Co-Creation...A strategic alternative to acquisitions and vertical/horizontal strategies

For companies who wish to control a larger part of their value chain or wish to eliminate uncertainty or reduce dependence on value chain partners (suppliers, distributors), vertical or horizontal integration is the best way available.

But such kind of integration either through takeover or acquisition involves lot of costs and risks. I was wondering if there is any other less costly/risky alternative to it and I came across a research article published in a leading economic newspaper about co-creation. Co-creation is the process wherein you involve your stakeholders like customers, suppliers, distributors and even other unrelated firms in the very act of developing products and delivering them.

After reading more about co-creation and the processes which it follows, I believe it is the best alternative to risky & costly strategies like vertical integration through acquisition of supply chain partners. In co-creation you bring various supply chain partners on a common platform and give them the responsibility to create an ecosystem, the ultimate aim of which is to deliver maximum value to customers at minimum possible cost. When every partner feels the ownership and a stake in the ecosystem, he contributes to it for his/her own benefit and thus the costs involved in establishing control system vanishes.

Another major advantage of co-creation as a strategy to better manage the entire supply chain is that you expand the canvas of creativity. You as an organization need not restrict your endeavours to those core competencies which you own; you can easily and effectively acquire additional competencies by simply co-creating or co-building them with right organizations.

A perfect example of it would be development of TATA Nano. The company involved all stakeholders’ right from suppliers, customers, employees and distributors in the process of co-creating a breakthrough product and this resulted in a huge success which we admire.

Although there is not a one co-creation model which suits all, but one thing is for sure that it is the best alternative to traditional strategies of acquisitions/takeovers and is the only way we can build enterprises of tomorrow.

Well next time you think of gaining new competencies or more control over your supply chain, don’t think about mergers and acquisitions. You have a smarter way of doing it.      Co-create it.