Introduction
Value co-creation refers to a strategy for developing new models, products, or services for varied groups of firms to improve revenue streams and profitability (Kaartemo & Helkkula 2018). Alternatively, it helps customers to enjoy personalized experiences when they collaborate with service providers to create customized products or services (Carnevale, Loureiro & Kabadayi 2018; Pavlínek & Ženka 2016). Broadly, the realization of the unique benefits of co-creation is subject to the type of relationship between the parties involved. For example, value co-creation could happen in business-to-business or business-to-customer contexts (Ehret & Wirtz 2018).
The latter is often linked with a customer’s ability to personalize his or her service experience using a firm’s resources (Davidow 2018). Alternatively, value co-creation could happen when companies maximize their product or service investments. The indicative metrics for growth could be in the form of increased profitability, new knowledge development, or the creation of superior brand values. This paper assesses value co-creation in the context of customer-to-business relationships through a theoretical review framework and an implications analysis.
Advantages of Value Creation
Value co-creation has not only been touted as one of the most impactful developments in business process thinking but also a useful concept in realizing business process improvements (Kakabadse, Goyal & Kakabadse 2018; Haase, Becker & Pick 2018). In this regard, it has been associated with several advantages to businesses, including an increase in return on investment (ROI), improved customer insights, and expanded intellectual resources (Yu & Sangiorgi 2018; Mahajan 2019). For example, studies have shown that value co-creation has brought significant efficiency gains to technology-based companies through big data management (Troisi et al. 2018).
The service innovation model has recently been used to explain these types of implications in business process development. It suggests that co-creation is a tool for increasing a company’s competitive advantage across firms and markets (Helkkula, Kowalkowski & Tronvoll 2018). Companies use different approaches in service innovation, but their varied tenets are based on unique theoretical contexts. For example, process-based service innovation modes are based on value-added phases, while output-based archetypes are based on output values (Galvagno & Dalli 2014; Helkkula, Kowalkowski & Tronvoll 2018). Collectively, these theoretical foundations of analysis form the framework for understanding the impact of co-creation for businesses and customers.
Limitations of Value Co-creation
Although value co-creation has improved corporate performance, studies that have investigated the topic in detail suggest that different factors could limit the process at micro and macro levels (Yu & Sangiorgi 2018; Mahajan 2019). For example, situational, social, and technological factors are known to limit how companies and businesses create value (Hracs & Jansson 2017). In the same context of analysis, Galvagno and Dalli (2014) have used service dominance (S-D) logic as the main theory for explaining the process of value co-creation in the business setting. It presupposes that the practice happens when the competencies of one party are used for the benefit of another (Galvagno & Dalli 2014).
Alternatively, the theory suggests that goods are not expressions of value, but rather, a distribution mechanism for their creation (Galvagno & Dalli 2014). A unique attribute characterizing the S-D logic theory is its ability to challenge the traditional way of thinking about a product’s worth, which is premised on a one-way transfer of value from a company to a customer. Instead, the S-D theory advocates for an alternative way of looking at value generation whereby the consumer takes part in the creation process (Mahajan 2019).
Stated differently, it helps to recognize that value creation could be initiated by a customer and end at the company level (as the consumer). The ambiguous roles between businesses and customers in value co-creation processes explain the importance of the digital age in developing new platforms for resource integration and network relationships (Kaur Sahi, Sehgal & Sharma 2017). Cultural and historical contexts also affect how both parties interact during the value integration process (Troisi et al. 2018).
These factors are important in understanding how people perceive the worth of the value created. This principle has been applied in the healthcare context to evaluate how patients and medical practitioners collaborate through value-creation and, consequently, it has been established that cultural and historical factors influence patients’ phenomenological experiences during value creation processes (Kaartemo & Känsäkoski 2018). Similar applications have been reported in business process development through market analytics because firms spend a lot of resources in understanding how cultural or historical factors affect the market reception of new services or products (Troisi et al. 2018).
Conclusion
The insights gathered in this paper suggest that value co-creation processes embody three broad theoretical perspectives: innovation and technology management, marketing, and service science. Innovation and technology are linked to resource integration by creating a new platform for companies to create synergies that ultimately result in the development of unique value propositions, while service science is a specialized aspect of the discipline that encompasses varied theories, such as the S-D logic.
Overall, the findings of this critical analysis suggest that value co-creation is premised on the need to understand the importance of context when creating value. Consequently, there is a need to understand the role of time and place dimensions in collaborative processes because they depend on the effective use of resources. The network relationships of service ecosystems between businesses and customers are also pivotal in understanding how both parties can generate more value through resource integration.
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