Venkat Ramaswamy and Kerimcan Ozcan
Venkat Ramaswamy is a Hallman Fellow of Electronic Business and professor of marketing at the University of Michigan's Ross School of Business. He is the co-author (with Francis Gouillart) of the HBR article "Building the CoCreative Enterprise" and the book The Power of Co-Creation. Kerimcan Ozcan teaches at International University of Japan.
CEOs Must Engage All Stakeholders
9:01 AM Tuesday October 4, 2011 by Venkat Ramaswamy and Kerimcan Ozcan Any attempt to reform capitalism must first take stock of the structural shifts in value creation that we are witnessing in society today. Because of the web, social media, and advances in mobile and interactive communications and information technologies, the experiences of human beings are now at the heart of value creation. The fundamental distinction of an enterprise that starts with human experiences to create value is that it must, by definition, engage the individual in both defining and delivering value. Platforms of engagement, based on human experiences, are the new loci of value creation and therefore the new engines of capitalism. Such experience-based engagement platforms — assemblages of people, interfaces, processes, and artifacts whose configurations evolve with value-generating experiences — are the key to unlocking the next sources of value in the system. Doing so can expand business-civic-social ecosystems in "win more, win more" ways for all stakeholders. Apple under the leadership of Steve Jobs offers a metaphor for the future role of the CEO as a co-creative engagement orchestrator. It has simultaneously expanded value creation for all its stakeholders — including its customers, employees, partners, suppliers, and investors — at a time when enterprises are scrambling to find new ways to grow. It has accomplished this through a strategic architecture of experience-based engagement platforms that span the whole enterprise from its physical and online stores, to its products and services (iTunes, and more recently, iCloud), to its SDK engagement platform that not only opens up its applicationsdevelopment process to all but also strives to make it easy to design and test applications across different devices.
Starbucks CEO Howard Schultz has turbocharged its remarkable turnaround since 2008 not only by redesigning its product-service offerings through experiencebased engagement platforms but also by gaining insights and ideas through effective dialogue with stakeholders (through its online MyStarbucksIdea platform). Inclusive engagement is central to orchestrating co-creative engagement, involving stakeholders in the process of gaining insights and designing solutions together. Effective participation of individuals requires meaningful engagement and is a function of the design of the environment in which the participation takes place. This, in turn, requires transparency, especially identifying situations that are in the self-interest of both enterprises and stakeholders alike. Spanish bank Caja Navarra's CEO, Enrique Goñi, has embraced transparency as a core principle in building its experience-based engagement platforms, believing that the time had come to change the rules as people demand transparency, participation, and responsibility. It closed out the 2010 fiscal year with €11.97 billion in retail managed resources, of which €8.43 billion were within the balance sheet, rising 7% versus the average of 0.5% for Spain's financial sector. Creating value together also means creative engagement that harnesses the collective intelligence of people. There are many examples of crowdsourcing, open innovation, and new business models that tap into the creativity of people from anywhere in the world today. Local Motors CEO Jay Rogers has not only built engagement platforms that enable crowdsourcing of automotive design while creating personalized experiences of building your own car, but its business model also enables creation of more local jobs. Even established businesses can tap into creative stakeholder engagement to drive new value creation. CEO Jørgen Vig Knudstorp of the LEGO Group has spearheaded platforms such as LEGO Mindstorms NXT and LEGO Games, which combine traditional physical experiences with new digital experiences in novel ways, while also tapping into external entrepreneurial creativity. Access to knowledge, expertise, skills, and tools is key to creative engagement. It not only enhances value in use but also enables stakeholders to modify and extend value. Finally, the engagement of people ought to be transformative, ultimately leading to positive change in the system. That means motivating and enabling reciprocal learning from interactions and plowing back insights to make the platform continuously better, in a reflexive manner.
CEO Dr. João Polanczyk of Hospital Moinhos de Ventos (Brazil) has done just that by innovating new wellness services and enhancing the quality of experiences together with patients and their families, nurses, physicians, corporate clients, and insurance organizations. It has resulted in positive cash flows, occupancy of over 90%, and higher levels of customer and employee satisfaction in 2010. By comparison, it had a negative cash flow and and occupancy rate of only 60% in 2006.. CEOs of the future must be orchestrators of co-creative engagement everywhere in the ecosystem in which the enterprise participates. It implies leveraging network and stakeholder resources (as opposed to just allocating resources) and accessing competencies in the ecosystem to support a strategic architecture of platforms. Senior executives must also pay attention to both the technical and social architecture of these platforms. On the technical side, the platforms must be reconfigurable, scalable, linkable, and generative. On the social side, it must support a participatory culture in the organization that enables "silo-breaking" engagement inside the organization with appropriately designed incentives (designed together with people), which encourages collaborative decision-making, and execution and re-formulation of strategies that expand ecosystems. As co-creative engagement orchestrators, CEOs can lead the way to evolve capitalistic systems into a more holistic process of wealth creation that has built into it the expansion of well-being and human potential.