Wednesday, October 9, 2013

Is the mass-customization really the future of the industry?

Is the mass-customization really the future of the industry?

Mass customization is a buzzy word. It has been talked about since 1970; however, there are rare companies who actually implement it successfully. 

Mass production refers to the practice of providing the customers the ability to customize product to their liking before purchasing them. [1] 

As the following figure shows, there are three kinds of production method -  traditional mass production, mass production with co-creation, and mass customization. 

Source: http://readwrite.com/2011/04/15/user-customized-products-future-of-business#awesm=~ojNV7cRvVoscsB

Tradition mass production include no customers involvement at all, and since the marketing demand changes rapidly nowadays, most companies embrace at least some consumers involvement somehow. As for the mass's production with co-creation, even though the companies listen to the customers, the consumer couldn't make any extra customization at the point of sale. Under mass customization, customers could decide what the product will eventually look like at the point of sell. Based on the extend to which the customers could customize the product, the mass customization can be divided into two groups. The first one is limited mass customization, like Puma. Puma provide several color and shoe model, and customers can choose among them. [2] The second one is full mass customization, like Ponoko. Customers could make small furniture, decoration and etc on Ponoko almost from scratch. 




The next question should be what's the benefit of the mass customization, compared to mass production with or without co-creation. The most obvious reason is that the mass customization better satisfy the consumer's need. Who could know the customers better than themselves. 

The second benefit is the cost. It seems counter-intuitive. As for the production cost, mass production is always cheaper than mass customization since mass production has more product volume to spread the fixed cost. However, the production cost is not the only expenditure. The expenditure also includes designing the product, distributing and storing the product. Local Motor is a mass customization automobile companies. It sets up a community with different kinds of member - designer, engineer, and even car hobbyist. [3] The atmosphere of the community encourage the members to contribute their idea, and actually most Local Motor's product comes from its member, and it's free. Mass customization utilize the idea of crowd-sourcing, and in some case people has more innovative idea, greater passions, and higher productivity when they work for free (roughly a decade ago, there is another "wikipedia" who pay people to contribute to the content but fails, and the current wikipedia who ask their member to contribute for free succeeded!). Since the fixed cost (like purchasing a machine) decrease thanks to the development of the technology, the cost saved from the other place could cover or at least offset the extra cost during the production phase. 

There are also other benefit: customers feel that they are involved in the creation of the product so that they would consider the product with higher value and are likely to pay more; the companies become more flexible and won't get stuck in the existed investment. 

Some experts believe that the mass customization may someday replace the mass production as the technology developed and cost keeps reducing. However,  I hold a skeptical opinions about the statement that mass-customization will become the future of the industry. 

I do believe there are great opportunities in developing user-customized product in many industries. There are successful stories across multiple industries including apparel (like Blank Label), automobile (like Local Motor), toy and etc. I think mass customization is a supplement to the current mass production model. I like the example given by the executive of the Local Motor. The mass customization is like sand, which fit in the space that the jar of marbles (mass production) couldn't satisfy. Mass customization and mass production will co-exist and reach a balance. 

Here are a few reasons that support my argument:

First, the computer industry de-customize their product. I remember back to 2000, I need to purchase the CPU, memory, motherboard and other components separate, and then come together an computer. Currently, people are more likely to purchase a all-in-one machine or a laptop. The computer has been standardized compared to 10 year ago. I believe the reason behind that is the demand for computers themselves doesn't have much difference; the demand for what the computer could do may have much difference (more about the software). 

Second, some products are unable to have significant difference that could be perceived by the customers. For example, Nike could let their customize to customize the material of the shoe lace. It won't have much effect since most customers can't perceive the difference in the shoe lace's material. The shoe lace color may be a better option since it's more obvious. 

Third, the customers with special demand, which is not satisfied by the current product in the market, may be unable/unwillingness to purchase user-customerized product. The target customers of Local Motor is a group of car hobbyist who love to researching the vehicle. However, for other products, the target consumers may want something special, but they just don't want to spend time in customization. Or they don't enough money to purchase it. 

Fourth, it's hard for the companies to balance the benefit from mass production and mass customization. It will be easier for the company if they only do mass production, or mass customization. For example, a automobile firms who adopt mass production, is more likely to improve their product based on what they have, instead of a disruptive innovation. The reason is that it's relatively more profitable and safer decision to make. An complete re-design product includes lots of uncertain. Koda invented the first digital camera but failed to produce it; IBM invented the first ERP system but failed to produce it for the same reason

What's kinds of industry you believe will be difficult (at least for now) to implement the mass customization?



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