Collaboration: co-production and the co-creation of value

Derivative Proposition 3

The continued ascendance of information technology with associated decrease in communication and computation costs, provides firms opportunities for increased competitive advantage through innovative collaboration.

The concept that the customer is always a collaborator is both a foundational premise (FP6) of S-D logic and a popular focus in the contemporary marketing literature (e.g., Bendapudi and Leone 2003; Prahalad and Ramaswamy 2004). However, it is often not recognized that there are two components of collaboration. The most encompassing of these components is the co-creation of value. The concept of co-creation of value represents a rather drastic departure from G-D logic, which views value as something that is added to products in the production process. S-D logic, however, argues that value can only be determined by the user in the “consumption” process. Thus, it occurs at the intersection of the offerer, the customer – either in direct interaction or mediated by a good as indicated in FP3 – and other value-creation partners. Therefore, the idea of co-creation of value is closely tied to “value-in-use” and is inherently relational. It is also highly related to the concept of customer experience (Pine and Gilmore 1999; Smith and Wheeler 2002) and also incorporated as a key element of perceived value in Parasuraman and Grewal’s (2000) model of the quality–value–loyalty chain.

The second component of co-production involves the participation in the creation of the core offering itself, and therefore, probably more appropriately (than value-co-creation) referred to as “co-production.” It can occur through shared inventiveness, co-design, or shared production and can occur with customers and any other partners in the value network. Common examples can be a person assembling Ikea furniture, a person advising their hairstylists during the hair styling process, and a retailer and a manufacturer co-producing a retail marketing program. Co-production, like co-creation, is also related to the emerging concept of customer experience.

Because both the “co-creation of value” and “coproduction” treat the consumer as endogenous, they are different from the production concepts associated with G-D logic. Clearly, they are also nested concepts with the former superordinate to the latter in the same way, and with similar implications, as the relationship between service and goods in S-D logic. Traditionally, most marketers and consumer researchers have focused upon buyer behavior related to the product and the transaction, and thus focused on only a subset of co-production (for a good review of relevant literature on customer participation see Bendapudi and Leone 2003). However, if, as S-D logic suggests, value is co-created, it is necessary to shift the focus to relationship formation and consumption behavior. It also implies that co-creation and co-production occur not only between the firm and the customer but also involves other parties (value-network partners), and implies that resource integration is a primary function of the firm (Vargo and Lusch 2006).

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