Giving customers "what they want." (mass customization)(includes related article on mass customization)(Daydreams)(Technology and the CEO: Nightmares, Daydreams, Solutions)
One size never fit all at Haworth Inc:. Whether it meant fitting rare leather upholstery on a chair or cutting exotic marble for a desktop, customizing office furniture has always been the Poland, MI-based manufacturer's core business.
But that philosophy didn't always extend to Haworth's IT systems, according to its chief executive, Jerry Johanneson. "A good portion of our customization was done by brute muscle. We got to a point where we could continue customizing our products without any technology, but we had to ask ourselves if we could afford to do that," he says.
Its patchwork of mainframes didn't really help Haworth manage the resources in its 37 plants. Nor did it let managers allocate the time and raw materials required to customize the chairs, tables, and other accessories that needed assembly. The company could continue using the old system, but at a cost. As it grew, Haworth would have to hire more employees and open new factories.
Mass customization on Haworth's scale may sound appealing, yet little is known about what effect, if any, such projects have on IT departments. Will they require more technology - and possibly more hires? Will the benefits outweigh the expenses? Most important, is mass-customization really needed in the first place? In some businesses, notably information-related ones, mass customization is becoming a must. Others are carefully considering the pros and cons of tailoring their product or service before committing to a mass customization project.
"Executives are having a hard time sorting out the hope from the hype," says William Band, a managing partner for Andersen Consulting's customer relationship management practice in Boston. "Most senior executives are not that IT-oriented, but one thing they know: they've been burned before with promises of technology."
Haworth decided to scrap most of its mainframes in favor of an enterprise resource planning system (ERP) with what's known as a finite scheduler - a program that considers available materials, orders, and space, and then determines how machines can be used most efficiently. "The system makes it easy for us to work in a very complex business," says Johanneson. "It will shorten the amount of time it takes us to process an order. And it will give us a unique advantage."
It is that kind of advantage that Pillsbury was looking for - and found - in its own ERP, says its chief executive, Paul Walsh. In April, the Minneapolis-based company embarked on a two-year project to implement a system that, in effect "will break down barriers between departments." For example, now when a customer calls the shipping department and asks about the status of an order, he might get transferred to several different departments before getting the right answer. Shipping might have all the information about when a particular order was sent out, but it wouldn't be able to retrieve any details about a client's credit on its computers. The new ERP would change all that by linking various internal systems to a common platform.
"Soon, if a customer calls us to ask the status of the shipment, the representative will be able to answer any question - not just the one about his order," says Walsh. "It should make us more customer-friendly and far more efficient."
Pillsbury is customizing its service rather than its products. Other companies have tailored their actual products to clients, with positive results. Take Dun & Bradstreet's U.S. division, which delivers business-to-business credit, purchasing, and marketing information. Its lifeblood is a series of databases containing 11 million U.S. lousiness records - and mass customizing the information in the databases for users.
"Our products are built as a result of certain customer segment demands," says Andre Dahan, Dun & Bradstreet's president. For example, when a major hotel chain wanted to identify the number of florists its properties did business with, Dun & Bradstreet customized the information for the company by matching customer files to its own database. "We found they were buying $7.2 million in flowers per year from 1,900 suppliers," Dahan says. "The company concluded that they would reduce the number of suppliers and entered into more rigorous price negotiations with the suppliers it stayed with."
Dahan believes tailoring a service the way Dun & Bradstreet has is possible outside of his industry. "I think the most critical thing is to make sure the supply side and the demand side are tied together in any mass customization project," he says. "In other words, make sure a customized product is what your customers want."
His sentiments are echoed by customization guru Jeffrey P. Parker, founder of First Call and now chief executive for Corporate Communications Broadcast Network LLC in Boston. "The efficient use of resources is essential to mass customization," Parker notes. That's not just true for Parker's company, which creates customized investor-relations Web pages for corporations, but for businesses in general. "Otherwise," he warns, 'Tour customers will never get what they want."
CCBN, which builds investor relations Internet sites for corporations, solved its mass-customization challenge through a relational database that quickly retrieved relevant information and then displayed it on clients' home pages. Indeed, most of the data sent from CCBN to customers is functionally the same. "It's the last 20 percent of the presentation - the color of the page, the look and feel - that's customized," says Parker. "So when you look at one of our client sites, like, say BankBoston, or Polaroid, you can't tell how much of the page is customized. It actually looks like everything is customized."
Whether it's internal or external, managers agree that any kind of customization project must carefully take IT systems into account. Haworth tried to mass customize, but without initial IT support. Pillsbury's mass customization may not have shown up in its products, but customers noticed the difference, even though they probably didn't appreciate the IT component. Dun & Bradstreet and CCBN made IT a centerpiece of their mass customization projects, and those decisions have kept the two companies competitive.
Addressability: Customers who are individually addressable and can be sent customized messages about a product or service. For example, a company direct-mailing an individualized offer to a prospective customer.
Design interface: A convenient and accurate way for customers to specify what they need. For example, a Web site that lets you order customized jeans, shoes, or computers - directly.
Electronic Data Interchange (EDI): An electronic exchange of information between a customer and a seller. Often includes information on ordering and fulfillment, open accounts and product or service specifications.
Knowledge-based marketing: The use of information about individual customers to maximize the mutual advantage between a particular customer and an enterprise, allowing a company to better meet his or her individual needs.
"Mass customization means a fairly large change within a company," says William Band, a managing partner in Andersen Consulting's customer relationship management practice. "It's not something that you can read about in a book, hire a consultant for, and just install. It requires sponsorship from the top."
And that's because it requires some hard executive choices. By definition, when a company decides to customize its product or service, it must ask itself which customers it wants to work with - and which ones it doesn't want to work with. "Very early in the process, a company discovers that not all customers are equally attractive," Band says.
But clearly, the process can be rewarding. Technology now offers the opportunity to respond to each customer as an individual. Custom jeans, custom credit card applications, customized bicycles, all are becoming feasible, says Band, thanks to innovations in the IT department. "But the vast majority of chief executives are still asking themselves how to do this," he adds, "how to implement this dream."
Every road to mass customization is a little different. All share a common and considerable IT component. And all share a common requirement: never lose sight of the customer. "The CEO has to always keep in mind this question: 'What's in it for the customer?'," Band notes. If clients don't notice the changes in the product in the time it takes for the product to ship or in the way their queries are handled, then the corporation may have lost its grip on mass customization.
|Printer friendly Cite/link Email Feedback|
|Publication:||Chief Executive (U.S.)|
|Date:||Feb 15, 1998|
|Previous Article:||Net nightmares.|
|Next Article:||Breaking down the walls.|