Lean Co-Creation

Lean Co-creation is a new tool which is giving participation of customers and suppliers in the

manufacturing and other industries where lean tools and techniques have been implemented.

Lean co-creation can give a new platform to manufacturing industries to improve efficiency,

productivity and performance of the workers and machines. Lean is a tool which is giving

important parameters to reduce different wastages in industries. Co-creation would impact

more in lean manufacturing industries.

It is not new the involvement of different suppliers, customers and co-workers in the

enhancement of performance of quality, performance and efficiency of products.

There are some companies like Mahindra & Mahindra in the automobile sector, which are

using lean co-creation by the involvement of their TIER 1, TIER2 and TIER 3 suppliers. By

the involvement of different suppliers to improve the quality of the final product and reduce

wastages, improve JIT, decrease lead time that would increase efficiency of the machines,

workers and materials.

Co-creation is a form of Economic strategy that emphasizes the generation and ongoing

realization of mutual Company-Customer value. It views markets as platforms for firms and

active customers to share, combine and renew each other's resources and capabilities to create

value through new forms of interaction, service and learning mechanisms. It differs from the

traditional passive consumer market of the past.

Co-created value arises in the form of personalised, unique experiences for the customer

(value-in-use) and ongoing revenue, learning and enhanced market performance drivers for

the firm (loyalty, relationships, customer word of mouth). Value is co-created with customers

if and when a customer is able to personalize his or her experience using a firm's product-

service proposition – in the lifetime of its use – to a level that is best suited to get his or her

job(s) or tasks done and which allows the firm to derive greater value from its product-

service investment in the form of new knowledge, higher revenues/profitability and/or

superior brand value/loyalty.[1]

Scholars C.K. Prahalad and Venkat Ramaswamy popularized the concept in their 2000

Harvard Business Review article, "Co-Opting Customer Competence".[2] They developed

their arguments further in their book, published by the Harvard Business School Press, The

Future of Competition, where they offered examples including Napster and Netflix showing

that customers would no longer be satisfied with making yes or no decisions on what a

company offers.[3] Value will be increasingly co-created by the firm and the customer, they

argued, rather than being created entirely inside the firm. Co-creation in their view not only

describes a trend of jointly creating products. It also describes a movement away from

customers buying products and services as transactions, to those purchases being made as

part of an experience. The authors held that consumers seek freedom of choice to interact

with the firm through a range of experiences. Customers want to define choices in a manner

that reflects their view of value, and they want to interact and transact in their preferred

language and style.

In their review of the literature on "customer participation in production", Neeli Bendapudi

and Robert P. Leone found that the first academic work dates back to 1979. [4] From 1979 to

1990, papers and studies focused on a firm-centric approach, examining customer

participation as a source of increased productivity.

In the late 1970s and early 1980s, scholars were mostly concerned with productivity gains

through passing on tasks from the firm to the consumer. The self-service model was at that

time popular. We observe, however, a slow shift starting in the mid-1980s: the participation

of the customers begins also to be understood under the perspective of less-accounting-type

metrics. Mills and Morris (1986) see the customers as partial employees and Goodwin (1988)

realizes that customer's participation may help increase quality.

From 1990 onwards, new themes are emerging: John Czepiel suggests that customer's

participation may lead to greater customer's satisfaction.[5] Scott Kelley, James Donnelly and

Steven J. Skinner are dealing with productivity but suggest other ways to look at customer

participation: quality, employee's performance, and emotional responses.[6] Song and Adams

(1993) suggest that customer participation should not be examined under the aspect of cost-

minimization. Instead it can be seen as an opportunity to differentiate.

Although not reviewed by Bendapuli and Leone, the groundbreaking article by R. Normann

and R. Ramirez suggests that successful companies do not focus on themselves or even on the

industry but on the value-creating system.[7] This idea is actually pretty close to that

developed by Vargo, Maglio, Akaka (2008), i.e., that of "service systems". As already

mentioned earlier in this paper, Normann and Ramirez disagreed with Porter's[clarification needed]

ideas and proposed that the linearity of the value chain be replaced by "value constellation".

In this context, the authors define the task of companies as the "reconfiguration of roles and

relationships among this constellation".

2004, Prahalad and Ramaswamy kept working on their original idea published four years

earlier.[12] In this other groundbreaking paper, they use extensively the wording "value co-

creation". Once used sporadically by other authors for instance Schrage in 1995, we can

therefore say that the official debut of "value co-creation" takes place 2004. The authors

recognize that the unilaterality of the marketing offer can not be sustained. According to them

the origin of this shift is to be seen in the increasing bargaining power of buyers due to the

emergence of communication between customers.

The authors see the co-creation of value as an initiative of the customers who are "dissatisfied

with available choices want to co-create value and thereby co-create value". The co-creation

of value is conceptualized thanks to a model called DART (for dialogue, access, risk-benefits,

transparency.

After Schrage (1995) stressed the need for "tools to analyze co-creation" Payne, Storbacka,

and Frow proposed a framework around value co-creation in the context of S-D logic. [15] The

framework is based on processes which the authors see as central in value co-creation. It

consists of three components. First are customer value-creating processes where the value

relies on "practices", i.e., routinized actions, the value of which can be enhanced by the

supplier. Second are supplier value-creation processes based on co-creation opportunities

(through technological breakthrough, changes in industry logics, changes in customers

preferences and lifestyles), planning, implementation and metrics. Third are encounter

processes.

Ramaswamy and Gouillart now advise companies on a third stage of co-creation that seeks to

improve how companies operate throughout their organizations, and in all their systems and

processes. This "full theory of interactions" goes beyond the existing forms of co-creation of

the customer experience and co-creation of products and services. Transforming traditional

corporate practices such as training, performance management, and communications into co-

creative interactions, sparks innovation, cuts costs, increases employee engagement, and

generates value. Examples of companies at various stages of transformation through co-

creation include Nike,[22] Nokia, IBM and Credit Agricole. Leveious Rolando, a co-creation

facilitator, says traditional media such as radio and television in their heyday heralded the

ability for families to come together and experience consumption as one entity. The

decentralizing of technologies of entertainment and consumption from the business sites into

the physical site of the body has meant new forms of configuration in design and

convergence. The iPod as the descendant of the Walkman phenomenon celebrates both the

body and movement while stressing the elements of individualization and personalization of

content whereby the moving body can create a library of sounds and content unique to itself

When Lean would be combined with co-creation than there are certain important issues on

which it would need modifications. Lean Co-creation is also a modified method in which

value stream mapping of the current process would be modified to future state value stream

mapping and there would be involvement of suppliers as well as customers in the modified

value stream mapping and other lean techniques by which wastage can be minimised and it

would give satisfaction to customers as well as suppliers.

In the value co-creation it is important to know about the value for the customer. Customers

can be directly involved in the mechanism by which companies can increase more value

added activities and decrease non value added activities. Value is co-created by the

experience. Since value is defined by its beneficiary.

With the help of DART Technique, Suppliers and customers both can contribute in the lean

co-creation which would enhance performance of the whole value stream mapping and also

make lean techniques more effective.

Value stream mapping is a process which reduces the non value added activities and increase

the value added activities. Co-creation activities improve the involvement of suppliers and

customers which would contribute in different processes in the whole manufacturing and

supply chain process.

Value stream mapping would be modified to future state value stream mapping. Already

there are many modifications done in the future state of alue stream mapping like

replacement of supermarket on place of inventory, lead time reduction, kaizen, levelling of

manufacturing cells, kanban techniques, forecasting done much more earlier as compare to

weekly forecasting. These all are modifications done in the future state value stream

mapping.

Co-creation of suppliers and customers would impact more in the future state of value stream

mapping like there is more quality of raw materials sent by suppliers, suppliers are also

adopting lean principles which implemented and adopted by core company. For example,

Automobile company is having 40 different suppliers, all these suppliers also using lean

techniques which improve further quality of final product.

Lean co-creation by suppliers would lead to fewer defects in the manufacturing process of the

core company. Main reason behind this is that lean techniques implied by the suppliers which

would improve the standards of the materials which received by the core company.

Co-creation by the customers also makes a huge difference in the performance and quality of

the final products of manufacturing industries. One of the famous processes of the co-creation

of customers is the feedback received by the company from its customers. Customers can

directly involved in the manufacturing activities and discuss about the drawback of some

processes which would create non value added activities.

There are different types of companies exist at different levels like TIER 1, TIER 2 and TIER

3 companies most of the TIER 2 & TIER 3 companies are working as the suppliers for TIER

1 or multinational industries. Co-creation is an extremely important for these TIER 1

companies with the help of TIER2 and TIER 3 industries. If suppliers are involved in

different processes of TIER 1 industry. Suppliers should participate and improve their own

process also and then suggest important areas in production and manufacturing for further

improvement.

Lean Co-creation is giving chance to suppliers and customers to participate in the

development from initial level of production to the final chain of the supply chain

management. Co-creation would be implemented through DART technique, with the help of

dialogue, access, risk and benefits, lean co-creation would be implemented.

Co-creation by the suppliers and customers can play an extremely important role to improve

value stream mapping and also to modify it to different chart. Current state of the value

stream mapping is having different drawbacks regarding to lead time reduction, extra wastage

which can be related to overproduction, excess motion, over processing etc.

If suppliers and customers would be involved to improve value stream mapping than in the

future state mapping it would be huge improvement which can lead to reduction in lead time,

supply chain improvement, cycle time improvement also reduction of excessive wastages

which would affect efficiency of workers as well as machines.

In both states of value stream mapping suggestions by the customers and suppliers plays an

important role to discuss about the SWOT analysis and with the help of SWOT analysis and

lean manufacturing techniques, efficiency of process would be increased.

S-D Logic

Service-Dominant (S-D) Logic is an approach for an integrated understanding of the purpose

and nature of firms, customers and the markets. The foundational proposition of S-D logic is

that the firms, customers, and markets are fundamentally concerned with exchange of

services. S-D logic holds the notions of the value-in-use and co-creation of value as a key to

superior competitive advantage, slightly than the value-in exchange and embedded-

value notions of Goods-Dominant logic (G-D logic).S-D logic considers the correlation

among service and a good – that is, a good is an application used in service provision. The

service dominant logic of marketing (S-D logic) is a marketing paradigm development which

shifts from the old paradigm to the firm-centric or good-centered view, to a new paradigm,

the Consumer-centric or service-cantered view (Vargo and Lusch 2004).The service-

dominant logic (S-D logic) suggests that service is the fundamental basis of exchange and all

social and economic actors are resource integrators that act together through shared service

provision to co-create value (Vargo and Lusch, 2004).Service-dominant (S-D) logic (Vargo

and Lusch 2006, 2008) describes service as the significant purpose of exchange and provides

understanding of how firms, customers, and other market actors co-create value through their

service interactions with each other. The service-dominant logic has advised that markets are

places where firms arrange and integrate operant and operand resources to co-create.(Arnould

2008, Lusch and Vargo 2006,Storbackaet al. 2008, Vargo, 2007).