Transcript Haier: Taking a Chinese Company Global

March 19, 2007
Strategic Computing and Communications Technology
Business Model of Co-creation
STUDENTS:
Carlos Penzini
Grace Uang
Mark Shilmovich
Panagiotis Koumantanos
Shohei Ishiwata
Zach Gillen
Agenda
 Introduction
 Business models
–Business model categorization
–Case study
 Candidate products
 Risks & Challenges of Co-creation
 Conclusion
2
Introduction
What is Co-Creation?
- Co-creation is value creation by Firm and Customer
together


“It‘s the democratization of industry…we are seeing the emergence of an
economy of the people, by the people, for the people.” --Prahalad
Co-creation creates a new dynamic to the producer/customer
relationship by engaging customers directly in the production or
distribution of value
3
Introduction
Locus of co-creation
-Co-creation has evolved from customization to experience creation
 Ubiquitous connectivity, Low transaction cost of idea and Globalization by
information technology enabled individual users to participate in value creation
Experience
Innovation
PERSONALISED or
UNIQUE CUSTOMER
VALUE
(8) Personalised
Value
Experience Value Creation
(7) Real-Time
and Knowledge
In-Use
Marketing & Service
(unique
Co-Creation
Adaptation
experiences)
IPOD, AMAZON (US),
(6) New
Service
Design
WITHIN THE
FIRM
TELIASONERA, ALARIS
MEDICAL SYSTEMS
(2) New Product
Design and
Development
(Lead User)
P&G, SILICON GRAPHICS,
VOLVO XC90, HARLEY
DAVIDSON, SATURN
Value Creation
Pre-Use
(Fixed attribute
products)
Customization
CONTACT CENTRE DIALOGUE,
CEMEX and FEDEX TRACKING
SYSTEMS
MEDTRONICS, JOHN DEERE,
ON STAR
THEOMCGROUP
(4) Mass
Customisation
ADIDAS, DELL, CAR
MANUFACTURERS
WITHIN
(5) Open Community MARKET and
Ideation and Product COMMUNITY
Design and
Development COMPUTER
GAMES MODS, LINUX, LEGO
MINDSTORMS, FIRFOX,
INNOCENTIVE
(3) Existing Product
Adaptation
(Customer Feedback
SONY ANTENNA SHOPS, CISCO
KNOWLEDGE CENTRE,
MICROSOFT KNOWLEDGEBASE
STANDARD
CUSTOMER VALUE
(1) Product
“Finishing”
IKEA
By THEOMCGROUP
4
User-Created Content vs. Co-Creation
Introduction
 Co-creation is broader in that it includes any kind of joint value
creation between a firm and its customer
– while user-generated content refers to content (information, or some
form of creative work)
 User-created content is one form of co-creation.
 User-created content is when an end-user uses a service to
mediate the creation and/or distribution of their creative work.
5
Business model
Business model
-Key question: What is the incentive and how to monetize?
 Conventional business model frame work only focuses on Firm,
because value was created mainly by Firm
 Value is co-created by Firm and Users together in Co-creation.
 We need to understand what value is created by each partner and
their incentives.
Revenue stream so far
Revenue stream in co-creation
User
Firm
Firm
User
User
Third party
Complicated..
6
Business model
Business model categorization
- Categorized by monetization of each parties
Profit
Yahoo Answers,
Lego Mindstorm
Firm gains revenue by
providing platform from user,
advertisement, etc
User mainly enjoys benefits
for free
Innocentive,
iTMS+iPod, Ebay
Firm gains revenue by
providing platform
User economically benefited
by playing on this platform
Firm
Wikipedia, Linux, (Delicious)
No Profit
Everybody takes part
voluntarily. Value incentive is
often personal.
No Profit
User
Craigslist
Firm acts like NPO and
supports users to gain
revenue.
Profit
7
Business model
Case Studies
Profit
Firm
Craigslist
No Profit
No Profit
User
Profit
8
Business model
Yahoo answers
Proft
Customers
Firm
No proft
No proft Proft
User
• Users / Posting Questions
• Advertisers
Competitors
Complementors
• Yedda
• ISPs
• Browsers
• PC
• Users / Answering
• Other Yahoo Services
(del.icio.us, Flickr etc)
• Oyogi
• Askville (by Amazon)
• Live QnA
• Brainboost
• Wondir
• Answerbug
• Answers.com
Suppliers
• Hardware
• Power Companies
• Employees
• Bandwidth
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Business model
Yahoo answers
- Users more interested in non-economical benefit
- Company benefited economically from value of network
Incentives for Participation
Users


Reputation management and recognition through
leaderboards
Sharing of information and experience without
endlessly searching through the Internet
Company



Pay-per-click advertising when using the search
option
Bundling with del.icio.us and Flickr into fan sites
Channeling to other Yahoo! services
Advertised
through the
search engine
Suggestions for Remuneration


Yahoo! could try a hybrid method encompassing
elements of Google Answers. It could form a pool of
experts which the users would have to pay in order
for them to answer his question.
More banner advertising
Word of Mouth
Developing the
value network
Channeling through other Yahoo! services
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Business model
Craigslist
Customers
Proft
Firm
No proft
No proft Proft
User
• Users / Sellers
Competitors
• Evite
• Friendster
• Lavalife
• LinkedIn
• Meetup
• Monster
• MySpace
• Spring Street
• Tickle
• Tribe Networks
• Yahoo!
Complementors
• ISPs
• Browsers
• PC
• Users / Buyers
Suppliers
• Hardware
• Power Companies
• Employees
• Bandwidth
11
Business model
Craigslist
- Philanthropic policy attracts users by Anti-eBay
style and users trade solid products for profit
Incentives for Participation
Users




Anti-eBay architecture
No advertisement banners
Public service culture attracts a fanatic base
Sense of community
Suggestions for Remuneration

If Craigslist were to change philosophy and become
more commercial it could use the following revenue
mechanisms:
– Posting fee
– Transaction fee
– Subscription fee
– Advertisements
Company


Philanthropic purpose
“serving customers come first and worrying about
revenues comes second”
Word of Mouth
Developing the
value network
Indirect promotion through Craig’s personal interviews
12
Business model
Innocentive
Customers
Proft
Firm
No proft
• Pharmaceutical Companies
• Consumer product firms
• Industrial chemical organizations
• Rockefeller Foundation
• Advertisers
No proft Proft
User
Complementors
Competitors
• ISPs
• Browsers
• PC
• Solvers / Users
• yet2.com
• Nine Sigma Inc.
• InnovationXchange
• R&D labs
Suppliers
• Hardware
• Power Companies
• Employees
• Bandwidth
13
Business model
Innocentive
- Users have solid economical incentive to participate
Incentives for Participation
User “Solvers” & “Seekers”


Solvers – Recognition, Monetary rewards, Possible
Relationship with seeker company
Seekers – Benefit to Cost Ratio = 20:1 for R&D
Company



Suggestions for Remuneration

Instead of basing the remuneration on the “seeker”
companies it could be based on the 110,000
scientists and scientific organizations that make up
the solver community:
– Subscription fee (Versioning based on usage
of system)
– Fee for access to the detailed problem
statement
Posting fee for “seeker” company
Annual fee for “seeker” company in order to access
specialized scientific staff
Success commission when a solution is chosen
Present in
Conferences
Where Solvers
attended
Sponsorship
of Relevant
Events
Developing the
value network
Posted selected challenges in scientific publications
14
Business model
Wikipedia
Proft
Customers
Firm
No proft
No proft Proft
User
• General public
Competitors
Complementors
• Britannica.com
• Columbia Encyclopedia
• Encyclopedia Drammatica
• Encyclopedia.com
• Information Please
•How Stuff Works
•Encarta Online
• Citizendium
• xrefer
• ISPs
• Browsers
• PC
• Users / Posting
• Other Wiki projects
Suppliers
• Hardware
• Power Companies
• Employees
• Bandwidth
15
Business model
Wikipedia
Philanthropic interests attracts users quickly
Incentives for Participation
Users



Status, reputation
Heritage to the world (through Wikipedia users are
`immortalized`)
There is tracking system to highlight contribution
Suggestions for Remuneration
?
Company


NPO
Based on donations and fundraising efforts
Word of Mouth
Developing the
value network
Bundling other Wiki projects
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Business model
Summary of business models
• Users more interested in
non-economical benefit
• Users have solid economical
incentive to participate
Earn profit
• Company benefited
economically from value of
network
Firm
No Profit
• Philanthropic interests attract
users quickly
No Profit
• Philanthropic policy attracts
users by Anti-eBay style
• Users trade solid products
for profit
User
Earn profit
17
Characteristics of Businesses with New
Opportunities in Co-creation
 Common characteristics
– Product
 Easy to modify or customize by
customer
– Such as hardware that
previously shipped hardwired,
but now comes with
reprogrammable circuitry.
 Existing online service
 Possible candidates
– More opportunities in Cocreation at existing co-creation
product
 iTMS
– New candidated for co-creation
 Industry Robotics
 Cellular phone
– This makes the cost of
communications infrastructure
low.
– Customer
 Large user community
– Easy to capture contributors.
18
Risks & Challenges of Co-creation
Risk and solution
 Privacy
 Legal
 Brand
 Goal divergence & Define objectives.
 Initial Effort & Investment to Provide Capabilities for CoCreation.
 Equity of returns & Manage Incentives.
 Be careful about who you ask to co-create.
 Clarify Rights & Acceptable Use.
 Control the channels.
 Granularity and Cost of Management & Assembly
19
Conclusion
 Technological advances are enabling newly
economical applications of co-creation
– Co-creation (partnerships with customers) have
always been around
– As transaction costs fall due to ubiquity of information
technology and the marginal costs of forming a
partnership decreases, the applications of cocreation begin to include
 finer granularity contributions
 access to a larger network of potential contributors,
(globalization)
 increased specialization
 community quality monitoring and metrics via reputation
systems, attention information, and user ratings.
20
Thank you
Q&A
21