[Editor’s note: This installment is part of an ongoing series. You can start at the beginning in order to follow its logical sequence.]
by Kenneth Rudich
No two configurations of the value chain are apt to look exactly alike as each enterprise populates the generic framework with people, facilities, technologies, activities and processes.
These inputs are particular to an organization’s resources, values, culture, mission, goals and strategy. And though they arrive as separate pieces and parts, they are meant to interlock in purpose and intent.
This is the very essence of a modular design.
It subdivides a larger system into smaller independent inputs, units or modules. The modules then become discrete parts that get plugged in and out of the larger system, platform or framework.
What’s important about this approach is that you can integrate the modules according to your particular design preferences or needs across time.
In consumer marketing jargon, this is referred to as mass customization, and it carries two implications for value chain marketing.
One implication falls under the heading of “Customer-centric Marketing,” and the other under “Specialization and Systemization.”
Near the middle 1980’s the manufacturing industry began to look hard at doing the reverse of one-size-fits-all mass production by asking if a product could somehow be rendered customizable while still holding onto the cost savings of a large-scale industrial output process.
It was as much a quandary as it was a question, insofar as it was difficult to conceive how a high volume assembly line, which heavily relied on product standardization to make it work, could suddenly be converted to accommodate customization.
For a long while the merging of these two ideas appeared unimaginable and invariably hopeless. But the tempting allure of bringing it about — someway, somehow — refused to go away.
The tenacity for entertaining this question stemmed from the recognition that it would create new value by offering the benefit of catering to customer preferences. Individuals could fashion a product into whatever they desired rather than merely take or leave what the manufacturer decided to make.
This one change in direction alone would provide a competitive advantage for those with the know-how to do it.
The answer to their quandary, it turned out, lay not in creating a product per se, but in creating a system, framework or architectural design that allows the individual customer to determine the composition of its component parts.
Professor of Strategy and Technology Management Ron Sanchez at the International Institute for Management Development (IMD), Lausanne, became one of the better known evangelists for encouraging this product development mindset. In a May 2000 interview, he depicted it as the third revolution, the design revolution, with the industrial revolution being first and the information revolution second.
“Businesses need to create product and process architectures that are capable of providing the flexibility to customize products for individuals and to upgrade them when better components come along,” he observed. “Creating appropriate modular architectures to support new kinds of product strategies is now central to business strategies.”
He could have added that services must likewise follow suit, offering various package deals, ad hoc bundling options and — perhaps the greatest example of all — a search engine-like capacity for assembling a highly tailored response.
At any rate, this inroad to mass customization was a pivotal moment because it had all the warmth and vigor of a win-win scenario.
It spurred the rise of modularity as an integral element in contemporary design, and it precipitated the imperative for a customer-centric approach.
It translates today into personalizing the configuration of all sorts of goods and services — such as a smartphone, tablet or personal computer, all of which allow the installing and uninstalling of various software and apps without having to replace or overhaul the host device for housing them.
Notice how each producer can still take advantage of mass production economics — the device manufacturers, the software designers and the app inventors — and yet no two customer devices need look exactly alike.
All these years’ later consumers have come to prefer — and even expect — the look and feel of customer-centric customization.
Even more to the point, they like to have — or believe they’ve been given — Locus of Control.