[Name here]‘s birthday is coming up in a few days — I need to rush to get an „original“ present now – but what?“ Take customized chocolate.
Chocri and MyM&Ms, for example, are competing with gift cards and gift books, not with other candy items. They are not to be eaten – even if they taste very good – but to express that I have thought of you and really have spent some effort in getting this present done. For this, I am willing to pay a premium of 1,000 percent or more. As a provider, however, this means that a delivery time of 24 hours is a must, plus advice for easy gifting, wrapping, additional greeting cards etc. Here, we still see many untapped opportunities.
When looking further in the domains of mass customization application, we interestingly only found very few good configuration toolkits (for functional customization) in the field of consumer electronics and computers. Here, apparently the improvements of hardware apparently make it less useful to customize a product via toolkits before purchase, but allow users to customize the product during the usage stage with an embedded toolkit. It may be a sign of the shift in mass customization that the early pioneer, Dell, today almost offers no customization at all at its website. Well, there still is a configurator, but the choice options are very limited.
A closer look into company structures
For 120 of the 500 companies, we also could obtain extensive data by means of a company survey. Figure 3 shows our two-step data gathering approach.
Figure 3: The expert evaluation of the Customization 500 was followed by an extensive company survey of 120 companies
Descriptive statistics for the responding firms are given in Table 2, providing an enhanced insight into the company structures of the players in the mass customization market today.
- About 83% of the firms were founded exclusively with the purpose of mass customization, while 17% run their mass customization business in addition to their standard business. In general, most firms are rather young.
- Only 16% of the mass customization offerings are older than five years, indicating the long time lag from the description of the idea to the broader application of toolkits for co-design.
- 54% of the firms have less than five employees.
- Annual sales of the responding firms range from less than $100,000 to over $5 million in the last fiscal year, with the majority having sales of less than $1 million (83.5%).
These observations are consistent with our observation that the current dynamism in mass customization is driven primarily by innovative startups that have built their business models from the ground up and focus entirely on the promises of mass customization.
Table 2: Descriptive data from the company survey of responding firms
Clones dominate mass customization entrepreneurship
If you have a good idea for a custom product, it will be copied fast. This is one of the major conclusions we can draw from our observations of the market. The barrier to entry for many products is rather low, and once an interesting idea comes on the market, copycats follow quickly. This in general has not to be a bad thing, as also clones help to build the market, generate attention, and signal to press that this is a new category.
However, for the pioneers this means that they have to focus as much attention on branding and differentiating their business as upon building the processes and systems. Patents or other forms of IP do not provide much help here, thus, we conclude: As a pioneer, be fast, smart, and differentiate your business beyond the brand name and your core products.
Despite the many "me-too" offerings, surprisingly often the late followers are doing very well in their segments. We see three reasons here:
(1) Strong growth opportunities in every market: The late comers even in the most crowded categories (like custom men's shirts) enter into a market that still is not matured at all. Overall, there is not one category in consumer B2C where custom products have more than a few percent of the overall category (in most cases, they have a few tenth of a percent!). So there is still enough space for everyone.
(2) Market education: Pioneers in a category often have to spend a lot of attention to educate the market and just let consumers (and journalists) know that this kind of custom product is available. Latecomers can build on this generated market education.
(3) "Best of Breed" solutions: Latecomers often perform as best of class of established players, combining the design elements of pioneers, but also of mass customization sites in other categories. A recent good example if getwear.com, which came late with another custom jeans offering, but has the best online configurator in its industry.
Mass customization platforms make the third wave of mass customization
But despite many clones, we also found a lot of innovative business models. Some of the best performing companies in the Customization500 are not stand-alone businesses that deal directly with consumers, but are mass customization platforms. These platforms can be regarded as the third stage of mass customization development.
The first wave of mass customization was driven by the early pioneers in the field in the early 1990s, motivated by the opportunities of new flexible manufacturing technology. Levi Strauss is a typical example from this time. Most of these offerings worked offline in a traditional retail environment. Also, first internet offerings coming of in 1995 and 1996, like CyberChocy or Creo Interactive, came up at this time. But in most markets, consumers were not ready yet.
The second wave came with the internet economy, around 1998-2002. Often, startups at that time just opened, as everybody could do it, not as customers needed it. But some great examples of mass customization survived, like NikeID (opening only because former Nike CEO Phil Knight wanted to have „something in the internet“, and so they selected mass customization as this promised to cause little channel conflicts with established retailers). In the following years, the internet-based mass customization offerings matured, and many more followed. It was the broader development of online configurators that made mass customization happening in a larger scale.
But a third wave of mass customization is happening now: It is driven by companies like Ponoko, Zazzle, Spreadshirt, Cafepress, Lulu, Gemvara, and many others, which offer design, manufacturing, and retail capacity to everyone. These platforms allow entrepreneurs to open a dedicated mass customization business at very low investment cost. On these platforms, people are not just customizing to fulfill their own needs, but to create (micro) niche markets for their peers. The platform providers have successfully combined the eBay idea of very easily selling things over the internet with the customization model of robust fulfillment processes. Here, we are just at the beginning and will see many more applications soon.
In an upcoming posting, we look more closer into the state of the practice of choice navigation (configuration) toolkits.
www.mc-500.com: More information on the Customization500 study and a list of the 500 companies included in the evaluation.
http://bit.ly/mcpc-proceedings: The Proceedings of the last MCPC conference cover many dozens of case studies, latest research, 2500+ slides, and 15+ hours of video of the plenary presentations. As part of the proceedings, you also find three detailed PPT presentations using the Customization500 data in larger detail.
www.mc2012.org: Speaking German? Then participate at the next meeting of the German-speaking mass customization community (Salzburg, 29 June 2012) – and learn from some of the German champions of the Customization500