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Cracking the Code of Mass Customization
 

Cracking the Code of Mass Customization

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Frank PILLER

Frank PILLER
FutureShoe International Forum - Bologna 2011

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    Cracking the Code of Mass Customization Cracking the Code of Mass Customization Document Transcript

    • SPRING 2009 V O L . 5 0 N O. 3 Fabrizio Salvador, Pablo Martin de Holan and Frank Piller Cracking the Code of Mass CustomizationPlease note that gray areas reflect artwork that has beenintentionally removed. The substantive content of the ar-ticle appears as originally published. REPRINT NUMBER 50315
    • MARKETINGCracking the Code ofMass CustomizationMost companies can benefit from mass customization, yet few do. The key is to think of itas a process for aligning a business with its customers’ needs.BY FABRIZIO SALVADOR, PABLO MARTIN DE HOLAN AND FRANK PILLERTHE CONCEPT OF mass customiza-tion makes sense. Why wouldn’t peoplewant to be treated as individual custom-ers, with products tailored to theirspecific needs? But mass customizationhas been trickier to implement than firstanticipated, and many companies souredon the approach after a number of high-profile flops, including Levi Strauss &Co.’s failed attempt at manufacturingcustom jeans. Now, executives tend tothink of mass customization as a fasci-nating but impractical idea, the preserveof a small number of extreme cases, suchas Dell Inc. in the PC market. Our research suggests otherwise. Overthe past decade, we have studied mass cus- THE LEADINGtomization at a number of different QUESTIONorganizations, including a survey of more How canthan 200 manufacturing plants in eight companiescountries. (See “About the Research,” benefitp. 72.) From that investigation, we found from mass customization?that mass customization is not some ex-otic approach with limited application. FINDINGS Managers mustInstead, it is a strategic mechanism that is tailor the process toapplicable to most businesses, provided an existing business — ratherthat it is appropriately understood and deployed. The key is to view it basically as a process for align- than vice versa.ing an organization with its customers’ needs. That is, mass customization is not about achieving Three capabilities are required:some idealized state in which a company knows exactly what each customer wants and can manu- (1) identifying the product attri-facture specific, individualized goods to satisfy those demands — all at mass-production costs. butes along whichRather, it is about moving toward these goals by developing a set of organizational capabilities1 that customer needs diverge, (2) reusingwill, over time, supplement and enrich an existing business. or recombining existing resources That set of fundamental capabilities is threefold: (1) the ability to identify the product attributes and (3) helpingalong which customer needs diverge, (2) the ability to reuse or recombine existing organizational customers deter- mine or build theirand value-chain resources and (3) the ability to help customers identify or build solutions to their own solutions.WWW.SLOANREVIEW.MIT.EDU SPRING 2009 MIT SLOAN MANAGEMENT REVIEW 71
    • MARKETING own needs. Admittedly, the development of these ca- The software enables consumers to build virtual pabilities requires changes that are often difficult models, or “avatars,” of themselves that allow them because of powerful inertial forces in an organiza- to evaluate (by virtually trying on or using) products tion, but that makes the argument more compelling: from retailers like adidas, Best Buy, Levi’s and Sears. Those companies that are able to develop the capa- More than 10 million users have already signed up bilities will be able to enjoy long-lasting competitive for the service, and the early results are impressive: advantages. In addition, we believe that many obsta- Land’s End Inc. reports an increase in average order cles can be overcome by using a variety of approaches, value of 15% and a jump in conversion rate of 45%.ABOUT THE and that even small improvements can reap substan- What do these examples have in common? Re-RESEARCH tial benefits. The trick is to remember that there is no gardless of product category or industry, they haveThe findings reported in one best way to mass customize: Managers need to all turned customers’ heterogeneous needs into anthis article are the results tailor the approach in ways that make the most sense opportunity to create value, rather than a problemof a number of researchprojects. The fundamental for their specific businesses. to be minimized, challenging the “one-size-fits-all”concepts and ideas come assumption of traditional mass production. To reapfrom a large-scale, multi- Understanding Mass Customization the benefits of mass customization, though, manag-respondent internal survey of The term “mass customization” was first popular- ers need to think of it not as a stand-alone business238 manufacturing plants ineight countries: the United ized by Joseph Pine, who defined it as “developing, strategy for replacing production and distributionStates, Germany, Italy, Swe- producing, marketing and delivering affordable processes but as a set of organizational capabilitiesden, Finland, Spain, Austria goods and services with enough variety and cus- that can help a company better align itself with itsand Japan.i Additionally, this tomization that nearly everyone finds exactly what customers’ needs.article integrates findings they want.”2 In other words, the goal is to providefrom multiple researchprojects on mass customiza- customers what they want when they want it. Con- Three Capabilities Requiredtion and theoretical insights sider the following examples. Of course, any approach to mass customization mustgained from more than a de- Pandora.com relieves people of having to channel- take into account various factors that are either in-cade of research on the topic. surf through radio stations to find the music they dustry or product specific. But through our researchMultiple methodologies andperspectives were utilized, like. Customers submit an initial set of their pre- we have identified three common capabilities thatincluding experiments,ii a ferred songs, and from that information the will determine the fundamental ability of a companylongitudinal three-year case company identifies a broader set of music that fits to mass-customize its offerings. (See “Three Funda-study,iii additional multiple their preference profile and then broadcasts those mental Capabilities.”)3case studiesiv and conceptual songs as a custom radio channel. As of Decemberpapers.v Some of this re-search is described in two 2008, Pandora.com had more than 21 million lis- 1. Solution Space Development A mass custom-books on the subject.vi teners who had created 361 million custom radio izer must first identify the idiosyncratic needs of its stations that play 61 million songs from 60,000 art- customers, specifically, the product attributes along ists every day. which customer needs diverge the most. (This is in Customers of Bayerische Motoren Werke AG stark contrast to a mass producer, which must focus can use an online tool kit to design the roof of a on serving universal needs that are ideally shared by Mini Cooper with their very own graphics or pic- all target customers.) Once that information is ture, which is then reproduced with an advanced known and understood, a business can define its “so- digital printing system on a special foil. The tool kit lution space,” clearly delineating what it will offer — has enabled BMW to tap into the custom after-sales and what it will not. Obviously, correlating market, which was previously owned by niche com- heterogeneous customer needs with differentiated panies. In addition, Mini Cooper customers can product attributes, validating product concepts and also choose from among hundreds of options for collecting customer feedback can be costly and com- many of the car’s components, as BMW is able to plex, but several approaches can help. manufacture all cars on demand according to each The first is to provide customers with a software buyer’s individual order. design tool like a CAD system but with an easy-to-use My Virtual Model Inc., based in Montreal, is interface and a library of basic modules and function- changing the very nature of the buying experience. alities. Using so-called innovation tool kits, customers72 MIT SLOAN MANAGEMENT REVIEW SPRING 2009 WWW.SLOANREVIEW.MIT.EDU
    • can by themselves translate their preferences directly A company could, for instance, eliminate optionsinto a product design, highlighting unsatisfied needs that are rarely explored or selected, and it could addduring the process. The resulting information can more choices for the popular components. In addi-then be evaluated and potentially incorporated by the tion, customer feedback can even be used tocompany into its solution space. When Fiat S.p.A. was improve the very algorithms that a particular ap-developing its retro, award-winning Fiat 500, for ex- plication deploys. When someone skips a song thatample, the automaker created Concept Lab, an Pandora.com has suggested, for example, that in-innovation tool kit that enabled customers to express formation is not just used to provide bettertheir preferences freely regarding the interior of the personalization of the music stream for that par-car long before the first vehicle was built. The com- ticular individual. It is also aggregated with similarpany received more than 160,000 designs fromcustomers — a product-development effort that no THREE FUNDAMENTAL CAPABILITIESautomaker could replicate internally. And Fiat allowed Mass customization requires three fundamental capabilities: solution spacepeople to comment on others’ submissions, providing development, robust process design and choice navigation. Various tools anda first evaluation of those ideas. Of course, mass pro- approaches are available to help companies develop those capabilities.ducers can also benefit from innovation tool kits, butthe technology is particularly useful for mass customi- CAPABILITY APPROACHES TO DEVELOP CAPABILITIESzation because it can be deployed at low cost for large Solution Space Innovation tool kits: Software that enables largepools of heterogeneous customers; in other words, Development pools of customers to translate their preferencesscalability is the key here.4 Identify the product into unique product variants, allowing each cus- attributes along tomer to highlight possibly unsatisfied needs. After a company has collected data about its which customercustomers’ needs, it has to interpret and render that Virtual concept testing: An approach for needs diverge efficiently submitting scores of differentiatedinformation in the form of product concepts that product concepts to prospective customerscustomers can then review. But the sheer number via virtual prototype creation and evaluation.of prototype variants that might be generated can Customer experience intelligence: A tool formake the process daunting. Consequently, some continuously collecting data on customer transac-companies have implemented an approach called tions, behaviors or experiences and analyzing that information to determine customer preferences.“virtual concept testing.”5 Take, for example, adidasAG, which used to produce more than 230,000 Robust Process Design Flexible automation: Automation that is not Reuse or recombine fixed or rigid and can handle the customization offootwear samples every season to sell an assortment existing organiza- tangible or intangible goods.of 55 million sneakers distributed among more tional and value-chain Process modularity: Segmenting existing orga-than 10,000 SKUs. But through the use of My Vir- resources to fulfill a nizational and value-chain resources into modules stream of differenti-tual Model technology, adidas has been able to ated customers needs that can be reused or recombined to fulfill differ-replace many of the physical prototypes with vir- entiated customers’ needs.tual ones that merchandisers can then sample on Adaptive human capital: Developing managers and employees who can deal with new and am-their virtual models. As a result, adidas expects to biguous tasks.save millions of dollars each season. In developing a solution space, companies Choice Navigation Assortment matching: Software that matches Support customers the characteristics of an existing solutions spaceshould consider incorporating data not just from in identifying their (that is, a set of options) with a model of the cus-current and potential customers but also from own solutions while tomers needs and then makes productthose who have taken their business elsewhere. minimizing complex- recommendations. ity and the burdenConsider, for example, information about products of choice Fast-cycle, trial-and-error learning: An approach that empowers customers to buildthat have been evaluated but not ordered. Such data models of their needs and interactively testcan be obtained from log files generated by the the match between those models and thebrowsing behavior of people using online configu- available solutions.rators. By systematically analyzing that information, Embedded configuration: Products that “under-managers can learn much about customer prefer- stand” how they should adapt to the customer and then reconfigure themselves accordingly.ences, ultimately leading to a refined solution space.WWW.SLOANREVIEW.MIT.EDU SPRING 2009 MIT SLOAN MANAGEMENT REVIEW 73
    • MARKETING feedback from millions of other customers to pre- around configurable processes (called “engage- vent the system from making that kind of incorrect ment models”). The objective is to fix the overall recommendation in the future. architecture of even complex projects while re- taining enough adaptability to respond to the 2. Robust Process Design A mass customizer also specific needs of each client. needs to ensure that an increased variability in cus- To ensure the success of robust process designs, tomers’ requirements will not significantly impair companies need to invest in adaptive human capi- the company’s operations and supply chain.6 For tal. Specifically, employees and managers have to this, the business needs a robust process design — be capable of dealing with novel and ambiguous the capability to reuse or recombine existing tasks to offset any potential rigidness that is organizational and value-chain resources — to embedded in process structures and technologies. deliver customized solutions with near mass-pro- After all, machines aren’t capable of determining duction efficiency and reliability. But how can what a future solution space will look like. companies reach that state? That task clearly requires managerial decision One possibility is through flexible automation. making, not software algorithms. Capital One Although the words “flexible” and “automation” Financial Corp., for example, rightly recognizes might have been contradictory in the past, that’s no that its business developers are the brains of its longer the case. In the auto industry, robots and au- mass-customization business. These individuals tomation are compatible with previously unheard-of are not ordinary employees: They are screened forSkepticism levels of versatility and customization. Even process special skills and attitudes that Capital One hasof mass industries (pharmaceuticals, food and so on), once identified as crucial for the position.customization synonymous with rigid automation and large batches, now enjoy levels of flexibility once consid- 3. Choice Navigation Lastly, a mass customizeris partly a ered unattainable. Similarly, many intangible goods must support customers in identifying their prob-consequence and services also lend themselves to flexible auto- lems and solutions while minimizing complexityof how the mated solutions, frequently based on the Internet. In and the burden of choice.8 It is important to remem-concept has the case of the entertainment industry, increasing ber that when a customer is exposed to myriadoften been digitalization is transferring the entire product de- choices, the cost of evaluating those options can eas-oversimplified livery system from the real to the virtual world. ily outweigh the additional benefit from having soand vulgarized. A complementary approach to flexible auto- many. The resulting syndrome has been called the mation is process modularity, which can be “paradox of choice,” in which too many options can achieved by thinking of operational and value- actually reduce customer value instead of increasing chain processes as segments, each one linked to a it.9 In such situations, customers might postpone specific source of variability in the customers’ their buying decisions and, worse, classify the vendor needs.7 As such, the company can serve different as difficult and undesirable. To avoid that, a company customer requirements by appropriately recom- can provide choice navigation to simplify the ways in bining the process segments, without the need to which people explore its offerings. create costly ad-hoc modules. BMW’s Mini fac- One effective approach is “assortment matching,” tory, for instance, relies on individual mobile in which software automatically builds configura- production cells with standardized robotic units. tions for customers by matching models of their BMW can integrate the cells into an existing sys- needs with characteristics of existing solution spaces tem in the plant within a few days, thus enabling (that is, sets of options). Customers then only have to the company to adapt quickly to unexpected evaluate the configurations, which saves consider- swings in customer preferences without extensive able effort and time in the search process. Using the modifications of its production areas. Process My Virtual Model software, for example, customers modularity can also be applied to service indus- build avatars of themselves by selecting different tries. International Business Machines Corp., for body types, hair styles, facial characteristics and so example, has been redesigning its consulting unit on. From that information, the system can then74 MIT SLOAN MANAGEMENT REVIEW SPRING 2009 WWW.SLOANREVIEW.MIT.EDU
    • recommend items out of the full assortment of agiven online merchant.10 But customers might not always be ready tomake a decision after they’ve received recommen-dations. They might not be sure about their realpreferences, or the recommendations may not ap-pear to fit their needs or taste. In such cases,software that incorporates fast-cycle, trial-and-error learning can help customers interactivelyconduct multiple sequential experiments to testthe match between the available options and theirneeds. Consider the online shoppers at 121Time.com, a leading provider of mass-customized Swisswatches. Those consumers might have a generalidea of what they want, but while using an onlineconfigurator to play around with various options,combining colors and styles, they can actually seehow one choice influences another and affects the the widespread skepticism is partly a consequence ofentire look of a watch. Through that iterative process, how the concept has often been oversimplified andthey learn about their own preferences — impor- vulgarized. Specifically, it has frequently been por-tant information that is then represented in trayed in terms of an “ideal state” in which a companysubsequent configurations. knows perfectly how to perform several Herculean Other companies are pushing the boundaries of tasks: thoroughly understand what its customers’choice navigation even further by completely auto- preferences are, completely mitigate the trade-offsmating the process. Take, for instance, recent between product variety and performance, simplifyproducts that “understand” how they should adapt the way its offerings are presented and produce cus-to the customer and then reconfigure themselves tomized items at mass-production costs. Achievingaccordingly. Equipped with so-called embedded that ideal state is impossible and even the so-calledconfiguration capability, these products might be champions of mass customization have fallen short.standard items for the manufacturer but, paradoxi- Dell, for one, requires a sophisticated call center tocally, the user experiences a customized solution. assist customers who have trouble configuring a per-Such is the case with the Adidas 1, a running shoe sonal computer online. And if the company hasequipped with a magnetic sensor, a system to adjust indeed achieved perfect mass customization, whythe cushioning and a microprocessor to control the does it charge exaggerated prices for options that fallprocess. When the shoe’s heel strikes the ground, outside its well-defined mass-purchasing agree-the sensor measures the amount of compression in ments with suppliers?its midsole and the microprocessor calculates So the question then becomes, what does masswhether the shoe is too soft or too firm for the customization really mean in practice? We believewearer. A tiny motor then shortens or lengthens a that managers should think of the implementationcable attached to a plastic cushioning element, of mass customization as a process, akin to movingmaking it more rigid or pliable. along a continuum whose limits are mass produc- tion at one end and the ideal state of massA Journey, Not a Destination customization at the other. A company’s locationMany managers have rejected mass customization on that spectrum is determined by the three crite-outright, simply on the preconception that it won’t ria discussed earlier: solution space development,work in their business. Of course, mass customiza- robust process design and choice navigation. (Seetion should never be implemented without a critical “The Mass Production-Mass Customizationeye, and this approach is not a universal solution. But Continuum,” p. 76.) When implementing massWWW.SLOANREVIEW.MIT.EDU SPRING 2009 MIT SLOAN MANAGEMENT REVIEW 75
    • MARKETING customization, a company might decide to improve based products, followed by the use of a configurator all three capabilities simultaneously, or it could in sales and order processing. Then the company focus on one or two of them as a priority, depend- began mass production of standard components in ing on the state of technology and competition in the Far East, with final assembly (per a customer’s its industry. order) at various sites around the world. The results: In other words, mass customization is a process Delivery time for a complete system has plunged rather than a destination — a process that can reap from 400 to 16 days, costs have decreased and prod- significant benefits even if an organization remains uct innovation has improved.11 Now the company is trying to apply the same mass-customization prin- ciples to its after-sales services, which are a majorTHE MASS PRODUCTION-MASS source of revenues and profits.CUSTOMIZATION CONTINUUMManagers should think of mass customization as a process in which a company moves Overcoming Powerful Inertiaaway from mass production toward mass customization by building three organiza-tional capabilities (solution space development, robust process design and choice The success of companies like APC notwithstanding,navigation). During that process, a company might decide to improve all three capabili- executives should never underestimate the chal-ties simultaneously or, rather, to prioritize one or two of them. Dell, for instance, has lenges of implementation. Take, for instance, Deereperfected its capability to define its solution space and to set up very robust processes, & Co., one of the world’s largest manufacturers ofbut the company now needs to improve its choice navigation. Currently, Dell customersneed to know pretty clearly which computer they want ahead of time, whereas many garden equipment. To keep up with its market forwould benefit from having a recommendation system that would lead them to the best premium products, which had been evolving towardproduct based on their individual personal needs. greater fragmentation and customization for more than a decade, John Deere’s lawn and garden equip- Mass Mass ment division began to offer more products, but that Production Customization then resulted in a proliferation of parts and pro- Solution Space Development cesses. Divisional managers were aware of this, and Understanding customers’ idiosyncratic needs they knew that they could save millions of dollars every year by simplifying their product platforms. Robust Process Design Reuse and/or recombine Yet they stubbornly resisted the change. In fact, it organizational resources to fulfill took Deere more than a decade to realign its solution Dell different customers’ needs efficiently space to the customer base and to add flexibility to its Choice Navigation Supporting the customer in identifying value chain. And this happened only after the very appropriate solutions without getting confused survival of the business was at stake. In our research, we were repeatedly amazed at the difficulty compa- far from the “pure” ideal of the approach. So, rather nies had in achieving even just moderate than trying to achieve some state of idealized per- improvements along the three fundamental capabil- fection, the goal for companies should be to ities of mass customization. Managers typically had improve continually their solution space develop- to overcome powerful inertial forces in the organiza- ment, robust process design and choice navigation. tion, with the strongest resistance tending to come Even small improvements can enable businesses to from the following areas:12 attain some strategic differentiation and competi- tive advantage, and success in one area can help Marketing Focus For mass producers, the focus of build momentum for changes in another. the marketing group is not about spotting differences Consider American Power Conversion Corp., a among customer needs; it’s about identifying and ex- leading manufacturer of network and data center ploiting commonalities. Consequently, traditional equipment. APC has been relentlessly improving its marketers often lack the appropriate knowledge and value chain for more than a decade, progressing from tools required by a mass customizer and, when faced its traditional (and costly) engineering-to-order with the addition of more variety in product lines, are model and moving toward mass customization. The likely to (1) rely unimaginatively on outdated product journey started with the development of module- differentiation criteria that were successful in the past76 MIT SLOAN MANAGEMENT REVIEW SPRING 2009 WWW.SLOANREVIEW.MIT.EDU
    • or (2) mimic differentiating attributes introduced by lead to serious failures. Take, for example, the wide-competitors. Either approach will likely fail to tap into spread belief that mass customization entailsunexploited customers’ heterogeneities. building products to order. That is not always true. As discussed earlier, customers are looking forAccounting Procedures With mass production, products that fit their needs, and they do not neces-detailed accounting procedures are not required to sarily care whether those offerings are physicallycompute and allocate to specific product offerings built to their order or whether those items comethe portion of manufacturing and engineering from a warehouse — just as long as their needs areoverhead that results from parts proliferation, sim- fulfilled at a reasonable price. Consider Sears Hold-ply because there is little or no variety. Consequently, ings Corp. and its multibillion-dollar onlinesuch organizations will often have trouble deter- business that uses avatars and style-matching tech-mining the precise cost implications of expanding nology to help customers browse through countlesstheir product offerings, and they can fail to appre- products, including kitchen appliances and furni-ciate the advantages of parts standardization. When ture. Sears focuses on personalizing the shoppingthat happens, costs can easily spiral out of control. experience but not its products, and the results at some business units have been impressive: double-Design Culture In mass production, the emphasis digit increases in the average order value.during product development is on design unique- The fundamental message is that a companyness or on minimizing the variable cost of newly should “customize its mass-customization strat-developed components. This leads to designs of egy”13 based on the requirements of its customermaximal uniqueness or the use of ad hoc parts with base, the state of the competition and the technologyminimal cost. With mass customization, the focus available. It should not blindly use successful massis instead on designs that have synergy with other customizers as templates to copy. After all, mass cus-designs, that is, designs that share parts and processes tomization is fundamentally not about standardas part of the solution space. practices; it is about an entrepreneurial endeavor that is broadly applicable to any business for whichInvestment Criteria The dominant investment customers might be willing to pay for tailored solu-logic for a mass producer is the quest for economies tions or experiences. Indeed, the time has come toof scale, which tends to favor rigid fixed assets that view mass customization as a strategic mechanismare unlikely to fit mass customization. This problem to align an organization with its customers’ needs byis exacerbated by the “sunk costs” syndrome: Manag- deploying three critical capabilities. Ultimately, theers will often resist divesting an investment they challenges of mass customization suggest a potentialmade in the past, even if it’s no longer appropriate. strategic value of those three capabilities — after all, what is hard to develop will be difficult to copy, andValue-Chain Constraints Reconfiguring a value as such the capabilities can be a powerful source ofchain that was originally conceived for volume pro- sustainable competitive advantage.duction in order to accommodate a variable Fabrizio Salvador is a professor of operationsproduct mix can present a number of problems. An management at the Instituto de Empresa Businessexisting corporate purchasing policy, for example, School and a founding member of the MIT Smartcan make it difficult for a division to select a new Customization Group. Pablo Martin de Holan is the chairman of the Entrepreneurial Managementbase of suppliers. Moreover, external structural Department of the Instituto de Empresa Businessconstraints within supply and distribution chan- School and a professor of strategy and organizationnels can also pose significant obstacles. at INCAE Business School. Frank Piller is a professor of management and chair of the Technology & Inno- vation Management Group of RWTH AachenCustomizing Mass Customization University in Germany. He is also a cofounder of theOne of the biggest lessons from our research is that MIT Smart Customization Group and a founding partner of Think Consult, a management consul-there is no one best way to mass-customize, and tancy. Comment on this article or contact thetrying to copy successful companies like Dell can authors at smrfeedback@mit.edu.WWW.SLOANREVIEW.MIT.EDU SPRING 2009 MIT SLOAN MANAGEMENT REVIEW 77
    • MARKETING ACKNOWLEDGMENTS body measurements of customers and then recom- mending the best-fitting pair of jeans out of the existing The authors are grateful for the support of the Spanish assortments of many major brands. From their users’ Ministry of Science and Education (grant SEJ2007- perspective, Zafu is offering a product that fits like tailor- 67582-C02-01). made jeans. But from the fulfillment perspective, Zafu is just matching standard inventory with individual needs. REFERENCES 11. The APC case is documented in L. Hvam, “Mass Customization in the Electronics Industry, International ” 1. For a definition of the concept of strategic capabilities, Journal of Mass Customization 1, no. 4 (2006): 410-426. see K.M. Eisenhardt and J.A. Martin, “Dynamic Capabili- ties: What Are They?” Strategic Management Journal 12. M. Rungtusanatham and F Salvador, “Transitioning . 12, no. 10 (2000): 1105-1121. from Mass Production towards Mass Customization: Hindrance Factors, Structural Inertia and Transition Haz- 2. J.B. Pine II, “Mass Customization — The New Frontier ard, Production and Operations Management 17 no. 3 ” , in Business Competition” (Cambridge, Massachusetts: (2008): 385-396. Harvard Business School Press, 1993). 13. J. Lampel and H. Mintzberg, “Customizing Customi- 3. Paul Zipkin discussed some of the capabilities of mass zation, Sloan Management Review 38, no. 1 (1996): ” customization in an earlier article, P Zipkin, “The Limits . 21-30. of Mass Customization, MIT Sloan Management Re- ” view 42, no. 3 (2001): 81-87 The derivation of the three . i. F Salvador, M. Rungtusanatham, A. Akpinar and C. . fundamental capabilities builds on work by F Salvador, . Forza, “Strategic Capabilities for Mass Customization, ” M. Rungtusanatham, A. Akpinar and C. Forza, “Strategic Journal of Operations Management, in press. (Note: A Capabilities for Mass Customization: Theoretical Synthe- shortened version of the article is included in the 2008 sis and Empirical Evidence, Academy of Management ” Academy of Management Best Paper Proceedings.) Proceedings (2008): 1-6. ii. N. Franke and F Piller, “Value Creation by Toolkits . 4. Spotting unaddressed differences among customers for User Innovation and Design: The Case of the Watch is not an easy task because information about custom- Market, Journal of Product Innovation Management 21, ” ers’ unfulfilled needs is “sticky” — that is, difficult to no. 6 (2004): 401-415. access and codify for the solutions provider. While this iii. M. Rungtusanatham and F Salvador, “Transitioning . problem is shared by both mass producers and mass from Mass Production to Mass Customization — Hin- customizers, it is more demanding for the latter because drance Factors, Structural Inertia and Transition Hazard, ” of the extreme fragmentation of customers’ prefer- Production and Operations Management, in press. ences. The notion that the information regarding customer needs is sticky has been discussed extensively iv. S. Ogawa and F Piller, “Reducing the Risks of .T. by Eric von Hippel. See E. von Hippel, “Economics of New Product Development, MIT Sloan Management ” Product Development by Users: The Impact of ‘Sticky’ Review 47 no. 2 (2006): 65-71; P Martin de Holan, N. , . Local Information, Management Science 44, no. 5 ” Phillips and T. Lawrence, “Managing Organizational (1998): 629-644. Ogawa and Piller discuss the resulting Forgetting, MIT Sloan Management Review 46, no. 4 ” problems in S. Ogawa and F Piller, “Reducing the Risks .T. (2004): 45-51; and F Salvador, C. Forza and M. Rungtu- . of New Product Development, MIT Sloan Management ” sanatham, “Modularity, Product Variety, Production Review 47 no. 2 (2006): 65-71. , Volume and Component Sourcing: Theorizing Beyond Generic Prescriptions, Journal of Operations Manage- ” 5. Virtual concept testing has been described in E. Dahan ment 20, no. 5 (2002): 549-575. and J.R. Hauser, “The Virtual Customer, Journal of Prod- ” uct Innovation Management 19, no. 5 (2002): 332-353. v. F Salvador, “Towards a Product Modularity Construct: . Literature Review and Reconceptualization, IEEE Trans- ” 6. J.B. Pine II, J.H. Gilmore and A.C. Boynton, “Making actions on Engineering Management 54, no. 2 (2007): Mass Customization Work, Harvard Business Review ” 219-240; F Piller, “Mass Customization: Reflections on .T. 71, no. 5 (1993): 108-118. the State of the Concept, International Journal of Flexi- ” 7. Ibid. ble Manufacturing Systems 16, no. 4 (2005): 313-334; and F Piller, K. Moeslein and C. Stotko, “Does Mass . 8. The “burden of choice” problem in mass-customiza- Customization Pay?” Production Planning & Control 15, tion systems was described first in C. Huffman and B.E. no. 4 (2004): 435-444. Kahn, “Variety for Sale: Mass Customization or Mass Confusion?” Journal of Retailing 74, no. 4 (1998): 491- vi. C. Forza and F Salvador, “Information Management . 513. Franke and Piller looked at this challenge in an for Mass Customization: Connecting Customer, Front- empirical study described in N. Franke and F Piller, . end and Back-end for Fast and Efficient Personalization” “Value Creation by Toolkits for User Innovation and De- (London: Palgrave Macmillan, 2007); and M.M. Tseng sign: The Case of the Watch Market, Journal of Product ” and F Piller, “The Customer Centric Enterprise: Ad- .T. Innovation Management 21, no. 6 (2004): 401-415. vances in Mass Customization and Personalization” (New York: Springer, 2003). 9. R. Desmueles, “The Impact of Variety on Consumer Happiness: Marketing and the Tyranny of Freedom,” Academy of Marketing Science Review 12 (2002). Reprint 50315. 10. Consider another example of matching: Zafu has cre- Copyright © Massachusetts Institute of Technology, 2009. ated a very profitable business at zafu.com by taking All rights reserved.78 MIT SLOAN MANAGEMENT REVIEW SPRING 2009 WWW.SLOANREVIEW.MIT.EDU
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