An Exploration - The influence of information technology on mass customisation

Contents

1. Research objective

2. Research questions and hypothesis

3. Literature review
3.1 Definitions
3.2 Reasons for mass customisation
3.3 Technology support
3.4 Technology limitations

4. Research methodology and proposed timetable

5. References

6. Table of Figures

An Exploration: The influence of information technology on mass customisation

1. Research objective

The purpose of this study is to investigate the influence of information technology for mass customisation using an action research resulting in a case study. At this stage the influence of information technology will be defined generally as the key factor that has enabled businesses in some industries to access and analyse individual customer needs and tailor products in direct response to these needs with the efficiencies of a mass production system.

2. Research questions and hypothesis

Many corporations use the Web to market directly to affluent consumers, eliminating middlemen and even bypassing their own sales force, and to automate “front office” processes, such as product configuration and product pricing. Since 1995 consultants have predict the rise of “mass customisation” on the Web, using specialised, interactive tools, and recently the way to success. Although many articles were wrote about the possibility changing from mass production to mass customisation, more studies need to be conducted to ascertain the effects of modern information technology for mass customisation.

Consequently, the leading questions will be when and how, if there is any likelihood, information technology support the concept of mass customisation. And also, to find out if Internet influences people to buy a individualised product:

1. Mass Customisation - the business opportunity for this millennium?
2. What Information Technology really means for Mass Customisation?
3. What are the requirements of new products for mass customisation? How to visualise them as personalised products?

3. Literature review

A huge variety of marketing strategies exist side by side, giving marketers a choice of strategic options. Part of this portfolio will be mass customisation, where some customers are targeted individually in a set of one-to-one relationships (Longman, 1997; Peppers and Rogers, 1993; Taylor, 1998).

3.1 Definitions

The notion of mass customisation dates back to 1970 when it was anticipated by Toffler and delineated in 1987 by Davis. Mass customisation is essentially an oxymoron, putting together seemingly contradictory notions, the production and distribution of goods on a mass basis.

The literature provides a variety of definitions of mass customisation. Christopher Hart (1995) has given a visionary definition and a practical definition for mass customisation. He defines mass customisation as “the ability to provide your customer with anything they want profitably, any time they want it, anywhere they want it, any way they want it”. This goal, rarely to achieve by a company leads to the second, practical definition: the use of flexible processes and organisational structures to produce varied and individually customised products at the low cost of a standardised, mass production system.

3.2 Reasons for mass customisation

Mass customisation is arising in direct response to the turbulence that has splintered the mass market. As Hart (1995) points out, companies who “stuck in a mass production system cannot grasp the nature of the upheaval and cannot ascertain a proper response”.

Therefore, the requirements of mass customisation as Tseng and Jiao (1998) state lie in three aspects: time to market (quick responsiveness), variety (customisation), and economies of scale (mass efficiency). The oxymoron of mass customisation depends on a leverage of these requirements.

According to an earlier article (Tseng and Jiao, 1996) suggest that particular in low to medium volume production, where production quantity cannot justify and leverage the investment, customers are otherwise willing to pay more because their special needs are satisfied. This would be the area where mass customisation provides an tremendous advantage in business competition.

Figure 1: Mass customisation: economic implications

Abbildung in dieser Leseprobe nicht enthalten

Data source: Concurrent design for mass customization

According to Gilmore and Pine (1997) a reason for mass customisation from the customers point of view might be that when companies mass customise their good, consumers no longer have to sacrifice what they want exactly by buying mass produced offerings designed for some average, and non existent, customer.

3.3 Technology support

One of the most exciting aspects of the mass customisation concept is the idea that as marketers seek to develop new products, they should systematically try to visualise these market offerings as personalised products (Foxall, 1984).

Until today, mass customisation is connected to the potential offered by new manufacturing technologies. But while the concept has already been discussed in the literature for more than one decade (e.g. Davis, 1987; Kotler, 1989; Müller-Heumann, 1992; Pine, 1991; Pine 1993) increased practical implementation of this strategy can been found in business only in the last few years. This time lag may be explained by the fact that only since some years sufficient technologies exist to handle the information flows connected with mass customisation.

Mass customisation, the ability to provide individual customers with tailor made products, has become possible because of information technology advancements that enable marketers to collect personalised information (Pine 1993). Pine believes the Web is an ideal engine for mass customisation that can be exploited by widely disparate companies for strategic advantage.

According to Feitzinger and Lee (1997) basic organisational principles as supply networks are required, designed to provide two basic capabilities: the ability to supply the basic product to the facilities performing the customisation in a cost effective manner, and the flexibility and the responsiveness to take individual customers` orders and quickly deliver the customised goods.

The prototype of personalisation according to Hof (1998) might be the World Wide Web. The power of the Internet is to tailor itself for each of its users, and recent reports suggest that personalised Internet shopping yields improved sales and profits to the firms which practice it.

Piller makes the point that customer related value added of mass customisation is produced on the information level. Consequently, mass customisation can be seen closely related to e-business and the new possibilities connected with the Internet economy.

3.4 Technology limitations

Goldsmith (1999) states that the use of Internet commerce might be limited. While the personalisation strategy seems a natural feature of Internet commerce, “it is applicable to many other product fields, but it will not be applicable to all product categories”. Further consideration on the degree of digitizability of customised product components has to be made.

Similarly, Shapiro and Varian (1998) see information richness as a strong indicator for the digitizability of goods.

Figure 2: Examples of mass customisation

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Data source: Mass customization based e-business strategies

4. Research methodology and proposed timetable

The research will be conducted as an exploration of the interest in Internet supported mass customisation. This will include an extensive literature of the existing writings on mass customisation. This in-depth research will be set in February 2001 and will be selected from different sources as follows:

- Catalogues from the University of Abertay Dundee Library and other local and national libraries
- Databases as Anbar, Emerald, Business ASAP and F & S Index
- Magazines as Marketing Week, The Economist and Business Week.

Furthermore, this study will be conducted in the context of the “e-commerce strategies“ thesis by Piller and the concept of the 4Ps - the Marketing Mix. Since this concept is still featured by most marketing texts as the central, co-ordinating concept around which the many other aspects of marketing practice are organised.

In addition, I will use a phenomenological paradigm, a case study approach, in order to answer the previously stated questions. Primary research will be qualitative inquiry (Reason, 1988) built around 3 case studies, each being conducted over a period of 3 - 6 month, starting in February 2000. This illustrative case studies will explain new and innovative practices adopted by particular companies. The focus of my studies will be set on international operating companies in the industrial sector. Close to summer 2001 the entire dissertation will be finished although several external factors might also retard my timetable scheduled.

Although a case study approach can be a very satisfying methodology, some limitations might appear. Access to a organisations like Procter & Gamble, DaimlerChrysler or Dell Computers is often difficult to negotiate and they might perceive certain inclusion of privacy at giving internal company data, customers data and so on.

5. References

Davis, S. (1987). Future Perfect, Reading: Addison-Wesley.

Feitzinger, E. and Lee, H.L. (1997). Mass customisation at Hewlett-Packard: the power of postponement. Harvard Business Review. Jan/Feb. pp. 36-45

Foxall, G. (1984). Predicting consumer choice in new product development: attitudes, intentions, and behaviour revisited. Marketing intelligence & Planning. Vol. 2 No. 1, pp. 37-52

Gilmore, J. H. and Pine, B. J. (1997). The four faces of mass customisation. Harvard Business Review. Vol. 75 No. 1, Jan-Feb. pp. 91-101.

Goldsmith, R.E. 1999. The personalised marketplace: beyond the 4Ps. Marketing Intelligence & Planning. 17. April. Pp. 178-185.

Hart, C.W.L. (1995). Mass customisation: conceptual underpinnings, opportunities and limits. International Journal of Service Industry Management. pp 36-45. 1998

Kotler, P. (1989). From mass marketing to mass customization. Planning Review. Sept.-Oct. pp. 10-47.

Müller-Heumann, G. Market and technology shifts in the 1990s: market fragmentation and mass customization. Journal of Marketing Management. 8 (No. 4 / 1992). pp. 303-314

Longman, M. (1997). Marketing mix customisation and customisability. Business Horizons. Nov-Dec. pp. 39-44

Pepper, D. and Rogers, M. (1993). The One to One Future, New York: Doubleday.

Piller, F. T. (2000). Mass customization. Ein Wettbewerbskonzept für das Informationszeitalter, Wiesbaden: Gabler Verlag.

Pine, B. J. (1993). Mass Customization, Boston: Harvard Business School Press.

Pine, B. J. (1991). Paradigm shift: From mass production to mass customisation. Master thesis, Cambridge: Massachusetts Institute of Technology.

Pine, J. B. (1993). Mass customization: The New Frontier in Business Competition, Boston: Harvard Business School Press.

Shapiro, C. and Varian, H. R. (1999). Information rules: a strategic guide to the network economy, Boston: Harvard Business School Press.

Taylor, W.C. (1998). Permission marketing. Fast Company. No. 14. Apr-May. pp. 198-212

Toffler, A. (1970). Future Shock, New York: Bantam Books.

Tseng, M.M. and Jiao, J. (1996). Design for mass customisation. Annals of the CIRP. Vol. 45 No. 1, pp. 153-156.

6. Table of Figures

Figure 1: Mass customisation: economic implications

Figure 2: Examples of mass customisation