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?

Comments

[Sarah]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sarah

http://www.craigslistpostingtools.info

[Graham Hill]

Hi Patty

Very timely after recent posts.

I think the real challenge isn't so much the product smart custimisation that you describe but services and experience customisation. In many cases this should be easier as services and experiences are by their nature flexible in a way that solid products never can be. Yet so many services and experiences seem to be hidebound by rigidities that go way beyond nature's physical laws.

One example of smart customisation in services that was very successful is the Customer DNA concept we developed at Toyota for cross-business customer lifecycle management. Although only Type 1 smart custimisation, we identified all possible push & pull contacts that a customer was ever likely to have with Toyota or one of its dealers and created a customer lifecycle management system that allowed Toyota to make the right contacts with the right customers at the right time.

The modular contacts were implemented into a cross-business customer lifecycle management system (where system = IT system, data, processes and other resources) that used business rules to decide what to do about an individual customer at any moment in time. By looking at what contacts the customer had had in the past, what different contacts the customer was eligible for at that moment and the contact management rules, the system could identify the best contact from all eligible ones. Generally no contact was the best contact. We didn‘t want to bombard customers with contacts just because we could. But sometimes several contacts might compete with each other to be made.

It enabled Toyota to combine contacts pushed by Toyota, e.g. a marketing promotion, with the contacts pulled by the customer, e.g. a request for a brochure, with local dealer contacts, e.g. a main inspection reminder, all in a seamless way. It also allowed Toyota to prioritise conflicting contacts and to automatically decide what to do with the lower priority contacts. So the brochure request might suppress the marketing promotion if it wasn't about the same vehicle family. But it wouldn‘t interfere with the vehicle main inspection reminder. Having said that, it would generate a contact for the dealer service advisor to talk to the customer before they had their main service about replacing the vehicle if it made sense for the customer.

One of the best things about this smart customisation approach was that it allowed other groups who wished to have contact with Toyota customers to build their own family of contacts and to integrate them into the customer lifecycle management system, without having to recreate the system from scratch. So when the Customer Experience Group decided to build an event-based experience offering it was relatively staraightforward to identify all the potential contacts and their busines rules and to integrate them as a family into the customer lifecycle management system. And the same with lead management contacts a short while after that.

The customer lifecycle management system was explicitly designed to emulate the charachteristics of DNA expresssion. This was because DNA is the most powerful way of managing information known to man. It has evolved over billions years and controls what an organism can be, how it develops and how it responds to environmental signals. It even repairs itself when mistakes occur. Families of contacts = chromosomes, the individual contacts themselves = genes and the unique combination of contacts from different families that each customer is eligible for = the customer's DNA.

Sounds complex but it was actualy quite easy to build iteratively and to implement. I blogged about it in a post on The Lean CRM - Toyota Story.

Simple smart customisation in business modelled on the ultimate in evolutionary smart customisation. The power of biomimetics.

Graham Hill
Customer-driven Innovator