Co-creation of Social Value

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Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448

Available online at www.sciencedirect.com

1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license

(http://creativecommons.org/licenses/by-nc-nd/4.0/ ).Peer-review under responsibility of the scientific committee of XVIII Annual International Conference of the Society of Operations

Management (SOM-14).

doi:10.1016/j.sbspro.2015.03.198

ScienceDirect

XVIII Annual International Conference of the Society of Operations Management (SOM-14)

Co-creation of social value through integration of stakeholders

Amit Kumar Agrawala,*, Arun Kumar Kaushik b, Zillur Rahmanc a, b Research Scholar, Department of Management Studies, Indian Institute of Tehnology, Roorkee (247667), Indiac Associate Professor, Department of Management Studies, Indian Institute of Tehnology, Roorkee (247667), India

Abstract

Co-creation of value has emerged as the most recent and dynamic phenomenon in management literature. Resource integrators asactors (customers, suppliers, intermediaries) are at the helm of every value co-creation process, nesting it in the social context.Thus, the value emerging from co-creation is social in nature. The purpose of our study is to define how stakeholders are creatingsocial value in co-creation for themselves and other customers. Considering the case study of Rastriya Swasthya Bima Yojna(RSBY), we would be discussing how the engagement of various stakeholders led to the evolution of social value for all thestakeholders involved in value co-creation. The study primarily focuses on social value through co-creation. Thus, other outcomeshave been purposely left out which is a major limitation of this study.

© 2015 The Authors. Published by Elsevier Ltd.Peer-review under responsibility of the scientific committee of XVIII Annual International Conference of the Society ofOperations Management (SOM-14).

Keywords: Value co-creation; customer engagement; social value; network

1. Introduction

Multidimensional aspects of value and complexities surrounding its nature have long been attracting the attentionof management scholars across the world. Holbrook (1996) defined value as an “interactive relativistic preferential

experience”. The concept of value has also evolved over time - from functional or utilitarian, to perceived value, valuefor customer, value chain concept, relationship value, superior value and recently co-created value. Such is theimportance of value that Marketing Science Institute (MSI) has included it in top research priorities for the years 2010-12, and 2012-14 (MSI 2012; 2014).

*Corresponding author. Tel. +918954167407. E-mail address: [email protected]

© 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license(http://creativecommons.org/licenses/by-nc-nd/4.0/ ).Peer-review under responsibility of the scientific committee of XVIII Annual International Conference of the Society ofOperations Management (SOM-14).

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443 Amit Kumar Agrawal et al. / Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448

The most important development in the concept of value over time has been the realization that value to thecustomer is not the exchange value, i.e. products or services they received through the transaction; actual value isvalue in-use or experiences undergone through the use of the product or service. Products or services received by thecustomer signify only the attribute satisfaction whereas the experiences undergone through the use of the productssymbolise goal satisfaction (Wodruff, 1997). Emergence of service dominant (SD) logic has reinstated that firm ismerely the facilitator of value proposition and it is the customer who co-creates value (Vargo and Lusch, 2004; 2007).It is also proposed in SD logic that “all social and economic actors are resource integrators” (Vargo and Lusch, 2007

p.7). These two propositions bring to the front the role of customers and other stakeholders in the co-creation of value.Every value co-creation process is nested in social context with interaction and dialog as building blocks (Gummesson,2004; Edvardsson et al., 2011). So whenever value co-creation is discussed, it should be appreciated in a social contextwhere a large number of actors such as firms, suppliers and customers are present in the system. Network andconfiguration of multiple actors play the most important role in reshaping and developing value.

The present paper deals with how involvement of various stakeholders in co-creation can lead to the developmentof social value. We would specifically be presenting the roles of various actors in value co-creation through the caseof Rashtriya Swathya Bima Yojna, an innovative health insurance scheme ran by the Indian government to help poor

people avail health facilities. Various stakeholder involved in co-creation were Government of India (GOI), doctors,insurance companies, patients and society as a whole. We would shed light on how society benefits when variousstakeholders come together and interact, and how social value is achieved in the form of improved health and bettersociety.

The paper is structured as follows: First section discusses value co-creation followed by the second section presenting the roles of various stakeholders. Finally, we consider the case of the rural health insurance scheme toexhibit how value is co-created by stakeholders through an innovative scheme, thus leading to the benefit of society.

2. Literature review

2.1. Value co-creation

Creating, communicating and delivering value are identified as primary activities of any firm. Value is defined asthe “capacity of goods, services or activity to satisfy a need or provide a benefit to a person or legal entity” (Haksever

et al 2004, p.292). While existing studies on value creation have addressed added value, value chain analysis, superiorvalue, perceived value, relationship value, stake holder value and value in-use, studies on value creation and co-

creation are still fragmented (Payne and Holt 2001; Wodruff 1997; Sánchez-Fernández and Iniesta-Bonillo, 2007).Various perspectives have been considered by authors to study value co-creation. Different perspectives outlined

are: management perspective (Prahalad and Ramaswamy 2000, 2004; Etgar 2008: Nambisan and Baron 2008; Payneet al. 2008), marketing perspective (Prahalad and Ramaswamy 2004; Payne et al. 2008; Cova and Dalli 2009;Gummesson, 2004; Grönroos and Ravald, 2011), service logic and service dominant logic(Vargo and Lusch 2004;Edvardsson et al. 2011; Vargo 2008), design logic (Nenonen and Storbacka 2010; Kohler et al., 2011), innovation andnew product development perspective (Kaushik and Rahman 2014; Prahalad and Ramaswamy 2003; Sawhney et al.2005; O’Hern and Rindfleisch 2010).

Various definitions of value co-creation have been discussed in management literature with perspectives frommarketing, service, interaction, design, innovation and NPD. Kambil et al. (1996) were the first to coin the term ‘value

co-creation’ for emphasizing the role of customers in business strategy and marketing, but the term was popularized

and disseminated by Prahalad and Ramaswamy (2000; 2004) who conceptualized value co-creation as the “co-creation

of personalized experiences with the customers”. Instead of focusing only on the offering, organizations shouldemphasize on experience creation as the basis of value co-creation at multiple points of exchange. Table 1 presentsvarious definitions of value co-creation as given by different authors.




Table 1. Various definitions of value co-creation

Authors Value co-creation

Grönroos andVoima (2013)

“[…] refers to customers’ creation of value-in-use where co-creation is a function of interaction.”

Roser et al. (2013 p.23)

“[…] an interactive, creative and social process between stakeholders that is initiated by the firm at different stages ofthe value creation process”.

Ind and Coates(2013 p.92)

“[…] as a process that provides an opportunity for on-going interaction, where the organization is willing to share itsworld with external stakeholders and can generate in return the insight that can b e derived from their engagement”.

Gronroos (2012 p.1523)

“[…] is a joint collaborative activity by parties involved in direct interactions, aiming to contribute to the value that

emerges for one or both parties”.

Edvardsson etal.(2011 p.327)

“[...] is shaped by social forces, is reproduced in social structures, and can be asymmetric for the actors involved”.

Xie et al.(2008) “[…] Prosumption as value creation activities undertaken by the consumer that result in the production of productsthey eventually consume and that become their consumption experiences”.

Payne et al. (2008 p.84)

“[…] process involves the supplier creating superior value propositions, with customers determining value when a

good or service is consumed”.

The definitions in the table 1 reflect some of the attempts to conceptualize value co-creation. Our conceptualizationof value co-creation is that of creation and delivery of richer experiences to stakeholders as a part of the process alongwith tangible outcomes, for instance, in the case study considered in this paper, availing of health care facilities bystakeholders.

Most of the research on value co-creation has been done either with business to consumer, or consumer to business perspective; the stakeholder approach has recently been adopted in value co-creation studies. Thus, involvement ofstak eholders in co-creation of value remained in nascent stages. Stakeholder involvement in value co-creation startedgetting attention of researchers only when network study and role of various other actors came to light.

2.2. Role of stakeholders

Earlier studies on value creation concentrated on the customer as a focal point. Customer importance in valuecreation gained prominence with the concept of quality improvement and productivity gains (Ziethmal, 1998).

Customer as a resource was considered key to achieving competitive advantage because of the free labour the customer provided. Later, various researchers spoke for customer integration in the firm’s value chain through expansion of

organizational boundaries. Customers later came to be considered human resources which were to be managed by thefirm to increase efficiency and effectiveness. Also, the role of customers in service settings and creating value startedgaining importance.

Normann and Remirez (1993) proposed that value started becoming denser in nature when actors started movingfrom their pre-defined roles in the network towards newer and dynamic functions. Kuppelwieser (2013) identified therole of customers in co-creating value for other customers through an example of YouTube.

3. Methodology

Case study methodology is used in the present study to obtain an answer to how stakeholders are creating value in

co-creation (Yin, 1994). The case study used is a single case design which is the most appropriate when the studydeals with an exercise that brings in fresh perspective to the problem and challenges existing knowledge and untestedassumptions.

A healthy population is the reflection of social and economic progression of any nation. Ill-health can induce thevicious circle of poverty, resulting into indebtedness and impoverishment. We present co-creation as means to creatingsocial value and extending health care services to the wide poor population of India. Through a critical review ofliterature and the case-study on Rastriya Swasthya Bima Yojna (RSBY) scheme, we propose engagement of variousstakeholders in co-creation of value to fight the menace that has captivated rural India. In addition to stakeholders’




engagement for co-creation of social value, the incentives present for each party can help further extend the reach ofhealth care to far flung areas.

The case study on RSBY or rural health insurance policy launched by GOI is chosen due to four main reasons:1)

The stated mission of RSBY is to :

Provide financial security to people belonging to the BPL category from hospitalization related expenses. Increase access to quality health care.

Provide beneficiaries the power of choice to select a health care provider. Provide a scheme which is simple and transparent for the end user.

2)

As an innovative rural scheme, it is committed to provide innovative health care solutions to the poor living below poverty line, and give them a choice to select between private and public hospitals for availing health carefacilities.

3)

RSBY is a business model for the social sector with a win-win proposition for all stakeholders: government,doctors, health insurance providers, hospitals and patients.

4) This is the first scheme of its kind to employ the use of smart card.5) RSBY has robust monitoring and evaluation programs.

3.1. About RSBY

Rastriya Swasthya Bima Yojna (RSBY) was introduced in August 2008 by GOI for extending health insurancefacility of Rs. 30,000 per annum to people below the poverty line. Surging health costs tremendously increase thefinancial burden on families in India and in the case of BPL families, they may even lead to abject poverty. Thescheme reaches out to this segment of society, charging them Rs. 30 as insurance premium while the rest is paid bycentral and state governments in a 75:25 ratio. Till date, 28 states with 364 districts have witnessed the success of theRSBY scheme (Jaiswal, 2010; Swarup and Jain, 2010).

Within a short span of time RSBY has been able to acquire a long list of customers, insurance agents, hospitals,and technology service providers, thus creating a platform where one of the weakest sections of society could availmedical facilities while other stakeholders also benefitted through acquisition of new customers, flow of money, andincreased reach of service providers.

3.2. Value co-creation through stakeholders’ involvement

RSBY as a business model has emerged as a platform for the engagement of six stakeholders: GOI, insurancecompanies, hospitals, doctors, technology service providers and BPL families. We would be discussing each of themindividually to see how they helped in co-creation of value (Jaiswal, 2010; Swarup and Jain, 2010).

3.2.1. Government of India (GOI)

India is a welfare state and GOI is entrusted with the responsibility of looking after each section of society, particularly the poor and weak. Rising population, income inequalities and surging health costs have widened socialgaps and it is the responsibility of the government to bridge these gaps which may otherwise have seriousrepercussions in the form of crime and other social menaces that may further deteriorate the health of the country(Jaiswal, 2010; Swarup and Jain, 2010).

GOI acts as a partner in the co-creation of social value by extending support to the scheme and paying 75% of the

premium. Thus, it shares the burden of the poor by financing the scheme. GOI also extends various other services andhelps in regular monitoring of the scheme. The scheme has emerged as one of the biggest social schemes where the poor can avail health benefits and contribute towards the country’s GDP (Gross domestic product).

3.2.2. Insurance companies

Insurance companies are benefitted by the scheme by getting access to a segment which was hitherto untapped bythem; it helps them extend their reach to the lower strata of society. They are able to increase their reach by bringingmore and more people in the ambit of the scheme, insuring more people. Participation in a social scheme also helps




in building a good brand image of the company. Both public and private insurance companies have shown keen interestin the insurance scheme (Jaiswal, 2010; Swarup and Jain, 2010).

3.2.3. Doctors

Doctors have also emerged as key beneficiaries in RSBY with the government allowing government doctors a

share of the revenue collected through the scheme. With increased empanelment, doctors are able to get larger numberof patients who earlier did not come to hospitals. These doctors receive their fee from GOI. A sense of serving thesociety has also motivated more doctors to engage with the scheme (Jaiswal, 2010; Swarup and Jain, 2010).

3.2.4. Technology service providers

Technology has remained key to RSBY scheme with the whole scheme run as a cashless smart card health scheme.Right from BPL data collection/validation, generation of identity numbers, enrolment of beneficiaries, databasemanagement, networking with healthcare providers and claim reimbursements, the scheme is administered throughstandard IT software and maintained by various software vendors. RSBY has also led to generation of jobopportunities for vendors, and development of innovative techniques for registering and monitoring BPL families,and providing them feedback (Jaiswal, 2010; Swarup and Jain, 2010).

3.2.5. Below Poverty Line (BPL) families/customers

The scheme was specifically launched for underprivileged people belonging to the unorganized sector. These people lived in abject poverty and were not able to avail health facilities for themselves and their families. BPLfamilies also co-create value through their active participation and experiences they undergo by availing the healthfacilities using smart card. Social value co-created for BPL families comes in the form of better health and protectionfrom debt for paying health bills. Thus, a better, healthier and more prosperous society can be created through theengagement of BPL families (Jaiswal, 2010; Swarup and Jain, 2010).

4. Discussion

The present study is an attempt to emphasize the fact that value co-creation is not limited to customers only. Indeed,efforts of various stakeholders engaged in co-creation of value for themselves and others is an example of how co-creation can greatly impact society. As RSBY has helped increase the prosperity of various stakeholders and alsocreated social value, we propose that interaction and relationships are key to value co-creation.

Technology and disruptive innovation have resulted in successful value co-creation which was otherwisehampered due to physical and situational limitations. Technology has helped in co-creation in far-flung areas thusincreasing the range and width of co-creation efforts. Also, co-creation leads to the development of innovativesolutions which reflects that customers and various stakeholders are well aware of their needs and that it is theirinvolvement which could bring out customized and personalized products and services tailored according to theirrequirements.

5. Conclusion and recommendations

Citing the case of RSBY, we would like to conclude that seeing co-creation as a customer – firm interaction willnot justify the concept as at any point of time, the customer is not alone and is surrounded by various other actors.Thus, value co-creation happens in a social context with interaction and relationships as building blocks. Prahalad andRamaswamy (2004) enunciated DART model where they emphasize on dialogue, accessibility, risk and transparencyas founding stones. We found each of these founding stones implicit in our study.

Further studies should look into how value co-creation gets disrupted and what are the factors that could lead tovalue destruction. Future research should also examine the role of trust and cultural context in value co-creation.




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Co-creation of Social Value