7 Tech Shaping Next Wave Of Customization
With consumers looking at increased customization in their products and services, companies are leveraging improved technologies to respond to their exact needs in a more precise way, while striving to get a substantial ROI. In a recent article, researchers at McKinsey & Company observe how technology is making it easier for companies to tailor products and services to the wants of individual customers—and still help them make a profit. The article, co-authored by Anshuk Gandhi, Carmen Magar and Roger Roberts, identified seven technologies that enable greater customization value, makes the process swifter, while delivering cost-efficient products and services.
The authors write that social media and crowdsourcing are by no means new, but they pave the way for better customization options by allowing companies to analyze the value that consumers attach to existing or proposed components of current or hypothetical “virtual” products, states the article. Starbucks does this with frappuccino.com, an inherently social site where the company lets users build their own virtual Frappuccino. This in turn allows Starbucks to measure the popularity of different ingredients as well as popular combinations before investing in any actual process or ingredient in its stores. By allowing customers to create real and virtual products, companies can in effect use customers as marketers and co-creators.
Online interactive product configurators
Online configurators are at the heart of the customization trend because they provide a user-friendly and speedy way to gather a consumer’s customization preferences. While online configurators have been around for years, user interaction in the past was limited to selecting a few configuration options in a form. Any advanced configuration was cumbersome and expensive, often requiring a salesperson to discuss options and selections with the customer. Today, advances in product visualization and the increased speed and adaptiveness of configuration software have made product configuration engaging and what many consumers describe as a fun experience.
3-D scanning and modeling
The shape of real-world objects can be analyzed by 3-D scanners, which collect data that can then be used to construct 3-D digital models. These scanners make it much easier to measure, for example, a human body for individualized products that are tailored to fit. Several companies have created scanning software that gathers exact body measurements in seconds or minutes, which can then be rendered into an online personalized 3-D model. Traditionally, these technologies have been expensive, hard to install, and difficult to roll out at scale.
E-commerce software has for years been able to recommend product choices based on previous selections. Recommendation engines are now moving into the customization space by helping customers configure products. Chocri, for example, operates a site called createmychocolate.com that customizes and ships chocolate bars, helping consumers configure their own bars from four base chocolates and 100 different toppings, state the authors. The company estimates that its recommendation engine has increased the rate of conversion from people configuring their own chocolate to an actual online order by more than 30%
Smart algorithms for dynamic pricing
Some companies are managing on-demand capacity by using smart algorithms and better data-processing capacity to enable dynamic pricing, thereby reducing the time consumers have to wait. The authors mention about a US pizza chain that lets customers configure their own pizzas, found that some ingredients take longer to place on the pizza base, such as sliced toppings. In contrast, extra cheese, for instance, can be sprinkled over the pizza in one hand motion. When there is a large backlog of pizzas to be customized, prices on the website are adjusted dynamically. In other words, smart algorithms decrease prices for toppings that are quicker to put on the pizza and increase prices for others, discouraging consumers from choosing those that take longer. This reduces the wait time for those customers and increases customer satisfaction as a result.
Enterprise and production software
Traditional technology for ERP and SCM was designed to enable sales and manage production of a limited variety of products with clearly defined input components. Translating an individualized order from a single customer into a custom picking list and assembly instructions for warehouse and production workers was a big challenge. Now companies are developing packaged software that enables tracking of individualized design features in customer orders and their translation into sourcing and production instructions. These tools connect the configurators at the front end with the production and SCM systems. This doesn’t only mean that the production staff knows what to assemble; it also means that customers are promised realistic lead times and progress updates and that they are not served up any options for which the components are not in stock. These back-office software changes can thus effectively enable smooth production of vast variety.
Flexible production systems
Flexible manufacturing systems are essential to making small-batch production for mass customization profitable. The automotive industry has been at the forefront of building this flexibility, say the authors. Ford and General Motors have invested in dynamically programmable robotics with interchangeable tooling that can switch agilely between models and variants with no loss of efficiency. Companies from other industries are adapting these technologies.
Finally, the authors state that to completely shape this next wave of mass customization, leaders must work closely with business-unit, IT, and other functional managers to create a new integrated business model that can harness the power of new technologies to cost-efficiently serve consumers on the exact needs they have. companies need to make fundamental, coordinated changes across business functions to be successful at mass customization.
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