Prahalad: From transaction to co-creation - Building symbiotic relationships
If you accept co-creation, if you accept personalized experience, everybody can look at Google and say yeah, that is true, the iPod and yeah, that is true. My attitude is, if you only talk about Google, iPod, Netflix and Amazon, people are going to dismiss it and say: I’m in an old industry; I cannot change. So I have to go and think of examples where this is taking place in very traditional, 100-year old industries. Like tires. And instead of selling tires, if you can come to me… Let’s assume you’re a fleet owner who has 50 trucks and I sell you tires. It’s a transaction. The primary consideration is price. Because it’s a big capex for you as a fleet owner, but if I can come back to you and say: I don’t want to sell you tires but I will only ask you to pay for the kilometers that you drive, and I can figure this is out by putting sensors on how you drive and also using GPS and if you allow me, I will monitor every truck, I will find out how many miles you drive and I will give you an itemized bill, for a truck owner that is very attractive. Because you don’t have to put capital up front, you only pay for use.
On the other hand for me it’s very useful, because I start understanding exactly how my product is used. I get real-time information and then I can go one step further and say: you have 60 drivers for 50 trucks. If you allow me to find out who is driving which truck, I can give you specific information and say: inflate your tires, or change your tires. Stop running the truck because it’s getting too hot. You know, everything that makes it safer and better use of the vehicle because the tires are better used. And I also know when to replace your tires.
So that means I’m creating a very personal experience for one driver Joe in a fleet. And this is a long-term relationship and neither of you can easily get out of this relationship. Why? Because we work closely together. It is a personalized co-creator experience. Not a transaction selling a physical product. The physical product is still there. It’s called the tire, but that’s not what you’re selling. So you can transform these businesses. The same thing is, we also talk about diabetes insurance. We’re talking about a whole range of businesses where you can transform the traditional way of thinking by very simple technology, because it’s not about technology. We know how to do this stuff. The real issue is, are we imaginative enough to build a new business model?