Sunday, May 26, 2013

Customized Product Design (CPD): The Next Wave of Competitive Advantage?

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


Unknown said...

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Unknown said...

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