The Future of Competition book.

Notes about the book “The Future of Competition”, focus on co-creation.

by the professors Prahalad and Ramaswamy

The book “The Future of Competition” was published in 2004 by the professors Prahalad and Ramaswamy, both professors at Michigan Business School. Ramaswamy is an expert on innovation, IT, online business, communities and customer management. Prahalad specializes in strategy, especially future trends and strategies.

While reading the book is possible to answer questions as: How the industrial system it is morphing and evolving to a consumer experience? How consumer behaviour will change the way we compete in the future? Which ideas from the past must be discarded? What new perspectives are needed to comprehend the evolving industrial system? What key tools do companies need to become skilled innovators of experience environments? Are companies still able to satisfy customers or sustain growth and profitability?

Traditional business thinking starts with the premise that the firm create value. Consumers represent demand for the firm’s offerings. Product variety has not necessarily resulted in better consumer experiences. The most basic change has been a shift in the role of the consumer, from isolated to connected, from unaware to informed, from passive to active.

The reader also can understand better the consumer behaviour tendencies, when the authors explore some themes as “Information Access”- consumers make decisions based on information, “Global view”- with the Internet consumers can find different and multiple information around world, “Networking” – consumers can join in thematic consumer communities, exchanging information with other people with the same interest, “Experimentation” – the Internet provides number of tools and facilities that enable consumers to develop, experiment, share their products and opinions, “Activism” - they can better discriminate when making choices.

The authors introduced a theme called “co-creation experience” which depends highly on individuals, context and their consume involvement. A firm cannot create anything of value without consumer engagement. Co-creation requires exchanges on the firm processes and consumers relations. The new value creation space is a competitive space centered on personalized co-creation experiences developed through interactions between the consumer and a network of companies and consumer communities.

By combining the four building co-creation blocks (DART) in different ways, firms create new and important capabilities. According to the authors the blocks are: “dialogue”- meaning interactivity, deep engagement, and a propensity to act on both sides, “access” – begins with information and tools, “risk assessment” – referring the probability of harm the consumer and “transparency” – facilitates collaborative dialogue with consumers, information about products, technologies and business systems becomes more accessible, creating new levels of transparency becomes increasingly desirable.

To increase the technology capabilities and fuelling the potential for robust experience environments they focus on five areas: “miniaturization” – meaning the ability to miniaturize electronics has allowed manufactures to create smaller, lighter, more portable products, “environmental sensing” – is about microsensors that could scan the environment, measuring biological, chemical, magnetic, optical and thermal conditions, “embedded Intelligence” – resumes in a variety of products already contain microprocessors and microchips designed to accomplish specific tasks, “adaptive learning” –looking for information personalized and embedded, based on user interactions and “networked communication” – technology that increasingly allows devices to announce themselves and communicate with one another.

They explain what companies need to become innovators, pointing: “granularity” – gives the consumer the ability to interact with experience environments, “extensibility” – involves exploring how allowing consumers to experience established functions in new ways, “linkage” – is the recognition that events connect in multiple ways from a consumer point of view, “evolvability” – involves capturing the learning from co-creation experiences and using it to develop experience environments that shape themselves to consumers’ needs and preferences.

According the authors what is the mentality of the managers to the co-creation value happening in the firm? Managers must attend to the quality of co-creation experiences, not just to the quality of the firm’s products and processes. Quality depends on the infrastructure for interaction between companies and consumers, oriented around the capacity to create a variety of experiences. The roles of the company and the consumer converge towards a unique co-creation experience.

Why co-creation?  Co-creation value offers opportunities for consumers to co-construct their own experiences, in a specific context and time. Accommodating a heterogeneous group of consumers, from the very sophisticated and active to the very unsophisticated and passive. Recognizing that every consumer does not always want to co-create. Firms also need to follow the new opportunities emerging with the new technologies. Engaging the consumer emotionally and intellectually. Respect the individual’s choices and feedbacks. Firms need to be prepared to change actions quickly to attend the consumer’s needs.

Prahalad, C.K., Ramaswamy, Venkat. 2004, The Future of Competition, Co-Creating Unique Value with Customers, Harvard Business School Press, Boston, Massachusetts.