Written by Tatjana Stanke

Over the years the business world, especially marketers, became familiar with the omnipresent terms of customer involvement, engagement or crowdsourcing. But more recently, a new term is gaining popularity: co-creation.

‘Lego Ideas’, McDonald´s ‘Make Your Own Burger’ campaign or the platforms jovoto.com and eyeka.com are just a few examples of the recent phenomenon of online co-creation through which companies co-create value with their customers.

In 1990, Michael Porter already stated that the most sustainable competitive advantage a company could have is innovation (Porter 1990). With the rise of the internet, increasing competition and shorter product life-cycles, companies began to realize that they have to look for sources of innovation outside the company - and found a valuable source in their customers. In the last years the internet, especially the Web 2.0, has empowered people in an unprecedented magnitude (Prahalad and Ramaswamy 2004). People have access to an unmeasurable amount of information, they interact with each other and create everything from texts, to videos, and pictures online. Therefore, the internet, and thus also online communities, became an important and popular source for co-creation for companies.

Considering the already wide spread use of co-creation on the internet and its rising popularity, this article’s purpose is it to analyze the benefits and risks of co-creation in online communities. Due to the variety of online communities, the focus will lie on co-creation with company initiated online communities with the purpose to create innovative value for the company and the customers.

What is Co-Creation?

One can find a vast number of examples for co-creation but there is little conceptual and theoretical clarity. The definition which is most widely accepted by researches is the one of Prahalad and Ramaswamy, the former also coined the term co-creation (Stern 2011). They define co-creation as follows:

“an active, creative and social process based on collaboration between producers and users, initiated by the firm to generate value for customers.” (Prahalad and Ramaswamy cited in Pétavy, Cére, Tan and Rot n.d., p. 4)

In general, co-creation is the involvement of consumers into the innovation process of a company, which as a result, generates value. The definition stresses that co-creation relies on collaboration of both parties and is not one-sided. The company and the customer must each contribute something in order to produce value. In this case, the former clearly defined roles of consumption (customer) and production (company) do not apply anymore (Prahalad and Ramaswamy 2004). Therefore, a central prerequisite of this definition is that customers are willing to participate and share their knowledge and creativity with the company (Füller, Hutter and Faullant 2011). Other scholars, like Romero and Molina (2011) define co-creation even narrower. They state that co-creation aims at customers who are especially skilled in their field and that they get rewarded for their participation. This article takes the definition of Prahalad and Ramaswamy as the base for further analysis.

Co-Creation vs. Crowdsourcing

Co-creation and crowdsourcing are often used interchangeably, but there are some significant differences. First, one has to take a look at the definition of crowdsourcing. In an attempt to consolidate different crowdsourcing definitions, Estellés-Arolas and González-Ladrón-de-Guevara (2012) state that crowdsourcing can be viewed as an open call made by a company, an organization or similar, to a large, heterogeneous group of people to fulfill a certain task. Hence both co-creation and crowdsourcing are based on interaction with customers, or other stakeholders, and the use of their knowledge.

However, Sawhney, Verona and Prandelli (2005) explain that one has to differentiate between reach and richness. Crowdsourcing may reach and involve more people but co-creation generates richer and deeper knowledge (Adams 2013). Another important difference is that co-creation has, in comparison to crowdsourcing, a long-term focus and additionally aims at building an engaged online community (Roser, Samson, Humphreys and Cruz-Valdivieso 2009). Lastly, co-creation has a strong focus on innovation:

“Crowdsourcing is a call to the crowds to contribute, co-creation invites the crowds to go one step further and innovate” (Kuipers 2010)

What Is Co-Creation Used For?

Co-creation has a wealth of applications ranging from evaluating ideas, creating designs and concepts to designing prototypes of products. Füller, Bart, Ernst and Mühlbacher (2006) explain that co-creation can especially be used along the entire new product development (NPD) process, which can be divided into three main parts: 1. idea generation and concepts, 2. designing and engineering stage and 3. test and launch phase. In these three phases customers can take different roles such as being the source of ideas, the co-designer or marketers and branders (Romero and Molina 2011). From a company’s perspective the distinction between marketing, research and development and consumer research become blurred as all of these areas are covered at the same time (Roser et al. 2009). For instance, an online community may be asked to find possible alternative uses of a product. Through these means, a company can increase its brand awareness, gain new ideas and, at he the same time, learn something about how their customers use their product.

What Are Online Co-Creation Communities?

In order to understand what online co-creation communities are, online communities (also called virtual customer communities) first need to be defined. Sawhney, Verona and Prandelli define online communities as follows:

“[virtual customer cummunities] bring together users who have common interest and engage in online conversations to share their experience with like-minded people”

(Sawhney, Verona and Prandelli 2005, p. 8)

Hence online communities provide a virtual environment where like-minded users can interact with each other, whether they share information or experience or fulfill some other need. In the special case of co-creation communities, users come together to create value for themselves and the company. Therefore they not only interact with each other, but also with the company (Füller, Mühlbacher, Matzler and Jawecki 2010).

There many different categorizations of online co-creation communities but combining the categorization of Füller et al. (2006) and Pétavy et al. (n.d.) three main types can be distinguished:

Existing co-creation communities (peer-to-peer or professional)
Co-creation communities hosted by a third party (Facebook, Instagram etc.)
Company created co-creation communities

Already existing co-creation communities can have two forms. The first are professional, specialized communities like jovoto or eYeka. Coca-Cola, for instance, hosted a co-creation project on eYeka and asked the users to interpret Coca-Cola as an energizing refreshment in their own style (see the video of the case study on Youtube) to get new positioning ideas. The second type of existing co-creation communities are run by consumers themselves whereupon the company can engage itself. Co-creation communities on third party websites mostly encompass the followers of the company page or especially designed campaign pages on social media sites like Facebook or Twitter. The third type are communities that were created by companies for a special purpose. Those co-creation communities either have a long-term orientation like Mystarbuckside.com, ‘LEGO Ideas’ or BMW´s Co-Creation Lab, or are set up for a special project like Mc Donald´s ‘Make Your Own Burger’ or Haribo´s Fan Edition.

The risks and benefits of co-creation with online communities will be discussed in part two of the article.