Theoretical Implications

The main purpose of this thesis was to understand the relationship between value co-creation and customer engagement. In addition, this study focused on defining the key components, challenges and learnings derived from the process.

Below, the theoretical and empirical findings are used to address the research questions, contribute to the research area by bringing new insights on the topic of value co-creation.

In academic literature the term co-creation has been around some time already, but only lately companies have started to recognize more the power of involving customers in business and made changes in their organizations to enable this engagement and dialogue. This single case study confirms the new emerging role of customers and companies becoming collaborators and co-creators of products, services and value as stated by Prahalad and Rawaswamy (2004) and O’Hern and Rindfleich (2010). Even though the concept of co-creation is very abstract, there is a process and a framework in place in the subject organization that guides the co-creation and customer engagement from the initial point of contact further down the relationship, which is in line with Grönroos and Voima (2011, 2013) stating that for value to exist, there need to be various touchpoints of interaction between a customer since a firm alone cannot deliver value. Co-creation is a long-term process between a customer and a focal firms requiring constant interaction and engagement from both sides. As in accordance with Romero and Molina (2011) the findings suggest that value is a

byproduct of the process of co-designing a product or service in close cooperation with consumers tapping their intellectual capital.

The empirical findings confirm that successful co-creation requires information on customer needs and problems that a company needs to solve as stated by Thomke & von Hippel (2002) and von Hippel (2005). Purposeful dialog is required in developing common understanding of latent needs that a firm can customize its offerings. However, according to the findings the key is to find solutions to problems of many customers, create value for many and in the end have a scalable solution that several consumers are ready to pay for. Thus, in real business the monetary side of co-creation is emphasized more over creating personalized experiences for individual customers. The experts stated that o-creation is not for every customer and important is to critically evaluate if the fit between a customer problem and company’s offerings is suitable for starting the co-creation process. Therefore, I find that Kambil et al. (1999) offer more suitable definition for customer value than Prahalad and Ramaswamy (2004), highlighting the correlation between the fit and customer value than the firm’s ability to create personalized and unique experiences. Could be argued whether the key in co-creation is to first determine the proper fit between a customer and a firm’s offerings, this fit will turn into customer value and later as positive customer experience. Also, from a firm’s point of view this customer experience should be scalable and create value for many, including the focal firm itself.

The service-dominant logic by Vargo and Lusch (2006) is in accordance with the empirical findings confirming that competitive advantage stems from developing specialized skills and knowledge instead of mere goods and services and customers are active participants and co-creators of value. However, the findings do not completely agree with the argument of Grönroos (2008) that customers create value for themselves in a self-service process where firms only provide resources for value foundation. The experts especially stress the importance of being in control of co-creation and managing customer expectations throughout the process. The findings point out that the challenge in co-creation is that it involves many parties with different backgrounds coming

together which requires structured and focused way of working from the organization and critical assessment of customer requirements. This indicates that a company should set specific frames for co-creation and take a more leading role instead of only facilitating the process. Sometimes customers are not even sure what they do want and especially in case of new technologies companies need to educate customers and from that point it might be a long way to co-creation. The challenge in the process is to get any hard commitment from a customer before a company can convince the customer and show some tangible results. On the other hand, a difficult task is to convince the customers to get fully engaged when the end result is not yet known. As per the empirical findings, honesty, transparency and regular communication support the collaboration and further commitment in the process.

What comes to the statement of Rawaswamy (2011) “personalized co-creation experience is the basis of value”, based on findings could be argued whether more proper statement would be mutual benefits derived from the co-creation process create value for both parties. This study confirms that there are various positive outcomes in co-creation, especially understanding of the latent needs of customers through customer dialogue and feedback as suggested by Kristensson, Matthing and Johansson (2008). Firms are able to build more suitable offerings reducing the risk of failure and customer costs since co-creation is seen as a way of getting customers faster and engaging them early further leading to sustainable competitive advantage as stated by Hoyer et al. (2010).

Experts also agree with Krishna, Lazarus and Dhaka (2013) that co-creation process strengthens the relationship between a company and a customer and increases confidence and trust towards a company. Also experts stated that openness and transparency increased as the relationship deepened. As per academic literature, findings confirmed that motivators for consumers to participate in co-creation were financial, cognitive and social. Customers acquired knowhow on latest technologies and got a chance to be the first ones to utilize these technologies in their respective industries. This can increase the status of companies and later turn into actual financial profits. Acquiring social

networks was also considered as a motivation to participate in co-creation. On the other hand, psychological motivational factors did not receive any support from the experts. This might be due to the type of an industry or a company specific, but also co-creation requires lot of commitment in terms of a time and other resources thus not everyone has the willingness to be fully engaged.

Therefore purely intrinsic (e.g. altruism, self-expression) might not be a sufficient motivator in this specific case.

RQ1: How to manage customer engagement in co-creation process?

According to the findings, successful co-creation requirement commitment and engagement from both sides. The concept is seen as abstract, a psychological state that occurs in interactive service relationships as defined by academics Bowden (2009), Brodie et al. (2011) and Vargo and Lusch (2008). The customer engagement in co-creation process starts from understanding the customer needs and problems. The relationship is built gradually and the key is to create the emotional connection towards a product, service or a brand, which can be leveraged later. The empirical findings confirm that trust and commitment towards a company increases among engaged customers as stated by Hollebeek (2011) and Brodie et al. (2013). Internet has become a powerful tool of collaborative innovation and firms utilize various internet based mechanism to receive feedback and to give new updates regarding products and services. The finding confirm that firms should commit resources to developing their customer engagement processes and platforms online to support dialogue and consumer learning. Especially these online platforms would support in the beginning of the co-creation process enabling the cost efficient and fast, remote element and as the relationship deepens, more in-person formats could be utilized.

For managing customer engagement in co-creation process I find the DART model of Prahalad and Ramaswamy (2004a) especially suitable. As for value creation, the same building blocks - dialog, access, risk-benefits and transparency – are equally relevant when building a relationship and engaging customers in the process. In co-creation a company and a customer must become joint problem

solvers and this is acquired through active dialogue which leads to common understanding and shared learning. The communication must be open, honest and transparent, informing customers clearly about the possibilities and risks in the process. According to the findings, the key in managing customer engagement is to clearly set the frames for innovation and properly manage the customer expectations, otherwise it can go wrong. Companies should not overpromise something that is not achievable and in the end disappoint the customer. And even in case the co-creation relationship is discontinued, experts experienced that this did not have any negative impacts due to open communication. In those cases the decision not to continue was done in mutual understanding, but the engagement was maintained in other level and it was managed differently. Agreeing with Van Doorn et al. (2010), a goal alignment perspective to customer engagement in co-creation should be taken and critically evaluate if there is a fit or misalignment since this correlates either positively or negatively to the overall outcome of the process. Furthermore, as customer engagement evolves over time, a firm should reflect these changes in their engagement strategies and evaluate these against its short- and long-term objectives. To sum up, the key in managing customer engagement in co-creation process is setting frames for innovation, proper expectation management, goal alignment and open communication of these throughout the relationship.

RQ2: How to increase customer value in co-creation process?

In addition to the factors mentioned above, findings suggest that a company could increase the customer value in the co-creation process by having clear internal processes and frameworks in place. Since co-creation with customers is a quite relative new way of working in organizations, there are not necessarily enough practical knowhow on how customers should actually be involved in the co-creation process. Often companies concentrate only on developing key customer strategies to facilitate the co-creation whereas they should dedicate resources to developing internal processes as well. Experts considered that there should be a co-creation framework on how different steps look alike and to have

clear requirements and guidelines on how to engage customers along these steps.

This framework would also make it easier to evaluate whether to discontinue an engagement with a customer. Furthermore, findings suggest that there is a lack of a proper way of measuring success and progress in customer development projects. The general feeling was that the internal communication was not in place between different teams and sales, which in turn affected the interaction and external communication with customers.

To increase the customer value in the co-creation process, would be important for organizations to develop their internal processes and communication tools to support the encounter processes with customers. As co-creation involves mutual learning between a customer and a company, also a company should not forget its internal learning and enablement of employees on newest technologies and products. Innovation topics should be brought to the whole company and a company should communicate this message and promote the vision externally as well. In this case, I consider the conceptual framework for value co-creation by Payne, Storbacka and Frow (2008) to be suitable since this type of planning for co-creation is outside-in and aims to ‘listen, customize and co-create’. This framework includes the necessary elements such as learning and metrics to evaluate customer value propositions and to develop further suitable engagement programs to support the sustainable growth. To sum up, a company can increase the customer value by having all the internal processes, frameworks and guidelines in place and to communicate these throughout the organization to support the external interaction and relationship building with customers.