Management Guru Venkatram Ramaswamy On Co-creation, Startups & Tech

Google ‘co-creation’ and you will see some 33 million hits, Venkatram Ramaswamy (right) likes pointing out proudly. The professor in Ross School of Business, University of Michigan, has reason to be proud. After all, he coined the phrase along with C.K.Prahalad. ‘Co-creation’ as a business concept, was first introduced in 2000 in an article in Harvard Business Review, written by Ramaswamy and the late management guru C.K. Prahalad.

In 2004, the duo came up with ‘The Future of Competition’. The book talked about how consumers and companies were intimately involved together in creating value that was unique to the individual customer and sustainable to the enterprise. It is almost 2011, and the future is here. Ramaswamy’s latest book, ‘The Power of Co-creation’ co-authored with Francis Gouillart, a leading management expert and president and co-founder of ECC Partnership, draws on his interactions with the thousands of managers  he met as he toured the world talking and consulting on co-creation and engagement platforms.

VCCircle’s Sudarshana Banerjee catches up with Ramaswamy for a candid conversation. The strategy guru explains why win-win situations do not work, how co-creation is the new Quality, and why it pays to be anti-Six Sigma. He also talks about co-creating your way out of the recession, what GE chairman and CEO Jefferey Immelt says about the economy, how Unilever is what Unilever does, and what his role is in the World Cup soccer tournament and Olympics in Brazil. Excerpts:-

It has been six years since ‘The Future of Competition’ came out. How has the enterprise environment changed since then?

When my last book came out, there was no YouTube! The explosion of interaction technologies between 2004 and now is just mind-boggling. I use the word ‘interaction technologies’ purposefully. People talk about IT as information technology, but it is increasingly a lot about communication. I was just reading an estimate that there are 4.6 billion mobile phones.  All these different ways that people can interact, and on such a large scale, fundamentally change things. 

Companies have begun to respond, some of it not by choice; they either engage their customers or lose control. Not just in the communication, branding or marketing side of things; but in the design and development of products and services as well. Things have become much more accelerated. Transparency and access have become enterprise building blocks. It has to be, because people can share their experiences on a wide scale now.

Has the global economic climate made you re-think co-creation in any way?

The Great Recession has forced people to think how they can grow and innovate and create value differently. Jefferey Immelt was at the Ross School of Business at the University of Michigan recently, and he was talking about ‘resetting and renewing”. The world has been reset, and now we must renew ourselves accordingly in the changed world.

We need a co-creative model of value creation in the whole economy.  If you think about it, co-creation is really creating wealth and well being at the same time. I do not believe in win-win situations. If I am winning, and you are losing, I see no business reason why I need to make you win. Co-creation leads to ‘win-more win-more’ scenarios. It is therefore in my own-self interest to make the other parties involved in the co-creating process win more, because that is the way I can win more too.

How did the ‘The Power of Co-creation’ germinate?

The ‘Future of Competition’ was about co-creation and engaging your customers. The book was very successful, and I found myself travelling and talking about co-creation to thousands of managers all over the world. During these discussions, our conversations would invariably shift to co-creating with other external stakeholders - partners, networks, suppliers, NGOs. Some of the managers I met with were doing things in those areas of interactions with stakeholders. Thus the notion of co-creation as a multi-stakeholder engagement process and model started getting shape.

The ‘Power of Co-creation’ in a nutshell is about how to harness co-creation in enterprise value creation processes - for me, the enterprise of the future is going to be a co-creative enterprise.

Which brings me to the question. How do you define a co-creative enterprise?

As an enterprise that engages all its stakeholders in generating the outcomes of value to all together. The way to to do this is by building platforms. In my mind, the new currency is platforms, platforms, platforms. You need to build platforms inside the company, you need to build platforms interfacing suppliers, platforms interfacing with partners, NGOs, exteral customers. Often you will see you are engaging multiple stakeholders in the same platform. So what you have is a whole co-creative ecosystem within a enterprise. 

Does it take a certain type of enterprise to build a co-creative framework of corporate culture?

Co-creation can be applied by any enterprise. Interactions generate value. Wherever there is interaction, there is opportunity for co-creation. Think back to the Quality movement - where wherever there is a process, you (can) apply Quality to it, reducing the variations within the process to create a fixed set of outcomes.

Co-creation is not so much about the process as about the outcome, which is why Quality cultures have a little bit hard time embracing co-creation - because you are actually increasing variation in outcomes and giving freedom and flexibility to people. Co-creation is anti-Six Sigma in that sense.

Given the very nature of citizen services, for example, co-creation seems inevitable. Have you seen government/ public sector interest in the co-creation model?

There is a lot of potential in the public sector.  Representative democracy is government elected by the citizens, so the people are already involved. Public-private-social multi-sector co-creation has huge potential.

No one country is ahead in the co-creation adoptation curve. Various people within various government agencies are recognizing the value propositions of co-creation, and championing co-creation within their departments. Let me focus on three countries.

Brazil - Brazil has some history of co-creation. Participatory budgeting was first introduced in the city of Porto Alegre. They are going to the host the soccer World Cup (in 2014), and the Olympics (in 2016). The country is now saying we are going to be investing in all this infrastructure, lets see how we can do this using the co-creation framework so we can minimize conflicts and maximize value. I am working with the Brazilian government through one of its agencies on this.

United States - I am involved with a council for inter-agency cooperation in Washington D.C. The agency is using co-creation principles to get the needle moving in positive direction on cooperation and collaboration. President Obama is a classic example of how grassroots social media can be used effectively. Though he inherited this whole recession, among other things, Obama had promised an open government, transparency and collaboration. Take this portal for example, where the Obama government is trying to share information on where the stimulus is going, and the impact of this money at local levels.

India - I am involved with a co-creative initiative on building a highway from the airport. There are some twenty stakeholders like the Pune Development Authority, companies like TCS, Infosys, and Wipro, the police and security in the area, and so on, involved in the project. It involves an amazing amount of complexity. Even widening the road by a few meters is not easy, because of issues like land acquisition. Now, some people in the public sector may not be thinking like the private sector. People from the private sector told me quite candidly they do not understand challenges in the public sector (like land acquisition). The question is, how can we build a platform where people from such diverse backgrounds can connect. In India there is also a lot of movement towards transparency in service delivery, where the citizens themselves are getting involved as the cost of building websites are getting down. 

Could you share with us some Indian case studies of enterprises using the co-creation model?

ITC e-chaupal is a good example. Its business model wasn’t co-creative per se, but for it to function effectively there are a lot of co-creative interactions behind the scene. I was talking to Vindi Banga (the ex-CEO of Hindustan Lever) some days back, and he was talking about the Unilever co-creation global drive, that spread from India to Asia, to worldwide. Sunsilk uses co-creation in the formulation of its shampoos, and has a social networking initiative as well.

ABB India has a triple bottom line focus, and is bringing innovative solutions to villagers in Rajasthan as part of their corporate social responsibility (CSR) initiative. They are engaging the government and the villagers in electricity generation through solar photovoltaic (SPV) panels.

How can existing companies, with a certain way of doing things, legacy systems in place, and fairly set corporate attitudes, transition to a co-creation framework of production? Also, how can start-ups integrate co-creation principles into their corporate DNA?

I recommend using co-creation principles internally before applying them to external stakeholders. Start a conversation and dialog. Co-creation is a silo-breaker by design. Once employees start engaging, build a platform, and then that platform can create a variant or link to another platform. Maybe involve the employees in some of the policies taking place in the manager’s manager level; which are typically handed out to them, and where they do not get a change to participate.

Functions where merit can be brought inside the management process through co-creation include innovation, strategy formulation and execution, talent management, or leadership development.

Once employees start getting the idea of co-creation internally, start involving some external stakeholders. A word of caution though. You need to design the interaction platform right, and also convey your seriousness to the employees. There has to be a back and forth dialog. A co-creation platform is a not a glorified suggestion box. Its not just you throw the ball, and someone throws it back.

Start-ups are in a unique position to cultivate a participative mentality by harnessing technical and social architecture and co-creating the governance process, because unlike established companies they do not have rigid processes unable to make the shift. They can also take advantages of next-generation IT like cloud computing to scale up or scale down without a lot of capital investment upfront.

What start-ups need to watch out for is how to sustain and scale up the co-creation framework. If someone from the old school of process design joins the company, things may fall apart very quickly.

Pepsi is one company that has consumer engagement officers, but for most companies  customer engagement is not really among the key deliverables or a job role. Who owns the co-creation function within the enterprise?

I think co-creation is everybody’s job. Quality is a good analogy. Quality is for everybody, from the CEO to people at the shop floor.  When Quality Management started getting adapted, some people were put in charge to ensure adaptation; and then it spread to the whole company.

There has to be leadership. Someone has to figure out where and how interactions are creating value, amongst whom and in what way, what is the purpose of a particular kind of platform, and have some way to link this back to the overall strategic intent of the organization. I like to say co-creation needs top-down leadership the bottom-up way.

The words ‘engagement  platform’ keep coming up in our conversation. What is an engagement platform?

I can reduce the world down to two things - the people and their environment. Now, we can design and build the environment based on interactions people have with the environment. Google Earth is a good example.

In order to engage people in large scales you have to build platforms - which is a very important concept in the book. An engagement platform is a purposefully-designed environment. It is very difficult to sustain co-creation without an engagement platform; but then again, just because you have a platform does not mean co-creation is happening. Facebook is a platform. The company had to pay attention to people’s problems on the platform and make adjustments. What you have is a platform where people co-create, and simultaneously you have people talking about the platform on the platform, and in essence, co-creating the platform itself.

The notion of dialog is very important. The challenge is how to keep evolving the platform and create stickiness. There are many available platforms, and people need to be involved in the design of the platform. You have to pay attention to the experiences in the platform, see the  context in which your platform is created, how interactions are taking place, and continue to build relationships with people on the platform.

What are some of the advantages of using the co-creation framework? What are some challenges to transitioning to a co-creative model?

The question is not whether you are co-creating or not; that’s like saying if are you doing Quality or not. Everybody is doing Quality - the question is whether you are doing it well. Co-creation if properly done should create value for everybody.

It generates some new risks which you have to manage, but by and large, it makes companies more efficient and increases productivity. You can generate insights more rapidly and learn faster what people value. You can make better decisions and speed up the decision-making process. You discover more and more opportunities because  people who you are trying to create value for, are working with you  in the value-creation process.

Existing corporate cultures and mindsets can be barriers to co-creation adoption. There cannot be a experience department within an enterprise, it is everybody’s job. You need leaders and need people thinking with a experience mindset, not just product or process mindset.

Another challenge is to sustain stakeholder interest. There are models where people are given economic incentives to participate, but by and large, people take part in the co-creation process because it makes them feel good. The experience of participation for the stakeholders has to be compelling, because the motivators are intrinsic, like Daniel Pink talks about in Drive The more intrinsic the motivation, the more sustainable it is.

People struggle with how to design the processes around the company, and a lot of time has to be spend on training people to think this way. Standardization and all that is fine, but there could be a tendency to  lose sight of the fact that you are trying to build a engagement platform, and not design a process.

Organizations have legacy systems and have not been built to democratize value creation in terms of co-creation. It evolves over a period of time; which is why you don’t want to open everything to co-creation - you start at one place and build different frameworks of interactions for different stakeholders.

‘The Future of Competition’ and the ‘The Power of Co-creation’ both have been received well by the media and the industry. What is your next book going to be about?

I would also like to write about how enterprises can go about designing "engagement platform architectures". Indeed, I believe the enterprise of the future is not just a collection of activities, but needs to be concieved as  portfolio of  co-creative engagement platforms with different stakeholders engaged in different parts of the ecosystem. This is the future of value creation. I'm also planning on writing about the next generation "theory" of value creation, which challenges conventional business and economic theory about the nature of value, firms, and markets.

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