Co-production has had various meanings over the years. In the 19th century, for example, the Oxford English Dictionary was “co-produced” from volunteer contributions of millions of slips of paper. For many years it referred to film co-production and the co-production of armaments. But today, the most frequent use of co-production is as a Web 2.0 tool where customers actually produce their own products and services. In the past, customers expected companies to do a lot of the work for them. Now, companies are expecting customers to do more of the work themselves.
The changes in the meaning of co-production are astounding. During the Cold War era, co-production meant transferring manufacturing know-how to allies to enable them to produce weapon systems. Co-production has also long meant film companies working together on a movie or a television venture in which more than one broadcaster is providing the funding. In publishing, co-production refers to the process where a book is created and sold to publishers in different countries in a joint production. The firms adapt or translate the book into their local language, sending the digital files for printing back to the originator who co-ordinates the overall production.
In the manufacturing sector co-production refers to a system in which multiple products are produced on the same production run for customers that differ in their product price thresholds or upgrade desires. A more recent definition of co-production is when clients work alongside professionals as partners in the delivery of social services. One refers here to the “coproduction sector” where service users are regarded as assets involved in support and delivery of services. Co-production redefines clients as assets with experience, the ability to care, and many useful skills.
One frequently used definition of co-production today emerges from the barriers to entry that many firms face when going into a foreign market. These include physical barriers, political and regulatory barriers, trade sanctions and export controls, market barriers, cultural barriers, and so forth. Many firms overcome these barriers by entering into arrangement such as joint ventures, licensing agreements, franchises, mergers and acquisitions, or greenfield investment. Another way to overcome market barriers is when companies cooperate to produce goods.
This kind of co-production allows firms to share complementary resources, take advantage of unused capacity, shift the location of production, and benefit from economies of scale. Companies may cooperate to make components or even entire products. In cross-manufacturing agreements, companies in different markets can cooperate to manufacture each other’s products for their local markets.
The newest definition starts with the notion of customers as the new co-production sector. This ranges from something as mundane as pumping one’s own gas or taking cash out of the ATM to something as sophisticated as designing one’s own laptop computer. In the internet era of relationship marketing, customer testimonials, and reputation networks, companies are creating goods, services, and experiences in close cooperation with experienced and creative consumers. They tap into their intellectual capital and reward them for what gets produced, manufactured, developed, designed, serviced, or processed. Co-production allows firms to reduce their own costs while giving the customer greater control and value. The net result is a value chain that increases usage, satisfaction, trust, loyalty, and ultimately lifetime customer value.
Co-production in this sense is a dynamic process composed of distinct stages where consumers can become involved. Certain economic, cultural, and technological preconditions have to be met. For example, customers from poorer economies may not be ready to attach greater value to customization in their needs satisfaction. Nor may the threshold of ease and accessibility of Web-based tools have been reached. Nor may customers have much of the determining resource in co-production, their own time. A highly innovative culture will lead to more co-production than a highly standardized or hierarchical culture. Also, the product makes a difference. A washing machine has a limited number of features and offers limited incentives for co-production than does a laptop computer. Situational factors such as trust make a difference (can I trust that my e-ticket will be honored?). Of course, the cost-benefit analysis in a co-creation activity is core.
A good example is the Swedish multinational IKEA. IKEA customers are accustomed to collecting unassembled pieces of furniture from a warehouse on the fringe of a metropolitan area in their own large car. They transport these kits to their own homes and, using tools provided by the manufacturer, they assemble the components into a sofa or a table. Southwest Airlines early on shifted booking to the customer through a simple Web interface for completing transactions. The incentive was the double awards credit (which it has since eliminated without negatively impacting their business).
For decades, consumers have been saving up their insights and rants because they didn’t have adequate means to interact with companies. The era of concretion and co-production has led to new forms of business. Customers are the minipreneurs, that is, consumers turned into value-creating entrepreneurs. They are also called e-lancers, micro businesses, Webdriven entrepreneurs, free agents, cottage businesses, co-preneurs, co-creators, eBaypreneurs, ad-sponsored bloggers, PodCasters, and so on.
Changes in the value chain lead to increased company revenue at a lower cost. When customers are given the opportunity of performing tasks themselves, their system usage increases and they are able to capture more value. Operating costs to the firm decrease since the do-it-yourselfer needs less help. This leads to a virtuous circle: Usage contributes to satisfaction, satisfaction leads to trust, trust leads to loyalty, and loyalty leads to an increase in the customer’s lifetime value to the company.
The Information Age
Co-production is now powered by Web 2.0 (online tools that enhance creativity, information sharing, and collaboration) and by Generation-C (customers imbued with creativity, content, and control). Generation-C entrepreneurs are multitaskers and they like constructing products rather than being sold to. They want to be interactive and want to customize as they choose. They are the emerging “co-production sector” where customers are regarded as assets, involved in mutual support and the delivery of products and services. Rather than being treated as “end users,” they are now seen as untapped potential assets.
Co-production in the Information Age has morphed into a number of new terms such as crowdsourcing, do-it-yourself advertising, customer product development, mass customization, and customer ticket clipping. Today’s co-producers enjoy a wide range of highly-developed tools, resources, and processes at their disposal. This includes hardware, software, ICT and skills; design, production and manufacturing; ways to monetize assets; new marketplaces; new forms of advertising; and new ways to find talent and manage finance, payment, and logistics. Wikipedia, the free online encyclopedia, is a good example of modern co-production because it allows anyone to change or create an article. Wikipedia content improves over time as more and more accuracy is gained through an exposure of articles to the whole community.
Where this all will lead is probably to the ballot box. Joined-up government, place-based policy making, and co-production with citizens offer exciting new possibilities for creating flexible, dynamic, and democratic governments.
- Seigyoung Auh, Simon J. Bell, Colin S. McLeod, and Eric Shih, “Co-Production and Customer Loyalty in Financial Services,” Journal of Retailing (v.83/3, 2007);
- Taco Brandsen and Victor Pestoff, “Co-Production, the Third Sector and the Delivery of Public Services: An Introduction,” Public Management Review (v.8/4, 2006);
- Carlson, “The Net Generation Goes to College,” Chronicle of Higher Education (October 7, 2005);
- Marcia-Anne Dobres, “Inside the Politics of Technology: Agency and Normativity in the Co-Production of Technology and Society,” Technology and Culture (v.48/1, 2007);
- Etgar, “A Descriptive Model of Consumer Co-production Process,” Journal of the Academy of Marketing Science (v.36, 2008);
- Selma Oener and Taner Bilgic, “Economic Lot Scheduling with Uncontrolled Co-Production,” European Journal of Operational Research (v.188/3, 2008);
- Tale Skjolsvik, Bente R. Lowendahl, Ragnhild Kvalshaugen, and Siw M. Fosstenlokken, “Choosing to Learn and Learning to Choose: Strategies for Client Co-Production and Knowledge Development,” California Management Review (v.49/3, 2007);
- Wei-Feng Tung and Soe-Tysr Yuan, “A Service Design Framework for Value Co-Production: Insight from Mutualism Perspective,” Kybernetes (v.37/1–2, 2008).
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