A century ago, Henry Ford’s idea of choice when it came to its Model T was “any colour, as long as it’s black”.
Today, the customer calls the shots — increasingly so, says best-selling author and strategy professor C K Prahalad.
In his latest book, “The New Age of Innovation”, he argues that customers will increasingly seek to co-create purchases with suppliers, leading to a new business model where companies will rarely have both feet planted in one specific industry.
In the last of a three-part interview, I ask Prahalad which businesses represent the apex of his co-creation model and companies stand to benefit by taking the plunge.
Who’s already co-creating and sourcing globally?
IGoogle. It’s yours. You create the page, but Google provides the platform. Apple — it’s your portfolio of music — it’s totally R=G. It doesn’t produce the content.
But the model applies to all businesses — it’s only a matter of time. If I can make a £30 mobile phone, the £500 version will have to be marketed in a different way — as a fashion accessory. Telecoms then moves into a different industry.
What are the biggest benefits to business?
The more you as a customer reveal through transactions, the more business can help you.
It can reduce churn dramatically. For a little investment, I’m increasing the switching cost for consumers because they cannot get the same quality and value if they go somewhere else.
I have no motivation to go to another supplier, because I’d have to start all over again. If the price is compelling, I might switch, but there is no natural motivation.
Will consumers always co-create?
No. Business must start with the assumption that consumers don’t want to apply the same amount of effort to construct all their experiences. Today, I will take whatever coffee I’m given — but on another occasion, I might be more particular.
People shift their priorities, where they want to customize, where they want to invest their energy and expertise.
So, if you build systems for total participation and co-creation, buying off-the-shelf is a sub-set and is also possible. If you only build a system for what’s available and what you make, then people cannot co-create.
You talk about it being urgent. Why?
If one company in one industry does this, others don’t have a choice — it would be like a business saying today, “I don’t like TQM.” Too bad. It’s the norm.
It will and should become standard. The ultimate is where an individual creates her own experience with the business - which then becomes the platform.
Before the iPod, consumers didn’t know they wanted one — can customers anticipate their own needs?
The Napster model pre-dated the iPod — the market was already created. The only thing that wasn’t there before Apple was the ecosystem to deliver it. We called it piracy, but how can 40 million kids be crooks?
The amazing thing for me is that Sony didn’t do it. It was stuck in the old model. It had all the technology to create a device. It had a lot of the content. But it kept focusing on the piracy issue.
How do you remove your blinkers to spot those trends?
A while ago I wrote paper about “dominant logic”.We are all socialised to think in a certain way. There is existing wisdom as to how a business is run.
When working with companies, I make their existing dominant logic — their latent beliefs about business — explicit. Then they can see what is applicable in the future and what’s not. Some, you may have to forget, some protect.
Over time successful business recipes become dull — your success leads to business structures that may become dysfunctional.
What we need to ask ourselves is — is there a different way?
Also on BNET — C K Prahalad lays out new business model and explains how to apply it to established organisations.
