Here is a brief excerpt from an article written by Jacques Bughin, McKinsey Quarterly, McKinsey & Company. He suggests three ways companies can make co-creation pay off. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Involving outsiders in the creative process of developing products and services is harder than it sounds. Here’s how leading companies do it.

Ever since companies began using the web to solicit ideas from outsiders for enhancing services and developing products, the promise of co-creation has overshadowed its measurable impact. Studies have shown that the impact of co-creation—the act of bringing external parties, usually customers or suppliers, into a company’s creative process—on new product innovation is neither statistically significant nor economically relevant, nudging the likelihood of success up by a scrawny 4 percent. While attempts to create products or services jointly may produce desirable side effects—in the form of reduced market-research costs or increased customer loyalty—the ultimate goal of bringing outstanding products to the market remains elusive.

While co-creation with customers has produced widely publicized successes at some brand-name companies, the challenges that practitioners must overcome to build and sustain a productive model of online collaboration have been minimized, if not ignored. That oversight should be corrected. Co-creation skills are an important capability for companies, requiring agile processes, quick test-and-learn cycles, and a deep understanding of customers. In fact, in contrast to the average practice, the masters of co-creation not only unlock value rapidly by delivering high-quality products and service innovation but also sustain that impact over time—all with little additional R&D overhead.

Last year, we studied more than 300 companies in three European countries and found that the best at co-creation excelled in three areas. [Here is the first.]

1. Target your co-creators

Our research found that while 90 percent of executives were eager to get consumers involved in co-creation, only 12 percent of Internet users had actually done so. In fact, only a quarter of consumers were even aware of the concept, while an additional 5 percent knew about co-creation but not how it actually worked. To overcome this issue, the best companies parse customer data to actively target co-creators and actively explain how to use their co-creation platform. They segment their audience and tailor marketing promotions to what appeals to users: for example, games, money, education, or pure peer recognition.

Since 2001, for example, P&G has successfully been bringing outsiders into its R&D process. As well as targeting them by motivation, the company has also targeted retirees with specific skill sets, including P&G’s own alumnae, as well as retired technical specialists at airline companies.2 P&G’s co-creation platform, Connect + Develop, has spawned dozens of products, boosted product development, and effectively doubled the number of employees engaged in R&D—without adding to payroll costs.

Implicit in this effort is getting to critical mass: without enough people, the chances of co-creation success drop. When Starbucks launched its My Starbucks Idea co-creation platform for customers, it understood from the start that it was critical to lure big numbers of participants—between 1,000 and 7,000 is an ideal number for one product.

An important element of successful recruiting is finding people who actually like your brand. Finding people on social media who not only “like” your brand but are also active promoters is a good place to start. In addition, the value benefit can increase. Our research shows that a brand’s market share is more than twice as correlated with those who are inclined to co-create with a brand than with those who only make positive comments on social media.

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Co-creation is here to stay. For companies that figure out how to do it well, the rewards can be far greater than a more effective and efficient R&D organization. More important, it is a core capability for unleashing the vast ingenuity of outsiders on an organization’s biggest challenges.

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Here is a direct link to the complete article.

Jacques Bughin is a director in McKinsey’s Brussels office.