Trying to give customers exactly what they want can be a big mistake. Manufacturers spend billions of dollars on market research and product development to deliver a diverse mix of goods with a variety of options on a mass scale. But, in the end, they are still often guessing at what an individual customer really wants. It’s an expensive, sometimes futile endeavor that can backfire badly.
Dell Computers—once the corporate poster child for mass customization—had to pull the plug on its make-to-order model, saying it had become “too complex and costly”. German luxury carmaker Maybach offered an extensive array of models and long list of options. But Daimler lost $439,000 on each car sold and ultimately discontinued the entire line. And more choice isn’t always what customers want. When Proctor & Gamble trimmed many of its product lines, including reducing the varieties of Head & Shoulders from 26 to 15, in an attempt to cut costs related to product complexity, its market share increased.
What had gotten lost in these cases was the feeling for what customers really wanted. But what would happen if customers could design and produce their own products?
Avi Reichental, CEO of 3D Systems, says in his TED talk: “My grandfather was a cobbler. Back in the day, he made custom-made shoes. I never got to meet him… But I did inherit his love for making, except that it doesn’t exist that much anymore. You see, while the Industrial Revolution did a great deal to improve humanity, it eradicated the very skill that my grandfather loved, and it atrophied craftsmanship as we know it… But that’s all about to change.”
Makers shake up manufacturing
Over the last decade, the quickly growing maker movement has enabled individuals and start-ups to bypass traditional industry to invent and produce bespoke goods on-demand. Make-it-yourself technologies such as 3D printing have been advancing exponentially. And thanks to hackerspaces that democratize access to high-end production tools, and new crowdfunding and online retail options, individuals can take product ideas from concept to funding to production to market on their own.
And that movement is poised to go mainstream. Consider:
- The inaugural San Francisco MakerFaire in 2006 attracted 65,000 DIY enthusiasts. Last year, 130,000 attended along with another 85,000 in New York.
- Today, there are 1,100 hackerspaces around the world giving people access to the tools of productions from computer numeric controlled machines to 3D scanners and giving birth to such maker start-ups as payment processor Square.
- Peer-to-peer ecommerce site Etsy’s revenue has nearly quadrupled in as many years from $525 million in 2011 to $1.9 billion in 2014.
- Crowdfunding has advanced from begging family and friends for seed money to the lending campaigns that generated $11.08 billion in 2014. The World Bank predicts the market will grow to $93 billion by 2025.
- The 3D printing market will quadruple to $12 Billion by 2025. In just three years, at least seven of the world’s top 10 retailers will be using such additive manufacturing technology to generate custom stock orders with entirely new business models concurrently being built on the technology, according to Gartner.
We’re on the cusp of a major breakthrough in manufacturing innovation. As the Computing Community Consortium pointed out last year when announcing its maker conference: “Today’s emerging ‘Manufacturing Renaissance’ is radically different” from those before, and “is more akin to the introduction of major transformative technologies such as the printing press, the programmable loom, and the computer itself.”
A confluence of technological and sociological shifts are converging that will turn the advances of the industrial revolution on its head. At the center of this shift are individuals. Today most products are designed for manufacturers – to make production easier. In the near future, products will be designed for—and by—individuals. This will not only shake up the manufacturing sector but will transform the way we live, work, and create.
A renaissance of creativity, craftsmanship, and community
That transformation has begun to take place in pockets of existing businesses already. Coca-Cola introduced the Freestyle fountain, giving soda buyers the ability to create their own singular concoction from more than 100 different flavors. NikeID enables individuals to put their personal stamp on sneakers, either online or in retail customization studios.Mars has an entire business unit dedicated to customized candies and products called Mars Direct. Hershey partnered with 3D Systems to create the CoCoJet 3D Printer, capable of printing custom designs in dark, milk or white chocolate.
But, soon, such customization will be the norm as individualization becomes a matter of changing a line of code rather than retooling an assembly floor. You’ll be able to 3D print a hamburger, a hearing aide—or a house (to be assembled with the help of some handy drones) to your individual specifications. And individuals will be able not only to personalize products. They will be able to dream up, design, and produce them.
Today, innovation is tucked away in the R&D departments of corporations. Funding is provided by corporate finance mechanisms. Production takes place a world away in a factory. Twenty years from now, it will take place in your neighborhood. Products that used to require economies of scale from a centralized factory will be produced locally. As 3D printing continues to accelerate and come down in price, more goods will be produced at or near their point of use.
Creative subcultures will flourish as individuals collaborate on ideas, funding, and production. Some may flock to cities and towns where these subcultures will thrive. Others may take advantage of increasing connectivity to work together virtually. Either way, the result will be a resurgence in creativity, craftsmanship, and community.
Let the customer customize
For companies to remain relevant in this make-for-me future, they will have to rethink their business models.
Of course, some commodities will always be commodities. You don’t need to put your own spin on nuts and bolts. Goods that require massive scale, speed, and efficiency will be mass-produced, and manufacturers will continue to squeeze every ounce of cost and efficiency out of those supply chains.
Everything else, however, will be able to be customized to the individual. Today, complexity is the enemy. It’s difficult and costly. Thanks to 3D printing, product complexity will become free - and therefore advantageous. And mass customization could overtake mass production.
Today, roughly 80 percent of shipments are finished products and 20 percent are raw goods. In the future, the inverse will be true. Instead of making products, corporations will come up with basic frameworks giving people the power to put it together as they wish.
As production is decentralized, and goods are individualized, the value proposition for companies will radically change. It will not be that you produce something that delivers value, but that you have the knowledge of how to produce it - and in myriad ways.
As a result, IP and design will be the most important corporate assets of the future. Instead of designing, manufacturing, and delivering products, companies will design and deliver IP. Companies that own and leverage the rights to products and services - rather than those that manufacture, sell, or distribute them - will flourish.
Remodel Customer Relationships
Such a radical shift will bring challenges:
- Gartner predicts that just by 2018, 3D printed items will result in the loss of at least $100 billion per year in IP globally. As IP grows in value, it will be an enormous target.
- Manufacturers will have to figure out how the quality controls in their large, centralized factories can translate into a distributed and individualized production environment. Physical quality control will shift to digital quality control as the number of partners involved in the process balloons.
- With a supply chain that is more distributed, is local, and works in real time, companies will need to approach customer service and standards for safety, quality, traceability, and social responsibility in new ways.
- Companies will have to reorganize themselves around open, user-centered innovation processes
Manufacturers cannot simply wait while these issues are sorted out by someone else. The changes required to compete in this near future will take time, investment, and commitment.
Companies that want to remain relevant will have to be willing to cannibalize their existing business models and reorganize around the individual. They will have to figure out how to let their customers customize.
This article first appeared on the Digitalist Magazine by SAP. To learn more about how exponential technology will affect business and life, see SAP Digital Futures
