Co-opting customer competence

Major business trends such as deregulation, globalization, technological co nvergence, and the rapid evolution of the Internet have transformed the rol es that companies play in their dealings with other companies. Business pra ctitioners and scholars talk about alliances, networks, and collaboration a mong companies. But managers and researchers have largely ignored the agent that is most dramatically transforming the industrial system as we know it : the consumer. In a market in which technology enabled consumers can now engage themselves in an active dialogue with manufacturers-a dialogue that customers can con trol - companies have to recognize that the customer is becoming a partner in creating value. In this article, authors C.K. Prahalad and Venkatram Ram aswamy demonstrate how the shifting role of the consumer affects the notion of it company's core competencies. Where previously, businesses learned to draw on the competencies and resources of their business partners and supp liers to compete effectively, they must now include consumers as part of th e extended enterprise, the authors say. Harnessing those customer competencies won't be easy. At a minimum, manager s must come to grips with four fundamental realities in co-opting customer competence: they have to engage their customers in an active, explicit, and ongoing dialogue; mobilize communities of customers; manage customer diver sity; and engage customers in cocreating personalized experiences. Companies will also need to revise some of the traditional mechanisms of th e marketplace - pricing and billing systems, for instance-to account for th eir customers' new role.