The Age of Mass Customization (Part 1 - The Efficiency Foundation)

The term Mass Customization may sound like an oxymoron to some people. We are all familiar with the terms Mass Appeal, Mass Communication, and even Mass Production. All these refer to the effort to provide huge numbers of people with exactly the same thing. 

Mass production in particular is the name for the manufacturing methodology that enables companies to drive production costs so low as to make goods affordable to the common man. The more people buy, the lower the cost. The lower the cost per unit gets, the lower the purchase price can go. The lower the price, the more people buy. The cycle continues. It is a beautiful thing.

Economies of Scale

The term for this is Economies of Scale. Henry Ford, using the assembly line and the mantra “you can have it any color as long as it is black,” popularized mass production in the USA. It was so successful that it became engrained in our society and our psyche. Mass production was an integral ingredient in fueling the growth of the overall American economy. That is, until emerging countries developed similar manufacturing techniques, and accomplished it with dramatically lower labor costs. Those lower labor costs started the drive to move high volume manufacturing off-shore.

Now it is time to look forward. At D2, we believe that significant new opportunities lie in customization. But, the word “customization” conjures up the idea of design as a specific effort, marketing towards specialized targets, and production in (at most) small batches. Where is the volume in that? How can we find economies of scale here? 

Looking for economies of scale alone, at this point in history is too narrow minded. What we really need is to look at efficiency more broadly.   

Instead of focusing on efficiencies that are brought about by volume of a single product, we can look at efficiencies brought about by the production of a variety of products. This is an advantage when there are factors that make it more efficient to produce a range of products that can leverage centralized resources. This improvement, which is seen when adjusting focus from one product to a range of products, is the first step to mass customization. The term for this is Economies of Scope, and was coined by John Panzar and Robert Willig in the late 1970s.

Economies of Scope

One example of economies of scope in the service sector is my company, D2. The value D2 brings to our customers is that we provide a deep knowledge of people, communications, and technology. This knowledge is gained not only by years of training and experience, but even more so by the enormous breadth of product experience across a large number of brands. That massive amount of experience across a diversified range of products and services allows us to continually expand our knowledge depth and breadth at a rate much faster any one brand could afford to do on their own. Ultimately, each customer has access to the great wealth of knowledge and experience, yet only needs to pay for a fraction of it, based on what is actually used.

An example of economies of scope in the manufacturing sector is an Asian car company that can reprogram its assembly lines to run different car models in near real time. This reuse of equipment, space, and people across different products is economies of scope.

The economies of scale and scope focus on creating more efficiency. However, I believe that we should look beyond cost-cutting. The next three economies – of speed, style, and simplicity – focus on full effectiveness to help us to have a true impact by, on, and for the customer. 

To look at true impact, we need to go beyond the economies and think about the product in different ways. We shouldn’t look solely the point of manufacturing, but instead out across time to view the entire product life cycle. Employing this technique, I have come up with Five Method Spaces of Mass Customization. They are The Consideration, The Aggregation, The Alteration, The Creation, and The Adaptation. These five methods are the enablers to effective mass customization. In future offerings in this series on The Age of Mass Customization, I will give a full description of the five method spaces and the three new economies. And ultimately how these will play together to bring about the age of mass customization.

Additive manufacturing (3D Printing) will play a huge role in advancing mass customization. Currently at D2 we are conducting a nation-wide survey on 3D printing. The survey should take less than 4 minutes. The industry could benefit by your input. Click here to start right now.

Tony Olson is the founder and president for D2 (Documents & Design), a company that specializes in understanding data, technology, and customers. To learn more about D2 click here.

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