Value proposition as a framework for value cocreation in crowdfunding ecosystems

Introduction

In recent years, several scholars have highlighted the interactive and networked nature of value creation (Achrol and Kotler, 2012; Grönroos, 2006; Gummesson, 2006a; Lusch and Vargo, 2006; Skalen and Edvardsson, 2016). Karpen et al. (2012: 21) point out that “a central implication of S-D [service-dominant] logic is that the notion of superior value co-creation replaces the more prevalent one of superior value provision as the cornerstone of business strategy.” Some authors refer to this as a new kind of business model that consists of actors, interactions, and networks (Gummesson, 2008b, 2008c; Laamanen and Skalen, 2014).

The present article looks in detail at the crowdfunding phenomenon, which is of interest because it is a new kind of business model where actors are able to exchange value in a context that can be considered an example of innovation in value cocreation. In this context, actors develop complex roles at the frontier between buying, selling, and investing. The European Commission (2014: 3) has recently published a report in which it points out that:

crowdfunding is a new financial system with its own particularities (….) Crowdfunding is also about attracting the emotional interest of users, setting up channels of identification with a platform’s core values and purposes, and exploiting the capabilities of social networks, community and proximity. This brings out new interactions between economic efficiency and democratic practices which are distinctive of the crowd-funding market.

Our definition of crowdfunding phenomenon is broader and includes an SD logic (SDL) perspective in that it “is a business model where actors co-create value to develop one actor’s proposal through by raising money and through other means of value co-creation.” The aim of this article is to contribute to the development of SDL, specifically in relation to FP 7 and FP 10 by establishing that the ecosystem approach is required to understand the new service model involved in crowdfunding. Crowdfunding platforms are an example of individuated generation capability, in which organizations can understand the resource integration process in a way that benefits all parties involved. The value proposition approach offers different interpretations for each level in the service ecosystem, where eight different forms of cocreation of value take place.

The active role of participants in the crowdfunding business model can be considered an example of good practice due to the capacity it creates to stimulate the cocreation of superior value in meaningful ways for all the actors involved, and it also supports sustainability and continuous change, because all parties feel part of the project and are able to make proposals to improve the model.

Although previous studies have analyzed the crowdfunding phenomenon (Burtch et al., 2013; Ordiani et al., 2011; Quero and Ventura, 2015), there is a scarcity of information on the changing role of the actors involved in crowdfunding, their ability to change, and their interest in innovating in the course of cocreating value propositions.

The research propositions we address in the present article are as follows:

P1: The crowdfunding phenomenon can be considered a service ecosystem.

As stated earlier, the research propositions are theoretically linked to foundational premises (hereafter FP) 7 and 10 of SDL (Vargo and Lusch, 2008a: 7), whose strategic themes are related to value propositions and the context. Karpen et al. (2012: 25) relate SDL logic to S-D orientation and refer to it as a part of an organization’s strategic capability. Specifically, they term it “individuated interaction capability,” defined as “an organization's ability to understand the resource integration processes, contexts and desired outcomes of individual customers and other value network partners.”

The present article interprets the crowdfunding phenomenon as a new generation of service (eco)system as defined by Wieland et al. (2012). Crowdfunding can be understood as an adaptation of resource integration processes to new contexts to meet the changing desires/outcomes of participants. In order to better understand how value is exchanged, this article identifies the actors involved in cocreation, and the methods of value cocreation in crowdfunding contexts. This results in eight categories of cocreation that incorporate all the ways in which value is cocreated in this context.

The results of the present article can also contribute to contexts other than crowdfunding, because new methods of value cocreation can be developed for other business models that are used by organizations to strengthen their relationships with actors.

This article is divided into six sections in which the research propositions are discussed in detail. First, it analyzes the crowdfunding phenomenon and the actors involved in it; second, this article adapts the value proposition approach and planning framework to crowdfunding ecosystems and establishes value cocreation as the basis for value proposition. Finally, a qualitative case study approach, which involved the participation of the Directors of two Crowdfunding platforms in Spain, is the basis for the creation of a crowdfunding ecosystem model based on value propositions. Some discussions, limitations, and directions for future research are offered in conclusion.

The crowdfunding phenomenon: Concept and actors involved

Although the literature on crowdfunding is somewhat limited, there is a growing interest in the different ways in which value is exchanged among actors. Ordiani et al. (2011: 444) define crowdfunding as “an initiative undertaken to raise money for a new project proposed by someone, by collecting small to medium size investments from several other people (i.e., a crowd).” In the same sense, Schwienbacher and Larralde (2010: 370) have conceptualized crowdfunding as “the financing of a project or a venture by a group of individuals instead of professional parties.” According to Lawton and Marom (2013), crowdfunding platforms facilitate sophisticated service ecosystems that rely on the participation of expert actors who interact with crowdfunders in order to attain proposed objectives. Crowdfunding platforms in the arts sector, consumers, and other actors actively participate in value cocreation processes and exchange much more than just money (Alves, 2013; Burtch et al., 2013; Russo-Spena and Mele, 2012; Ordiani et al., 2011). Platforms provide arts organizations with spaces of collaborative value cocreation, or service ecosystems, with unique characteristics, which set them apart from other organizational solutions: “(…) crowd-funding, although sharing some characteristics of traditional resource-pooling and social-networking phenomena, has some unique elements related to creating service platforms through which individual consumers can pool monetary resources to support and sustain new projects initiated by others” (Ordiani et al., 2011: 445).

Ramos (2014) identifies four different types of crowdfunding platforms:

Equity-based platforms, which specialize in projects that provide investors with tangible benefits.

According to data from Forbes (May 11, 2012), the world crowdfunding market in 2014 can be broken down as follows: donations (49%), loans (22%), equity (18%), and rewards (11%). In Spain (where our research is framed), a similar structure is seen. In 2013, crowdfunding investments increased by 100%, reaching 19.1 million Euros (Infocrowdsourcing, 2013).

Belleflamme et al. (2012) distinguish between two types of crowdfunding, depending on the actors involved. In the first type of crowdfunding project, the fundamental objective of the actors who participate is to raise enough money to finance the project. In such cases, crowdfunding is understood as a pre-sale mechanism, in which the financing actor adopts the role of consumer (financing consumer). Alternatively, participation in crowdfunding projects may be motivated by the potential for financial reward, in which case the participating actors play the role of an investor (investors). Ordiani et al. (2011) identify three kinds of actors in crowdfunding contexts: actors who propose ideas and/or projects to be funded; the “crowd” that supports certain projects (and who bear risk in the expectation of payoff); and crowd-funding organizations (platforms) that bring together those who seek to deliver new initiatives with those who finance new initiatives. Furthermore, Belleflamme et al. (2012) characterize expert actors as those who have domain expertise and a particular interest in the field or phenomenon in question. These experts often act as advisors for crowdfunding projects and suggest changes that could be made to improve the project or advise on the project’s likelihood of success.

Regarding research P2 above, the literature identifies up to seven kinds of actors in the crowdfunding context:

With the growth of the phenomenon of crowdfunding in various markets around the world, a new actor has emerged in the crowdfunding association, not as yet considered in the relevant literature. The role of crowdfunding associations has developed in importance as they have exchanged knowledge and experience and invested to the benefit of all parties in the value cocreation process. As a result of the growing interest in crowdfunding, governments are starting to legislate to regulate the process, which has given crowdfunding associations ever-increasing importance in their role as lobbyists who seek to preserve and enhance the perceived benefits of crowdfunding for all actors. Table 1 describes the actors identified in the crowdfunding context and their actions and intentions as depicted in the literature.

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Table 1.

Actors in the crowdfunding context.

Actor	Literature
A.1. Creative core	Ordiani et al (2011), Belleflamme et al. (2012), Burtch et al. (2013), and Quero and Ventura (2015)
A.2. Platforms	Ordiani et al. (2011) and Quero and Ventura (2015)
A.3. Financing customer	Ordiani et al (2011), Belleflamme et al. (2012), Burtch et al. (2013), and Quero and Ventura (2015).
A.4. Non-financing customers	Quero and Ventura (2015).
A.5. Investors	Belleflame et al. (2012) and Quero and Ventura (2015).
A.6. Experts	Belleflame et al. (2012) and Quero and Ventura (2015)
A.7. Crowdfunding associations	Asociación Española de Crowdfunding (AEC) (2015) and World Crowdfunding Federation (WCF) (2015)

Value proposition and the crowdfunding ecosystem

An ecosystem approach to the phenomenon of crowdfunding requires an in-depth consideration of the concept of value propositions. Vargo and Lusch (2004, 2008a, 2008b) highlighted the importance of the value proposition concept as an issue related to the cocreation of value. Vargo (2011: 220) posit that

S-D logic is essentially a value co-creation model that sees all actors as resource integrators, tied together in shared systems of exchange – service ecosystems or markets. In this way, markets are characterized by mutual value propositions and service provision, governed by socially constructed institutions.

Frow and Payne (2011) propose an iterative planning framework that consists of five steps coupling the stakeholder concept and value cocreation with the objective of cocreating value propositions. The present article amends their concept of stakeholder to “actor” (as suggested by the SDL literature) and adapts the planning framework to the crowdfunding context as follows (see Figure 1).

Identify actors. The literature on crowdfunding identifies seven actors (as described in previous sections). However, the innovative and open nature of the crowdfunding phenomenon means that the actors involved are likely to change as crowdfunding evolves over time. The capacity of each actor to offer and receive value propositions will determine their continued involvement or eventual disengagement from the process.

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Figure 1.

Value proposition planning framework in crowdfunding ecosystems. Source: Adapted from Frow and Payne (2011: 233).

Value cocreation as the basis for value proposition

To account for the collective dimension of value cocreation, Vargo and Lusch (2008a: 5) argue:

while we initially focused on exchange between two parties, we have increasingly tried to make it clear that it needs to be understood that the venue of value (co-)creation is the value configurations – economic and social actors within networks interacting and exchanging across and through networks.

In this sense, crowdfunding can be seen as a collective action where the actors offer value propositions through cocreation.

The concept of value cocreation has been addressed by several authors in the SDL literature. For Karpen et al. (2012: 15) “the notion of co-creating value refers to assisting customers in co-constructing and engaging in superior experiences.” Laamanen and Skalén (2014: 3) refer to “the collective dimension of practices arguing that value is co-created when firms and consumers enact practices congruently.”

Frow et al. (2014: 332) offer an interesting analysis of the concept of “value proposition” from a service ecosystem perspective: “Within a service ecosystem, exchange occurs because no one actor has all the resources to operate in isolation and is therefore required to participate in resource integration practices (…).” This perspective is in line with the context of crowdfunding ecosystems in that it identifies seven kinds of value propositions that are linked to the micro-, meso-, and macrolevels in an ecosystem.

Russo and Mele (2012) conceptualize cocreation as a method of innovation in service and create the “Five Co’s” model where five categories of cocreation are found as follows: (1) co-ideation, (2) co-evaluation of ideas, (3) co-design, (4) co-test, and (5) co-launch. Quero and Ventura (2015: 125) have outlined two additional categories of value cocreation in the specific context of crowdfunding: (6) co-investment and (7) co-consumption. Recent literature also proposes new methods of value cocreation, which mean that an eighth form of value cocreation should be added to the model: (8) co-authorship (Kumar, 2015: 55). Co-authorship refers to “a key mechanism that links different sets of talent to produce a research output.” Although the empirical approach developed by Kumar (2015) is related to scientific collaboration in research, it is also clearly applicable to crowdfunding, which is characterized by great flexibility allowing actors to switch easily between different roles.

Methodology: A qualitative case–study approach to rewards-based crowdfunding platforms in Spain

Crowdfunding is a recent phenomenon that is transforming how value is cocreated in the arts sector. Taking into account the complexity of information related to the relationship between actors in crowdfunding contexts, this study employs a qualitative case–study methodology. Qualitative research has a flexible nature that helps researchers deal with the phenomenon (Gummesson, 2001, 2006b). Specifically, the case study method is appropriate in that the research propositions seek to explain a present circumstance, requiring an extensive and “in-depth” description of a social phenomenon (Yin, 2014). We offer an analysis of a number of cases that facilitate the exploration of participant responses in context and use a variety of information sources, as Gummesson (2006b: 171) writes, “(…) addressing the complex reality of management issues, qualitative methodology supported by modern natural sciences is superior to quantitative methodology emanating from traditional natural sciences.” Along similar lines, other authors (Dubois and Gadde, 2002) also consider qualitative methods to be the most appropriate for obtaining in-depth information about new phenomena (as is the case for crowdfunding). The qualitative case study method referred to by Yin (2014) has been used to design and structure the qualitative research for the study reported herein.

The scope of the present study is limited to the cultural sector. Case selection therefore involved a review of cases published on the most dynamic crowdfunding platforms in Spain in order to search for crowdfunding proposals of a cultural nature. Following this review, purposive sampling was used to select two widely known crowdfunding platforms in Spain: Verkami (2015; http://www.verkami.com/) and Lánzanos (2015; http://www.lanzanos.com/). They are positioned rather differently: while Verkami accepts only arts and design projects, Lánzanos accepts all kinds of projects (social cultural, technological, etc.). In the cultural context, Verkami represents 70% of all crowdfunding projects. In 2013, Verkami financed 953 projects, 61% more than in 2012 and the money raised for these projects was almost 5 million Euros, 89% more than in 2012. In 2013, Verkami had 122,000 financing customers (A3); overall, the platform has a success rate of 70%.

Information was gathered from a variety of sources, with the objective of achieving a complete and complex understanding of the phenomenon (Järvensivu and Törnroos, 2010). The use of multiple data sources ensured access to the large number of perspectives required, given the nature of the methodology. The information analyzed included primary data from in-depth interviews and secondary data obtained from a netnographic study of selected forums, two crowdfunding platforms, and the impact of each of these platforms on social networks. The context in which crowdfunding took place was limited to online platforms created to facilitate interaction between participants. A netnographic study, along the lines developed by Kozinets (2002: 62), emerged as the most suitable approach, given that, as the author indicates, “(…)’Netnography’, or ethnography on the Internet, is a new qualitative research methodology that adapts netnographic research techniques to study the cultures and communities that are emerging through computer-mediated communications.” The data collected were coded and analyzed using ATLAS.ti (version 7) software. Figure 2 contains the study design.

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Figure 2.

Study design.

The netnographic analysis was very important for gaining prior knowledge of the platforms and allowed us to confirm the relevance of the two platforms in the crowdfunding context in Spain. We followed five crowdfunding communities for 4 months (January to April 2014). It also provided information that helped us design in-depth interviews with platform directors (Lánzanos and Verkami). We developed in-depth interviews with the directors of each platform. The interview protocol used for conducting the interview had a semi-structured format, allowing the option of including unplanned questions during the interviews.

Results: Crowdfunding ecosystem model based on value proposition

It is important to confirm that the crowdfunding actors identified in the literature match the reality of crowdfunding in Spain. The two platforms, Lánzanos and Verkami, were agreed on the importance of an additional actor that has not hitherto featured in the literature: Public institutions. When asked about the character of this relationship, the director of Lánzanos said, “There was a great need for regulation. I think it is good for the market, not to be on unknown terrain.” Table 2 provides the actions and intentions that can be ascribed to each actor according to the directors of these two crowdfunding platforms.

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Table 2.

Actors, actions, and intentions in crowdfunding.

Actor name	Actor actions/intentions
A.1. Creative core	Proposes ideas and/or projects to be funded. Wants his/her project to be financed.
A.2. Platforms	Bring together those who want to deliver projects with those who can provide finance. They receive benefit from their mediation of the process.
A.3. Financing customer	Pays to finance the product/project that interests them.
A.4. Nonfinancing customers	Do not contribute financially but promote the project and support its success.
A.5. Investors	Fund the project in order to receive a potential financial reward. In cultural projects, this is very unusual, although, as the director of Lánzanos noted, “The creative core always has the possibility of deciding the kind of reward. One of these rewards can be financial, as was the case with El Cosmonauta.”
A.6. Experts	Have a particular interest in the field of the phenomenon in question.
A.7. Crowdfunding associations	Represent the institutionalization of crowdfunding. They work to improve crowdfunding processes and create links among actors (mainly the platforms).
A.8. Public institutions	They have increased their presence in this market, regulating crowdfunding, and offering a legal context.

In response to the first research proposition, the results of the qualitative research showed that the crowdfunding phenomenon can be considered an ecosystem. In Figure 3, we show how different groups of actors co-create value at micro-, meso-, and macrolevels. When the platform directors were asked about the relationship between actors and the ecosystem concept, the director of Lánzanos responded, “every actor in the crowdfunding context is equally important,” and the director of Verkami said, “I agree with the idea of ecosystem, as all the actors are important.”

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Figure 3.

Crowdfunding ecosystem model.

Value proposition can be used as the foundation of a service ecosystems perspective (Frow et al., 2014), which constitutes a framework where actors cocreate several categories of value. The open nature of crowdfunding makes it difficult to attribute any specific kind of value cocreation to any one actor. No limits are set for participation, and one individual may sometimes behave as a consumer while also acting as a financer or expert on other occasions. In Figure 4, we observe how different categories of value propositions (that Frow et al., 2014 refer to as “metaphors”) frame different kinds of relationships among actors who cocreate value at every level.

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Figure 4.

Value proposition as a framework for value cocreation in a crowdfunding ecosystem.

Following the six categories of value cocreation offered by Frow et al (2014) and the ecosystem levels established by Chandler and Vargo (2011), the crowdfunding ecosystem consists of three levels.

Discussion

On the basis of the findings of the present research, crowdfunding can be considered a service ecosystem, a context in which eight actors “come together” to create positive synergies to the benefit of all participants. Crowdfunding service ecosystems are complex in the sense described by Gummesson (2006a), because these ecosystems involve the participation of many different actors and include much broader structures and functions than mere finance. Indeed, structurally and functionally, they enable value cocreation through the application of the resources of all participants in order to create a market-oriented and relationship-based market offering. Chandler and Vargo (2011), Lusch et al. (2010), and Frow and Payne (2011) have suggested three conditions under which a network can be considered an ecosystem. All three conditions are present in the crowdfunding context:

Service offerings are coproduced.

As stated by Frow et al (2014: 339) “value propositions represent a fundamental component of marketing strategy, as they determine resource commitment (…). A value proposition supports the well-being of the ecosystem as it sets out the resource sharing that sustains each actor.” The present research frames value cocreation as value proposition and analyzes value propositions at each level of the crowdfunding ecosystem to offer a framework for strategic planning. Although the empirical research for this article took place in relation to the crowdfunding context, the theoretical approach can be applied to other systems or ecosystems.

Implications, limitations, and directions for future research

The present article has important implications for practitioners and scholars. Relationships between actors have traditionally been an influential factor in the management of cultural organizations (Hume and Mort 2008; Quero and Ventura, 2009). Although relational marketing theories already contained the stakeholder perspective (Frow and Payne, 2011), the “crowdfunding ecosystem” proposed here constitutes a significant contribution to the theories of ecosystems. It is therefore necessary from a strategic planning point of view to complete the following actions when an ecosystem is identified:

Identification of all of the actors in an arts crowdfunding service ecosystem.

The current research also includes an analysis of the processes carried out in each of the different types of cocreation and for each of the various actors involved. The context provided by social networks and the Internet means that, until now, this form of value exchange has been of particular relevance from the perspective of strategy planning and design.

In terms of implications for scholars, the present article builds on FP 7 and FP 10 by concluding that the ecosystem approach is needed to obtain a full understanding the new service model involved in crowdfunding. The results confirm the research propositions:

P1: The crowdfunding phenomenon can be considered a service ecosystem.

The present research could be used as a foundation for future studies exploring in greater depth the types of value created in crowdfunding, the practices involved in such value creation, and the marked tendency towards interconnection between agents that facilitates the emergence and maintenance of crowdfunding ecosystems. It would also be interesting to analyze what could be learned from crowdfunding and how innovative strategies grounded in value networks could be developed in other contexts. Further research could also address some of the limitations of the current study that arose from the research context. In the current study, specific cases of crowdfunding featured on the most representative platforms in Spain were selected for analysis. The sampling design could be improved by broadening the type of cultural projects considered and by including the experiences of projects in other countries in the analysis. It would be interesting also to check the validity of the theoretical model developed in environments other than the cultural setting. Platforms such as Verkami are increasingly interested in featuring other kinds of enterprises in addition to cultural and social projects. To this end, Lanzanos has recently launched Seedquick (https://www.seedquick.com/), which offers a space for both business and technology crowdfunding projects. Furthermore, an in-depth study of the factors that underlie the emergence of sustainable ecosystems would be useful. Finally, the phenomenon of crowdfunding is just one formula which, enabled by new technologies and the internet, has provided a suitable environment for certain projects. However, the continued development of technology and the growing inter-relationship between diverse actors that technology allows will continue to facilitate the development of new models, which it will be interesting to include and consider from both a theoretical and an empirical point of view.

From the present research, we conclude that the crowdfunding context in the cultural sector in Spain acts as a service ecosystem, where eight kinds of actors such as the creative core, the platform, financing customers, nonfinancing customers, investors, experts, and public institutions cocreate eight types of value (co co-ideation, co-evaluation of ideas, co-design, co-test, co-launch, co-investment, co-consumption, and co-authoring). These kinds of value cocreation can be framed as six value proposition categories or metaphors: promise, proposal, invitation to play, bridge connecting our worlds, wild card, and journey to a destination. Future research will increase our knowledge of value proposition strategies and provide a greater understanding of how crowdfunding operates in sectors other than the creative industries and in other countries.