Innovating with Experience Co-Creation for Blue Oceans

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Innovation truly matters. When done well - by radically simplifying and maximizing value for the customer - it leads to Blue Oceans, as we learned in Part I of Francis Gouillart's discussion, Innovating with Blue Ocean Strategy and Experience Co-Creation.

This next part in Gouillart's presentation focuses on Experience Co-Creation - or involving the customer in defining or creating the value to focus on, first from a strategic perspective, and then at the process level.

Progressive Insurance is both the lowest cost and fastest growing US insurance company, ahead of GEICO and Mercury Auto Insurance. Progressive's success results from creating unique customer experiences. In thinking carefully about which elements of the car insurance experience to focus on and re-design, it identified 4 'experience environments' to reinvent:
- the accident site experience
- the "repair/claims settlement" experience
- the "getting an on-line quote" experience
- the "share my driving habits" experience

Accident Site Experience
Progressive first created a Blue Ocean around the accident site experience by sending its immediate response vehicles complete with adjuster to the accident scene. Not only did a branded Progressive vehicle make a strong visual splash at the scene, but the adjuster was prepared to settle accident claims at the accident site thereby eliminating [or at least minimizing ] the accident 'hassle-factor'.

In the process, Progressive generated value not only for the consumer, but also for itself. And, since each accident is unique, elements of co-creation were taking place in that value creation.

From Progressive's perspective, its presence at accident sites helped prevent fraud schemes. It learned what truly matters to customers after an accident and reduced loss payments by not having to involve doctors or lawyers in the settlement process.

The customer appreciated that hassles were reduced at the distressful accident scene [noteworthy particularly from an industry that tends to create hassle rather than eliminate it]. Progressive acted more like a friend [showing up in person] than a faceless organization and quickly took care of details. It also decreased accident costs by not forcing the customer to call a doctor or lawyer and creating an environment of trust and transparency around the settlement.

NOTE: the notions of trust, fairness, transparency play a big role in successful co-creation.

Repair/claims settlement experience
Progressive further innovated the repair/claims settlement experience through a breakthrough concept called concierge service. Customers could now entrust repairs and claims settlement entirely to Progressive via an easy and transparent concierge level of claims service that involved the customer in creating the solution to fix the damage.

This, again, captured value for both parties. For Progressive, it learned about customers' preferences during the claims settlement process, helping them manage a strong network of repair shops and health care providers. It reduced repair cost overruns by not having to absorb unexpected surprises often revealed during repairs. For the customer, not only did Progressive create an easy and transparent repair process, but it let the customer be in control. Progressive acted as an advocate within the repair network without forcing the customer to accept a second rate solution. The result: approx. 90% customer satisfaction ratings.

Getting an on-line quote experience
Progressive encouraged customers to get on-line quotes and compare them to competitor prices under 'Progressive Direct'. This generated more engagement between the user and Progressive, more comparisons and more exploration of options -- definite co-creation. For those who might shy away from this, look at your own behavior. Don't you comparison shop? And those sites or stores that help you comparison shop, don't you remember them and talk about them and probably buy from them? [It also reminds me of the cafeteria approach to building individual health care benefits plans to help control costs.]

Once again, both parties benefited. Progressive gained a broader perspective on the marketplace, understanding better how quotes trigger action. It learned when it won vs. lost so it could modify offerings and improve close rates. It also tapped into a larger pool of applicants, allowing it to better select risk better and lower loss ratios [i.e., risk profiling]. This dramatically decreased the cost of market research and of attracting new customers [i.e., less switching and more word-of-mouth endorsements]. The customer saved considerable time by getting direct quotes online, easily comparing other options, and not over-paying out of ignorance.

Drive Insurance
For those customers who preferred to purchase their insurance through agents, Progressive also offered an improved experience, benefiting all three parties. Not only did it reduce its own costs in interacting with agents, but it also those of agents through Drive Advantage. Customers appreciated that they could choose which channel to obtain insurance from.

Through Drive Advantage, Progressive attracted better agents; it gained better market and customer behavior knowledge. Progressive reduced processing costs because agents enrolled in Drive Advantage used Progressive's technology tools. What a way to create a competitive advantage!

On the customer side, Progressive willingly accommodated customer preferences and ensured that, whichever the choice, quality remained at the forefront. Any additional costs represented peace-of-mind and time savings for the customer.

Share my driving habits experience
The latest innovation allowed Progressive policyholders to collect and share data on their driving habits TripSense to qualify for a discount at renewal time. The customer completely controlled the process. TripSense may track the data, but the customer reviewed it and decided whether to share it.

Interestingly, through TripSense, Progressive had the beginnings of community. For parents worried about their children, the tool generated data to coach them into becoming better drivers. Good drivers were rewarded through a discount [i.e., greater fairness in pricing], while Progressive reduced its claim losses.

The data was priceless. Having access to detailed driving records allowed the company to better understand what drove accident and claim costs, how to improve underwriting and pricing criteria, and how to reduce overall claims cost by understanding driver habits and increasing the likelihood of attracting better drivers.

As you can see from the value curve to the left, Progressive created an amazing win/win proposition through economic co-creation.

Cost and risk became extremely low for Progressive. This included:
- the cost of attracting quotes
- the cost of processing applications thru agents
- the cost of claims settlement thru claims concierge
- reducing losses thru TripSense

For the customer, the 'experiences of value' rose dramatically [and remember, this is insurance]:
- the ease of getting online quotes, and the reassurance that quotes are fair
- the ease of applying thru an agent
- a sense of control in the repair and claims settlement process
- an increased sense of fairness and control thru TripSense

Experience co-creation at a strategic level was not only powerful in delivering value to the customer and generating intense loyalty, but also delivered a deep Blue Ocean.

Let's take it to a different level. Co-creating a new experience at the PROCESS level is also powerful as the following examples illustrate especially in gaining market insight and building communities.

For those of you who might not yet fully appreciate the Blue Ocean possibilities of web 2.0 and social media, this is a big deal. Here's why: web 2.0 allows for community building -- think Harley-Davidson HOG groups or Apple and iPod users where like-minded people come together around a topic they are equally passionate about. Together they come up with better solutions; they form alliances around their common interests; they trust one another and engage in word-of-mouth referrals; they influence one another's purchases..... [See Blogs Are Not Social Media for additional perspective.]

Gaining Market Insight:
The most powerful example of how co-creation leads to powerful market insights come from Dell and its abysmal fall into Dell Hell created by its terrible customer service record. Jeff Jarvis' BuzzMachine brought it to people's attention and -eventually- to Dell's. Their initial reaction was denial, then anger, and finally acceptance. Dell has created its own blog to address consumer issues [Direct2Dell] and engaged in robust interaction with its consumers, learning a great deal about the marketplace in the process.

Another example comes from Starwood Hotels and its aloft hotel in Second Life where it invites Second Life residents to participate in the design of the hotel. This represents an extremely different approach to conducting market research. Although a test concept, Aloft - when it opens in real or first life - will be the product of co-creation.

Building Communities:
In terms of building communities, Gouillart brought up TripAdvisor. It's the largest online travel community. It's totally transparent, offering real traveler perspectives on hotels. Photos, comments, experiences provide a check on otherwise lofty and unrealistic marketing materials. Feedback occurs instantaneously. It's totally authentic because the community believes so strongly in the value that it provides through truthful reviews.

Another example consists of a 'different kind of travel agency'- ClubTourism which co-creates events and trips. Established in 2004 primarily with on older Japanese populations [particularly women] in mind, it now numbers 7.6 million members. It differs from traditional travel agencies in that it focuses not only on the trip, but also on the before and after. In so doing, it creates clubs with a 'travel friends circle' feature and has led to the propagation of additional clubs.

Having examined how experience co-creation leads to Blue Oceans, it's important to realize that customer value is defined by experiences and not by products and services. The products and services may be important, but what truly matters is the experience we deliver to our customers as they consider the product and service options we offer.

Further, the experience customers have comes from the interactions with us, not from our processes. The beauty of interactions is that they require co-creation, by their very nature. Because each interaction is unique, it cannot be staged or made predictable. However, our processes set the stage for the interaction and for experience co-creation.

So, to start on this journey, consider opening up ONE customer facing process [e.g., call center, sales process, design, ...] to co-creation, and then the rest will follow.

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