As we draw towards the end of 2006, It is reasonable to say that the idea of empowering customers with a higher degree of control over their relationship with business has gained widespread acceptance. This basic idea has been researched in great depth over the last twenty years or so. Various terms and acronyms, such as mass customization, customer innovation, peer production, and so on have been devised to describe different approaches or strategies that empower the customer. Each of these strategies has the ultimate goal of enabling the business to say “These are our abilities, how do you want to use them?”, instead of “This is what we make, take it or leave it”.
It occurred to me that, while there has been extensive analysis of these various concepts, there has not been as much examination of how they have influenced and interacted with each other. To a certain degree, individual conceptual ideas overlap with each other, which may sometimes lead to a degree of confusion among those who are developing their understanding of mass customization and related business strategies. I hope that this article will shed some light on the origins of various concepts that have developed. It is probably fair to say that the terminology can come across as “management-speak” to many people, so it may be a good idea to come up with a more accessible description which can apply to them as a group.
An essential component in the evolution of these customer-centric business strategies from concept to reality has been the development of the web, firstly in the form of the world wide web itself, and more recently the ‘social internet’, sometimes referred to as “Web 2.0″. The role of information systems in the growth of the customer-centred business models will also be explained.
As is often the case when explaining something like this, a diagram helps. I have, to the best of my ability, mapped the evolution of mass customization and its ‘cousins’, such as user innovation and customer innovation. Towards the end, I’ll show a cumulative diagram which displays how all the different trends fit into the ‘big picture’.
From the first mention of the ‘prosumer’ in Alvin Toffler’s 1970 book ‘Future Shock’, right through to the current use of customer-driven innovation processes, there have been a great many significant events, which may at first appear unrelated to each other, but all of which have played a role in getting us to where we are today.
The ‘history’ of Mass Customization (it may seem strange to use the word history for something that is still developing) is likely to be familiar to readers of this website, but to quickly recap, the concept is generally traced back to Alvin Toffler’s 1970 book ‘Future Shock’ which referred to the producer and consumer working in concert. (It has recently come to light that an un-named lecturer at IBM’s System Research Institute outlined the mass customization idea as far back as 1963). Toffler used the term ‘prosumer’ to describe this type of interaction. The first use of the term mass customization occurred in Stan Davis’ 1987 book, ‘Future Perfect’, which was followed in 1993 by Joseph Pine’s landmark book ‘Mass Customization – The New Frontier in Business Competition’, which set out how this new strategy could be deployed in an enterprise.
Developments in supply chain management during the 1980′s and 1990′s, such as Just-in-Time delivery, made it feasible to dispense with large inventories of parts, and instead order frequent smaller deliveries to match demand. This made it more feasible to offer products built to order, as part order quantities could be based on actual customer orders.
The major impediment to widespread adoption of mass customization in the early 1990′s was the absence of an efficient communication channel for customers to describe their requirements. Telephone ordering existed, but it was not an efficient method for taking large numbers of orders for a customized product. However, two separate strands of information systems research were about to combine supply the right tool: the Product Configurator.
I’m open to correction on this, but my research suggests that the earliest work on what would be considered a product configurator was carried out by Ron Brachman at Harvard University in 1977. At that time, the term used was ‘knowledge representation’. In the mid-1980′s, Brachman worked at the Artificial Intelligence Principles Research Department at American Telephone and Telegraph (ATT) which developed the PROSE product configuration system for use in the telecoms industry. A few years later, unrelated research by Tim Berners-Lee would produce the first web-browser. By 1996, Dell had combined these two technological innovations into the first web-based product configuration system, that would allow anyone to specify their requirements when purchasing a computer. The idea of allowing customers to configure products on a website and then purchase the product was now no longer just a theoretical idea, but a reality.
Technological developments continued through the late 1990′s, with product configurators being developed by many different IT companies, but the general business concept of mass customization was largely unchanged during this period: companies would offer a basic product that could be configured in numerous ways by the customer at the time of purchase. The first two examples of how mass customization could be the catalyst for new business models came about at the turn of the Century. These can be summarised under the headings of Manufacturing Service Provider and Micro Manufacturing.
A manufacturing service provider is one who manufactures mass customized products, and also provides software to allow other brands to sell these customized products under their own name. The term ‘Manufacturing Service Provider’ is a variation on the well-known phrase ‘Application Service Provider’ which describes companies that provide business software as a service on the internet. The manufacturing service provider is simply offering custom manufacturing as a service to other companies through the internet. The best known exponent of this business model is Bivolino, a Belgium-based manufacturer of custom-made shirts. Customers can design and purchase made-to-measure shirts on Bivolino’s own website. However, Bivolino also provide other retailers with their expertise in custom shirt making, through an associated company, Shirtsdotnet. Retailers can set up their own website with their ‘branded’ version of the shirtsdotnet product configurator installed. They can also install a Shirtsdotnet kiosk in their stores, which their customers can use to configure a shirt while they are in the shop. Like on the retailers website, the retailer’s own branding appears on the kiosk version of the product configurator. The completed order is then manufactured and delivered by Shirtsdotnet/Bivolino, but under the brand name of the retailer.
The second of these business models, micro manufacturing, is exemplified by two companies: Zazzle and CafePress. Both of these companies offered conventional personalization of everyday products – you could upload your picture and they would print it on items like t-shirts and mouse mats. However, the most important aspect of their business was that they were also ‘micro-manufacturers’. Micro-manufacturing works like this: You have a website and you would like to earn money from it by selling merchandise. You have some interesting logo, photos or artwork that you want to put on t-shirts or other everyday items, but you have no factory, employees, suppliers or budget. No problem – sign up with a micro manufacturer. Upload your artwork to their website, then fill in a few details and copy some code to your own website. You are an instant retailer of your own collection. Manufacturing, distribution and payment are all dealt with entirely by the micro-manufacturer. All you have to do is run your site and wait for your share of the revenue to arrive from the micro-manufacturer. The idea has been a huge success, with Zazzle and Cafepress both having signed up hundreds of thousands of webmasters as members.
The growth of these companies was important in that it showed how the mass customization idea could be adapted to create completely new business models.
In conventional mass customization, the customer had, as yet, no role beyond specifying their requirements and making the purchase. However, it was obvious from the success of micro-manufacturing that there were a great many people who wanted to jump across from being customers to being developers of products themselves.
Ideas about involving the customer in the innovation process had been around since the late 1980′s. This area of research has a number of slightly different strands that have gradually come closer to each other over the years. User Innovation is the earliest of these concepts, devised by Eric Von Hippel at the Massachusetts Institute of Technology (MIT). Von Hippel discovered that most products and services are actually developed by users, who then give ideas to manufacturers. This is because products are developed to meet the widest possible need; when individual users face problems that the majority of consumers do not, they have no choice but to develop their own modifications to existing products, or entirely new products, to solve their issues. Often, user innovations will share their ideas with manufacturers in hopes of having them produce the product, a process called free revealing.
In 1986, Von Hippel introduced the Lead User method that can be used to systematically learn about user innovation in order to apply it in new product development. A Lead User is someone who faces needs that will be general in a marketplace – but faces them months or years before the bulk of that marketplace encounters them. Lead users are also positioned to benefit significantly by obtaining a solution to those needs. So user innovation can be combined with mass customization so that the customer is directly involved in the lifecycle of the product, from the design stage through to the configuration and purchasing stage.
Later, the idea of Open Innovation was devised by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at Berkeley. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license ideas (i.e. patents) from other companies. In addition, internal ideas not being used in a firm’s business should be taken outside the company (e.g., through licensing, joint ventures, spin offs). While Open Innovation encourages greater openness in a company’s research and development, it doesn’t specifically encourage interaction with end-customers. Therefore it is quite different in this respect to User Innovation.
Another approach to this area is referred to as ‘co-creation’. This originated in the 1994 book ‘Designing Interactive Strategy – From Value Chain to Value Constellation’ by Richard Normann and Rafael Ramírez. They they proposed a model of ‘co-production’ between ‘actors’ in the business environment, coming together in a ‘value constellation’. The co-creation idea was later expanded upon by management writer C K Prahalad, who argues value is increasingly being co-created by the firm and the customer, rather than being created entirely inside the firm. Co-creation is at the heart of the open source software movement, where users have full access to the source code and are empowered to make their own changes and improvements to it. Open source software is the inspiration for other new business models, which I will come back to later.
Most recently, Patricia Seybold has updated the User Innovation idea in her book ‘Outside Innovation‘. This recent book brings right up-to-date the idea of customer involvement in the innovation process, and some of the concepts described in this article are explored in detail in ‘Outside Innovation’. Therefore, I would strongly recommend Outside Innovation as reading for anyone interested in exploring these ideas further.
Just as the first generation world wide web had allowed businesses to sell customized products to consumers, Web 2.0, or the social internet, enables new methods of interaction between business and customers. (The correct usage of the term Web 2.0 is sometimes subject to a certain amount of debate and argument about particular technologies. Therefore for this article I will stick with the more generic term of ‘social internet’).
The social internet is the name given to web-based activities that involve two-way conversations, where the consumer of information (the website reader) can also become a contributor of information to that same site. Examples of the social internet include blogging, where the reader can leave comments on an article, and wikis, where the reader can join a community and contribute to authoritative content on a particular topic. In the world of mass customization, the social internet has been adopted by some businesses to integrate their customers into proposing designs for products. In the business-to-consumer sector, companies like Threadless and Innertee have adopted this strategy, referred to as ‘Crowdsourcing’.
Crowdsourcing involves the use of discussion and debate among participants to arrive at a solution which satisfies the requirement. In some cases, such as Threadless, there is a formal ‘voting’ process. Designs submitted by members are voted upon and the most popular are then marketed by the business. In a crowdsourcing model, the designers whose ideas have been selected sometimes receive a commission on each example of their design that is subsequently sold.
An alternative approach in crowdsourcing for deciding the correct solution is a process of discussion and review. This is generally moderated by people within the enterprise who eventually decide what solution will be used based on a consensus among the contributors.
While crowdsourcing, to date, has been used mostly in the area of visual design, it could easily be adapted to issues of technical design also. Who is to say that an electronic equipment company could not use crowdsourcing to develop new products? There could be thousands of engineers itching to submit designs for new devices or contribute to the design of a new product. Indeed, Patricia Seybold’s Outside Innovation describes just such a case, that of National Semiconductor, which empowers design engineers to reach their desired outcomes with a comprehensive software toolkit.
Crowdsourcing can generally be described as commercial organisations encouraging customers or users to contribute knowledge or ideas, that it can then use to its own benefit, and the contributors may or may not share financially in the benefits. However, the possibility of using crowdsourcing for technical development inevitably hits a stumbling block due to the traditional concerns regarding the protection of intellectual property rights. Very few CEO’s would be willing to have their intellectual property and product designs discussed openly. However, the same viewpoint has been significantly challenged in the publishing sector, with the growth of the Open Source software movement. If open source can be accepted in relation to copyright, it might also be more accepted in other forms of intellectual property.
The general view among publishers of all kinds (including software) for many years was that it was essential to maintain copyright over the work to protect the financial benefits for the author and publisher. However, the growth of open source software changed attitudes to copyright, and it was only a matter of time before similar open distribution models would appear in other areas of activity. The first very significant development in this regard was Creative Commons licensing. This concept was devised by Lawrence Lessig in 2001, and it enables copyright holders to grant some of their rights to the public while retaining others through a variety of licensing and contract schemes, including dedication to the public domain or open content licensing terms. Creative Commons was adopted by many websites as a means of allowing the content to be distributed while giving a degree of recognition to the original publisher.
If you combine creative commons with user innovation, the result closely resembles another concept, Peer Production. Commons-based peer production is a term coined by Yale’s Law professor Yochai Benkler to describe a new model of economic production in which the creative energy of large numbers of people is coordinated (usually with the aid of the internet) into large, meaningful projects, mostly without traditional hierarchical organization or financial compensation. He compares this to firm production (where a centralized decision process decides what has to be done and by whom) and market-based production (when tagging different prices to different jobs serves as an attractor to anyone interested in doing the job). Peer production to date has been limited mostly to information technology projects, a good example of which is the open source Mozilla Firefox web browser.
The Outside Innovation book describes how this project is run on a non-profit basis, but has generated significant financial surpluses due to sponsorship arrangements with other technology companies. The Mozilla organisation is reported in Outside Innovation as looking at ways of distributing part of its surplus back to those who took part in its development. This gives rise to an interesting question – just as today’s public companies are listed on the stock market, distributing surpluses to shareholders in the form of dividends, might there in the future be a ‘stakemarket’ where peer production projects are listed and distribute surpluses to stakeholders who have contributed to them intellectually? Exploring this question is probably one for another day.
Getting back to our discussion, if you combine crowdsourcing with a type of creative commons intellectual property arrangement, you could have a business model where products are developed by users under creative commons licensing, which would in turn allow other businesses to use the intellectual property subject to conditions (financial or otherwise). This presents the potential to massively advance countless areas of technology, by opening them up to faster development by sheer weight of numbers.
Another part of our jigsaw is digital manufacturing (or digital fabrication – ‘fabbing’). This originated with CNC milling machines and the like in the 1980’s, but took a step forward technologically with the development of additive fabrication during the 1990’s. Without going into too much technical detail, additive fabrication is three-dimensional printing. Design data is read from a file, and a three-dimensional object is created by depositing materials in successive layers to create the shape contained in the design.
A company called eMachineShop combined digital manufacturing with the world wide web to create an ‘online factory’ which can make almost anything from a designs submitted by customers. Customers download eMachineShop’s own design software, an easy-to-learn CAD application. They then use this software on their own computers to compose their design, before uploading it to the eMachineShop website and place the order for it to be manufactured by the company.
eMachineShop’s design software is a type of ‘user toolkit’- the name given to software that assists users to design new products for manufacture by the company concerned. Although eMachineShop customers mostly design and purchase items for themselves, user toolkits are most often associated with open innovation, where they are used to contribute design knowledge to a project. User toolkits are to open innovation what product configurators are to mass customization. Of course, a user toolkit may exist as a web application or a software download.
It is also possible to combine one or more of these business concepts with digital manufacturing. There is already one example of Creative Commons and digital manufacturing being combined for the purpose of allowing customers to ‘download designs’ for products. Ronen Kadushin, a lecturer in furniture design at the Shenkar School of Engineering and Design in Israel, has published a collection of lighting and accessories, where the product designs available for download under the principles of ‘Open Design’.
In explaining many of these concepts, it is difficult to state definitively if a particular project belongs to one or the other concept, as it may display attributes taken from many or all of them. So, while all of these ideas and concepts for new ways of doing business were devised separately, they do overlap to a signficant extent. Patricia Seybold has devised a ‘continuum of customization’, showing many of these ideas on a scale of customer involvement, beginning with the most basic level of product customization and moving towards ever increasing involvement of customers as stakeholders in the business, through their contribution to product design and development.
Looking to the future, in the event that hardware manufacturers were to produce an affordable digital manufacturing system for home use, the popularity of downloading designs would grow exponentially. Chris Anderson discussed this idea in the final chapter of his recent book ‘The Long Tail‘ .
Combining user-friendly digital manufacturing with mass customization and the other concepts described above would enable a host of new business models to gain popularity, from the Creative Commons distribution example used by Ronen Kadushin, to ‘shareware’ style examples (get a basic product design for free, pay a fee for a more advanced version), through to standard commercial agreements. And, of course, any of these business models for digital products could be combined with all of the other ideas discussed above, for example:
- User innovation – users contribute to the design of a digital product design which is then made available for download by other customers;
- Crowdsourcing – users upload designs of their own for peer review and possible resale by a digital manufacturing business;
- Custom marketplaces – webmasters upload three dimensional product designs to a custom digital manufacturing marketplace (a sort of combination of eMachineShop with Zazzle or Cafepress).
One other technology development that may yet be a significant factor in the development of customerism is digital identity management. Inputting personal details, and especially personal measurements or other preferences, is a chore for most people. What if you could store all of your personal details in a manner where they could be retrieved instantly, to be used whenever you are purchasing a customized product, contributing to an open innovation process, or just about anything else? An open source project currently underway, called the Higgins Project, may be the path towards having a single overall digital identity for every web user. This project is still at the development stage, but could be a major leap forward in the way that personal data is accessed on the web. While its impact cannot be predicted with certainty, if successful it could make filling out detailed order forms on the web look quaint in years to come.
This is the overall diagram (set your browser to full-screen view for best results) which shows how the various events and trends described above have interacted with each other. In the diagram , the event flows sometimes originate at a great distance from each other, not so much in the geographic sense, but rather in their field of research or activity. However, each new development feeds off everything that has gone before, and differences between the concepts tend to be eroded as ideas become adapted to real-world applications.
This is where we are now then: a collection of separate business concepts and enabling technologies, that encourage user/customer participation, whose attributes overlap with one another to a significant extent. I have given some thought as to whether they can be labelled collectively as a group. While there is no single word that can take in all of them (‘masspeercustomizationcommonsmarketplace’ doesn’t roll off the tongue!), my personal opinion is that there is one word to describe a series of ideas that empower the customer with a greater level of participation in deciding how products are designed and how they are produced. It has been used before in a couple of places, more so to describe the general growth of consumer power, rather than in the context I am describing here. However, “..isms” generally refer to a collection of ideas, so it seems appropriate to use it for this purpose.
It’s called ‘Customerism’.
Note: Some information for this article, particularly the definitions of some concepts, was sourced on Wikipedia. Logos of companies are shown in diagrams to illustrate an event or trend only.
It might be appropriate to namecheck those people who have used the term ‘customerism’ in other contexts previously. Firstly, Dan Gillmor wrote an article in SiliconValley.com some years ago which used the term (unfortunately this article seems to be no longer available online), and more recently, Jeff Jarvis titled a posting “The Age of Customerism and Producerism”. This article discussed at length the merits of the blogging approach to communication with customers.