In my experience, clients large and small realize that customer alignment leads to a transformation that exceeds their expectations, in a good way. The more customers realize their vendor is committed to listening, embracing and delivering their precise requirements, the more they want to be involved in that organization.
The operative phrase is to “be involved in.” Increasingly, that is taking the form of customer co-creation. Prahalad and Ramaswamy defined co-creation as “the joint creation of value by the company and the customer; allowing the customer to co-construct the service experience to suit their context.” In my work, I define co-creation as the “purposeful action of partnering with strategic customers, partners or employees to ideate, problem solve, improve performance, or create a new product, service or business.”
The concept has been around since 2000 yet has taken over a decade to catch on. Co-creation is not a customer advisory board on steroids or a clever sales and marketing tactic. It’s about jointly creating value , for the vendor as well as customers. To most managers, the thought of openly and transparently engaging customers, sharing detailed data is downright scary. The rewards, however, should cause CEOs to pause and reconsider.
Let’s look at how two very different companies are using co-creation to drive value.
The first is DHL, the global market leader in logistics, part of the world’s largest mail and logistics services company, Deutsche Post (“DP”) DHL. You may know them by their yellow and red delivery trucks. Privatized 15 years ago, today the DP DHL Group employs some 490,000 employees around the world producing $57 billion in annual revenue. You might think a company this size would struggle being agile, let alone set standards in innovation and customer service.
What DHL discovered was its customers wanted help in rethinking their supply chains to improve business performance. “That is quite a challenge, as we are typically dealing with very complex global supply chains,” shared Bill Meahl, chief commercial officer at DHL, “one which fueled us to embark on a journey of customer co-creation.”
Embarking on this path meant more than just process and service changes, it meant picking the right customers to work with and deepening employee capabilities to understand how they impact customer business, customer perception and sustainability. A critical success factor was teaching employees how to “walk a mile in customer shoes so they intimately understand the dynamics of working with customers ,” according to Meahl. That competence is critical to developing a range of viable recommendations and new solutions that not only meet customer goals but demonstrate the value of DHL as a business partner.
DHL understands that innovation must be customer focused. One way they ensure this happens is by bringing customers and their DHL service partners together in specially built Germany- and Singapore-based innovation centers for workshops to share best practices and create value. The purpose is to “conduct intensive hands-on workshops that explore and understand technology, economic, socio-political and culture trends to develop new ways to manage supply chains and logistics.”
Sessions sometimes start with a look at what business could look like in 2050. Employing a proven methodology of scenario planning, DHL’s approach takes customers on a time journey which showcases a four-quadrant view of what the world could look like in 2050. The quadrants are radically different from each other; one quadrant is always a doomsday scenario and its opposite is a perfect world. The power of scenario planning is that it breaks mindset. The joint team then “walks” backwards from 2050 to 2020, which provides a platform for specific trend lines, core competencies, and problems that need to be solved. From there, the joint team brainstorms solutions and approaches.
Some of the innovations that have been launched as a result of the over 6,000 engagements conducted in DHL’s innovation centers and other customer co-creation formats include:
• Parcelcopter, a drone delivery research project, which may in future enable companies to be more responsive, agile and cost-efficient.
• “Smart glasses” and augmented reality, co-created with DHL customer Ricoh, to improve inventory and warehouse picking efficiency by 25%.
• “Maintenance on demand” (MoDe), co-created with DHL’s customer Volvo Trucks and other partners, uses sensors that automatically send back vehicle and component performance to identify when and where truck maintenance will be required.
• IoT Report, an industry report, authored by DHL and Cisco, that identified and evaluated the implications and use cases of the Internet of Things in logistics.
• Robotics applications that are currently being jointly tested with customers. These range from self-driving trolleys that support pickers to do their work in a less strainful way to collaborative robots that support workers for value-added services such as co-packing.
Meahl admits the co-creation concept was initially received with skepticism, internally and externally. Customers thought it was a clever sales tactic. Internally DHL has multiple business units who have differing business models serving the same customers. Identifying the right DHL leaders who “owned that customer” and aligning and coordinating multiple teams to productize the innovation workshop outcomes forced the company to take a hard look at its own structure and processes.
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/products is up.
At the other end of the spectrum is Phononic, an early stage technology company that develops solid state heating and cooling. Phononic sells into traditional industries that manufacturer refrigeration and HVAC systems.
The founder and CEO, Dr. Tony Atti, believes that “companies should understand their customers’ desired experience and use that knowledge to work backwards to define company processes and culture .” In Atti’s opinion a core part of B2B customer engagement should be based on emotion versus engineering or technical terms. “Co-creation is about helping the customer imagine a different future .”
Most of Phononic’s products are the result of customer co-creation — these are highly complex, precision engineered equipment that can cost millions of dollars. Fully integrated team of engineers, supply chain experts, sales and marketers partner with customers to define new products, design requirements, prototypes, and finalize manufacturing specifications.
The result is a small company that is disrupting an old, established industry. Atti swears by the co-creation model for the entire customer lifecycle journey, not just product innovation. It is at the core of Phononic’s differentiation as well as its culture .
Along the way he has learned some valuable lessons:
• Don’t limit co-creation to just problem solving or new product definition; use it to define new markets to grow into.
• Be consistently honest and transparent about your business and its goals with employees as well as customers.
• Build a culture that constantly pushes the company beyond its comfort zone while “beating out the fear of making a mistake” through empowerment.
• Conduct annual “outside-in” journey mapping as the blueprint for processes, mapping emotions as well as actions taken.
Atti and Meahl both stress that for companies to structure their organizations and processes around their customers; co-creation is the new table stake of success.
Your strategic customers are expecting this from you. That being said, not all customers and markets are ready to embrace the commitment, transparency and responsibility of co-creation. Atti and Meahl will tell you to “choose your markets and customers wisely and go into co-creation eyes wide open.” But do it now.
This article was written by Christine Crandell from Forbes and was legally licensed through the NewsCred publisher network.