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. 1/2005.
Have you ever wondered why so many mass customization projects fail? One cause beyond the typical reasons discussed (like incomprehensive IT systems, lack of branding, wrong scope of variety, etc.) may be the strong demand for internal change management — an issue not discussed in the mass customization literature before. However, in the meetings of an industry board of mass customization experts, hosted monthly by our research group at TUM Business School, change management for mass customization was mentioned as a predominant need and major factor of success.
Why change management? Mass customization empowers customers to become co-creators and design their own, individual products or services. Empowered customers, however, have to meet motivated and competent employees. The company’s employees have to understand mass customization and their roles in this co-creation process. Managing mass customization thus includes to manage the internal change in an existing organization that is moving from a closed production system towards a system of mass customization. Shifting the locus of value creation towards customers requires no less than a radical change in the management mind-set.
Mass customization demands that customers are regarded not as „enemies“ or disruptive factors of steady business processes. As a basic condition to enable mass customization, firms have to cope on the level of the normative management with the challenge to change old, often negative perceptions of the customers in an organization appropriately. The basic idea of mass customization has to be implemented deeply into the cultural mindset of the organization.
Consider the example of Levi Strauss‘ final failure to implement mass customization (see http://www.mass-customization.de/news/news04_01.htm#levi). The main reason why this venture failed was, in my opinion, Levi’s lack of change in management thinking. MC was seen as a marketing gimmick and nice PR-tool, but without seeing the needs and possibilities of dealing with single customer orders.
Like all humans, business managers and their employees at Levi and other companies moving from mass production to mass customization are socialized into a dominant logic, shaped by the attitudes, behaviors, and assumptions that they learn in their business environments (Prahalad and Ramaswamy describe this good in their book „The future of competition: co-creating unique value with customers“, Boston, MA: Harvard Business School Press 2004).
What are the areas where change management initiatives inside the manufacturer’s organization have to take place to foster mass customization and other strategies of customer integration like open innovation?
Members of the manufacturer organization have to be motivated to acquire feedback from the customers that can be used in the production process, and transfer this information to the right internal organizational units. Here, often training sessions and workshops building „mass customization mentality“ have to be undertaken with the firms‘ employees. This process has to be accompanied by implementing corresponding information systems like toolkits.
Change management has to support the assimilation and transformation capabilities of a firm. Assimilation describes a firm’s routines and processes allowing the firm to process, analyze, interpret and understand information from external sources, in our case demand information from an individual customer. Transformation is the capability to design and re-design the routines that facilitate combining existing knowledge and the newly acquired and assimilated knowledge. The objective is to prevent a new „not-invented-here“ syndrome. The firm has to be able to assimilate and transform the customer input in form of need and / or solution information for the mass customization process efficiently and effectively.
Exploitation capability is based on the routines that allow firms to refine, extend, and leverage existing competencies or to create new ones by incorporating acquired and transformed knowledge into its operations. This is the largest and most thorough task. In many firms, mass customization initiatives are tried as a pilot initiative, but not implemented as part of the organizational routines of the production process. Here, change management has to increase heavily the exploitation capability of a firm that wants to benefit from open innovation over a longer period of time.
Firms may, however, get support in the change management process form the customers themselves. Customers are becoming change agents for the company. The motivation of employees to be customer orientated is not only influenced by employee training and internal motivation, but also by the interaction and social exchange with the customers. Employees are controlling their behavior by the perceived feedback and discernments of the customers as much as by the perceived discernments of their hierarchical leaders. Customers are becoming „organizational consultants“, as Schneider and Bowen, two service management researchers have written in 1995.
However, in most cases it is not sufficient to believe that customers will do the co-change job alone. Internal change management for mass customization demands that the firm’s (top) management actively installs programs to comply the organization’s norms and routines with open innovation. The most generic starting point is this regard is to adjust the firm’s cultural guidelines. Today, most firms have written cultural guideline, which are taught to all members of the organization. Within these guide lines, often regularly a code of conduct in regard to the firm’s stake holders is included, mentioning also the customer. On this level, open innovation and the role of customers as a value co-creator have to be deeply integrated and communicated. But just writing about the need for open innovation is not enough.
Companies have to develop change management programs addressing this need. Do you have own experiences or ideas in this regard? Write me — I am very interested in your insights!