Can companies alone no longer create product value!? ~ Driving Innovation Through Co-Creation

"Co-Creation" refers to an approach where new value is generated through dialogue with diverse stakeholders. Derived from the meaning of "creating together," it is also called "kyosou" (共創). The co-creation portal "cotas, " operated by Dentsu Inc. and Infobahn, held the third "Japan Co-Creation Awards 2014" to honor outstanding examples of co-creation. This series explores co-creation trends and movements through the winning cases and the judges' perspectives.

Part 2 features a dialogue between Shigeru Sumitomo, CEO of Conselax and a judge for the " Japan Co-Creation Award 2014," and Yoshihiko Kyoi of Dentsu Business Creation Center's Future Creation Group.

Mr. Kyoi's Future Creation Group is a business team that creates clients' futures through ideas. It was formed from the concept of becoming a business partner even before the advertising stage to provide better ideas. It's co-creation marketing that utilizes appropriate external forces across all business processes, from distribution to prototyping, not just idea generation. Can a game-changing shift be achieved by viewing the true upstream for companies as customers (consumers) rather than management? We explored this nascent co-creation business.

Why Co-Creation Now?

 

Kyoi: I've worked on several projects with Mr. Sumitomo and we meet frequently lately. Today, I'd like to start by asking you again: "Why co-creation now?"

Sumitomo: I first heard the term "co-creation" back in 2001. That was the era when broadband made the internet commonplace. Since then, co-creation has become widely discussed. And now, co-creation has evolved from something we thought "would be nice to do" to something we "must do." I believe three factors drive this shift.

Third, the advent of the internet and smartphones has shifted product value for users from functional value to "experiential value." For example, the product value for iPhone users isn't the iPhone itself, but the experiences provided by the apps they use on it. Crucially, these experiential values are delivered not by Apple, but by external companies. Apple needs these external companies to effectively utilize the iPhone.

Kyoi: I feel that by the time someone says, "We've made the product, now figure out how to sell it," the options available are already limited. Co-creation can also be positioned as an extension of social media marketing. In typical social media marketing, the first step is listening, and the final step is reaching co-creation. However, the reality is that it often ends at the listening stage, where we hear consumers' voices. I believe co-creation should be integrated more deeply into the core of corporate activities.

 

You can't innovate with just the ingredients in your refrigerator.

 

Sumitomo: For companies to effectively utilize external resources, they must shift away from self-contained thinking. The internet has enabled collaborative groups among users, and the shared experiences gained through purchasing a product have become more important than the product itself. For example, people competed to buy smartphones not because they were multifunctional, but because they were good devices for sharing experiential value on social media like Facebook and LINE. Furthermore, considering co-creation with companies from the consumer's perspective, the experiential value of a product increases not just by purchasing the finished item, but also by learning about and participating in the process from planning to marketing.

Kyoi: Consumer needs and desires are shifting toward "experiential value." This means companies can no longer create product value solely on their own; they now need the power of consumers.

Sumitomo: Considering co-creation from another angle, I believe co-creation and innovation are very closely related concepts. To achieve innovation, diverse elements must connect to realize something different from before. I call this the "refrigerator theory": opening the fridge and cooking with the ingredients inside might be possible. But it might not be the dish you actually want to eat. We seek "what we want to eat right now" before what we can make immediately. If the ingredients for "what we want to eat right now" aren't in the fridge, we must bring them in from elsewhere. In today's world, where consumer information is exploding, is there any company that holds all the ingredients for what consumers want to eat within a single refrigerator—meaning, within a single company? Today, responding to consumer needs requires co-creation with external partners. And the best way to know what to create is to listen to consumers themselves. When companies take the lead in co-creation, they tend to focus on using only the resources they already have—like the ingredients in their own refrigerator. What's crucial isn't how to use existing resources, but what ingredients are needed to deliver what users truly want.

Not "customer insights," but "consumer experience insights"

 

Kyōi: How do you think we should approach user insights?

Sumitomo: I believe "user experience insights" are more important than "customer insights." It's not just about exploring insights from "customers" regarding companies or products. We must also uncover insights hidden in the details of the life experiences of consumers who aren't yet customers. For example, when considering a product like a car, it's vital to understand the "experience insights" across all touchpoints in the consumer's life experience. This includes every stage of their lifestyle journey: from pre-purchase consideration, through purchase, driving, family trips, sports, parking, waiting in traffic jams... all processes related to the consumer's life experience, which varies by lifestyle.

Kyoi: That's right. Even when trying to think from a "customer" perspective, we tend to focus only on touchpoints with our own products. We must first consider where there is room to provide services within the broader life experience. Currently, even within initiatives called co-creation, many seem to be listening to consumers' voices without truly hearing them.

Sumitomo: The difficulty of incorporating a co-creation perspective into companies is often discussed. Even if large corporations suddenly proclaim "openness" or "sharing," changing corporate culture and business processes is extremely challenging. Cases where innovation can be achieved within existing frameworks and organizations are few and far between. Moreover, that approach isn't necessarily the right choice. What's needed is ingenuity in how to incorporate new wisdom while leveraging existing frameworks. For instance, rather than abruptly changing rules, it's effective to utilize external organizations—like venture companies skilled in co-creation methods—as platforms. Creating opportunities to learn practically through shared experiences is a valuable approach. In corporate activities, while executives must strive to create corporate value for shareholders and the stock market, that alone is insufficient. Corporate value fundamentally arises from continuously creating customers. Exploring consumer experience insights and co-creating products and services together with consumers enhances customer experience value and leads to the continuous creation of customers. To achieve this, mechanisms and catalysts are needed to shift the vector of corporate activity away from the perspective of internal superiors or management, and toward the perspective of external consumers. The ultimate manifestation of this is co-creating the voice that says, "Consumers are passionately desiring this." That is the consumer insight itself, and it also becomes the most compelling material for persuading management.

Kyoi: Our role is to serve as a platform connecting consumers and companies to drive co-creation and realize innovation. Today's discussion has confirmed that this approach is indeed correct. Thank you very much for today.