Mass customization refers to a firm's ability to produce a customized product at an economically viable unit cost. This is often comparable to that achievable by large scale, mass production. This ability to personalize a product at a viable cost has arrived over the past few decades with the advent of computers and the Internet.
Mass production has historically been synonymous with the uniformity and standardization that was necessary to lower costs. Customization is the exact opposite; it is the individualistic and unique, which almost always costs more. On the face of it, the term mass customization seems like a contradiction in terms, and for many years, it was. Digital technologies changed all that.
It may be tempting to assume that mass customization applies only to cyber-based businesses. Clearly, its relevance to these firms is enormous. Yet the concept, as originally developed in 1987 by Boston-based business consultant Stan Davis in his book Future Perfect, was targeted to the analysis of old economy, brick-and-mortar businesses. In this old economy, the focus remained the same when Joseph Pine subsequently developed the concept in his 1992 book, Mass Customization — the New Frontier in Business Competition.
Production costs are lower in many brick-and-mortar businesses due to the application of computers. Car, boats, planes, and trains are all cheaper today because of computer-assisted design and manufacture. In addition to computers, the Internet has also assisted lower production costs, particularly in service industries such as investment management, R&D, insurance claim processing, and customer call centers.
Distribution costs are dramatically lower due the Internet. Countless products, including books, newspapers, magazines, insurance claims, and university educations, have all achieved lower delivery costs. Distribution costs are now so low that the market area of many products extends globally.
Combined, these production and distribution cost savings have made mass customization a reality. A good example is the newspaper. In the old days, prior to digital technology, there was a morning edition, an evening edition, and perhaps a late edition. For any edition, every reader got the same copy.
Today, that same newspaper comes in hard copy just as always. There may also be an online version that is constantly updated, almost infinitely customizable, and deliverable anywhere in the world where there is an Internet connection. An online reader can often choose both the content and layout according to his or her preferences.
These new production and distribution capabilities made possible by computers and the Internet have significantly expanded the competitive arsenal available to firms. Computers and the Internet significantly increase the opportunities for product development. The ability of companies to use technology to customize their products is a new competitive weapon.