Re-Post: Customize your time: Mass Customization in the watch industry – Microsoft’s SPOT watches, Swatch Via d. Spiga, and Factory 1to1 (from the MC Newsletter 1/2003)

Re-Post: I have republished these articles to make them better accessible for search on the blog. This article has been published first in the Newsletter No. 1/2003.

In the age of the cell phone, who needs still a watch? All of us – but more and more not to get the time but to express our personality. Watches are one of the most prominent fashion items and a dominant matter of self expression. Thus, customization of watches is a very interesting field to study. While different companies started several attempts to offer customized watches within the last decade, I would consider few of the existing offers as a serious and professional move towards mass customization. Many companies are either small start up operations with limited scope or professional management of the customization processes, or they do not offer real customization but only small series (e.g., logo watches for promotion activities). But recently, there is a change, and more serious initiatives to customize watches on a real one to one base are approaching.

Microsoft SPOT watches

Bill Gates of Microsoft recently announced plans to use watches as a transponder for customized services. Teaming up with Fossil Inc., Suunto and Citizen Watch Co. Ltd., Gates presented in January 2003 a concept wristwatch based on Microsoft’s Smart Personal Objects Technology (SPOT). With compelling features such as customizable watch faces, access to personal messages and appointments, and the ability to receive up-to-date news, traffic, weather and sports information, the watches are the first wave of smart objects that shall extend Microsoft’s reach from personal computing to everyday objects. However, first models are expected to be available not before fall 2003. But it will be very interesting to see how these companies bundle hard and soft customization around the physical product and accompanying services.

Two other great examples of mass customization of watches are already available, both focusing on the (aesthetic) design level of customization:

Swiss based watch customizer Factory121 opened its Internet store some months before, and launched officially in April 2003. This is not only the best customization site in the watch industry, but also one of the best configuration systems in all categories. Why? See below.

But let’s first have a look on the customization initiative of a big and established player in the industry: Swatch. This brand is sometimes quoted as an example of mass customization – but it is not. Swatch is a typical example of a variant manufacturer that has the capabilities to bring out a huge quantity of variants and collections in a short time. However, customers can only select between made-to-stock products out of a huge variety.

Swatch Via della Spiga

After two very successful decades, the brand lost some of its original power in the last couple of years. While in former times Swatch could handle forecasting and product planning pretty easily as demand was so strong that even not so popular models could be sold without problems, new competition (trends) and an too established brand name force the company to go new ways. One approach to redefine the brand is the introduction of new (standard) models breaking with the traditional product platforms. Another tactic is customization which was recently introduced quietly in one concept store and is now in a pilot phase.

„Experience the language of fashion – you become the artist and accessorize your own Swatch.“ This is the advertising claim of Swatch’s Via della Spiga concept store in Milan, Europe’s fashion and style metropolis #1. Placed in the trend setting arena of the city where all big international designers have their stores, Swatch tries to update its image by using the latest fashion details of the surrounding designers for a very special collection of watches. „Catwalk details, chic styling, fabric trimming, edgy appliqués, unexpected coupling of materials, textile variants, enhancers such as crystals, feathers, fun fur, chandelier strands, studs, stones, ribbons, snaps, buckles, and beads await you. It’s a chance to indulge your personality. Define your fashion silhouette,“ says the catalogue.

I visited the store three weeks ago. It looks much more boutique than the standard swatch store, more like a fashionable jewelry store. First of all you recognize a really beautiful collection of ready-made watches which are only available in this store, however, pre-configured. In a second room, a workshops appears. Here, as demonstrated in a video, customers can design their own (women’s) watches. Breaking with the traditional concept, clients choose from pre-assembled watch bodies and combine them with a made-to-measure jelly ribbon plastic band that is supposed to be turned around one’s wrist, ankle, neck or waist several times. The band can be decorated with heart, flower and star crystal appliqués, and even filled with different objects like small pearls or stars. The results is a very special look (you can get an idea on http://www.swatch.com, go to the „Via della Spiga“ section). All custom assembling is done by the client with the help of a sales clerk on the spot. Watches are priced between 37 and 100 Euro.

While the extent of customization is not going very far, and the total approach is rather simple, this is one of the most striking examples of a new customization trend that goes beyond the traditional differentiation advantages of mass customization:

* Swatch uses customization in this store as an expression of self, as a concept to redefine its brand. While in former times a single, often famous professional designer was featured creating a special watch, in this concept the individual customer and its creativity and personal style is in the center of the product design. This is a total change of thinking.

* However, the product family design and constraints of the product system stop „bad design“. Even if users have plenty of choices, restrictions prevent that the Swatch brand image is spoiled by bad consumer co-design.

* The open store atmosphere and the public workshop invite a community driven co-design. While in most mass customization applications individuality means also a one-to-one configuration process, the Swatch store provides the platform for a community of users to create an individual piece jointly. Using virtual and real-life communities to support mass customization is a concept that got just recently growing attention.

I am curious to see how this system develops: is it only a short pilot or the starting point of a larger movement? I will keep you posted.

Factory 121

In the watch-making industry, high quality „Swiss made“ brands have been out of the reach of the majority of watch buyers – if they didn’t want to get a Swatch. The intention of mass customization pioneer Factory121 is to close this gap. Frédéric Polli, one of its founders states it very clearly: „Margins and cost structures in the classic watch distribution channels are a major obstacle to the positioning of ‚Swiss made‘ watches for the majority of watch buyers. New information technologies, like the internet, give us the ability to offer the excellent quality of Swiss watches to ordinary buyers under different conditions.“

But the firm does much more than just bypassing the traditional sales channel. On Factory121’s Internet site, users can co-design their very own wristwatch. After several years of planning, product development, marketing tests, and technology development Factory121 opened its (virtual) doors at the beginning of this year. The visible center of Factory121 is its web site, developed over a two-year period under the lead of Pete Beck, CEO of Brighton based Electrostrata LTD (http://www. electrostrata.com).

I had the opportunity to follow the development of this company since a longer period of time, and even if I had an idea of what would come up, I was really expressed when the official site launched. What makes this mass customization site an foremost exemplar for its industry (and mass customization in general, make sure that you interact with the site at http://www.factory121.com):

* The customer co-design process begins with a watch model that is already partially assembled. By presenting this pre-configuration, complexity is reduced. However, the combinations offered are almost infinite.

* As in the case of Swatch, the product family design prevents „bad design“. Restrictions of choice prevent that a specific style is spoiled by „bad“ consumer co-design.

* The 3-D quality of the design tools delivers a great user experience. Speed and feedback of the site are excellent. Virtual images are created in real-time depending upon the uses‘ choices. The interaction and animation elements of the Internet site are based on Java, a mature, reliable and popular technology that does not demand any plug-in.

* Users get a game-like interactive experience in which they perceive themselves living a unique and fun buying process („flow experience“). When designing and purchasing a watch from Factory121 the buying process becomes an important part of the product – and, thus, an important driver of customer satisfaction.

* Despite the nice design and experience, the site offers also plenty of explanations and product information. Just have a look at the customized product description once you finished the customization process.

* The site supports price customization. It enables customers to design a watch within the constraints of their personal budget. Therefore, just by choosing, e.g., a leather strap over a stainless steal one, clients can choose an option suiting their budget. As customers work through each category of components, colors and selections, they are always aware of how their design choices are impacting the watch’s final price. Doing so, Factory121 is one of the few examples using modular pricing.

The site is supplemented by high customer service. The firm operates own repair centers in its most important international markets, free shipping, and a strong quality guaranty. As buyers cannot physically touch the watch they are ordering, Factory 121 guarantees that, in case of any problems, the product will be exchanged or taken back after repayment in ten days without any question.

The price paid by customers (between 120 and 200 Euro) represents very much a mass customization cost structure – and is much below the average price of a standard Swiss watch of this category. Costs and distribution margins which can easily reach two thirds of a watch’s price in a traditional distribution system have disappeared in this model. This enables Factory121 to invest heavily in the maintenance and development of the firm’s online platform – and to counterbalance the additional manufacturing and transaction (handling) costs of dealing with individual customers‘ orders.

As soon as an order is made, it is transferred to the manufacturing site of Rhodanus AG, located in the Swiss province of Valais. The sixty employees of this family owned watch-maker have been assembling prestigious Swiss brands for over thirty years. A made-to-order watch will be mailed to the customer within ten working days. Despite the already launched web site, the owners plan to offer their products also in affiliate stores and for corporate customers.

The web site has just launched, and it’s too early to evaluate if Factory 121 will become the DELL of the Watch Industry. However, early user feedback is very promising („Je suis impressionné en bien par la qualité de votre service client“, says Marc Priolo, Head of DELL Customer Service Switzerland). I will follow this case closely and keep you informed what’s happening at Factory 121. In the meantime, I am waiting for the real big innovation in this field: How could I customize my time and get that 25-hour-day?

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.