Co-creation of Social Value through Integration of Stakeholders

Available online at www.sciencedirect.com ScienceDirect Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448 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 Kaushikb, Zillur Rahmanc a, b c Research Scholar, Department of Management Studies, Indian Institute of Tehnology, Roorkee (247667), India 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 as actors (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 creating social 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 the stakeholders involved in value co-creation. The study primarily focuses on social value through co-creation. Thus, other outcomes have been purposely left out which is a major limitation of this study. 2015The TheAuthors. Authors. Published Elsevier ©2015 © Published by by Elsevier Ltd.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 Peer-review responsibility of the scientific committee of XVIII Annual International Conference of the Society of Operations under Management (SOM-14). Operations 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 attention of 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, value for customer, value chain concept, relationship value, superior value and recently co-created value. Such is the importance of value that Marketing Science Institute (MSI) has included it in top research priorities for the years 201012, and 2012-14 (MSI 2012; 2014). *Corresponding author. Tel. +918954167407. E-mail address: [email protected] 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 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 the customer is not the exchange value, i.e. products or services they received through the transaction; actual value is value in-use or experiences undergone through the use of the product or service. Products or services received by the customer signify only the attribute satisfaction whereas the experiences undergone through the use of the products symbolise goal satisfaction (Wodruff, 1997). Emergence of service dominant (SD) logic has reinstated that firm is merely 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 context where a large number of actors such as firms, suppliers and customers are present in the system. Network and configuration 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 development of social value. We would specifically be presenting the roles of various actors in value co-creation through the case of 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 various stakeholders come together and interact, and how social value is achieved in the form of improved health and better society. 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 to exhibit 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 as the “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, superior value, perceived value, relationship value, stake holder value and value in-use, studies on value creation and cocreation 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; Payne et 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 and new 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 from marketing, 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 should emphasize on experience creation as the basis of value co-creation at multiple points of exchange. Table 1 presents various definitions of value co-creation as given by different authors. 443 444 Amit Kumar Agrawal et al. / Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448 Table 1. Various definitions of value co-creation Authors Value co-creation Grönroos and Voima (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 of the 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 its world with external stakeholders and can generate in return the insight that can be 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 et al.(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 products they 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 conceptualization of value co-creation is that of creation and delivery of richer experiences to stakeholders as a part of the process along with tangible outcomes, for instance, in the case study considered in this paper, availing of health care facilities by stakeholders. 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 of stakeholders in co-creation of value remained in nascent stages. Stakeholder involvement in value co-creation started getting 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 value creation 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 the firm to increase efficiency and effectiveness. Also, the role of customers in service settings and creating value started gaining importance. Normann and Remirez (1993) proposed that value started becoming denser in nature when actors started moving from their pre-defined roles in the network towards newer and dynamic functions. Kuppelwieser (2013) identified the role 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 study deals with an exercise that brings in fresh perspective to the problem and challenges existing knowledge and untested assumptions. A healthy population is the reflection of social and economic progression of any nation. Ill-health can induce the vicious circle of poverty, resulting into indebtedness and impoverishment. We present co-creation as means to creating social value and extending health care services to the wide poor population of India. Through a critical review of literature and the case-study on Rastriya Swasthya Bima Yojna (RSBY) scheme, we propose engagement of various stakeholders in co-creation of value to fight the menace that has captivated rural India. In addition to stakeholders’ Amit Kumar Agrawal et al. / Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448 engagement for co-creation of social value, the incentives present for each party can help further extend the reach of health 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 : x Provide financial security to people belonging to the BPL category from hospitalization related expenses. x Increase access to quality health care. x Provide beneficiaries the power of choice to select a health care provider. x 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 care facilities. 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 insurance facility of Rs. 30,000 per annum to people below the poverty line. Surging health costs tremendously increase the financial burden on families in India and in the case of BPL families, they may even lead to abject poverty. The scheme reaches out to this segment of society, charging them Rs. 30 as insurance premium while the rest is paid by central and state governments in a 75:25 ratio. Till date, 28 states with 364 districts have witnessed the success of the RSBY 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 avail medical facilities while other stakeholders also benefitted through acquisition of new customers, flow of money, and increased 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, insurance companies, hospitals, doctors, technology service providers and BPL families. We would be discussing each of them individually 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 social gaps and it is the responsibility of the government to bridge these gaps which may otherwise have serious repercussions 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 and helps 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 by them; it helps them extend their reach to the lower strata of society. They are able to increase their reach by bringing more and more people in the ambit of the scheme, insuring more people. Participation in a social scheme also helps 445 446 Amit Kumar Agrawal et al. / Procedia - Social and Behavioral Sciences 189 (2015) 442 – 448 in building a good brand image of the company. Both public and private insurance companies have shown keen interest in 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 number of patients who earlier did not come to hospitals. These doctors receive their fee from GOI. A sense of serving the society 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, database management, networking with healthcare providers and claim reimbursements, the scheme is administered through standard IT software and maintained by various software vendors. RSBY has also led to generation of job opportunities 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. BPL families also co-create value through their active participation and experiences they undergo by availing the health facilities using smart card. Social value co-created for BPL families comes in the form of better health and protection from debt for paying health bills. Thus, a better, healthier and more prosperous society can be created through the engagement 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 cocreation can greatly impact society. As RSBY has helped increase the prosperity of various stakeholders and also created 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 otherwise hampered due to physical and situational limitations. Technology has helped in co-creation in far-flung areas thus increasing the range and width of co-creation efforts. Also, co-creation leads to the development of innovative solutions which reflects that customers and various stakeholders are well aware of their needs and that it is their involvement which could bring out customized and personalized products and services tailored according to their requirements. 5. Conclusion and recommendations Citing the case of RSBY, we would like to conclude that seeing co-creation as a customer–firm interaction will not 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. 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