Exponential technological development has contributed,
in recent years, to a massive increase in product lines and products. Companies
typically run hundreds, if not thousands, of store keeping units (SKUs). The more
global a company is the greater the proliferation of SKUs. SKUs typically
define product variations to meet country and customer specific homologation
needs. It is, therefore, tempting to hypothesize that there is a huge wave of
customization that is sweeping the industrial scenario. Unfortunately, SKU
proliferation ends up adding to complexity with variations rather than meeting
multiple customer needs with real customization. Product variations do not necessarily mean
customer customization. The nature of
variations, oftentimes, tends to be as per design templates rather than
customer needs. Product variations, as
are commonly found irrespective of product or country, tend to fall broadly
under three main categories: category driven, performance driven, and price
driven. There are, however, two influencers that are esteem driven and policy
driven.
Category-driven is exemplified by broad and
dominant product configuration; for example, smart phone versus non-smart (or,
dumb?) phone and sedan versus utility vehicle. Performance-driven is
exemplified by hardware and software differences which together set performance
differential between products. Price-driven appears rather easy to understand
in terms of different price points at which a product can be positioned but is
actually more complex; specifications-driven costs and brand-driven premiums
impact price. Esteem-driven is reflective of product-market niches that are
created by companies. Policy-driven is the outcome of the influence of
regulatory policy on product design. The preference for 660 cc mini cars in
Japan or sub-four meter cars in India which qualify for lower excise duty
reflect that category. Despite five such categories and multiple SKUs, rarely
do products get designed around customers.
Customer choice; a mirage?
The interests of the customer and corporation
are conceptually aligned but practically tend to be misaligned. When one sees
the hundreds of apparel in retail stores, it is easy to appreciate that the
apparel are designed with certain standard sizes and ruling fashions in mind.
In fact, factory production, ipso facto, tends to promote standardization and
reduce customization in any field. Reverting to the example of apparel, decades
ago when there used to be no readymade apparel, tailoring represented the only
and complete form of dress development, which was truly customized to the
individual. In the earlier paradigm, the
consumer had the choice of selecting a cloth and getting it tailored to his or
her measurements and stylistic requirements. In the current paradigm, mass
production of multiple designs does not necessarily translate itself into real
customer choice. Probably, the right phraseology for the current scenario is
product choice rather than customer choice.
Mass production in factories, of course,
vests several other advantages of quality in design, manufacture and delivery,
use of superior material and methods, reliability and adoption of global
trends. Henry Ford’s assembly line manufacture of a standardized car in a
single color in the 1910s represented that extreme of industrialization while
General Motors’ competing strategy of differentiation was an alternative
approach. In contemporary times, Apple represents the early Ford of smart
phones with not more than a couple of products in each product line while
Samsung with its scores of smart phones represents an amplified version of General
Motors in smart phones. Customer choice, however, is not a matter of numbers
either; there need not necessarily be proportionality between SKUs and customer
choice. A simple question clarifies: Is Galaxy S4 equally ergonomically optimal
to hold and operate for all ages and for all types of palms? The answer,
unfortunately, is a ‘no’, which implies that a person of a small palm has to
either bear the burden of an oversized state-of-the-art phone or a right-sized
smaller screen phone of lower specifications.
Customer choice defined
True customer choice occurs when a customer
is able to secure a product that meets his or her expectations on all
specification and at all price points. This is an awakening that is occurring
slowly, but surely, even in some of the most strident category manufacturers.
Luxury vehicle manufacturers such as Mercedes Benz and Audi are now moving down
the categories to B class and A class cars as well as towards compact SUVs to
provide their customary luxury specifications across all categories and price
points. Becoming a full length manufacturer is commonly seen as the solution to
providing customer choice. Probably, this is a beginning and still not a full
resolution of the trend. The concept of full line manufacture as it exists
today is one of positioning products at different price points, which almost
invariably translates having a range of products from low-spec to high-spec. True customer choice, however, enables the
design of a product around the customer needs, with a very open and flexible
mix and match approach.
Dell, the computer maker was long seen to be
a leader in customers designing their computers by selecting the configuration
of choice. Even the Dell model is not representative of true customer choice.
Changing the processor, adding RAM capacity or battery power, or providing operating
system (OS) options and accessory choices are more in the nature of upgrades
rather than product redefinition. True
product definition would occur if a customer can, in the case of Dell for
example, mix and match the specifications of Inspiron, Latitude and XPS models
as well as those of laptop, ultra-book and tablet. Similar is the case with
automobile manufacturers who try to customize marginally based on power train
options or interior trim. The day when a hatchback can be grown proportionally into
a compact utility vehicle at customer’s choice is probably still decades away
even globally. Service industries, which are not manufacturing oriented and
therefore should be better placed for flexibility, find it difficult to offer multiple
services in flexible formats.
Customized product design
The challenge in achieving true customer
choice lies in combining the benefits of mass factory production with the rigor
of fulfilling individual customer choice. Reverting to the example of readymade
apparel, there could be two ways by which the manufacturer can achieve
customized service. All this would require is a measurement system in each
retail shop. By taking the measurements and communicating them to the central
factory along with the requisite cloth and style codes through the company
information technology system, the retail shop can provide the custom-stitched,
yet factory made, apparel to the customer rather than try to force-fit or
re-tailor the available options at the retail store. This first way leads to
the second way of building up a database of thousands of people measurements
and developing a more customized size and style classification that could
combine the advantages of factory design and production with the benefits of
custom tailoring for the customer. Needless to say, over a few months the
database would exponentially expand and provide a competitive advantage to the
apparel manufacturer relative to the others.
The concept can be extended virtually to any
sector with appropriate modifications. Given the openness and the lead time of
6 months in designing and manufacturing a smart phone, the smart phone makers
can encourage customers to pre-book their phone requirements by taking a
picture of the buyer’s hand (palm lines and finger prints can be covered to
avoid risk to personal details) and an inventory of his choices in terms of screen
size, screen type, pixel resolution, on-board memory, micro-card memory, processor
speed, operating system, camera pixels, flash type, battery power and build
type to quote, just a few parameters. This customer data base can facilitate
the design of a truly ergonomic and operationally customized smart phone. Like with
apparel, as the company builds up a database of millions of customer profiles,
smart phones can be smartly, rather than presumptively, designed for the widest
possible focused fulfillment. This approach can be leveraged for any product or
service with appropriate data capture and analysis systems to move towards mass
customization.
Mindsets and competencies
What is proposed in this blog post is a
radically different way of conducting product design. The proposed paradigm
makes the customers the product designers by enabling them convert their individual
experiences, thoughts and desires into millions of specifications which can be
sifted through using high speed processing technologies to develop histograms
customer choices. The paradigm requires a major shift in the mindsets of
corporations. They must resolve to understand and fulfill customer requirements
first hand by asking intelligent questions, providing meaningful options and
redeeming the customer hopes with products that are better customized. Customers also must change for the paradigm to
be successful. They must be discerning, responsive and responsible. They must
be demanding but also patient. To enable the initiative achieve widespread awareness
and expand to achieve self-sustaining capability, corporations could do well to
form customer clubs which can become the nuclei of customer creativity and
design enablement.
Corporations need also competencies to be
able to successfully pilot the customized product design initiative and
institutionalize the customer integration. Companies need to identify and
establish the essential infrastructure that is required to connect the customer
to the corporation. As with the apparel company, it could be the ubiquitous tailor
for taking measurements of customers in the apparel retail store, supplemented by
style manuals or style portals. As with the smart phone company, it could be
palm scanning and product design kiosks in the phone retail stores. At the central
level would be a very strong information technology backbone that connects all
the primary data collection hubs with a powerful central server system, a high
speed algorithmic processing system and a multi-faceted analytical capability. Organizational
design must provide for structures and processes that enable continuous interactions
between the market and product design divisions of the company. Talent that is technology
savvy and customer friendly as well as analytical would be essential.
Customized product design (CPD) as proposed
in this blog post could be the next wave of competitive advantage for corporations
if backed by appropriate mindsets and infrastructures.
Posted by Dr CB Rao on May 26, 2013