This is Net-powered word-of-mouth?
Prahalad: Thanks to the Internet and mobility, we now have thematic communities and word-of-mouth that's more rapid than everbeyond what people had anticipated years ago. And many companies still don't fully understand how this will manifest itself in the marketplace.
The problem with CRM, for example, is people assume that a company knows what to do to create value for customers. But I say no, this decision cannot be unilateral; it has to be collaborative. Consumers will not be seen as targets any longer, which is what CRM is abouthow to target a single consumer with a database. Key now is how to engage them as equal problem-solvers so that we get value that is unique. And once you've come to this conclusion, the amazing thing is the opportunity for value creation to expand exponentially because now we have more people telling us what they want. We don't have to second-guess and we don't have to do shock demand forecasting by SKU. If you deliver experiences, you're going to be producing on demand. That's the idea.
Isn't that more costly?
Prahalad: Actually, it is cheaper. Think of why that's so. First, you reduce the risks. Second, you access competence on demand. That means you build a network and only activate suppliers on demand. You don't keep any inventories of any kind. You're sort of inventory-less, if you will. You're taking Dell one step further. And third? You're always getting ideas for product development and ideas for new experience creation from your consumers.
Now, co-creating experiences is not the same thing as co-designing a product. I don't want you to design a car, but I want to create for you the experience of owning and using a car that is unique to you. It's hard for people coming from a customization background to understand this, perhaps. We're not talking about customizing products. We are talking about customizing experiences or creating unique experiences for individuals, even if they all have the same silly product. The difference is if that product is energized by information technologies, the experience can be personalized.