Part 3: Solution Space Development: Understanding where Customers are Different

By: Dominik Walcher / Fabrizio Salvador / Frank Piller

A company seeking to adopt mass customization must first understand what the idiosyncratic needs of its customers are. After this crucial step, the company may establish what it is going to offer and what it is not. In part three in this series on mass customization, Frank Piller and Fabrizio Salvador walk through some of the potential methods of solution space development.

In our research, we found that companies that perform best in mass customization have implemented three fundamental capabilities. In this and the following two parts of this series, we want to introduce these capabilities in larger detail.

The solution space of a mass customization offering

First and foremost, a company seeking to adopt mass customization has to be able to understand what the idiosyncratic needs of its customers are. This is in stark contrast to the approach of a mass producer, where the company focuses on identifying “central tendencies” among its customers’ needs, and targets them with a limited number of standard products. Conversely, a mass customizer has to identify the product attributes along which customer needs diverge the most.

Once this is understood, the firm knows what is needed to properly cover the needs of its customers. It can draw up the “boundaries of its playground”, clearly defining what it is going to offer and what it is not – the firm’s solution space is defined. Mass customization implies by necessity the development of vast solution spaces, thus escalating the cost and complexity of understanding customer needs, in terms of spotting differentiating attributes, validating product concepts, and collecting customer feedback.

Setting an appropriate solution space is one of the greatest competitive challenges for a mass customization company.

Setting an appropriate solution space is one of the greatest competitive challenges for a mass customization company as it directly affects the customers’ perception of the utility of the customized product and determines the efficiency of downstream processes in the fulfillment system. Despite the importance of solution space development, there is surprisingly little research. Also, in the companies we investigated we found that solution space definition often is just conducted intuitively and without much planning. Hence, we want to comment briefly on some of the potential methods of solution space development.

Options for customization: Fit, form, and function

From the perspective of product development, value by customization can be achieved via three design features of a product (or service), any of which can become the starting point for customization: the fit (measurements), the functionality, and the form (style and aesthetic design) of an offering. These are generic dimensions that match the demand of a customer towards an offering. Along those dimensions, heterogeneities of demand from a customer perspective can be derived. The solution space should represent choice options for those dimensions where customer heterogeneities matter in a particular case.

Fit and comfort (measurements): The traditional starting point for customization in consumer good markets is to fit a product according to the measurements provided by the client, for example, body measurements or the dimensions of a room or other physical objects. Market research identifies better fit as one of the strongest arguments in favor of mass customization. Often, however, it also is one of the most difficult dimensions to achieve, demanding complex systems to gather the customers’ proportions exactly and to transfer them into a product which has to be based on a parametric design. This often calls for a total redesign of the product and the costly development of flexible product architectures with enough slack to accommodate all possible fitting demands of the customer base.

Functionality: Functionality addresses issues such as speed selection, precision, power, cushioning, output devices, interfaces, connectivity, upgradeability or similar technical attributes of an offering according to the requirements of the client. This is the traditional starting point for customization in industrial markets, where machines, for example, are adjusted to fit in with an existing manufacturing system, or components are produced according to the exact specifications of their buyers. Functionality demands similar efforts to elicit customer information about the desired individual functionality as the fit dimension. In manufacturing, however, the growing software content of many products today enables the customizability of functional components more easily.

Form (style and aesthetic design): This dimension relates to modifications aiming at the sensual or the visual senses, i.e. selecting colors, styles, applications, cuts, or flavors. Many mass customization offerings in business-to-consumer e-commerce are based on the possibility of co-designing the outer appearance of a product. This kind of customization is often rather easy to implement in manufacturing,  especially if digital printing technology can be applied. The desire for a particular outer appearance is often inspired by fashions, peers, role models, etc.; and the individual’s desire is to copy and to adopt these trends.

To illustrate these options, consider the examples of shoes and cereals. For custom footwear, fit is mostly defined by the last on which the shoe is formed, but also by the design of the uppers, insole and outsole etc. Style is an option for influencing the aesthetic design of the product, for example, the colors of the leathers, or patterns. A shoe’s functionality can be defined by its cushioning, heel form, or cleat structure. In the case of cereals, these options could be translated into package size (fit), taste (no chocolate and raisins, lots of strawberries), and nutrition (vitamins, special fibers).

Market research for mass customization

The task of solution space development is to understand which of the three options for customization matter most for the target market, and in which dimensions.

The first method for solution space development is to engage in conventional market research techniques, that is, to meticulously gather data from representative customers in a chosen market sector. To reduce the risk of failure, need-related information from customers is integrated iteratively at many points in the new product development process. The manufacturer selects and surveys a group of customers to obtain information on needs for new products, analyses the data, develops a responsive product idea, and screens this idea against customer preferences (needs) and purchasing decisions.

This model is dominating especially in the world of consumer goods, where market research methodology such as focus groups, conjoint analysis, customer surveys, and analyses of customer complaints is used regularly to identify and evaluate customer needs and desires. However, there are no dedicated market research methods developed especially for the development of a mass customization solution space. We see here many opportunities for future research.

Use toolkits for customer co-design

A second approach companies can use to define their solution space is to provide (advanced) customers with an expert toolkit for user innovation. When Fiat was developing its retro Fiat 500, for example, the automaker created Concept Lab, an innovation toolkit that enabled customers to freely express their preferences regarding the interior of the car long before the first vehicle had been built. The company received more than 160,000 designs from customers — a product-development effort that no automaker could replicate internally. And Fiat allowed people to comment on others’ submissions, providing a first evaluation of those ideas. Of course, mass producers can also benefit from innovation toolkits, but the technology is particularly useful for mass customization, because it can be deployed at low-cost for large pools of heterogeneous customers.

Learning from past experience

Third, in developing their solution space, companies can employ some form of “customer experience intelligence”, that is, to apply methods for continuously collecting data on customer transactions, behaviors, or experiences and analyzing that information to determine customer preferences. This also includes incorporating data not just from customers, but also from people who might have taken their business elsewhere. Consider, for example, information about products that someone has evaluated, but did not order.

Such data can be obtained from log files generated by the browsing behavior of people using online configurators. By systematically analyzing that information, managers can learn much about customer preferences, ultimately leading to a refined solution space. A company could, for instance, eliminate options that are rarely explored or selected, and it could add more choices for the popular components. Hence, it is important to note that solution space development is not a one-off activity but rather a continual, iterative improvement process. What customers want today may be different tomorrow. Companies would thus be well advised to implement a formal process to revise, trim, or extend their solution space at regular intervals.

The state of practice: Learning by doing

Many entrepreneurs started their businesses simply by translating their own unsatisfied needs into a custom product offering.

The “Customization 500” study has shown that the practice of toolkits for user co-design is dominated by start-up companies. Research on entrepreneurship has investigated the nature of opportunity recognition — the process through which ideas for potentially profitable new business ventures are identified. Our study has shown that opportunity recognition also plays an important role in developing the initial solution space.  In fact, many entrepreneurs started their businesses simply by translating their own unsatisfied needs into a custom product offering — mass customization meets lead users. In the era of mass production, customers implicitly agreed to trade off less customization for lower prices.

If customers take a mass produced product and adjust it to their own needs, it indicates the potential that other customers out there would prefer a similarly customized item. For example, indicustom.com and smart-jeans.com built their business model on the realization that many customers take their jeans to a tailor after purchasing them. Also, the first customized chocolate bar by Chocri was an attempt to create an original, last minute birthday gift. The tricky task in determining what should be customized, or not, is to detect what sacrifices most customers make, not just one. But as lead user theory has shown, lead user entrepreneurs know this much better than the traditional manufacturer.

By Frank Piller & Fabrizio Salvador