Co-Creation, Innovation and New Service Development

The Case of Videogames Industry

Jedrzej Czarnota

• Verlag: Routledge
• Jahr: 2017
• ISBN:
  9781351795418
• Auflage: 1
• Thema: Negocios y empresa
• Thema: Gestión de la información

Involving customers in the development and production of new services becomes a powerful force across many creative industries. Customers can directly supply the firm with innovative ideas, provide skilled labour, and act as a powerful force in marketing. Firms across the world, as they seek to innovate and to better respond to market needs, begin to recognize the benefits stemming from customers' involvement in their operations. Co-creation also becomes more prevalent as customers begin to expect it from firms – seeking to influence their favourite services or products, and to have them better tailored to their needs.

Nevertheless, empowering the customers and involving them in the internal affairs of a firm is both difficult and risky. Despite co-creation becoming increasingly important to firms, very few accounts of it exist and many firms fail. Therefore, to navigate those straits, and to reap the benefits of co-creation, requires knowledge and more complete understanding of socio-cultural forces underpinning it.

By studying a wide array of videogames firms in the USA and Europe, this book provides a unique insight into co-creation. It builds on the existing theories to provide unified framework for understanding co-creation in creative industries and other sectors. It combines insights from the dynamics of customer communities, with firm's perspective on innovation management and organizational transformation.

The book offers highly detailed insights into the industry, which is at the forefront of co-creation. Furthermore, it sheds new light on the videogames firms and their operations and is therefore ideally designed for researchers, educators, and students alike in the fields of knowledge management, innovation management, firm strategy, organization studies and creativity management.

1 Introduction

Co-creation is becoming a practice of high importance. It accompanies the changes in economy, in which networks that exist both within and outside of organizations determine and generate value. In businesses, we observe the merging of processes that traditionally used to be separate, or even secret: production and use, marketing and consumption, innovation and experience. Co-creation is the key to understanding modern creative industries—it is the practice at the core of this dynamic.

Co-creation¹ is defined as a collaborative work between a consumer and a firm in an innovation practice, where a substantial component to the design, development, production, marketing or distribution of a new or existing service is contributed by a customer or customer communities (Roberts et al., 2014; Banks, 2013). It has become a widespread phenomenon, which reflects wider societal and economic changes in participatory culture (Hartley, 2008; Bruns, 2008), as value is increasingly co-created by both the firm and the customer (Hartley et al., 2012: 21). While this blurring of production and consumption practices is not a new phenomenon (Jenkins, 2009), it has become more salient in the context of digital technologies (Van der Graaf, 2009). This participatory turn in culture (OECD, 2007) is viewed as a logic that seems to favour new production-consumption configurations.

Firms have begun to realize the commercial potential of engaging customers in service development (Edwards et al., 2015). Nevertheless, it is a practice characterized by high uncertainty (Sakao et al., 2009; Lynn and Akgun, 1998; Knight, 1921), and for every firm mastering it, there are many others that fail spectacularly (Gebauer et al., 2013; Banks, 2009).

Co-creation, as it describes the dynamic of customer inputs to new service development, is a manifestation of the wider customer innovation phenomenon (Sundbo and Toivonen, 2011). In the light of scholarly works on customer innovation in technology-intensive industries (Füller et al., 2008; Baldwin et al., 2006; von Hippel, 2005; Franke and von Hippel, 2003; Luthje and Herstatt, 2004), there is a dearth of literature on how parallel practices occur in more experience-driven industries. With the associated rise in the importance of service-like dimensions of many products (Vargo and Lusch, 2004, 2008), and the role of customers in determining the value of these (Fisher and Smith, 2011; Grönroos, 2011; Echeverri and Skalen, 2011; Lusch and Vargo, 2006), it becomes important to study the customers’ role in innovation in more experience-driven settings—such as the videogames industry. We also seek to apply some of the von Hippel’s (2005) observations on lead user innovation to creative industries and experience services to provide practical lessons to managers on how to benefit from the creativity of the most talented customers.

Creative industries such as broadcasting, music, design and fashion are characterized by a large amount of continuous interaction between the firm and its customers, as well as the existence of networks of customers, where the value-ascribing decisions take place (Hartley et al., 2013; Potts, Cunningham et al., 2008, Potts, Hartley et al., 2008) by mechanisms such as word of mouth (Gebauer et al., 2013). Some works on the customers’ input to the design of creative services exist already (Kohler, Füller, Matzler et al., 2011 and Kohler, Füller, Stieger and Matzler et al., 2011; Kohler et al., 2009; Füller and Matzler, 2007), but little attention is being paid to the firms themselves. To focus on the firm in the co-creation practice is the major goal of this work, as there is little research concerning the impact of co-creation on the firm—and how the practices of organizations are affected by it. At the same time, there is a wealth of literature proposing taxonomies, typologies, and other classifications of co-creation, depending on the role of the firm, duration, frequency, actors involved, stage in service development, locus of control and many others (O’Hern and Rindfleisch, 2010; O’Hern et al., 2011; Hoyer et al., 2010; Piller and Ihl, 2009; Piller et al., 2011; Frow et al., 2011). Existing work focuses on the practice itself, while the firm is black-boxed—we seek to shed light on the firm and its activities, thus being of use to businesses wishing to deploy co-creation in new service development (NSD) in creative industries. To that end, we need more empirical material and observations from firms which were successful at implementing co-creation, so the lessons from them can be transferred and applied to other companies.

Understanding how customer involvement works in the development of experiential services will show firms how to successfully tap into customer innovation. Furthermore, practical analysis of customer innovation in creative industries, where the ‘content’ of a service plays a significant role in determining market performance, is another core focus of this book.

Among creative industries, the videogames industry forms a particularly informative setting for a study of co-creation. Videogame firms are secretive and reluctant to share information about their own practices and operations, either with their peers or with researchers (Nardi, 2010; O’Donnell, 2014; Boellstorff et al., 2012). The videogames industry is also a young industry, in which production, innovation and marketing practices are still evolving in large leaps (Grantham and Kaplinsky, 2005). Many of the videogame developers are self-taught, and there are few higher education institutions that offer courses and degrees valued by industry practitioners. That’s why the industry overall has a propensity to experiment with different new service development methodologies, including co-creation. Its companies are currently at the forefront of commercial application of co-creation, and other firms in creative industries can learn from their practices and copy some of them (or use them as a warning; see for example Banks, 2013).

In the videogames industry, socio-cultural effects of fandom and participation visibly overlap with market aspects of videogame development and marketing. Videogame customers actively shape their engagement with the service (Jäger et al., 2010). Videogame firms traditionally have also been close to their customers (King and Borland, 2014), and the industry has always been characterized by the close collaboration of both the makers, as well as players (Nardi, 2010). The clear distinction between videogame developers and customers has begun to emerge only in recent years, together with the spike in game production costs (Marchand and Hennig-Thurau, 2013; O’Donnell, 2012; Zackariasson and Wilson, 2012).²

Co-creation is surrounded by the uncertainty of using it as a viable business strategy. We don’t know much about how co-creation practices should be structured in practice (Kohler, Füller, Matzler et al., 2011 and Kohler, Füller, Stieger and Matzler et al., 2011). We translate the potential locked in the cultural shifts such as prosumption (Ritzer and Jurgenson, 2010), playbour (Kücklich, 2005), Web 2.0 (O’Reilly, 2005) and user-generated content (Hartley et al., 2013) into firm practices and strategies. We highlight the pitfalls awaiting the firms, which are varied in their nature, and occur virtually in all sites of the firm (Miles and Green, 2008), service design areas (Voss and Zomerdjik, 2007), and stages of new service development (Piller et al., 2011; Hoyer et al., 2010). Understanding what they are, and more importantly, how to avoid them and succeed in co-creation, is the prime concern of this work. By identifying the main characteristics of a firm that influence co-creation practice, we enhance the existing managerial practice of involving customers as co-creators in NSD. This also assists in planning, or anticipating, the organizational changes accompanying co-creation—their scope, site within the organization, as well as their effect on NSD. It also helps in strategic planning of funding and revenue model within organizations—shedding light on their consequences.

This research unifies in a single analytical framework the effects of co-creation on both market performance as well as relationship with customers. It explains to managers how the marketing-driven decisions to co-create with customers may impact the firm’s ability to develop its services, as well as affect the internal functioning of the organization. It also demonstrates the opposite—that having customers as participants in NSD must be managed not only for productivity, but also for its experience, in order not to cause heavy damage to the firm’s relationship with customers (Gebauer et al., 2013). We explore the NSD dynamics in firms that have close links to customer communities, where innovation is influenced by communities of consumption (Jeppesen and Frederiksen, 2006).

Therefore, we seek to identify and understand the key organizational characteristics and arrangements that determine co-creation practice in firms. We also set out to enhance the understanding of the changes that co-creation has on the NSD and innovation. Finally, we investigate the way in which organizations assimilate the inputs from their customers, and how those ways are linked to both organizational characteristics, as well as co-creation’s outcomes on the organizational level. Attention is devoted to the role of funding arrangements, crowdfunding in particular, as well as to the role of organizational culture in influencing a firm’s propensity and style of co-creation (Naranjo-Valencia, 2011; Martins and Terblanche, 2003; Barney, 1986). We aim to enhance managers’ understanding of co-creation and its role in firms, particularly in firms’ NSD and innovation practices. From the stance of innovation management, we analyze the possibilities for innovation stemming from co-creation in creative industries. We uncover the effects of co-creation on firms’ functioning related to NSD and innovation, as well as other aspects of a firm. We delve into organizational transformations and processes that need to be instituted by firms embracing customers as a source of innovation.

To achieve that, we analyze three elements of co-creation: firstly, the competences for co-creation on the side of the firm—the ability to assimilate and appropriate the inputs originating from the community of customers (Piller and Ihl, 2009; Yee, 2014; Füller, 2010; Burger-Helmchen and Cohendet, 2011); secondly, various patterns of interaction with the customers (Lettl, 2007) and establishing co-creative practice within a firm; thirdly, a firm’s ability to maintain stable and positive relationship with its customers (Gebauer et al., 2013; Banks, 2013; Gummesson, 2002; Grönroos, 1994).

The form of co-creation can differ for various NSD projects conducted by a firm. A firm can decide to tap into customers’ potential for co-creation to varying extents depending on its needs, competences and strategy (Teece, 2010; Rosenbloom and Christensen, 1994). In the case studies, we observe the practice of co-creation to be moderated by two factors: the funding arrangements and organizational culture. Funding arrangements are the first moderator (Ordanini et al., 2011; Hoyer et al., 2010). Of significance here is the phenomenon of crowdfunding (Belleflamme et al., 2014; Mollick, 2012). The second moderator is organizational culture (Naranjo-Valencia et al., 2011; Martins and Terblanche, 2003; Barney, 1986). It reflects the history of the firm (whose approaches to NSD and innovation were successful in the past), its strategic orientation (including also the stage at NSD; Cheng and Huizingh, 2014; Grant, 2010), and its employees’ attitudes (meaning how employees view co-creating customers; Malaby, 2009).

We also investigate the way in which customer inputs contribute to a firm’s co-creation practice, including innovation. While it is often seen as obvious that closer links to customers support successful innovation, there is reason to think that being too close to customers may impede radical innovation (Aoyama and Izushi, 2008; Christensen et al., 2005; Gruner and Hombug, 2000). Customer inputs typically involve incremental change, which is visible in the form of their inputs to firms’ NSD and innovation, as they tend to fall along the existing trajectories of service development. Those inputs focus mostly on improvements on the propositions brought forward by the company and play a well-visible role in quality assurance as well as marketing. Such inputs take various channels in reaching organizations.

We set out to understand how the customers contribute to a firm’s innovation practices in eight sites of an organization (Miles and Green, 2008). We clarify the issue of co-creation’s relationship to radical innovation and incremental improvements (Kasmire et al., 2012). We investigate what is the form of customers’ inputs that influence and are assimilated by the firm, seeking their locus in the domain of incremental, ‘under-the-radar’ contributions rather than break-through ideas reshaping and changing the nature of the firm’s service offering. The third problem relates to the extent of co-creation occurring by the means of formal practices within an organization, as opposed to resulting from numerous and close interactions of employees with customers across the firm boundary (Cohendet and Simon, 2007; Van de Ven, 1993), akin to ‘hidden innovation’ described by Miles and Green (2008). We clarify the differences between formal and informal co-creation, as well as contextualize them within the issues of a firm’s control over co-creation practice (O’Hern and Rindfleisch, 2010), changes to the organization (Voss and Zomerdijk, 2007; den Hertog, 2000) as well as the outcomes of that practice (Gustafsson et...

Inhaltsverzeichnis

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of Figures and Tables
• Acknowledgements
• 1 Introduction
• 2 Beyond State-of-the-Art in Co-Creation
• 3 Observing the Videogames Industry
• 4 Managerial Insights for Creative Services
• 5 Key Findings
• Index