Customerization encompasses more activities and functions than mass customization of

products. Hart (1996) defines mass customization as “using flexible processes and
organizational structures to produce varied and often individually customized products and
services at the price of standardized mass-produced alternatives.”

The impact of mass customization on manufacturing is well known. The technology and
strategy of lean production significantly changed the tradeoffs between efficiency and
customization, sending shock waves through manufacturing (see, e.g., Nicholas, 1998;
Delbridge, 1998). While much attention has been given to the impact of customization on
manufacturing, we are just beginning to understand its impact on marketing. Various chat
groups at that time were discussing both the flaw and the solutions being proposed by Intel
(Wall Street Journal, November 29, 1994). Likewise, the reluctant adoption of the MP3
standard by the music industry, after vigorous attempts by the leading industry players to
thwart its adoption, is a testament to the clout that online customers have in decisively
influencing the direction of entire industries. Lynch & Ariely, 1998; Shankar, Rangaswamy,
& Pusateri, 1999).

The convenience, time-saving aspects, and product matching features of online markets can
increase the price a customer is willing to pay. For example, a Wharton School study found
that by their fifth visit to Amazon.com, customers had shaved off 200 seconds from their
purchase time. When customers become familiar and comfortable with a shopping site it
reduces their incentive to shift to other sites for lower price. Further, if a company
understands the customer (e.g., by tracking and understanding what customers do while
visiting its website) and facilitates the creation of a co-production process to produce a
product and service tailored to the customer’s need, there is relatively little opportunity or
incentive for customers to comparison shop based on price. Customerization of the product or
service adds so much value and strengthens the relationship, that the price becomes a less
important factor (Simison, 2000).

While technology makes the implementation of customerization easier and cheaper, the
accompanying strategic and organizational decisions are actually more complex and more
expensive. For example, to avoid spamming customers with e-mail and to be able to make the
right offers on a website, the company has to be able to determine the right information to
send to each customer. Databases and data mining techniques (Zahavi, 2000) can help in this
process. Using database technologies, travelocity.com maintains customer profiles using
information provided by the members themselves about the particular destinations and trips
of interest to them. Whenever the fares change for any of the selected destinations or trips,
travelocity.com sends out a customized e-mail (about 2 million per week) with this
information. Seybold and Marshak (1999) indicate that customers welcome this type of
customized email promotion, which is one of the most successful programs at
travelocity.com. Data mining is also critical in helping a company identify the customer
segments most receptive to customerization. Customerization also raises a number of
challenges including issues related to obtaining information from customers, the
identification of the intangible factors that can make or break an offering, enhanced customer
expectations, the need for limiting the complexity of options, pricing issues related to
customized offerings, and the required changes to the entire marketing and business strategy
of the firm (Fisher, Jain, & MacDuffie, 1995).

The trend to smaller batches, approaching one, is what is pushing savvy manufacturers
toward flow manufacturing. Mass Customization relies on flow manufacturing to provide the
batch-size-of-one capability. Whether manufacturing a wide variety of standard products or
individually customized products, mass customizers depend on several elements of flow
manufacturing to enable them to build products economically in any order quantity, even as
low as one(Brynjolfsson & Smith, 1999). Modularity is an essential part of every mass
customization strategy [Duray et al. (2000), Gilmore and Pine (1997), Kumar\ (2004)].
A mass customization system is characterized by a low production cost per unit normally
associated with mass production. To reach this objective, a mass customization system has a
finite solution space, i.e., all processes are performed within a fixed product and process
architecture characterized by flexible and responsive but stable processes. This is also the
main difference between mass customization and conventional craft customization. In a craft
production system, not only are the products engineered-to-order for each customer, but also
the resulting fulfillment processes. In a mass customization system, however, the processes
are fixed within a given range, i.e., designed to yield output limited to certain range of
specifications, represented by a consequent modular product design(Huffman & Kahn, 1998).
But mass customization may also lead to new complexities from the customer’s perspective.
More customization does not necessarily mean greater delight, and therefore, greater value,\
for the customer. Customer satisfaction may not only plateau after a certain customization
level of the product, but also decrease because of the frustration a customer feels due to
excessive choice or variety [Dellaert and Stremersch (2005)]. Thus, setting the right degree of
customization and carefully selecting the options for customization is crucial for mass
customization success.

While mass customization systems are characterized on the level of components by

prefabricated (standard) modules, final assembly only takes place after an order has been
placed. This allows companies in markets with high product variety to move\ from a forecast-
based planning system to a model where only those products that have already have been
ordered are being produced. The resulting cost-saving potentials are predominantly based on
the better access to knowledge about the needs and demands of the customer base [Salvador
& Forza (2004)]. This knowledge may translate into significant cost reductions, like the
elimination of distribution inventory, less product returns, reduced obsolescence or
antiquated-fashion risks, mitigated product liability risks, and reduced cost of staffing to deal
with post-sales product failures, complaints, liabilities, and loss of reputation [Kumar (2004),
Piller et al. (2004)]. This principle of mass customization also provides new opportunities for
marketing and customer relationship management. Recent research by Franke and Piller
(2004) and Schreier (2006) has shown that up to 50% of the additional willingness- to-pay for
customized (consumer) products can be explained by the positive perception of the co-design
process itself.
This process is conducted with a dedicated system for customer co-design, known as
configurator, user toolkit, or co-design-platform. Co-design toolkits are responsible for
guiding the user through the configuration process. Different variants are represented,
visualized, assessed, and priced with an accompanying learning-by-doing process for the
users, helping them to understand their own needs and demands. The number of firms
operating with these toolkits is growing steadily in industrial as well as in consumer markets,
along with a large number of software vendors offering standard toolkits for product
configuration [Evans (2005)].

The combination of advanced engineering and information technology enables firms to be

highly flexible and responsive in providing product variety through mass customization (e.g.,
Pine, Victor, and Boyton 1993). However, marketing researchers are just beginning to
explore the\ effectiveness of mass customization strategies from a consumer perspective
(Huffman and Kahn 1998; Wind and Rangaswamy 2001). mass customization becomes more
complex, it becomes more likely that consumers need to resort to simplifying decision
heuristics (e.g., Newell and Simon 1972).
Extent of mass customization. Increases in the extent of mass customization lead to a greater
number of possible products that a consumer can compose through the mass customization
configuration. On the one hand, such increases likely reduce the average distance between the
mass-customized product that a consumer may compose and his or her ideal product, thereby
increasing product utility. On the other hand, consumers must trade-off a greater number of
possible module levels. In turn, this increases the number of cognitive steps in the consumer
decision-making process, which increases perceived complexity (Bettman, Johnson, and
Payne 1990).

In order to fully understand the implications of a mass customization system, its

characteristics and capabilities must be examined. Different companies adopt different
methods or strategies for producing mass customized products. Mass customizers can be
classified based on different characteristics, one of them is the point of customer involvement
in the design process. Knowing the point of the customer involvement is one of the key
elements in defining the configuration of processes and technologies that must be used to
produce mass customized product (Chandra and Kamrani, 2004; Inala, 2007).

Collaborative customization involves a dialogue with the customer in order to identify and
fulfil their needs. Gilmore and Pine (1997) use the example of Paris Miki eye glasses to
illustrate this type of customization. The Mikissimes design system captures the face of a
customer and analyses various attributes and customers choice of design and looks. The
system then recommends different sizes and shapes of lens and the customer can collaborate
with the optician in order to decide the desired lens. Looking at the customization of this
product, it can be considered as standardized customization, in the context of Lampel and
Mintzberg (1996) model, as the customer chooses from a standard set of components but
assembles them according to his will. However all the examples that fall under standard
customization cannot be classified as collaborative. In the opposite case, a pure customization
requires a collaborative approach, that probably is more complicated than the glasses case.

Adaptive customizers present standard products that can be altered by the user according to
their needs. Lutron Grafik (Gilmore and Pine, 1997) lighting system is an example which
allows user to have different light effects by merely changing the programmed settings.
Another case is that rafered to vending machines.
Cosmetic customization provides standard products differently to different customers.
Typically, customization is provided in the distribution and use stages. It’s again similar to
segmented customization that targets clusters of customers. Most common examples are T-
shirts with special prints (Inala, 2007).

Duray, et al. (2000) model classifies mass customizers based on customer involvement and
product modularity. This classification argues that “mass” in mass customization cannot be
achieved without modularity (Duray, et al., 2000). Pine (1993) stated that achieving true mass
customization needs modularity in production. Baldwin and Clark (1994) argued that
modularity allows achieving economies of scale and scope across product lines. McCutcheon
et al. (1994) suggested that modular product design would provide variety and speed up the
process by reducing delivery times. Modularity is the concept of decomposing a system into
independent parts or modules that can be treated as logical units (Jiao and Tseng, 1999). By
using a modular approach, a product is designed such that part of the product is made in
volume by standardized components. Customization is then achieved through a combination
or modification of modules. A range of modularity types can be considered for different mass
customizers (Tezcanli, 2006).

Rudberg and Wikner (2004) recognize that in the sequential approach, no difference is made
between production- and engineering-related activities. In order to integrate engineering
resources with operational processes, they developed an approach based on two dimensions:
Engineering and Production. The production dimension covers the traditional CODP’s related
to the material flow (MTO, ATO and MTS). The engineering dimension covers a continuum
with two extremes. One extreme point in the engineering dimension is the situation when a
new product (concept) is designed and engineered to order (ETO). The other extreme point in
the engineering dimension depicts the situation when a product is designed before the
enterprise faces actual customer demand, which could be interpreted as if the product design
is already ‘in stock’.

According to Chen et al. (2009), strategically, there is an inherent conflict within mass
customization as its name suggests and as many critics rightly claim: Mass implies
aggregation and repetition, while customization means individual and one-of-a-kind.
Traditionally, companies compete either on mass via high efficiency and low cost or on
customization by offering differentiated solutions and charging monopoly premiums.
Combining mass and customization into a single strategy risks saddling the company in a
dilemma where competitive advantage gets lost on both ends. Operationally, there are
conflicts between different performance objectives in mass customization. Under the
customer-centric philosophy, customers’ pull is the ultimate driving force for mass
customization (Tseng and Piller, 2003). However, customers’ needs are usually diverse and
irregular. The diversity of customer needs requires manufactures to offer high product
variety, which often leads to high component variety, large numbers of suppliers, and high
administrative complexity. The irregularity of individual customers’ needs means demand
unpredictability and instability. As a result, production planning becomes very difficult and
ineffective, leading to either resource under-utilisation or shortage. Furthermore, as the value
chain in product customization is driven by customers’ ‘pull’ instead of manufacturers’
‘push’, delivery lead time becomes part of customers’ waiting time. Customers’ increasing
demand for responsiveness further aggravates the difficulty to simultaneously achieve high
efficiency and high quality of customization.

The drive for mass customization needs to maintain its customer focus. Unjustified variety
not only causes unnecessary cost, but also creates customer relation confusion. From a
customer’s point of view, the economic justification of mass customization lies in the
availability of more choices that could potentially best fulfil the customer’s individual
specific needs with slightly or no extra payment. However, there are some mediating factors.
Choice itself does not mean value but only a potential. Choices are associated with tradeoffs,
which may not be a pleasant experience to customers and could result in dissatisfaction or
even distress. Huffman and Kahn (1998) points out that there is a thin line between mass
customization and mass confusion.

According to Piller et al. (2004), with customers integrated into value creation in the
customization process, companies gain access to more accurate information about market
demand and can postpone some activities until an order is placed. As a result, manufacturers
can reduce, if not eliminate, expensive inventory of finished goods. Also, by producing in
response to real market demand, manufacturers can avoid using costly marketing techniques
like sales discounts to clear unpopular products. In a highly competitive and volatile
marketplace, the cost of inaccurate forecast could be very significant. Furthermore, customer
loyalty can be enhanced via customization because companies are able to interact with each
individual customer directly. The information gained through customer interaction also
provides valuable insight into customers’ latent needs and can guide future product
development (Kotha, 1995; Piller et al., 2004).

With respect to the product and production design, products must be designed to be
customizable. In other words, the firm must have access to information concerning individual
needs and furthermore they must have processes in place to translate these needs into actual
specifications (Hart, 1995). But customers may not know what they really want. Need is a
term with contextual connotations. It is subject to influences of the social environment,
human emotions, and other factors that are difficult to be captured. Customers are often
unable to articulate their needs for a customised product. There is an asymmetry between
customers and manufacturers in terms of information and knowledge. Customers may fail to
understand or appreciate manufacturers’ offerings even when the customised offer fulfils
their articulated preferences. Consequently, much of mass customization research is devoted
to capturing customer requirements and transformation of these requirements to product
design manufacturability (Tseng and Jiao 1998).

Market conditions must be appropriate to support a competitive environment. In this case,

timing of the development of a mass customization system is a crucial factor. Market
turbulence as defined by instability and unpredictability of demand is very important in
determining the right time to employ a mass customization system. The greater the market
turbulence, the greater the potential customer need for variety and customization (Pine et al.
1993).

Organizational readiness has to do with attitudes, culture and resources of the firm. Foremost,
the firm´s leadership capability is an important consideration. It must be enlightened, open to
new ideas and aggressive in the pursuit of competitive advantage (Hart, 1995), and promote a
culture that emphasizes knowledge sharing trough the development of networks ans new
product and process technologies. This type of culture is very important in developing the
firm´s ability to translate customer demands into products and services, specially since mass
customization is a chain based concept (Feitzinger and Lee, 1997). Its success greatly
depends on the linked network and readiness of suppliers, manufactures and retailers.
According to Salvador et al. (2009), a mass customizer must first identify the idiosyncratic
needs of its customers, specifically, the product attributes along which customer needs
diverge the most. This is in stark contrast to a mass producer, which must focus on serving
universal needs that are ideally shared by all target customers. Once that information is
known and understood, a business can define its “solution space,” clearly delineating what it
will offer—and what it will not. Obviously, correlating heterogeneous customer needs with
differentiated product attributes, validating product concepts and collecting customer
feedback can be costly and complex, but several approaches can help. The first is to provide
customers with innovation toolkits; customers can by themselves translate their preferences
directly into a product design, highlighting unsatisfied needs during the process. Fiat allowed
people to comment on others’ submissions, providing a first evaluation of those ideas
(Salvador et al., 2009).

In developing a solution space, companies should consider incorporating data not just from
current and potential customers but also from those who have taken their business elsewhere.
For example, information about products that have been evaluated but not ordered. Such data
can be obtained from log files generated by the browsing behaviour of people using online
configurations. 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 (Salvador et al., 2009).

According to Salvador et al. (2009), a mass customizer also needs to ensure that an increased
variability in customers’ requirements will not significantly impair the company’s operations
and supply chain. For this, the business needs a robust process design—the capability to reuse
or recombine existing organizational and value-chain resources—to deliver customized
solutions with near mass-production efficiency and reliability. But how can companies reach
that state? Salvador et al. (2009) state that one possibility is through flexible automation.
Although the words “flexible” and “automation” might have been contradictory in the past,
that’s no longer the case. In the auto industry, robots and automation are compatible with
previously unheard-of levels of versatility and customization. Even process industries
(pharmaceuticals, food and so on), once synonymous with rigid automation and large
batches, now enjoy levels of flexibility once considered unattainable. Similarly, many
intangible goods and services also lend themselves to flexible automated solutions, frequently
based on the Internet (Salvador et al., 2009).

A complementary approach to flexible automation is process modularity, which can be

achieved by thinking of operational and value-chain processes as segments, each one linked
to a specific source of variability in the customers’ needs. As such, the company can serve
different customer requirements by appropriately recombining the process segments, without
the need to create costly ad-hoc modules. BMW’s Mini factory, for instance, relies on
individual mobile production cells with standardized robotic units. BMW can integrate the
cells into an existing system in the plant within a few days, thus enabling the company to
adapt quickly to unexpected swings in customer preferences without extensive modifications
of its production areas (Salvador et al., 2009).

Lastly, Salvador et al. (2009) state that a mass customizer must support customers in
identifying their problems and solutions whiles minimizing complexity and the burden of
choice. It is important to remember that when a customer is exposed to myriad choices, the
cost of evaluating those options can easily outweigh the additional benefit from having so
many. The resulting syndrome has been called the “paradox of choice” (Schwartz, 2003), in
which too many options can actually reduce customer value instead of increasing it. In such
situations, customers might postpone their buying decisions and, worse, classify the vendor
as difficult and undesirable. To avoid that, a company can provide choice navigation to
simplify the ways in which people explore its offerings (Salvador et al., 2009). One effective
approach is “assortment matching,” in which software automatically builds configurations for
customers by matching models of their needs with characteristics of existing solution spaces
(that is, sets of options). Customers then only have to evaluate the configuration, which saves
considerable effort and time in the search process. Using the My Virtual Model software, for
example, customers build avatars of themselves by selecting different body types, hair styles,
and facial characteristics and so on. From that information, the system can then recommend
items out of the full assortment of a given online merchant (Salvador et al., 2009). But
customers might not always be ready to make a decision after they’ve received
recommendations. They might not be sure about their real preferences, or the
recommendations may not appear to fit their needs or taste. In such cases, software that
incorporates fast-cycle, trial-and-error learning can help customers interactively conduct
multiple sequential experiments to test the match between the available options and their
needs. Consider the online shoppers at 121Time.com, a leading provider of mass customized
Swiss watches. Those consumers might have a general idea of what they want, but while
using an online configuration to play around with various options, combining colors and
styles, they can actually see how one choice influences another and affects the entire look of
a watch. Through that iterative process, they learn about their own preferences— important
information that is then represented in subsequent configurations (Salvador et al., 2009).

Other companies are pushing the boundaries of choice navigation even further by completely
automating the process. For instance, recent products that “understand” how they should
adapt to the customer and then reconfigure themselves accordingly. Equipped with embedded
configuration capability, these products might be standard items for the manufacturer but,
paradoxically, the user experiences a customized solution. Such is the case with the Adidas1,
a running shoe equipped with a magnetic sensor, a system to adjust the cushioning and a
microprocessor to control the process. When the shoe’s heel strikes the ground, the sensor
measures the amount of compression in its midsole and the microprocessor calculates
whether the shoe is too soft or too firm for the wearer. A tiny motor then shortens or
lengthens a cable attached to a plastic cushioning element, making it more rigid or pliable
(Salvador et al., 2009).

Firms pursue mass customization following different routes; customers get involved at
different points along the value chain and they are involved in different ways subject to
factors like industry structure, product nature, market conditions, etc. Different operation
modes of mass customization will involve different people and require different approaches
and methodologies for collaboration. In discussing product customization in a broad
manufacturing strategy context, Spring and Dalrymple (2000) propose a generic model of
product customization.

The source of innovation has been a subject of debate. The manufacturer-centric view holds
that innovations result from intentional research, e.g., the design and development work in a
company’s R&D centre. The user-centric (or customer-centric) view contents that many
innovations actually come from users, particularly the so-called lead users, whose present
needs will become general in a marketplace in the future (Von Hippel, 2005). One common
foundation between these two different views is that (customers’) need information and
(manufacturers’) solution information need to be brought together for innovation to take
place. As a result, problem solving in mass customization is collaborative in nature and
designated as collaborative innovation (co-innovation) (Chen et al., 2009). As engineering
methodology is concerned, the joint problem solving in mass customization is essentially a
collaborative design activity. Product Family Architecture (PFA) provides a compact and
structured way to represent and organise design knowledge from multiple views (Tseng and
Jiao, 1996; Jiao, 1998). Under PFA, customers, product engineers, and process engineers can
work under a unified framework. As a result, PFA could serve as a framework for co-
innovation (Chen et al., 2009). Given the preferential differences between customers and
manufacturers, conflict resolution mechanism is a key issue in co-innovation. The ECN
paradigm (Lu, 2003) provides a promising methodology to address this issue. For technical
tools, engineering design tools like Computer Supported Collaborative Work (CSCW)
(Monplaisir and Salhieh, 2002) can be used to support the co-innovation process. In the
context of mass customization, Von Hippel (2005) proposes user toolkits to facilitate user
innovation. With the support of embedded design knowledge, customers are able to innovate
on their own and design products or services according to their individual specific needs.
Reversely, manufacturers can economise upon the cost of eliciting customers’ ‘sticky’ need
information by shifting partial design task to customers via user-friendly design tools.

Configuration is the stage where customers and manufacturers come to agree upon the
specifications of a specific product offering. It corresponds to the design specification stage
as defined by Spring and Dalrymple (2000). Configuration is essentially a special form of
product design with the PFA already defined and the solution space determined. In other
words, configuration is a process of searching from a fixed pool of alternatives to locate a
specific product variant that is mutually satisfactory to the customer and the manufacturer.
The quality of configuration is critical to customer satisfaction because it will determine how
well individual needs will be satisfied, and it also determines to a large extent on
manufacturers’ performance on several dimensions that include cost, delivery lead time, etc.
However, high-quality configurations are usually difficult to achieve, particularly when the
product to be customised is complex. It requires good understanding of customers’ needs as
well as manufacturers’ offerings plus the ability to effectively match these two (Chen et al.,
2009).
One approach of configuration is to shift the task of configuration to customers via product
configuration systems, e.g., Dell’s online PC configurator. Using configurators can
streamline the configuration process, reduce configuration errors, and enhance flexibility and
responsiveness (Sabin and Weigel, 1998). However, shifting configuration to customers has
its downside. When products are complex and customers are unclear about what they really
want, they could get overwhelmed by the choices offered and the tradeoffs to be made. They
may find the configuration process unpleasant or even stressful (Huffman and Kahn, 1998;
Schwartz, 2003).

Salvador and Forza (2004) did an extensive survey on the application of configurations for
product customization. Their findings indicate that although many companies tend to rely on
product configuration systems to customise their products, they are faced with difficulties
like inadequate product information supply to the sales office, excess of repetitive activities
within the technical office, and high rate of configuration errors in production, etc. The
difficulties faced by many product configurations can be accounted by the partisan approach
they take, i.e., they view configuration either from the manufacturer’s or the customer’s point
of view while the collaborative nature of configuration in mass customization is neglected.
As a result, these configurations perform well in environment where manufacturers are able
to effectively convey what they can provide our customers know precisely what they want.
There is a need to treat configuration from a collaboration perspective to deal with the
customer diversity and product complexity in mass customization. The scenario of applying
collaborative engineering in the design specification stage of mass customization is
designated as collaborative configuration (co-configuration) (Chen et al., 2009).

In a typical organisation setting, co-configuration often involves customers and sales

engineers (sometimes design engineers). Up to date, there has been no engineering
methodology developed specifically for co-configuration. Existing configuration design
methodologies can be generally classified into rule-based, case-based, and model-based,
depending on the reasoning techniques used (Sabin and Weigel, 1998). In a rule-based
system, design knowledge is codified as configuration rules or constraints; in a model-based
system, design knowledge is contained in a system model, which consists of decomposable
entities and interactions between their elements; in a case-based system, new configurations
are adapted from previous, similar configurations (or cases) (Chen et al., 2009).
Production here (Chen et al., 2009) corresponds to the transfer stage (Spring and Dalrymple,
2000) by including material conversion, material transportation, shop floor control,
procurement, inventory management, etc. To many manufacturers, inefficiencies in
production remain a critical roadblock to pursue mass customization strategy. The
simultaneous need for high variety, responsiveness, low cost, and high flexibility outstrips
any manufacturers’ financial resources or technical capabilities. Collaborating with supply
chain partners or end customers promises great potential to further increase production
efficiency, improve responsiveness, and reduce cost.

The authors (Chen et al., 2009) define the collaboration between customers and
manufacturers in production functions of mass customization as collaborative production (co-
production). The people involved in co-production usually include customers, supply chain
managers, and production engineers, etc. By sharing demand and supply information, supply
chain partners can better utilise production resources in response to volatile market demand.
Many methodologies have been proposed for co-production from different perspectives.

Cachon (2003) applies game theory to mathematically analyse different collaboration

scenarios in a supply chain structure and design contracting schemes accordingly. The
Voluntary Inter-industry Commerce Standards (VICS) group promotes Collaborative
Planning, Forecasting and Replenishment (CPFR) as a roadmap to cope with mutual
reconciliation of activities in supply chain collaboration. Advanced Planning Systems (APS)
begin to incorporate collaborative planning as an important functionality (Kilger and Reuter,
2005).
The scope of research on co-production has been focused at the supply chain level with
business customers, and attention has been primarily placed on the value of information
sharing. Primary methodologies are based on game theory and optimisation. Participants of
collaboration are usually assumed to be utility or profit maximising. To cater to a mass
customization environment, there is a need to extend the research scope to investigate how
manufactures and a large number of individual customers can collaboratively arrange
production activities (Chen et al, 2009).
As more and more companies are pursuing the mass customization paradigm starting to offer
more variety and customization, market segments are narrowing down to smaller and smaller
segments and eventually there is left markets of one individual customer. While development
toward mass customization is still under way, Pine and Gilmore (1999) have already
envisioned the future challenges after the mass customization roadmap has been walked
trough.

All the definitions of product family are similar point to the thought of a group of products
with common characteristics and addressed to the same target market segment. According to
Meyer and Lehnerd (1997), the key to a successful product family is the product platform
around which the product family is derived. A product platform comprises a set of variables,
features or components that remain constant for each product belonging to a product family.

As Robertson and Ulrich (1998) point out, “By sharing components and production processes
across a platform of products, companies can develop differentiated products efficiently,
increase the flexibility and responsiveness of their manufacturing processes, and take market
share away from competitors that develop only one product at a time.”

A product platform can also facilitate customization by enabling a variety of products to be

quickly and easily developed (Jiang et al., 2007).

Each product family member derived from a product platform incorporates specific attributes
to satisfy a target niche inside a segment characterized by a set of customer needs while the
product family will typically address the whole market segment (Muffatto and Roveda,
2003).

As Huang et al. (2005) state, another key dimension for the success of a product family is to
provide enough product variety to meet customer requirements, business needs and technical
advancements while maintaining economies of scale and scope within manufacturing
processes. Leveraging the costs of delivering variety is a priority goal for companies that
want to offer products to one or multiple market niches. A correct product family design can
dramatically reduce development risks by reusing proven elements in a firm’s activities and
offerings (Ulrich, 1995; Sawhney, 1998).
Tseng and Piller (2003) indicate that the backdrop of a product family is a wellplanned
architecture, i.e. the conceptual structure and overall logical organization of generating a
family of products, which provides a generic umbrella to capture and utilize commonality.
Each new product is instantiated within this architecture and extends so as to anchor future
designs to a common product line structure. Strong product platforms will enable that each
new derivative product can be developed at an incremental cost relative to the development
of the initial product architecture (Jiao et al., 2003).

Ulrich and Eppinger (1995) define product architecture as the scheme by which the
functional elements of a product are arranged into physical units and the way in which these
units interact. Ulrich (1995) defines it more precisely as: 1) the arrangement of functional
elements; 2) the mapping from functional elements to physical components; 3) the
specification of the interfaces among interacting physical components. The choice of product
architecture has broad implications for product performance, product change, product variety,
and manufacturability. Product architecture is also strongly coupled to the firm’s
development capability, manufacturing specialties, and product strategy. Traditionally, the
research has been focused in the architecture and modular product design mostly in the
context of a single product. Since manufacturing companies increasingly develop product
families to offer a large variety of products with limited development and manufacturing
costs, the architecture(s) for product families become more and more important (Meyer,
1997).

Fujita and Ishii (1997) pointed out one important characteristic to discern the architecture of a
family of products from that of a single product, i.e., the simultaneous handling of multiple
products.

Erens and Verhulst (1997) adopted various product models to describe the architecture of
product families. Essentially, they modeled the architecture of product families as a
packaging of single product models, instead of a unified product family model.

Yu et al. (1999) and Zamirowski and Otto (1999) approached product architectures from a
functional perspective, that is, defining the architecture of product portfolio based on
customer demands.
Tseng and Jiao (1998) recognized the rationale of a product family architecture (PFA) with
respect to design for mass customization. They pointed out the development of PFA involves
systematic planning of modularity and commonality across the functional, behavioral and
structural views (Jiao and Tseng, 2000).

Zamirowski and Otto (1999) also perceived the necessity to develop the product architecture
and platform with the synchronization of multiple views such as those from customer needs,
function structures and physical architectures. The leveraging of modularity and commonality
in PFA development is also observed by Siddique (2000). Du et al. (2000) investigates the
Architecture of Product Family (APF) introducing the concepts of common bases (CB) that
refers to shared elements within a product family, differentiation enablers (DEs) as the basic
elements for making products within a product family different from one to another and
configuration mechanisms (CMs) to define the rules and means of product variant derivation.

Martin and Ishii (1997) propose Design for Variety (DFV) as a methodology to help
companies to quantify the costs of providing variety and to guide designers in developing
products that incur minimum variety costs. They suggest the need to be in possession of
quantitative and qualitative tools that quickly estimate the costs of increasing or reducing
variety the definition of MC adopted by this paper is Hart (1995) stating that MC was: “The
use of flexible process and organizational structures to produce varied and often individually
customized products and services at the low cost of a standardized, mass produced system.”

In short, increasing variety and involvement for every customer without losing manufacturing
efficiency. It has been suggested that MC has not had the business impact that was anticipated (Lee
et al 1999), however MC can be seen in a wide variety of products/services and industries. Spread
shirt the online 'make your own' apparel business allows anyone to design one off clothing produced
and dispatched within 48hrs. Lego now actively engages their customer base in new product
developments and allows users to design their own Lego sets online (for more about the Lego
Factory see Berger et al 2005).

In the footwear industry most of the major trainer manufacturers allow for custom designing (such
as Reebok with “Rbk CUSTOM” or Nike through “NikeID”) and some offer completely custom
products exactly molded to fit the customers foot (such as Adidas’ “miAdidas” service, see Berger et
al 2005). Other MC products include Wine (Elite Vintners), Cameras (Leica) or the extremely
successful build to order model used by Dell.

One common feature in all the examples above is that they use the Internet as the key enabler,
with which to interact with their customers. Advances in Information Technology and the
Internet in recent years, particular in e-commerce and social network (eg Facebook), has created
what is now a global marketplace. This new technologies are recognized as the key enabler for
wider adoption of MC (Piller 2002, Von 5 Hippel 1998, Schubert and Koch 2002, Pine et al
1993, Fuller and Hienerth 2004)

Sawhney & Prandelli (2000) concluded that a business model that combined communities into
product development empowers peripheral players, giving them the right to contribute their own
experience and individual knowledge to the final output. Each consumer can add to the collective
knowledge of the community adding knowledge from their individual experiences. Jeppesen &
Molin (2003) believe that this user creation and development results in a longer product life and
greater sales of the basic product. Some studies have proven that without conscious effort from
the community sponsor, collaborative activity is already taking place. Franke & Shahs (2003)
research concluded that “Without exception, the innovating community members we surveyed
do not innovate in isolation or secrecy; they receive important advice and assistance from other
community members” (Pg. 158).

It’s suggested that conceptual polarization has lead management thinkers to ignore strategies
which combine these logics (Lampel & Mintzberg 1996). One company which on the surface
seems to combine these two strategies well and will be the focus of this papers research is the
online t-shirt retailer Threadless.com. Threadless’ business model cannot be categorised under
Lampel & Mintzbergs framework as it has one fundamental difference from all the approaches,
the customisation & customer input occurs at the earliest possible point in the value chain, at the
conception stage.

It is believed that there has been an over emphasis in promoting MC as the future of
manufacturing, jumping from one extreme to the other and ignoring strategies combining both
these logics (Lampel & Mintzberg 1996). The fundamental assumption of MC is that with no
obstacles, challenges or inconveniences, customers would rather create a unique product or
service. Predictably today’s business does not offer this hypothetical ideal for any but a handful
of businesses. As a result it is suggested that there is a disconnect between the customers desire
for involvement and individualization, and the manufacturers desire for economies of scale and
predictable, manageable demand. The framework below outlines this perceived disconnect and
recaps some points from the literature which encapsulate this.

MC as a concept has been discussed in academic literature with regularity since it was first
articulated some 25 years ago. The idea of a customer designing a unique product or service was
not a new concept even then, instead writings on MC were commenting on an increasing shift
away from Mass Production towards individualised products, increasingly designed with input
from customers.

The Internet has the potential to change the way we buy and sell, empowering small
businesses to sell on a global platform as if they were a multinational (Collin 1999), reducing
barriers of entry (Porter 2001). The Internet facilitates direct and rich interaction with
customers (Piller & Walcher 2005), allowing customers to give feedback and collaborate on
new products. Internet sites such as Facebook or Ebay have shown that the power of the
Internet lies in uniting individuals, developing a VC of loyal customers to support your brand.

The proposed benefit of MC is that consumers are incorporated into the design process,
designing the exact product or service they require. This will allow a business to develop a
1:1 relationship with their customers, understanding their exact requirements, helping to build
a relationship with them which is impervious to competitors (Pine et al 1993).