Co-creation: the key to manufacturing success

A survey by Deloitte found that 1 in 5 consumers are willing to pay a 20% premium for personalized products. Deloitte even goes as far as saying that manufacturers who don’t incorporate an element of co-creation and personalization into their offerings risk losing both revenue and customer loyalty.

Speeding up time to market

Sportswear giant Adidas has embraced this trend wholeheartedly. It recently built new manufacturing plants – dubbed Speedfactories – which can produce shoes faster and at lower cost to directly address customer demand.

Adidas has started to use “nowcasting” – which involves analyzing social media sentiment to gauge demand for its products in particular cities. Meanwhile, shoes are equipped with an NFC reader in the tongue that connects to an app, generating valuable data that enables Adidas to understand product usage trends.

This is a radical departure from push-based manufacturing, which involves anticipating customer demand, creating a sales forecast, and procuring the right resources and people to produce the appropriate quantity of goods. A pull-based manufacturing approach de-risks the whole process.

Morgan Stanley estimates that shifting to this production model could offer brands an extra 15% rise in sales growth. It’s no surprise that Adidas has said it plans to get 50% of its sales from “speed-enabled” products by 2020.

The role of business ecosystems

Businesses like Adidas are increasingly looking not just to their consumers or lead users but also their suppliers, partners, university labs and independent inventors to co-innovate. Adidas, for example, has partnered with technology giants to create digital twins of their production lines, enabling them to be altered rapidly for new batches of shoes that need to be produced that week.

New business ecosystems rely on data – for example from the NFC connected shoes – to better anticipate and meet consumer needs. This is all part of what we call the third era of the Internet – the so called “Internet of Enterprises.” It's about connecting people to objects, objects to business processes and business processes to technology infrastructure.

Collaborating to innovate

This trend is not just the preserve of the clothing and footwear sector. At BMW’s “Co-Creation Lab,” consumers can help design future cars and evaluate the in-house team’s design concepts. Meanwhile, Lego uses its “ideas platform.” Lego enthusiasts can post their own designs for consideration or vote on others submitted. Designs that garner 10,000 plus votes are considered for production. This approach ensures an interactive relationship with consumers and a continual stream of ideas.

IDC estimates that in 2019, half of manufacturers will collaborate directly with customers to design improved products using cloud-based crowd sourcing and virtual reality, boosting sales by 25 percent.

Kimberly Knickle, Research Vice President at IDC manufacturing insights, said that it has previously assessed the health of the manufacturing sector on productivity. With the acceleration of digital transformation, the analyst firm is now looking at innovation in business models and processes as a definition of success. “Manufacturers that can speed their adoption of digital capabilities in order to create business value will be the leaders of their industry,” she said.

Co-creation is changing the face of the manufacturing sector. By working directly with their customer base and leveraging their business ecosystems, innovative manufacturers can deliver exactly what they want, when and where they want it. It is a proven way of generating higher margins and greater market share.

Read more about the growing importance of business ecosystems.