We know there's value in customer co-creation. If a customer helps you come up with an idea that you can make into a salable product or service, clearly there is value. But is that all there is?

The article My Customer, My Co-Innovator by Michael Schrage in Strategy + Business, talks about two other potential areas of value.

Let's say I call the value I just described in the first paragraph "idea value." This is not news: "Involving customers in the innovation process can add value to new product designs." That has been reported over and over in the stories on crowdsourcing, lead users, customer co-creation, etc.

But here's a second one -- I'll call that "insight value." It does not get talked about as much, and is well worth noting -- by inviting customers into your innovation process, you can learn a lot about what those customers actually want. It's like marketing research on steroids. Schrage quotes Randy Pond of Cisco: “We’ve found that when we share our tools with customers rather than just demonstrate how much we’ve improved our technologies, we learn a lot more."

The third area of value I want to call "trust value." This one has rarely been tied to customer co-creation. It's this: Inviting customers into your innovation process creates an environment of trust and can start a relationship that makes it easier for your customers to buy from you. Letting customers have a peek behind the curtain starts a relationship, and more importantly, implies a level of trust. And trust is persuasive -- people buy from someone they can trust.

So, even if you never gain a single usable insight or see a single usable idea out of the relationship you develop by inviting your customers as co-creators, you still benefit by the relationship because they are more likely to trust you -- and buy from you -- if they know how you do what you do. Here's a great illustration from the Strategy + Business article:

The world’s top investment banks, meanwhile, profitably peddle tens of billions of dollars’ worth of complex financial instruments, such as synthetic securities and derivatives, every year. Even sophisticated customers, such as Fortune 1000 companies and hedge funds, are often understandably reluctant to take a chance on new financial instruments. So the banks now give their customers the same computerized “wind tunnel” and “stress testing” algorithms that their own quantitative analysts have used to design the products in the first place.

“In the early days, we would run simulation after simulation demonstrating that our instruments would help them better hedge their risks,” acknowledges one former Goldman Sachs and Salomon Brothers executive. “But, frankly, they didn’t fully trust either us or our simulations. It wasn’t until we started giving them the simulation tools we used ourselves that they took us seriously.”

These free simulators proved to be the most profitable innovation that the Goldman Sachs derivatives group launched. Soon, clients began asking for custom derivatives and other tailored instruments. “Without the simulators, customers would never have known what to ask for, and we would never have thought to ask,” recalls the bank executive. Yet, despite its success, this innovation appeared nowhere in the bank’s R&D budget or prospectus. It was only a tacit, not an explicit, locus of value creation.