Outside Innovation

Local Motors: Reinventing the Car Industry from the Outside In

One of the most inspiring "stories" at the Business Innovation Factory's fifth annual summit, BIF-5, in Providence, Rhode Island was told by Jay Rogers, the founder of an innovative new American car company, Local Motors (www.local-motors.com). Jay is an ex-marine whose grandfather instilled in him a passion for cars. His grandfather owned, among other companies, Indian Motorcycles. Jay grew up in a car-mad family. His experience fighting in Iraq convinced him that the U.S. needed to shed its dependence on foreign oil. So he has invented a new kind of car company.

The cars are made out of easily assembled, lightweight composite materials to reduce fuel consumption. The car chassis is licensed from an existing mass-producer of cars (the first one uses a BMW chassis). The "proprietary open source" car designs are contributed by world-class industrial and automotive designers participating in open competitions on the Local-Motors Web site. The designs are submitted, evolved, voted on, and critiqued by car fans, designers, and prospective customers (customers' votes count more). The car designs are specific to each region of the country. The community also participates in the design-to-build phase through an open prototyping process for each new model. Each phase is photographed, commented upon and posted, with trade-offs discussed.

Once each local car model is in production in its micro-factory, each customer helps assemble his own car at this local sales/manufacturing facility/service location. (Think Build-a-Bear for cars!). As Jay Rogers explained: your car is the second most expensive investment most people make in their lives; why shouldn't you have an amazing experience and an amazing car?

Spreadshirt: Making It Easy to Be Your Own Brand

Like sneakers, custom-designed and printed T-shirts are a huge category in mass-customized products. Spreadshirt is one of the most mature companies in this space. It was founded in Leipzig in 2002 by Lukasz Gadowski and Matthias Spiess, and quickly became a European market leader in personalized clothing. The original idea wasn't a direct-to-consumer play, but an online shop partner that would empower small retailers to create and sell their own branded goods. With the combination of a well-designed Web infrastructure and custom manufacturing expertise, the firm grew from a prototype to a multimillion Euro global company.

CNN Partners with Spreadshirt

Make a Statement

CNN partnered with Spreadshirt to enable customers to make T-Shirts out of CNN headlines.

Refocus on Shirts and My Brand

Jana Eggers is now the CEO of this company, which has offices in Leipzig and Boston. "We're a creative, personalized apparel company. We have millions of direct customers and over 300,000 shop partners."

Jana told the story of the refocusing of Spreadshirt. "About a year ago, we refocused. We were producing a lot of custom merchandise: puzzles, clocks, lanyards, mugs, and, of course shirts. We went through a transition from "you think it, we'll print it" to a laser focus on making it about them—the customers and the products that carry the most emotional impact for them."

They did a lot of soul searching and research. "We asked our employees first; then we went to our customers." They asked customers: "What made it "your own label?" Jana explained. What they discovered is that wearable apparel packed a lot more impact than any other customizable object. And that telling a story or making a statement about yourself is the key emotional driver. Jana said that the phrase that really summed up the customer research for her was: "I wear my shirt every time it's clean." This was the big epiphany. "Shirts are very personal to them. People comment on them. They wear them proudly. We also learned that the process of creation is a really important part of the perceived value of the experience. Many customers commented that they wanted to spend more time in creating their customized shirts; not less."

Mars Direct: Personalizing Candy & Expressions

Personalized Expressions

Dan Michael, the R&D Director of Mars Direct, told "the story of how and why a personalized chocolate business was started and grown within a mass market snack food company." He briefly described the evolution of Mars Direct which currently sells, manufactures, and delivers personalized M&Ms and Dove Chocolates. "We're not a candy company; we're a personalized expressions company," Dan emphasized. "We make special moments more magical. The giver makes meaningful moments more magical through personalization." Personalized M&Ms are used at birthdays, weddings, company bashes and sporting events. "My Dove" chocolate bars, with specially printed messages on the foil wrap, have been used to propose marriage as well as to celebrate events.

My M&M's

Create Your Personalized M&Ms

For each order, you select from among 22 colors and create the verbiage you'd like. Add imagery, including photos.

My M&Ms. I have personal experience with My M&Ms®. I've ordered them for my grandkids' birthdays. They're always a big hit. I learned about them from an online ad at myrecipes.com. It's quick and easy to go to the mymms.com site and use the online tools to select your colors, type in your message(s), and select your packaging. As of June, 2008, you can also upload an image or a logo and have it printed (in black) on a colored M&M.

One of the things the My M&M team has learned is that customers not only want to personalize their candy to tell a story or to commemorate an event. They also want to customize the packaging they select. Depending on the event, customers may choose to have the personalized candy delivered in bulk (so they can pour it into bowls), or wrapped in cellophane bags, or delivered in boxes or tins. Dan reports that the most popular options are currently the 7 ounce cellophane wrapped bundles and the bulk delivery.

My Dove. The customization of M&Ms packaging gave the Mars Direct team the idea to use custom packaging as the personalization mechanism for other snacks—ones that don't lend themselves to printing on the candy. The personalized expressions that customers create for My Dove candy bars are printed on the foil paper used to wrap the candy.

When you visit the Mydovechocolate.com site, you'll discover a wealth of seductive personalization and customization options. You can select the type font, create multiple messages, and select the color of foil wrapping. You can select among a wide variety of gift boxes, with different types of chocolates and different packaging options, e.g., ribbon colors, and so on.

American Power Conversion: Profiting from Smart Customization

Lars Hvam and Niels Henrik Mortenson head up the Centre for Product Modeling at the Technical University of Denmark's Department of Manufacturing Engineering and Management. At the MIT Smart Customization Seminar, they presented several compelling case studies of smart customization in action among their clients. These are all major B2B manufacturers who have been applying the principles of smart customization and modular design of product lines and business processes for several years.

These cases are covered in more detail in their recently published book, Product Customization.¹ One of the most detailed accounts that Lars and Niels presented included highlights from American Power Conversion.

The Importance of a Product Variant Master

Niels Henrik Mortensen and Lars Hvam described how American Power Conversion created a streamlined modular product line by mapping out the current product assortment and processes and then simplifying them.

Dramatic Reduction in Lead Times by Moving from Engineering to Configuration

American Power Conversion (APC) is a multibillion dollar provider of complete power management systems for data centers, access providers, business networks, and home/small office.

It used to take APC 18 months to design, configure, and deliver the power management infrastructure for a data center for on-site assembly. Today, the company's 35,000 customers receive (or generate) a quote in less than an hour. The lead time for delivery of a complete infrastructure system for a large data center has been reduced from 400 days to 16 days! Since the systems arrive pre-assembled, on-site installation and integration has also been dramatically reduced.

Customers and technical consultants no longer engineer these complex solutions; they configure them. American Power Conversion's configuration and ordering systems are used by more than 10,000 sales engineers and dealers worldwide as well as by the majority of APC's customers.

APC manufactures standard modules in the Far East (power supply, air conditioning, cabling). All of these modules are mass produced. "The manufacturing is planned and executed based on the product and manufacturing specifications generated in the configuration systems," they explained. Most systems are then pre-assembled in one of APC's 15 assembly distribution centers around the world.

*Endnote*
1) Lars Hvam, Niels Henrik Mortensen, Jesper Riis. Product Customization. Springer, 2008

*Endnote*

Adidas Pioneered in Providing Custom Footwear

Adidas has been a true long-time pioneer of mass-customization. The company has tried many different approaches over the years and has learned a lot from all of them. At the MIT Smart Customization Seminar in November 2008, Alison Page, Manager of Customization at Adidas, gave a great presentation covering a few of the highlights.

Adidas sprang to fame when, in 1955, the German soccer team beat the favored Hungarian team to win the World Cup. This upset was dubbed "The Miracle of Bern." The German team was wearing Adidas boots with removable studs. When the rain came, they screwed the studs onto their shoes and won the match against the Hungarians.

Customizing Sports Performance Shoes: High Tech/High Touch

Although Adidas had always kept up the tradition of designing customized shoes for top athletes, it wasn't until the late 1990s that Adidas decided to make customized shoes available to the mass market. mi adidas, the mass-customization operation, was piloted in 1999 and launched in 2000 to bring custom footwear to the common person.

The Adidas approach to the custom design of performance shoes relies heavily on well-trained knowledgeable experts—people who understand both fit and performance and can truly add value to the co-design activity. Starting in the late '90s, Adidas outfitted a number of its retail outlets to provide custom fitting and custom design services. They also brought the custom design skills and technology to major sporting events. I described the approach in my book, Outside Innovation¹, quoting from a case study co-authored by Frank Piller:

"'The company provides a service that, until now, was only available to top athletes…Customers' feet are scanned using a foot scanning system, in order to determine the exact length, width and pressure distribution of each foot.'² This information is entered into a software program at a sales kiosk to determine the best-fitting shoe. The customer is then given prototype shoes in the right fit and style to try on. 'Once satisfied with fit, the customer designs the color elements and selects material preferences. All of these steps are performed with the help of a sales kiosk leading the customer through the co-design process, supported by a sales clerk.'³ The shoes arrive within three weeks."⁴

Over the years, Adidas has continuously refined the technology assists that it provides its personnel to custom design performance shoes. In 2006, Adidas opened an Innovation Centre in Paris which includes a pressure sensitive treadmill used to capture runners' gaits as well as the use of touch screen and handheld technology for customers and trained associates to capture fit and to select and to customize the shoe designs. Here's a YouTube link⁵ to a video describing the experience.

In Store Design of Adidas 

Originals footwear in the mi Originals retail execution

The look and experience is reminiscent of a tattoo parlor. Customers can browse samples while they create their own custom designs for selected shoe styles.

CustoMax: Platform & E-Market for Custom-Tailored Apparel

Learning by Doing

Bas Possen is a mass customization veteran. He has been designing and selling made-to-order business suits and shirts for men and women since 1969 through his company, Possen Made-to-Fit Fashion.

After growing up in the fashion industry with a background in custom-tailoring, Bas Possen wanted to take advantage of the latest technology. "In 1998, we started with body scanners from Human Solutions. We were the world-first fashion retailer with a 3D body scanner in Amsterdam as well as in a mobile store visiting clients. We were the world's first, but not the world's best. For example, during the first year of operation, we scanned 10,000 people, but we had to give money back to 30 percent of them. We realized that we were tapping an unmet need, but the scanning software was immature and the logistical control wasn't there."

Bas also experimented with online design and ordering of custom tailored apparel. "We wanted to be an Internet player, but we found we needed to be brick and click. We had no clue about the proper distribution model."

CustoMax provides a total mass customization ecosystem for apparel retailers

 

Retailers use the configuration software to capture customers' measurements and apparel specifications. Custom manufacturing is outsourced.

Use Smart Customization to Recession-Proof Your Business?

 

Ever since I attended the MIT Smart Customization Seminar in November, I've been aware that a switch has flipped inside my gut. For me, this is a sign that there's an important shift in the technology-enabled business strategy landscape that my clients need to act on! It also reminds me of the visionary clients I have who are already way ahead of me in adopting (and probably shaping) the transformation that's upon us. People like Phil Gibson at National Semiconductor, Pat Kerpan at Cohesive FT, and Jonathan Clark at Elsevier are among our clients who have been pioneering in smart customization for years (although they may not have called it that).

My "gut feels" usually occur just before the knee of the adoption curve. Sometimes it's several years before, but, recently I notice that the lag time is decreasing... My instincts are slowing down with the rest of me as I age.  These days (as I near 60!) my inner alarm only blares a few months ahead of the tipping point. So there's even more urgency to pay attention!

Smart Customization is BIG! I now believe that if you don't switch your business operations and processes to embrace this paradigm, you're going to left in the proverbial dust. Smart Customization is when you empower customers and partners to custom-design their own goods, services, experiences, and approaches and you deliver these customized products quickly (within minutes or days) and cost-effectively (at only a small premium above mass-produced or standard products). You can apply smart customization to information, apparel, food, manufacturing—virtually any industry or practice.

Smart Customization is a sustainable approach to practicing customer-led innovation. It's a form of iterative customer co-design that causes you to profoundly rethink your business architecture. To be successful, you need to decompose your offerings into modules. The boundaries (or APIs) of these modules are defined based on the characteristics or attributes that matter most to customers in specific contexts.

Smart Customization is a really shrewd strategy to jumpstart or revive during a recession. You can start small. You can leverage the many platforms and ecosystems that already exist. You make money by streamlining operations, eliminating inventory, and reducing time-to-cash dramatically. You boost and differentiate your brand by injecting excitement and emotion into it. Customers become invested in the experience of customizing and personalizing. They come back to do it again. They tell others.

If you miss the smart customization bus, there may not be another one.

This week, I offer a "Best Practices Report"—Smart Customization Comes of Age—based on the case studies presented at the MIT Smart Customization Seminar. It's a great place to begin your journey.

Opportunities to Improve Customer Experience While Cutting Costs

We are all watching the downward spiral of the global economy with trepidation and making contingency plans. Our budgeted projects may be slashed. Our headcount may be downsized. Our travel will be severely curtailed. Our customers’ spending on our products and services will no doubt decrease. But what’s the silver lining in a severe downturn? We have to get innovative and resourceful. Here are some tips to consider:

Shift Policies to Trust Your Customers and Partners and Eliminate 30% of Business Friction

As we work with organizations and their customers to streamline customers' scenarios and to improve the customer experience, we find that some of the most customer-unfriendly practices are the result of deep-seated customer distrust on the part of the organization. Well-meaning corporate stewards have put policies and processes in place to prevent fraudulent behaviors in response to the actions of a minority of bad acting customers. Instead of using intelligent technology to identify the few real offenders, companies put elaborate blanket safeguards in place. These safeguards create friction and a lot of unnecessary work for your employees, your partners, and your customers. Our recent Customer Scenarios in a wide-variety of industries show dramatic opportunities to save money and increase revenues by shifting to a customer-trust model.

Create Trust-Based Policies; Isolate Offenders. Why not operate on the assumption that your customers and business partners are honest and will not knowingly steal from you or defraud you? Remove the costly and onerous hoops you currently make everyone jump through in order to use, share, restore, and enjoy the products and services you provide. Here are just a few examples of customer-unfriendly policies that annoy customers while increasing operational costs:

• Placing a multi-day hold on funds deposited at an ATM machine, forcing customers to come into the branches to make deposits so they can access their money (a common banking practice in several countries).

• Requiring that a serial number match a service contract number before you'll provide technical support or renew a support contract.

Tagging the Physical World

When I was a young French teacher, I used to put big signs on all the objects in our classroom (which was actually an old farmhouse) with their French names—la table, le cahier, la chaise, le mur, la peinture, le chat (the cat didn’t like it very much!). I was reminded of this practice when I stumbled upon a similar real-world tagging phenomenon that is cropping up in odd places around the world. It’s a form of mobile tagging, using Semapedia and QR Codes. Semapedia is a research site that lets people create two-dimensional bar codes for physical objects, paste a label with the code on the objects, and link those objects to a Wikipedia article. QR codes (which stands for Quick Response) are the specific 2D bar codes that people seem to have gravitated towards. A QR Code is a matrix code created by Japanese corporation Denso-Wave in 1994. While the patent is held by Denso-Wave, the company encourages broad usage. QR codes were originally used in Japan for tracking automobile parts. But they soon began to be used by advertisers who placed them on posters and products in order to provide a quick link to a specific promotion via customers’ mobile phones.

Citizen-Tagging for Fun and Edification

Now, all over the world, people are pasting labels with 2-dimensional bar codes on them onto buildings and objects of all kinds. The purpose of these tags is to provide a link to a relevant Wikipedia article. It’s a citizen-led, guerrilla approach to linking objects in the physical world to useful context and information in the virtual world.

These tags are turning up on stores, museums, paintings, ATM machines, bridges, street corners, parks, records, books, and other types of merchandise. (I found a tag on a carton of San Pelligrino bottled water and another tag on a shelf with Perrier.) If you have a mobile phone with the right software installed, you can point your phone’s camera at the bar code, and the code will be converted into a mobile-URL link to the Wikipedia article about that object. If you take a photograph of the object and upload it to Flickr and add your geographic coordinates, it will also appear on a map which is maintained at Semapedia.org.

Accelerate Your Innovation Metabolism through Partner-Practitioner-Subject Matter Expert-Cross-Industry Ecosystems

In a May 15th, blog post, "Optical communications goes nano—HP announces practical interconnect tech (and an ecosystem for it to grow in)," Scott Jordan also extolled HP’s breakthroughs in silicon photonics through nanoimprint lithography. The goal is to reduce the cost and increase the speed of data transfer through the convergence of nanotechnology and optics. Scott quotes Colin Johnson’s story in EETimes:

“Using silicon photonics to connect blades, boards, chips and eventually cores on the same chip has become a strategic goal for Hewlett Packard... By harnessing its expertise in nanoimprint lithography to fashion low-cost, high-speed silicon photonic devices, HP said it hopes to seed the fledgling community of optical interconnect component makers. Rather than doing it all, HP is seeking partners with other silicon photonic pioneers in hopes of developing its first optical interconnect technology in products by 2009.”

But what really excited Scott was the fact that HP convened a gathering of the smartest people they knew and invited others around the world to join in an open innovation ecosystem around this new technology. Scott participates in National Instruments’ ecosystem of scientists and engineers, so he knows how effective these customer/partner/expert ecosystems are in advancing the application of new technologies to tackle new problem spaces and to advance the state of the art. What’s particularly important in designing these kinds of ecosystems is to ensure that you have vibrant participation from experts in many different disciplines. It’s often the cross-disciplinary or cross-industry idea transfers that yield the most momentum.