Adopting Value Co-Creation in Theory and Practice - opportunities and challenges

Transcription

1 University of Edinburgh Business School Centre for Service Excellence Inaugural Conference 28th October 2016 Adopting Value Co-Creation in Theory and Practice - opportunities and challenges Christian Grönroos Professor emeritus of Service and Relationship Marketing CERS Centre for Relationship Marketing and Service Management Hanken School of Economics Finland (Svenska handelshögskolan)

2 Defining service SERVICE is supporting another party s everyday processes in a way that helps this person or organization reach its goals in a value-creating manner A firm should gear its processes and ways of operating towards supporting its customers everyday processes

3 The service perspective (Service Logic) is multi-faceted Depending of the perspective taken, service has different meanings: From a user perspective (User service logic) User service logic means that customers use resources provided, together with other required resources, and apply skills held by them, to support their processes in order to create value for themselves ( resources used as service ). From a provider perspective (Provider service logic) Provider service logic means that a firm strives to support its customer s processes with its processes and competencies, with an aim to facilitate the customer s value creation ( resources provided as service ).

4 Value creation: challenges and opportunities resources used as service resources provided as service Mismatch between resource use and resource provision hinders value for customers from emerging

5 Value creation: challenges and opportunities resources used as service resources provided as service Match between resource use and resource provision enables value for customers to emerge A thorough understanding of customers is a must! Scratching on the surface is not enough.

6 Dangers of lacking customer focus and understanding: Case Lift Service and Maintenance The firm: Big in the lift (elevator) service business The problem: The service and maintenance business brought in 50% of the turnover (at the time of the case events), but the firm had problems to keep its customers First action: A survey to investigate how the firm s customers experienced its service operations (repair and maintenance) The message: The firm s services are expensive and their quality is low Management reaction: Confusion. We have the best resources and systems in the industry by far!

7 Case Lift Service and Maintenance (cont d) Second action: A qualitative study using personal interviews, basically with only one question: What mistakes are we doing? Scope: Key representative of 100 recently lost customers were interviewed

8 Case Lift Service and Maintenance: The message from the second study What the unsatisfied customers said: - no problems with the actual repair and maintenance - the way the maintenance people behave is often irritating - we cannot communicate with them - frequently we don t understand their way of working - it is often difficult to get in touch with you - it is often difficult for us to adapt to your systems - timetables that are not kept is a problem for us, and irritate us - it is often cumbersome to get problems that sometimes occur attended to - lack of flexibility in your systems often causes inconveniences for us - we don t know how much we can trust you - because of this, we consider your services expensive Management reaction: There is a quality problem after all, but it depends on other reasons than we originally thought!

9 What can be learnt from this case? Although the firm offered services, it was operating in a product-oriented way, focusing on the outcome only i.e. it operated as a product business! No thorough understanding of the customers quality definition. There was a mismatch between resources provided and resources used.

10 Conflicting quality definitions The firm s quality definition: dominated by technical aspects The customers quality definition: dominated by behavioural aspects

11 Analysing the firm s customer focus The customers quality definition FIRM Resources; the firm s processes Customers; the customers processes CUSTOMERS The firm s quality definition

12 A not too uncommon situation The customers quality definition Customer expectations FIRM Resources; the firm s processes Management focus/firm orientation Customers; the customers processes CUSTOMERS The firm s quality definition

13 Mismatch between management focus and customer expectations: causes and consequences REVENUES The customers quality definition Consequence: The customers willingness to pay Customer expectations FIRM Resources; the firm s processes Cause: Focus on developing the firm s internal efficiency Management focus/firm orientation The firm s quality definition Customers; the customers processes CUSTOMERS COSTS

14 The management challenge REVENUES The customers quality definition Customer expectations FIRM Resources; the firm s processes Management focus/firm orientation Customers; the customers processes CUSTOMERS The firm s quality definition COSTS

15 Value creation: Conflicting models 1. Value Chain Model: Value is created throughout in the supply chain, becomes embedded in products, and is exchanged for money (Value-in-Exchange concept) Meaning: The organization network creates value, the customer consumes (destroys) value 2. Value Facilitation Model: Value is created during use/consumption by the user/consumer, and facilitated by the actions of the supplier and other actors in the supply chain (Value-in-Use concept) Meaning: The user (customer) creates value, the organization fundamentally facilitates the customer s value creation, but if their processes interact, value co-creation can take place

16 Value creation: Value-in-Use vs. Value-in- Exchange Supplier sphere Customer sphere Design Development Manufacturing Delivery Usage Value-in-Use evolving over time (a process) Creation of Value-in-Exchange Valuein-Exchange (an output) Service Logic embraces the Value-in-Use notion. Creation of Value-in-Use The customer creates value. The supplier creates potential value only in order to facilitate the customer s value creation. WHAT ABOUT CO-CREATION OF VALUE?

17 Value creation and co-creation: macro theory and micro (managerial) practice Macro theory (Service-dominant logic): When lifting the perspective above the micro level, it can be observed that several actors (firms, institutions, customers...) contribute to the value that emerges for the customer (and others in the chain). Metaphorically this is labelled all actors co-create value for the benficiaries. Micro practice (Service logic): When staying on the managerial level, it is evident that everything is not co-creation. Real value co-creation requires direct interactions between actors. For practical managerial use, much more fine-tuned models are needed.

18 The value process: The value facilitation approach/the Grönroos-Voima value creation model PROVIDER S VALUE FACILITATION CUSTOMER S VALUE CREATION Provider Sphere Joint Sphere Customer Sphere ORGANIZATION BOTH CUSTOMER Value-in-Use evolving over time Resource Compilation Provider s creation of Potential Value-in-Use Source: Grönroos & Voima, JAMS 2013 Co-creation Platform Co-creation of Value-in-Use Customer alone Independent creation of Value-in-Use

19 Managing the value process challenges and opportunities for management 1. Sometimes a macro analysis of what outside the sight of a manager may have a direct impact on the value process is required 2. However, the managerial task always involves a. understanding the customers as the value creators b. developing an offering (potential value) which when used facilitates the customers value creation c. identify, or if possible, develop opportunities to interact directly with customers (human-human or smart technologies) and thereby establish a platform of co-creation d. develop and make use of capabilities to co-create value with customers on this platform and thereby directly and actively influence their value creation

20 Finally: Opportunities to develop and extend marketing beyond its conventional borders According to the principles of Service Logic, WHEN CO-CREATING VALUE WITH CUSTOMERS, MARKETING IS NOT RESTRICTED TO MAKE PROMISES ONLY, BUT CAN BE EXTENDED TO DIRECTLY AND ACTIVELY INFLUENCE PROMISE KEEPING AS WELL. THANK YOU Source: Grönroos, Christian, SERVICE MANAGEMENT AND MARKETING. Managing the Service Profit Logic. 4 th Edition. Chichester, UK: John Wiley & Sons, 2015