The Concept of Mass Customization

April 13, 2011 at 4:56 pm by admin

The concept of mass customization has evolved since its inception in 1987, which is attributed to Stan Davis. In his book Future Perfect, he emphasizes that in traditional industrial production there is on the one hand mass production, using economies of scale to produce goods at low costs, but with nearly no variety or on the other hand individual production with a high degree of variety but in small volumes with high costs. Moreover, he suggests that new business models will have to accept “the coexistence of mutually contradictory phenomena” (Davis, 1989, p. 16).

This is possible with the help of new technology that offers both speed and specificity, which is needed to produce goods, that are individually and cost-efficiently manufactured. Besides manufacturing, the customer’s awareness and perception of mass customization is mentioned as another prerequisite of the concept (Davis, 1989, p. 17).

To support his concept, Davis emphasizes that mass customization is not limited to industrial production. It is also applicable to services. In the same way product modularity can be used to increase variety and minimize costs, services can be customized as well.

Customization of Markets

In the course of industrialization mass markets evolved and it was possible to offer standardized goods to a wide range of customers at very low costs. This, however, offered only a minimum of product variety. Therefore, comapnies tried to define market segments, in order to devide the all potential customers into broad groups of special interest. As the market segments became more and more detailed, the term “niche markets” appeared.  

In this context Davis proposed the idea of mass customizing markets. This gave birth to the term “Units of One” (Davis, 1989, p.20). This concept describes, that the same way segmented and niche markets were reached, individuals can be addressed using both a customized and a mass market approach at the same time. This process is depicted in Figure 1.

 

Davis

Figure 1: Market Development, Source: Davis, 1989, p. 20

Refining every market till the very end, each market consists only of a single customer. Therefore, meeting the needs of each customer on a mass basis is the final step. By reducing the size of each niche to a single customer the heterogeneity of needs becomes apparent and is taken to an extreme (Franke; von Hippel, 2003).

While a “mass-customized product is a one-of-a-kind manufacture on a large scale” mass-customized markets invert this paradigm by “taking products of standardized manufacture and locates the one particular selection that is tailored to the individual’s needs.” (Davis, 1989, p. 20). This concurs with the concept of long tail markets, where incremental costs for additional variety are small enough for companies, in order to compete on an endless number of market niches, instead of competing on blockbuster products (Anderson, 2006). Consequently, the idea of “Units/Markets of One” can be seen as the antecedents of postponement and point-of-sale customization. Davis offers the example of paint, which followed nearly the same development as markets in terms of variety. He points out that mass-customization became available by taking the final stage of manufacturing closer to the customer. In this case, this was done simply by mixing paint in hardware stores (Pine II, 1993, p. 184). Postponement on the other hand is a more general approach, where the customization stages are postponed as long as possible in the value chain in order to have a production chain as similar as possible to mass production (Yang et al., 2005, pp. 238).

Implications of Mass Customization for Companies

Joseph Pine further developed the concept of Mass Customization in his book “Mass Customization – A New Frontier in Business Competition” in 1993. In this book he focused on strategies for companies to implement the new concept by developing three strategies “Move Incrementally, Transform the Business and Create a New Business” (Pine, 1993, p. 133). In addition to that, mass customization related change management was developed for companies to cope with barriers, that occur while switching from mass production to mass customization (Pine, 1993, p. 162). Another core theme of his work focused on criteria, which a company has to take into consideration, when introducing a customization offer (Pine, 1993, p. 167).

Similarly, Salvador et al. realized, that in order to successfully introduce mass customization, a company has to develop certain capabilities. Whereas Pine already mentioned “dynamic stability” (Pine, 1993, p. 215) as a crucial element for companies, Salvador et al. offer three distinct capabilities, solution space development, robust process design and choice navigation which cover both internal and external aspects of mass customization. Solution space development describes the understanding of the customer’s needs and preferences by using this knowledge to create a solution space, meaning the customizability of the offered products.  A robust process design consists of efficient work flows, which are capable of dealing with individually produced products, implying lot sizes of one. Choice navigation is used on the one hand to communicate the mass customization offering to the customer and on the other hand to help the customer to decide on the right specified product amongst a wide range of options (Salvador et al., 2009, p. 73).

In the contemporary literature, definitions range from “producing goods and services to meet individual customer's needs with near mass production efficiency” (Tseng & Jiao; 2001; p. 685) to “a strategy that creates value by some form of company-customer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products” (Kaplan & Haenlein; 2006; p. 176p).

References:

Stanley M. Davis, (1989) "From “future perfect”: Mass customizing", Strategy & Leadership, Vol. 17 Iss: 2, pp.16 – 21.

Niolaus Franke; Eric von Hippel (2003) "Satisfying heterogeneous user needs via innovation toolkits: the case of Apache security software", Research Policy
Volume 32, Issue 7, Pages 1199-1215.

C. Anderson (2006) "The Long Tail: Why the Future of Business Is Selling Less of More", New York: Hyperion.

B. Joseph Pine II (1993) "Mass customization: the new frontier in business competition", Harvard Business School Press, Boston.

B. Yang, N. D. Burns & C. J. Backhouse, (2005) "The application of postponement in industry", Engineering Management, IEEE Transactions on, 52, 238-248.

Fabrizio Salvador,  P. de Holan, Frank Piller, (2009), "Cracking the code of mass customization", MIT Sloan Management Review. 50 (3), 71-78.

M.M. Tseng, J. Jiao (2001) "Mass Customization, in: Handbook of Industrial Engineering", Technology and Operation Management (3rd ed.). New York, NY: Wiley

A.M. Kaplan, M. Haenlein (2006) "Toward a parsimonious definition of traditional and electronic mass customization", Journal of product innovation management 23 (2).