If Sir Isaac Newton stood on the shoulders of giants, the pioneers of co-creation stand together with their customers and collaborators to innovate. So goes a rather grandiose comparison used to define co-creation in Wikipedia, itself a product of collaborative working. Such froth may prompt any right-thinking business strategist to throw the idea out the window with other internet-related hyperbole.
However, when the world's largest consumer goods firm gets in on the act, maybe there's something in it. Since 2001, Procter & Gamble has used a secure internet portal to collaborate with chemicals and biological science firms to create new products. According to Gartner the programme now accounts for 35% of the company's innovations and has increased R&D productivity by nearly 60%.
Bruce Brown, P&G chief technology officer, says: "Historically, P&G relied on internal capabilities and those of a network of trusted suppliers to invent, develop and deliver new products and services to the market. We did not actively seek to connect with potential external partners.
"Similarly, the P&G products, technologies and know-how we developed were used almost solely for the manufacture and sale of P&G's core products. Beyond this, we seldom licensed them to other companies."
With its website Connect & Develop, P&G uses innovation from outside the firm, and allows its own creations to be exploited by other companies. This can encompass everything from trademarks to packaging, marketing models to engineering, and business services to design, Brown says.
Although not quite the revolution created by Newton, P&G's efforts in co-creation have led to new products including Bounce, the world's first dryer-added softener, which it created after acquiring the product technology from the independent inventor who developed the innovative fabric-care solution. Meanwhile, P&G found the perfect complement to the Swiffer brand in a hand-held duster developed by a Japanese competitor. P&G bought the product, leveraged elements of existing manufacturing processes and advertising components, and launched Swiffer Dusters within 18 months.
Untangling the intellectual property rights from collaborative working can be complex, but worthwhile, says Jeff Le Roy, a P&G spokesman for Connect & Develop. "IP rights are determined on a deal-by-deal basis," he explains.
"Normally a collaboration is viewed like a marriage you keep what you bring to the relationship, we keep what's ours, and we need to determine who 'gets' what we create together. IP rights are one of the most difficult things to negotiate. That said, we closed 91 deals last year alone, so our primary motivation is not owning the IP it is how we can create the most value with our partners."
P&G has mainly sought to collaborate with other R&D departments and businesses, rather than directly with its consumers. But Lego, the Danish firm behind the omnipresent children's brick system, has done just that and invited its most enthusiastic customers to design products.
Since Lego's last patent ran out in 1988 it has had to survive the onslaught of copycat firms while competing for children's attention with the burgeoning market for video games and consoles. However, the internet has allowed the company to reach its loyal customer base in a new way. With the online Lego Factory system, they can design and order their own products using a downloaded virtual design environment. Consumers can also browse and buy products created by other customers.
The front end of this process now includes social networking systems so Lego customers can get to know each other and share design ideas. Meanwhile back-end fulfilment and product packaging systems required re-engineering to help the concept of mass customisation bear fruit in the real world. Essentially, though, Lego was already making all the components in these products.
To launch the concept Lego ran a competition using its Lego Factory system to allow consumers to enter their own product designs. After sifting through 200,000 entries, Lego chose 10 designs to create three new products to launch into the mass market. The firm paid a 5% royalty to the winners.
Eight million people a month use the system and the community produces its own journal to keep its members abreast of the latest developments. Lego's aim in supporting these activities is to enhance its customers' play experience by encouraging their input and innovation.
According to Gartner, using the social networking system to gather customer ideas on innovation could have widespread applications. "The majority of mainstream organisations could benefit from contained low-cost experimentation with non-routine interaction technology," says its research note on co-creation.
While IT departments will be expected to develop and support the systems that enable and manage the co-creation process, they can also benefit from it. As software has become more modular and re-usable, it has become more like Lego. It's not surprising then that software firms are working with customers and partners to develop their products - and those customers engaged with the process can be the first to reap the benefits.
Netezza, a supplier of datawarehouse infrastructure and appliances, has opened up its technology to allow partners and customers to build applications code close to the data repository, with a radical improvement in performance.
With amazon.com, HBOS and Orange among its customers, Netezza launched its Developer Network last year, which provides customers, developers, systems integrators, technology partners and academics with widespread support for the creation of new analytics software.
Netezza's vice-president of product management and marketing, Phil Francisco, says: "We have opened up the internal of the [datawarehouse] appliance to allow programmability beyond SQL. This allows [people to] program in very high performance analytics."
With direct access to the appliance code, one Netezza Developer Network member, an analytics service provider, was able to reduce a batch process of data analysis from 49 hours down to 45 minutes, according to Francisco. "That's a game change for them and allows them to differentiate their offering. The firm can now offer low latency analytics," he says.
The Netezza Developer Network now has around 90 members, from universities, end customers and partners, each with an interest in advanced analytics. For a nominal administration fee, they get a development toolbox, containing four of Netezza's Snippet Processing Units and a software development kit, which effectively opens the technology to outside innovation.
At the moment the network itself is cost neutral. The fees cover the overheads but Netezza does not charge licensing fees for any technologies built from knowledge of its source code. The firm hopes to derive value from the project, through, because customers will get more value from Netezza's products with these add-on features, and it will help its datawarehouse appliances gain market share.
"It's about building a community," Francisco says.
"What's good for the community is good for us. Success breeds success."
While co-creation is becoming well established in biological sciences, engineering and other high-tech industries, cultural and procedural barriers can stop the concept catching on elsewhere, according to Gartner vice-president and distinguished analyst, Carol Rozwell.
"Sometimes there is a fear of negative feedback if a business opens its gates to customer ideas. But you should really see this as an opportunity to create better products," she says.
Measuring the wrong things also prevents co-creation catching on, according to Rozwell.
"If you measure the number of new concepts that come out of the design team, then there's no driver. But if you look at the fastest time to market for an idea across the whole institution, then co-creation begins to look like it has something to offer," she says.
However, changing the way an organisation measures its performance can be difficult in itself. "This can come from a visionary CEO," says Rozwell. "However, the change only usually comes when the company is in dire straits, through a poor financial position or fierce competition."
With the economic climate getting bleaker by the day, by Rozwell's reckoning it is likely more companies will be forced to develop new products and services using the process of co-creation.
Lego allows customers to develop Lego bespoke kit, which they can buy. Kits are built in a virtual Lego environment created in a software tool downloaded from Lego's website. You can also view and buy creations of other customers on the website. Lego also uses social networking tools to encourage innovation among its customer base.
Connect and Develop is a website and community dedicated to encouraging collaboration between chemicals and biotech firms, either those who want to sell their inventions to be used in P&G products, or use ideas from P&G to develop their products. External innovation now contributes to around half of P&G's products.
Innocentive is an online ideas marketplace. Creative thinkers, such as engineers, scientists and business people can join a solver's community to address some of the world's toughest challenges. Meanwhile 'seeker' organisations post their challenges on the Innocentive website, and offer registered solvers significant financial awards for the best solutions.
This was first published in December 2008