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Strategy & Leadership

Co‐creating value through customers' experiences: the Nike case


Venkat Ramaswamy
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Venkat Ramaswamy, (2008),"Co#creating value through customers' experiences: the Nike case", Strategy & Leadership, Vol. 36 Iss 5 pp.
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Co-creating value through customers’
experiences: the Nike case
Venkat Ramaswamy
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Venkat Ramaswamy, the ustomers need no longer be mere passive recipients of value propositions offered
co-author (with C.K.
Prahalad) of The Future of
Competition: Co-creating
C by firms. They are now informed, connected, networked, and empowered on a scale
as never before, thanks to search engines and engagement platforms like Google,
the growth of Internet-based interest groups, and widespread high-bandwidth
Unique Value with communication and social interaction technologies. Customers have learned how to use
Customers (Harvard
these new tools to make their opinions and ideas heard, and involve themselves in the value
Business Press, 2004), is a
creation process. Seeing opportunity in this new environment, leading firms are responding
Hallman Fellow and
by engaging their customers in the co-creation of value. In the process they are inventing
Professor of Marketing at
new competencies and business practices.
the Ross School of
Business, University of The innovation and marketing processes of one such company, Nike, provide a glimpse of
Michigan (venkatr@ the next ‘‘best practices’’ of value co-creation with customers. The source of new
umich.edu). His current competitive advantage and the seeds for a firm’s future profitable growth lie in the strategic
book project (with Francis capital it can build by continuously interacting with its customers through engagement
Gouillart) has the working platforms, especially those centered on customer experiences. This new strategic capital is
title Co-creating Strategy: the accumulated knowledge and skills continuously garnered by the firm through
Building a Co-creative interactions with customers. These interactions strengthen a firm’s capacity to use global
Organization to Generate network resources and thematic communities to continuously identify and act upon new
New Strategic Capital innovation and value creation opportunities. In sum, leading firms are learning how to sustain
through Valuable competitive advantage by co-creating experiences of value with customers.
Engagement Experiences.
As shown in the center of Exhibit 1, co-creative interactions are an emerging strategy for
value creation. By engaging with informed, connected, and networked customers around
the globe, the shoe company Nike has found a new source of value. Whether as ‘‘single
individuals,’’ or as members of global thematic communities, customers or other
stakeholders now can and want to be involved with Nike in shaping outcomes of value.
They do this by sharing their interactions and experiences – these range from their ideas
about how to improve or customize products to their feelings when they use products.

The Nike case


During the 2006 World Cup, in partnership with Google, Nike set up a social networking site,
Joga.com, that invited individuals to film their soccer skills, upload the videos that
showcased their talent, and then have the network community comment on, rate and share
the user-generated content. The community was the judge of a winner every month.
Joga.com invited individuals to create their own profiles and socially network with others.
Joga.com was in effect a thematic community that enabled individuals to share personal and
collective soccer experiences. With over one million fans participating in this innovative
brand building effort, Nike had a unique opportunity to learn directly from its customers.
Joga.com, however, was not an isolated Internet marketing initiative. Nike sponsored street
soccer competitions, created a web site that connected professional players with their fans,
and also sponsored conventional Internet marketing programs. A Nike video of Ronaldinho,

DOI 10.1108/10878570810902068 VOL. 36 NO. 5 2008, pp. 9-14, Q Emerald Group Publishing Limited, ISSN 1087-8572 j STRATEGY & LEADERSHIP j PAGE 9
Exhibit 1 Co-creating value through experiences
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the world-famous Brazilian striker, was downloaded over 32 million times. In addition, on the
‘‘Nike ID’’ web site, the firm invited twenty purveyors of sneaker culture to compete in
designing a new shoe for Nike. The firm structured the competition as if it were a reality show
and then asked the Nike Internet community to vote on the best design. Besides these
designs and Nike’s original new designs for the season, fans could go on the Nike ID site to
personalize their own shoes from various styles and colors, including putting the flags of the
countries they wanted to support on their shoes. Nike provided software tools for local
soccer teams and professional leagues to co-design and customize the soccer shoe.
Through these many initiatives, Nike is connecting with millions of soccer fans around the
globe. The strategic opportunity for Nike is to build and promote the use of Internet
engagement platforms through which the firm can establish customer relationships on a
scale and scope as never before. Effectively managing these new initiatives initially posed a
new challenge for Nike, a traditionally product-centric organization. The company soon
recognized that competition for advantage in the sneaker market had shifted to creating
value through experiences.
Charlie Denson, president of the Nike brand, says the market reaction to these initiatives
helped persuade the company to translate Joga.com into a sustained effort to develop
customer relationships, something the company had failed to do in the past. ‘‘When the
World Cup was over, the Nike brand teams who had built that whole platform moved on to the
next thing.’’ And Denson thought, ‘‘Whoa, whoa, whoa, you just dropped the keys to the
kingdom in the moat.’’[1] To Nike’s credit, it is now proactively working on building a strategic
architecture to ‘‘connect the dots’’ between Joga.com, its retail network and Nike ID, all
centered on the soccer experience. As Stefan Olander, the company’s director of digital
content notes, ‘‘In the past, the product was the end point of the consumer experience. Now
it is the starting point.’’
In the Nike soccer example, Nike can generate and refine new ideas rapidly, accumulate
learning about what customers want and don’t want and how they want to engage. Plus, Nike
can tap into the collective creativity of its customer base. As it engages with its community of
customers Nike can build its brand in unique ways. For example, Nike’s customers gain
experiences of value to them through their participation and influence in the design process,
by being a part of creating the product/service offering, by socially networking with people
who share like-minded passion for the sport, and by reducing their risk of dissatisfaction.
The positive word of mouth from the community can reduce new product-service failure and
misalignment with the market and accelerate and enhance market acceptance. Nike has
started to move rapidly in this direction across its other businesses as well.

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PAGE 10 STRATEGY & LEADERSHIP VOL. 36 NO. 5 2008
The DART guidelines for co-creating value with customers
From the firm’s perspective, co-creating value with customers involves rapid and continuous
learning by the firm from interactions with them about how they relate to the options and
features that the firm has on offer and how those offerings might be of more value to
customers. Taking this idea one step further, the Experience Co-Creation (ECC) process
involves enabling co-creative interactions so that individuals can have meaningful and
compelling engagement experiences. Either process requires some management
guidelines based on enlightened self-interest.
To illustrate how an EEC initiative works in practice, consider the running shoe business of
Nike. In May 2006, Nike launched the Nike þ (NikePlus) platform, a collaboration between
Nike and Apple, consisting of an Apple iPod music player, a wireless device to connect the
music player to running shoes, a pair of Nike shoes with a special pocket to accept the
wireless device, and membership in the iTunes and Nike þ online communities (itunes.com
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and nikeplus.com). The Nike þ co-creation platform capitalizes on the connection between
running and music. The combination of innovative, mobile technology, online communities
and athletic gear expands the field for co-creation.
To manage the co-creation of value process in this market Nike uses guidelines based on the
DART Model – dialogue, access, risk-return and transparency – to establish best practices
(see Exhibit 2). At Nike, these guidelines set the stage for high quality co-creative
interactions between individuals (runners); groups (teams of runners, running clubs); and
organizations (Nike and Apple).[2]
Dialogue. The DART co-creation model is designed to foster meaningful dialogue, for
example, between the customer and the company. The Nike þ system encourages
meaningful dialogues:
B Between the runner and Nike.
B Between the runner/listener and Apple.
B Among runners.
B Between runners and running experts.
Runners can engage in nearly real-time conversations online. Groups of runners can
challenge one another and friends can cheer on each other as they make progress toward
their goals and resolutions.

Exhibit 2 The DART model

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VOL. 36 NO. 5 2008 STRATEGY & LEADERSHIP PAGE 11
‘‘ Nike soon recognized that competition for advantage in the
sneaker market had shifted to creating value through
experiences. ’’

Access. In order to foster such a complex dialogue, a company must provide its customers
with access to each other and to company listeners. In the case of Nike þ , access is
provided by the iPod Nano/Sport Kit device and by the Nike þ web site.
Risk-return relationship. This guideline considers how to manage the risk/benefit proposition
for both the customer and for the company. For example, Nike þ enhances the economic
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value of participation for runners by reducing their personal risk of injury. Many
conversations on Nike þ are about proper training methods to avoid getting hurt: why
over-training is dangerous, how to monitor your heartbeat; or whether you should limit your
running because of certain recent surgeries. From the firm’s perspective, Nike’s main risk is
losing the relationship with the runner. Nike þ lowers the risk of losing customers because
runners are interacting with the products and the web site frequently, sharing personal
results and soliciting and receiving feedback.
Transparency. The fourth guideline of the DART model of co-creation of value is
transparency, in other words, shared information. Nike believes that runners need more
insight into how they should train, what routes they should run, or what shoes might be best
for their needs. Nike þ offers a wide range of information. By logging into the Nike þ web
site, runners can find out which routes are most popular, what distances and paces others
are achieving, and how their progress compares. From the company’s standpoint, Nike þ
allows Nike to know a lot about the individual runner. Many dedicated runners now record
every run they make, their goals, the courses they run, the partners they run with, and,
through the web site blogs and discussions, their personal concerns and feelings about
running. This input provides Nike with a goldmine of ideas for potential innovations.
By using the DART model to assess the effectiveness of interactions, firms can co-create
mutual value continuously, even in existing engagement spaces. For example, runners using
the Nike þ system have access to a host of new experiences: they can integrate two
passions, music and running; they can track runs with unparalleled precision; and they can
take part in an active, new social network. Nike þ enhances runners’ enjoyment of the sport
and increases their motivation. For Nike, the learning from these customer interactions
creates new strategic capital. The company can now learn directly from the behavior of its
customers, both from mining the data and from customers’ direct input on their preferences.
Nike can build relationships and trust with the Nike þ community and experiment with new
offerings, all the while enhancing its brand.
Nike þ also generates economic value outcomes for both parties. For the customer, there is
a reduced cost of training and enhanced productivity when seeking to improve running
performance. For the company, there is a reduced risk of customer dissatisfaction and
reduced costs of marketing (through positive word-of-mouth advertising). These value
outcomes and others from the Nike þ co-creation platform can be displayed in an ‘‘X Map of
co-created value’’ see Exhibit 3.

New sources of competitive advantage


For many companies, as products and services become commoditized, as the forces of
globalization and outsourcing flatten competitive playing fields, and as activity chains
fragment, conventional value chain based sources of competitive advantage are eroding.
Seeking new sources of competitive advantage, smart firms now recognize that customers
are a source of competence which they can tap into.
As in the Nike soccer and running examples, the components of value creation now entail
global resource networks of partnering firms and suppliers as well as communities of

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PAGE 12 STRATEGY & LEADERSHIP VOL. 36 NO. 5 2008
Exhibit 3 X-map of co-created value: NikePlus
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individuals (customers) outside the firm. To grow in this environment companies must have
the competence to manage and influence large numbers of collaborators – including skilled
individuals, communities of customers, and many varieties of stakeholders around the
globe. This de-centering and democratization of the process of value creation is spreading
into many industries.
As shown in Exhibit 4, there is a fundamental shift in the basis and process of value creation
– from products and services towards experience co-creation platforms, and from a
unilateral value creation process by the firm to co-creation with individuals, in short

Exhibit 4 Transformation of strategy: new sources of competitive advantage

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VOL. 36 NO. 5 2008 STRATEGY & LEADERSHIP PAGE 13
Experience Co-Creation. In sum, ECC is about firms jointly creating value, through
co-creative interactions anywhere in the business system that generate experiences of value
to customers and strategic capital of value to firms.

Notes
1. Global Brands – Financial Times Special Report, April 23, 2007.

2. The DART Model was originally developed by C.K. Prahalad and Venkat Ramaswamy (2004), and
enhanced further to show how it can be leveraged to make engagement platforms co-creative and
generate co-created value outcomes by Venkat Ramaswamy and Francis Gouillart (2009).

Corresponding author
Venkat Ramaswamy can be contacted at: venkatr@umich.edu
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PAGE 14 STRATEGY & LEADERSHIP VOL. 36 NO. 5 2008
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