How technology can drive the next wave of mass customization
Seven
technologies are making it easier to tailor products and services to the wants
of individual customers—and still make a profit.
Consumer choice has increased steadily since Henry Ford’s Model T, when
buyers could pick any color—as long as it was black. After Ford’s single
product came standard specifications for different consumer segments, for
example, clothes in different sizes and colors. In the last decade or so, we’ve
seen features that allow each shopper to customize his or her product or
service with a range of components, for instance, when ordering a car,
computer, or smartphone. Such configured mass customization is bound to
reach ever-greater levels of sophistication.
There’s more to come. Now individualized
customization appears to be within reach. This next wave of mass
customization—building a unique product for each customer (for example, custom
suits and shirts made to fit your body shape)—has been on the horizon but has
proved hard to achieve profitably at scale. Successes have usually come from
start-ups or from niche plays by established corporations, and there are many
examples of costly failures.
Profitable mass customization of
products and services—whether they are ones that are unique for each customer
or ones that consumers can configure extensively to their needs—requires
success in two broad areas. The first is identifying opportunities for
customization that create value for the customer and are supported by smooth,
swift, and inexpensive transactions for both consumers and producers. The
second is achieving a manageable cost structure and cost level for the producer
even as manufacturing complexity increases.
We believe the time for widespread,
profitable mass customization may finally have come, the result of emerging or
improved technologies that can help address economic barriers to responding to
consumers’ exact needs in a more precise way.
For example, online configuration
technologies that can easily and cost-effectively assemble customers’
preferences and 3-D digital modeling that lets shoppers envision the final
product are becoming increasingly affordable and scalable. In manufacturing,
dynamically programmable robotic systems can switch between models and variants
with little loss of efficiency.
Other trends also support bets on
mass customization. In recent years, hundreds of start-ups have created
successful business models for providing customized goods, although not at
scale. Moreover, the generation that has grown up with the Internet and its
personalized delivery of information and recommendations is likely to demand
tech-enabled personalized products.
The benefits for successful
companies are compelling, not least for global brands struggling with a
decrease in loyalty after the recession and eager to avoid a painful race to
the bottom of the cost curve in globalized and standardized product arenas.
Mass customization has the potential to help companies increase revenue and
gain competitive advantage, improve cash flow, and reduce waste through
on-demand production. Mass customization can also generate valuable data that
may be used in the development of standard products and in online marketing and
public-relations campaigns.
We have identified seven
technologies that enable mass customization, make it more practical today, and
will drive further advances in the near future. We divided these technologies
into two groups that correspond with the success factors identified earlier:
those that make it easier to create customization value for the consumer and
those that control costs for the producer, despite the challenges of
manufacturing complexity.
Creating
customization value
To create a sustainable, scaled
offering, the value of customization must go beyond the novelty effect and have
a functional or aesthetic purpose—usually based on preferences dictated by
biology (for example, body shape, DNA, and dietary requirements) or taste (for
instance, in design or food). Mass customization has configured and
individualized applications across industries, including apparel and health
care
Before launching customized
products, executives must understand what customers want to individualize and
what components they want to configure (such as the type of fabric, the shape
of a collar, or the thread attaching buttons) and, consequently, which options
should be offered and how they should be priced. What used to entail a costly
conjoint analysis to define the solution space can now be done much more easily
with the help of new technologies, many of which also make the transactions
required for creating customization value smoother, swifter, and less
expensive.
Social
technologies
Social media and crowdsourcing are
by no means new, but they pave the way for better customization options by
allowing companies to analyze the value that consumers attach to existing or
proposed components of current or hypothetical “virtual” products. Starbucks does
this with frappuccino.com, an inherently social site where the company lets
users build their own virtual Frappuccino, with ingredients such as raspberry
flavoring and protein powder. This allows Starbucks to measure the popularity
of different ingredients as well as popular combinations, such as caramel and
whipped cream, before investing in any actual process or ingredient changes in
its stores.
By allowing customers to create real
and virtual products, companies can in effect use customers as marketers and
cocreators. Social technologies empower customers to broadcast their creations
to a large network, which is essentially free marketing for the company whose
products they are promoting. This is uniquely suited to customized products, as
many consumers are proud of their creations. One company that has tapped into
this is Adagio Teas, which offers consumers the option to create their own
mixtures of tea online; these are then made to order and shipped. If consumers
want to, they can offer their tea creation to the public through the site,
along with a name and image of their choice—for example, “Jasmine Dream,” with
an image of the jasmine plant. Every time someone else purchases the creation,
the maker receives points, which can be redeemed for Adagio products.
Increasingly, many company sites only allow customers to save their custom
creations after logging in with their Facebook credentials, which semiautomates
the social-sharing process.
Online
interactive product configurators
Online configurators are at the
heart of the mass-customization trend because they provide a user-friendly and
speedy way to gather a consumer’s customization preferences. While online
configurators have been around for years, user interaction in the past was
limited to selecting a few configuration options in a form. Any advanced
configuration was cumbersome and expensive, often requiring a salesperson to
discuss options and selections with the customer. Today, advances in product
visualization and the increased speed and adaptiveness of configuration
software have made product configuration engaging and what many consumers
describe as a fun experience.
One example is Shoes of Prey, a
website that lets its users configure custom shoes. Users choose from 12
general shoe types, from flat to ankle boot. After selecting a type, different
designs for the toe, back, heel, and decorations are offered, with each click
automatically updating a preview in the center of the screen. The most engaging
part is when users click on the different elements of the shoe to select colors
and fabric types. The shoe spins around after every selection, as if to
celebrate the choice. A “trending now” page shows a seemingly endless list of
shoes that are designed by site users, with several updates every minute,
attesting to the fact that users of the site are having fun. Shoes of Prey
found that the more sophisticated models of the customized product increased
conversion rates online by 50 percent.
3-D
scanning and modeling
The shape of real-world objects can
be analyzed by 3-D scanners, which collect data that can then be used to
construct 3-D digital models. These scanners make it much easier to measure,
for example, a human body for individualized products that are tailored to fit.
Several companies have created scanning software that gathers exact body
measurements in seconds or minutes, which can then be rendered into an online
personalized 3-D model. Traditionally, these technologies have been expensive,
hard to install, and difficult to roll out at scale. Companies like Styku that
perform these scans are now using off-the-shelf technology (for example, Kinect
cameras and a Windows 8 tablet) to achieve total hardware costs under $3,000.
The accuracy of the resulting
measurements is often even better than those of hand measuring. Styku has sold
a large number of the resulting 3-D measurement terminals to retailers all over
the United States.
Another company, the start-up
Constrvct, invites consumers to enter their measurements into a form on its website
and then generates an online 3-D model showing what a certain dress would look
like on their body shape. This reduces some uncertainty on the part of the
consumer as to whether a garment would fit well with the customization options
selected. Indeed, in the future, 3-D scanning and modeling might move directly
into the home, giving consumers the ability to scan themselves, upload the 3-D
model, and start ordering clothing “tailor-made” just for them.
Recommendation
engines
E-commerce software has for years
been able to recommend product choices based on previous selections.
Recommendation engines are now moving into the customization space by helping
customers configure products. Chocri, for example, operates a site called
createmychocolate.com that customizes and ships chocolate bars, helping
consumers configure their own bars from four base chocolates and 100 different
toppings. The site tells consumers which spices go well with the base chocolate
and main ingredient chosen in the previous step. For a milk-chocolate bar with
strawberry bits, for instance, the site recommends cinnamon, roasted almonds,
hazelnut brittle, and edible gold flakes. Recommendations are based on popular
choices users of the site have made and are edited by the company for taste,
thereby reducing the risk the customer takes when ordering a product she or he
has never tasted. Chocri estimates that its recommendation engine has increased
the rate of conversion from people configuring their own chocolate to an actual
online order by more than 30 percent.
Smart
algorithms for dynamic pricing
On-demand custom orders can often
challenge companies with unpredictable spikes in demand, resulting in long wait
times, which in turn are a potential deal breaker for consumers. Some companies
are managing on-demand capacity by using smart algorithms and better
data-processing capacity to enable dynamic pricing, thereby reducing the time
consumers have to wait. A US pizza chain that lets customers configure their
own pizzas (rather than offering a limited number of combinations) found that
some ingredients take longer to place on the pizza base, such as sliced
toppings that need to be placed one by one. In contrast, extra cheese, for
instance, can be sprinkled over the pizza in one hand motion. When there is a
large backlog of pizzas to be customized, prices on the website are adjusted
dynamically: smart algorithms decrease prices for toppings that are quicker to
put on the pizza and increase prices for others, discouraging consumers from
choosing those that take longer. This reduces the wait time for those customers
and increases customer satisfaction as a result.
Controlling
manufacturing costs
Technology has driven and will
continue to drive dramatic productivity and flexibility improvements in
manufacturing. Modularization of product designs, advanced back-office
software, and flexible production technology already have the power to reduce
the costs of mass customization.
Enterprise
and production software
Traditional technology for
enterprise resource planning and supply-chain management (SCM) was designed to
enable sales and manage production of a limited variety of products with
clearly defined input components. Translating an individualized order from a
single customer into a custom picking list and assembly instructions for
warehouse and production workers was a big challenge. Now companies like Just
in Time Business Consulting and Configure One have developed packaged software
that enables tracking of individualized design features in customer orders and
their translation into sourcing and production instructions. These tools
connect the configurators at the front end with the production and SCM systems.
This doesn’t only mean that the production staff knows what to assemble; it
also means that customers are promised realistic lead times and progress
updates and that they are not served up any options for which the components
are not in stock. These back-office software changes can thus effectively
enable smooth production of vast variety.
Flexible
production systems
Flexible manufacturing systems are
essential to making small-batch production for mass customization profitable.
The automotive industry has been at the forefront of building this flexibility.
Ford and General Motors have invested in dynamically programmable robotics with
interchangeable tooling that can switch agilely between models and variants
with no loss of efficiency. Companies from other industries are adapting these
technologies. Caterpillar’s production system, for example, cuts out shoe parts
according to customers’ measurements with an automated, computer-guided cutter.
Furthermore, the advent of 3-D
printing is truly changing the way we think of manufacturing. These flexible
devices can print objects with materials such as ceramics, metals, and even
chocolate. While primarily used in prototyping, 3-D printers are making inroads
into the mass production of customized objects, such as jewelry, home
decoration, and clothing. On Shapeways’s site, for example, users can enter a
poem or custom text, which is then automatically transformed into a visual of a
vase composed of the words. Shapeways then makes a 3-D print of the vase and
ships it within a few days. The advances of this technology mean that the
primary constraint in adoption will be the creativity of entrepreneurs and
leaders in how it is applied. As mind-sets about what is possible change, we
expect many more innovative concepts and processes to blossom that accelerate
the cost-effective production of customized goods.
And there’s more to come. On the
horizon, manufacturing, supply-chain, and logistics functions will benefit from
the broad penetration of digital sensors and smart tags that will offer
greater potential for visibility, flexibility, and control of product flows, as
well as for automation of tasks that enhance product value. This is the broad
trend toward what is known as the Internet of Things, which blends sensors,
standards-based networks, and smart analytics to enable new information
architectures for optimizing production. Imagine, for example, products that
adapt to their users’ habits and usage, or the use of predictive analytics to
ensure parts or modules are automatically replenished when they are approaching
end of life or failure. The falling cost and growing capabilities of connected
sensor-driven systems can make these techniques, applied to expensive equipment
such as large turbines today, applicable for consumer goods. Indeed, modular
design, coupled with new manufacturing and logistics chains, will allow
businesses to break the traditional compromise made between variety and
production cost.
Mass customization has been driven
primarily by sales and marketing teams that understand the demand for
customized products but can’t enable profitable customization on their own. Few
large companies have brought the different approaches to customization together
across business units and supported them with appropriate technology from the
start. True scale in mass customization can only be achieved with an integrated
approach where technologies complement one another across a company’s various
functions to add customization value for the consumer, bring down transaction
costs and lead times, and control the cost of customized production
The technology platforms that come
together to enable mass customization could rejuvenate stagnant markets and
help companies pioneer new opportunities that deliver attractive growth and
margins. However, to shape this next wave of mass customization, leaders must
work closely with business-unit, IT, and other functional managers to create a
new integrated business model that can harness the power of new technologies to
cost-efficiently serve consumers on the exact needs they have. While many will
start with pilots to prove the potential, this shift will require a true
commitment to break many established orthodoxies. We believe the rewards will
be great for those that lead the change.
Anshuk Gandhi, Carmen Magar ,Roger Roberts
http://www.mckinsey.com/insights/business_technology/How_technology_can_drive_the_next_wave_of_mass_customization?cid=manufacturing-eml-alt-mip-mck-oth-1402
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