Mass appeal: find out how mass customization - one of the hottest trends in business - can work for you

Entrepreneur, August, 1996 by Mark Henricks

For somebody who's been in the soap-making business nearly 20 years, George Homan doesn't seem very slick. He doesn't sell all-purpose detergent for every cleaning job, and he doesn't mix huge batches to get economies of scale.

Instead, the president of 40-employee ChemStation International Inc. in Dayton, Ohio, prepares special formulations for each customer and each cleaning job. At ChemStation's 29 franchised and three company-owned operations around the country, minimanufacturing plants churn out unique mixtures of detergents, softeners, rinsing agents and fragrances.

"To the customer, the benefit is simple," Homan says of his approach. "He has a product designed for a particular problem, as opposed to a catchall."

When he started, Homan's approach didn't have a name. Today, it is called mass customization - the application of mass production techniques to the production of tailor-made products and services - and it's one of the most powerful trends in business.

Instead of the long production runs mass producers seek, mass customization shoots for lot sizes as small as a single unit. It seeks to eliminate inventory by producing only to order. It lets firms sell to ever-more fragmented markets and cope with ever-shorter product cycles by creating new products practically on the spot.

Big firms in many industries have started doing it. Publisher McGraw-Hill creates custom textbooks in quantities under 100 copies. Motorola can build any of 29 million varieties of pagers. TWA Getaway Vacations Inc. sells one-of-a-kind tours for the same price as standard packages.

But mass customization isn't just for the big guys. In fact, "it's very appropriate for small businesses because it's not dependent on economies of scale," says Joe Pine, founder of Ridgefield, Connecticut, management consulting firm Strategic Horizons LLP and author of Mass Customization: The New Frontier in Business Competition (Harvard Business School Press). "And it allows them to out-compete larger competitors who tend to focus on things like economies of scale."

* WHERE IT COMES FROM

Mass customization isn't new. Paint stores have long been stocked with white paint plus a palette of tints that lets them mix any shade on the spot. But today even traditional, have-it-our-way service industries such as banking and insurance are beginning to customize, Pine says.

Why the shift? "Customers are driving it," says Harsha Desai, a management professor at Baltimore's Loyola College in Maryland. "They want customized, personalized and individualized products and services."

What customers want is made possible thanks to technology, Desai says. Bigger, faster, cheaper computers let companies efficiently gather and manage highly detailed customer requests. The refinement of flexible manufacturing tools such as numerical control milling machines lets factories retool for single-unit lot sizes. And management tools such as cross-functional training provide workers with the skills to meet constantly shifting customer demands.

In one of the best-known examples of mass customization, Levi's has begun selling custom-made jeans. Shoppers at some Levi's outlets have their personal measurements taken and entered into computers. The measurements are transmitted to a Levi's plant. There, highly flexible manufacturing lines turn out a custom-fitted pair of jeans.

"More and more Fortune 500 companies are going to do this," Pine says. "If you look at what happened with quality in the '70s and '80s, the same thing is going to happen with mass customization." And while bigger companies struggle to make the move, smaller companies may be able to beat them to the punch.

Why? What mass customization requires is, for many big companies, a change of strategy. Mass customizers have to start looking for ways to make smaller quantities more efficiently. They must end marketing aimed at the masses and seek products and services that appeal to niches. In short, they must do exactly what many entrepreneurial firms have been doing all along.

"We've gone past the days when you could view your marketplaces as completely homogeneous," says Dean Kropp, professor of operations and manufacturing management at Washington University in St. Louis.

Before you can mass customize, then, you have to know exactly what your customers want. But a mass customizer isn't interested in what the market of all possible customers wants. Instead, he or she is interested in individual customers - and that's where small businesses that can offer personal attention have an edge.

* TECHNIQUE TOOLS

Once customers' wants and needs are understood, the problem is finding a cost-effective way to satisfy them. Most mass customizers, says Pine, rely on modularity. Modular products and services are made up of a number of components that can be put together quickly and easily to create custom solutions, similar to children's Lego building blocks.

"What can you build with Legos?" asks Pine. "Anything you want, because there are a large number of modular Legos and a linkage system that allows you to snap them together."