Customization is the most prominent theme in this thesis. As stated in the main research question, it should be investigated how customization of digital products over the Internet can be supported in order to maximize variety while minimizing complexity and search costs. Mass customization is a popular subject in research (Pine, 1993; Gilmore and Pine, 1997), and is getting more attention in literature the last decade because the needs and desires of the consumers are changing, which leads to high market turbulence (Pine, 1993). However, in literature little attention is paid to the customization of digital products.
Because there is no uniform definition of mass customization, I will start this section first by defining customization, followed by a review of the relevant literature on mass customization. This literature can be classified according to the point of consumer involvement and the type of modularity employed (Duray et al., 2000). The reason for this positioning is that mass customizers can be identified and classified based on two characteristics: the point in the production cycle of consumer involvement in specifying the product and the type of modularity employed (Duray et al., 2000).
Mass customization is a term often used in literature, generally referred to as the mass production of customized goods. The term mass customization was introduced by Davis (1987) as a strategy for the future where technology should enable mass customized goods. It seems there is no commonly accepted definition for the term. Some definitions of mass customization used in the literature are ‘providing products that are created to the consumer’s specifications’ (Ettlie and Ward, 1997), or ‘offering unique products in a mass-produced, low-cost, high volume production environment’ (Duray, 2002). This absence of a definition was also identified by Kaplan and Haenlein (2006). They presented a definition of traditional mass customization, and use that definition to define electronic mass customization. The definition of electronic mass customization addresses digital products as one of three dimensions. This research intends to grasp the concept of customization for digital products in the Internet economy. Therefore, I will use the definition of electronic mass customization to come to a definition of customization of digital products over the Internet.
Traditional mass customization can be defined based on three findings (Kaplan and Haenlein, 2006). First, mass customization should be applied to products only. Second, mass customization should only be used to describe consumer–producer interaction at the operations level of the value chain. Thirdly, mass-customized products should have production costs and monetary prices similar or only slightly higher than those of mass-produced goods. Earlier, Tseng and Piller (2003) used a comparable definition of mass customization by defining a differentiation level for customized products or services, a cost level like mass production efficiency and a relationship level to increase consumer loyalty. Kaplan and Haenlein (2006) argue that customization can only be practiced on products and not on services. Their definition is as follows:
“Mass customization is a strategy that creates value by some form of consumer–producer interaction at the fabrication/assembly stage of the operations level to create customized products with production costs and monetary price similar to those of mass-produced products.”
Kaplan and Haenlein (2006) use the definition stated above to define electronic mass customization. For that, they use the dimensions product, player and process which can all be physical or digital (Choi et al., 1997). These dimensions determine the degree of electronic commerce, and are adopted to define pure electronic mass customization. If all dimensions are digital, it can be called the core of electronic commerce (Choi et al., 1997).
Loebbecke (1999) argued however that the dimensions of Choi et al. (1997) cannot be used for on-line delivered content or purely intangible products. Since this research focuses on intangible products only, this definition is not applicable. Loebbecke (1999) proposes a distinction similar to Choi et al. (1997) that a product can be either physical or digital, but the player or the consumer is always physical. In addition, Loebbecke (1999) adds the characteristic of bundled or unbundled value. Traditionally, intangible products were always embodied in some physical means. Now, the link between content and support has been loosened (Goedvolk et al., 2004). As a result, identical content can appear in different forms and packages. The content is what is valuable, bundled or unbundled. For a digital product to be delivered over the Internet, it should be unbundled from a physical carrier. The importance of bundling content with a physical carrier has decreased significantly with the emergence of the Internet. The process dimension is kept, but is reformulated as off-line and on-line. Furthermore, a high degree of customization can be achieved when consumers are involved at the design stage of the production cycle (Lampel and Mintzberg, 1996; Duray et al., 2000; Da Silveira et al., 2001; MacCarthy et al., 2003). Pure customization can therefore not only occur at the fabrication/assembly stage, but also at the design stage.
The definition of customization for this thesis is based on the definition of Kaplan and Haenlein (2006) and uses the dimensions of Loebbecke (1999). This results in the following definition, which is visualized in Figure 2.1. This definition draws on mass customization addressed in existing literature, which is reviewed in the next section. The definition incorporates the type of product to be customized, the process and the value.
“Pure customization is a strategy that creates value by some form of consumer– supplier interaction at the design stage of the operations level to create customized products with production costs and monetary price similar to those of mass-produced products, where the product is digital, the process is online and the content is unbundled from its physical carrier.”
Figure 2.1 shows the difference between pure electronic mass customization and traditional mass customization. A mass customization market can differ in three components when traditional mass customization and pure electronic mass customization are compared: the product, the process and the value. To illustrate these dimensions, the figure has orthogonal axes.
Point of consumer involvement
The definition used in this thesis holds a high degree of customization when consumers are involved at the design stage. According to Duray et al. (2000), mass customizers can be identified and classified based on two characteristics. One of them is the point of consumer involvement in the design process; the second is the type of modularity employed. The point of consumer involvement in the production cycle is a key indicator of the degree of customization provided. It is used to operationalize the degree of customization. If consumers are involved in the early design stages of the production cycle, a product is highly customized. This paragraph reviews existing literature on the point of consumer involvement that can be the case for mass customization.
Lampel and Mintzberg (1996) differentiate between five mass customization strategies, which are pure customization, tailored customization, customized standardization, segmented standardization and pure standardization. These strategies vary in consumer involvement in the value chain, from where consumers are not involved at all, which is the case for pure standardization, to where consumers are involved in distribution, assembly, fabrication and design. This is the case for pure customization, where the product is truly individually customized.
The work of Gilmore and Pine (1997) is very influential in the literature on mass customization. They mention four approaches of mass customization, which vary in change or no change for both product and representation (Gilmore and Pine, 1997). The first customization approach that the supplier can adopt is collaborative customization, which is appropriate for businesses whose consumers cannot easily articulate their needs. This approach inhibits both a change in product and representation. An advantage of this approach is that consumers can be assisted in discovering products that they otherwise would not have identified or found (Gilmore and Pine, 1997). The second approach is the adaptive approach, where the product and the representation do not change. This approach is appropriate for businesses whose consumers want the product to perform in different ways on different occasions. In this approach it is technology that plays an important and active role, because direct interaction is not needed. Permutations, one of the characteristics of information products (Choi et al., 1997) are possible in standard offerings. The third approach is the cosmetic approach, which is appropriate when consumers use a product in the same way and differ only in how they want it presented. Personalized offerings and advertisements are suitable possibilities for products over the Internet. The final approach is the transparent approach, which is appropriate when consumers’ specific needs are predictable or can easily be deduced. In this approach only the product changes, not the representation.
All of the above approaches have advantages over the others, and at the same time suffer from some limitations. This was also acknowledged by Gilmore and Pine (1997), and they propose to combine two or more approaches. They argue that it is the key to draw on whatever means of customization prove necessary to create consumer-unique value (Gilmore and Pine, 1997; Pine, 1993).
Da Silveira et al. (2001) also reviewed literature on mass customization, and classified that literature in generic levels of mass customization. They also reviewed Pine (1993), who suggests four stages of customization. These stages range from modular production where standard components can be configured in a high variety of products which is the highest customization stage, followed by point of delivery customization where additional custom work can be done at the point of sale. The next stage is customized services where standard products are tailored by people in marketing and delivery before they reach consumers, and providing quick response meaning short time delivery of products, and the stage which Pine (1993) calls embedded customization where standard products can be altered by consumers during use. Da Silveira et al. (2001) also reviewed Spira (1996) who develops a similar framework with four types of customization. According to Spira (1996, in Da Silveira et al., 2001) customized packaging is the lowest level of customization, followed by providing additional services, then by performing additional custom work, and by assembling standard components into unique configurations which is the highest level of customization.
Da Silveira et al. (2001) conducted a literature review on the work of Gilmore and Pine (1997), Lampel and Mintzberg (1996), Pine (1993) and Spira (1996). They combined all their work on mass customization, which led to eight generic levels of mass customization ranging from design to standardization. Their eight levels are design, fabrication, assembly, additional custom work, additional services, package and distribution, usage, and standardization.
MacCarthy et al. (2003) conducted a similar study. They also identified a chain perspective of mass customization (Ross, 1996, in MacCarthy et al., 2003), using five approaches. These approaches vary from core mass customization which is an approach where the consumer can modify core elements, post-product customization where a customized service converts a standard product into a customized one, mass retail customization where customization takes place at the retailer, self-customizing products, and the last approach is high variety push. MacCarthy et al. (2003) also addresses mass customization strategies identified by Alford et al. (2000). The first is core customization where the consumer is involved in the design process, optional customization where the consumer is able to choose from a very large number of options, and form customization where consumers are limited in changes or enhancements. MacCarthy et al. (2003) criticize the classification schemes they reviewed, because they under-emphasize the temporal relationships between activities and whether the resources used in order fulfilment are fixed or modifiable. According to MacCarthy et al. (2003), the classification schemes they reviewed omit whether a company customizes a product on a once-only or on a call-off basis. With these considerations, they identified five fundamental modes of mass customization. The first is catalogue mass customization, where a consumer order is fulfilled from a pre-engineered catalogue of variants, produced using standard order fulfilment processes. The second is called fixed resource design-per-order mass customization. A consumer order is fulfilled by engineering a consumer specific product, produced through standard order fulfilment processes. The third mode is flexible resource design-per-order mass customization, where a consumer order is fulfilled by engineering a consumer specific product, and produced through modified order fulfilment processes. The fourth mode is fixed resource call-off mass customization, where a customized product is designed for a consumer, to be manufactured via standard order fulfilment processes in anticipation of repeat orders. The fifth mode they identified is flexible resource call-off mass customization. This is the same as the fourth, but the order fulfilment activities are modifiable.
All off the above reviewed literature are about the point of consumer involvement in the production cycle. The earlier the consumer is involved in this process, the higher the degree of customization is. According to Duray et al. (2000), consumer involvement can be scaled into two factors. The first factor is consumer involvement in the design and fabrication stages, and is considered as a high degree of customization. Consumers can change the actual design of the product or introduce new features rather than selecting features from a listing. This involvement requires the design or fabrication of a unique component for such consumers, and consumers are seen as partners (Piller et al., 2004). In summary, the specific items that support this factor are the following:
- consumers’ requests are uniquely designed into the finished product;
- each consumer order requires a unique design;
- consumers can specify new product features;
- each consumer order requires the fabrication of unique components prior to assembly;
- consumers can specify the size of components.
The second factor is consumer involvement in the assembly and use stages, and is considered as a low degree of customization. All items relate to the involvement of the consumer through the selection of standard components or products from a prescribed listing of features. It does not allow for new designs or features to be produced. The specific items that support this factor are the following:
- each consumer order is assembled from components in stock;
- consumers can select features from listings;
- consumer orders are filled from stock;
- consumers can assemble a product from components.
The above consumer involvement factors accurately depict the role of the consumer in the design process (Duray et al., 2000). The next subsection reviews the literature on modularity, which is the second characteristic to classify a mass customizer.
The second characteristic to identify and classify a mass customizer is the type of modularity employed (Duray et al., 2000). The best method to implement mass customization is to develop products around modular architectures, thereby achieving economies of scale and scope (Blecker et al., 2006). The definition of customization used in this thesis states that production costs and monetary price of customized products should be similar to those of mass-produced products. Duray et al. (2000) addresses this issue by suggesting that modularity can facilitate an increase in the number of product features available, while simultaneously decreasing costs. Creating modular components that can be configured into a wide variety of end products and services is the best method for achieving mass customization (Pine, 1993). Modularity can be defined as follows:
“A system is modular when it consists of distinct (autonomous) components, which are loosely coupled with each other, with a clear relationship between each component and its function(s) and well-defined, standardized interfaces connecting the components, which require low levels of coordination (Wolters, 2002)”.
This definition followed from a literature review where some features where distinguished that are of importance to determine the degree of modularity. These features are: distinctiveness or autonomy of components, loose coupling between modules and tight coupling within modules, clarity of mapping between functions and components, standardization of interfaces, and low levels of coordination. The modularity of a system decreases when one or more of these conditions fail to hold (Wolters, 2002).
There are six types of modularity for the mass customization of products and services (Ulrich and Tung, 1991, in Pine, 1993; Duray et al., 2000). These six types are component-sharing modularity, component-swapping modularity, cut-to-fit modularity, mix modularity, bus modularity and sectional modularity, see Figure 2.2.
In component-sharing modularity, the same component is used across multiple products to provide economies of scope. These products are uniquely designed around a base unit of common components, for example elevators. This kind of modularity never results in true individual customization, but allows the low costs production of products and more variety of products. It is best used to reduce the number of parts and thereby the costs of an existing product line that already has high variety (Wolters, 2002).
In component-swapping modularity it is possible to switch options on a standard product. Modules are selected from a list of options to be added to a base product, for example personal computers. The key to taking advantage of component-swapping modularity is to find the most customizable part of the product and separate it into a component that can easily be reintegrated. The separated component should have three characteristics. First, it should provide high value to the consumer, second, it should be easily and seamlessly reintegrated once separated, and third, it should have great variety to meet differing consumer needs and wants. An infinite number of components to be swapped, or variety so great that consumers are unlikely to run across anyone with exactly the same product can lead to true individual customization.
Cut-to-fit modularity is similar to component-sharing and component-swapping modularity, except that one or more of the components is variable. The dimensions of a module can be altered before it is combined with other modules. This type of modularity is used where products have unique dimensions such as length, width or height. Examples are eyeglasses, or clothing. This type of modularity is most useful for products whose consumer value rests greatly on a component that can be continually varied to match individual needs.
Mix-modularity is also similar to component-sharing and component-swapping modularity, but is distinguished by the fact that when combined, the modules lose their unique identity, and as a result they become something different. An example is house paint. When particular colours of paint are mixed together, those components are no longer visible in the end product.
Bus modularity uses a standard structure that can attach a number of different kinds of components. One or more modules are added to an existing base, for example track lighting or the universal serial bus (USB). The bus can be seen as the infrastructure, and is usually hidden. The key of this type of modularity is the existence of a bus, the infrastructure that is really required for each consumer, and modularizing everything else into components that can be plugged into that standard structure.
Sectional modularity is the type of modularity that provides the greatest degree of variety and customization. It is similar to component swapping, but focuses on arranging standard modules in a unique pattern. As long as each component is connected to another at standard interfaces, it allows the configuration of any number of different types of components. An example is Lego, where the number of objects that can be built is not limited by anything. This type of modularity allows the structure or the architecture of the product itself to change and to reuse, which provides tremendous possibilities for variety and customization. The key to be able to use this type of modularity is to develop an interface that allows sections or objects of different types to interlock.
Modularity also has its drawbacks. Products, which are based on the same encompassing system (often called platforms) may only differ one or a few modules from each other. In this case, customers may indeed have difficulties in distinguishing them (Wolters, 2002).
To measure the type of modularity employed, Duray et al. (2000) also identified two factors. The first factor is modularity through fabrication, and can be considered a measure of modularity in the design or fabrication of a product. Components are original designs, or alterations to standard designs. The modularity types that fit in this classification are component sharing modularity and cut-to-fit modularity (Ulrich and Tung, 1991, in Pine, 1993; Duray et al., 2000). The specific items that support this factor are the following:
- components are designed to consumer specifications;
- components are sized for each application;
- components are altered to consumer specifications;
- component dimensions are changed for each consumer.
The second factor is modularity through standardization. It contains items that address modularity in the form of options to standard products or interchangeability of components. This type of modularity is most likely to be utilized in the assembly stages of a manufacturing process. The modularity types that fit in this classification are component swapping modularity, mix modularity, bus modularity and sectional modularity (Ulrich and Tung, 1991, in Pine, 1993; Duray et al., 2000). The specific items that support this factor are the following:
- products have interchangeable features and options;
- options can be added to a standard product;
- components are shared across products;
- new product features are designed around a standard base unit;
- products are designed around common core technology.
The factors of both point of consumer involvement summarized in section 2.2.2 and type of modularity employed in this section can be combined and classified into four mass customization configurations, see Figure 2.3.
When both the point of consumer involvement and the type of modularity occur during the design and fabrication stages in the production cycle, the mass customizer can be classified as a fabricator. Consumers are involved early in the process. They closely resemble a pure customization strategy, but employ modularity to gain commonality of components (Duray et al., 2000). When the point of consumer involvement occurs during the design and fabrication stages, but modularity is used during the assembly and use stages, the mass customizer can be classified as an involver. Consumers are involved early in the process, although no new modules are fabricated for this consumer. Customization is achieved by combining standard modules to meet the specification of the consumer (Duray et al., 2000). When the point of consumer involvement occurs during the assembly and use stages, but modularity at the design and fabrication stages, the mass customizer can be classified as a modularizer. They use modularity earlier in the process than when the consumer is involved (Duray et al., 2000). When both the point of consumer involvement and modularity occur at the assembly and use stages, the mass customizer can be classified as an assembler. They provide mass customization by using modular components to present a wide range of choices to the consumer. To employ modularity, a varied assortment of products is needed.