Mass Customization

In short, mass customization means to profit from the fact that all people are different. Many managers regard heterogeneity of demand as a threat, as a challenge to overcome. I see it, however, as an extraordinary profit opportunity. If you set up the right processes and product architectures, you can serve your customers individually and efficiently at the same time. Exactly this is the essence of mass customization.

The term was first popularized by Joseph Pine, who defined it in his 1993 book as “developing, producing, marketing and delivering affordable goods and services with enough variety and customization that nearly everyone finds exactly what they want.” In other words, the goal is to provide customers what they want when they want it.

Similarly, Bruce Kasanoff, a keynote speaker at the MCPC 2009 conference and the author of of “Making it Personal” (2002), defines personalization “After years of trying to simplify personalization, I finally got it down to two words, which are included in my comments: Personal = Smarter. The more you customize, the smarter you get. The smarter you get, the more formidable competitor you become. It really is that simple. Doing it, of course, takes a lot of work.”

So we can say that personalization is the result and mass customization the process of achieving it. The focus of mass customization is at realizing a stream of individual products and services for individual customers with high efficiency, “mass production efficiency”, as Prof. Mitchell Tseng called it. To reach this objective, a company has to work along three different basic capabilities of mass customization (Here is an extra page with more definitions!).

I first realized the mass customization phenomenon by reading Joe Pine’s book as a graduate student, working on a paper for my master’s degree in management (in 1993). One year later, I was in New York City, visiting one of the first Levi’s stores selling its first version of mass customized jeans. There I thought, “Hey, they are doing it really” and was hooked by the concept. When I continued my education with a Ph.D. in Operations Management, I decided to study mass customization from a management perspective in more detail. After placing the first article on it in the German edition of the Harvard Business review (1996), I also got some great feedback from managers on the topic. Since then, I am continuously working on this topic.

The objective of mass customization, serving different customers differently and exactly according to their needs, can be implemented in many ways. BMW customers can use an online toolkit to design the roof of a Mini Cooper with their very own graphics or picture, which is then reproduced with an advanced digital printing system on a special foil. The toolkit has enabled BMW to tap into the custom after-sales market, which was previously owned by niche companies. In addition, Mini Cooper customers can also choose from among hundreds of options for many of the car’s components, as BWM is able to manufacture all cars on-demand according to each buyer’s individual order.

But also consider Pandora.com. The company relieves people of having to channel surf through radio stations to find the music they like. Customers submit an initial set of their preferred songs, and from that information Pandora identifies a broader set of music that fits their preference profile and then broadcasts those songs as a custom radio channel. As of December 2008, Pandora.com had 21.5 million listeners who created 361 million radio stations and played every day 61 million songs from 60,000 artists.

Also this is mass customization, but in a very different way as at BMW. Both companies have turned customers’ heterogeneous needs into an opportunity to create value, rather than a problem to be minimized, challenging the “one size fits all” assumption of traditional mass production. To reap the benefits of mass customization, though, managers need to think of it not as a stand-alone business strategy for replacing production and distribution processes but as a set of organizational capabilities that can enrich the portfolio of capabilities of their organizations.

So while there may be little mass customization in the extreme way of producing a physical objective for anyone in lot size of one, there is a lot of mass customization thinking in many business models. In a recent article in “MIT Sloan Management Review” (Spring 2009), my co-authors Fabrizio Salvador and Pablo Martin de Holan and I describe mass customization a strategic mechanism that is applicable to most businesses, provided that it is appropriately understood and deployed. The key is to view it basically as a process for aligning an organization with its customers’ needs. That is, mass customization is not about achieving some idealized state in which a company knows exactly what its customers want and can manufacture specific, individualized goods to satisfy those demands — all at mass-production costs. Rather, it is about moving towards these goals by developing a set of organizational capabilities that will, over time, supplement and enrich an existing business.

Sure! Research by my colleagues and my own group has identified three common capabilities that will determine the fundamental ability of a company to mass customize its offerings

(1) Solution Space Development A mass customizer must first identify the idiosyncratic needs of its customers, specifically, the product attributes along which customer needs diverge the most. (This is in stark contrast to a mass producer, which must focus on identifying central tendencies so that it can target those needs with a limited number of standard products.) Once that information is known and understood, a business can define its “solution space,” clearly delineating what it will offer — and what it will not.

(2) Robust Process Design Next, a mass customizer needs to ensure that an increased variability in customers’ requirements will not significantly impair the firm’s operations and supply chain. This can be achieved through robust process design — the capability to reuse or recombine existing organizational and value-chain resources — to deliver customized solutions with near mass-production efficiency and reliability

(3) Choice Navigation Lastly, a mass customizer must support customers in identifying their own problems and solutions while minimizing complexity and the burden of choice. It is important to remember that, when a customer is exposed to myriad choices, the cost of evaluating those options can easily outweigh the additional benefit from having so many alternatives. The resulting syndrome has been called the “paradox of choice,” in which too many options can actually reduce customer value instead of increasing it. In such situations, customers might postpone their buying decisions and, worse, classify the vendor as difficult and undesirable. To avoid that, a company can provide choice navigation to simplify the ways in which people explore its offerings

In the past, most companies regarded their customers as passive consumers or users of products and services imagined, developed, designed, and provided by the company. With mass customization, we turn the view to more active consumers who also are part of a co-design process that enables them to get a product that really meats their individual preferences. From plenty of research, we also know that in general, consumers appreciate and enjoy this more active role: Much of the additional benefit of a mass customization offering comes as much from the sheer act of co-creating as from the resulting outcome, the custom product, itself.

One has to acknowledge, however, that mass customization always is a weak or “light” form of customer co-creation. Different to other concepts like user idea contests or users engaging in open source development communities, in mass customization, all customer interaction is in an operational form .. one that is scalable, easy to perform, and totally controlled by the company.

Mass customization is about configuring a product to one’s individual need, it is not about inventing it. It only allows for what has been set by the company it’s the solution space. This constraint, however, enable the immediate and efficient manufacturing of the good, making it available for more or less “instant” consumption. In other forms of user innovation and co-creation, users can imagine many more things — but often it will take a long time until they can access these products in reality.

Mass customization today is driven by companies funded by young entrepreneurs who are utilizing three recent trends:

(1) Opening a MC company is cheaper than ever. Thanks to web-services and better standards, creating a compelling frontend to sell customized goods is easy and cheap. The same refers to manufacturing, where in some industries generic suppliers came up that allows one to outsource custom manufacturing more easily.

(2) Consumers are finally ready for it. I believe it took 10 years of consumer education on the net so that MANY of them feel confident to not just shop standard products from a catalog, but also co-create. Also, today’s 25-35’s – a core group of people buying custom goods – are trained by the interactive solutions of social networking, but also co- creation in computer games. This generation is the natural shopper for custom goods – and getting old enough now to have the discretionary income to buy custom goods online.

(3) Leading by examples: In Germany, MyMuesli and Spreadshirt were the two blueprints for companies that inspired many young entrepreneurs to follow. The same with Cafepress and Zazzle in the US. These companies inspired the press to write about it, consumers to purchase, and other entrepreneurs to start their company.

Well, on the consumer side, these trends are not as profound in Europe compared to the US yet. But I believe that these trends inspired more entrepreneurs to create a MC offering. And with more supply, more demand. MC is a bit like “technology push”. The average consumer does not think about it, but when they see an offering for a custom product that makes sense for them they buy.

I also see a blurring line between DIY, makers, and big companies that offer customization. They all now can use the same tools, have access to very similar manufacturing technologies, and also can reach global customer bases online. An industry where this clearly is happing is anything that can be produced by “additive manufacturing”, or 3D printing. Here, we have platforms like Ponoko or Shapeways enabling Makers to create custom products also for the average consumer, and distribute them broadly.

In my opinion, mass customization never will overtake mass production (or better, a forecast-based production of variants made-to-stock). True mass customization will remain a niche topic. However, niches can be very profitable, and in a large market segment, big enough for several players.

One of the core success factors of German machine tool makers and machinery companies is that they focus on a specific niche market that they serves with highly customized equipment. This often makes them the world market leader in this segment.

The same, I believe, is true for custom apparel or footwear, for example. For the next decades to come, the majority of products we buy are standardized, pre-fabricated, from the shelves. And this is efficient and convenient for both consumers and manufacturers. But for a few items about which we really care, where we have a high involvement, we choose customization.

Over the years, I recognized three cycles of mass customization. This first was in the 1990s when people looked on it as a production technologies, still yery much rooted in the CIM-Thinking that originally lead Alvin Toffler to deliver the first modern description of mass customization in the late 1970s. During this time, mass customization was very much rooted in business-to-business markets. Machine tool makers like Sandvik from Scandinavia opened the first large scale mass customization businesses.

The second wave happed with the internet revolution (starting in 1998). Finally firms could connect their flexible manufacturing technologies with customers efficiently. This cycle brought us many great examples of mass customization, but also quite some disappointments. Often, start-ups during this time just opened, as you could do it, not as customers needed it. But some great examples of mass customization survived, like NikeID (opened for the only reason as former Nike CEO Phil Knight wanted to “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 happens in a larger scale. Have a look at our web-site “http://www.configurator-database.com” for the scale and scope of configurators today.

The third wave of mass customization is happening now: It is driven by companies like Ponoko, Zazzle, Spreadshirt, Lulu, Shapeways, and many others, which offer design, manufacturing, and retail capacity to everyone. So in this third stage, people are not just customizing to fulfill their own needs, but to create (micro) niche markets and serve them efficiently. Here, I think, we are just at the beginning and will see many more application soon.

The core drawback of most configurators today is that they are still parameter (option) based. Customers have to make their own decisions out of a list of pre-defined options. This often demands a large number of decisions and also knowledge of the user about the product. While this may be perfect in the business-to-business context where configurators originated, in consumer markets this is not always the best option.

Here, need-based configuration often is better. This means that users have to tell something about her preferences, requirements, or expected outcomes. This input then is transferred by an algorithm into a product configuration. There is a great paper by three scholars that compared the use of a parameter versus need-based configurator for Dell (asking people what graphic card they want versus asking people what games they play). In this paper, the authors clearly find that most users prefer the need-based solution, mimicking the behavior of a good sales person (T. Randall, C. Terwiesch, and K. Ulrich, User design of customized products. Marketing Science, Marketing Science, 26 (2007) 2 (March-April): 268-280). Here, I believe, industry has to invest much more in developing better configuration systems that minimize “mass confusion”.

The intellectual background of crowdsourcing is Harvard professor Yoachi Benkler, who has described this economic principle perfectly in his book “The Wealth of Networks” (2006) and an earlier article in 2002: Instead of either buying a product or service on the market or assigning a task within your hierarchy (to one of your employees), you ask an open network of potential contributors to provide this task. Jeff Howe’s crowdsourcing article (in Wired) coined the term and made the concept much more feasible and applicable. I found that mass customization also relates to Jeff Howe’s definition. A company places its configurator openly on the internet and then consumers can select if they take this extra effort to design a product or if they just buy a standard product. This is the open call for participation in Jeff’s definition.

In our research, we found a number of powerful inertial forces of a company on its way to mass customization. One is marketing focus. For mass producers, the focus of the marketing group is not about spotting differences; it’s about identifying and exploiting needs that are similar. Consequently, traditional marketers often lack the appropriate knowledge and tools required by a mass customizer and, when urged to add more variety to their product lines, are likely to 1) unimaginatively rely on product differentiation criteria that were successful in the past or 2) mimic differentiating attributes introduced by competitors. Either approach will likely fail to tap into unexploited customers’ heterogeneities.

Another factor of inertia relates to a firm’s design culture. With mass production, the emphasis during product development is on design uniqueness or on minimizing the variable cost of newly developed components. This leads to designs of maximal uniqueness or the use of ad hoc parts with minimal cost. With mass customization, the focus is instead on designs that have synergy with other designs, that is, designs that share parts and processes as part of the solution space.

A final factor preventing companies to move towards mass customization are constraints in the value chain. Reconfiguring a value chain that was originally conceived for volume production in order to accommodate a variable product mix can present a number of problems. An existing corporate purchasing policy, for example, can make it difficult for a division to select a new base of suppliers. Moreover, external structural constraints within supplier and distribution channels can also pose significant obstacles.

One field that really is getting more attention in the context of mass customization is sustainability. Mass customization offers large promises to reduce the waste in an industrial system, waste of overstocks, waste of unwanted products, waste of products people litter because of a lack of personal attachment. But at the other hand, mass customization also may use more resources to build a custom product. There is much research needed to really calculate the pros and cons of mass customization for sustainability.

Another field is the connection of mass customization and co-creation or user innovation. For many companies, mass customization is like the vehicle to entry a close relationship with their customers, which is then used for other purposes as well. This connection is one that we will investigate more closely in our community of MC researchers in the future.

Absolutely! I recently see better matching-systems for standard products as a strong alternative to mass customization. Within an assortment (of pre-fabricated products), customer specific choices/options are recommended. Consider My Virtual Model (mvm.com), a matching service for fashion retailers and the appliance industry. MVM enables consumers, either on its own site or on the sites of its clients, to build themselves in a virtual model (an avatar), by selecting different body types, hair styles, face characteristics, etc. Consumers also type in their basic measurements so that the virtual model represents their body measurement. In addition, customers can specify what kind of “fit” they prefer (loose, comfort, tight, etc.) so that the recommendations provided do not only fit the customer in terms of sizes and appearance, but also in terms of how they do feel inside the garment.

When MVM started offering virtual avatars in 1999, they looked more like a curious oddity. But now their avatars are used by more than 12 millions individual users. Companies such as Adidas, Best Buy, Levis, Sears and H&M are using these virtual models to generate business and stronger ties to their customers, lured by the increase in such metrics as average order value and conversion.

Another great example is Zafu.com. Finding the right size of a pair of jeans is a challenge for many women. The answer of mass customization is taking a customer’s measurements and making a custom pair of jeans for her. Zafu offers a different approach. From the customer perspective, the experience starts similarly. Zafu asks women shoppers eleven questions about how they prefer jeans to sit on their hips or waist to create a body profile. In addition, they ask for some basic body measurements.

But instead of using this information to create a custom cut, they match it with a large database of proprietary fitting information about the jeans of more than 30 major brands. This database contains hundreds of styles, from broadly marketed Gap to pricey designer labels. The consumer then gets a list of ranked results, linked with the brand’s website to purchase.

Zafu’s personalization service is an alternative model to conventional mass customization. It may not have the inventory advantages and value prepositions of mass customization, but is much easier to implement and is a much faster scalable system. For consumers, such a matching service also implies less waiting time as well as no price premiums associated with custom products.

But both models supplement each other: For most consumers, a better matching service like MVM or Zafu will provide sufficient value. For others, however, the ultimate product still will be the truly custom jean––providing not only perfect fit, but also the hedonistic satisfaction connected with a custom product. Zafu is well positioned to profit from this trend. The company is owned by Archtetype, a major enabler of true mass customization for the clothing industry. Thus, they easily can refer a customer finding no fitting piece in Zafu’s database of the existing assortment of standard products to the custom clothing offerings.

I predict that we will see many more examples of these matching services as they offer companies to profit better from what they already have: vast assortments of existing goods. The result may be a new understanding of mass customization, beyond its roots in on-demand manufacturing and product design. In the end, it is the customer who drives the business. And customers are not differentiating between personalized, customized, or standardized offerings. I believe that we will need a broader understanding of mass customization. And I am excited to work on this challenge in the coming years.

A very interesting trend is something I called “user manufacturing”. Consider emachineshop.com. They are like a Kinko for machinery. You download a very easy to operate free CAD software. Then you can design what you want, upload 3D designs from the Internet, and then you can place the design on a huge park of machines – drilling, laser lathes, CNC cutters, whatever you need. You can select materials and you push a button and start a remote production process. Two days later, your design arrives at your home. So you have an entire machine park without any of the transaction costs.

It is really incredible what you can do there as a consumer. My favorite example is IKEA. You find many IKEA furniture designs today reverse-engineered by users somewhere on the Internet. Say, you find a specific table you like, but you want a modification. Normally there is no way to get your own design from IKEA. But now you just download the 3D design of this table from the internet, you make the modifications, upload it to emachineshop or a similar provider, place the order, and you get your design. This is possible today, and the premium is less than one would expect – as you as the consumer do all the design work.

Yes, we still need them as most consumers don’t care about most of the products so that they would do this effort. For most things we are satisfied with the standard model. .But some products where we care or have a specific need, we will get involved. We still need the traditional model so I don’t think that the high variety production we have today will ever die but with this crowdsourcing model we have an additional model that will be utilized in the domains where users care about it.

Absolutely! In the beginning, MC was very much production driven. Then, it was connected with the internet. Today, we have a third generation of mass customization companies, connecting mass customization with online communities. Consider Spreadshirt, Zazzle, or CafePress. These are companies that allow you to customize goods, but you can order those not just for you, but you can sell your creations to others. So these companies have combined the eBay model of very easily selling stuff over the internet with the customization model.

You can very easily use the infrastructure of these companies to get your ideas into reality and even make money with this. Consider Spreadshirt. They have like 250,000 shop and sell like 100,000 products a month. So most shops don’t sell any products in a month. But no one cares, as this is not connected to any physical inventory or cost. Manufacturing is centralized, and what they do is produced on demand.

The MCPC conference series started out as a bi-annual conference devoted to Mass Customization & Personalization. The content has broadened in recent years, including also open innovation, user co-creation and other strategies of customer-driven value creation. But mass customization is still the main trend that drives the success of the MCPC conferences, bringing together hundreds of the world’s most remarkable people in the field. Previous conference took place n Hong Kong, Munich, and Boston.

This is an interesting question, and I have no ready answer on it. Nor do I know any particular research that would have answered this questions. So here are just a few ideas:

(a) Many developing countries still have a great tradition of craft goods, which also are being used by many more people. Craft goods often are customized. Mass customization in a way can be seen as an industrialized version of the craft model — hence making the mental shift for consumers less difficult compared to countries where users only use “mass produced”.

(b) Also, developing countries in general have a much broader manufacturing base of flexible workshops and small scale manufacturers. Those don’t have to learn the skills to become mass customizers compared to large-scale mass producers. I see a good model for brokers and intermediaries connecting these local manufactures with the internet and consumers and using them as efficient and flexible manufacturing outlets for mass customization.

In Germany or the USA, it has been proven IMPOSSIBLE to find any manufacturer capable to produce mass customized fashion items, footwear, accessories, etc. All western companies seeking for these kind of manufacturers ended up in developing countries like North Africa, China, India, or Eastern Europe (Romania etc.).

(c) On the negative side, however, I feel that for many consumers in developing countries with paying power, Western brands and standards are the products to get. There may be less a kind of appreciation of customization as a status symbol as it is in industrialized companies. But here I may be wrong — I just don’t know and have no data of this. This is a great opportunity for further research.

Short: Frank Piller, Professor of Management at RWTH Aachen University
Long: I am a professor of management and head of the innovation management group at RWTH Aachen University, Germany’s leading institute of technology. I am also a co-founder and a co-director of the MIT Smart Customization Group, a research group at MIT, Cambridge, MA.