"How do you generate word of mouth? Excellence, of course." Tom Peters
Francis Gouillart is president and founder of the Experience Co-Creation Partnership. He is a consultant and teacher who helps many organizations implement co-creation around the world, and co-author of the acclaimed book Transforming the Organization. He lives in Concord, Massachusetts, and blogs at francisgouillart.com. Francis Gouillart, co-author (with Venkat Ramaswamy) of The Power of Co-Creation: Build It With Them To Boost Growth, Productivity and Profits.
Francis, what is co-creation?
FG: Co-creation is an innovation methodology, for lack of a better term. It's a way of changing both individual processes, potentially entire strategies and ecosystems. Co-creation goes from the very small to the very big. It's a way of starting with a human experience of various stakeholders in the system and inventing new interactions between them.
When you say ecosystem, you mean everybody who's involved from the beginning of creating a product until the time it gets into a customer's hands and they start using it?
FG: Exactly. The basic concept is that there is an internal co-creation, which is a redefinition of how the various people inside the company interact with each other. They obviously do things—what we classically describe as processes—and you can migrate those processes into interactions. You can pay more attention to the experience of the various players within that company, and redefine how they interact with each other. How the back office of a bank works with the front office of a bank, that's internal. And eventually the same principle will apply to co-creation outside, which is how, say, the teller employee in a bank interacts with the customers, and potentially how the customers interact with entire communities of people.
So there's a whole chain there within the traditional value chain of a company, but then it extends outside that company to, again, entire systems of players, ecosystems—the suppliers, the company, its customers, and the various stakeholders. When you start thinking about issues like sustainability, it's all a game of interactions. As long as there are human beings involved in it, and as long as they interact with each other, there is room for co-creation.
So who is doing this well now?
FG: Let's start with the history of co-creation, if I may take this kind of Marxist revisionist view of co-creation over the ages here. Most people associate co-creation with customer co-creation. An example of this would be Nike, which we describe in the book. Most people quote Apple as being in this area.
Customer co-creation is a redefinition of how a customer relates to the company and to the people within the company, in particular. In the Nike example, the best-known example is Nike Plus, or Nike Running, where Nike identified the population of the people who run for exercise, and it puts a little sensor inside the running shoe, allows the sensor to communicate with an iPhone or an iPod, and then you sync this with your computer, giving you access to a whole bunch of things.
Some of it is data—you can see the course you just ran and measure your speed and the calories that you've burned, and so on. But you can also start socializing with other people. You can challenge others on the distance run, you can challenge yourself. You can interact with running clubs. You can map your runs on a Google map. All of a sudden, what you have is a very different experience of the customer.
And the reason why we call this co-creation is now Nike's not only offering you a shoe and the experience of running with a shoe. It's offering me the experience to truly co-create my experience. It's now uniquely my run in a given city. It's my own challenge. It's my own groups of friends with whom I interact. So the process that I use in running myself is as important as the processes of Nike offering me the shoe and designing this offering.
That's the customer co-creation side.
When I hear the word co-create, I think everybody's going to work together to figure out how to design this thing or this product. Perhaps I'm being too product-conscious here. I understand, from what you've just said, that this co-creation involves the customer in creating their experience around the product. They're not in there co-creating with Nike—or is that a next step? You do mention how people will start having input into sneaker products.
FG: That's right. The way you just defined co-creation is probably narrower than we would define it. I've talked to a lot of audiences, particularly engineering-oriented audiences, who think of co-creation as the co-creation of products; so essentially, the co-design of products. And that is an important piece. In my Marxist revisionist view of co-creation through the ages, that would be generation two—this notion that you open up research and development, product development to the community of customers. Many cars are now being co-created through customer labs. The Z4 BMW is that way. Mini Cooper is that way. Honda now has a huge co-creation lab as well, as does Toyota. That's the co-creation of the product itself and the design.
What I was describing as the first generation here with Nike is the co-creation of an experience. In the case of Nike, you still see the blurring between the producer and the consumer, which characterizes co-creation. In the traditional Nike system, the marketing would be controlled by Nike. They would be hiring stars, showcasing them on TV, placing ads in magazines, and so on. All of a sudden, the communities of customers and the customers themselves become the marketing arm, right? In other words, the marketing function has now been externalized to the customers, who take advantage of this to create their own experience. And, by the way, dramatically reduce the cost to the company.
One of the characteristics of co-creation that's true in the Nike example is that they gained 10 percent market share the first year, and their market share has continued to increase since they did that in 2007. At the same time, they've dramatically reduced the conventional advertising part of their spending by a factor of roughly two.
So you have this kind of very desirable effect through co-creation of changing the customer experience, which typically results in more growth and more revenue, and at the same time reducing the costs since you've, in effect, externalized the cost to other people.
The second generation is really what you described, designing the product. And Nike, by the way, is doing some of that as well. They've discovered this game of co-creation through the marketing end, and now they're also using all the knowledge they accumulate and the access that they have to all those runners and their characteristics to design a better product.
The way it manifests itself is their testing is now much more externalized. They pick the best testers through their community of Nike Plus runners. They engage those people into, in effect, doing the job that would traditionally be done by in-house testers and engineers. They give them shoes. These people act as a community with each other and start, in essence, developing the next generation shoe. They do that explicitly now with the design itself through design studios where they invite the best runners. And these people, in effect, insert themselves in the R&D value chain of Nike.
That would be the second generation.
Then there's the third generation. The third generation is probably the one we focus on in the book the most, which is really everything in between the marketing and the R&D. Because the marketing side is now better known, the R&D side is better known as well. Hank Chesbrough writes about this under the name open innovation. People talk about crowd sourcing, and so on.
The piece that interests us the most is now the transformation of the entire company and its ecosystems through co-creation. Even the relationship, for example, between employees and the company itself is changing. Employees also interact with the company, yet the company traditionally thinks of the management of employees as being done through processes; most notably HR processes, but also operational processes. And our claim is that even those internal processes touching employees themselves can be opened up to co-creation. That's the third generation.
I think I found this at your ECC Partnership (Experience Co-Creation Partnership) site. You have a two-page document here. But one line I particularly like, and it picks up what you just mentioned about the internal processes is, and I quote: "The ultimate vision has to be to engage the customers in co-creation. But if you're not co-creating inside with your employees first, you'll have no credibility with customers."
That puts me in mind of Hal Rosenbluth, who started a travel services company that he then sold to one of the very large companies, but his thing was always about having happy employees. You really had to focus your energy as a leader on the employees and your company, because without that, they would not have good relationships with your customers. We've seen the same thing in a classic way with Southwest Airlines.
So clearly co-creation is picking up on that idea, or it's developed from that, or it's taking that as a foundation?
FG: Taking that as a foundation is probably a good way of expressing that. The basic argument is very much what you describe for Rosenbluth and Southwest and other players, which is there's a virtuous chain of experiences that ripples inside out, right? If my employees are happy, generally speaking, my customers will be happy. There's a correlation between the quality of experience inside the company and outside the company.
The positive aspect is true. And the negative aspect is probably more intuitively true. If I have a bad experience with a call center, very often it is because a call center person herself or himself also had a bad experience because he or she doesn't have the access to the right information and cannot solve my problem. This virtuous correlation also translates into a very negative correlation of experiences.
What I think we have learned in the transformation through co-creation type of approach is that it is really about a vision of transforming the interaction with a customer. But in order to have the credibility to do that, you need to start inside.
An example that we mention in the book: we were fortunate enough to be associated with the transformation of the French postal system. They have 17,000 post offices, more than 300,000 employees.
The original vision, from the top management of the French post office, was to use co-creation to transform the relationship with the customer. We would say this is the correct vision to have, particularly when you start with an outfit, which, as is true for most postal services, was not a paragon of virtue when it comes to customer service and motivation and employee engagement. They were struggling with mail decreasing. Their parcel and package business was struggling against UPS. There were long waits in the post office.
In running workshops there, what we rapidly discovered was that if anything was going to happen with the customer, it had to happen with teller employees first, because they were not going to start carrying a message of reinvention and innovation unless they themselves found some means to engage.
It started, in this case, with a fairly trivial process, scheduling tellers' hours at the post offices. Traditionally this was done by the manager of each office, who would schedule each person's hours in that office. And the way people were deployed against this classically would be the post office manager would say, "Well, this is Mrs. So-and-So, you come up at such time. And Mr. X, you come up at such time."
What happened here is people started expressing the desire to co-create their own schedule, deploy their 35 hours as a function of their other life, their non-professional life. The post office basically let them to do that with a simple spreadsheet on a wall, and in a small village it's easy to do. In a larger city, it requires a little bit more of a computerized spreadsheet, and obviously some arbitrage at the end to make sure that the right people still add up and are deployed in the right place.
But just the opening of that process, which is a very mundane process—certainly nobody would look at the scheduling of teller employees as being very strategic. But the moment employees started doing that, you saw employee engagement going up. You saw absenteeism going down. So you have, again, that noble effect, in essence, of an experience improving at the human level and the costs going down from an economic standpoint for the company.
Then they started parlaying that into, "Well, if we can co-create our schedule, we should probably co-create the opening hours with the public at large." From there on, they moved into engaging the customers at the level of each post office. They redefined the opening hours sometimes as a function of the open air market that was opening in the village; doing such things as starting early, working during the lunch hour, which in France was a big change for them.
In the big cities, people started wanting to work later in the day and on weekends because they had this direct contact and engagement with customers. All of a sudden, in Paris and Lyons, offices stayed open until 8:00 p.m., where for years before that there was a reluctance to do that because it was a very union-to-management kind of dialogue, so everybody was set in their way. Through co-creation you could open up the gates at the individual level.
Just that little bit of scheduling control engages them and gets them invested in the whole process. There's an acknowledgment that they have lives outside of their work. Now they can schedule around those other conflicts, whereas in the past they probably said, "Screw them, I'll just take a sick day because I need to be somewhere at two in the afternoon."
FG: We got the idea for what we did with the French postal system from a call center in India. There's a company called 24/7 Customer, headquartered in the U.S., but most of its resources are in India. They manage call centers. Venkat and I visited one of them.
They're interesting because they've reinvented the recruiting process. They're looking for college graduates, women mostly. It's a tough market there to attract people for a call center. There is cultural reluctance associated with women working at night, alone, in big, bustling cities.
What they have created is like a group audition, or a group recruiting process. In a call center, people work in what is known as a batch. You have a group of ten people who chase lost luggage for British Airways or handle the customer service for National Grid, or some utility in the U.S.
They invite people who are friends to come in and, in effect, audition as a group. It looks very much like a Broadway audition. They set up this group and they get them to work as a team at a table, and the recruiters are out there. But the whole idea is to recruit you as a batch. You're being recruited as a team, rather than the classic recruiting process, which involves individual specs, and deciding whether you fit or don't fit.
The recruiters are interested in those group dynamics. So that changes the experience; it's reassuring for people who don't like to travel alone at night, and so on. Then, if you're recruited at that, you will become the operating unit. You will become the batch. So not only have you been recruited that way, but now you'll manage yourself that way.
And that's essentially what the post office does, to a degree, as well. One of the things they learned there is that if you let the people schedule themselves, they will cover for each other. The end result there is that absenteeism essentially went down to nothing at that point.
The ultimate form of this, in the case of a company like 24/7 Customer, is that their strategy is not to be your classic labor arbitrage call center. They're trying to be kind of a remote re-engineering company. Rather than simply reacting to the problem that you have and solving it, they're trying to change the process that created that problem in the first place. Maybe the website itself didn't give you the right indication, or maybe there is somebody in the field service organization at British Airways or at my utility that repeatedly doesn't show up, and therefore that's a performance problem for that person. What they tried to do is get the call center agents to be more than somebody who's just trying to solve the problem after the incident. They try to get the person to become an analyst of what was the root cause of the problem in the first place.
What they discovered is that when they hire people as a team, let them staff themselves as a team, their problem-solving ability is much greater. They are better remote engineers or remote re-engineers, in essence, because they already work as a team, so it has all the favorable elements of good team dynamics there.
Then the performance elements start also inflecting, frankly, towards the revenue side. It's not only that there's less absenteeism and more productivity, that they spend less time on each call and solve more of them, it's also that they contribute to the strategy of the firm much better, essentially decommoditizing, if there is such a verb, the offering of the company as a whole.
Those internal dynamics translate into very strategic outcomes.
I found this quote at your website: "Co-creation is about people. They want to generate personalized experiences for themselves, not be automatons in a process, whether they're employees or customers in that process. In other words, they want to exert their creativity in some fashion in that process and co-create."
There was a Japanese company, Wacoal, who make intimate clothing. Customers submit designs, they're voted on to determine the most popular and then those are produced. It turns out these people are getting great satisfaction. Some might say some kind of artistic satisfaction from that level of participation.
At some level, I think this is incredibly sociological. It goes beyond the company. It's clearly good for the company—the more input you have the better. But this is good for people.
FG: Absolutely. It is sociological, to a large extent. In the Wacoal example, perhaps the most interesting part of the story is that their targets are those very busy Japanese women who are, I think, in the 25- to 40-year-old range. These are professional women. These are women who have children. They're very often in big cities, and have a long commute back and forth from work. These are the most time-squeezed people. Yet their passion for being garment designers at heart finds a way of expressing itself, in spite of all that.
They will spend an extraordinary amount of time working on designs, and Wacoal actually tracks that through surveys, just because there is a passion. In many ways it's a response to the traditional time management approach—where there is passion, there is no need for time management tools. People will, in essence, elbow out any other activity to make it happen.
I noticed you had a blog post about Peggy Olson, the copywriter character on the TV show Mad Men. You seem to imply that women have, I don't know, a feeling for co-creation that might be a little more intuitive than a man's. Is that fair?
FG: That's correct, yes. You expose yourself to all kinds of dangers making statements like that.
But we can say ... in general.
FG: In general, I would say so. My co-author, Venkat Ramaswamy, always used to say, kind of smilingly, after either a workshop or a public address of some kind, "You know, women usually get co-creation faster than men." His argument was one about speed, in a sense.
It started growing on me at the beginning, and I kind of laughed it off and so on, because this is a semi-dangerous road to travel, because you're sort of critical of men when you do that.
But the truth is, it is really generally true; like all generalizations, they are generally true. In most groups, you find an intuition for co-creation with women. Even the way women approach things as fundamental as strategy. I had another blog entry recently; I was contrasting, for example, the language that Anne Mulcahy, the former CEO of Xerox, used when she was talking about what strategy is about and how she transformed Xerox.
It was fairly nurturing. She's a very feminine leader. At the same time, she was a powerful and very successful leader. But you listen to the language, and it is very much around the people, the nurturing, the redefinition. And there are hard decisions made along the way as well about product lines and investments, and so on.
Then I contrasted that with the way Michael Porter talks about strategy, and it's still a military analogue. He talks about bargaining power, about dominance, about competitive advantage.
And I must say, in some ways it's more fun to work with women when you are in the co-creation business because their natural attraction is going to be more toward that. They'll have an intuition about that much earlier. Women are not afraid of saying, "Well, my strategy is go in and gauge my B2B partner, and we will work it out together." For males, generally, that is viewed as an admission of "I don't have any ideas."
You see this in politics as well. I remember in the early stages when Hillary Clinton said she was going on a listening tour. I forget what the vocabulary was. That was, in our jargon, co-creation. People interpreted that as, "Well, she probably doesn't have any ideas, right?" But for a woman, it's much easier to accept that point of view as a natural humility and openness than it is for guys.
So if you were a large company and you say, "Oh, my god, we've got to go this way. This is the wave of the future for us to stay viable in the marketplace," how do you begin?
FG: There are some people who want to start immediately at the big level. We're seeing more of them now, and we get calls, because of the book and the article, from top level managers who say, "I see that this is about co-creation and I want to transform the healthcare business that way," or something like that.
But by and large, that's not the way it starts. By and large, people start out by picking a process. Sometimes it's a product line and they say, "I would be interested in exploring what co-creation would do there."
The thing I've learned about co-creation, and it's probably self-serving to state it like that, but I truly believe this is the case, is that it has a viral kind of quality to it. If you've learned even at the level of a single process, like scheduling in the post office, or marketing a running shoe, that somehow if you open the floodgates of the imagination around human experience and you let that guide the interactions of the people, rather than doing what's traditionally been done, which is doing process design and activity design, you figure out that it works at that level. Then the people who've done that immediately will start expanding the scope of what they want to do.
They'll realize, "Hey, if we've done it in marketing, we can probably do it for the testing of the shoe. We can probably even design the shoe that way." And you start opening it up to more and more of that.
I've been in the transformation business for about 30 years now, and what you see in doing this is traditionally the methodologies I've been associated with, like balanced scorecard or blue ocean strategy, these things were always still a conceptual sale. At the end of the day, you have to sell people on the notion, "Yes, a scorecard is good for you and this is why." You didn't have that natural lighting-up-of-the-jungle kind of quality that you find with co-creation.
In co-creation, you see that happening even in fairly sleepy organizations, like a post office. You see it happening in healthcare now, which has been historically, again, a kind of sleepy strategic area when it comes to innovation. So, once people understand the principle of that, because it taps so much into this desire to start with human experience, you find an immediate migration, and it starts moving across the organization fast.