23 August 2019  4 min read

Linking customer experience to value. How does co-creation save money and increase ROI?

In my experience, large and medium-size incumbents understand that customer alignment leads to a change that exceeds their expectations, positively. The more customers realize their service or product provider listens, embraces, and deliver their specific expectations and requirements, the more they are loyal and want to contribute to the organization development. How to achieve this level of engagement?

The answer is co-creation which engage third-party individuals as partners and internal influencers. That community could be formed by consumers, vendors, suppliers, consultants, key opinion leaders but customers (people who pay for the service or product) are the most critical part.

Co-creation is not a customer advisory board with a high level of energy or a smart and tricky business development tactic. It's a process with a step by step method with specific phases of discovering defining, and testing value proposition, for the customers as well as the company. To most executives, the idea of openly engaging customers, exposing them to detailed data is frightening. The benefits, however, should cause every CEO of the business to pause and reevaluate her perception.

Companies' executives decide to choose co-creation because they want to foster the discovery of customer value proposition, which they can turn into innovation and competitive advantage at a lower risk and most effective ROI. The process of co-creation starts with:

  1. Mapping customers jobs - the step specifies what the customer is trying to accomplish to achieve a specific goal. For instance, to prepare the formula for the infant. Mapping customers jobs means:
    1. Define the execution step - what are the most critical tasks that must be accomplished,
    2. defining the pre-execution steps, which means understanding the core step/task which ensures the job is successfully carried out?
    3. Defining the post-execution steps - what must be marked as done after the core execution step.
  2. Defining pains - it's a list of things which annoy the customer before, during, and after getting the job done. There are three categories of pains: costs, emotions, and risks. Pains can be severe or light to the customer, to uncover them co-creation process recommends the following questions:
    1. What does the customer find too costly in terms of money, time, or effort? For instance: getting up in the night, heating the formula is time-consuming and requires much effort. Pre-heating, which could start automatically removes the pain.
    2. What makes your customer feel bad, sad, unhealthy, or tired?
    3. What negative social consequences do your customer encounter or fear?
    4. What risks does your customer fear?
  3. Defining gains - Gains describe the outcomes and benefits your customers require, expect, or desire. Gains can be cataloged into three categories: functional, social, emotions, and cost. The following questions help to recognize gains:
    1. Which savings (money/time) would make your customer feel great?
    2. What measurable outcomes does your customer demand in terms of time and money?
    3. What would make your customers job easier (requires less effort)?
    4. What positive social consequences can the product bring (people will like your customer more if she can dunk, run faster, look better, have a better car, etc.)?

The importance of co-creation. Why is co-creation the future of any successfully launched and scaled product/service or microservice?

Constant listening is critical in smart and measurable innovation.

Co-creation requires self-examination and constant listening and can tap every interaction and relationship in the process of innovation and value creation. A proper context, which comes from customers, provides meaning and direction to data insights. Co-creation calls for comfort, lack of fear of failure, and execution in dealing with different experiences, perspectives, and points of view. Large organizations can work with nimbler players via accelerators, strategic investing, hackathons, competitions, and crowd platforms and increase costs efficiency, which positively influences ROI.

Source not intermediaries.

Deep insights about people's real needs and expectations — from the source without intermediaries. Co-creation uncovers insights that won't come from surveys, focus groups, or even in-depth interviews. Too often, firms assume that their multimillion-dollar product development projects will meet customers' needs, so satisfaction is guaranteed. If the company chooses co-creation, the method will mitigate that risk with the speed of light. That's because co-creation can recognize which features of a product, service, or microservice provides value and generate ideas for how to fix the ones that are not important for customers or are useless.

Break down silos.

Customers consider brands as unified wholes, not collections of departments, teams, or organizational groups. Customers don't care about how the corporations are structured. When siloed brand break that image, customers feel disappointed and, at times, frustrated, but most of the time, they don't know why, as silos are invisible. Organizations can tackle the challenge by eliminating those walls; however, to build a better structure, they must understand that transparency, open innovation, and fast communication is the key. In a co-creation model, customers, suppliers, partners are involved throughout the process, as are all company managers, leaders, and specialists. There is no room for silos. Real-time, continuous feedback during the co-creation process reduces misunderstandings and guarantees a stronger value proposition for every product and service discovery, design, prototyping, and scaling. Co-creating value with customers benefits the offering and the organization.

Less waste. Better cost structure.

Co-creation, by definition, lets businesses reduce the costs and risks inherent in the product, service development process, which influence the risk of product portfolio management. Co-creation streamlines feedback and guarantees necessary feedback at critical times instead of waiting until work is done to seek customer approval. Since co-creation involves customers' voice from the very beginning, companies mitigate risks that a product or service won't find market-fit or loose fight with unidentified competitors. Ultimately, co-creating provides teams with more ideas and knowledge upfront, so company designers, business developers, and other stakeholders are less likely to make significant mistakes along the way.

Let's talk execution and results.

DHL is the global leader in logistics, part of the world's largest mail and logistics services company founded by Dalsey, Hillblom, and Lynn. DHL International GmbH is an American-founded German company which is now the international courier, parcel, and express mail division of the German logistics company Deutsche Post DHL. Deutsche Post DHL is the world's largest logistics company,[3] particularly in sea and airmail. The company delivers over 1.3 billion parcels per year (Source: Wikipedia)

What DHL discovered was it needs to improve the logistics and come up with new services.

"That is quite a challenge, as we are typically dealing with very complex global supply chains," shared Bill Meahl, chief commercial officer at DHL, "one which fueled us to embark on a journey of customer co-creation."

DHL recognizes that innovation must be customer-focused from the very beginning. DHL executives decided to get customers and their DHL service partners together in specially built Germany- and Singapore-based innovation centers for workshops to get customers feedback, collect insight and design the value proposition with customers and partners. The purpose is to conduct intensive workshops that explore trends, technologies, and business models in the logistics area - all with customers and for them and the company.

Here are several innovations that DHL launched as a result of the 6,000 engagements conducted in DHL's innovation centers:

• Parcelcopter, a drone delivery project, which came up with the amazing drone which can carry 13 pounds of goods. It is flying and working hard for DHL success, check the articles about it here: Deliver Future: DHL Parcelcopter flies 37 miles autonomously to a remote island in Lake Victoria and DHL press release which explains the project impact on logistics.

• "Smart glasses" and augmented reality, co-created with DHL customer Ricoh, to improve inventory and warehouse picking efficiency by 25%. Check the press release for more information and explanation of the innovation impact.

• MoDe ("Maintenance on-demand"), co-created with DHL's customer Volvo Trucks and other partners, uses sensors that automatically predict when and where truck maintenance will be required. DHL brought together 11 companies from all over Europe and focused on developing a commercially viable truck that leverage automation in predictive maintenance.

"Thus, instead of today's common 'just-in-case' set-up, just-in-time deliveries of spare parts are feasible. The implementation of MoDe benefits customers as they can decrease their logistics costs, reduce the risk of breakdowns, and improve their CO2 efficiency." - Source

The result has been well worth it.

Except for launching new products faster, bringing customer loyalty as the most critical aspect of DHL business the company changed CSAT (Customer Satisfaction) scores over 80% and on-time delivery performance has reached 97% level or even higher globally. Customer churn rates have decreased, and revenue from new services/products boosted.

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