What is Co-Creation and Why is it so Valuable?

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How can global businesses prevent themselves from running out of ideas? Even companies at the top of the food chain can only rely on their own success for so long. How can they continue to approach problems from fresh angles, and consistently present products that consumers actually want?

It requires innovation. And more than that, it requires input from outside the business. We call this co-creation. 

Co-creation opens your innovation process up to a wide range of voices that would normally never be involved. Chief among these is your customers – the people who ultimately matter most. 

But as we’ll see, co-creators can be a wide range of players, each bringing something special to the table. The end results are products and services that closely align to your buyers’ needs and solve problems.

We’re going to explore the what and the why of co-creation. And we’re going to see some of the businesses you should look to emulate if you want to end up on top. 

So let’s begin with the classic definition.

What is co-creation?

Co-creation is when businesses include outsiders in the ideation and development process. Most companies keep new products and processes strictly internal; some even work hard to keep them secret. 

But co-creation lets companies collaborate outside the business to gather fresh ideas and break from their own status quo. They acknowledge that they don’t have all the answers in-house, and they make it easy for others to bring the answers to them. 

This idea is nothing new. In fact, the term was popularized by a Harvard Business Review article in 2000. In this article, the authors focused on the relationship between a business and its customers: 

“Thanks largely to the Internet, consumers have been increasingly engaging themselves in an active and explicit dialogue with manufacturers of products and services.”

And it’s true – most of the time we think of co-creation between a company and consumers. But co-creation can also include: 

  • Prospective buyers (not just current fans)
  • Suppliers (working together to improve the chain)
  • Competitors
  • Industry influencers

The goal is to approach issues from a new perspective and come away with better products and processes. And while most businesses will feel more comfortable working with current customers, there may be more opportunities available elsewhere.

How do you co-create?

As we’ll see shortly, there are plenty of different ways to make outsiders part of your ideation and development processes. In fact, many “old fashioned” research and development techniques – focus groups, surveys, and polls – are co-creation efforts in their own right.

But modern technology makes it easier to involve customers earlier in the process. Social media, internet forums, and online portals mean that co-creating can occur at every stage of the development process – from the initial idea, through to reviewing products once they hit the market. 

Businesses need to find the most direct way to involve customers in product innovation. In many cases, the simplest solution is to build a web portal where users can suggest ideas, give feedback to one another, and stay connected to all co-creation projects.

This is a great way to build an endless stream of new product ideas. But it also builds brand loyalty and will increase customer satisfaction in the long run. 

When buyers feel that they’re being heard, they naturally become more invested in the success of your business.

What are the benefits of co-creation?

A well-designed co-creation process is a step towards creating value all across the company. 

Here are five clear ways that your business stands to gain value:

1. Better products based on customer desires

The most obvious (and likely best) reason to invest in co-creation is to make something new. Every business wants to be unique, to blaze a trail, and to disrupt. But with the same voices always pitching similar ideas, you’re more likely to end up with variations of what you already produce.

Co-creation brings in new viewpoints to help businesses disrupt themselves. You don’t have to predict what consumers or influencers are going to want – they’ll tell you themselves.

And the result is new products that reflect the way that real consumers think. 

In one study, 61% of businesses said that co-creation leads to more successful products. It may take a little more energy than simply updating last year’s range, but the reward can be far more significant. 

2. Better financial performance

This is probably all you need to hear: co-creation efforts are consistently shown to be good for your bottom line

51% of businesses say co-creation improves financial performance. Companies save huge sums on research and development, marketing costs, and see lower customer churn. 

Take DHL for example. According to Forbes, executives were initially sceptical that crowdsourcing ideas would bring any value. But “the result has been well worth it. CSAT scores are over 80% and on-time delivery performance is 97% or higher worldwide. Customer churn rates are down and revenue from new services and products is up.”

Parcelcopter Dhl Co Creation
The Parcelcopter is a famous result of DHL’s co-creation process. Source: DHL

On top of pure revenue, 54% of businesses also say that co-creation improves social impact. Customer co-creation helps to bring your community closer to the business and builds stronger ties with fans and buyers. 

Which of course leads back to more revenue in the future. 

3. New and unexpected ideas

One of the biggest inhibitors to corporate innovation is specialization. On its face, it makes perfect sense that employees should be bona fide experts in your company’s products and processes. That’s why companies tend to hire staff who’ll fit right in

But if one of your goals is to create new and exciting goods, or to overhaul your current product development, your in-house experts may be too accustomed to the way they’ve always worked

By definition, co-creation brings new voices and ideas into the fold. These may not be the kinds of people you’d normally hire. In fact, the best ideas can come from totally alien industries, or from people with no subject matter expertise at all. 

Provided you’re open to their submissions and willing to consider each on its own merit, you’ll be able to approach issues from a whole new perspective. 

4. Making the consumer part of the creation process

From a purely bottom-line perspective, co-creators are truly valuable. You essentially increase your workforce without adding to payroll

That’s exactly what P&G has done, developing dozens of new products thanks to help from alumni and customers who just want to be involved. 

Pg Co Creation
Source: PGConnectDevelop.com

And as McKinsey found, while some contributors are motivated by money or prizes, more get involved out of curiosity (28%) or as a way to entertain themselves (26%). If you can accentuate these aspects of your co-creation strategy, you may not even need to offer monetary rewards.

The process is also a key way to increase customer loyalty. A user who sees their ideas taken seriously and even pursued through to development is now part of the decision-making force. They’re not just a buyer; they’re a real stakeholder. 

This is so important for companies who truly want to be customer-centric, rather than just talking about it.

5. Removes barriers between industries

The “silo effect” is a popular concept in businesses all over the world. Mostly we think of silos existing between different corporate teams – your marketing team is siloed from sales or product, for example. 

But the silo effect exists between industries as well. A software company doesn’t think about the latest trends in retail or delivery. It hires staff with a specific set of skills, which they narrow and refine until they’re exceptional in their area of expertise. 

Working with co-creators brings brand new skills into the company. You may not even realize how a supply chain expert or mechanical engineer could help you design the next great handbag, tea bag, or sleeping bag.

The beauty is, you have access to these skills with no risk. And if their ideas are no good, you simply move on to the next one. 

5 excellent examples of co-creation

Co-creation takes many forms, and works for all kinds of businesses. So to illustrate, we’ve identified five companies that collaborate in different ways outside the business, each having a positive effect on the business.

For more examples, check out these 10 great co-creation examples.

1. Anheuser-Busch

The brewing company behind some of the world’s most famous beers, Anheuser-Busch is perhaps not what you’d think of as an innovator. After all, fans drink Budweiser, Beck’s, and Stella Artois because they’re familiar. You always know what you’re going to get. 

But that doesn’t mean that the company can rest on its laurels. Food and beverage markets are notoriously competitive, and beer companies always need to find new ways to promote themselves and create new products that will generate buzz. 

In 2012, Budweiser was outselling its four closest competitors combined. And yet it was still selling only a third the amount of beer as it did in 1988. The market for “premium regular beer” had shrunk. 

So Anheuser-Busch held a competition to come up with a special edition Budweiser. The company asked its 12 Budweiser brewmasters to develop a new flavor that would debut in a Super Bowl ad in early 2013. 

So far, no co-creation. What made this different was the national taste testing that followed. More than 25,000 American adults tried the new beers, ultimately settling on a winner, Budweiser Black Crown:

Budweiser Black Crown
Source: NateHorowitz.com

In this case, co-creation didn’t come at the recipe level. Rather, the company used its legion of fans as judges

By the time the Super Bowl ad ran, people already knew about and were interested in Black Crown. The result, according to the CEO of Anheuser-Busch, was good immediate sales of Black Crown and even stronger sales of Budweiser overall, not to mention a whole lot of buzz.

2. BMW

It shouldn’t be a surprise to see BMW on this list. The automobile company was relatively early to begin online co-creation, and launched its own permanent lab in 2010

BMW’s first open innovation contest, “Tomorrow’s Urban Mobility Services,” let internet users submit their best suggestions to improve mobility in the cities and urban areas of the future

500 participants joined the lab (digitally), leading to 300 distinct product ideas. The ultimate winner – as judged by an expert panel – was the PMUP (“Pick me up please”) system, which lets pedestrians request rides via cell phones which connected directly to car computers. 

The most interesting aspect of BMW’s co-creation lab is not the single winning idea that came out of this contest. Nor the 300 new potential products that were also unearthed. 

More importantly, a web community grew around the contest. More than 5,000 comments were posted about the 300 ideas, and 8,600 idea evaluations were given. Web users weren’t only submitting ideas, they also showed BMW how to assess new creations

By 2016, BMW’s Co-Creation Lab had more than 5,000 regular participants, and each contest brought on average 1,300 new ideas. In an industry that relies heavily on innovation and small advantages over the competition, this initiative has certainly proven its worth.

3. DEWALT

Based on pure user numbers, DEWALT’s Insights Panel makes BMW’s look small. More than 12,000 stakeholders interact on the platform – most of them active tradespeople. 

Dewalt Insights Panel
Source: CMXHub.com

The purpose of this community is very clear: to give DEWALT’s end users a voice in developing and improving the tools they rely on every day. Unlike our two previous examples, it doesn’t revolve around one-off competitions. The community works just like any online forum – users discuss their favorite tools, what they’d like to see next from DEWALT, and help each other solve DIY problems. 

The difference is that DEWALT actively uses these conversations to improve products. It can solicit specific feedback on new packaging and design, and even on website updates. 

And to really stimulate innovation, the community also has an invention submission system. Users can suggest new products they’d like to see, and others can comment on these suggestions. 

The result? “Product testers respond faster, research is empowered to make product lifecycle decisions, and DEWALT has saved over $1 million in study costs in 2016 and close to $6 million since establishing the DEWALT Insights Panel.”

This creates an end-to-end innovation cycle involving customers the whole way. From the first idea, to initial designs, to production, and then to user reviews, it all takes place inside the community. 

4. IKEA

Swedish furniture empire IKEA has perhaps the clearest example of long-term, sustainable co-creation on this list. It has developed a truly robust platform – Co-Create IKEA – through which it can work directly with consumers on any project it chooses. 

Activities always cover at least one of three main areas

  1. Exploring life at home. Polls, surveys, and other customer feedback to understand “the emotional and functional needs” in normal people’s lives. 
  2. Ideas and prototypes. Based on the results of the first step, IKEA’s team develops working models with the help of customers. 
  3. Voting and feedback. Platform users give direct feedback on both in-progress prototypes and help choose the finished products.

The company opens submissions in areas that it’s particularly interested in. At the time of writing, its next big focus is on scents:

Ikea Co Create Scent
Image source: https://ikeacocreation.com/

IKEA provides tools and resources to help users submit the best possible ideas. And winning submissions are even eligible for cash rewards. So it’s no wonder that this co-creation portal is enormously popular. 

This is an excellent example of a company bringing the customer into the production process by giving clear instructions and a framework through which to create. And the occasional monetary prize can only sweeten the deal.

5. Coca-Cola

As we saw with Budweiser, even companies at the top need to keep innovating. Coca-Cola is the undisputed champion of the soda fountain, but it still needs to find new and exciting ways to sell products – especially in emerging markets. 

In 2018, the beverage giant embarked on a co-creation campaign in the Southeast Asian market. The goal was to create “an agile design thinking innovation protocol to identify products that would create a clear impact in the market.” 

In other words, Coke needs to know what really matters to Southeast Asian consumers if it wants to stay ahead.

So far, there’s not a lot of information about what the company has actually set up. Coca-Cola has always relied on agencies to build new campaigns, and this hasn’t changed. But it has “opened up briefs to everyone” as a way to crowdsource new ideas in Asia. 

More tangibly, the company has rented local cafés and brought in customers to try out new products. Special focus is placed on customers driving these interactions, letting Coke’s research and development team gather feedback and ideas in a natural setting. 

We’ll have to wait and see what these initiatives produce. But the heavy emphasis Coca-Cola places on co-creation tells us that they’re serious about the strategy. 

Ready to build your co-creation hub? 

In essence, co-creation is simply working with your customers to create products and services you know they’ll love. Instead of waiting until a new product is almost finished, you make customer feedback and ideas central to development from the very beginning. 

We’ve seen five different examples of this in action. These include one-off competitions with splashy marketing campaigns, active internet communities that give constant feedback, and open innovation platforms that involve customers in every stage of product development. 

It’s hard to think of a single business that couldn’t benefit from more integrated consumer feedback.The only real question is, are you bold enough to seriously invest in co-creation?