When mass production rose in the early 1900s with the Model T Ford, the saying went, “You can have any color you want…as long as it’s black!”
Mass production grew in importance, but advances in technology have enabled more flexibility and a more modern twist on the theme: Mass Customization.
This post explores what Mass Customization means, its importance in strategy, and the Mass Customization benefits that project managers must deliver.
What Is Mass Customization?
Mass Customization is a hybrid of mass production and job shop customization.
As a hybrid, mass production efficiencies may be an aspiration that is not fully reached. Full job shop customization will also not be reached, but it can come close, especially on the main features.
The visual at right shows one way to look at Mass Customization – in terms of Product versus Representation changes.
This view results in four types, as follows.
- Transparent Customization – There is a change to the Product, but there is no visible Representation of the change. An example is a change to the software portion of the product to achieve a higher level of security. This will be Transparent to the user.
- Collaborative Customization – There is a change both to the Product and to its Representation. The consumer sees the change in the Product, and also how it is represented. The consumer and producer are part of the Collaborative process of making the change. An example is a custom financial plan, which is the result of in depth Collaboration between the planner and client.
- Adaptive Customization – No change to the Product is offered, and the consumer sees the unchanged products as Represented. However, some customization choices are offered to the consumer at the point of purchase. An example is buying a computer, which is highly modularized. While the consumer is offered a standard product, he or she can Adapt it at time of purchase with custom choices for memory and disk space.
- Cosmetic Customization – No change to the Product, but change to the way it is Represented. An example is a manufactured product that has multiple uses. It is packaged and advertised in accordance with the important attributes desired by the target customers, but the product otherwise remains exactly the same.
The quad chart’s breakdown of types of Mass Customization touches the surface. The opportunity for Mass Customization goes much deeper and exists at every touch point. There is an opportunity for customization – and thus Mass Customization – at every link in the Value Chain.
How Does Mass Customization Impact Strategies?
The figure at right provides a graphical view of Mass Customization.
The figure shows that with No Mass Customization (blue), there is a direct relationship – almost linear – between Cost and Customization. Higher Customization results in a proportionately higher Cost.
The green line shows the effect of Mass Customization. While Cost still increases with Customization, it increases at a much slower rate.
This shift in the relationship between Cost and Degree of Customization has a clear impact on strategy.
Porter’s three generic strategies provide yet another view of Mass Customization. Cost Leadership, Differentiation and Focus – are based on the idea that you should choose only one for a particular business.
Let’s look at some assumptions behind this.
- Cost Leadership – If you put your resources into being passionately efficient, the business can become the Cost Leader in the industry. Lower cost – and lower price – will lead to higher volume, which in turn moves you down the experience curve to further cost reductions. Efficiency is won in part by limiting or eliminating differentiation and serving a mass market with no frills offerings. You will serve your market broadly. Mass customization shifts the conditions behind this strategy.
- Differentiation – You also want to serve your market broadly – but by building a better, not less expensive, customer offering. The focus is on features – the customer experience – and putting your resources into making the products and services better than the competition. Mass Customization also shifts the conditions behind this strategy.
- Focus – You want to serve one or a handful of specific segments within the industry. You do so by passionately working for cost advantages in the segment – even greater than those of a Cost Leader – or for better products and services for that segment – even better than the Differentiator that is still trying to address the whole market. Again, Mass Customization shifts the conditions behind this strategy.
In short, Mass Customization blurs the lines between there three generic strategies.
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Strategists need to keep in mind the shifting tradeoffs, risks, and effects impacting strategy as a result of Mass Customization. They need to define new positions among these generic strategies.
How Does Mass Customization Reshape Strategy?
At face value, Mass Customization turns the theory of three generic strategies on its head. Digging deeper, it simply changes the differences among them. Here’s how:
- Cost Leadership – Mass Customization provides the opportunity for volume leaders to also offer a degree of customization – and differentiation. It also enables them to potentially infringe on specialized cost benefits that a Focus business might offer at lower cost than the Cost Leader.
- Differentiation – With Mass Customization, Differentiators are at risk that Cost Leaders will infringe on their space. At the same time, Mass Customization provides new opportunities for Differentiators to reduce costs, and maybe even become more competitive with Cost Leaders.
- Focus – Companies with a Focus strategy run the risk that their Cost or Differentiation Focus will not be enough to keep larger, more broadly focused competitions away. At the same time, Mass Customization can bring opportunities that can allow for more opportunities to find profitable Cost- or Differentiation-driven niches.
Mass Customization blurs the lines and reshapes the positions among the three generic strategies. The challenge is for each to remain true to their chosen strategic direction – as indicated by the generic strategies – while playing more to the middle to defend turf from competitors and gain additional benefits themselves.
Managing Projects With Mass Customization Benefits
Managing projects is about more than delivering within the constraints of scope, time, and cost. It is about delivering benefits.
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Michael Porter, in his talk to the PMI about strategy and project management, identified two types of benefits drivers for projects: cost savings and strategic. Mass Customization provides the opportunity for a hybrid type of project combining the two.
- Cost saving projects – These are ‘best practice’ projects, where processes are improved and optimized. The problem with these projects is that they ultimately only maintain parity with other leading competitors that are also doing the same things. Mass Customization can allow these types of projects to also inject a degree of flexibility – and differentiation – into the processes. Solutions can evolve from one-size-fits-all to supporting efficient choice.
- Strategic benefit projects – These projects distinguish a company from its competitors. They provide a unique competitive advantage. Mass Customization allows these unique benefits to not only build differentiation but also cost efficiency. Mass Customization enables greater opportunity for strategic projects.
The line has blurred between these two types of projects and the types of benefits they can provide.
Mass Customization also can provide benefits to both customers and providers.
- Customer benefits – Ability to add custom features to products but still pay mass-produced prices.
- Producer benefits – Ability to broaden the customer base by satisfying the needs of a greater number of individual customers.
Mass Customization also provides many tertiary benefits. These benefits can accrue to suppliers, distributors, and other service providers in the industry. There are plenty of benefits to cascade across the value chain.
The Good, the Bad, and the Ugly About Mass Customization
There are pros and cons, or advantages and disadvantages, of incorporating Mass Customization into an organization’s strategies. However, the existence of Mass Customization means that strategists must consider it, as they can either use it as a Competitive Advantage, or go a different direction recognizing the potential risk that competitors may use it.
Here are some pros, cons, advantages, and disadvantages that will affect that decision.
- There are a multitude of strategic opportunities available to small companies to differentiate, and at lower cost.
- A Cost Leadership strategy is more complex, balancing the opportunities of more customization with higher costs – without getting stuck between Cost, Focus, or Differentiation as the main strategy.
- Mass Customization makes Differentiation a more complicated strategy, since it is more accessible to Cost Leaders and those with a Focus strategy.
- The Cost Focus strategy is riskier with Mass Customization because there is greater ability by a Cost Leader to customize its offering to the same niche.
- The Differentiated Focus strategy is riskier, because more broadly focused Differentiators have more potential go deeper into each segment.
The bottom line is that Mass Customization provides both opportunities and increased risks for industry competitors of all types.
For more insights on Mass Customization, I recommend the following resources:
- Mass Customization, by the Corporate Finance Institute
- Mass Customization, by Investopedia
- Pros and Cons of Mass Customization, by Global Electronic Services