How technology can drive the next wave of mass customization

Posted on: February 28th, 2014 by bobmorris

How technologyHere is an article co-authored by Anshuk Gandhi, Carmen Magar, and Roger Roberts for McKinsey & Company in which they explain how and why seven technologies are making it easier to tailor products and services to the wants of individual customers—and still make a profit. To read the complete article, check out other resources, learn more about the firm, and register to receive email alerts, please click here.

To learn more about the McKinsey Quarterly, please click here.

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Consumer choice has increased steadily since Henry Ford’s Model T, when buyers could pick any color—as long as it was black. After Ford’s single product came standard specifi­cations for different consumer segments, for example, clothes in different sizes and colors. In the last decade or so, we’ve seen features that allow each shopper to customize his or her product or service with a range of components, for instance, when ordering a car, computer, or smartphone. Such configured mass customization is bound to reach ever-greater levels of sophistication.

There’s more to come. Now individualized customization appears to be within reach. This next wave of mass customization—building a unique product for each customer (for example, custom suits and shirts made to fit your body shape)—has been on the horizon but has proved hard to achieve profitably at scale. Successes have usually come from start-ups or from niche plays by established corporations, and there are many examples of costly failures.

Profitable mass customization of products and services—whether they are ones that are unique for each customer or ones that consumers can configure extensively to their needs—requires success in two broad areas. The first is identifying opportunities for customization that create value for the customer and are supported by smooth, swift, and inexpensive transactions for both consumers and producers. The second is achieving a manageable cost structure and cost level for the producer even as manufacturing complexity increases.

We believe the time for widespread, profitable mass customization may finally have come, the result of emerging or improved tech­nologies that can help address economic barriers to responding to consumers’ exact needs in a more precise way.

For example, online configuration tech­nologies that can easily and cost-effectively assemble customers’ preferences and 3-D digital modeling that lets shoppers envision the final product are becoming increasingly affordable and scalable. In manufacturing, dynamically programmable robotic systems can switch between models and variants with little loss of efficiency.

Other trends also support bets on mass customization. In recent years, hundreds of start-ups have created successful business models for providing customized goods, although not at scale. Moreover, the generation that has grown up with the Internet and its personalized delivery of information and recommendations is likely to demand tech-enabled personalized products.

The benefits for successful companies are compelling, not least for global brands struggling with a decrease in loyalty after the recession and eager to avoid a painful race to the bottom of the cost curve in globalized and standardized product arenas. Mass customization has the potential to help companies increase revenue and gain com­petitive advantage, improve cash flow, and reduce waste through on-demand production. Mass customization can also generate valuable data that may be used in the development of standard products and in online marketing and public-relations campaigns.

We have identified seven technologies that enable mass customization, make it more practical today, and will drive further advances in the near future. We divided these technologies into two groups that correspond with the success factors identified earlier: those that make it easier to create customi­zation value for the consumer and those that control costs for the producer, despite the challenges of manufacturing complexity.

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Here’s a direct link to the complete article.

Anshuk Gandhi is a consultant in McKinsey’s Southern California office, Carmen Magar is a consultant in the New York office, and Roger Roberts is a principal in the Silicon Valley office.

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