Internet-Enabled Co-Production - Partnering or Competing with Customers by Schultze et al - Article Example

The article emphasizes on the importance of voice of the customers in the design of products and services by an organization. Understanding the customer’s needs and managing the organizational operations to fulfill those needs have been considered essential for a long time. This leads to customer satisfaction and loyalty. However, co-production of products and services has extended the customer involvement concept to a different level. Many organizations have yielded considerable benefits due to co-production. These organizations include restaurants offering buffets, gas pumping stations, hotels, technology companies and airlines. There are some obvious benefits of co-production. The labor costs in companies are saved. The customers get customized products according to their needs. The liability of errors in service is passed on to the customer. Having discussed the advantages the ill-effects of co-production can’t be ignored. Many customers may not be ready to spend effort in product or service design. They would rather prefer a high service quality from the producer. Also many times the customers are unaware of the product or service and are unable to co-produce. Asking customers to co-produce in such situations may actually lead to deterioration of quality. There is also a view that technology is always ahead of customer demand. Hence, the customers will coproduce products only in a way they desire. However, it may be possible to design better products with available technology but the customers are simply not aware of the realm of possibilities. Coproduction in such cases is actually a hindrance in the path of progress. With the use of co-production, the organizations have tried to remove their own inefficiencies in addressing customer needs. However, it has led to significant cost and time savings for them. In spite of this, co-production cannot be considered as a sure shot method of success. There are very successful and innovative companies such as Apple, who do not even believe in market research, forget about co-production. Apple believes that the company needs to give consumers a product which they would never imagine on their own. The article says that the customers should be given a choice between conventional methods and co-production methods such as in banks and ATMs. The article also divides the customers into five types on the basis of their willingness to do the tasks themselves. However, there may be a large number of customers, especially rural and illiterate customers who may be uncomfortable with technology involved in co-production. The article also discusses methods to enable coproduction. The best method is to create expert customers by educating them. One of the key bottlenecks in the success of co-production is lack of consumer awareness. Consumers need to be educated through campaigns, advertisements, seminars, booklets and user manuals about the product uses and the way the customers can participate in product enhancement. In the recent years, many companies have actually realized the advantages of co-production in their operations. While they may have defined it by different names, the underlying concept has essentially been that of co-production. Hewlett Packard’s Colarado Telecomm Division (CTD) faced a lot of problems in the early nineties. The strength of CTD’s Protocol analyzers was in producing a very large amount of network data for analysis as compared to competitors. However, the competitors eroded its market share by attacking niches and customizing their products to specific customer applications and needs. In order to improve this situation, Hp tried to realign their Research & Development goals with customer driven feedback. However, this worsened the situation. CTD then took a new approach to this challenge called as Delivering Profitable Value (DPV) which is nothing but a form of co-production. According to this approach, it is not sufficient to know what the customers wanted. What was really needed was to know the working patterns of the customers and the problems they faced while working. Therefore, CTD came up with ‘day in the life of’ a number of customers. This approach focused on network maintenance staff, end customers as well as employees. This approach enabled CTD to come up with a new mission statement bringing forth a newly identified value proposition. DPV had a dramatic impact on CTD’s business and strengthened the concept of co-production. Another methodology which has been used by organizations for co-production along with DPV is Service Dominant Logic (SDL). SDL tries to remove the conventional distinction between goods and services. It recognizes the fact that the customers buy goods for the attached services that come with them. Hence, by accepting this fact, the companies help consumers to co-produce their products and services. SDL emphasizes that goods are only a special case of services. The customers are actually looking for services and not goods. For example, the customers’ primary service need is to enjoy good music. This need was being served by live musicians in early ages. Then audio records, cassettes, CDs and DVDs followed. Today digital music devices such as MP3 players and IPods are the norm. Hence the products keep on changing but the customer demand for a particular service remains the same. SDL is being followed by a number of companies. These companies believe that they are actually selling services and products are just a way for the customers to enjoy these services. Sun Microsystems gives free workstations to customers who buy service licenses. General Electric and IBM are prime examples of organizations that were primarily product manufacturing organizations not very long ago but today more than 40% of their revenues come from the attached services. One of the major factors that have facilitated co-production has been the emergence of internet as a communication medium. The customer today is more connected, informed and active. Therefore, they can’t be taken for granted. The companies can’t develop an antagonistic relationship with them and it makes more business sense to involve them in co-production. One of the limitations of co-production, as specified earlier in case of Apple, is that it can enable a company only to have incremental innovations. However, for achieving breakthrough innovation, the companies need to go beyond what the customers desire. Therefore, co-production has to be adopted with caution. The companies need to involve all types of customers in their production and not only the ones who are easily accessible and well connected (Schultze et. al., 2007). In a nut shell, co-production is an essential but not a sufficient criterion for success. It is not a panacea to all problems. It can take an organization to a certain level buy other factors do play a role in continuous improvement. Works Cited Schultze, Prandelli, Salonen, Alstyne.(2007). Internet-Enabled Co-Production: Partnering or Competing with Customers? Communications of the Association for Information Systems, Volume 19, Number 1 Read More