Rather, the combination of how and when they interact to make a product or provide a service is constantly changing in response to what each customer wants and needs. From continually trying to meet these demands, the mass-customization organization learns what new capabilities it requires.
Its employees are on a quest to increase their own skills, as well as those of the unit and the network, in a never-ending campaign to expand the number of ways the company can satisfy customers. Managers in these ever-changing settings are coordinators whose success depends on how well they perfect the links that make up the dynamic network.
They strive to make it ever easier and less costly for the process modules to come together to satisfy unique customer requests. And they lead the effort to increase the range of things that the organization can do. What all this boils down to is that mass customization is a totally different world from continuous improvement.
To exploit that opportunity, the organization must perpetually generate new product teams. The key to success is designing a linkage system that can bring together whatever modules are necessary—instantly, costlessly, seamlessly, and frictionlessly.
Continuous improvement can certainly be a subset of mass customization. The autonomous operating units within a mass customizer can and should strive to continuously improve their processes.
But as Toyota, for one, seems to have finally realized, mass customization generally cannot be a subset of continuous improvement. By doing this, Toyota ended up not succeeding at mass customization and, at the same time, undermining its continuous-improvement efforts.
For example, Toyota assumed that its work force had attained the skills needed to handle production of its rapidly growing range of product offerings. Rather than developing the loose network necessary to make a mass-customization organization work, Toyota managers turned to machines. Over time, this ended up weakening the skills of the workers and thus violated an essential tenet of continuous improvement.
It also caused internal friction. One action Toyota took was to invest heavily in robots. And the company installed computer-controlled spotlights illuminating the bins containing the right components.
These measures deprived employees of opportunities to learn and think about the processes and, therefore, reduced their ability to improve them. Another big problem at Toyota was that product proliferation took on a life of its own.
Like mindless continuous improvers, engineers created technically elegant features regardless of whether customers wanted the additional choices. In mass customization, customer demand drives model varieties. At Toyota, project leaders have overall responsibility for the development of a given model, but separate teams develop individual components, such as brake systems or transmissions, which ideally will be used in several models.
Project leaders felt that the intensifying pressure to share components was forcing them to compromise their models, and they began to resist. Other companies have also been attempting to achieve mass customization with less than optimal results. Some of their experiences highlight the potential pitfalls companies can encounter in trying to make this leap. Despite the fact so many companies are struggling, scores of others are joining the quest. The appeal is understandable.
Mass customization offers a solution to a basic dilemma that has plagued generations of executives. A company could pursue a strategy of providing large volumes of standardized goods or services at a low cost, or it could decide to make customized or highly differentiated products in smaller volumes at a high cost. In other words, companies had to choose between being efficient mass producers and being innovative specialty businesses.
Quality and low cost and customization and low cost were assumed to be trade-offs. This old competitive dictum was grounded in the seemingly well-substantiated notion that the two strategies required very different ways of managing, and, therefore, two distinct organizational forms. The mechanistic organization, so named because of the management emphasis on automating tasks and treating workers like machines, consists of a bureaucratic structure of functionally defined, highly compartmentalized jobs.
Managers and industrial engineers study and define tasks, and workers execute them. Employees learn their jobs by following rigid rules under tight supervision. In contrast, the organic organization, so named because of its fluid and ever-changing nature, is characterized by an adaptable structure of loosely defined jobs.
These are typically held by highly skilled craftsmen. They learn through apprenticeships and experience, are governed by personal or professional standards, and are motivated by a desire to create a unique or breakthrough product.
The mechanistic organization, whether in a manufacturing or a service setting, gives managers the control and predictability required to achieve high levels of efficiency. The organic organization yields the craftsmanship needed to pursue a differentiation or niche strategy. Each of these organizational forms has innate limitations, however, which in the past have forced managers to choose one or the other.
Almost all change is anathema to the mechanistic organization. And the artistry and informality at the heart of the organic organization defy efforts to regulate and control. The development of the continuous-improvement and the mass-customization models show that companies can overcome the traditional trade-offs. In other words, companies can have it all. Continuous improvement has enabled thousands of companies to realize lower costs than traditional mass producers and still achieve the distinctive quality of craft producers.
These companies are achieving low costs, high quality, and the ability to make highly varied, often individually customized products. Since achieving mass customization requires nothing less than a transformation of the business, managers must assess whether their companies must and whether in fact they can make the transformation.
Not all markets are appropriate for mass customization. Customers of commodity products like oil, gas, and wheat, for example, do not demand differentiation. In other markets, like public utilities and government services, regulation often bars customization. In some markets, the possible variations in services or products simply are of little value to customers. Also, variety in and of itself is not necessarily customization, and it can be dangerously expensive. Some consumer electronics retailers and supermarkets today are experiencing a backlash from customers confused by too broad a range of choices.
Continuous improvement will continue to be a very viable strategy for companies whose markets are relatively stable and predictable. But those companies whose markets are highly turbulent because of factors like changing customer needs, technological advances, and diminishing product life cycles are ripe for mass customization.
To have even a chance of successfully becoming a mass customizer, though, companies must first achieve high levels of quality and skills and low cost. For this reason, it seems impossible for mass producers to make the leap without first going through continuous improvement. Westpac, the Australian financial services giant, is a case in point. It spent huge sums attempting to become a mass customizer by automating both the creation and delivery of its products.
It wanted to install software building blocks that would allow it to create new financial products like mortgages and securities more quickly. Strategically, the move made sense. Deregulation had spawned a dizzying array of new products and services, and intensifying competition had caused significant downward pressure on prices. Westpac tried to leapfrog continuous improvement by going from mass production directly to mass customization.
The challenges of automating inflexible processes, building on ossified products, and trying to create a fluid network within a hierarchical organization—particularly at a time when the company was in poor financial condition due to intensifying competition in depressed markets—proved too difficult.
Westpac has had to scale back significantly its ambitious dreams of becoming a tailored-product factory. As we have stressed, even a company that has mastered continuous improvement must change radically the way it is run to become a successful mass customizer. A company must break apart the long-lasting, cross-functional teams and strong relationships built up for continuous improvement to form dynamic networks.
It must change the focus of employee learning from incremental process improvement to generating ever-increasing capabilities. The traditional mechanistic organization, aimed at achieving low-cost mass production, is segmented into very narrow compartments, often called functional or vertical silos, each of which performs an isolated task. Information is passed up, and decisions are handed down.
Compensation of employees, who are viewed as mere cogs in the wheel, is generally based on standardized, narrowly defined job levels or categories. The thought of producing mass quantities of customized products was not considered a possibility for many years.
In the past, a manufacturer had to choose a manufacturing strategy of either mass production of a limited product offering, or limited production of customized products Duray, Mass production manufacturing principles include the concepts of interchangeable parts, specialized machines, focus on the process of production, division of labor, economies of scale, product standardization and focus on operational efficiency Pine, These strategies can help to achieve efficient and cost effective production, but typically at the expense of variety.
Product variation is not handled well by traditional mass production techniques Anderson, Some companies have positioned themselves to provide customized products without sacrificing cost, quality or lead time. These companies are able to capitalize on the market advantages of customized products with the economies of scale associated with mass production Duray, Many topics of interest within the operations research community relate to mass customization principles.
Flexibility and agility are also integral to mass customization as well as operations research. Using E-business to communicate with customers is another field common to both O. As mentioned above, Ford and other members of the auto industry continually strive to give customers more options in their vehicle selections. Dell computers have a business strategy to provide custom assembled computers to match each individual customer's requirements.
Nike allows customers to order shoes from a site on the Internet. The customer chooses a base shoe design and then selects colors from a predefined list of options. The customer can also apply his or her logo beside the trademark Nike Swoosh symbol. Polo shirts can be ordered online, specifying the style, size, color and applying custom initials to the side opposite the Polo logo.
Many firms today are using mass customization to attract customers who do not want stock products, but are not willing to pay high prices for totally custom designed and manufactured goods. MRGBits is a designer and manufacturer of custom horse bits. Horse bits are somewhat like the jewelry business. There is a huge range in the cost of a custom bit, depending on the materials used, complexity of the bit and even the reputation of the designer.
Mike Gillespie, the owner of MRGBits, has been in the custom bit-making business for nearly 25 years. Although they are unique pieces of craftsmanship, they are designed to be functional working bits, not merely cosmetic display pieces. MRGBits uses many different techniques to provide a mass customization offering to its customers. This mass customization offering is MRGBits' core competency and its major competitive advantage over the competition in the market.
Gillespie describes three types of customers in the horse bit business. One type of customer wants a stock bit with little or no customization, but they want it immediately. This type of customer requires a supplier to stock finished goods in inventory and provide low-cost production. MRGBits has a minimal focus on this type of customer.
It represents less than 20 percent of the company's order volume. Another type of customer wants to design a truly custom bit with custom components.
These customers typically purchase from a craft manufacturer, who will make one-of-a-kind bits with all components being unique. MRGBits does not attempt to sell to this type of customer. Supporting this type of customer eliminates the ability to utilize many of the techniques associated with mass production.
Production efficiency is very difficult to achieve in this style of manufacturing environment. The third type of customer is the one that MRGBits targets as a customer base.
This customer group wants a bit that looks custom and has key custom features, but is willing to accept some standardized components. Part of the business strategy is to understand which features the customer is willing to pay for customization on and which features can be standardized. This type of customer represents the core business for MRGBits and accounts for 80 percent of its sales volume. This is the type of customer base where mass customization becomes a competitive advantage.
The strategies utilized by MRGBits to enable mass customization operations include product line rationalization, modularity and part standardization, Internet catalogs and order entry, supply chain design, lean manufacturing and total cost measurement.
Mass Customization Strategies Product line rationalization is the practice of focusing efforts on only those products that can be produced efficiently and are profitable. Other products are either dropped from the offering or outsourced. Most companies have structured methodical procedures for introducing new products into their line. Few companies put forth the same effort to remove products from their offering. At one time MRGBits had a product offering that included spurs, belt buckles and other forms of western jewelry.
Leatherwork was performed at MRGBits to produce some of the products offered. In order to focus operations on making bits, the most profitable portion of the business, these other product lines were discontinued from production.
Even today, Gillespie still receives requests from customers wanting custom-made jewelry. Specific bits have been dropped from the catalog due to low volume, complexity or similarity to another product. One bit in particular was dropped from the offering, because customers did not understand how to use the bit properly.
This resulted in confused and dissatisfied customers. Another bit was discontinued because of its similarity to another product. More often, however, managers will discover that they need a mix of some or all of the four approaches to serve their own particular set of customers. The approach most often associated with the term mass customization , collaborative customization is appropriate for businesses whose customers cannot easily articulate what they want and grow frustrated when forced to select from a plethora of options.
Paris Miki, a Japanese eyewear retailer that has the largest number of eyewear stores in the world, is the quintessential collaborative customizer.
The consumer and optician next collaborate to adjust the shape and size of the lenses until both are pleased with the look. In similar fashion, consumers select from a number of options for the nose bridge, hinges, and arms in order to complete the design.
Then they receive a photo-quality picture of themselves with the proposed eyeglasses. Finally, a technician grinds the lenses and assembles the eyeglasses in the store in as little as an hour. The adaptive approach is appropriate for businesses whose customers want the product to perform in different ways on different occasions, and available technology makes it possible for them to customize the product easily on their own. Rather than repeatedly having to adjust separate light switches until the right combination is found, the customer can quickly achieve the desired effect merely by punching in the programmed settings.
The cosmetic approach is appropriate when customers use a product the same way and differ only in how they want it presented.
Rather than being customized or customizable, the standard offering is packaged specially for each customer. Although personalizing a product in this way is, frankly, cosmetic, it is still of real value to many customers.
Witness the billions of dollars that consumers spend each year on such products as embellished T-shirts and sweatshirts. The Planters Company, a unit of Nabisco, chose cosmetic customization when it retooled its old plant in Suffolk, Virginia, in order to satisfy the increasingly diverse merchandising demands of its retail customers.
In the past, Planters could produce only long batches of small, medium, and large cans; as a result, customers had to choose from a few standard packages to find the one that most closely met their requirements.
Consider ChemStation of Dayton, Ohio, which mass-customizes a product that most of its competitors treat as a commodity: industrial soap for such commercial uses as car washes and cleaning factory floors.
This practice eliminates the need for customers to spend time creating or reviewing orders. They do not know which soap formulation they have, how much is in inventory, or when the soap was delivered. They only know—and care—that the soap works and is always there when they need it. Although each of the four companies has implemented a strikingly different customization strategy, all share an orientation that challenges the conventional concept of markets and products.
As mass production took hold in the hearts and minds of managers during the past century, the definition of a market shifted from a gathering of people for the sale and purchase of goods at a fixed time and place to an unknown aggregation of potential customers. Today as markets disaggregate, the definition is changing again: customers can no longer be thought of as members of a homogeneous market grouping. In fact, the concept of markets needs to be redefined still further as customization becomes more commonplace.
Economies of scale in manufacturing and distribution brought down the price of mass-produced goods so much that all but the most well-to-do customers were often willing to forgo their individuality and settle for standardized—but very affordable—goods. Still, the uniqueness of individual customers never went away; it was just subsumed in the averages of countless bell curves in every market-research study ever performed.
The concept began coming back into view when companies discovered segmentation in the s and niche marketing in the s. And so it seems that we have come to the end of a year progression. Or have we? In fact, the journey does not end with every customer being his or her own market. The next step, a widespread recognition that multiple markets reside within individual customers, will turn the entire notion of markets and customers completely inside out.
The idea that every customer is in different markets at different times and different places is not as heretical as it initially might sound. For instance, newspaper publishers have long recognized that most of their customers have more leisure time on Sundays to read the paper and accordingly have filled that edition with a greater number and wider variety of stories. Similarly, airlines, hotels, and car-rental companies find that the desires of their clients differ greatly depending on whether they are traveling for business or for leisure—and differ yet again when they combine the two.
Only those companies that take their approach to customization down to this level will gain access to the multiple markets within each of us. How can companies tackle this task? If the technological wherewithal exists, the easiest approach would be to design a product that could adapt to whatever market its user happened to be in—such as a car transmission that can be sporty for tooling down the coast or smooth for taking the in-laws out to dinner.
For frequently purchased goods and services, a company could work with individual customers first to identify the markets they potentially could be in at different times and in different circumstances and then to maintain a distinct profile for each possibility.
A real opportunity arises here because even the customers themselves may not realize these distinctions. Many people in many situations will discover things about themselves only in a collaborative dialogue with a trusted supplier. Together, customer and supplier will create the multiple markets within. Instead of focusing on homogeneous markets and average offerings, mass customizers have identified the dimensions along which their customers differ in their needs. These points of common uniqueness reveal where every customer is not the same.
Adept mass customizers have identified the dimensions along which their customers differ in their needs. To be effective, mass customizers must let the nature of these sacrifice gaps drive their individual approaches to customization. Paris Miki understood that consumers rarely have the expertise to determine which eyeglass design best fits their facial structure, desired look, and coloring, and therefore chose to collaborate with customers to help identify their largely unarticulated needs.
Lutron adopted adaptive customization because it knew that no two rooms have the same lighting characteristics and that both individuals and groups use any given room in multiple ways. Planters realized that each of its retail customers varied in how it wanted to receive and merchandise standard peanuts, so cosmetic customization was its favored choice. And ChemStation understood that although each of its customers had unique formulation and delivery needs, none of them wanted to be bothered with either the day-to-day procedures or the formulation of such a mundane part of its business as soap.
Altering the product itself for individual customers provides the most clear-cut means of customization. But adept mass customizers realize that customizing the actual product is only one way to create customer-unique value. Customizing the representation of the product—or how it is presented or portrayed to the customer—can be effective as well.
In fact, separating the product from its representation can provide a useful framework for considering which forms of customization are most appropriate for a given business. A cosmetic customizer changes only the representation of the product—the packaging in the case of Planters. Collaborative customizers change the product itself in addition to changing some aspect of the representation. A transparent customizer uses a standard representation to mask the customization of the product.
Each Lutron customer programs a lighting effect by adjusting bars that represent the intensity of each light in the room; the customer then can label the particular lighting effect. The following components also can change the form of an offering for individual customers:. The four companies that we focus on identified the critical customer sacrifice gaps in their businesses and then carefully identified not only what but also when to customize in an effort to create the greatest customer-unique value at the lowest possible cost.
Instead of taking a hit-or-miss approach, these four companies customized only where it counted. Instead of taking a hit-or-miss approach, successful companies customize their goods and services only where it counts. Customers in these industries have to make onetime decisions based on difficult and multidimensional trade-offs—trade-offs such as length for width, comfort for fit, or complexity for functionality.
Customizing the representation permits customers to participate in the design stage and play with the possibilities available to them.
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