In the late 1990s, Levi Strauss & Co. announced to great fanfare that it would begin to create customized jeans. People could go in and have their measurements taken, and then design the pair of jeans they'd like. But while this sounded like a great idea, the project ultimately flopped.
In the abstract, mass customization makes sense. The goal is to provide customers what they want when they want it. And why wouldn't people want products tailored to their specific needs? But it's difficult to implement, and many companies have soured on the approach, especially after a number of high-profile flops, including Levi Strauss'. Now executives tend to think mass customization is a fascinating but impractical idea.
However, companies should understand that mass customization is not about achieving some idealized state in which a company knows exactly what each customer wants, and can develop those goods at mass-production costs. Rather, it's about developing a set of organizational capabilities that will, over time, supplement and enrich an existing business. There is no one best way to mass customize. Managers need to tailor their approaches in ways that make the most sense for their businesses.
Consider some recent successes. There's Pandora.com, which allows customers to submit songs they like. From that information, the company identifies a broader set of music that fits their customers' preferences and then broadcasts those songs as a custom radio channel. As of December 2008, Pandora.com had more than 21 million listeners who have created 361 million custom radio stations.
Another example is Bayerische Motoren Werke AG, which lets its customers use an online tool kit to design the roof of a Mini Cooper. The tool kit has allowed BMW to tap into the custom after-sales market. In addition, Mini Cooper customers can also choose from among hundreds of options for many of the car's components, as BMW manufactures all cars on demand according to each buyer's individual order.
In fact, there are some common capabilities that will determine companies' abilities to mass customize their offerings.
The first is developing “solution space.” A company needs to identify its customers' idiosyncratic needs -- specifically, the product attributes along which their customers' needs diverge the most. Then the organization can delineate what it will offer and what it won't.
In developing a solution space, companies should incorporate data not just from current and potential customers but also from those who have taken their business elsewhere. By systematically analyzing that information, managers can learn more about customer preferences, which will lead to a more refined solution space. A company could, for instance, eliminate options that are rarely explored or selected. And it could add more choices to the popular components. Companies can also use customer feedback to improve the algorithms a particular applications uses. When someone skips a song that Pandora.com has suggested, for instance, the company uses the information to provide a better personalized music stream, but it also aggregates the feedback from millions of others customers to prevent the system from making that kind of incorrect recommendation in the future.
The second capability involves having a robust process design, which means reusing or recombining existing organizational resources so that companies can create the various customized products. Organizations can do this by making their automation more flexible. Or they can create more process modularity, segmenting their resources into modules that can be reused or recombined. In either instance, they need to train their managers and employees to deal with these new and ambiguous tasks.
A third capability involves helping customers identify their problems and solutions while also minimizing the complexity and burden of choice. It's about establishing a middle ground. Too many options can be overwhelming and take too much time to sift through -- negatives that outweigh the benefit of having lots of choice. This is called the “paradox of choice” -- too many options actually reduces customer value instead of increasing it. Customers might postpone their buying decisions and, worse, classify the vendor as difficult and undesirable. To avoid that, companies should simplify the ways in which people explore their offerings.
Ultimately, when creating their mass customization strategies, companies must consider the requirements of their customer bases, the state of the competition and the technology available. They should not blindly use successful mass customizers as templates to copy. After all, mass customization isn't about standard practices. But if done successfully, mass customization can be a powerful source of competitive advantage.
This article is adapted from “Cracking the Code of Mass Customization,” by Fabrizio Salvador, Pablo Martin de Holan and Frank Piller, which appeared in the Spring 2009 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.