We value our uniqueness. We have an innate desire to put our brand on everything. Starbucks knows this, and so do large manufacturers. They know that customers will pay more, even a lot more, to individualize their purchases – or better still, to interact with making the items.
Large-scale assembly lines use state-of-the-art controls to efficiently produce low-cost replicates. But such streamlined manufacturing is not intended to provide individual style expression. Enter the age of mass customization (MC) – a business model innovation that utilizes a company’s existing organizational excellence and process to enable truly differentiated product manufacture.
This is the opposite of Henry Ford’s “car painted any color so long as it is black” mentality. It allows corporations to expand market share, secure customer loyalty and capture exceptionally high margins. How high? Depending on the item, 50 to 500 percent more margin is possible.
According to Professor Frank Piller, codirector of the MIT Smart Customization Group and technology and innovation director at RWTH Aachen University, “Whenever customers are not getting what they need, business opportunities are opened.” Piller cites the growing number of single households, changing demographic structure and new awareness of quality and functionality as reasons why products must correspond exactly to the specific needs of the purchaser. [mc-500.com]
At the heart of MC are state-of-the-art supply-chain management, module-based components, robust product platforms and excellent 3-D computer graphic order processing. Successful firms retain economies of scale, yet give customers what they want, when they want it.
While the term has been used since 1993, it is the rapid expansion of e-commerce and sophistication of mobile devices that have enabled almost every company to participate. Harley-Davidson, BMW, Dell, Nike, Peterbilt and Mars are just a few examples of companies who have embraced MC. You can custom-style your Mini Cooper roof using great interactive graphics, configure the sleeper of a semi truck, or personalize a handbag and T-shirt. Moreover, customers can share their designs using social media, so customers become a marketing force.
Let’s say it’s February and you have no idea what “original” present to buy your Valentine. No need to panic: mymms.com will let you design colored candies with personal messaging. In return for this interaction and just-in-time manufacturing (about seven days), Mars profits up to 1,000 percent – a nice return for pretty wrapping that says, “I have thought of you.”
So, how does a company delight the individual customer? According to Piller, with the right digital toolkit. Successful websites provide fun, intuitive visual realism, and empower the customer with freedom to personally design “my” product. Customers need a simple and easy design template as a starting point, instead of a blank canvas. Piller estimates that about 50 percent of additional willingness to pay can be explained by the online experience and feeling of co-design. [configurator-database.com]
E-commerce opens the door to MC with simple user steps and delightful imagery; but it is a manufacturing process that postpones the point of differentiation, that enables the winning business innovation. Typically, a standardized portion of the product is produced during a first stage, while the “differentiated” portion is produced in the second, customer-integrated stage. Flexible automation is a common component. Digitalized additive manufacturing, robots with higher levels of versatility, and even process modularity (plug-and-play assembly robots) are being integrated into 21st-century MC portfolios.
Mass customization provides a guaranteed sale. There is no finished goods inventory risk, because the product is produced after an order has been placed and paid for. Beyond the pre-sale revenue, there is often the customer loyalty benefit of post-sale add-ons. Consider Harley-Davidson; not only can one design a bike online, but HD reaps continuing rich profits from post-purchase custom accessories.
There may be new thinking needed to implement modular manufacture on present lines, and provide customer-engaged design. But consider the number of upcoming consumers who play video games. This suggests MC business innovation should be a core competency and necessary part of your future success.
Mass customization can deliver long-lasting competitive advantages through adapted products and custom services. Most firms are already directing large resources into the burgeoning e-commerce market. With the added advantages gained by MC, even small changes to one’s business model and manufacturing platform can deliver substantial benefits.