Tv 18 - Lessons in Excellence

LESSONS IN EXCELLENCE

THE CO-CREATION EXPERIENCE

TV18's third in the series of the acclaimed management strategy show, Lessons in Excellence. The series will feature renowned marketing guru C.K. Prahalad and Venkat Ramaswamy in conversation with CNBC-TV18's ace analyst Ashu Dutt on a particular competency that is critical for a company to become world class - Co-creation. The series is based on the seminal work of Prahalad and Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers. They 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 to recipient to active co-creator of value.

EPISODE - I

ASHU DUTT: Competition for most of us is about selling products and services better than others out there, meeting bottom lines, gaining market share, that is pretty much as we look at it now, but what is the future of competition? Ever thought about Coke creating unique value with your customers? That's what C.K.Prahalad and Venkataramaswamy, professors at the University of Michigan are advocating and they are right here with us. Gentlemen, welcome. Lets set the context of what the future of competition is going to look like...

C.K.PRAHALAD: Thank you, both Venkat and I are delighted to be here and take this journey together on what the future might hold. Before we get started, I thought it might be useful if we set some contexts as to how did we come about writing this book. What is the process by which we came across the idea of co-creation of unique value with customers as the next factors or the next round of competitions? I think, when the Dot com's were in their heights around 1995 to 1998/99, there was a lot of euphoria that the dot com's are going to take over and at the same time the large established incumbents were supposed to roll over and die, so there were lots of worries on one hand and lots of excitement on the other. We spent a lot of time together thinking - is this going to happen? Or we at the cost of a different kind of change, which is subtler, but more enduring. So we came to the conclusion pretty early, in fact, I thought of course, really looking that dot com's is not going to take over, neither are the old established incumbents going to die, so we call it A and company type B and we are going to get a new type of company called C which is a morphing of the incumbents and at the same time the lessons that we as consumers and as industries have learnt in the dot com phenomenon.

ASHU DUTT: There was something else that companies like STAR BUCKS were creating. We would of course be discussing that but Venkat, set the context for us on co-creation.

VENKAT RAMASWAMY: Companies tend to start with a very product and service centered view and that is quite natural if you go back to the last 100 years, starting from Henry Ford, we went through a mass production of goods and services and then we evolved into creating a whole variety of products and services, we segmented customers, we tried to match what we are producing with customer demand for this product and services and we have come up to a point where some companies like Dell practice mass customization. So the product centered view is very deep rooted in the industry because the firms who believe they are producers and there are consumers on the other end who are essentially represent the man for the company can produce. But what has started to happen in the last decade of so as CK was mentioning was that there has been a lot of change. Let me pick up on one thing that he said about dot com's and he said that as consumers it taught us something. Now what does it teach. I think it taught us is the fact that we can have a more active role, because if you go back to the heart of the dot com movement as a consumer, it allowed me for the first time to have some say in terms of how I want to have relationship with the company. The very fact that can go on the Internet and click your way through a bunch of screens and start to have some input into the choices you make.

ASHU DUTT: What you are saying is that we were almost moving away from products and services to almost and experience for a consumer or a customer. Prof. Prahlad, let us talk about the act of Co-creating. That is the fundamental of what we are talking. What exactly is it and if you could co-relate it to the fact that you still call it a weak signal?

C.K.PRAHALAD: I think I call it a weak signal because it is not universally accepted or it is not universally practiced as yet. but there is enough evidence to show that this is happening. Now let us go back to where we started. The firms believe that they are creating value by creating products and services. You can tailor make as many products as you want based on your assumptions on what the customer wants. What we really are talking about is, if we start think about product and services, by experiences then by definition, experiences must involve the individual consumers and not treat them as passive. Second, once you start involving the individual consumer, that experience is conditioned by the context of the consumer. Where I am? What point in time? And what do I bring priors to that experience so it is a very event oriented, space and time constrained context within which the individual experiences. So co-creation is not about how well the firm can focus on the customer but how the firm and the consumer can jointly create an experience for the consumer where the consumer is actively involved.

ASHU DUTT: Let's at the very outset set out an example to differentiate the traditional model of products and services and to differentiate a co-created experience of product and service, how would you put it in example?

C.K.PRAHALAD: Take for example- let us take something that is common for all of us. Let us assume we go to a restaurant. The restaurant has a whole set of products that they can give me. That's called the menu, but that has got very little to do with my experience with the restaurant.

ASHU DUTT: That's the traditional approach. You've got a menu, pick something from there and they will serve it.

C.K.PRAHALAD: Now we have based on our understanding of our customer base, we have a whole range of menu items and we can make it better than