Forrester Giffgaff Uses Co Creation to Build a Differentiated Mobile Service Business

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February 9, 2011

Case Study: Giffgaff Uses Co-Creation  T  To o Build A Differentiat Differentiated ed Mobile Service Busine Business ss by Douglas S. Williams for Consumer Product Strategy Professionals

Making Leaders Successful Every Day

 

For Consumer Product Strategy Professionals

February 9, 2011

Case Study: Giffgaff Uses Co-Creation Co-C reation To Build A Differentiated Mobile Service Business An Empowered  Report  Report by Douglas S. Williams with J. P. Gownder and Laura Wiramihardja

E XE CU TIVE S U M M ARY Just a ew years ago, mobile virtual network operators (MVNOs) were a dime a dozen. Big companies like Disney and ESPN tried — yet ailed — to create a mobile experience ex perience differentiated rom the main operators in their markets. How have consumer product strategy (CPS) proessionals at giffgaff, a small offshoot o UK mobile operator O2, succeeded where other prominent companies repeatedly ailed? Te early success o giffgaff hinges on its ability to deliver a radically differentiated service in an extremely mature market. By eschewing traditional service provider business models in avor o co-created products and services, CPS proessionals at giffgaff have created a distinct product experience that is continuously evolving evolving via co-creation with public community members. Other CPS pros can take a page out o giffgaff ’s playbook and look or ways to leverage co co-creation -creation to launch new entrepreneurial lines o business either within or outside o their core markets.

 TA B L E O F C O N T E N T S 2 Co-Creation Is The Foundation Of The Giffgaff Business Model Giffgaff Built The Community First And The Business Second  The Community Shapes Ongoing Development Of The Product 5 Co-Creation Allows Giffgaff To Deliver On Its Four Key Business Tenets RECOMMENDATIONS

Start up Within Your Your Own 6 Unleash The Startup Company ALTERNATE VIEW

7 Supplement Or Supplant Innovation Labs With Radical Co-Creation

N O TE S & RE S O U RCE S Forrester interviewed Robbie Hearn, head of member experience at giffgaff, and Katy Kiem, chief marketing officer and Dan Ziman, vice president — marketing at Lithium Technologies Technologies..

Related Research Documents “Market Overview: Co-Creation Vendors 2011” 2011” January 24, 2011 “How To To Turn Social Media Assets Into Social CoCreation Assets” Assets” December 1, 2010 “Identify Participants And Engagements T To o Drive Co-Creation Efforts” Efforts” October 5, 2010

© 2011 Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRankings, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective owners. Reproduction or sharing of this content in any form without prior written permission is strictly prohibited. To To purchase reprints of this document, please email clientsupport@ forrester.com. forrester .com. For additional reproduction and usage information, see Forrester’s Citation Policy located at www.forr www.forrester.com. ester.com. Information Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.

 

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Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

CO󰀭CREA CO󰀭CREATION TION IS THE FOUNDA FOUNDATION TION OF THE GIFFGAFF GI FFGAFF BUSINESS BUSIN ESS MODEL

Giffgaff is a wireless mobile virtual network operator (MVNO) in the UK and is a wholly owned subsidiary o mobile operator O2.1 Consumer product strategists at giffgaff believe that customers ofen perceive traditional mobile operators as coming up short with regard to cost, billing, transparency, and customer service. o combat these shortcomings, product strategists at giffgaff transparency, designed a radical business model based on deep customer co-creation, which they believe promotes the core c ore values o their company: honesty, honesty, simplicity, simplicity, transparency, and mutuality.2 How radical is giffgaff ’s co-created business model? Product strategists designed the servic servicee with a simple tagline: “Te mobile network run by you.” And they mean it: Tey’ve designed giffgaff to have:

· No call centers. All customer-service-oriented questions are posed to the community, community, and giffgaff relies upon the community c ommunity to provide most answers.

· No formal marketing. External marketing efforts are minimal. Te community ser ves as the main customer acquisition channel, as members are incentivized to sign up new members.

· Very few employees. As o December 2010, giffgaff employed just 14 people; this is a testament to its ability to extract input and value rom the cco-creation o-creation community, community, thereby delivering operational savings to the bottom line. Giffgaff Built The Community First And The Business Second

Core to giffgaff ’s success is the member me mber community it has developed. Many companies recognize the value o public and private communities or (among other things) developing new products that satisy unmet customer needs.3 In this situation, situation, product strategists at giffgaff built the community first, then co-created the service s ervice offering with the community’s community’s help — all in a public orum. Te reason giffgaff ’s radical approach to co-creation works is because giffgaff is operating as an entrepreneurial business within a relatively mature market — and one the development team knows is rie with consumer discontent. Product strategists developed the service by:

· Creating and developing the plan for the business. Te idea or launching a wireless service ser vice that was defined and largely run by its users came rom  rom Gav Tompson, head o brand strategy at O2, in the summer o 2008. O2 knows the UK wireless market inside out, so product strategy proessionals had little difficulty building a easible business plan within the MVNO (i.e., wholesale) model. Over O ver the next year, O2 developed and approv approved ed the business plan and registered the company.

· Selecting a vendor to host the public community. community. Product strategists at giffgaff began their  vendor selection process in the second quarter o 2009; they selected Lithium echnologies as the community platorm provider in August o that year. Tey chose chos e Lithium based on its

February 9, 2011

© 2011, Forrester Research, Inc. Reproduction Prohibited

 

Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

reputation in the reputation t he market and its experience ex perience working with other prominent companies like Verizon, as well as the flexibility o its technical architecture and its ability to integrate into giffgaff ’s knowledge base and eCommerce systems. Developing and launching the site — with community engagement at the center. Lithium  Lithium · completed development o the site within eight weeks. Te community launched in October 2009; upon launch, the company’s ocus was not on growing the business but instead on growing the community, community, both in terms o numbers as well as level o engagement. Te community began as a very “expert” group comprised largely o knowledgeable, tech-savvy men, yet over the past six months, giffgaff has seen its membership become more ethnically diverse and gain a greater number o women as well. serv ice and letting the community go to work. Te MVNO service went live · Launching the service

on November 25, 2009, roughly two months afer the launch o the community.  o o achieve operational cost savings, giffgaff did not create a call center or customer service. Instead, it simply hosted a “Help” “Help” section on the community, where members could post and reply to questions. Tis was the biggest “unknown” “unknown” in the business model, but the results have been strong, with response times averaging less than t han 3 minutes (and that’ that’ss 24 hours a day).4 In this sense, the members memb ers are co-creating not just the product but also the overall product experience, which is one o the key selling points o the giffgaff service.5 The Community Shapes Ongoing Development Of The Product

It would be an understatement to say that the giffgaff community is active (see Figure 1). Membership currently numbers in the tens o thousands, yet about 220,000 posts po sts have been submitted across all o the community orums. Members have been involved in: defining the contents and prices or “goodybags” “goodybags” (bundles o text, voice, and data); choosing a new voicemail dial-in number (they selected selec ted 443, or GIF); independently indepe ndently developing giffgaff iPhone ap apps ps (which have been revised based base d on member ee eedback); dback); and creating and distributing a micro SIM template, allowing members to physically alter a giffgaff SIM so that it works in an iPhone 4. Prominent giffgaff community orums where co-creation takes place include:

· Contribute. Here, giffgaff asks or ideas relating to small tweaks in service ser vice or new promotions or other ways to generate interest in the company c ompany.. Posts in this orum come rom  rom both giffgaff and members. More than 30,000 posts have been made in this part o the community. community.

· Submit. Tis is the ormal ideation site, with more than 13,000 posts to date. Tis is where giffgaff empowers members to share “ully fledged” ideas, as well as to vote or and comment on other members’ ideas (see Figure 2).6 A total o 134 member membe r ideas have been implemented 7 in less than a year.  Robbie Hearn, head o member experience, considers the sheer volume o ideas (more than 200 per month) to be the biggest surprise in terms o how giffgaff has evolved.8

© 2011, Forrester Research, Inc. Reproduction Prohibited

February 9, 2011

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Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

· Help. Te Help orum serves as the customer service department or giffgaff. With more than 145,000 posts, this is where members memb ers ask questions and receive responses rom one another, awarding kudos to members that provide helpul answers. While not thought o as a direct orum or ideation, customer service centers can reveal shortcomings within a business that savvy product strategists can uncover and fix. Best Buy and Bosch Bos ch Group have leveraged customer service channels in this way.9 o validate these community-generated ideas, product strategists at giffgaff use a scorecard that evaluates key actors such as implementation implementation time, project cost, complexity, complexity, integration into existing systems, commercial viability, viability, strategic fit, and the impact o the idea on the product planning road map already in place.10 Figure 1 Most 1 Most Community Participation Lies In Helping, Contributing, And Submitting Ideas

Source: giffgaff website 58657

February 9, 2011

Source: Forrester Research, Inc.

© 2011, Forrester Research, Inc. Reproduction Prohibited

 

Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

Figure 2 A 2 A Distinct Ideation Site Exists Within The Giffgaff Community

Source: giffgaff website 58657

Source: Forrester Research, Inc.

CO󰀭CREATION TION ALLOWS GIFFGAFF TO DELIVER ON ITS FOUR KEY BUSINESS TENETS CO󰀭CREA

Remember those our key tenets to which product strategists at giffga giffgaff ff wanted to adhere when developing this new mobile service? s ervice? It turns out that t hat co-creation actually helps product strategists at giffgaff deliver on those tenets in the ollowing ways:

· Honesty. Giffgaff creates a stronger bond between customer and provider by being honest with the community and treating members membe rs with respect. For example, giffgaff tags submitted ideas so that the originator and the community know the status o the suggestion.11 When ideas simply do not work or are too difficult to implement, giffgaff provides that honest eedback as well. A urther example: When explaining data rates to members in the ccommunity ommunity,, giffgaff asks or eedback but also clearly states that i a lower price is demanded at one place in the model, another price point must rise. 12 With giffgaff being honest about the tradeoffs in its

© 2011, Forrester Research, Inc. Reproduction Prohibited

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Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

pricing structure, the community can make inormed and rational decisions, rather than simply demanding something or nothing.

· Simplicity. Giffgaff is a “bring your own phone” business, which keeps thing simple because the only physical product it distributes is SIM cards.13 On launch, the only ser vice plan available was a simple pay-as-you-go model, but engagement with the community quickly revealed preerences or bundles o voice minutes, text usage, and data. Tese “goodybags” were cocreated with the community and are purchased on a month-to-month basis. By keeping things simple, product strategists at at giffgaff have devised a ser service vice with easier marketing and administration — and its members have a clear sense o what they are purchasing and the flexibility to change services as needed. co-c reation community has inormed product strategists at giffgaff about · Transparency. Te co-creation  just how transparent transparent it needs to be. Te first time a network outage occurred, the community lambasted giffgaff or taking 45 minutes to respond. Te next time, giffgaff ’s response was wellreceived, as it took just 15 minutes and accompanied it with detailed technical inormation explaining the cause. On another occasion, the t he community expressed its displeasure at giffgaff or removing one o several service ser vice offers that had been co-created co -created with the community six 14 months earlier.  Product strategists at giffgaff have learned to share as much as possible with the community, community, but they are also challenged to set expectations expect ations with the community around unreasonable levels o participation.

· Mutuality. In the spirit o mutual giving, product strategists at giffgaff give members the opportunity to co-create the mobile service that best suits them. In return, members give product ideas, customer service support, marketing services, and sales channels to giffgaff. Members earn points or participating in the community, provi providing ding accurate responses to customer service questions, encouraging riends to become members via activating giffgaff SIM cards, and generating new product ideas.15 Tis sense o mutuality provides provides members with an incentive to participate.16

RECOMMENDATIONS

UNLEASH THE STARTUP WITHIN YOUR OWN COMP COMPANY ANY CPS professionals tasked with innovation or new product planning should be on the lookout for entrepreneurial startup opportunities within their own organizations. But be mindful that these new — sometimes radical — products or services serv ices need not emerge from entirely new markets. In building giffgaff, product strategists at O2 engaged in radical experimentation using co-creation co- creation to develop a new line of business within their own familiar product space: the UK wireless market. With this new investment, product strategists at O2 struck the right balance between risk and a nd safety — lessons from which other product strategists can learn.

February 9, 2011

© 2011, Forrester Research, Inc. Reproduction Prohibited

 

Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

.  O2 is in the wireless business, · Stay within your knowledge base and comfort zone . . . O2 so its product strategists knew a ton about the wireless market mark et to begin with, including the terms and conditions, rates, and policies that would apply to giffgaff as an MVNO. This allowed product strategists designing giffgaff to leverage internal expertise to build a business plan that made sense. differentiation.  Product · . . . while pushing against conventional wisdom to create differentiation. Product strategists at O2 also recognized the need to deliver a highly differentiated product experience into the market. In this case, that meant ignoring the handset angle preferred by many operators in favor of giving consumers what they found lacking in other operators in the UK market. It was through co-creation via a public community that product strategists at giffgaff were able to identify those unmet needs in the market mar ket and deliver a differentiated product, while also holding true to the four key tenets of their business. ALTERNATE VIEW

SUPPLEMENT OR SUPPLANT INNOVA INN OVATION TION LABS WITH RADICAL R ADICAL CO󰀭CREATION CO󰀭CREATION Some companies like Google and HP provide opportunities oppor tunities to employees across the organization to build out their own ideas for new products and services ser vices through a type of internal “innovation lab” process.17 While these efforts can be successful for large multinational organizations, internaldriven innovation also has limitations because it focuses on what the company’s employee employeess know and believe. Instead, product strategy professionals at companies large and small should step outside the boundaries of internal conventions to explore robust new opportunities. In order to use radical co-creation engagements to involve consumers early in the process of exploring complementary or substitute products, product strategists should: out.  We aren’t suggesting that you blindly hand the office · Have some target areas mapped out. We keys to consumers. Conduct an internal brainstorming session to identify some targeted markets that could be explored, even at just a high level — such as mobility, outerwear, or automotive accessories. accessories. No experience is necessary: necessary : This is an opportunity to move outside your comfort zone. community. Outside-the-box thinkers or specialized experts can help you identify · Engage a community. Outside-the-box what opportunities or unmet needs may exist in those markets. mar kets.18 Co-creation vendors can help you identify and engage with those people in markets around the world by creating a custom-built community or leveraging a vendor-cultivated community community..19 Community members will help you find new business ideas — or provide quick feedback that the pastures you are beginning to explore are not fertile. t he idea later. Management later. Management will want to know what the ROI is · Worry about monetizing the before you even get started. Product strategists should be ready to demonstrate how radical co-creation can help unveil new opportunities, shorten the exploration/ideation process, and reduce risk of failure moving forward. Once you are armed with a good idea, the business case will fall into line.

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Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

ENDNOTES 1

2

O2 itsel is wholly owned by eleónica. I you know your Scottish Gaelic, you’ll recognize that it’s it’s all in the name: Giffgaff is an old term that means “mutual giving,” which is precisely how the company operates with its customers, or “members.” I you don’t know your Scottish Gaelic, visit http://www.gaelic.com/ http://www.gaelic.com/ to bone up on it.

3

Forrester has published two case studies exploring social co-creation via private online communities. communities. See the December 17, 2010, “Case “Case Study: IHG, Chase, And Consumers Co-Create A New Rewards Credit Card Card”” report and see the January 21, 2011, “Case “Case Study: Philips Achieves Consumer Proximity Using Privat Privatee Online Communities” Communities” report.

4

Giffgaff recognizes that it can’ can’tt source 100% o customer service to the community, community, as the company has to address issues relating to account or credit.

5

Te Era o Experience is a new era o economics, where breakthrough product experiences will become common, everyday events. Forrester prepares people to lead — rather than ollow — in this era by adopting a “total product experience approach” to product strategy, thus opening a Pandora’s box o compelling and consistent digital experiences that extend the value o physical products into the realm o digital experience. See the October 18, 2010, “How “How o Prepare For Te Era O Experience Experience”” report.

6

Tis site operates like other well-known ideation sites, such as Ford’s Your Ideas and Starbuck’s My Starbucks Idea. See the September S eptember 24, 2010, “Case “Case Study: Ford Pursues Co-Creation With An Ideation Site Site”” report and see the September 22, 2010, “Case “Case Study: Starbucks Uses Social C Co-Creation o-Creation  o o Drive Green Product Strategy ” report.

7

Source: vincent, “Giffgaff ideas are overwhelming,” giffgaff community, January 25, 2011 (http://community. giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413).

8

Te increase in volume has caused giffgaff to alter its policy o replying individually to every member who submits an idea in avor o replying only to those members whose ideas generate 10 “kudos” rom other members. Giffgaff publicly announced this policy change on its blog in order to maintain transparency and welcome any eedback. Source: S ource: vincent, “Giffgaff ideas idea s are overwhelming,” giffgaff community community,, January 25, 2011 (http://community (http://community.giffgaff.com/t5/Blog/G .giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413). iffgaff-ideas-are-overwhelming/ba-p/354413).

9

Source: Janelle Noble, “Video Case Study: Bosch, Bosch,”” Brightidea, January 26, 2011 (http://blog.brightidea.com/ (http://blog.brightidea.com/ innovation_work/2011/01/video-case-study-bosch.html#t innovation_wo rk/2011/01/video-case-study-bosch.html#tp) p) and see the June 30, 2010, “Case “Case Study: Best Buy’ss Retailer-Led Product Strategy ” report. Buy’

10

Source: vincent, “Giffgaff ideas are overwhelming,” giffgaff community, January 25, 2011 (http://community. giffgaff.com/t5/Blog/Giffgaff-ideas-are-overwhelming/ba-p/354413).

11

Ideas are tagged into one o the ollowing categories: Implemented, Accepted, Under Consideration, Future Review, Need More Feedback, New Ideas, Duplicate (duplicates are marked, and a link to the original idea is provided), or Not Suitable (giffgaff posts a response to inorm the user why it decided that it was not suitable).

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Case Study: Giffgaff Uses Co-Creation T To o Build A Differen Differentiated tiated Mobile Service Business Business   For Consumer Product Strategy Professionals

12

Source: “An update on data pricing,” giffgaff community, January 25, 2011 (http://community.giffgaff.com/ t5/Welcome-and-News/An-updat t5/W elcome-and-News/An-update-on-data-pricing/td-p/35508 e-on-data-pricing/td-p/355085). 5).

13

Te lack o subsidized phones also eliminates the need or long-term service contracts.

14

Source: gaffer, “£30 goodybag, a closer look,” giffgaff community, November 16, 2010 (http://community. giffgaff.com/t5/Blog/30-goodybag-a-closer-look/ba-p/157451).

15

Giffgaff also has the ability to award additional additional points at its discretion, which it may do or a particularly inspiring new idea. In addition, “paybacks” occur every six months, whereby active members are rewarded or their participation in the community and or getting new members to join. In December De cember 2010, a total o £128,000 was awarded back to nearly ne arly 15,000 members o the community. community. Source: robbie28, “Christmas comes early or giffgaff community, with £128,000 bonus,” giffgaff community, December 17, 2010 (http:// community.giffgaff.com/t5/Blog/Christmas-co community .giffgaff.com/t5/Blog/Christmas-comes-early-or-giffgaff-com mes-early-or-giffgaff-community-with-128 munity-with-128-000-bonus/ba-000-bonus/bap/249535#comments); clairekav, “Spreading holiday cheer,” giffgaff community, December 3, 2010 (http:// community.giffgaff.com/t5/Blog/S community .giffgaff.com/t5/Blog/Spreading-holiday-cheer/ba-p/208265 preading-holiday-cheer/ba-p/208265). ).

16

Not all participating members are involved just to earn billing credits or preloaded SIMs. In act, at the bequest o the community, giffgaff now enables members to donate their earned credits to a charity that was — you guessed it — chosen by the community.

17

In HP’s HP’s 70-year history, it has innovated in many new and established technology fields. But how does the firm cope with the inevitable slide — aced by most dominant global firms — into driving established products rather than innovative ones? Whether in personal pers onal computers (PCs), printers, printers, or other consumer products, HP has shown a capacity or driving product innovation over a long period o time. HP has established a strong core organization to drive rapid, near-term innovation via strong management, a series o documented processes — and a willingness to openly talk about these. SSee ee the September S eptember 21, 2009, ““Case Case Study: How HP Drives World-Class Product Innovation” Innovation” report.

18

In order to pursue co-creation, CPS pros need to have h ave a firm grasp o the participants they can engage and the types o co-creation engagements they can leverage. o o that end, Forrester has constructed taxonomies o co-creation participants and engagements. See the October 5, 2010, ““Identiy Identiy Participants And

19

Engagements o o Drive Co-Creation Efforts” Efforts” report. Are you interested in implementing implementing social co-creation engagements that move beyond Facebook, wi witter tter,, and the occasional outreach to consumers via the corporate blog? I the answer is yes, a near-endless string o questions will soon ollow, all centered on a single word: how? Here, we offer CPS pros guidance around what social co-creation engagements require assistance rom outside partners and the relative benefits o each type o engagement. See the January 24, 2011, “Market “Market Overview: Overview : Co-Creation Vendors 2011” 2011” report.

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