Volume 17, Number 2 Article by K Kumar June, 2005
The Future of Competition: Co-Creating Unique Value with Customers : By C K Prahalad and Venkat Ramaswamy, Harvard Business School Press, 2004, pp. 256, Price: Rs. 495. :
In this book, the authors, C K Prahalad and Venkat Ramaswamy, have sought to build a cogent vision of the future, by making sense of the dynamic changes currently witnessed in the business environment, particularly in the technological front. They have called their discourse The Future of Competition, though the title The Future of Business would fit just as well.
The trigger for the authors’ thought process was the rapid emergence of the new economy, characterised by globalisation and the convergence of path breaking technologies in the information, computing and communication domains. Amidst the extreme positions taken by many observers, the intuition of the authors was that the old economy firms wouldn’t all perish, nor would the new economy firms all prosper. They expected that a new class of firms that blended the old with the new would emerge. The authors’ attempt to define this new class of firms has led them to this exposition on the future of competition.
The basic argument in the book centres on value creation. The authors contend that the traditional view, that firms create value unilaterally in the form of products and services that get exchanged with the customers in the market place, is fast getting outdated. They propose that in the emerging scenario, the consumer and the firm are intimately involved in jointly creating value that is unique to the individual consumer and sustainable to the firm. These arguments are further developed along two dimensions – what firms can do to enable customers to co-create value and what they can do to make such co-creation of value sustainable to the firm.
While laying out the first dimension, the authors have put forth the notion that in the emerging world, the consumer experience, and not just the product or service, is the basis of value creation. Building on this notion, the authors assert that, at the very minimum, every firm should have what it takes – the building blocks – to enable their customers to cocreate value. These building blocks are: an ongoing dialogue with the consumer; unfettered and multiple accesses for the consumer to interact with the firm and its network along the entire value chain; a constant assessment of risks associated with the value creating experience; and transparency of the value creation process. The authors also emphasise the role of innovation and personalisation in maximising the cocreated value. The central role of the powerful and rapidly diffusing technological capabilities at once in enabling and maximising the co-creation experience is also amply emphasised by the authors. The authors also highlight the importance of networks in co-creating value with customers. A wide range of examples of customers co-creating value is presented, drawn from business domains such as healthcare and games as well as non-business domains such as scientific research.
The second dimension, namely the ability of firms to sustain this co-creation of value is addressed in terms of implications for strategy and organisation. In the co-creation framework, the authors recognise customers as a source of competence for the firm. The authors also identify the key aspects along which strategic capital can be built. One such aspect is in enabling managers to identify with customers’ experiences – the challenge here being that managers differ in their ability to do so. Another aspect relates to rapid knowledge acquisition and management – the prime consideration here being that knowledge is predominantly tacit and hence has to be managed in real time. The approach to strategy making also comes in for a fresh look against the backdrop of the cocreation framework, which the authors refer to as a voyage of discovery. With nothing more than a broad direction to guide one at the outset, the details of the voyage are expected to emerge along the way through learning from the cocreation experience. The authors also point out the dilemmas in dealing with customers who are both collaborators (in creating value) and competitors (in appropriating value).
The strength of the book lies in its cogent exposition that firms can exploit the emerging opportunities only in a collaborative mode by co-creating value along with the customers. It effectively takes the threads from the various facets of technological and social developments and weaves them into an intellectually appealing and plausible tapestry of emerging business. The examples are current, simple and easy to relate to. One can argue that some of the ideas presented in the book are not entirely new – for instance, the idea of mass customisation has been around for a while. But the authors have definitely carried these ideas forward by incorporating the experience and collaboration aspects into it.
The book perhaps falls short in exploring the implications for actions by business leaders and managers. While it does expose the critical issues at both the strategic and operational levels.
The book poses some intriguing questions for scholars. The authors question the traditional concept of the market and propose that the market is a forum in which the roles of the customers and the firm converge. This line of thinking may provide interesting avenues for enquiry by researchers in various business disciplines
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