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B. Joseph Pine II is known to most readers of this blog as the author of THE book on Mass Customization (Mass Customization: The New Frontier of Business Competition, Harvard Business School Press, 1993). Published in eight languages, this book opened the debate on Mass Customization and made the concept widely known around the world.
Together with his partner James H. Gilmore, he also wrote The Experience Economy: Work Is Theatre & Every Business a Stage (Harvard Business School Press, 1999). This book demonstrated how goods and services are no longer enough; what customers want today are experiences – memorable events that engage each customer in an inherently personal way. He and his partner followed that up by editing a collection of Harvard Business Review articles entitled Markets of One: Creating Customer-Unique Value through Mass Customization (Harvard Business School Press, 2000).
Joseph Pine is also an internationally acclaimed speaker and management advisor to Fortune 500 companies and entrepreneurial start-ups alike. He is co-founder of Strategic Horizons LLP, a thinking studio dedicated to helping businesses conceive and design new ways of adding value to their economic offerings. Prior to beginning his own company, Mr. Pine held a number of technical and managerial positions with IBM. One of his many assignments was key to the effective launch of the Application System/400 computer system, where he managed a team that brought customers and business partners directly into the development process of the system.
I am very glad about the opportunity to start the 2007 blogging year with the following great conversation with Joe Pine. He was always a main source of inspiration and ideas for me, and I am still grateful for his spontaneous willingness to provide a wonderful introduction into my first German book on mass customization (in 1997).
Joe, what was your first encounter with mass customization?
I first became interested in the topic when I worked directly with customers on the AS/400 system at IBM. I realized that every one of those customers was unique. They used the system in different ways, applied different applications with different data sets, and connected to different hardware. We didn’t really take that into account in developing the system, designing it for what we thought was a large, homogeneous market that simply did not exist.
After the system came out I joined strategic planning and soon read Stan Davis’ 1987 book Future Perfect. When I absorbed his chapter on mass customizing, it was like the heavens opened up and the angels sang! It explained everything I saw happening, and gave me a context for thinking about what we could do about it. I made sure Mass Customization became an integral part of our strategy, and when IBM gave me the opportunity to get my master’s degree at MIT, I decided to write my thesis on this subject and turn it into a book.
And the rest, as they say, is history! Indeed, almost everybody reading my blog has also read that book, Mass Customization. Is there anything in this book you would phrase different today? And is there an idea in your book that was a bit overlooked?
Yes, indeed. I put everything I know about Mass Customization into that book – and then some! I would definitely do it differently today – and perhaps you and I ought to think about joining forces to do exactly that, Frank – starting with one glaring fact I got wrong. I defined Mass Customization as “variety and customization through flexibility and quick responsiveness”. Variety, however, is not the same thing as customization. Variety is still putting something in inventory in the hope that a customer will come along and say they want it. It’s only true customization if it’s done in response to a customer order, reflecting the needs of a real, live, breathing customer.
Today I define Mass Customization more exactly as the low-cost, high-volume, efficient production of individually customized offerings (which, incidentally, may be goods, services, experiences, or transformations). Or even more simply, to use the phrase coined by my friend Steve Goldstein of Growth Advisors, it is efficiently serving customers uniquely.
The perhaps overlooked idea – well, I don’t know if it’s the most overlooked idea, but it is the one with the greatest potential impact – is the Product-Process Matrix framework provided in Chapter 9, which was originally developed by Bart Victor (now a professor at Vanderbilt) and Andy Boynton (now Dean of the Carroll School of Management at Boston College). We extended this model in “Making Mass Customization Work”, our 1993 Harvard Business Review article and other places, most completely in Victor & Boynton’s book Invented Here (Harvard Business School Press, 1998) – an overlooked book that should be widely read, particularly by everyone reading this blog.
I affectionately call this model THE 2x2, so powerful is it for explaining the shift to Mass Customization. It frames the entire debate on changes in business competition, and contains a pattern – a fractal – yielding insight at many levels of analysis, from the entire history of business at the top level, through what happens in industries, companies, units, processes, and even what happens in the brains of individual people as they learn and work. I also find that same framework and pattern popping up in widely diverse subject arenas, from how ecologists see forests growing to Jim Gilmore’s and my work on how theatre is performed.
What is the state of Mass Customization practice today? Are we beyond or behind the situation you envisioned when writing the book almost 15 years ago?
Yes and no. I did expect it to be more pervasive in consumer markets (particularly apparel, where every body is unique), but on the other hand it’s quietly become widespread in B2B industries, for companies can more precisely gauge the value of the customization their suppliers can provide.
There are also a number of industries that have been revolutionized by Mass Customization, including personal computers, eyewear, painting, sign-making, textbooks, lighting controls, windows, car rental, and insurance. And there are some incredibly significant industries that simply could not exist without it; mass customizing is the only way to do, for example, check printing (think Deluxe), package delivery (FedEx), internet search (Google), and digital music delivery (Apple iPod/iTunes).
In this vein I should give one mea culpa on my first book. It’s amazing to think (even to me), that in 1992 when I finished it I didn’t include what is now clearly the world’s premier mass customizer, Dell, Inc. Indeed, I view Michael Dell as the Henry Ford of Mass Customization – the man who put it all together and created a shining example for the world to see. But I suspect I was too blinded by the company I worked for at the time to take them seriously. What a mistake – for IBM even more so than for me.
Do you see any upcoming mass customization trends with regard to new players, technologies, markets, etc.?
I think the biggest trend is the realization of everything implied by the principle that anything that can be digitized can be customized. Once it enters the realms of zeroes and ones, one can instantly change a one to zero and vice versa. With the advent of digital technology and especially the rise of the Internet, so much more can be digitized today than before, and soon everything that can be will be. In some cases (such as music) the actual offering can be digitized, in other cases the process for creating the offering can be digitized (such as book publishing), and in all cases information about the offering can be digitized. Any company in the world, therefore, can reach any potential customer in the world with a digitized representation of what it has to offer, and can change that representation – and then the actual offering – to meet the needs of that individual customer.
(I also look forward to the day when everyone in business recognizes that the phrase “individual customer” is redundant; until then you and I will keep pushing the case.)
One other thing I’ll mention doesn’t relate to new players, new technologies, or new markets – rather, new offerings. As alluded to earlier, in The Experience Economy my partner Jim and I show that there are two offerings beyond commodities (which, by definition, can’t be customized), goods, and services: experiences, memorable events that engage each person in an inherently personal way, and transformations, effectual outcomes that change each individual to achieve his aspirations. There’s precious little that has been done to mass customize either experiences or transformations, and a world of opportunity for firms that wish to start.
Recently, there is all this hype about Web 2.0 and Social Commerce. How does this fit with Mass Customization and the Experience Economy, if at all?
They are part and parcel of the same trends. Web 2.0, as I understand it, is about the web becoming a platform – a modular architecture – for weaving everything available on the Internet into a dynamic flow that is right for each individual. Social Commerce brings in the aspect that much of the available content is not created by companies, but merely facilitated by them while being generated by individual people (I hate using the term “users” in this context). So together you have the beginnings of a truly mass customized, digitally delivered experience.
The other phenomenon this brings to mind – although probably not directly related to your question – is virtual worlds. What is happening with Everquest, Worlds of Warcraft, There, and all the rest – especially all the commercial activity going on in Second Life – is fascinating to me. Now the opportunity exists to mass customize virtual offerings to the avatars of real people!
What are the main challenges for companies doing mass customization today? What questions should managers ask themselves when considering entering the mass customization market?
The main, overarching issue is still mindset. The executives, managers, and workers in the company have to understand how the mindset required to properly mass customize differs from that of Continuous Improvement, Mass Production, or Invention organizations (to allude now to THE 2x2 that I mentioned earlier). If you don’t have that, you flat-out will make decisions antithetical to what’s required to efficiently serve customers uniquely.
I truly believe there are few if any non-commodity markets where Mass Customization can’t be a success. (Every single time I say to an audience that I don’t think it would work in a certain industry or endeavor, someone invariably points out a company that’s already doing it in some way, shape, or form.) The question isn’t one of “Is there a market?”, but rather “What do we need to do to find the market?” And the way to find that market is to ask “Where do customers sacrifice today?”
A term that Chris Hart of Spire Group first said in work we did together, customer sacrifice is the gap between what a customer wants exactly and what he has to settle for today. As opposed to customer satisfaction, which relates to expectations, customer sacrifice looks at what each customer really and truly wants and needs. Companies need to uncover the few dimensions, or even just the one, solitary dimension of sacrifice that will yield the most value for their customers, and for them. Think of Select Comfort, which focuses relentlessly on the one dimension of mattress firmness and you can see how effective this can be.
Today there are plenty of people doing academic research on Mass Customization – your original thoughts have started an entire new discipline. Are there any particular research questions that you think are especially fruitful to pursue for future research?
First, Stan Davis should continue to get all credit for coming up with the idea and the term – and Alvin Toffler as well for presaging the idea in his 1970 book Future Shock. That said, it is indeed gratifying to see how far this idea I was able to popularize has come, and how many have latched onto it as an arena worthy of research. In my mind, the key research areas include: modular architectures, process technologies (particularly in bringing the concepts to industries where some invention is still required), design tools, financial models (a big one!), and, again, applying the principles of Mass Customization to experiences and transformations.
You once told me you are writing a new book. Can you share a bit about your new thoughts: What is your next big idea next after Mass Customization and the Experience Economy?
Jim and I are indeed finishing up a book, expected to be published (once again by Harvard Business School Press) in Fall 2007, on authenticity in business. We realized that in the Experience Economy people increasingly question what is real and what is not. Authenticity is therefore becoming the new consumer sensibility – the buying criteria, if you will, by which people choose what to buy and whom to buy from. They no longer accept the fake from the phony; they want the real from the genuine. Therefore, rendering authenticity needs to become a new management discipline whereby companies diligently manage the perception of authenticity amongst their customers.
And, yes, as you might expect we do believe that offerings mass customized to individuals tend to be perceived as more authentic than mass produced, standard, off-the-shelf offerings done for anybody in general and nobody in particular! All of our ideas and frameworks relate to each other, and flow from one common world view.
Can you share a little bit about the "private" Joe Pine? What moves you beyond writing and working with your clients?
In this year’s Christmas letter my wife Julie just wrote how her job is handle absolutely everything around the house so I can work, read, and golf. So, mostly, I work, read, and golf! The reading (four daily newspapers, over fifty periodicals, and scores of books every year) informs my work, enabling me to recognize patterns going on in business as well as the world at large. Golf lets me enjoy friends and the great outdoors while enabling me to focus on something that I can get better and better at – while keeping me decidedly humble.
I would also add that I adore my wife and family – one daughter, Becca, is now a freshman in college, with Lizzie a junior in high school – and seeing my kids grow and mature is a great joy in my life. I would also add that my business worldview is informed by my personal worldview, which is firmly Christian and shared with Jim. My early goal at IBM was to rise up the management ranks until the age of 45 or 50 (a band I am now within), and then go back to get a Ph.D. and teach and write for the rest of my life. The only question was whether that degree would be in business/economics or theology.
So I was basically fortunate to begin that path 10-15 years ahead of schedule on the business front. At some point, I may swing back over and focus my remaining days on Christianity, particularly in apologetics.
To conclude: What is, in general, the greatest mass customization offering ever – either one that is already existing or that you would like to get in the future?
Well, the one I’d like to see is what Jim and I call experience guiding. With so many companies getting into the business of experiences and transformations and with the very real limits in the time, money, and attention any individual can give to these offerings, what emerges is the crying need for companies to wade through this growing mass of possibilities and help individuals determine what is right for them. People are beginning to ask, and will eventually clamor, “What experiences should I encounter?” – that is, determining what would be most gratifying; “What transformations should I undergo?” – that is, what would be most edifying; and, overarchingly, “What offerings are right for me?” – that is, what would be most authentic.
Transformations are experiences guided to achieve particular demonstrated outcomes; that’s why I call this experience guiding – the capability of understanding, determining, recommending, and managing the set of experiences individual customers have to effect the transformations they desire. Note that it applies just as much to business customers as to consumers. With individuals in businesses, there also is an overload of possibilities for the knowledge they need in order to transform their own businesses, with limited time, money, and attention to gain that knowledge. For knowledge is experiential information, learned by experience and applied in experience.
While no one has put it all together – indeed, I think all the functions being lumped into Web 2.0 will be required – there are many elements coming together, with companies increasingly doing parts of it.
And if somebody actually does experience guiding well, perhaps that will be my signal finally to turn to pursuits other than the world of business!
Thanks a lot for your comments and thoughts, Joe! And keep on your productive and creative thinking in 2007!
Contact Joe Pine at www.strategichorizons.com, bjp2@aol.com, +1 651 653-6850
Hi, This subject has been haunting me for a couple of months now.. I love that you think authenticity is the big thing. I call it transparancy. Transparancy results in valueing products and companies on their intrinsic values they offer..
I made 2 presentations. One about the difference between a growth strategy and a contribution strategy and one between the changing role of large production scale companies versus small entrepeneurs. Would love to hear any feedback on them..
http://www.slideshare.net/Thinkmobile/growth-versus-contribution
http://www.slideshare.net/Thinkmobile/user-generated-products-large-enterprises-vs-small-entrepeneurs
Posted by: Raimo van der Klein | January 05, 2007 at 08:13 AM