Embracing Co-Creation to Manage Complexity and Revitalize Value Creation by Venkat Ramaswamy

Propelled by advances in global communication and information technologies, there has been an explosion in interactions in the business-civic-social-natural system. These interactions are among both human and nonhuman entities (e.g., devices) in the system and entail the following five key characteristics of complexity:

1. An increase in the number of entities interacting in the system.
2. An increase in the diversity of entities in the system.
3. An increase in the interdependence of entities in the system, with each entity affecting and being affected by the actions of other entities in the system.
4. An increase in the unpredictability of actions and events in the system.
5. An increase in the variability of potential outcomes and consequences in the system.

 

Now, consider how we as individuals have typically operated in the system in which we participate. In a previously less globally connected world, we interacted mainly with a limited number of entities, typically like-minded with less cultural and cognitive diversity. The system had less unintended consequences and more predictability. Consequently, we embraced Six Sigma style thinking in enterprises where “variation” was seen as the “enemy” of value creation. Interactions existed in the system, but were typically designed to be controllable, or at best, interactions were unpredictable, but could be reasonably known, as in air traffic control systems (where planes for the most part are constrained in terms of flight paths for instance). In the economy of goods and services, the focus was largely on “averages” (with the dominant assumption that life follows a bell curve), and subsequently “standardization” was the norm on the supply side.

 

Today, complexity is a given. It cannot be controlled but must be leveraged in value creating ways. This requires us to embrace a whole new paradigm of co-creation that reframes value creation with interactions as the starting point and the very locus of value creation. Harnessing the power of co-creation requires the purposeful innovation and design of engagement platforms (assemblages of persons, artifacts, interfaces, and processes that facilitate productive, collaborative, creative, and meaningful interactions) everywhere in the system—from the resource space to the opportunity space of value creation, and from enterprise decision-making to offerings—to democratize and de-center value creation. Just as a Copernican paradigm shift occurred in seeing the earth as revolving around the sun, we need to see individuals and their personal and collective agency as the new center of gravity of value creation.

 

A fundamental implication is that enterprises are now a nexus of interactions and value must be created with, and for, individuals as co-creators:

1. Enterprises must stop thinking of individuals as passive and docile recipients that firms traditionally deliver to, but must instead engage individuals as active co-creators of value.

2. All entities that affect or are affected by the actions and outcomes of a value creation process can be a co-creator. In other words, the more inclusive the engagement of stakeholders in the act of creating value (through engagement platforms), the better.

3. “Value” is subjective and not only varies from individual to individual, but also within individuals in the context of their experiences in space and time. The meaning of “value” is thus a function of human experiences, and products and services are a means to this human experience-based embodiment of value.

4. Individuals are, by definition, an integral part of creating experience-based value. Their own creativity is relevant to the process of creating outcomes of experience-based value. This requires effectively designed engagement platforms as the means to enacting value creation together. Engagement platforms are both offerings and the means to create those offerings.

5. Individuals must be continuously engaged as stakeholders in value creation, as much on their terms as that of enterprises, expanding how enterprises think about both value creation resources and opportunities.

6. Convergence of value creation based on human experiences of individuals in economy and society, necessitates that all enterprises, whether private, public, or social sector enterprises, must engage people individually and collectively.

7. Private-public-social enterprises must build ecosystems of capabilities centered on the wealth, welfare, and wellbeing of all individuals.

 

We need to build the technical and social enterprise architectures to support ecosystems of capabilities that enable platform engagements to give rise to new sources of unique value that is contextual and centered on events in the system and in the daily lives of individuals.  And to be successful, we must connect deeply with the actual lived human experiences of individuals as stakeholders in managing the reality of complexity. All of this requires knowledge, learning and insights on top of fine-grained real-time analytics through active, explicit dialogue, appropriate levels of access and transparency, and reflexive sharing of experiences to make platforms come alive and be mutually valuable to participating individuals.

 

Platforms must facilitate inclusive engagement, while enhancing self-expression of the inherent creativity of individuals. The integrativity, generativity, linkability, and evolvability of platform capabilities directly affect its co-creative capacity to cope with the scale, nature, scope, and patterns of complexity in “opening up” interactions in the system as new sources of “win more—win more” stakeholder-enterprise value. Infrastructure, governance, sustainability, and development must evolve towards working together with stakeholders in transparent fashion to maximize mutual involvement and consensus building of joint solutions.

 

Enterprises can better manage the triple bottom line that balances economic success, environmental stewardship, and social progress, by going beyond an “enterprise-centric” view of doing well by doing good, with all stakeholders having a say in and benefitting from valuable outcomes. By creating more value with others, the “win more—win more” nature of co-creation simultaneously generates enhanced wealth, welfare, and wellbeing. Ultimately, leveraging complexity through co-creation is about connecting with the dynamic flow and enormous variety of human experiences of value in an increasingly complex world.

 

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Venkat Ramaswamy (www.venkatramaswamy.com) is a Professor at the Ross School of Business , University of Michigan, Ann Arbor. He is the author of the books, The Future of Competition (with the late C. K. Prahalad) and The Power of Co-Creation (with Francis Gouillart). His new forthcoming book is The Co-Creation Paradigm (with Kerimcan Ozcan).