Using Enterprise Co-Creation to take B2B collaboration to a whole new level. PRTM's Mark Deck and ECCP's Francis Gouillart present examples that include Texas Coaters, EZ Printer and Best Bottler.

1. reprinted from
PRTM Insight | Second Quarter 2011
The Craft of Co-Creation
Taking B2B collaboration to a whole new level
Francis Gouillart and Mark Deck
ARTICLE

2. ARTICLE
Business-to-consumer (B2C) co-creation is a big trend these days, as
consumers increasingly participate in the designing of products and
services that better meet their needs—and that bolster companies’ reve-
nues. Less familiar, but potentially just as powerful, is business-to-business
(B2B) co-creation, where companies selectively open up and design their
operational processes with each other. For those brought up with the belief
that the B2B customer/supplier balance of power can only be managed by
closed processes and tight-lipped negotiation, this may seem counterintui-
tive. But as the case example described below shows, such B2B co-creation
can offer significant opportunities to enhance revenues and profits on both
sides—and, potentially, across the entire value chain.
C
ustomer-supplier relationships are tradi- for innovation and value creation. The primary
tionally built on the assumption that the reason is that it’s very difficult to predict which
processes of each player are separate, and interactions will offer the biggest opportuni-
are connected only through structured interface ties—as label manufacturer Texas Coater and its
points that pass specifications one-way. Price value chain partners learned.
negotiation, on-time delivery, and quality checks In co-creating a production process, Texas
serve as static checkpoints, but basically it’s like Coater and its partners jointly mapped their
two tennis players hitting the ball back and forth interactions across this mini-ecosystem, uncov-
across the net. ered new interactions that had previously not
This “tennis court” approach works—up to a been apparent to one another, and started
point. If a supplier lacks insight into the custom- connecting their operations in new ways. This
er’s production processes, or the customer is initiative—far from giving away intellectual
unaware that its specs require extra time and property, a concern companies often have when
expense for the supplier, margins suffer on both discussing co-creation—led to all-around reduc-
sides. Some companies make a point of sharing tion of time to market and gains in market share.
processes for critical value chain activities—for
example, automotive original equipment manu- Understanding the Beverage Value Chain: The
facturers (OEMs) that locate development staff Case of Texas Coater
from their Tier 1 suppliers in their manufac- Texas Coater makes giant rolls of pressure-
turing plants to make sure that vehicle compo- sensitive adhesive (PSA) laminates destined to
nents integrate properly. Some OEMs even share become printed labels used in the production of
their product road maps to ensure that major beverage bottles. The global company is one of
suppliers can meet their needs. Yet this process the key players in what is universally considered
sharing is selective at best: Invariably, most a commodity industry. Its immediate customer,
of the companies’ operational processes still EZ Printer, prints the labels and sells them to
remain closed to their partners. Best Beverage Co., a leading beverage maker.
As long as suppliers and customers keep Best Beverage, in turn, affixes the printed labels
most operational processes cordoned off from to its 12-ounce bottles in the course of produc-
each other, they will miss out on opportunities tion (Figure 1).
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3. The Craft of Co-Creation
reprinted from PRTM Insight, Q2 2011
Figure 1: Three Links in the Beverage Value Chain
(Supplier) (Intermediate Customer) (End Customer)
Texas Coater EZ Printer Best Bottler
Produces labels Prints labels Bottles beverages
Although it sits several steps from the end certain operational processes to the company’s
consumer, Texas Coater nonetheless plays a crit- customer and allow EZ Printer to do the same.
ical role in the final look and feel of the bottle— The idea was that this mutual sharing would
no small consideration given how ferociously enable new ways to interact and solve problems
beverage companies compete for shelf space in together to make margins attractive all around.
grocery stores. Equally important are the label Although some colleagues were worried internal
company’s production costs, since they greatly production data would be used against them,
influence the total cost of the finished product in Texas Coater gave the go-ahead—it was the only
a highly price-sensitive market. way to save the deal.
In a recent sales coup, Texas Coater secured
Setting Up Interaction Maps
an agreement from Best Beverage to switch
from paper to PSA labels—a superior laminate Texas Coater’s first step was to clarify its own
both functionally and aesthetically. EZ Printer, processes and interactions. A series of discus-
however, immediately threw up a roadblock: sions involving the marketing, sales, purchasing,
Given Best Beverage’s cost targets, the printer R&D, and production teams resulted in the
could not meet Texas Coater’s price demands creation of an interaction map that detailed
and still realize any profits. the firm’s performance objectives and metrics
Texas Coater prided itself on its internal around critical inter-functional interactions. For
“Six Sigma” process discipline and professional example, the main objective for purchasing was
approach to managing its accounts. Repeated to drive down raw material costs and for produc-
attempts to negotiate a viable solution with EZ tion to minimize coating costs, whereas R&D
Printer led to an impasse. A Six Sigma team sought to drive revenue through differentiation
tried to diagnose the problem from the Texas and marketing tried to create new sources of
Coater side but could demand. Arriving at an internal understanding
on what drove the behavior and experiences
As long as suppliers and find no way of improving
margins enough to make around key interactions was a valuable exercise in
customers keep most itself; most employees usually have only a general
operational processes the deal feasible. To break
the stalemate, a senior idea of how other functions and departments
cordoned off from each within their companies really work.
account manager at
other, they will miss out
Texas Coater suggested Texas Coater shared the interaction map
on opportunities for
co-creating a solution with EZ Printer. Since labels accounted for 70
innovation and value
with EZ Printer. This percent of the printer’s total cost, the company
creation. would involve opening up naturally pushed hard on Texas Coater’s prices.
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4. ARTICLE
But without a deep understanding of the other’s program to co-create a single integrated production
processes, each was still generating significant schedule that maximized the size of runs at both
charges for the other. facilities. Managers at the two companies esti-
mated that the program would reduce changeover
To shed more light on the subject, EZ
time by a factor of two (Figure 2).
Printer created its own interaction map. The
printing process, it turned out, was often forced The second engagement platform consisted
to come to a complete standstill because of of face-to-face dialogue between operators at the
imperfections in the way Texas Coater’s lami- Texas Coater and EZ Printer factories, which are
nate rolls were wound. The printer would also only 60 miles apart. This dialogue proved illu-
encounter delays during set-up periods if a minating on both sides. For example, EZ Printer
sufficient supply of laminates was not available operators explained how wrinkles in Texas
Coater’s large laminate rolls could create jams
for the next run.
in the high-speed printing presses, reducing
Making Co-Creation Operational with Engage- productivity and even creating a fire hazard.
ment Platforms The operators now provide constant feedback
on what they find while unwinding the rolls in
To solve these two problems, Texas Coater and front of the printing presses—input that allows
EZ Printer decided to create two engagement plat- coating operators to watch for defects in Texas
forms that would allow new interactions around Coater’s own production processes. The tech-
scheduling and prototyping. Essentially, they nical dialogue has been important, but equally
agreed to co-create these two processes. The first important is the empathy that has developed
engagement platform was a simple scheduling between the two production staffs.
Figure 2: The Challenges of Building a Better Bottle
Could not produce a distinctive-looking bottle at
BEST BOTTLER an affordable cost
Could not get reliable volume runs
Could not meet end customer specs at an
EZ PRINTER acceptable margin
Could not resolve manufacturing process problems
Could not sell new film with new capabilities to
printer at acceptable margins
TEXAS COATER
Could not intervene in process between EZ Printer
and Best Bottle
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5. The Craft of Co-Creation
reprinted from PRTM Insight, Q2 2011
In just six months, the Texas Coater and would order super-thin label stock from Texas
EZ Printer pilot went to full-scale production, Coater to minimize material costs. These
with both companies seeing significant gains in labels, however, would jam in Best Beverage’s
productivity and cost savings. The total cost of bottling production line, or they would produce
printed PSA labels dropped significantly. And visible wrinkles in the finished product’s label,
the Texas Coater Six Sigma team was a big help reducing productivity and sales for the beverage
in making this happen, now that the co-creation company. What was optimal for Texas Coater
effort had opened up new transparency between and EZ Printer was decidedly not optimal for
the two companies. Best Beverage.
Emboldened by their success, the companies It did not take much urging to convince Best
turned their attention to an even more ambitious Beverage that a more thorough understanding
co-creation effort. of its partners’ processes and their collective
interaction would help everyone. The beverage
Extending Co-Creation through the Value Chain company agreed to contribute to an extended
interaction map encompassing all three parties.
Texas Coater and EZ Printer had opened up
Best Beverage also used its sway to overcome
their processes to each other, but so far had not
legal concerns that could have
engaged their ultimate customer, Best Beverage,
torpedoed the co-creation In just six months,
beyond standard business practices. Yet bottle
effort. When in-house attor- the pilot went to
labels, and PSA labels in particular, are known
neys for Texas Coater and EZ full-scale production,
to have a major impact on beverage sales.
Printer attempted to claim all with both companies
PSA labels allow the use of more vivid colors
intellectual property for their seeing significant
than paper-and-glue labels. They even make it
own companies, Best Beverage gains in productivity
possible to do wraparound designs where the
orchestrated an agreement that
bottle appears engraved—a unique look that and cost savings.
preserved value for everyone.
differentiates the product from competing
This co-created legal accord gave each company
brands on the crowded store shelf.
the IP that was most valuable to it—each partner
The current process for designing labels retained the use of the engagement platforms,
was highly sequential and full of headaches for but was able to pitch them to its clients after a
all parties. Typically, the beverage manufacturer certain period of time.
would hire an ad agency to design the labels.
The key to making the new co-creation
Packaging engineers at the beverage company’s
effort work was a new engagement platform: a
bottling plant would translate the design into
prototyping tool that would allow joint design
a detailed specifications document. The specs of the label across all dimensions, including
would then be sent to EZ Printer for price quotes. aesthetics, material, fit, manufacturability,
This process was full of costly inefficiencies for and cost. Conceivably, the tool would promote
the printing company: The label design often kept a dialogue between the artistically inclined
changing long after the first set of specs had been designers and the cost- and process-driven
communicated, forcing the printer to repeatedly manufacturing people, allowing them to explore
develop new solutions and prototypes. the various options and trade-offs. Marketing
EZ Printer would pass on the pain. As and design staff could understand what features
co-creation discussions revealed, the printer created big problems for production (and test
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6. ARTICLE
minor design changes that could ease produc- Amplifying Results for All Parties
tion schedules), while the production staff at
As a result of these co-creation initiatives,
both Texas Coater and EZ Printer would be able
Texas Coater now provides its partners with
to turn around prototypes more quickly.
a dramatically differentiated experience. The
After developing a robust visualization tool, results have been impressive all around (Figure 3).
Texas Coater, EZ Printer, and Best Beverage After just two years, Texas Coater’s time to market
began co-creating label prototypes rather than for new labels has fallen 20 percent, production
handing off portions of the process sequen- volume has increased 50 percent, and profitability
tially. Today, using freehand designs from
as a percentage of sales has risen three points. EZ
marketing, the company is able to simulate the
Printer’s business with Best Beverage has grown
look and feel of the label on various bottle types,
25 percent. Best Beverage has seen time to market
provide the technical specs, and estimate the
for new labels drop six months to two, while
cost of manufacturing the label under various
uptime on the shop floor has increased from 86 to
production scenarios. There have been several
91 percent. And bottles with wrinkled labels have
new label launches using the new prototyping
become a thing of the past.
technology, and the meetings between the three
companies have yielded many new insights. The As a next step, the three companies are
label designers have learned a lot about manu- considering introducing consumer-designed
facturing constraints, and plant-floor people labels, which would open up a whole new set of
are able to suggest design changes that would possibilities. They are even discussing setting up
improve manufacturability of the label. remote monitoring of shop floor conditions, such
Figure 3: Benefits Times Three
COMPANY RESULTS
Better designs
Best Bottler Reduced breakdown time in manufacturing
Greater consumer involvement
Better laminated labels
EZ Printer Less scrap
Greater loyalty from Best Bottler
Faster label development time
Texas Coater Reduced number of reworks
Ability to capture new trends faster
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7. The Craft of Co-Creation
reprinted from PRTM Insight, Q2 2011
as temperature and speed—signifying a high 4. Give governance to co-creation. As you and
level of trust, indeed. your B2B partner(s) progress in co-creation,
establish a formal governance system for
Enterprise Co-Creation for the B2B Network the effort. This governance structure has to
straddle the boundaries of the companies
Texas Coater executives learned that, despite
involved—a new experience for business-
well defined and executed processes, perfor-
people accustomed to negotiating rather
mance may not be able to improve appreciably
than co-creating.
when these processes are closed to the outside.
How can you bring Texas Coater’s success to 5. Create engagement platforms. As early as
your own operations and those of your partners? possible in the co-creation process, start
Here are five practices to apply: developing a co-creation idea manage-
ment platform that allows stakeholders on
1. Be willing to take the first step. If you want
all sides to start suggesting new ideas and
to co-create, take the risk of making one or
avenues for co-creation. This platform will
more of your processes transparent to your
allow partner companies to expand the
business partner. This creates vulnerability,
scope of the co-creation effort wider and
but it’s the price you have to pay to initiate
wider, involving more and more strategic
co-creation. The good news is that B2B
interactions. Additionally, create targeted
customers nearly always reciprocate when
operational engagement platforms to enable
approached in this fashion.
specific working interactions that add value.
2. Co-create inside first. Make sure your
own people are ready for co-creation. In Strategic partnering of B2B firms doesn’t go
particular, make sure they know how to far enough in many cases. Customers increas-
describe their own functional interactions ingly want to be more involved in ensuring
and experiences in transparent fashion (this outcomes, while suppliers increasingly focus on
is known as the “glass house” method). end customer outcomes instead of functional
inputs. Meanwhile, today’s collaboration and
3. Use a common language and analytical
interaction technologies can help suppliers and
structure. Words such as experience,
customers engage in co-creation at scale. B2B
interaction, and engagement platform have
co-creation offers all parties willing to engage
specific meanings in a co-creation initia-
with one another a new way to win together.
tive. Also, co-creation business cases need to
quantify benefits for all parties involved, not
only one company.
For more information, please contact:
Francis Gouillart, President, ECC Partnership
fgouillart@eccpartnership.com, +1 978.369.4074
Mark Deck, PRTM Director
mdeck@prtm.com, +1 781.434.1200
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