Thursday, 30 May 2013

internet business model Part 3.3; of rules, methods, character, systems and economic models

Co-creation is another powerful method that if applied correctly can reduce costs and develop better products with less internal resources.  Is this new?  Using surveys for opinions is a form of co-creation for new product development for a traditional company but not in the context of how new online companies do so.  Co-creation makes the product, not as a secondary feedback mechanism to an already finished one. 

While similar to crowdsourcing, organisations use co-creation in a different manner.  As crowdsourcing is more generic, co-creating is more deliberate and thus a smaller crowd takes part.  Linden Lab’s Second Life is about co-creation where the co-creator (user) creates value for himself but rubs off on Second Life, a site.  Away from the online world, others such as a shoe designer, John Fluevog allows customers to submit designs.  The best ones get put into production, thus co-creating a new shoe.  And it has gone to Hollywood.  The movie ’Snakes on a Plane’ actually engaged its audience from scripting to marketing.  It could also be applied to something as simple as a comic strip.  Applied correctly, it is a powerful business tool.  It engages your customers and potential customers to co-create an experience they want.  Thus it can be employed by a restaurant to engage their patrons in coming up with creative dishes or a magazine for a section that is created by its readers.

Taken on a larger context, co-creation generates mutual value from an organisation view.  It involves co-creative engagement among stakeholders of its eco-system of partners, clients, consumers, regulators and employees.  These opportunities add value and extend the life cycle of the product.  It makes an impact with fewer resources. It scales in ways that centrally designed systems cannot as it benefits from constructive feedback.  It innovates swiftly, making it harder for competitors to react.

Co-creation is sometimes executed via a method called an Open Platform model, itself in time could become an economic production model on its own.  This as the term implies is a mode of an organisation to openly allow outside access to its content.  It in fact deliberately taps into the crowds of consumer, partners and customers.  The Guardian newspaper in Britain, Google, Yahoo uses this unusual business means.  Introduced recently, the municipality of London uses it in a hope to catalyse social-economic development.  They even make significant efforts in an endeavour that traditional businesses would be scratching their head figuring why.  They organise their data, building engagement platform for outsiders, making tools available to access the data and provide training.  It is indeed strange considering that content has value.  If he has any hair left, the answer lie in the insight to the open culture of the internet that translates to a business model.  If you think about it, the internet is a case study in itself.  The reason why it is what it is today is derived from it being an open platform, its greatest strength. In this brave new world, the Open Platform model is a new way to improve client relationship, innovate, create new products and lower costs.  It improves organisation productivity but ultimately it is to be more competitive.

The Guardian.allows access to their articles and applications, many developed by others and all integrated within the Guardian network.  They even allow applications based on Guardian content to be available on other online platforms.  They are adapting.  Amazon recognised this new model early and uses it to better its business.  It is now a global leader for cloud computing.  The model that works in the old world, of closely guarding its property, is changing as power shifts to the consumers.   

In execution, the organisation needs to identify the area for external collaboration.  It may be a product, a software module, a transaction engine, a data set, a service.  Not everything should be open though and to make this model work, there should be some trial and error and letting it evolve trying out various schemes until a viable business model emerge.  Success lies in ‘closing up’ the right parameters.  The aim is a progressive platform without destroying the characteristics of the product for example.  Bear in mind that participation will only remain viable for as long as all the stakeholders are appropriately compensated for their contributions, be it monetary or other means.  Don’t expect perpetual gratis.  The ultimate objective is about building a loyal base of contributors that make your ecosystem stronger than your competitor by continuously creating new value for the users.  If well managed, over the long term the organisation evolves with trends, comprehending customers’ requirements in situ, that is, it provides a degree of future proofing and in a natural manner being always on top of industry dynamics.  The Open Platform thus used becomes a powerful business system.

If you were to ask me to single out only one ‘rule’, I would, after two decades studying internet business models, say the open platform model.

Now, let’s switch to something more practical in the next blog.

LinkedIn – dr tommi chen (goggle + profile not completed)

©Chen Thet Ngian, (2012, 2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and with appropriate and specific direction to the original content.

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