November 2009

"Consumers are beginning in a very real sense to own our brands and participate in their creation. We need to learn to begin to let go."

A. G. Lafley, CEO of Proctor and Gamble

Co-creation grants consumers free rein to work with company-provided resources in the production of their own value offerings. The ongoing participation of active consumers in the production of their own use and exchange value inverts the long-standing marketing orthodoxy of the company as the arbiter of value. Rather than resist this fundamental shift in the locus of value creation, savvy firms positively embrace the change and seek to manage consumer freedoms in order to harness the consumers' productive capabilities. Using the example of the Apple iPhone and App Store, and drawing on labour theories of value and Foucault's notion of government, we show how granting consumers freedom through co-creation has become the most effective mode of production for contemporary marketers.

Value Co-creation

Touted as one the most significant shifts in contemporary business thinking, co-creation is a new frame of reference for achieving the fundamental business goal of value creation. It is premised on the notion that the firm is no longer the sole arbiter of value as consumers take increasingly active roles in the creation of their own value. More than ever before, companies and customers now continually co-operate in innovative and productive efforts. Adopting this collaborative approach necessitates a fundamental shift in business thinking on the part of the co-creating firm. Rather than simply considering customers as end consumers, companies must actively seek engaged, mutually beneficial relationships by enabling and empowering users to be creative collaborators in the production process. These ideas put the spotlight squarely on the company-consumer interface, and suggest that personalized interaction between the company and consumers, as well as between consumers themselves, has become the locus of value creation. The company's vision of production and of what constitutes customer value is no longer privileged. Value is now jointly created by customers, who express their requirements, share their knowledge, and even actively participate in the manufacturing. The company provides the resources that enable such customer participation.

This newfound spirit of collaboration is fostered by companies' increased willingness to relinquish some control of their resources to consumers. A combination of factors, such as the convergence of technologies and industries, rapidly emerging and changing markets, ubiquitous connectivity, and increasingly sophisticated and demanding consumers, has changed many aspects of the business world. Consumers and companies are now partners in constituting markets. Companies which recognize this new collaborative commercial reality will achieve superior organizational performance by way of increased consumer involvement and satisfaction. Collaboration is based on sustained dialogues and consumers need access to information about the extensive range of options open to them. This privileged consumer position is partially facilitated by the company becoming more transparent about the nature of its products and processes, and the ways in which they and consumers can apply them for mutual benefit. By placing previously proprietary information and resources into consumers' hands, companies allow consumers to engage in effective dialogue, often outside of the company's purview. Newly liberated, consumers' creative zeal is employed toward creating individualized value propositions. Through their effortful inputs, company resources are re-imagined and re-worked on a grand scale.

The sum total of this creative consumer energy is greater than what the company can achieve alone. Consumers have a range of specific skills and competencies that companies are unable to match. Companies must effect ways to attract consumers and to maximize their value. From this perspective, consumers are productive workers, or prosumers, who are granted authority by companies to articulate their specific requirements, share their unique knowledge and apply their particularized skills to the consumption tasks at hand. The company benefits from outsourcing to a diverse and flexible consumer workforce some of the costly functions once conducted internally. Consumers have become resources and might as well be regarded as assets on a balance-sheet in lieu of costly plant, staff and production facility overheads. Previously, the lifetime value of a consumer would be measured in dollars spent through the course of their patronage. Now it encompasses the softer value of their knowledge and input and how they engage and work with company resources.

The company must seek to create an open communications environment in which consumers are encouraged to be playful, sociable, and ultimately creative - where they can effectively apply and enhance their knowledge for the benefit of everyone. In so doing, a company is funding the mobilization of consumer immaterial labour, which entails a process of creating and controlling processes in which the consumer's personality and subjectivity are involved in the production of value. With immaterial labour, all facets of life become extensions of capitalist production. With co-creation, a company adroitly ingrains their offering into consumer life and harnesses and appropriates their particularized ingenuity. The market becomes a platform for participation in a culture of exchange, where companies offer consumers resources to create, and where consumers offer to companies "a contact with the fast-moving world of knowledge in general".

Marketing Challenge of Co-creation

The marketing challenge posed by co-creation rests with establishing ambiences that program consumer freedom to evolve in ways that permit the harnessing of consumers' productive capabilities. As a corollary, what offerings can companies provide to attract the interest of consumers to work towards augmenting them? An ambience is a device that provides the context for productive cooperation to unfold and then be guided in one direction. It is argued that generating and capturing the productive cooperation of labour requires coercive devices, yet these are fundamentally weak and can only exert a channelling effect on consumers. Ambience can perhaps best be understood as a frame or platform of action that does not over-determine the direction, intensity, and nature of the social production it encourages, but still assists companies in their ongoing efforts to manage seemingly unmanageable consumers. This is seen in the construction of brands, which are encoded with rich meanings in an effort to orient our understanding of what they are and how we should interact with them. To Arvidsson, brand managers create particular ambiences with an eye to being able "to frame and partially anticipate the agency of consumers", or to program the freedom of consumers in certain directions. This allows managers to maintain a semblance of control over their brands in an era in which consumers wilfully imbue them with their own meanings and use them in ongoing individual and collective identity projects. Providing ambiences is a form of "government" in which behaviours and actions are subtly shaped from the bottom up, rather than being imposed through highly prescriptive rules and orders from on high. This type of power is still focused on generating particular forms of life, but does so through practices "that make up subjects as free persons".

In co-creation, we see how company-generated ambiences enable consumers to produce and share technical, social, and cultural knowledge through their prosumptive acts. While companies have been able to adopt information and communication technologies that facilitate consumer actions, there is no one-size-fits-all approach to how companies may wish to engage in co-creation. Some companies provide platforms for creativity, sociality and free expression on which almost anything the consumer can conceive can be made manifest. In other instances, platforms might be more circumscribed and the range of alternatives more limited, such as when consumers assist in research and development (R&D), build toys from company-produced raw materials, or involve themselves in different brand-specific communities. While these few examples demonstrate many different types and levels of co-creation, they show the obvious managerial potential of this paradigm in the variety of ways in which active consumer inputs can create value for the company. They also highlight the importance for companies to make the consumption experience more attractive. This is achieved by creating robust experience environments in which consumers can indulge their creative, practical, hedonic, or any other sides they please, as they act as innovators and idea generators. The consumption experiences that consumers have been able to tailor around themselves are of more value than standardized company offerings. What they receive in exchange for their money, effort and work is better suited to their specific needs and wants, as they are instrumental in its production. This extra use value allows companies to charge consumers a price premium for the co-created commodities. Co-creation not only encourages consumers to work, it also allows the company to charge them more. Herein rests the real efficiency of the co-creation model.

Although positioned as beneficial to the consumer, we see how forging and fostering productive relationships with customers is ultimately valuable for the company. Co-creation allows the company to maintain a level of control and becomes the company's primary method by which to control elements of the market. The fickle postmodern consumer becomes a partner in the value creation process. Consumer interactions with the company and with other consumers centered on the company's offerings mean that they become increasingly embedded in ongoing value creating relationships. The unbounded creativity presents consumers with the opportunity to undertake many of the costly and time consuming processes once undertaken by the firm, from R&D to ongoing proactive product add-ons, upgrades, maintenance and even repair.

Apple iPhone

Launched in June 2007, the iPhone is Apple's first foray into the Smartphone market. This is a highly competitive market, populated by established players such as Nokia, Palm, Research in Motion, Microsoft and Symbian, all with their own Smartphone operating system. Like the others, the iPhone is more than a just phone. It is a mobile operating system or technology platform, with a range of inbuilt applications and the inherent potential to create more. Although a relatively late entrant to the market, Apple has outstripped its rivals in terms of sales and customer satisfaction. We delve into how and why iPhones have been so successful. Beyond the cutting edge design and technology, we show how Apple's success is due in part to their adherence to co-creation principles, as they invite consumers in as application creators and merchants. Although Apple is still learning how best to work with and through consumers to channel and appropriate their creative energies, its openness makes the iPhone a site of co-creation as consumers work with company technologies to create value.

With the App Store, Apple simplified the process of adding software to the phone. Steve Jobs contends that Apple does not plan to make much money on games and other applications; he has also said that the company does not make much money selling music on iTunes. "We are not trying to be business partners," Mr. Jobs said of the App Store. Instead, he said, the goal is to "sell more iPhones." Apple gives developers a 70% cut of sales.

An Apple App is a software add-on that expands the functionality of the iPhone. In comparison to many other software development programs, the iPhone offers high flexibility and functionality in conjunction with low barriers to entry in terms of the cost, time and technological capabilities required of developers. The iPhone is designed specifically to make the creation of Apps relatively straightforward, and to allow users to easily incorporate elements of the phone's hardware, such as its GPS or Motion Sensor systems, into their Apps. The result is a flood of Apps. As of September 2009, more than 125,000 developers (each of whom pay a $99-$299 registration fee to join the iPhone Developer Program) have created in excess of 85,000 third-party applications. These are available on Apple's App Store, some for free but most at relatively low prices such as 99 cents. The resultant range of functions is impressive and the iPhone has become increasingly integrated into users' lives. Beyond performing a mobile phone's traditional functions, an iPhone can help you: navigate London's subway system, book, check in and manage flight details with Air Canada, avoid speed cameras, control your television or home lighting from the office, talk to other music fans and the band at a concert venue, tap along to your favourite songs, or find a decent local restaurant. All help to make good Apple's claim of doing "everything on iPhone". Each week, Apple's 40 full-time App reviewers examine more than 8,000 applications bidding for inclusion in the App Store, which to date has provided more than two billion downloads. The App Store marketplace is a testament to the ingenuity and creative zeal of App developers, in addition to iPhone users' seemingly limitless appetite for Apps.

This close engagement with customers is a new tactic for Apple who has not typically demonstrated such openness with its technology. Apple had been a veritable closed shop, adhering to a code of silence about their technologies, and certainly not inviting consumers to tinker, play and augment. Instead, teams of in-house Apple experts worked in a top-down process of design and production. Even now, Apple has not fully embraced co-creation, and seems to be taking tentative steps towards the potential it holds. As the Steve Jobs' quote demonstrates, Apple is not seeking to become partners with their customers in the App creation process. Yet, Jobs himself has since admitted his surprise at how much activity the iPhone and Apps has spurred, saying, "I've never seen anything like this in my career in software".

So popular is the iPhone that whole industries have grown up around it. Commercial and community-run services are available to assist would-be developers with almost any App-related issue. Companies such as iFund, positioned as "a $100M investment initiative that will fund market-changing ideas and products that extend the revolutionary new iPhone and iPod touch platform", serve as iPhone App investment houses for new iPhone-related software businesses. A set of conditions exists that makes the iPhone attractive to both developers and regular consumers. In this ambience, developers find the iPhone to be a fertile, and in some cases profitable, platform on which to build. Consumers consider the iPhone an attractive proposition in part because of the sheer array of easily available Apps. This growing number of iPhone customers makes the iPhone an even more attractive proposition to entrepreneurial creators who see an exponentially growing marketplace. Other platforms find it hard to compete as this perpetuating community of users is already invested in the iPhone and have embedded it and its Apps into many facets of their lives.

Discussion

This ambience has to be carefully managed by Apple. Developers must continue to find value in the iPhone. Matt of the iFund says, "[Apple] can't kill the golden goose. The promise of the iPhone is developers. If you choke them off, there are "a lot of other platforms waiting". There have already been grumblings of discontent. For some it is based on uncertainty and frustration with Apple's ambiguous and arbitrary way of assessing the suitability of an App for sale in the App Store. For others it is the relatively low level of returns. Apple must nurture relationships with powerful customers who have the means and abilities to apply their skills to other platforms. Regular customers who have embraced the iPhone and its myriad offerings must also be kept onside in this progressively competitive market.

This situation highlights the somewhat contradictory nature of co-creation. Although consumers are exploited as unpaid workers, they are free to leave at any time. Power does not necessarily reside with one party. Rather, the company and customers are co-dependent: an attractive company offering entices consumers in, while the work undertaken by these consumers makes the offering more attractive and valuable. Consumers are granted a say in the market and Apple allows their desires for distinction, exchange, community, and creative experimentation to blossom. Apple acts as gatekeeper and appropriates the benefits of these effortful consumer actions in the form of profits, ideas and attention. To paraphrase Terranova, free labour is the moment where the knowledgeable consumption of culture is translated into productive activities that are pleasurably embraced and at the same time exploited.

Recommended Resources

Innovation Creation by Online Basketball Communities

Collaborating with Customers to Innovate: Conceiving and Marketing Products in the Networking Age

Evolving to a New Dominant Logic for Marketing

 

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