Not sure where the clear connection to complexity is. This could all be said without reference to “Managing Complexity”.

Consider that networked individuals around the globe are no longer passive and docile recipients of supply, thanks to digitization, globalization, the World Wide Web, advances in interactive communications and information technologies, social media, and ubiquitous connectivity. Rather, all stakeholding individuals expect not sure – they want to be served even better than what they could imagine to be active participants and collaborators in the value creation process, as co-creators of value through the lens of their human experiences. The fundamental distinction between a human experience and a good/service is that the former must by definition involve the individual. It is impossible to create an experience of value to you without engaging you actively (in contrast to the conventional “production” of goods/services.) From the perspective of enterprises, platforms of engagement based on human experiences are the new locus of value creation. Such experience-based engagement platforms—assemblages of people, artifacts, interfaces, and processes, whose design evolves with value-generating experiences—are both the means and ends of value creation, and the key to thriving on complexity. But first, we must recognize the shift in thinking that this requires:

1. Engaging stakeholders personally and collectively in creating value together, as much on their terms as those of the enterprise, expanding how the enterprise thinks about opportunities and resources.

2. Recognizing that value is subjective and varies from individual to individual, as a function of their interactions with their environments around them;

3. Viewing individuals as attaching meaning to actualized outcomes and imputing value as a function of their human experiences over time;

4. Leveraging the capabilities of meshworks across social, civic, business, and natural communities in which individuals are embedded, together with the capabilities of stakeholders themselves; and

5. Virtualizing new potentialities of value-creation by building ecosystems of capabilities together with other private, public, and social sector enterprises to expand wealth-welfare-wellbeing in economy and society as a whole.

Co-creation can be practiced everywhere in the ecosystem in which the enterprise operates, designed for varying purposes. As this blog entry is not the place to discuss examples in detail, see the book, The Power of Co-Creation (Simon & Schuster, 2010, with F. Gouillart), for over forty enterprise examples from over twenty sectors, and the forthcoming book, The Co-Creation Paradigm (Spring 2014, Stanford University Press, with K. Ozcan), for a detailed exposition of the theory and practice of co-creation as a paradigm of value creation and innovation, entailing engagement platforms for:

• Product-service offerings themselves;

• Encouraging entrepreneurship and decision-making;

• Enabling the design of offerings;

• Harnessing ideas and insights;

• Supporting the delivery of offerings;

• Facilitating training and sales interactions; and

• Expanding the circle of value creation stakeholders.

Innovating experience-based engagement platforms can enable enterprises to thrive on complexity by:

• Learning faster through the experiences of its customers and other stakeholders;

• Building deeper relationships and trust with the communities served and whose resources it depends upon;

• Generating new ideas and insights rapidly and becoming more resilient to unpredictable events in the system;

• Experimenting with new offerings quickly and engendering stickier brand collateral; and

• Enhancing new sources of value creation advantage by inclusively leveraging network and stakeholder resources (as opposed to just allocating resources) and accessing competencies in the ecosystem on demand.

Senior executive leadership must also pay attention to both the technical and social architecture of engagement platforms. On the technical side, the platforms must be reconfigurable, scaleable, linkable, and generative, with the capacity to enable and support new forms of value together with stakeholders. On the social side, it must enable and support a participatory culture in the organization that enables “silo-breaking” engagement inside the organization with appropriately designed incentives (designed together with people), encouraging collaborative decision-making, and strategy execution and re-formulation that expand capability ecosystems.

If leaders become co-creative engagement orchestrators, we can thrive on complexity by co-evolving our organizational systems, structures, and states (offerings, decisions, ideas, and relations) into a more holistic, next generation co-creative value creation that has built into it the expansion of wealth, welfare, and wellbeing of individuals, enterprises, economies and societies.

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).