C'K' Prahalad

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The New Frontier of Experience Innovation
C.K. Prahalad Venkatram Ramaswamy
Sunum Can Uçkan Yüksel 502070951
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Practices of innovation must shift the focus away
from
Experience Environment
Products Services
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Accelerators of creating value
Stress reasons for creating value
Advances in digitization, biotechnology, smart
materials (increasing the opportunities in wide
range of industries). Deregulation,
Connectivity, Globalization.
Intense competition Shrinking profit margins
? Profitable growth can only come from
innovation ? Company-centric, product service
focused view can NOT deliver innovation and value
sustainably.
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Emerging Competitive Landscape
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Field A
Field B
Field C
Field D
Field E
PAST
Entertainment
Education
Health
Leisure
Communication
Field A
Field C
Field E
PRESENT
Field B
Field D
Industry names are exemplary and graphics are
off scale are given just to explain the
conceptual shift.
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• ? Traditionally a still camera was different then
  a cellular phone and a video camera was different
  than television. There were clearly defined
  products and industry boundaries.
• Digitization has enabled the combination of
  features and functions of traditional industries
  and products in myriad of new wayIndeed, in
  almost every industry, the distinct identities of
  products, services, channels, industries and
  companies are rapidly disappearing.
• Companies defense mechanism against
  boundaryless and eventually transforming
  competitive space is increasing the product
  variety. For company and product-centric
  premises that create value through the products
  and services, it is very normal to compete
  through variety.
• On the other hand, consumers find it confusing
  to embed many features and functions in product.
• Creating product and service variety is getting
  easier everyday with enhancing technological
  background framework, competing for value through
  that variety is NOT easy.

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The Co-creation Experience as the Basis for Value
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• Assuming an active role for the individual
  consumer in value creation is different from
  allowing customers to access to a companys
  technology base or seeking their help in the
  product development.
• That leads to innovations center remain the
  product or the technology itself which is a best
  variant of the dominant logic.
• The center of gravity must shift to the
  individual's co-operation experience.
• ex Cardiac pacemakers (device that monitors
  and manages the heart rhythm). The comfort of
  that device would be expanded if it could be
  monitored remotely and alert the patient and
  doctor simultaneously. Moreover it could direct
  the patient which hospital to go if s/he is away
  from home. The device would give the medical
  history to the doctor on that hospital.
• ? The value is NOT on the product, NEITHER on the
  IT network, NOR in the social-skill network that
  includes doctors-hospitals-family and the broader
  community.
• ? The value creation is defined by the
  experience of a specific consumer, at a specific
  point location, in the context of a specific
  event.

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? Ex Pacemaker producer company based Medtronic
Inc1. Developed a system of virtual office
visits that enable physicians to check patients
implanted cardiac devices via internet. By
holding a small antenna over patients implanted
device and patient collects data. Physician
review the data on a special web-site, and
patient can check his own condition from a
website with special interface for the patient.
That technologic platform would support blood
pressure, sugar readings, brain activity,
etcmonitoring.
? Ex OnStar 2 launched by GM on 2000. OnStar
service is integrated to the vehicle and provides
safety and emergency services. When a consumer
locks himself out of the car, OnStar opens the
door remotely, when the airbag of the car is
blown off, OnStar detect the accident and its
severity, direct the local emergency service to
the scene. Also it helps tracking down the
vehicle if its stolen. The services of OnStar is
expanded afterwards with entertainment,
information and fun oriented services. It can
determine the locations of the nearest favorite
restaurants and making reservations.
1 http//www.medtronic.com/ 2 http//www.onstar.c
om/us_english/jsp/index.jsp
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? Both of them (Medtronic and OnStar) are
focused on events and sensitive to the time and
space context within which those events occur. It
allows consumers to interact with system through
a simple, flexible interface. These dimensions
are critical for putting the individual at the
heart of co-creation experience.

• Key points about Experience Innovation
• A nodal company that pulls together the
  suppliers, partners and consumer communities is
  necessary to build up the infrastructure for
  individual interaction to create an experience
  network.
• It is futile for either the nodal company or
  the network to try to manage individuals
  experiences.
• Experience environment can be thought of as a
  robust, networked combination of company
  capabilities ( including technical and social
  capabilities) and consumer interaction channels (
  including devices and employees), flexible enough
  to accommodate a wide range of individual
  context-and-time-specific needs and preferences.

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• Ex LEGO building blocks in various sizes and
  shapes, multicolored, snapped together in almost
  infinite combinations.
• With the leadership of Seymour Papert, MIT
  researchers introduced technology convergence
  with the launch of its Mindstorms Robotics
  Invention System 3. Mindstorms combines
  technology capabilities (miniaturization,
  environmental sensing) to allow consumers to
  create intelligent robots with the traditional
  bricks. Added that many websites are popped up
  offering instructions and new ideas for a
  plethora of LEGO robots that can be built up and
  programmed.

Mindstorm case shows two important aspects of a
successfully evolving experience environment
Continuity (blocks are same as they have always
been) Transformability ( functions, features,
capabilities can change continuously) ? In each
cases (Pacemaker, OnStar, Mindstorm) there is a
base of competence promising three value
co-creators the company and its network, the
consumer, the consumer community.
3 http//mindstorms.lego.com/news/
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Migrating to the New Frontier The role of
Technology
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• Cost, efficiency, quality and product variety
  are believed to be the primary sources of
  competitive advantage in product- centric
  companies.
• Reducing costs, measuring quality, logistics,
  developing suppliers, manufacturing, load
  factors, new tooling machines, modifying existing
  plants, training associates and the like are
  focused issues because they are believed to be
  the advantage to deliver the planned functions
  and features on time better than competitors.
• Increasing number of companies has moved toward
  an intermediate stage between products and
  experience solutions space. Solutions- based
  innovation focuses both non physical product and
  accumulated company expertise - soft knowledge.
  
• In contrast, the transformation to an
  experience-innovation perspective is a quantum
  leap.
• Experience-based approach can not be without
  products and services naturally, but the
  managerial attention should be shifted on
  experience space as the locus of innovation.
• ? To change the focus, manager need to leave
  thinking from company perspective. Moreover,
  they must learn to see existing and emerging
  technologies not as enhancers of products,
  features and functions, but as facilitators of
  experiences.

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• The ability to imagine and combine technological
  capabilities to facilitate experiences will be a
  key success factor in experience innovation,
  regardless of industry.
• ex Miniaturization of electronics hardwares
  allowed a lot of products become smaller and more
  portable. The portability of music and
  entertainment started with Sony walkman. Now
  Ipods let the users carry their personal music
  archives and favorite movies.
• Companys view of portability was the primary
  benefit for the customers afforded by
  miniaturization. So, the locus of the innovation
  was in the product space. The products are tried
  to be designed as smaller and lighter as
  possible. But consumers perspective might be
  different and challenging Can I hold and carry
  it comfortably in different context?
• The companies which realizes the fact that a new
  technology is important to consumers only when it
  eases and increases the quality of their life.
• ex Sonys add-on smart device that interacts
  Sony televisions and DVD players. It can store
  videos from broadcast or download from internet
  and store it PVR (personal video recorder.

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• Miniaturization trend has allowed pocket-sized
  devices become multiple functional and let those
  devices be in a networked communication, talk to
  each other.
• ex Apples new iMusic created a potential
  network for music enthusiasts and musicians with
  the help of interlinked digital music devices
  which can be added to anywhere like cars phones,
  PDAs, game consoles and home stereos.

• There is another emerging technological
  improvement adaptive learning.
• ex TiVo Inc. intelligent digital video
  recorder stores the viewing history and analyzes
  the consumers interests. Then with the
  evaluation of that analysis it records programs
  without the consumers intervention.

• Miniaturization, networked communication and
  adaptive learning are examples of technological
  enhancements that can expand the product-centric
  innovations. But with different perspective and
  intent ,they can play important roles in
  experience innovation.

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Traditional Innovation
Experience Innovation
Focus of Innovation
? Products and processes
? Experience environments
? Co-creation experiences
Basis of Value
? Products and services

• Firm creates value
• Supply-chain-centric fulfillment of products and
  services
• Supply push and demand pull for firms offerings

View of Value Creation

• ? Value is co-created
• experience environment for individuals to
  co-construct experiences on contextual demand
• Individual-centric co-creation of value

View of Technology
? Facilitator of features and functions ?
Technology and systems integration
? Facilitator of experience ? Experience
integration
Focus of Supply Chain
? Supports fulfillment of products and services
? experience network supports co-construction of
personalized experiences
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Thank You
Prahalad, C. K. and Ramaswamy, V. (2003). The
New Frontier of Experience Innovation, MIT Sloan
Management Review, Vol. 44, no. 4, pp. 12-18.