formal involvement of those who are responsible for implementing innovative solutions is required for a successful community. Efficient validation of ideas and the supply of new information can only be achieved when the responsible employees are involved and committed to the community. Efficient validation and information supply are needed to enhance the product related benefits for the users and to strengthen user participation.

To secure financial resources, a clear support by executives is needed. This support can mobilize employees to integrate user generated ideas in product development processes.

Finally, the company should be prepared to deal with negative community feedback. Users are not always satisfied with products and will mention their discomfort in the community. Community managers should realize that these users put effort in the community by registering and submitting feedback. Companies should take the opportunity to listen to these complaints carefully. If a company decides to start a community, it should also be willing to admit mistakes and to be transparent as possible. Open and honest communication can enhance the participation of users.

Recommended Resources

Study: Viable Business Models for Co-creation Communities

Based Innovation: A Method to Utilize the Innovative Potential of Online Communities

From Idea to Business Blueprint

Online Co-creation and Beta Trialling of Mobile Software and Services

Share this article:

Cite this article:

Rate This Content: 
No votes have been cast yet. Have your say!

Add new comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.