Why has co-construction become a must?

In a globalized and highly competitive economic environment, to stay competitive companies have no other choice but to open up to unprecedented, partnership dynamics. Three experts share their point of view.
Published in the dossier of July 2016

Why is the logic of co-construction becoming increasingly essential? In your opinion, what are the social and economic trends that are pushing the emergence of this logic?

Laurent Auguste, Veolia Executive Vice President, Innovation & Markets

The heightened levels of complexity in terms of economic development call for an unprecedented convergenced and combination of skills, which lead to more comprehensive solutions.

Laurent Auguste: The world has entered a new stage in terms of economic development, which reveals the systemic nature of our models and requires us to cope with heightened levels of complexity. These call for an unprecedented convergence and combination of skills, which lead to more comprehensive solutions. The tensions on resources reveal their interconnection. For example, the improved use of mining resources reduces water and energy consumption and also allows the materials extracted to be repurposed more effectively. Likewise, new interfaces are appearing between the players in the same area: in some instances, cities and industries find themselves competing for the use of resources, especially water. More positively, new opportunities are arising: one person’s waste becomes another person’s resources. These interconnections and conflicts of use imply greater collaboration in order to manage increasingly scarce shared resources — such as water and rare earths. Collaboration not only between companies, who will have to move beyond their usual scope of action, but also between companies, local regions and civil society. Efficient recycling implies taking product design and lifecycle into account. This enables, for example, interaction between the recycler, the designer, and possibly the local authority that organizes the waste collection. The sharing economy also makes it possible to invent new collaborations between different local players.

Arnaud Mourot: It’s true; there is no longer a single societal problem that can be solved nowadays by just one group of players, public authorities, business or civil society. On the contrary, combining everyone’s strengths — social entrepreneurs’ innovation and agility, companies’ clout and international networks, and public authorities’ ability to coordinate and provide a framework — offers possibilities of action greater than the sum of the parts. However, beyond the macroeconomic level, co-construction also has its own benefits: it allows mutual learning and is a source of innovation through the meeting of different languages and cultures.

Megan Beck: I think in this discussion we should not forget the importance of digital technology, which is in my view the key driver of the shift to co-construction between organizations and their networks, although there are social and cultural developments that are happening in parallel, also driven by this shift. Digital technology has decreased the transaction costs of sourcing, communication and collaboration. With lower transaction costs, it is much easier to find the right resources, communicate with them, identify what they have to offer you, and work with them. 

“One person’s waste becomes another person’s resources. These interconnections and conflicts of use imply greater collaboration in order to manage increasingly scarce shared resources.” Laurent Auguste 
 

In concrete terms, what forms will this logic of co- construction take?

Megan Beck, Associate, OpenMatters

Digital technology is the key driver of the shift to co-construction between organizations and their networks.

Megan Beck: When it comes to what is co-constructed between companies and external elements, we usually consider four different types of assets that can be created or shared: things, services, ideas, and relationships. Co-construction around physical things could include a company inviting its suppliers or customers to collaborate on the design or manufacturing of a new product. Co-construction on services is similar, where the external network participants can provide input, or even offer the services themselves, such as Uber. Co-construction based on ideas often happens on forums and review websites, such as Yelp or TripAdvisor, but can also take a more technical or specialized form, where companies seek new intellectual property from external sources. Finally, co-construction on relationships is a construct where the company leverages the relationships of its network.

Laurent Auguste: When it comes to co-construction, a wide variety of possible partners exists, and several of them are very often needed on the same project. For example, we have a global partnership with Danone to help them meet their environmental targets. In addition to this alliance, we wanted to establish another partnership that brings together different players: the Livelihoods initiative, in which we are involved alongside Danone, Mars and Firmenich, to support sustainable farming, water management and soil preservation, in partnership with NGOs. Another example is our partnership with the insurer Swiss Re on the question of urban resilience, particularly flood management. Our expertise in managing rainwater harvesting infrastructure complements Swiss Re’s expertise in calculating the economic impact of these events, as well as forecasting how it might evolve. Together, we have the possibility of serving as a bridge between the private sphere, which carries most of the economic risk, and cities that control the infrastructure, to optimize the search for solutions.

Arnaud Mourot: I would add that while the legal status can vary endlessly, the important thing is to establish a sincere peer-to-peer exchange, putting the company, the social entrepreneur or the other partners on an equal footing, even if there are major differences in size. Co-creation is not the same as a joint venture, consulting or subcontracting; it’s a really strategic way of innovating — especially in areas where conventional business models don’t work. Veolia is more than capable of providing water to people able to pay for it in developed countries, for example. But when it comes to extremely remote areas without traditional networks, with precarious populations who are unable to pay in the same way, social entrepreneurs’ detailed knowledge of these populations is irreplaceable. Incidentally, this is also true of populations below the poverty line in France. 

“Another good opportunity for co-creation occurs when the organization needs to be responsive to a rapidly adapting situation. For example, as vacation spots become more and less popular, Airbnb’s host network will act in its own best interest and provide more or fewer properties.” Megan Beck 
 

Is there something that you would like to underline among the many and varied possible facets of co-construction?

Megan Beck: Obviously, I am particularly interested in the potential of networks. Companies can use co-creation to increase intimacy and affinity with key external networks, whether customers, suppliers or communities. In these cases, the content of the co-creation will depend on the interest and expertise of the network. Another good opportunity for co-creation occurs when the organization needs to be responsive to a rapidly adapting situation. For example, as vacation spots become more and less popular, Airbnb’s host network will act in its own best interest and provide more or fewer properties. Network co-construction is a great way to deal with complex problems.. 

Arnaud Mourot, CEO Ashoka Europe

Arnaud Mourot

There is no longer a single societal problem that can be solved nowadays by just a group of players, public authorities, business or civil society.

Laurent Auguste: From my point of view, I would highlight the responsibility of the private sector in initiating these new dynamics. An example of this private-private collaborative dynamic is the alliance formed between IBM and Veolia to come up with new solutions to make cities smarter. Companies must link up with local authorities and other local players, motivated by several driving factors, including competition. Innovative and proactive, they are able to transform themselves rapidly, share and connect experiences on a global level.

Arnaud Mourot: I would like to stress the importance that we afford the local level at Ashoka. When we identify a problem to be solved, we try to create an ecosystem, a local coalition to come up with solutions together that none of the players would have been able to find on their own. And it’s about finding the right balance, the right tension within this network of complementary players, so that they can get on well and work together despite partly divergent interests, which can especially be achieved on a local level.  

“Co-construction also has its own benefits: it allows mutual learning and is a source of innovation through the meeting of different languages and cultures.” Arnaud Mourot 
 

Don’t you think that the partnership rationales involved in co-construction may present risks for companies (loss of know-how, for instance)?

Megan Beck: There are certainly risks to co-construction for a company. Loss of control and brand risk are two factors that make many leaders wary of creating slightly more permeable boundaries around their organizations and allowing external players, whether contractors or customers, to play key roles. However, there are benefits that can only be achieved through co-construction. Given the enormous complexity of organizations today, with proliferating product lines, divisions, geographies and more, a top-down, command and control style of leadership simply will not work. With digital technology rapidly advancing and providing many ways for companies and individuals to interact and co-construct, there is an option for every company.

Arnaud Mourot: In my opinion, the greatest risk is not being sincere about what you are doing. For if your fundamental aim is to enhance your image and engage in social washing, you will inevitably be found out in the end and it will come back to hit you in the face. This is, of course, true for all partners, companies, local authorities, NGOs or social entrepreneurs. Whereas if you act authentically, in the worst-case scenario, if you fail you will have lost a little time and money, but even so you will have learned a lot from different people, unusual environments and unknown models.

Laurent Auguste: In the light of the major changes underway, the primary risk is... to stick with past models and be unable to evolve. Of course, you have to maintain a measured approach, protect your intellectual property and remember that perhaps you won’t win every time. However, the world is now in movement, the ball is rolling, and we cannot continue to act as if resources were unlimited and we were in yesterday’s world. To bring about a paradigm shift, we have to open up, invent new models, and ambitiously try things out with a view to creating value in a powerful new way.