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"It is impossible for ideas to
compete in the marketplace if no forum for The Business Forum Journal
Customized
consumer products: what really matters? By David J. Gardner
I often receive questions about whether or not a company is a mass customizer and why the whole world isn't moving to mass customization. Some customizers have been a bit miffed that I don't consider them to be a mass customizer. For me, the difference between customization and mass customization is as plain as night and day. For others, the differences are much murkier. Mass customization isn't appropriate for every manufactured product. There will always be a need for mass produced products. This posting is created around an email thread that, hopefully, will make the differences a bit clearer and clarify what really matters. Eric: My name is Eric Heinbockel. I am one of the founders of Chocomize.com, one of the first producers of customized chocolate bars in North America. I have read your book Mass Customization: An Enterprise-Wide Business Strategy as well as many of your articles for Fast Company. It seems to me that most of the literature on mass customization that I have come across (including Joe Pine) covers large manufacturing like configurable cars, computer systems, etc. In the United States, customers have come to expect mass customization in cars and computers, but, there is a disconnect when they are not familiar with the ability to customize their own smaller, daily use or consumer products. As a result, we have teamed up with a number of non-competing co-creation companies like shirtsmyway.com (custom dress shirts), slantshackjerky.com (custom jerky), meandgoji.com (custom organic cereal), gemvara.com (custom jewelry), etc., in order to try and create awareness for mass customization on an everyday basis. I thought perhaps this subject, the growth of mass customization in everyday products and the disconnect in consumer understanding and awareness might be an interesting topic for your Fast Company blog. Dave: Thanks for reaching out, Eric. If I'm craving a candy bar, I'm likely not going to order one over the Internet--I'm going to run out to a store to obtain instant gratification. North Americans live for instant gratification. Most of us don't even finish a bottle of antibiotics when we are ill. And, you wonder why we don't plan ahead to order our chocolate bars? Most daily use or consumer products are produced under the mass production business paradigm and available through well-established retail channels. Under mass production, the consumer has choices at the point of purchase, but, cannot directly influence what is available in store fronts. For consumer and retail goods, the concept of producing customized products is still a bit foreign in the North American market. In essence, you are swimming upstream against 100 years of inertia. The mass customization business paradigm allows the customer to order exactly what they want--a manufacturer produces nothing until it has a confirmed order. And, while your customer can obtain much greater variety and personalization, they must wait. The "upside" is also a potential "downside." I confess to having adopted a bit of a "purist" stance about the use of the term "mass customization" and have written that many "customizers" really aren't "mass customizers." I offer this point of view not to create discomfort or discredit the efforts of companies offering customized products, but to try to maintain a consistent perspective and not introduce confusion about what mass customization truly is--its own business paradigm with its own unique set of attributes. I define "mass customization" as the ability to produce a single, customized product with the same efficiency as a mass produced product. We can all imagine what it takes to produce thousands of Hershey bars but how does the effort differ to produce just one or three? Mass customization implies seamlessness from the standpoint of configuring, pricing and ordering all the way through the manufacturing process. Where customizers often lose efficiency is the set-up time to produce an order. A mass customizer would not suffer this inefficiency. For example, while Blank Label, a custom dress shirt manufacturer has a configurator front-end to their business to configure and order custom dress shirts, they presently produce products using craft production techniques. Given that, is Blank Label a "mass customizer?" No. They are, however, a customizer. Any restaurant that allows any form of modification to a menu item could claim to be a customizer from fast food ("hold the pickles") to high end. Are they a "mass customizer?" No. Does unit volume determine whether or not a customizer is a mass customizer? No. Many customized products are produced using a craft production approach or even using sub-optimal mass production approaches. Volume doesn't matter in determining if a company is a mass customizer. So, is Chocomize.com a "mass customizer?" From my vantage point, I can't tell. And, more importantly, I'm not sure it is even important from the standpoint of your value and utility in the world. Do you allow customers to order exactly what they want on line from previously rationalized and modularized choices? Eric: You are correct. We do allow customers to choose from a rationalized and modularized set of choices. Dave: Do you seamlessly connect the front-end order process to the back-end order fulfillment process or is most of the automation limited to the front end? In other words, what efficiencies do you enjoy in your back-end processes? Or, is your process more like craft production? Eric: While we have improved the process of production to a fairly efficient point our process is definitely more of a hand craft production process. That being said the hand-crafted nature of our process is more a reflection of our current circumstances. Dave: That is to be expected at this point in your evolution. You need to make sure the business model works before moving to the next step in your evolution. Eric: Our circumstances being that we are a new company and our demand is building gradually as we increase awareness, and that as a small start up we do not have the start up capital to make the process as efficient as possible. We feel that with the right tools the business is completely scalable and would be efficient on a level that would no longer resemble a hand crafted production process. I guess from this perspective perhaps we are a customization company that hopes to grow into a mass customization company when funding allows and demand requires this process shift. Dave: That, too, is to be expected. Chocri.com (custom chocolate bars), for example, has recently received an infusion of capital that is enabling just such a process shift. Here are excerpts from an announcement in venturebeat.com on September 20, 2010: German startup Chocri has enlisted the backing of major chocolate manufacturer Ritter for its plans to deliver personalized chocolate bars. Carmen Magar, the company's U.S. chief executive, told me Ritter has invested in the low seven figures (i.e., single-digit millions of dollars) in exchange for a third of the company. Until now, Chocri was self-funded. The cash should help the company increase and automate its production, Magar said. It's also a clear sign that traditional manufacturers are taking an interest in a more customized approach. "While we make 50k bars a month, they make 75 million," Magar said. "There's so much we can learn from Ritter." In fact, she said that Ritter's advice has already led to a 30 percent increase in Chocri's productivity. Further automation can certainly improve margins, something that benefits the owners of these companies. Companies that produce very low volumes of wildly different products (typically characterized as "low volume/high mix") eventually begin to see margins erode particularly as variety and complexity increases. One last question: you and others in your space seem to want to use and leverage that you are "mass customizers." Isn't it sufficient to be a customizer? Why is being able to label yourself a "mass customizer" so important? Eric: I do not think that there necessarily is a downside to being a customization company rather than a mass customization company. In some cases I think it can be an upside, our marketing strategy definitely plays up consumers appreciation for specialized, hand crafted goods. I think perhaps this group of companies we are talking about are labeling ourselves mass customizers, perhaps incorrectly, because we do not fit into another category neatly. Our companies certainly are not mass production companies but we feel that the volume of custom products and the reach of our enterprises are more reflective of mass customization though our production methods may be more of a traditional customization model. In my mind, companies like blank-label.com or shirtsmyway.com fit somewhere between mass customization and custom production. They are producing on a volume I would assume that eclipses that of the custom tailor with a storefront servicing local customers but their production methods are very similar. Again it seems as though the sales, marketing and even pricing strategy is reflective of mass customization but production methods lag and are more of custom production. Again I feel this is limited only by resources and demand as these are new products consumers are just learning about. In a way it is kind of the reverse of the shifts you and Pine talk about which is mostly shifting from mass production to mass customization. Dave: Contrary to popular belief, most companies shifting to mass customization aren't doing so from the mass production paradigm. The companies that are moving to mass customization are doing so from craft production or engineer-to-order paradigms in a quest for greater efficiencies. Why is this? Most mass producers are heavily entrenched in the mass production paradigm making it extremely difficult to make the transition. For example, Levi Strauss tried custom jeans. The retailers revolted and Levi Strauss learned that consumers really wanted to physically "try on a pair" before buying. Compaq (prior to HP) wanted to offer built-to-order computers and cut out the retailers. The retailers, again, revolted. I see Chocomize.com as desirous of moving from craft production to mass customization.Eric: I read Gilmore and Pine's Four Faces of Mass Customization article in Harvard Business Review and it confirms what we discussed in the last few weeks about the literature on mass customization mostly focusing on how mass production can transform into mass customization. You have raised a number of interesting questions that my partners and I have not previously thought of and have spurred some interesting discussions here at our office. What Really Matters? Consumers don't care how you get them want they want--they care that you meet your commitments and their product expectations. It matters not whether you are a "customizer" or a "mass customizer." I encourage you to not focus on how you do what you do; talk about what's in it for the customer. Strong unit sales growth begs for operational improvements before a margin crisis sets in. Implementing the mass customization business paradigm can be just such an operational improvement.
David J. Gardner, has held management and senior management positions in Product Development, Manufacturing, Sales, Marketing, and Customer Service, and Product Management. He joined Tandem Computers in 1979 where he was responsible for Corporate Documentation Standards for Tandem's highly configurable and expandable computer systems. In 1983, he designed and implemented a Configuration Guide for Dialogic Systems instituting a process that greatly simplified a complex, modular product such that the field sales organization and international OEM customers could easily define their order requirements. This methodology satisfied the product definition needs of sales, marketing, engineering, manufacturing, customer service and finance. David founded his consulting practice in 1991. He is a graduate of San Jose State University (BA) and Santa Clara University (MBA). David is a member of the Society for the Advancement of Consulting (SAC) and has been Board Approved in the Area of Configurable Product & Services Strategy and Implementation. In 2010, he was inducted in the Million Dollar Consultant� Hall of Fame. Out of over 1,000 consultants who have completed Alan Weiss�s mentoring program, only 26 have been inducted in the Hall of Fame.
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