Outside Innovation

Smart Customization Comes of Age

Best Practices from the MIT Smart Customization Seminar 2008

Netting It Out

What is smart customization and why is it important to your business? Joe Pine defined Smart Mass Customization in 1993 as:

“developing, producing, marketing and delivering affordable goods and services with enough customization that nearly everyone finds exactly what they want.” Smart customization gives customers the ability to select and/or contribute the product or service attributes that matter most to them.

Smart customization is the term that the MIT Design Lab uses to describe the second generation of mass customization offerings. Smart customization is both profitable and sustainable.

It’s profitable because customers are happy to pay more for the customization experience as well as for the outcome of customization.

Smart customization is sustainable because products are built to order and assembled close to the customer, limiting inventory carrying costs and reducing transportation costs.

What follows is my “trip report” from The MIT Smart Customization Seminar that was held November 10-11th, 2008. The seminar was co-chaired by William Mitchell, Joseph Pine, and Frank Piller. Unlike many of the academic meetings that have been held on the topic of mass customization, this was a business best practices event, with practitioners from the U.S., Europe, and Asia providing glimpses of what they have done and what they’ve learned along the way.

Smart Customization Gains Momentum

There’s a “new” way to design products and services as well as the businesses that produce them. Your starting point is the conviction that customers want and value products, services, and experiences that are custom-designed for them and/or by them.

Your business case is that customized products, services, and experiences can be produced quickly and cost-effectively and yield a much higher margin than mass-produced and/or custom-designed products and services.

Different Types of Smart Customization

There are several kinds of customization that were discussed at the MIT Smart Customization 2008 seminar:

1. Custom-configure products from a set of standard components

2. Custom-tailor using a set of constrained configuration options to meet specific dimensions or tolerances

3. Personalize products to include artwork or other intellectual property the customer contributes

4. Use end-user “manufacturing” solutions to enable customers to produce their own custom-designed products

We also discussed the power of pseudo-customization, recommendation or match-to-order:

5. Select previously-made products based on customized requirements

Five Types of Smart Customization Discussed at the MIT Smart Customization Seminar

1. Custom-configure products from a set of standardized components.

BugLabs Open Source PDA Design Modules

Design standard modules that can be easily mixed and matched. Bug Labs manufactures customer-programmable appliances that can be mixed and matched to yield a custom PDA device. (www.buglabs.net)

2. Custom-tailor products from a set of constrained configuration options to meet specific dimensions or tolerances.

ProperCloth Lets Men Custom-Tailor Their Shirts

ProperCloth is a recent start-up selling men’s shirts that customers design and purchase online. http://propercloth.com

3. Personalize products to include artwork or other intellectual property the customer contributes.

Mars Empowers Customers to Personalize Their M&M’s

Mars Candy has been enabling customers to personalize their M&M candy and packaging for 3 years.

4. Use end-user “manufacturing” solutions to enable customers to produce their own custom-designed products.

Desktop Factory Lets Customers Print 3D Objects Using Nylon

Desktop Factory is a 3D Printer that will be affordable enough ($4,500) for home and/or small business use. You can use it to create prototypes, samples, and one-off custom objects from 3D drawings.

5. Pseudo-customization: Select previously-made products based on your own custom parameters from a set of recommendations.

Zafu Helps Customers Find Pre-Manufactured Jeans that Fit!

Zafu.com is a jeans-shopping site that enables customers to select the off-the-rack jeans that will best fit their own dimensions.

What I find personally gratifying is how well the smart customization “movement” fits with my own world view of customer-driven innovation. Customer co-design is an essential characteristic of smart customization. To be successful, you have to (re-)design your organization, your products, your infrastructure, and logistics to respond to customers’ changing needs. You need to listen deeply and observe the patterns of how customers design and use their solutions. You need to let customers learn from and build upon one another’s creativity.

Why Is Smart Customization Gaining Traction?

After spending two days with 60+ practitioners of smart mass customization from the U.S., Europe, and Asia, I became convinced that there is no longer any question about whether or not smart customization is a viable business strategy in most industries. The practitioners are convincing, successful, and hard to dismiss. There were many proof points and success stories from a wide variety of industries.

The professors who led the discussions and provided the conceptual frameworks all conveyed the impression that smart customization is in its adolescence; not its infancy.

The questions that remain aren’t about whether or not to take the plunge; they are more about how to do it. What are the best practices? What works well? How do you design or change your organization’s culture and processes to embrace smart-customization?

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.

Celebrate the Inauguration Through Service (with your Mom!)

This weekend I'll be traveling south for the presidential inauguration. But I'm not going to D.C.

I'm going to Haverford, Pennsylvania, to share this momentous event with my 92-year old mom and her friends. This is probably one of the most important, not to mention historic, days in my mom's long life. She has been a community and political activist all of her life, quietly advocating for women’s rights, for birth control for unwed moms, for peace before and during all of our wars, for voters' rights for the disenfranchised, for civil rights, for economic empowerment, for literacy, for gay rights, and for workers' rights. The fact that she has lived to witness the swearing in to office of Barack Obama and that he is both a symbol of, and a champion for, everything she has worked for all these years is wonderful.

Every time I talk to her on the phone, she says, "I can't believe we did it!" Of course, she's not just talking about putting a black man in the white house. She's talking about taking back control of our government and becoming good global citizens.

On Monday, January 19th, my mom and I will be participating in what the Obamas are calling a "National Day of Service" on Martin Luther King, Jr. Day. We'll be helping local schoolchildren who are pooling their pennies and putting together emergency kits for young people in need. It's a small thing, but it will feel great to be part of history and to be involved. It's easy to find (or to host) a service event in your community—(see USAservice.org).

Make It Easy to Stop Being a Customer

By Ronni Marshak
SVP and Sr. Consultant/Analyst, Patricia Seybold Group

In these hard economic times, we keep being reminded how important it is to keep the customers that you have. But sometimes you simply can’t. The customers aren’t moving to another provider, they are simply doing without.

So it is important to also offer a great customer experience for the customers you are losing so that, when things get better (soon, we all hope!), they will be excited about returning to do business with you.

Looking at finances this week—and facing a major construction repair project in my condominium—I realized that I had to cut down on expenses in anticipation of a possibly bleak financial year and continuing investment losses. Just yesterday, I had two very different customer experiences related to reducing my costs.

An Unpleasant Product Cancellation Experience

First, the bad experience:

Months ago, I ordered a beautiful, yet relatively expensive sweater online from an etailer with whom I have often done business, and with whom I have a great history. The sweater was backordered, but I was informed it would be shipped before the end of the year. During the holidays, I got an email notice saying “good news, your backordered item has been shipped and should arrive within 5 to 8 business days.” And then I forgot about it as I went about celebrating with family and friends.

Since I hadn’t yet received the sweater, I called the company, first, to see where it was, and second, to arrange to return it. I really didn’t need it.

After going through the IVR labyrinth, I was connected with a lovely woman to whom I told my story. She checked my account and saw that the delivery company stated that the package had been left outside my (condominium’s) door. Since my item was now “missing” (probably stolen, since it was left outside the building), she had to escalate to a supervisor.