Endangered species in IT and advertising
Yesterday, I spent the morning with IT people at a large European multinational, and the afternoon with some advertising people at a Top 5 global advertising agency. Both groups were attempting to work with their clients – internal for the IT group, external for the advertising agency. Both were struggling. The IT group had set up a whole intermediate function to connect the nerds from IT with the suits from the business. Of course, this group had credibility with neither side, but was trying very hard to earn it by showing they could elicit specifications from users with exquisite precision. The word “specs” is a tip-off that co-creation will be an uphill battle.
Co-creation as cost reduction
Co-creation is getting other people to do the work and love you for it. While most people think of co-creation as a way to innovate and change the competitive rules, it is also a way of cutting cost. Why is Apple so profitable? Among other reasons because it gets its customers to market to each other. If my friends sell me on the latest Black Eyed Peas release by sharing their play list with me on iTunes, Apple doesn’t have to spend marketing dollars to promote it to me. And by the way, my friends love selling me on this new release because it allows them to show how far ahead of me they are in their understanding of latest trends in rock music. Why is IBM able to reduce its R&D cost? By setting up “collaboratories” where its partners not only bring their expertise in specific domains, but also underwrite some of the cost of that research. Not only do these partners do what would have been IBM’s work in the past, but they also see unique value in engaging IBM in a proprietary development from which they will benefit.
Many companies are in retrenchment mode in this down-cycle. In their renewed attention to cost, they are reverting to the quality and re-engineering paradigm of the last century, attempting to take cost out by streamlining business processes, shortening cycle times, or implementing enterprise resourse planning software packages. While this approach is helpful to create a performance baseline, the traditional efficiency reserves in most organizations have been tapped out. Most of these companies will die completely healed.
A more fruitful avenue is co-creation. In general, organizations bite off more than they can chew. They think of themselves as having to control and optimize a wider set of one-sided processes than is necessary. They want to single-handedly deliver predictable outputs from those processes using only company resources, failing to recognize that people at the receiving end of those processes no longer want to be passive, but want to engage in the design of the process and the co-creation of their experience. And they’re willing to do the work required to get there, therefore allowing companies to externalize some of that cost. The cost saving opportunity lies in letting go.
The two areas best known for co-creation are at the two extremes of the value chain: in customer-facing processes (like Apple) and in the product or service development area (like IBM). We routinely see companies able to cut their marketing, advertising, sales, or customer service costs by 30% or more by involving customers in the design and delivery of those processes. We witness the same order-of-magnitude improvement when companies engage third-parties in their product and service development processes.
Ultimately, though, the greatest gain lies in applying the principles of co-creation inside the company. Individual functions inside a company suffer from the same evil as the company as a whole. They try to do too much on their own, attempting to create value by defining themselves as “process owners” responsible for delivering a repeated and predictable output to their “process customers,” typically another function in the firm. Whenever sourcing views manufacturing as its client rather than as a co-creation partner, it inevitably generates too much cost for itself and for manufacturing, and destroys some experience value for both. The same is true when an actuary in an insurance company views marketing as its client, when a chemist formulates a product “for” marketing, or when the Human Resources department views the management team as its client for coaching services. Most cost to be “engineered out” lies at the intersection between company functions.
Eliminating this cost requires setting up platforms that engage both parties in a dialogue where the processes on both sides are made transparent, enabling a new dialogue between them and leading to the development of new experiences beneficial to both parties at a fraction of the cost. Unlike in the old re-engineering and quality paradigm, these platforms do not attempt to create a deterministic process that optimizes the flow of goods and information between functions based on some perceived need. Instead, they enable faster, more contextual decisions that dramatically reduce cost and improve cycle time by tapping creativity on both sides in continuous fashion. These platforms sometimes require some form of information technology investment, but they often involve a simple reconfiguration of basic day-to-day interactions between people.
In that sense, co-creation is the new frontier of productivity.
Co-creation is eternal
It started close to home. My friend David Norton, of Balanced Scorecard fame, came to see us as soon as he heard in the morning that two of our guys were in the first plane that crashed on the Towers. Several times during the day, he visited our conference room, as we were trying to find out information from the American Airlines emergency call center and relay it to the two wives of our colleagues. Dave is not the exuberant type, but seeing him there provided a strongly reassuring presence. I particularly remember the deeply egalitarian nature of human suffering, which brought everybody together at that moment, from simple front-desk people to world-class scholars. Toward 7 pm, American Airlines told us there was no hope left. No more need to look stoic and resourceful. We all broke down and cried.
While the emotional burden felt heavy, it was nothing compared to what the families of the victims were going through. I remember this time as one of extraordinary clarity of purpose. My role was not to show compassion, but to provide support: help the widows and their children financially, provide support mechanisms for the surviving employees of the firm, and figure out how to survive economically as a firm in spite of the human losses. Undoubtedly to make me feel better, people undeservedly kept praising me for my focus in managing our little ship through the storm. But what else is there to managing a ship in a storm than try to survive it?
We discovered we had famous friends. The widow of one of the victims sang for the Tanglewood Festival Chorus, chorus of the Boston Symphony Orchestra. The entire group came and sang at the memorial service. Warner Music — the company for whom my two colleagues were working on that fateful day — not only sent superb artists for the service, but gave us another project to make sure our little firm would continue to exist in spite of losing two of its key people. Ted Kennedy — who passed away recently — intervened to allow one of the two victims to be recognized as the father of the child he and his wive were in the process of adopting — the first time in Massachusetts a child was adopted by a deceased father.
We also learned we had a lot of other, regular friends. The downstairs cafeteria in our building had a particularly gruff employee –nicknamed the “soup Nazi” after the Seinfeld episode. When he handed me my food a couple of days after the attack, he had a tear in his eye. The landlord in our building erected two flag posts in memory of our two fallen comrades, one at each end, and both flags still proudly fly today at that building. We received e-mails and cards from friends we never knew, simply because people all over the world were touched by the story of what happened to our little firm. The memory of our two guys still lives at the new firm we have created since then. Two members of our current firm were close to one of the victims, and although we rarely speak about it, we know the memory of our fallen friend binds us powerfully.
So tomorrow, I will not be sad. I will celebrate the community that these two people built for us. Through this community, they still live with us. Co-creation is eternal.
Pro-creation vs. co-creation
The conversion of experts
My real purpose, though, lies in exposing them to the world. For I don’t simply want to observe them in their corporate quarters. I want the walls around them to come tumbling down, revealing to the world how great minds manufacture hits in their studio. I want to make their labs into remote stages and get them to become inadvertent stars in live public performances.
At the beginning, they look at me funny. Actually, some of them don’t even look at me, like actuaries (the introverted actuary looks at his shoes, the extroverted one looks at the other guy’s shoes, as the joke has it). “You wanna do what? Take me to some agents and customers? Do you actually understand what actuarial science is? It’s about numbers, dude. Nothing to do with customers.”
The trick is to get them to explain what they do in layman’s terms, so that ordinary people can understand their craft and connect it to their experience. The whole idea is to blur the line between what they do and what the customer does, since the goal is co-creation. Of course, I’m the first test case. Most of the time, I don’t have a clue, which makes me the perfect foil for the “tell me how you cook” line of questioning. I’ve discovered the perfect word to use with experts is “vulgarize.” This puts them at ease, granting them the respect they deserve while allowing some slight sense of condescension toward lesser educated beings.
The trick for experts is to let go, to move from bottler of science to broker of knowledge. It’s not easy to let go. The lab is more comfortable than the cold stare and acerbic questioning of customers. At the first workshops, they want to lecture, preferably using equations or molecular representations. I try to get them to pause and think through: “if a customer were there listening to you, what questions would you like to ask him?” They look baffled and annoyed, then slowly start formulating questions. From one workshop to the next, some of them get really good at it. A Franco-German chemist recently developed such a wonderful story that he could get farmers on four continents engaged in co-designing the formulation of the next product with him as if they were PhD chemists themselves.
The best moments come in the bus or the plane on the way back from those workshops, often in remote parts of the world. Occasionally, one of those experts comes to me and says: “I have changed the way I think of my job.” And just like that, it all becomes worthwhile.
Do the French have a word for “entrepreneur”?
President George W. Bush reputedly told Tony Blair one day that “the French don’t even have a word for entrepreneur.” Not only was he etymologically confused, he may have been downright wrong. The French have created a lot of successful global businesses over the last 40 years, although these businesses do not fit the classic Anglo-Saxon entrepreneurial model. The French believe in the power of government funding to launch and sustain global enterprises. As a French-born, University of Chicago-educated boy, this success has generated a personal schizophrenia between the natural interventionism of my origin and the laissez-faire convictions acquired from my alma mater. As a result, I have slept badly for most of my adult life.
In the grand, centrally controlled tradition of Napoleon, French political leaders believe state governments can and should play a role in business. In fact, Jacques Attali, an influential advisor to most recent Presidents of France, from the socialist François Mitterand to the conservative Nicolas Sarkozy, advocates that France’s competitive advantage over the last 40 years has been its ability to centrally fund major infrastructural developments. Success stories have included Airbus, the French-led, European consortium of aircraft manufacturers taking on Boeing in civil aviation; the French national utility EDF establishing a strong global position in nuclear energy; and the national railroad company SNCF and its supplier Alsthom jointly learning to build and operate TGVs, the French high-speed train. To add insult to injury, Attali contends that the U.S. has begun a gradual decline because of its capitalistic excesses – “similar to the Roman empire in its decadent phase”, he adds for good measure – pointing out that the center of the economic world is now leaving the U.S. to continue its eastward shift toward China.
It is difficult to argue that the U.S. free market model is thriving, particularly at a time where the U.S. economic policy under the Obama administration has become vastly interventionist to support banks and automotive companies, and is trying to establish a government healthcare mandate. It is equally hard to deny that the stock of China is rising compared to the U.S. So maybe we let the French win this one for now and grant that they indeed have a word for “entrepreneur,” which is “l’état entrepreneur.”
The ultimate economic model, though, remains to be crafted. There is an undeniable global appetite for tightening the social compact between citizens, including in the more traditionally free-for-all U.S. market. At the same time, government organizations still suffer from relative inefficiency, including at Airbus, SNCF and EDF. The future may lie in a new form of technology-enabled, bottom-up democracy where politicians co-create the economic agenda with their citizens. We have seen evidence of co-creation seeping slowly into politics, with the campaigns of Howard Dean and Barack Obama in the U.S. (and some Republicans rapidly catching up), and the presidential campaign of Ségolène Royal in France (and more recently Nicolas Sarkozy). The Hong Kong administration and the government of Andhra Pradesh in India have offered advance glimpses of this future, technology-rich form of government, where the social contract is built piece-by-piece by citizens at the local level, rather than mandated from the top, fostering a more efficient use of resources and preventing the excesses of raw capitalism. We should encourage citizens to build this economic agenda with their local businesses. There is already a powerful local food trend. Why not a strong local business trend?
Only then – when co-creation of the economic agenda by citizens at the local level becomes the “third way”– will I get to sleep, finally at peace in this Franco-American reconciliation of economic models.
A brief history of co-creation
Wikipedia comes of age
Then things turned ugly. Wherever I’d be teaching, someone would point to the latest manipulation. The most recent is by a young Irish student who manufactured a quote in Wikipedia about Maurice Jarre, the French composer, upon his death in May of this year. I cannot resist giving you the quote, since it is as wonderful as it is fake: “One could say my life itself has been one long soundtrack. Music was my life, music brought me to life, and music is how I will be remembered long after I leave this life. When I die there will be a final waltz playing in my head, that only I can hear.” Although it was listed with no source, the quote was picked up by many papers around the world, including the prestigious Guardian of London.
I had another incident in Chicago three years ago. As I mentioned Wikipedia, a bunch of young guys in the front row started giggling. It turns out they’d been watching Stephen Colbert, the American comedian and talk-show host, brilliantly make fun of Wikipedia the night before (why were these guys not working on their assignment anyway?). In particular, Colbert had just coined the term “Wikiality” to describe the creation of “a reality we can all agree on.” It’s not easy to re-establish your professorial authority when you’re up against Colbert.
In particular bad taste were the attempts by some in Wikipedia to describe Senator Ted Kennedy as dead when he was still alive (I just learned at breakfast this morning in Paris that he passed away last night).
The solution for Wikipedia turns out to be a simple one. Remembering that co-creation does not mean abdication on the company’s side, the Wikipedia board just announced that it will anoint editors who’ll check entries made about living people. Wikipedia people are up in arms about the perceived sell-out, but from where I sit, there’s nothing wrong with injecting a little control in your co-creation. After all, the “co” in co-creation stands for both company and community.
With this new policy in place, I may even go back to uttering the W word in public.
Drew Carey plays better soccer than David Beckham
Healthcare co-ops as co-creation
There have been so few new ideas on either the Democratic or Republican side of the political debate since the advent of the Obama administration that we should welcome the arrival of the healthcare co-op idea recently floated by the Senate Finance Committee.