Face to face: Venkat Ramaswamy – New business model for the future

The same old business tricks don’t work any more,” says Venkat Ramaswamy. “Enterprise is effectively starting from rock bottom after the GFC. And there is new receptiveness to the transformational changes that co-creative approach to doing business and running organisations brings.”
Ramaswamy is Hallman Fellow at the Ross School of Business, in America’s University of Michigan. He co-authored the prophetically insightful business book The Future of Competition with equally high profile management guru CK Prahalad, before joining forces with Francis Gouillart to write The Power of Co-creation, his latest book.
Prahalad, who died last year, and Ramaswamy wrote series of articles between 2000 and 2004 on the probable impacts for business and society of more “connected and empowered” customer. They described the accelerating shift toward networks of customer communities and global talent that reside outside, but interact with businesses on the one hand and the emergence of global resources networks of enterprises on the other.
Customer experience, they said, was central to “enterprise value creation, innovation, strategy and executive leadership”. These broad changes in business and society called for co-creation – practice of developing systems, products or services through collaboration with customers, managers, employees and other stakeholders.
Seven years on and enterprise is now confronted by the everyday realities of rapidly expanding world of highly connected and networked people and enterprises. The new actuality is, as Prahalad and Ramaswamy predicted, changing consumer and employee attitudes toward products, services and to the organisations they buy from or work for.

Disengaged employees
Consumers want to help “design” the value of the products and services they use; want ongoing conversations with the companies they do business with and want to be heard. “Simultaneously, surveys show that between 70 and 80 percent of employees are either fully or somewhat disengaged from their employing organisations,” says Ramaswamy. “Enterprise must engage more fully with both customers and employees. The co-creative enterprise answers, at least in large measure, these challenges.”
Enterprise transformation is not, in his opinion, matter of choice. It is more “structural” than that and probably represents the next iteration of the organisation and traditional business model. Co-creation is about “engagement platforms” and is, says Ramaswamy, direct outcome of rapidly evolving and increasingly advanced communication technologies. “It will probably lead to very different design of the enterprise and management structures.”
In his opinion, the future belongs to the co-creative enterprise, the core principle of which is transforming enterprises toward engaging individuals to “create valuable experiences together while enhancing network economics”.
“Co-creation,” he says, “involves both profound democratisation and
decentralisation of value creation.” His book describes the process as moving value creation from inside the firm to interactions with customers, customer communities, suppliers, partners and employees and other stakeholders. The enterprise then operates by communicating with both internal and external groups through series of communication technology-driven engagement platforms.
Co-creative organisations use individual experiences as the starting point in building relationship with customer. Developing compelling experiences with individuals means they participate directly in the design of value. This leads to recasting of the conventional role of strategy, innovation, marketing, supply chain management, human resources management and information technology.
According to Ramaswamy, the co-creative enterprise drives growth. “It enhances strategic capital, increases returns, and expands market opportunities,” he says. “It draws innovative ideas from customers, employees and stakeholders at large. It also enhances company’s capacity to generate insights and take advantage of opportunities they might not have identified, while reducing risk and capital needs by using global networks and communities.”

Changing mindsets
However, organisational transformation on the scale he envisages requires major changes to management and director mindsets. Organisations will need to challenge and mutate their “DNA”. “Change management programmes often fail because the change process is not co-created,” says Ramaswamy. Managers assume that if particular pre-defined change process is used, then solution will automatically emerge.
It is of course difficult to change the dominant mindset of an organisation, including the way individuals view each other, their collective beliefs, culture and assumptions. Ramaswamy’s book outlines how he and his co-author think organisations can be transformed through co-creation.
Engagement platforms germinate and feed the co-creative enterprise. “They allow the enterprise to be more fluid and dynamic,” he says. “People have ideas and are increasingly frustrated by their inability to do anything about, or with, those ideas. Each one of us wants to help the world. The question becomes how to make it easy for people to be part of process to help the world – so to speak.”
Connectivity is the trigger that fires Ramaswamy’s innovation bullets. “It is not availability of information, there is plenty of that, but rather communications technology that facilitates the ability to extract more value from available information that underpins the co-creative enterprise.”
Introducing co-creative approach requires “top down leadership”. Unfortunately, individuals lower down the organisational hierarchy are more likely to grasp the significance and application of engagement platforms than say, directors and senior managers. “Employees are often already connected and sharing ideas,” he says. “They get it. What management and governance needs to do is change its collective experiences to connect better with the co-creative concept.”
He sees the engagement platform approach as an opportunity to enhance and improve shareholder and board involvement with the organisation. Sportswear manufacturer Nike’s successfully adopted more transparent and co-creative approach to management and governance that enhanced both its leadership and its business performance, he says.
“The co-creation approach is different from our traditional transaction and silo-based organisation structure with its infrequent interactions with shareholders and other stakeholders,” says Ramaswamy. “This is about creating networked enterprise that is designed specifically to listen to and work with all stakeholders. Things don’t just happen by accident.”
Co-creation is, he suspects, an evolutionary outcome that began with manufacturing process enhancements such as those introduced by Dr W Edwards Deming’s quality management movement of the 1950s. “But unlike quality and many of the other process concepts like Six Sigma that enhanced the old model, this is whole new paradigm of how we create value and wealth and wellbeing,” he says.

“Us versus them”
“Co-creation is also human-centric. There is lot of disenchantment with the ‘us versus them’ attitude toward corporations. There are tensions between the public, private and social sectors of our communities. This has the potential to provide positive common denominator by which all of us can be involved in decision-making processes,” he says.
The co-creative enterprise is not, as his book points out, just about thinking outside the box. It is about transforming the box. The authors claim this transformation results in “win more – more win” approach to doing business.
Ramaswamy accepts that companies are always transforming. The difference co-c

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