Customer Integration:
From Mass Customization to Open Innovation
Erik Kruijer
Student Nr. 1198335
Email: kruijer@gmail.com
1
Customer Integration:
From Mass Customization to Open Innovation
Summary
Recently user generated content (UGC) received massive attention. Websites as YouTube
make it possible for amateurs to upload their self-created videos and share it with others
with the chance of fame. Some of the videos are actually very funny and are watched by
hundred thousands of people. Some other videos are only watched by small groups with
similar interests, which might be a reason to argue that users can supply for the ‘Long
Tail’.
The objective of this work is to make a deep dive into the methods and tools that are
available for consumers to make valuable creative contributions to the development of
products. It proposes customer integration as a means to involve consumers in the new
product development in an innovative way. Customer integration is an essential principle
of a mass customization (MC) strategy, although most attention has been given to its
internal (production) principles. A website like Nike ID offers consumers toolkits – or
configurators – with which they can ‘design’ their own individual products, but the design
possibilities are rather superficial. This work argues that MC configurators have
many merits1, but could be leveraged by offering also a high-end toolkit
especially for lead users.
In order to ensure commercial success, it is important that a MC process is simple so that
consumers finish it and buy the product. A funnel approach could improve the conversion
and therefore a MC configuration process is in reality often rather linear. This hinders
experimentation and learning-by-doing processes, albeit both are part of an innovation
process. It focuses on the shopping experience, since consumers derive much value from
that. A MC configurator must also be accessible for a broad public, since the high
investments in a mass customization system must be earned back. The problem is that
ordinary consumers won’t develop valuable innovations, since they suffer from a
functional fixedness. Only lead users – who have extreme needs – can create radical
innovations. Research has confirmed that lead users can develop innovations with high
commercial value and that cooperation with them will increase the chance of success.
Cooperation with lead users sounds easier than it is, since the problem of sticky
knowledge makes it practically impossible for a lead user and a company to jointly
develop a solution for the needs that the lead user experiences. Therefore it is better to
provide the lead user with a toolkit, so that he can develop and try out different solutions
by himself. Ultimately, the lead user can simply send his final design to the company,
that doesn’t need explanation for understanding how to produce the solution with its
existing technologies and capabilities (not per se: existing production system).
Lead users are generally early adopters of MC configurators, but they are also the first to
abandon them. After some time they start to demand more advanced design possibilities.
Lead users are willing to invest time in mastering a more complex toolkit, if it can help
them to create exactly what they need. If the MC company doesn’t offer a high-end
toolkit, the lead user starts to search for one that does or even develops his own toolkit.
Hereby the MC company risks the possibility that lead users develop a disruptive
innovation with a toolkit that is linked to a competitive technology (standard).
Furthermore, it gives up the chance to cooperate with lead users for now and in the
future. The major problem with lead users is namely that they are hard to identify.
However, research has shown that a lifecycle pattern amongst users of toolkits exists.
Thus a company could breed its own lead users with a MC configurator instead of hunting
for them. So, a company with a mass customization strategy could have a competitive
1
The first chapter of the literature review will describe the most common found advantages of a MC strategy.
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advantage over other companies that adopt (the outside-in archetype of) open
innovation, since its base of lead users is scarce and hard to copy.
A literature study of both MC and Open Innovation shows that they are appropriate under
the same circumstances and based on similar principles. Companies in many consumer
markets are confronted with heterogeneous and rapid-changing needs. They recognize
that they can’t respond efficiently on this with existing approaches as segmentation and
traditional market research. They adopt an approach wherein the customer is seen as
partner for value creation: the customer is integrated in the value-creating processes of
the company. At the same time, groups of consumers exist that are highly motivated to
cooperate with a company in order to satisfy their individual needs. Interaction is
essential for a fruitful cooperation, since the customer-specific information about the
individual customer’s needs and preferences needs to be exchanged, as well as
information about the company’s capabilities. Internet has enabled cost-effective
interaction with individual customers on a mass scale. Web-based toolkits make it
possible for a company to outsource part of its value-creating processes to consumers,
but at the same to control their activities by means of setting a solution space. A MC
configurator does allow consumers only to design custom products that can be produced
within the existing, flexible production facility. In that way a MC company can produce
individual products against near mass production efficiency. A toolkit for innovation has a
larger solution space than a MC configurator, but ‘forces’ the user innovators to make
their designs in a language that the company understands. Furthermore, the toolkit
allows the user innovator to develop only a solution that is based on technologies and
capabilities that the company owns. For instance, a construction should be build with
LEGO bricks and new compatible modules and not with Mecano.
The literature review has also identified some differences between MC and Open
Innovation, such as the differences between low-end and high-end toolkits2. However, a
continuum between both toolkits exists and both approaches are complementary instead
of conflicting. So does Fiat not alone offer the ‘Fiat Configurator’ for people that want to
buy a car, but also the Fiat 500 Concept Lab. The latter website includes an idea contest
in order to get the most innovative ideas for future accessories and a configurator of the
FIAT 500 prototype. LEGO Company is often referred to as leading in both MC and Open
Innovation, since it has embraced the efforts of consumers to hack it’s configurators in
order to get more design freedom. LEGO offers nowadays toolkits with more design
freedom such as the LEGO Designer and Mindstorms toolkits. Furthermore, it
experiments with innovative business models, whereby LEGO sells models on its website
and in stores that have been designed by consumers (who also receive royalties). Similar
examples of this micro merchandising business model are known in the t-shirts industry.
However, it is still surprising that there are so few examples of companies that combine
both toolkits. The case study wants to find out why. It investigated an industry where
already many (leading) companies have adopted MC: namely the shoe and clothing
industry. The research question that will be answered is:
“Why have only a few companies in the shoe and clothing industry, so far,
combined a mass customization strategy with an open innovation strategy?”.
Based on the literature study and common sense, two initial hypotheses have been
developed. The first hypothesis assumes that lead users are satisfied (for now) with the
design freedom that is offered by MC configurators. Examples like LEGO have shown that
companies only became aware of a need for more advanced toolkits, once customers
started to demand them or came up with usercreated / hacked toolkits. So that would
explain why companies don’t offer high-end toolkits (yet). The second hypothesis
assumes that companies in the shoe and clothing industry reject the idea of open
innovation. Both MC and Open Innovation aim to identify a (individual) need and then
develop a solution for that. An often heard critique on open innovation is that successful
2
See paragraph 4.2
3
innovations like the car and walkman would not have been developed, if one would have
looked for a need. Clayton M. Christensen has even described in his book ‘The
Innovator’s Dilemma’ that companies that focus too much on their customers, run the
risk to be surprised by disruptive innovations. So it might be that a company follows a
MC strategy in order to ‘fine-tune’ the product variances to the individual and
unpredictable preferences of consumers, but doesn’t want to rely on customer integration
for the development of innovations. The literature about diffusion of innovations has also
described that in the case of the fashion industry, an innovation (e.g. a new fashion
style) might create a need for it that didn’t exist before, instead of the other way around.
There are strong arguments against this reasoning: the assumption of gradual diffusion
of needs means that companies could identify the ‘sudden’ trends in an early stage by
focussing on lead users. Especially in the fashion industry do fashion innovators and
opinion leaders play a major role in the diffusion process of new fashion trends. Research
has found that lead users are often opion leaders as well. So a fashion company that
cooperates with lead users, would also increase the chance of success of the co-created
innovations, since the lead users form simultaneously the selection system and actively
promote it. Fashion companies are well aware of the role of opinion leaders, but might
prefer to bet on their famous designers for the actual creation of their products. The
cooperation with amateurs might harm their brand image, whereas the cooperation with
designers or popular stars creates (secondary) value.
The case study describes developments in the shoe and clothing industry that invalidate
both hypotheses. A comparison of more than 30 MC websites shows that their design
freedom is limited. Websites for individual sport wear offer expensive upgrades in order
to increase the functional performance of the product. However, the basic configurators
allow not creating new options, although studies have found a high percentage of user
innovators amongst users of sport equipment. Websites for custom formal shoes, shirts
and suits don’t show a virtual product. Furthermore, they focus mostly on custom fit and
(discrete) style modifications. Small independent manufacturers of fashion jeans ask
consumers to send their creative designs, but they don’t support them with a toolkit. It is
still necessary to call these (craftsman) companies to find out what can be made and
what not. In contrast, casual shoe brands as Nike, Reebok and Puma have state–of–art
toolkits, but offer nothing more than choices. These websites keep on developing their
configurators, but the focus is on adding more products, colour variants and unique
options and experience in order to increase sales and to differentiate themselves from
other MC websites. Since (mass)exclusivity and offering experiences are major trends in
this industry, they do often also organize workshops for opinion leaders such as VIPs and
weblog owners. The goal seems to be to generate free publicity instead of gathering
creative ideas for new products. Finally, some websites offering customized t-shirts have
adopted a micro-merchandising business model. Threadless has even introduced the
innovative collective-commitment method for selecting the designs with most creative
and commercial value. However, the designs aren’t created with online toolkits but
uploaded.
An observation of the posts in the independent forum for sneaker addicts – Niketalk.com
– showed that users ridiculize the `design´ possibilities of MC websites like Nike ID.
Instead, the users post pictures of their paintbrushed shoes or design sketches. A large
group makes designs in templates that have been made available by experienced forum
members. The forum also features a Photoshop competition, wherein users re–design
existing shoes. So, it seems that certain consumers could use more design freedom than
they get in the current MC configurators. This finding invalidates hypothesis 1.
The case study found that manufacturers organize many shoe design contests. Some
contests have the objective to generate publicity. Others have serious intents to
integrate the contributions in new products: e.g. some winning shoes were taken into
production and winners received royalties. One organizer has kept the results of the
competition for months secret with the explicit purpose to prevent competitors from
benefiting of it. Other contests aim to identify talent. So, companies in the shoe and
clothing industry don’t completely reject the idea of integrating consumers in their
innovating activities. Typical is that the contests were not supported with online toolkits
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and a forum, despite the success of Niketalk community where fans like to discuss and
comment each others designs.
It is necessary to find an explanation why companies deter from offering high-end
toolkits, although they are interested in customer integration. It could be related to
budget and technical constraints: it is easier and cheaper to organize a design contest
without a toolkit. The programming language of many MC configurators – Flash – might
not allow creating new elements without much effort and knowledge about Flash. It is
also costly to develop such a new toolkit. On the other hand, a toolkit has to be
developed once and can be re-used numerous times (economies of scale). A web-based
toolkit facilitates the design process of the lead user and it is possible to build an online
community around it. The latter has the benefit that lead users can comment on each
others work, or even work as a collective comparable with open source communities.
Furthermore, research has found that diffusion in a (lead user) community is a reliable
predictor of success outside the community and so of commercial success. Basically, a
traditional design contest with a jury is a form of expert selection, whereas a community
of lead users has a peer selection system. Which selection system is better, depends on
the industry. The difference in selection systems hints at the possibility to view the
situation with theories from the strategic management of innovation. Namely, concepts
like diffusion, opinion leaders, radical innovations etc. have also been mentioned. IPR
(intellectual property rights) might play an important role.
Several scholars (e.g. Eric von Hippel) have written about IPR and Open Innovation. User
innovators are generally not able to protect their findings with IPR against imitation.
Companies can benefit from user innovations, since they own the complementary assets
needed for commercialization. Problems can emerge when the company co-creates with a
consumer, since the consumer might be able to claim (shared) IPR ownership.
Furthermore, consumers can claim without cost copyright protection for their designs. So
when a company has invited the consumer to send his contributions, it must be careful to
avoid similarities. Companies have probably enough legal knowledge to ensure that their
products won’t infringe copyrights, but a consumer who sees some similarities with his
designs might think otherwise. The problem for the company is not the outcome of a
legal dispute, but the damage to its reputation. This could especially be the case in
creative industries like the fashion industry, where brands emphasize how unique their
designs are. This discussion gives arguments why companies deter from open innovation
at all, or even develop policies to explicitly refuse ideas or designs from others. If a
company wants to invite consumers, then it is in a better position when they sign an
entry form for a contest and thereby agreeing to the terms and conditions. Furthermore,
if the company likes to take a design into production, it has to deal with only one creator.
In the case of (collective) design via a toolkit and community, one shoe could be
designed and influenced by several participants. It becomes increasingly difficult, when
one person has re-designed a part of another’s design. This has lead to the third and last
hypothesis, namely that companies deter from offering high-end toolkits, because
conflicts about the ownership of IPR might arise.
The case study presents the Open Source Shoe project of John Fluevog. This project was
almost stopped because of the discussions about IPR ownership with the contributors.
The problem was solved by letting everyone declare that his design is in the public
domain. It is questionable whether a major manufacturer would do this, when he – like
Fluevog – has the intention to take the best designs into production. The t-shirt website
Threadless does actually become the owner of a winning design. In exchange, the winner
receives a fixed remuneration that is so high, that is also attractive for undiscovered but
professional designers to contribute. The intelligent collective customer commitment
business model gives Threadless the security that there is enough demand for the
product, so that they don’t run a risk. Basically Threadless is an online continuous design
contest, with a peer/market selection system instead of an expert selection system. Both
Fluevog and Threadless show they were able to solve the IPR, but none of them operated
a high-end toolkit for innovation. To investigate this, a few decision makers of MC
websites were interviewed and asked to react on the idea of giving more design freedom
in their MC configurator.
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These persons brought up the issue of IPR spontaneously, but the issue was not a
potential conflict with a consumer. A parallel with YouTube was found: companies are
afraid that ‘creative’ consumers submit designs that infringe intellectual property rights of
third parties. A user might upload a Mickey Mouse picture to a Nike shoe. To prevent
this, t-shirt customizers already scan all designs contributed and delete suspicious
content. Furthermore, they ask submitters to state that they are the original creators of
their work, but at the same time Cafepress.com (a stock-listed online t-shirt maker)
encourages it’s users to search for materials in the public domain. These companies run
the risk that they become the target of claims. Mass customizers might obtain (exclusive)
licenses with owners of popular IPR (content, trademarks) to solve this problem and to
differentiate themselves from other mass customizers. T-shirt customizers Cafepress and
Zazzle have licenses with e.g. Disney, and Reebok offers consumers the possibility to
place the logo of their favourite team in the NFL or MLB. Shoe manufacturers already
cooperate with major brands and stars, but with the MC technologies they could supply
the long tail of ‘stars’, e.g. a Nike sneaker for a local popular rapper or band.
The last suggestion to get licenses for unique content is basically an idea how MC could
further develop in the future. It does not answer the question whether high-end toolkits
for innovation will emerge. The examples of design contests and Threadless show that
the IPR discussion can be solved by buying winning designs. This approach is only
practical when one winner exists. Toolkits and communities enable collective
development: the IPR ownership of one design becomes then vague and more than one
creator is involved. This problem is solved in open source communities – for software but
also John Fluevog’s Open Source Shoe – by declaring that all contributions are in the
public domain. This makes it difficult for the organizing company to protect the final
product against imitation, especially when production and distribution aren’t scarce
complementary assets as in the shoe and clothing industry. Literature about MC writes
often about the benefits of product platforms with regards to the production of varieties.
It is proposed here to investigate the possibility to create toolkits for innovation that are
based on a propertary product platform. Lead users could then develop new modules that
become part of the public domain, but that are useless without the basic product.
Successful examples for this approach can be found in the computer games industry. It
might also work for tangible products like shoes. If Nike holds the patent on its ‘Nike Air’
technology, then it could allow lead users to design new models or to develop this
technology further. Some recent innovations as the Nike that is connected to the iPod
and the Adidas sport shoe with a computer chip show that the industry is developing
intelligent, unique and hard to copy products. Nevertheless, it is more likely that this
approach will be first found in b2c industries where mass customization is already based
on modular platform products, such as cars, computers, consumer electronics and LEGO.
Finally, it would make sense if companies based their high-end toolkits on the advanced
design software programmes like Adobe Illustrator and Photoshop that are already being
used by consumers. The companies could save money and effort by providing plugins
and 3D templates that fit with this software.
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Table of Contents
1. RESEARCH DESCRIPTION
p. 8
LITERATURE REVIEW
2. MASS CUSTOMIZATION
p. 9
3. OPEN INNOVATION
p. 25
4. FROM MASS CUSTOMIZATION TO OPEN INNOVATION
p. 41
5. STRATEGIC MANAGEMENT OF OPEN INNOVATION
p. 45
6. RESEARCH DESIGN
p. 48
CASE STUDY
7. THE MOTIVE(S) FOR MC IN THE SHOE & CLOTHING INDUSTRY
p. 54
8. CURRENT CUSTOMIZATION IN THE INDUSTRY
p. 58
9. USER INNOVATION IN THE NIKETALK COMMUNITY
p. 67
10. DESIGN COMPETITIONS IN THE INDUSTRY
p. 71
11. IPR CONFLICTS
p. 78
CONCLUSION
p. 82
REFERENCES
p. 87
CONCEPTS AND DEFINITIONS
p. 92
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1. RESEARCH DESCRIPTION
1.1 Research Formulation
This explorative research aims to provide a better understanding of customer integration.
In particular it focuses on the idea of combining an open innovation strategy with an
(existing) mass customization strategy.
Research objective / Contribution of this project to theory:
The contribution of this thesis is that it will test hypotheses from the literature about
mass customization, open innovation and the strategic management of innovation to see
whether a company can improve the effectiveness (and speed) of its innovation process
by extending its existing mass customization strategy into an open innovation approach.
Research question:
“Why have only a few companies in the shoes and clothing industry, so far, combined a
mass customization strategy with an open innovation strategy?”
Research Boundaries
The project focuses primary on:
 Business to consumers industries;
 A customer centric perspective of mass customization, not the internal view;
 Open innovation, only the outside-in archetype (customer integration);
 Web-based toolkits;
 Product innovations, although the toolkit approach itself is innovative as well.
 Note that in this thesis the terms ‘consumer’ and ‘customer’ sometimes could also
apply to the user that isn’t a customer. It will deviate from this practice in the
case of well known terms like ‘user innovation’ and ‘lead user’.
1.2 Research Method
A literature study is performed in the fields of mass customization, and the configuration
process in particular, open innovation and strategic management of innovation theories.
A deep understanding about the following particular subjects has been obtained 3:
 Customer integration;
 Mass customization;
 Open innovation;
 Configuration process;
 Innovation process;
 Customer interaction, and customer co-design;
 Economies of customer integration;
 Toolkits for co-design and innovation;
 Customer communities;
 Learning relationships;
 Sticky knowledge;
 Lead user theory;
 Collective commitment method;
 Creative industries: gatekeepers & superstar system;
 Intellectual property right protection and licensing;
 Complementary assets;
 Core competences;
 Absorptive capacity.
Please read chapter 6 for the development of the hypothesed and the set up of the case
study.
3
See also the list of concepts and definitions in exhibit …
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2. MASS CUSTOMIZATION
“The most creative thing a person will do 20 years from now is to be a
very creative consumer… Namely, you’ll be sitting there doing things like
designing a suit of clothes for yourself or making modifications to a standard
design, so the computers can cut one for you by laser and sew it together
for you by NC machine…”
Robert H. Anderson, Head Information Systems, RAND Corporation,
quoted in Alvin Toffler “Third Wave” (1970: 274)
2.1 What is Mass Customization?
“In the mass customisation concept, goods and services are to meet an individual
customer’s needs whilst being produced with near mass production efficiency” (Tseng
and Jiao, 2001).
§2.1.1 Definition
The term ‘mass customization’ (MC) was used for the first time in 1987 by Davis who
referred to Anderson and Toffler (1970). The idea was later developed into a business
approach by Joseph Pine II in his book ‘Mass Customization’ of 1993. Since then it has
become a popular subject for scholars and still a lot of research in this field is going on,
what is confirmed by the establishment of the International Journal of Mass
Customisation4 in 2005. Also more and more companies have adopted mass
customization as an e-business approach in the recent years, since MC is seen as
compatible with electronic commerce (Lee, Barua, & Whinston, 2000). Established
manufacturers5, retail companies6 and also start-up (internet) companies7 opened
websites where customers can customize all sorts of products. MC has also been adopted
as a strategy of supply-chain management (Salvador, Rungtusanatham, & Forza, 2004).
There are potential synergies between supply chain management, that addresses
production management from the inside out, and MC that starts with the customers’
needs, thus from the outside (Tseng and Piller, 2003).
Three industries in which several well known examples of MC can be found are the
clothing and shoes industry, the car industry – at least for the European market, e.g. the
American market is almost completely made-to-stock - and the computer hardware
industry (e.g. Dell). Furthermore, companies in other industries are pioneering with MC.
Noteworthy examples are mass customized watches, gifts (including books, jigsaws,
roses and giftwraps), cosmetics customized according to the customer’s type of skin,
stamps, furniture, LEGO, Barbies and M&Ms.
In this thesis we will adopt the working definition of mass customization by Tseng and
Jiao (see top of the page), since it is used by most scholars in their recent work (Berger,
Möslein, Piller and Reichwald, 2005; Duray, 2002; Piller and Müller, 2004; Rangaswamy
and Pal, 2003; Reichwald, Piller and Tseng, 2003; Tseng and Piller, 2003). One
conclusion of the Tseng and Jiao definition is that it is the goal of MC to detect customers’
needs first before fulfilling these needs with near mass production efficiency (Tseng and
Piller, 2003).
However, for a good understanding of the defining elements of MC some other influential
definitions will be discussed here as well. Davis referred to mass customization when “the
same large number of customers can be reached as in mass markets of the industrial
economy, and simultaneously they can be treated individually as in the customized
For the International Journal of Mass Customisation, see http://www.interscience.com/ijmassc
For example Nike (http://www.nikeid.com), Adidas (http://www.adidas.com)
6
For example WE (http://wemadebyme.com), C & A (http://www.cunda.de)
7
For example Possen (http://www.possen.com/nl), Threadless (http://www.threadless.com), Cafepress
(http://www.cafepress.com)
4
5
9
markets of pre-industrial economies,“ (Davis, 1987: 169). Thus, it is the objective of
mass customization “to deliver goods and service for a (relatively) large market…” (Piller,
Reichwald, Möslein and Lohse, 2000: 1).
§2.1.2 Premium price?
The definition of MC of Tseng and Jiao is sometimes supplemented with the requirement
that no premium price will be charged for the customized solution in contrast to what is
traditionally the case with craft customization (Davis, 1987; Hart, 1995; Schenk and
Seelmann-Eggebert, 2002; Victor and Boyton, 1998; Westbrook and Williamson, 1993).
However, an opposite viewpoint is supported in this work: “We consider the value of a
solution for the individual customer as the defining element of mass customization.”
(Tseng and Piller: 5-6). The intent for providing a customized solution is to increase
revenues by charging premium prices (Porter, 1980). It is possible to charge a price
premium for customization when value is added. Customers are namely often willing to
pay a price premium for an individualized solution that fulfils their specific needs better
than the best standard product available and that results in an increment of product
utility (Chamberlain 1962). Besides that, it will be shown in §2.3.3 that the price
premium is not the biggest obstacle for consumers with regards to MC. Consumers
perceive the cognitive costs due to three types of uncertainty as higher than the price
premium (Piller, Schubert, Koch, Möslein, 2005).
The ability to ask price premiums has been verified by a few experiments that measured
the willingness to pay (WTP) for mass customized products. Two methods for measuring
the WTP were used: the contingent valuation method and the Vickrey auction. After the
measurement the WTP was compared with the price of (best-selling) standard products
of the same technical quality. It showed that customers are willing to pay considerable
premium prices for self-designed products in several product categories (Franke and
Piller, 2004; Schreier, 2006). Moreover, an online survey among 600 young consumers
used a refined price sensitivity measurement method for measuring the WTP for
customized footwear and found a much higher WTP (Piller, Hönigschmid, and Müller,
2002). However, the WTP could be distorted since measuring it by means of
questionnaires leads often to unrealistic results (Piller and Müller, 2004). Therefore it is
better to take into account some cases from the shoe industry. This shows that the price
premiums differ highly. Adidas can charge premiums of up to 50 percent for its
customized Mi Adidas sports shoes, whereas its competitor Nike can get just 5 to 10
percent price premium for its customized Nike ID sports shoes. Selve sells customized
ladies shoes in the local upmarket segment for a price premium of 100 percent (Piller,
Möslein & Stotko, 2004; Piller and Müller, 2004). An explanation for this phenomenon will
be given later in our case study about the shoe and clothing industry.
Another interesting phenomenon that must be taken into account during analysis is the
availability of upgrades. Cove, a German supplier of customized suits, finds that most
customers are choosing better fabrics for their suits during the configuration process.
This results in an average selling price that is almost 100 percent higher than the outset
price. Concluding, a supplier of mass customized products can not only skim the
additional value of customization on the product level, but also on the option level (Piller
and Müller, 2004). The few available experiments that focussed on the configuration
process have already shown that the design of the process has serious impact on the
average price and the customer satisfaction with the process and product (Dellaert and
Stremersch, 2004; Levin, 2002). The design of the configuration process comprises for
example the decision to offer default configuration settings and whether options are
added or subtracted (subtractive or additive option framing).
Finally, it is hopefully convincing that MC only applies for products of which the value of
customization (price premium) exceeds the cost of customizing (Tseng and Piller, 2003).
For all that, it is possible to ask a premium price for both mass customization and (craft)
customization, but they are not the same. The distinction between ‘mass customization’
and ‘customization’ can be derived from the previously given definition of Davis. The
market segment will change when a premium price is asked for the customized solution
10
regarding craft customization; it will move to a (smaller and) higher market segment.
The market segment will not change compared to that of a standard product in a mass
production system when a price premium is asked in the case of mass customization
(Piller, Möslein & Stotko, 2004).
§2.1.3 The three levels of mass customization
Piller (2002) has formulated a definition that is built around three levels of mass
customization. The first is labelled as the differentiation option. The mass customized
goods “…meet exactly the needs of each individual customer with regard to certain
product characteristics…” (Piller, 2002: 3). Furthermore, the goods are produced “…at
costs roughly corresponding to those of standard mass-produced goods (cost-option).”
(Piller, 2002: 3). This implies that in MC, companies compete from both a cost as well as
a differentiation position at the same time. This logic conflicts with the widely accepted
conception that a company must clearly follow one type of generic competitive strategy
or otherwise it runs the risk of getting “stuck in the middle” (Porter, 1980: 16).
Accordingly a company cannot combine a cost leadership strategy with a differentiation
strategy (or a focus strategy), because they are incompatible according to Porter.
However, it is argued that nowadays a hybrid strategy as MC is practically possible. The
trade-off between variety and productivity can be reduced thanks to new technologies in
manufacturing and information management (Piller, 2002).
Finally, Piller (2002) has added a new element - the relationship option - that is not
being addressed in the Tseng and Jiao definition. It will be shown that it is the most
important level according to some scholars. “The information collected in the course of
the process of individualization serves to build up a lasting individual relationship with
each customer” (Piller, 2002:3). Hereby the customer loyalty can be increased.
The idea of this so-called learning relationship is not new. This term was defined by
Peppers and Rogers (1997) as when a “… relationship between a customer and an
enterprise gets smarter and smarter with every individual interaction, defining in ever
more detail the customer’s own individual needs and tastes.” (Peppers and Rogers,
1997:15). They see the learning relationship as the most effective strategy for keeping
customers and the strategy should be based on customer collaboration and customization
tactics. Customer collaboration in the view of Peppers and Rogers means that the
customer spends time to teach the company about his individual needs and preferences
and because of this he will develop interest in the benefits of this learning. Because of
this they see the customer base as the primary asset (of a 1:1 company). Peppers and
Rogers see the relationship option as most important: “the real power of mass
customization is that it links the enterprise’s behaviour with a particular customer’s
individually specified needs, allowing the firm to create a learning relationship with that
customer.” (Peppers and Rogers, 1997:136).
Piller does also see the learning relationship as very important. A barrier against
switching suppliers will exist once a customer has successfully purchased an individual
item (Piller, 2002). This might even prevent the customer from switching when a
competitor possesses the same customization skills and offers a lower price. This is for
two reasons: first the customer has to go again through the entire procedure of
supplying information for product customization – note that this goes beyond creating a
customer account as in regular internet shops. Second, the customer is again faced with
uncertainties that are specific to buying mass customized goods for the first time at a
certain supplier (see, §2.3.3). Piller joins here the view of Pine who mentioned that
learning relationships are “the ultimate benefit” especially since by engaging a two-way
dialogue “the relationship becomes impervious to competition” (Teresko, 1994: 46). Or in
other words, “mass customisation may increase the stickiness of a consumer to a
supplier,” (Piller and Müller, 2004: 2). It is important that the information that is
collected in the configuration process is stored: the “customer specification memory”
(Peppers and Rogers, 1997: 138). MC can hereby benefit from the progress in customerrelationship management (CRM), since MC and CRM have similar goals and technologies
(Zipkin, 2001).
11
When a company decides to pursue a strategy of learning relationships based on mass
customization it will face some severe complications when it tries to implement it.
Customer feedback is required for a learning relationship and this is not easy when a
manufacturer must use intermediaries like retailers. Disintermediation of the distribution
network is the best solution according to Peppers and Rogers (1997), but they admit that
this is quite difficult. Cooperation with retailers might be a more practical solution,
however exploratory research (Berger, Möslein, Piller, and Reichwald, 2005) has shown
that this stood in the way of developing successful learning relationships in the case of
Adidas.
Figure 2.1 Four levels of mass customization (Tseng and Piller, 2003)
§2.1.4 The fourth level of mass customization
Tseng and Piller carry the idea of three mass customization levels further in their book
‘The Customer Centric Enterprise’ (2003). Here it is mentioned that the three levels have
in common that they all have a customer centric perspective. A fourth level with an
internal view, relating to the mass customization fulfilment system, is added: the solution
space level (Tseng and Piller, 2003). “The size of solution space determines the amount
of freedom that consumers have for their creations” (Jeppesen, 2002: 13). The solution
space is unlimited in the case of craft customization. On the other hand mass
customization operations are performed in a fixed solution space (Lampel and Mintzberg,
1996; Pine, 1993; Piller and Müller, 2004; Tseng and Jiao, 2001; Tseng and Piller, 2003).
The fixed solution space represents “the pre-existing capability and degrees of freedom
built into a given manufacturer’s production system” (Von Hippel, 2001:..). Thus, a mass
customizer does not re-invent its processes for every new customer, but it produces a
high variety of products using “stable but still flexible and responsive processes” (Tseng
and Piller, 2003: 6).
Modularization is often recommended as a tactic to enable stable processes (Tseng and
Jiao, 1996; Tseng and Piller, 2003). Some authors go even a step further and regard
modularization or platform thinking as the central principle of MC (Feitzinger and Lee,
1997; Piller, 2002; Pine, 1993). The reason for this is that modularity provides both
economies of scales and economies of scope. “A modular approach can reduce the
variety of components while offering a greater range of end products”, (Duray, 2002: 4).
Another tactic is postponement. Economies of scale can be achieved when standard halffinished products (e.g. modules) are pre-fabricated (made-to-stock). At the same time
the company can still deliver individualized products by means of postponing
differentiation (completion) of the product. It is most important to postpone the
decoupling point - the point from where the activities are made-to-order - “until the
latest possible point in the supply network…” (Feitzinger and Lee, 1997: 1). In that way
the company can operate at maximum efficiency and it can quickly fulfil the customer’s
order. However, the degree of customization will not be great when the point of customer
12
involvement is late in the production cycle. The point of customer involvement is namely
a key indicator for the degree or type of customization offered (Duray, 2002).
A lot has been written about modularization and mass customization production systems,
however we will let that topic rest from now on. The fixed solution space in mass
customization is however an important notion. It will become clear that this does not
alone distinguish mass customization from craft customization, but also from open
innovation.
§2.1.5 Mass customization approaches
Several scholars have identified MC approaches and/or mass customization archetypes
with corresponding types of mass customized products. Gilmore and Pine (1997) have
described four well known distinct approaches to MC – collaborative, adaptive, cosmetic
and transparent.8 This classification is based on two dimensions: whether the product has
been changed (individualized) and whether the representation has been changed.
Collaborative customization is the approach that is most often associated with MC. Duray
(2002) has made a classification too, namely in fabricators, involvers, modularizers and
assemblers. Another classification is made by Piller (2002) between soft and hard
customization. He refers to soft customization when it is based on fully standardized
manufacturing processes, e.g. customizing services around standardized products and
services. Hard customization starts within the manufacturing processes by means of
modularization or a combination of customized and standard production activities.
In this research project only the conception of style, fit and functionality will be further
developed. Customization can be carried out in three dimensions. The first dimension is
style or aesthetic design: “modifications aiming at sensual or optical senses, i.e. selecting
colours, styles, applications, cuts or flavours” (Piller and Müller, 2004: 6). An example
includes the Nike ‘ID program’9 where customers select various styling and colour options
for the otherwise standard shoes. The second dimension is that of fit and comfort. This is
“customisation based on the fit of a product with the dimensions of the recipient, i.e.
tailoring a product according to a body measurement or the dimensions of a room or
other physical object. This is the traditional starting point for customisation (tailoring),”
(Piller and Müller, 2004: 6). Examples include the Selve ladies shoes10 and the mi Adidas
sport shoes11. Functionality or function is the third dimension: “i.e. selecting speed,
precision, power, cushioning, output devices, etc. of an offering. Functionality is often
overseen when mass customisation is addressed,” (Piller and Müller, 2004: 7). The car
industry offers numerous functionalities options like engine type (fuel, horsepower etc.),
automatic gearboxes, radio sets, handsfree sets for the mobile phone and GPS navigation
computers. Adidas is one of the very few examples of mass customizers in the shoes
industry that (also) customizes in the functionality dimension, i.e. customers can select
soles and cushioning for their shoes according to their running preferences. Adidas does
even offer an intelligent shoe – with a microprocessor in it – that automatically adapts its
level of cushioning to the weight of its owner, his current running speed and the terrain
underfoot12. This unique and innovative approach of Adidas has several serious
consequences for its implementation and success as will be shown in the case study.
2.1.6 Summary
In this paragraph we have identified the subsequent characteristics/principles of mass
customization. At the end of this chapter additional principles will be added; these are all
related to the configuration process that will be discussed in the last paragraph. The next
paragraph will continue with the motivations for companies to start with MC and the
model of value creation.
See for a description of these four approaches the list of concepts and definitions.
See the website, http://www.nikeid.com
10
See the website, http://www.selve.net
11
See the website, http://www.adidas.com
12
See for the adidas_1 shoe on the Adidas website.
8
9
13
MC
MC
MC
MC
MC
MC
MC
MC
MC is aimed at a relatively large market.
First the needs of the customer are detected before fulfilling these.
Price premium: the value of customizing exceeds the costs.
Differentiation option: the product meets the needs of every individual
customer with regard to certain product characteristics.
Cost option: goods are produced at costs with costs roughly corresponding to
those of standard mass produced goods.
Relationship option: The information collected in the course of the process of
individualization serves to build up a lasting individual relationship with each
customer.
Solution space level: stable processes and product architectures.
Style, fit and functionality
14
2.2 The Mass Customization decision by the company
§2.2.1 Why companies adopt mass customization strategies
Companies adopt mass customization strategies in the following situations, or a
combination of them: demand for variety, market heterogeneity, quickly changing
demands, individualization of demand, more actively involved and knowledgeable
customers, new possibilities for low cost customer interaction, decreasing customer
loyalty and price competition (Franke and Piller, 2003; Pine, 1993). The most common
goal of mass customizers is sustainable differentiation in competitive markets, besides
the opportunity to increase revenues with price premiums. However, this paragraph will
show that gaining market research information, disintermediation and building brand
image can be (primary) goals of mass customizers as well. In §2.1.3 it is already
explained that building customer loyalty is a goal of some companies.
Today, large assortments and variety can be found in (mature) markets. There is a
number of situations in which mass customization can add value since it can offer
customers even more variety. First, mass customized products are novelties. Products
like M&M’s with the (abbreviation of the) name of your company have appeal just
because they are fun and unique. The value of such products is transitory (Zipkin, 2001):
it is no longer as surprising when all the companies on a career event have it. Another
situation is that of when customers “differ sharply in their preferences for certain
attributes of a product….for example, when products require matching different physical
dimensions,” (Zipkin, 2001: 5). A good example for this is clothing. Furthermore,
customers can demand variety due to differing tastes in general (Zipkin, 2001).
Variety is likely to be offered when customer preferences in a market are heterogeneous.
It is widely acknowledged that many markets are heterogeneous and that demands
change rapidly (Piller and Müller, 2004). Despite great variety in seemingly mature
markets, there remains a large group of dissatisfied customers with unfulfilled needs
(Franke and Piller, 2003; Franke and Piller, 2004). As a result these customers show two
tendencies. In some cases, like in the case of Apache security software (Franke and Von
Hippel, 2003a), they are willing to pay a premium for improvements that satisfy their
individual needs. The other effect is that users take over the task of innovation or they
modify existing products (Franke and Piller, 2004; Von Hippel, 1988). Several studies
show that 10 to 40 percent of users have modified or developed a product in diverse
product categories (Franke and Shah, 2002; Franke and Von Hippel, 2003b; Lüthje,
2002). The fact that many customers are willing to have an active role (and to pay a
premium price) in order to satisfy their own individual needs supports the idea of offering
mass customization (Franke and Piller, 2003; Franke and Piller, 2004). It is important to
notice that customers have taken on an active role in the design of products with the
purpose of creating value for themselves. The next chapter (about open innovation) will
show evidence that some customers have created products that had value not only for
themselves, but for others as well. That fact supports the idea of following an open
innovation strategy and gives an immediately idea that mass customization strategies
can have ‘spill-over’ effects that are beneficial for the company’s own innovation
processes.
The notion that some customers are willing and capable/knowledgeable to be actively
involved in the design of products is not new; see for example (Von Hippel, 1988).
However, companies started with MC strategies since recently. The cause is the
emergence of new possibilities like new flexible production facilities and information
technology. This has made it possible to interact with many customers on an individual
basis against costs comparable to mass production costs (Wikström, 1996).
The heterogeneity of markets is increased by the individualization of demand. There are
several explanations for this development: “(1) a tendency towards an experience
economy, (2) the growing number of single households, (3) an orientation towards
design and, most importantly, (4) a new awareness of quality and functionality which
demands durable and reliable products corresponding exactly to the specific needs of the
purchaser,” (Piller, 2002: 2; Piller and Müller, 2004). Furthermore, individual product
15
choice is a means of expressing personality for (wealthy) consumers (Piller, 2002).
However, “customers are not buying individuality; they are purchasing a product or
service that fits exactly to their needs and desires,” (Piller and Müller, 2004: 10).
Changing the terms of competition is for some companies the objective of a mass
customization strategy. Pine (1993) has concluded that markets with a high level of
turbulence – as described above - favour a mass customization. However, it is frequently
found that companies in homogeneous and stable consumer markets start with a MC
strategy (Wikström, 1995). Mass customization is for those companies a chance for
sustainable differentiation from their competitors and thus a way to escape from price
competition (Franke and Piller, 2003). Thereby they can also make the markets more
heterogeneous and dynamic (Wikström, 1995). Peppers and Rogers (1997) encourage
companies to change their homogeneous markets into markets with heterogeneous
needs; and to change those into markets with even more heterogeneous needs.
Furthermore, Peppers and Rogers (1997) come to the conclusion that the ‘paradigm’ of
competition is changing. Instead of competition among companies for aggregrate
markets as in traditional competition, the competition is shifting towards the individual
customer. The goal is to build learning relationships that result in higher customer
loyalty.
Kotha (1995) studied the transfer of gained product knowledge at the mass customized
product to the standard production lines at National Bicycle. Not all mass customizers
have both a standard production line and a MC line – especially start-ups don’t – and for
most of them the transfer of gained knowledge about the customer preferences shall not
be the primary objective but a pleasant side effect. However, for some companies it is
the reason to start with MC. Proctor & Gamble (P&G) started in September 1999 an
experiment in selling customized cosmetics online: Reflect. P&G gained efficiently
valuable market research information and insight on custom beauty from interaction with
the customers of Reflect. P&G applied this information from its ‘life panel’ in its standard
product lines, e.g. Cover Girl’s Custom Compacts. In June 2005 the Reflect business was
closed: "What happened was, we learned what we needed to learn," (Berger, Möslein,
Piller and Reichwald 2005; Piller, 2005; Piller, Möslein and Stotko, 2004). This example
supports the idea of potential synergies or “economies of integration” (Piller, Möslein and
Stotko, 2004:7) between a MC strategy and other activities in the organization, like
innovation.
MC is a good means to start with disintermediation in the value network. In §2.1.3 it was
mentioned that in order to establish learning relationships with individual customer
disintermediation is preferred. Furthermore, transaction cost theory recommends direct
interaction between the buyer and the manufacturer (Williamson, 1981; Williamson,
1985). A retailer would only add a cost generating level to the transaction chain whereas
e-commerce has shown that retailers are not necessarily an indispensable chain in the
value network (Piller, Reichwald, Möslein and Lohse, 2000). Additionally, it is observed
that in several manufacturing industries, like the sports good industry, the value-chain
role of manufacturers is becoming less attractive due to increased competition. At the
same time, selling and servicing products (especially in the case of a large installed base
of products) creates more economic value. Consequently, MC is an attractive means for
manufacturers to move downstream (Berger, Möslein, Piller and Reichwald, 2005). A MC
project can even be a covert front line of a manufacturer that plans to move
downstream. A manufacturer can use arguments from literature to convince its retailers
that he simply ‘must’ start a direct sales channel - that is threatening their own channel for its mass customization project. The same logic can also work in the other direction:
some retailers see in MC a means to increase their share of the value chain (Berger,
Möslein, Piller and Reichwald 2005). Furthermore, retailers see in MC a way to
differentiate their offerings in competitive markets or to become more service oriented.
Finally, some mass customizers claim to start MC projects in order to build a brand image
(Berger, Möslein, Piller and Reichwald, 2005). This will create value for their standard
product lines that are being sold through the traditional sales channels. However, it can
also be part of a covert disintermediation strategy: to let a sleeping dog lie.
16
The next paragraph will elaborate on the model of value creation mass customization
systems. It will compare MC to traditional approaches towards (esp.) market
heterogeneity: namely variety and segmentation strategies.
Figure 2.2 A model of value creation in mass customization systems (Piller, Möslein and Stotko,
2004)
§2.2.2 Value creation in mass customization systems
This paragraph will describe how value is created in mass customization systems.
Therefore it will explain the model of value creation by Piller, Möslein and Stotko (2004);
see figure 2.2.
In §2.1.2 it has been argued that the goal of customization is to increase the revenues
by means of increasing the customers’ willingness to pay a premium price. However, a
defining element of MC is that the value of customizing exceeds the costs. It is likely that
costs will increase when a company tries to provide individual solutions for each
customer instead of mass produced goods. Most obvious is that manufacturing costs will
increase due to a loss of economies of scale. Additionally, complexity (costs) may
increase, the costs of inventory might rise and investments in e.g. flexible machinery
could be necessary. Finally, the company has to invest in systems for customer
interaction and integration like configuration tools, internet websites, CRM systems and
other (ICT) systems. These customer interaction and integration systems, especially the
configuration tools, will be described in more detail in §2.2.4. It can be expected that the
investments and costs are very high when the company decides to follow a direct sales
strategy. In that case the company will find that its sales and logistics are far more
complex: communication with numerous individual customers instead of with relatively
few retailers. It also has to deliver matching products to the houses of individual
customers instead of sending bulk shipments to the large warehouses of retail chains like
Walmart.
In order to counterbalance the additional costs of customization, some tactics are
frequently recommended. These tactics have already been discussed in §2.1.4, namely
fixed solution space, stable processes, modularization and postponement strategies.
Piller, Möslein and Stotko (2004) categorize these tactics under the label of “Principles of
Mass Customization”. They state that IT systems can reduce or handle the complexity of
17
MC: e.g. CRM systems, manufacturing planning systems or computer-integrated
manufacturing.
Piller, Möslein and Stotko (2004) find also another category of approaches that
counterbalance the additional costs, namely “Economies of Customer Integration”.
Hereby they mean that customer integration in the value creating processes – customer
co-design - is not only a driver of costs (costs of configuration tools etc.) but also a
source of cost-saving potentials. By means of customer integration the company can gain
deeper knowledge about its market and prevent waste due to imprecise planning
information. “Economies of integration arise from three sources: (1) from postponing
some activities until an order is placed, (2) from more precise information about market
demand and (3) from the ability to increase loyalty by directly interacting with each
customer,” (Piller, Moeslein & Stotko, 2004:5). A relevant source of cost saving that is
not mentioned in MC literature is the reduced cost of sales. Especially in mature markets
– where MC is most often applied – it is adviced to focus on the effectiveness and
efficiency of sales (Zoltners, Sinha and Lorimer, 2006). MC websites could reduce the
amount of face to face contact with sales employees. Think for example about the sales
cost of cars. Nowadays are consumers better informed when they come for the first time
to a car dealer, since most of them use information on internet in general. MC websites
prepare potential buyers even better, since they inform them about the choices regarding
options (which is the domain where car manufacturers have highest margins).
Economies of integration based on postponement are known as “economies of efficiency”
or “economies of mass customization” (Piller and Müller, 2004: 2). MC differs from a high
variety strategy or a niche strategy on the basis of its on-demand manufacturing
approach of MC and its customer interaction / integration. On-demand manufacturing
involves the production (or completion) of a (half-finished) product for an identified
customer after the order has been received (make-to-order). At the other hand, products
are produced in advance for defined market segments and put in inventories for
anonymous customers in high variety or segmentation strategies (Lee, 1998; Piller,
2002; Piller and Müller, 2004). Furthermore, in a segmentation strategy the marketer
surveys and projects segments that are assumed to be static and passive targets. MC
aims at individual customers with needs that change from time to time and the company
interacts with its customers. Accordingly, a MC strategy is not a logical extension of
segmentation strategy in the sense that it aims to serve ‘segments of one’ (Peppers and
Rogers, 1997). In addition, a company cannot achieve economies of integration with a
variety or segmentation strategy, since it doesn’t interact with its customers.
The first source of economies of integration includes its ability to reduce its finished
goods inventories and fashion risk (Berger, Möslein, Piller and Reichwald 2005; Piller and
Müller, 2004; Tseng and Piller, 2003). This is especially valuable for industries with
capital-intensive inventories like the car industry. Also the clothing industry will benefit,
since its products have the risk to become out of fashion after a period. In that case the
unsold products have to be sold against high discounts (sales) resulting in lost profits
(Berger, Möslein, Piller and Reichwald, 2005). It can even lead to undesirable sideeffects, like groups of customers that delay purchases until sales periods or sales periods
that continue throughout the year and thereby cannibalize the high margin sales – unless
you live in Belgium where sales are only allowed in January and July. The (fresh) food
industry will also benefit from this a lot, since its products can become obsolete and then
have to be sold against discounted prices or thrown away.
Another advantage of postponement and customer integration is better planning
conditions (Piller, 2002; Piller and Müller, 2004). For example, a ‘normal’ company can
suffer from lost sales and the potential for lost market share due to out-of-stock
problems with suddenly popular products (Berger, Möslein, Piller and Reichwald, 2005).
However, a mass customizer can identify this trend early and produce additional products
in advance or when more orders are received. Fashion items are a typical example of hitor-miss products (Ogawa and Piller, 2005) and Benetton has reacted on this as following:
it postponed the dying of its uncoloured sweaters until it had a better idea of the
consumers’ color tastes of that season. To make this possible Benetton had to change
18
the order of its knitting and dying production processes (Feitzinger and Lee, 1997).
Another application is that new customers can be served better and more efficiently by
means of profiling; a new customer is presented the same product variation that was
purchased by previous customers with a similar profile (Piller, 2002). The concept of
affinity groups (Peppers and Roger, 1997) could be a possible solution here. Finally other
costs of high variety that are (partly) reduced are customer returns (because of buying
the wrong items), sales force training, post sale services, and confusion (complexity
costs) inside and outside a company (Tseng and Piller, 2003).
The second source from which economies of integration arise is more precise information
about market demand. The company gets access to so-called ‘sticky information’ (Von
Hippel, 1994). The concept of sticky information will be described in the next chapter.
The aggregation of sticky information from various customers will lead to more precise
information about market demand, due to a lack of (traditional) market research biases
and the gain in information quality due to access to implicit – sticky – information (Piller,
Möslein and Stotko, 2004). This information is valuable input for product development
activities – as shown in the P&G/Reflect example in §2.2.1.
The third source of economies of integration has already been described in §2.1.3,
namely better utilization of the customer base (relationship option). The company can
sell additional sales to its existing customer base. The company can decrease its costs for
marketing activities and customer acquisition, because of the increase switching costs for
its customers.
Finally, the place of the postponement point and the degree of customer interaction
influence the extent of economies of integration (Piller, Möslein & Stotko, 2004). The
decision about the decoupling point / point of customer interaction has been discussed in
§2.1.4 as well as its influence on the trade-off between costs and degree of
customization. The degree of customer interaction will be discussed in the next
paragraph that will show the drawback of a high degree of customer integration:
customers that struggle with complexity.
2.3 The Mass Customization decision by the customer
§2.3.1 MC process = the MC buying decision and the co-design process
This research project assumes that the MC process or “the buying (configuration)
process” (Piller, Schubert, Koch, Möslein, 2005: 1) can be viewed as both a (traditional)
choice making process and a co-design process. In the first process, the customer
decides whether or not to buy a mass customized product compared to other alternatives
(MC buying decision). The co-design process describes the cooperation between the
customer and the company during the configuration process of a customized product
(Franke & Piller, 2003, 2004; Franke & Schreier, 2002; Piller, Schubert, Koch, Möslein,
2005; Wikström, 1996). The co-design process is a crucial element of both a MC and an
open innovation strategy, whereas the choice making decision applies only to MC.
However, this paragraph will show that the MC buying decision and the co-design process
are interrelated. The next paragraph (2.4) will describe the co-design process of mass
customized products.
§2.3.2 The MC buying decision equation
“One of the most important tasks of the supplier is to ensure that the customer’s
expenditure is kept as low as possible, while the benefit she experiences has to be clearly
perceptible.”
(Franke & Piller, 2003)
The MC buying decision of customers is the result of an economic equation: the more the
perceived (expected) benefit (returns) from the product exceed the (expected) cost, the
higher the likelihood that the customer will design its own product via MC sites (Franke &
19
Piller, 2003; Piller, Schubert, Koch, Möslein, 2005). It has already been explained in
§2.1.2 that customers are willing to pay a premium price when the increment of product
utility is high enough. However, the perceived returns from MC do comprise more than
product utility. Moreover, the costs of MC include more than only a premium price.
The returns of MC are twofold: (1) the value of a customized product and (2) the rewards
from the design process (Franke and Piller, 2003; Piller, Schubert, Koch, Möslein, 2005).
The first is the increment of utility that a customer gains due to a better fit with the
individual needs than the best standard product (Tseng & Jiao, 2001). The customer
experience or special shopping experience is the reward from the design process: flow
experience or satisfaction with the fulfilment of the co-design task, the latter can be
compared to the satisfaction from solving a jigsaw puzzle (Dellaert and Stremersch,
2003; Franke and Piller, 2003; Novak, Hoffman, & Yung, 2000; Piller and Müller, 2004).
The customized product can be seen as objective individualization, whereas the process
of co-designing can be seen as subjective individualization, for instance in the form of
pride of ownership. In some instances, especially when it regards consumers, it can be
the process that creates the value for the customer and not the individuality of the
product itself (Franke and Piller, 2003). On the other hand, the value of product
customization is of course more enduring than the value of the customer experience
(Franke and Piller, 2003).
The costs of MC are also twofold: (1) the premium price the customer has to pay and (2)
the drawbacks of active participation in the configuration process (Franke and Piller,
2003; Piller and Müller, 2004; Piller, Schubert, Koch, Möslein, 2005). §2.1.2 has provided
evidence from research that customers are often willing to pay a premium price and it
disclosed already that consumers perceive cognitive costs higher than a monetary
premium. The co-design tasks demand a lot of inputs from both the customer and the
supplier. This brings purchasing complexity (information overload), additional time and
effort, uncertainty, risks and a demand for trust along for the customer (Franke and
Piller, 2003). Pine referred in an interview with Teresko (1994) to the drawbacks for the
customer as a result of the MC process with the term “mass confusion”. Piller, Schubert,
Koch and Möslein (2005) identify three different groups of sources of mass confusion: (1)
the burden of choice, (2) problems related to matching needs with product specifications,
and (3) problems resulting from information gaps regarding the behaviour of the
manufacturer. The next two subparagraphs will describe these three categories.
§2.3.3 Mass confusion and burden of choice
“The fact is, customers don’t really want choice. That is, they don’t want to have to
choose. What customers want, whether they are consumers or businesses, is that for you
to know what they want, and when and how they want it.”
(Peppers and Rogers, 1997:137)
“Customers don’t want choice. They want exactly, what they want.”
(Pine, 1998: 14)
A mass customizer offers its solution capability to the customer. A large solution space
allows great variety and accordingly the customer to create a lot of customization value,
i.e. the product utility. It is namely more likely that a solution that exactly fits the
individual needs of the customer will be found when the variety is great. At the same
time excess variety may result in internal and external complexity (Tseng and Piller,
2003). Approaches for counterbalancing internal complexity have been mentioned in
§2.2.2. The burden of choice implies that customers could become confused or
overwhelmed by the great number of choices (Huffman and Kahn, 1998). Given the
limitations of the human capacity to process information (Miller, 1956), the burden of
choice may lead to information overload (Franke and Piller, 2003; Maes, 1994).
The problem of information overload does not apply exclusively to MC. Many producers
have followed high variety strategies in order to provide every customer with a matching
20
product, but this approach has not delighted the busy consumers at all (Peppers and
Rogers, 1997). Consumers do often perceive large assortments and choice as negative
(Franke & Piller, 2003; Schwartz, 2004). Schwartz (2004) illustrates the problem of
choice overload with many typical examples in his book ‘The Paradox of Choice’.
Consumers frequently complain about having to make too many choices - consider the
recent decisions about the healthcare insurance in the Netherlands - and about having
too much choice, for example the broad range of master studies and specializations in
the Netherlands. Further customers (perceive to) lack the knowledge for making the
‘optimal’ decision. Consequently consumers delay their buying decisions (or don’t even
buy at all) and use heuristics for making their buying decision (Schwartz, 2004; Teresko,
1994). An example of such a heuristic is that some customers always buy the product
that is in promotion as a means to avoid choosing from the total assortment (Franke and
Piller, 2003). This burden of choice has also negative results for the companies.
Customers are dissatisfied due to unrealistically high expectations. The result of this is a
high rate of product returns.
The problem with MC is that the number of choices exceeds these existing decision
problems by far (Franke and Piller, 2003). MC is namely characterized by a high intensity
of information for both the customer and the supplier (Piller, 2002; Piller, Moeslein &
Stotko, 2004). The customer has to be willing to take the time and effort to study the
long list of available options. Because of that the configuration process may last quite
some time and customers dislike long configuration processes (Piller and Müller, 2004).
Furthermore, customers may experience uncertainty during the transaction. Studies have
found that customers simplify their co-design decisions by choosing for default
configurations that are often offered by MC toolkits (Dellaert and Stremersch, 2004,
2005). As a result, most customers buy a mass customized product that still doesn’t fit
their individual needs entirely: they have forgone the opportunity to make fully use of
the MC potential and to optimise their product utility. For some customers – satisfiers –
this may be fine, but other customers – maximizers – may be very unsatisfied with their
purchase (Schwartz, 2004). It is also argued that some customers walk away from the
MC process and don’t buy anything at all (Piller, Schubert, Koch and Möslein, 2005).
§2.3.4 Mass confusion: product specification and uncertainty
What’s more than the burden of choice is that the customer has to give a definition of the
product specification that corresponds to his needs during the configuration process. In
general, consumers lack the knowledge about the ideal solution for their needs or even
about what their needs are to fulfil this task properly (Huffman & Kahn, 1998; Piller,
Schubert, Koch, Möslein, 2005). This does not only apply to the specification of an
unfamiliar and complex product like a healthcare insurance, but it can also be difficult to
give an explicit specification for a simple product like a pair of sports shoes when the
customer has to decide about different widths, colour patterns, cushioning options and so
on (Piller, Schubert, Koch and Möslein, 2005).
The sources for mass confusion in the third category are related to the information
regarding the potential behaviour of the manufacturer. Many consumers may have not
bought customized clothing yet and for them it is uncertain whether the manufacturer
will make a product that fits their specifications and expectations. For example, an
inexperienced customer may like to buy a tailor-made pants and has to take
measurements of its body dimensions. However, he might be uncertain how to do this:
should he take the shrinking of his pants in the first wash into account when taking
measurements and thus add additional centimetres to the measurements of his waist?
And will the quality of the garment and knitting meet the expectations of the customer?
Experience will influence process satisfaction (thus reduce mass confusion): it has been
found that MC configuration toolkits have more appeal to expert consumers (Dellaert and
Stremersch, 2003).
Besides this uncertainty, there is a typical principle agent problem due to an
asymmetrical distribution of information. The customer buys (and pays for) a product
that he has never seen and he has to wait several days or weeks before the product is
21
delivered (Franke and Piller, 2003; Piller, Schubert, Koch and Möslein, 2005). This
uncertainty will deter some customers from buying mass customized products, especially
when it regards unknown suppliers (brands). Can a customer trust the company behind
the website www.bivolino.com and pay more than 100 euros in advance for a customized
formal shirt? This is perhaps a reason for this company to cooperate with established
retailers like WE and offer its services under their brand name as well.
Co-design of mass-customized product:
Production of mass-customized product:
(OUT OF SCOPE THESIS)
Information provided by website
- Modules that can be customized
- Options for each module
Conversion:
if both the product and the process
Interactivity
live up to expectations
CA mainly driven by technical
innovations
Consumer inputs
-Make-to-order production
- Preferences
-Modularization
- Choices among
-Print-on-demand
alternatives
-Etc…
Figure 2.3 A conceptual model of the MC process that shows that the customer will only purchase a
mass customized product if both the product utility and the process satisfaction are high enough.
§2.3.5 The importance of a smooth MC process for the MC buying decision
This paragraph has shown that customer co-design is a distinctive side of the MC process
that can provide value for the customer (and the supplier), but that leads to costs – mass
confusion – as well. The customer’s perception of the costs of the MC process is seen as
an important success factor for MC (Piller, 2002). The customer will only buy a mass
customized product when a particular minimum level of satisfaction with the MC process
has been reached (Franke & Piller, 2003).
It is important to note that the customized product is the direct result of the process in
MC (Franke and Piller, 2003). A pleasant and successful MC process will therefore have
an impact on the two sources of value creation and the most important driver of cost.
The process can increase the satisfaction with the customized product (Franke and Piller,
2003; Riemer and Totz, 2001). Or: the perceived product utility decreases if the
perceived process complexity is high (Dellaert and Stremersch, 2003; Franke and Piller,
2004). A successful process can increase the satisfaction with the process: namely a
good customer experience and reduced mass confusion.
Research has found several methods that can be applied in order to help the customer to
find a fitting solution as smooth and easily possible; that is to increase the process
satisfaction. First, it has been found by Huffmann and Kahn (1998) that an optimal user
input exists. The satisfaction with the configuration process is related to the degree of
customer input in an inverted u-shaped pattern. They also find that customers prefer an
attribute based presentation to alternative based presentation. Furthermore,
personalization can reduce the complexity and burden of choice. For example the
customer can start with a personalized pre-configuration or only relevant options are
22
presented according to information from the customer’s profile (Tseng and Piller, 2003).
Finally, but most important, interaction systems for MC – configuration toolkits - can
reduce mass confusion (Franke & Piller, 2003). These systems guide the customer
through the co-design process and enable the customer to start a learning-by-doing
process. The next paragraph will describe the co-design process and will pay special
attention to these configuration toolkits.
2.4 The co-design process in MC
“In sum, elicitation is both essential and difficult. To give customers exactly what they
want, you first have to learn what that is. It sounds simple, but it's not.”
(Zipkin, 2001: 3)
Figure 2.4. A screenshot of the MC configuration toolkit on the Nike ID website (www.nikeid.com)
Paragraph 2.3 has learned that the co-design process is characterized by high
information intensity and large inputs from both the customer and the supplier. It also
showed that it requires the customer to invest time and effort in discovering its needs
and preferences and in learning the available options (solution space). What needs to be
discussed is that a web-based MC configuration toolkit enables two processes: (1)
efficient interaction and cooperation between the customer and the supplier, and (2)
learning-by-doing and trail-and-error processes for the customer. The latter processes
can be improved by studying how innovations are conducted (Franke and Piller, 2003).
Therefore Von Hippel (2001) recommends immediate feedback tools for MC toolkits.
These feedback tools are of even greater importance in toolkits for innovation. For that
reason the topic will be discussed in the next chapter. This paragraph will only show that
a MC configuration toolkit enables efficient cooperation and interaction between the
customer and the supplier.
The interface between manufacturer and customer is seen as a premier success factor of
mass customisation (Franke and Piller, 2003). The interface comprises the solution space
of the suppliers manufacturing facilities, it is the design instrument, the core
communication tool and it is supposed to be the main origin of customer loyalty (Franke
and Piller, 2003; Peppers and Rogers, 1997; Riemer and Totz, 2001). Nevertheless
Franke and Piller (2003) conclude after a literature review that the design of MC
configuration toolkits – a crucial element of a MC system - has hardly been researched.
23
Some sort of interaction is needed in order to get insight into the customer’s needs and
preferences and into their priorities (Wikström, 1996). In other words, a dialogue is
needed for the needs specification (Peppers and Rogers, 1997). Customer interaction is a
condition for customer co-design, the process where the customer has to express his
product requirements and carries out (part of the) “product realization processes by
mapping the requirements into the physical domain of the product” (Khalid & Helander,
2003; von Hippel, 1998). Every customer can choose his individualized combination of
product specifications from a comprehensive but finite range of options (Fiore, Lee and
Kunz, 2004). This so-called process of elicitation is the main distinctive principle of MC
according to Zipkin (2001), thus not e.g. modularization.
Elicitation is a mechanism for interacting with the customer and obtaining specific
information that is being used to make a product specification that reflects the
customer’s needs and desires (Zipkin, 2001). As the quote by Zipkin at the beginning of
this paragraph shows, elicitation is not easy. The difficulty depends on the sort of
customer-specific information that is required. For printing the customer’s name on a pair
of sport shoes only the name is required. However, MC requires in general more
customer-specific information and because of that an elaborate mechanism for
interaction is needed: a MC configuration toolkit. Configuration toolkits are also known as
configurators, choice boards, design systems, toolkits, or co-design-platforms. A MC
configuration toolkit guides the customer through the configuration process and thereby
helps to reduce mass confusion (Franke and Piller, 2003).
It can be argued that the custom-made product is (partly) customer-made in the case of
MC. Interaction means that the customer takes part in activities and processes which
used to be the domain of the company (Franke and Piller, 2003; Wikström, 1996). The
customer is seen as a partner for value creation and integrated into the value-creating
processes of the company (Piller, Moeslein & Stotko, 2004). Toffler (1980) described this
new value-creating customer as a co-producer or “prosumer”. This term may justly apply
to do-it-yourself (DIY) approaches, e.g. a customer of IKEA that produces part of its
furniture and thereby saves money for both himself and IKEA. However, in the case of
MC the interaction takes place in the design process (Wikström, 1996). Therefore it is
more appropriate to call a mass customizing customer a “co-designer” (Franke and Piller,
2003). Co-design implies a form of cooperation – or co-creation - between the customer
and the company during the configuration process of the mass customized product
(Berger, Möslein, Piller and Reichwald 2005; Franke & Piller, 2003, 2004; Franke &
Schreier, 2002; Piller, Schubert, Koch, Möslein, 2005; Ramirez, 1999; Wikström, 1996).
Internet can be seen as the main enabler of MC in consumer markets, since it enables
cost effective interaction with individual customers on a mass scale. Web-based
interaction tools, thus MC configuration toolkits as on the NikeID website (figure 2.4),
allow to outsource the configuration process to the customer (Piller, 2002). It is too
expensive to let sales people advice customers in offline shops when it regards low-cost
consumer products, otherwise the cost of customization will exceed its value. Some face
to face involvement of sales people mcould be possible for more expensive consumer
purchases like cars.
It can be concluded that due to web-based MC configuration toolkits both cost-effective
interaction and cooperation with many individual customers is possible. Because of that
MC strategies can be applied for more product categories in consumer markets, e.g. the
shoes and clothing industry.
24
3. OPEN INNOVATION
3.1 What is open innovation?
“I use the term "open innovation" to describe a concept of innovation following the
principles of open source development to perform innovation innovatively in many
product categories. The main idea is that customers and users, and communities of
users, are actively integrated into the innovation processes by the means of dedicated
tools and platforms.”
(Piller, 2003: http://www.madeforone.com/Concepts/OpenInnov.html)
Open source software (OSS) development is an innovative way of performing innovation
in collaboration with others in communities. Several examples of OSS communities, e.g.
around the Linux and Apache software, have been well documented in literature. More
recently, performing innovation following the principles of open source development in
other product categories than software has been described, for example by Eric von
Hippel in his book Democratizing Innovation (2005).
Open innovation “is a strategy of finding and bringing in new ideas that are
complementary to existing R&D projects,” (Teresko, 2004:1). The company can increase
its potential for innovation by means of customer integration into the innovation process.
This is even about to become best practice (Enkel, Kausch and Gassmann, 2005).
Paragraph 3.2 will show that traditional market research methods fail in identifying future
customer needs reliably and accurately and for that reason many innovations fail.
Customer integration is better suited to identify future needs (and solutions) in rapidly
changing industries. It is more efficient and more reliable and it makes it possible to
harness ‘disruptive technologies’ (Teresko, 2004). Furthermore, rapid product
proliferation makes speed in the new product development process nowadays very
important. Customer integration can shorten the product development cycles due to task
partitioning between the customer and the company. Two wellknown approaches for
customer integration in the innovation process are the lead user approach (Von Hippel,
1986) and IT-based virtual customer integration by means of web-based toolkits – the
toolkit approach – and online communities (Enkel, Kausch and Gassmann, 2005).
Paragraph 3.4 will deal with the lead user method and 3.5 will discuss the toolkits
approach. That paragraph will also argue that both approaches are complementary and
thus could be combined.
‘Open innovation’ includes more than customer integration into the innovation process.
Customer integration can be seen as one of three archetypes of the open innovation
process: namely the outside-in process. The other archetypes are the inside-out process
and the coupled process (Enkel, Kausch and Gassmann, 2005). The inside-out process
includes licensing ideas that have been developed by the company to other companies.
The coupled process includes both outside-in and inside-out processes for example in the
form of joint ventures and strategic alliances. Open innovation or open-marketinnovation is thus systematically opening the innovation borders to the outside world,
whereby some information is exchanged (Enkel, Kausch and Gassmann, 2005; Rigby and
Zook, 2002).
Finally, Henry W. Chesbrough refers to the demand to cooperate to innovate with this
term. In general, companies are cooperating in the innovation process more often and
more intensively with resources located outside the company. The company can
cooperate with customers, research companies, business partner, and universities etc
(Prügl and Schreier, 2006). This study is only interested in the cooperation between the
company and the consumer. Furthermore, it limits itself to the outside-in archetype of
open innovation; that is customer integration.
25
Customer integration is not a novel phenomenon in business to business (b2b) settings.
However, companies in business to consumers (b2c) industries are today inviting
customers to actively participate in their idea generation and creative problem solving
processes as well. Companies apply several means for customer interaction like design
contests, communities and innovation labs, which is illustrated by the following
examples.
First, it seems that user generated content (UGC) had its breakthrough in 2006. Websites
like Youtube, Current TV and Google Video where user created videos can be uploaded
and watched are very popular. Many established content and cable companies rush to
start up their own UGC websites such as CNN Exchange (CNN), Skoeps.nl (Talpa & PCM),
VideoTalent.nl (NCRV), Zizone.tv (@Home) and Shoobidoo (KPN). Popular for some
longer time is the trend to organize contests in which customers can contribute ideas for
advertisements or even make the advertisements themselves – the winning
advertisement is usually broadcasted by the organizing company (e.g. the shopping cart
commercial of Centraal Beheer). However, this work is not focussing on UGC but likes to
show that consumers can be involved in the development of many other products as
well. In the last few years several companies have organized design contests: e.g.
Peugeot Concours Design (cars); Timex The Future of Time (watches); Illy Café
competition, Philips Senseo Artworks (coffee machines); IKEA (furniture); Threadless (Tshirts); O’Neill (sneakers) etc. These companies have received hundreds of contributions
and a couple of designs have actually been taken in production.
Another mechanism for interaction with customer is the customer community. Certain
companies use these for the generation of new ideas / designs. Some companies make
use of existing communities that have been established by their (fanatic) customers, e.g.
the Lugnet (LEGO) community, the iPod lounge community, the TiVo community,
Yamaha community and the Mini Cooper community etc. Other companies establish their
own company-controlled communities, for instance the Threadless community (t-shirts),
Muji (Japanese specialty retailer in household goods and apparel) and Propellerhead
(computer-controlled music instruments).
Finally, a few companies (e.g. BMW, Audi, Adidas, Procter & Gamble) use closed
environments, sometimes named ‘innovation lab’, where only customers that have been
invited have access to.
26
3.2 Why traditional innovation fails
Why should companies change their way of performing innovation, thus adopt open
innovation? The answer is simple, namely traditional innovation fails: most new products
(often more than fifty percent) that have been brought to the market are commercial
failures (Mansfield and Wagner, 1975; Booz, Allen and Hamilton, 1982). Research has
found that the main reason for these commercial flops is poor understanding of user
needs, not technical problems. Reliable information about user needs is the most critical
information for successful new product development and commercialization and this
information is traditionally gathered by means of market research (Ogawa and Piller,
2005). However, conventional market research is not only very expensive, it has also
some shortcomings as described by Von Hippel (2001; Hippel and Katz, 2002). First,
need information is very complex and often difficult to transfer, and traditional market
research methods only skim the surface. Methods that go deeper are both difficult and
timeconsuming whereas speed in the NPD process is often seen as critical. Furthermore,
needs change and markets become increasingly dynamic. In addition, several companies
try tro serve ‘markets of one’ thus unique and individual needs and this means that
generalization of sample results becomes increasingly difficult. The result is that the
specification of new products often doesn’t fulfill the needs.
Ogawa and Piller (2005) also find that traditional market research causes high failure of
new products. Traditional market research fails namely in delivering reliable information
that can be used for forecasting potential sales volumes of new products. Because of that
wrong decisions are taken and products are commercialized for which there is not
enough sales potential. Market research has difficulties in forecasting sales potential,
since focus groups and most other common market research lack realism. They provide
information about attitudes towards new products and intentions of participants to
purchase them, but not quantitative estimates of sales, market share, cannibalization
etcetera based on behaviour. Of course test markets can deliver more reliable and
accurate forecasting data since they are based on actual behaviour, but these are even
more expensive, sensitive towards noise (e.g. promotions of competitors) and it takes
long to deliver results. The result is that many companies do not incorporate market
research in their NPD process anymore.
The criticism on traditional market research methods does not mean that they should be
completely abandoned. Lüthje and Herstatt (2004) conclude that for incremental
innovations companies can apply the existing market research methods, but that these
fail in case of radical innovations. One solution is to invite lead users instead of typical
customers in market research for radical innovations; this idea will be elaborated in §3.4
about lead user theory.
Customer integration in the NPD process could increase the success of innovation
(Cooper and Kleinschmidt, 1995) and it could also help to become more customer
centric. First, cooperation of the customer with the company – co-creation – will lead to
increased success of product development, since his involvement (or empowerment)
reduces the risk that the customer will reject the end product (Prahalad and Powell,
2004). A recent example that illustrates this is the development of the Fiat Ducato X250version, that was developed (for the first time) in cooperation with all main camper
manufacturers. The result is a van that is prepared in many details for post-build into a
camper. Fiat was able to increase its margin and its marketshare in this segment
(volume of Fiat approx. 50.000-60.000 in 2006). Reading this example, one might think
that this argument will only be valid in b2b settings with a limited number of customers
to cooperate with and not in a b2c environment. However, modern interaction
mechanisms can identify implicit and individual customers’ needs better and do this
effectively, so it is possible in b2c industries as well and this will be shown in §3.5. The
next paragraph will show that users can make creative contributions have commercial
value.
27
3.3 User innovation
“Indeed, to paraphrase Solow’s famous quip, user innovations appear everywhere but in
the economic literature.”
(Henkel and Hippel, 2005: 1)
§3.3.1 User innovation is happening, also in consumer markets
It is often assumed that only manufacturers develop innovations, however customers
(besides e.g. universities) do develop innovations as well. Most notable is the research by
Von Hippel (1988) who found that in certain areas, like scientific instruments, most
innovations are developed by customers, who then convince a manufacturer to
commercialize the innovation. These user innovations are sometimes even the starting
point of a whole new industry (Hienerth, 2006). Even when a new product is developed
by a manufacturer, then still a large fraction has been directly initiated by the needs and
special requests of customers. In some industries customers are actively involved in later
NPD stages as well, for instance prototypes and first devices have been developed by
users (Lüthje and Herstatt, 2004). Otherwise, it might be that re-invention by users –
that is the modification of an innovation in the process of adoption and implementation takes place after the launch of a new product (Rogers, 1995). Rogers uses in his book
many examples regarding adoption of agricultural innovations. An interesting and more
recent example of re-invention is how LEGO Factory was hacked just 15 days after it’s
launch. This new online mass customization service of LEGO made use of a toolkit for
user design, called LEGO Designer, but some users thought that they had to buy too
many packages of bricks for their designs. So they created a new algorithm that
optimised the designs, so that they had to buy less packages. LEGO embraced this
development, although it undermined its potential sales13. It is necessary to mention that
LEGO had experience with hackers: in 1997 the operating system of its Mindstorms robot
development system was also hacked shortly after its launch. Gradually LEGO seems to
have discovered the benefits of a community that shares its product improvements. The
user created programs can now be uploaded to the official Mindstorms website as well.14
The LEGO Factory example shows that user innovation does not only apply to industrial
customers and users, but that it takes place in consumer markets as well. Open source
software (OSS) is probably the most well known example of innovating consumers. OSS
shows also that user innovators can work together on innovative projects when they are
connected through internet. Connectivity through Internet implies that user innovation is
becoming more important (Jeppesen and Frederikson, 2004), nevertheless the research
by Von Hippel (1988) shows that this phenomenon is not new and b2b examples in oil
refinery and chemical industries have already been reported in the 1960s. The case study
will show in detail that also online communities have been formed by consumers with
similar interest in shoe design. Another LEGO example shows that consumers can be
heavily involved in the NPD process. For the development of an upgrade for LEGO
Mindstorms was a Mindstorms User Panel (MUP) from early on involved.15 Anecdotal
cases of products that are invented by users include ‘TipEx’, invented by a secretary at
the end of the 1950s, and ‘Gatorade’ that was invented by a trainer of a college football
team (Lüthje and Herstatt, 2004).The Dutch television broadcasts a show (‘Het Beste
Idee van Nederland’) in which both inventors, design students and consumers pitch their
inventions to industry experts and the audience. Jeppesen and Frederiksen (2004)
provide an overview of empirical studies about user innovation in the field of consumer
products. This reveals that so far mostly sport equipment has been studied. The
percentage of users that have developed or modified products ranges between 10% and
For this example, see the Mass Customization & Open Innovation newsletter by Frank Piller of November
2005 on http://mass-customization.blogs.com/mass_customization_open_i/2005/11/lego_factory_ha.html
14
For this example, see the summary of The Economist interview with Eric von Hippel on the MC & Open
Innovation newsletter by Frank Piller of August 2005 http://masscustomization.blogs.com/mass_customization_open_i/2005/08/customization_i.html
15
For this example, see the article of Koerner on Wired: http://www.wired.com/news/culture/0,69946-0.html
13
28
40% for equipment for hiking, mountain biking, snowboarding, sailplaning and
canyoneering.
An important question is why consumers start developing innovations. The main
motivation is that they derive personal benefit from it through personal use (Lüthje,
Herstatt and Hippel, 2002). For this reason they do not try to make the innovation more
appealing to others, because this might compromise their own personal benefit.
Furthermore does Rogers (1995) find that users re-invent products in order to fit
particular conditions. He also mentions that user innovators enjoy the creative innovation
process, thus they are rewarded in the form of pride of ownership. Financial benefit is not
an important motivation for most user innovators in the b2c domain, since they would
have to obtain intellectual property rights (IPR) and license them to a manufacturer.
Obtaining IPR is for most consumers too costly and it is uncertain whether the user
inventor will benefit from it. Shah and Tripsas (2004) have created a model in which they
describe when user innovators (should) start their own firm, when they (should) license
it or when they should not commercialize it at all. Despite this model, it remains an
unlikely motive for consumers (Lüthje, Herstatt and Hippel, 2002). This is different in a
b2b setting, where industrial customers can gain significant financial gains through user
innovations (Hippel, 1988). Reputational gains is sometimes seen as a motivation to
participate in OSS communities. OSS projects often do also provide the opportunity to
show one’s skills and abilities, which is important when one is looking for employment.
The case study will show that several participants in shoe communities express their
desire to become shoe designer and that they see contests as an invitation to show their
skills.
Research has shown that some preconditions for user innovation exist, namely the
availability of tools and materials, the absence of time constraints, some kind of
incentives to develop a novel product and the relative importance of the product part in
question (Tietz, Morrison, Lüthje and Herstatt, 2004). Consumers can choose to let a
manufacturer develop an individual solution (thus buying) instead of developing it self,
but higher costs is often a reason to do it self (don’t forget that suppliers have to obey
legal and regulatory requirements and a consumer may in many cases not). Also the
pride of ownership is a reason to develop something self.
§3.3.2 User innovations can be successfully commercialized by companies
It is of course an interesting phenomenon that a lot of innovations are developed by
users, but what is the relevance when they yield no or less commercial value? Besides
this rhetorical question, can be asked how user innovations with significant commercial
value can be identified.
It has been found that user innovations can be successfully commercialized by
companies. The first argument is that user innovations started up totally new industries,
for example the kayak rodeo industry as described by Hienerth (2006). Second, OSS has
shown that user created products can win market share from state-of-art commercial
(software) suppliers (Jeppesen and Frederiksen, 2004). Furthermore, empirical research
finds that users are able to create product ideas that are original, valuable and realizable
(Kristensson, Gustafsson, and Archer, 2004). In addition, various studies have shown
that user innovations are technically sophisticated (Hienerth, 2006).Therefore it is
recommended that companies involve users also in the creative phases of the NPD
process (Kristensson, Gustafsson, and Archer, 2004). It has also been found that
companies have great opportunities to source ideas for valuable new product concepts or
product features from innovative user communities (Franke and Shah, 2003). For
example, Harley-Davidson has integrated concepts from the highly innovative community
the ‘Harley-Owners-Group’16 in the NPD process (Füller, Bartl, Ernst and Mühlbacher,
2004). Also the design norms that exist in a community might provide a company an
indication of the general trend in consumers’ design (Jeppesen and Molin, 2003).
16
For more information, see http://www.hog.com
29
User innovations are also attractive, because they are developed by “low-cost providers”
(Lüthje, Herstatt, and Von Hippel, 2002:1). The explanation is that users apply local
knowledge – that is information about needs they personally experience and knowledge
they already possess e.g. for their daily profession - for the development of the solution.
This means that an user community can develop innovations in an economic way, since
every user contributes to a part of the solution and the final solution incorporates
knowledge from many different fields. The manufacturer also could reduce his
innovation-related costs by substituting it with user innovation activities, which is
illustrated by the case of Westwood. Westwood has provided the users of its computer
games with toolkits that they can use to create content (e.g. landscape maps). The result
is that “consumers carry out labor-intensive design work that traditionally has been done
in-house by computer game manufactures” (Jeppesen, 2002: 8).
Users can also develop modifications for the popular computer game ‘The Sims’ and
share these in a community, which has been researched by Prügl and Schreier (2006).
These modifications are complementary to the original product and create value for the
manufacturer in several ways. First, they fill out small market niches that have been
neglected or that were not interesting enough to invest in. Thus users can provide supply
for the long tail (Anderson, 2006). In addition value is created by extending the product
lifetime (for instance play the game longer) and by increasing sales of the basic product
(Jeppesen, 2002; Jeppesen and Frederiksen, 2004). The commercially successful
computer game ‘Counter Strike’ was created by a user on the basis of the ‘Half-Life’
toolkit, and increased tremendously the sales of the basic product (Prügl and Schreier,
2006). Statistics software company STATA does incorporate highly innovative solutions
into its later products with expansion packs (Hippel and Katz, 2002). Propellerhead
(software) picks up innovations in communities and incorporates those in new version
and makes it available for free download on its website (Jeppesen and Frederiksen,
2004). The European ski manufacturer Edelwiser allows its users to design their skis with
a toolkit, but allows users also to share their designs in a community: “Edelwiser's
business model will allow users to decide whether they wish to (1) publish their design
free of charge, (2) sell their design (including limitations on their "edition"; the user can
also define the margin to be charged), or (3) keep their design "secret" (block it for all
other users).” (Prügl and Schreier: 26). LEGO Factory is based on a similar principle as
Edelwiser: consumers can choose to sell their designs for LEGO models to other
consumers, whereas LEGO supplies the needed bricks. Threadless, Cafepress and Zazzle
are other companies that have adopted this so-called micro-merchandising model for the
shirt industry and also game manufacturers are experimenting with paid user-created
content (Frederiksen and Jeppesen, 2004). Although financial rewards may not be an
important motivation for users to start innovating (§3.3.1), it might be in the interest of
the manufacturer to reward them financially. This could create better preconditions for
user innovation, namely absence of time constraints. For example, a teenage boy that
makes very innovative contributions towards the development of computer games might
spend more time (= more output) on his hobby when he wouldn’t have to do his paper
round.
Finally, user innovation plays a major role in the early stages of the new product
development and therefore companies cannot neglect it. Why are user innovators better
in developing (radical) innovations in the early stages of the lifecycle? The answer is that
users have a need-related information advantage in this fluid stage. An user innovator
can namely develop something for this need, try it out immediately, abandon it when it
doesn’t solve his need, and directly incorporate his findings into a new idea; and he goes
through this iterative process a numerous times. On the other hand, a manufacturer will
traditionally present a concept to users in e.g. focus groups and try to get their feedback.
The problem is that this is costly, slow and doesn’t help the engineers to understand in
which direction they should search for a better solution. Better is to integrate the user
into the NPD process so that the engineers interact with users and can ask for detailed
explanation why the prototype doesn’t fulfil the needs. But this is still very difficult, since
this need-related information is tacit and sticky (Von Hippel, 2005). Besides that, costly
30
and time-consuming face-to-face interaction will still be required. The toolkit method that
will be described in §3.5 can diminish these disadvantages.
A better approach for manufacturers in this early stage is perhaps to let the user
innovators try out things, to offer them the tools they need, and to connect them for
instance by establishing a community. What the company should do is monitor the
reactions of user innovators on each others ideas in order to identify as early as possible
the (potential) winners. Diffusion amongst the community members – who know their
needs better than the company – is a signal that the user innovation has value (Shah
and Tripsas, 2004). Since this is actual behaviour it is also a more reliable projection for
potential sales (Hippel, 2005). Prügl and Schreier (2006) put forward that speed and
extent of diffusion can be seen as an indicator of innovativeness and that diffusion in a
community can be an indicator of diffusion in the total market. Franke and Shah (2003)
have found a high correlation between these two. In the case of information goods such
as software, games, videos and music is it very easy to measure diffusion inside a
community by means of download figures. In other cases a company could install a peer
voting system or use the innovative collective customer commitment method that will be
described in the case study.
In the end, once a dominant design has emerged, usually manufacturers enter the
industry and adapt the product with incremental innovations so that it can be mass
produced and appeals to a broad public (Utterback and Abernathy, 1975). Manufacturers
can exploit their market-related information in this phase of the lifecycle (Von Hippel,
2005). In addition, the user innovator doesn’t have complementary assets (Teece, 1986)
and needs IPR to license its creation to a manufacturer who has them: “Since hobbyists
do not often have access to distribution, commercialization, and mass-production
facilities, hobbyist innovation will tend to become more freely shared as non-rival goods
than professional users’ innovations.” (Jeppesen and Frederiksen, 2004: 9). User
innovators have therefore better chances to start-up a firm in the early stages of the
lifecycle (Shah and Tripsas, 2004). This lifecycle in specific for user innovations has been
well described in detail by Baldwin, Hienerth and Von Hippel (2006).
Most important for companies that consider adopting open innovation methods is that
products that are co-created by manufacturers and users are often more profitable for
manufacturers than those that are developed without involvement of users (Von Hippel,
1986). Furthermore, products that have been developed with lead users perform several
times better than products developed by manufacturers alone. Therefore it is
recommended to learn more about lead users in the next paragraph.
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3.4 Lead user theory
Definition of ‘lead user’:
“I define "lead users" of a novel or enhanced product, process or service as those
displaying two characteristics with respect to it:
o Lead users face needs that will be general in a marketplace—but face them months or
years before the bulk of that marketplace encounters them, and
o Lead users are positioned to benefit significantly by obtaining a solution to those
needs.”
(Hippel, 1986:6)
Paragraph 3.2 already mentioned that for radical innovations companies should invite
lead users instead of ‘typical customers’ in their market research. Imagine therefore what
could have happened when the NS (Dutch railways) would have invited ten-fifthteen
years ago a group of executive business people instead of typical train users, although
business people might hardly or never travel by rail. Some of the executives might have
already owned a laptop and because of that the need for power sockets in trains might
have emerged. The NS would consider the business executives as non-representative
customers and therefore this need would be validated by asking normal customers
whether they need a power socket or not. These customers would then probably decline
it because they couldn’t think of something to use it for. This fictitious example shows
that normal customers are mentally constrained by their own real-world experience. They
cannot forecast their own needs for a context that doesn’t exist yet and are unlikely to
generate novel concepts that conflict with the familiar (Hippel, 1986). Normal customers
are usually invited for market research because of their experience with the product. For
that reason they suffer from a functional fixedness and can only search for incremental
improvements that improve the existing product instead of finding something completely
new (Enkel, Gausch and Gassman, 2005). This is not a problem when it concerns a slowmoving industry, and Von Hippel (1986) regarded many consumer industries, such as the
car industry, as relatively slow moving. However, it is not unreasonable to argue that
many consumer industries have become more dynamic since 1986, for instance because
more high technology is integrated in common consumer products.
In contrast, when it concerns fast-moving industries, it is proposed that lead users “who
do have real-life experience with novel product or process concepts of interest are
essential to accurate marketing research. Although the insights of lead users are as
constrained to the familiar as those of other users, lead users are familiar with conditions
which lie in the future for most – and so are in a position to provide accurate data on
needs related to such future conditions.” (Hippel, 1986:6). In the NS example, the
business people were early adopters of laptops. And because of their experience they
could forecast their need to have a power supply in the travel by train.
The NS example clarifies more elements of lead user theory. First, it shows that fast
developments can take place outside a relatively slow moving industry and later have
(big) impact. Second, the involvement of lead user involvement has especially value
when a product has a long commercial lifetime such as train coaches (Hippel, 1986). It is
also important to predict future needs for other (durable goods) industries like cars,
houses and infrastructure. Third, lead users are often found outside the current customer
base: few executives travel by train. Patricia B. Seybold writes an interesting weblog and
a book about open (or outside) innovation and uses there the term ‘lead customers’, but
she has been corrected by Eric von Hippel. Besides using lead users is it also
recommended to include indirect users/customers – such as soccer coaches for sports
shoe manufacturers - in mixed workshops in order to ensure that existing customers get
a broader view and do not focus alone on incremental innovations (Enkel, Kausch and
Gassman, 2005). Besides the fact that lead users are often not found in the existing
customer base, more problems regarding identifying lead users have been described. The
32
definition of lead users by Von Hippel (1986) includes that lead users are ahead of a
trend that is followed by the majority in the marketplace. This is based on the
assumption of gradual diffusion of needs across markets, thus a new need doesn’t impact
all customers simultaneously (Hippel, 1986; Rogers, 1995; Lüthje and Herstatt, 2004).
In retrospective view, this was true for the adoption for laptops, since nowadays many
students (in the Netherlands frequent train travellers) and other people own a laptop as
well. However, it is necessary to identify the underlying trend before one can look for
users that have a leading position in this trend (Hippel, 1986) and this is not as simple as
it may sound. The other lead user characteristic, that they will have high benefit from a
solution, is often hard to use when looking for lead users. Namely, they may have
already solved their problem (power supply in the train) with an ‘innovative’ solution of
their own (e.g. extra batteries) and therefore they might not react when one is looking
for people who need power supply in the train (Hippel, 1986). In addition, it is possible
that lead users are ahead of several trends and that only one is followed by the mass.
Therefore the company might look for people who are only in one trend ahead (Hippel,
1986). The risk is namely that these lead users do think differently than normal
customers and thereby forecast needs that will deviate from general needs (Enkel,
Kausch and Gassman, 2005). The problem thereby is that research has found that lead
users play a role of opinion leader. They have a high interest in a product and will benefit
a lot from innovations, and therefore is it in their own interest to speed up the diffusion
of (their own) innovations (Morrison, Roberts and Midgley, 2002; Jeppesen and
Frederiksen, 2004). For example, a leading scientist who is the first to write on a certain
topic will try to diffuse his theories and findings as fast as possible in the (online)
community in the hope that others will provide feedback and will follow (build on it).
Literature about strategic management of innovations describes similar examples as well,
for example about the establishment of new art streams.
One element from lead user theory is not found in the NS example, namely that lead
users are often user innovators (Hippel, 1988; Hippel, 2005; Morrison, Roberts and
Midgley, 2002) and that user innovation tends to be concentrated around lead users (Von
Hippel, 1986). The definition of Von Hippel (1986) implies that lead users are motivated
to adopt or develop a solution as one of the first. Several studies have also confirmed
that lead users are often early adopters (Morrison, Roberts and Migley, 2002). Why lead
users are often innovator can also be explained by linking the concept of absorptive
capacity to lead users. Namely since lead users perceive a need earlier than others, they
are also more likely to “recognize, to memorize and to apply pieces of information that
may be relevant for developing solutions to their needs” (Lüthje and Herstatt, 2004:5).
Thus this explains why lead users are also able to develop (better) solutions than others.
What perhaps is more interesting for companies that might be interesting in adopting
lead user methods is the relation that has been found by Franke, Von Hippel and Schreier
(2006:19): “Overall, we confirmed that a high intensity of lead user characteristics
displayed by a user has a positive impact on the likelihood that the respective user yields
a commercially attractive innovation.” The theoretical explanation why lead user
innovations have great commercial value is that, although they develop the products for
personal use, it will appeal to the many others later as well, since lead users are ahead of
the trend. It has also been empirically confirmed that the ahead of the trend component
of the lead user construct is associated with innovation attractiveness (Franke, Hippel
and Schreier, 2006). In addition, studies have shown that lead user innovation have been
successfully commercialized by manufacturers (Hippel, 2005). Finally, many empirical
studies find that the lead user theory can be used as a method for selectively identifying
commercially attractive user innovations (Franke, Hippel and Schreier, 2006).
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3.5 The toolkit approach
“A toolkit is a design interface that enables trial-and- error experimentation and gives
simulated feedback on the outcome. In this way, users are enabled to learn their
preferences iteratively until the optimum product design is achieved (von Hippel and
Katz, 2002). The manufacturer, in turn, produces the product to the customer’s
specifications….Depending on the type of toolkit, the outcome is an individualized product
(Park et al., 2000) or even an innovation (Thomke and von Hippel, 2002). The rationale
underlying the toolkit, however, is the same: it allows the customer to take an active
part in product development.” (Franke and Piller, 2004:1-2)
How can a company create products in response to individual needs of customers without
having to invest time and effort in trying to understand the customer? This paragraph will
explain how the toolkit approach can solve the information stickiness problem (Hippel,
1994). It will describe the requirements for an effective toolkit, see figure 3.5.1, the
situations in which toolkits can be applied and their benefits. Furthermore, it will describe
the differences between high-end and low-end toolkits. It will argue that the toolkits
approach and lead user method are complementary and that it can be advantageous to
combine them. Finally it will show on the basis of the related theory about User Design
that toolkits can also be primarily used to improve market research.
§3.5.1 How effective toolkits solve the information stickiness problem
The first toolkits for co-design and innovation were used in industrial markets: a
proprietary software tool for designing custom chip circuits was introduced by LSI Logic
in the early 1980s and soon became industry best practice (Hippel, 2001). Another
industry that adopted early the idea of the toolkit approach was the computer games
industry (Jeppesen, 2002; Jeppesen and Molin, 2003). Also in this industry toolkits for
innovation are (becoming) best practice: 35% of the computer games already offers a
toolkit to its users according to a survey by Jeppesen and Molin (2003) under 94
computer games. The console manufacturer like Nintendo goes in 2007 even a step
further into the direction of open source by providing consumers with the tools for
creating completely new games and a market place for sharing / selling them. Reason for
the success is the reduced need to transfer information between the customer and the
manufacturer and the loss of numerous iterative steps in the product development
process. The problem is namely that only the customer knows his individual needs and
that he wants the manufacturer to develop a custom solution. The need information is
sticky: this means that it is costly to acquire, transfer and use (Hippel, 1994). It will be
hard to ‘unstick’ this need-related information and because of that it is not what the
toolkit approach tries to achieve. Instead, the basic idea behind it was “a new task
partitioning of product development that co-locates problem solving tasks with sticky
need-related information in the consumer setting” (Jeppesen, 2002:6). This means that
the manufacturer has outsourced tasks for product development to the customer: the
customer should come with a design to the manufacturer. Managers that have
experience with outsourcing (e.g. of IT) might expect that the manufacturer sends a
document full with requirements to its customers, otherwise the manufacturer runs the
risk that the customer will send a design that is impossible to understand and/or to
produce. However, this is not what happens.
Five objectives that must be enabled by effective toolkits for innovation
1
Designs can be produced by the manufacturer’s production system
without requiring revision by manufacturer-based engineers.
2
Solution space encompasses the designs that users want to create.
3
User friendly: familiar design language is used -> not much additional
training needed.
4
Users can carry out complete cycles of trial-and-error learning.
34
5
Module libraries for commonly used modules -> focus on truly novel
elements of the design.
Figure 3.5.1 Requirements for toolkits for innovation (and MC). Source: Hippel, 2001
Instead the manufacturer makes a toolkit for co-design and innovation available to the
customer. The manufacturer has determined the design language in its toolkit so that he
can translate a design directly and error-free to this production system. It is not
necessary for the manufacturer to do the design over again. For example, LEGO Digital
Designer (LDD) is the name of the online toolkit for designing LEGO models. 17 The design
language in this model is build around the LEGO bricks: a user has to build a model brick
by brick in the toolkit. It is not possible to draw or upload a picture that then is
translated by LEGO into a brick model (that would mean revision). The manufacturer will
also decide on the scope of the solution space, so that the customer can only make
designs that can be economically produced with the pre-existing capabilities and
flexibility in his production system. For example, in LDD are currently 241 different bricks
available. A user cannot design his own bricks, neither can he give bricks other colours
than those available. It may be technically possible for LEGO to produce purple bricks,
but a small production batch for only one user would make the costs exceed the price by
far. So, the solution space in a toolkit is linked to a particular production system. The
solution space can be large, when the production system is very flexible (Hippel, 2001).
What seems to happen often is that the manufacturer limits the solution space further:
for example Nike ID does not allow to make shoe designs with ‘Reebok’ on it.
If the solution space is large enough for the designs they want to create, then customers
should be very motivated to use the toolkit, since it allows them to create products that
better fit their needs. However, another main prerequisite is that it should be userfriendly and that they don’t need to invest much time in learning to understand how to
work with it (Hippel, 2001). For that reason, the LDD makes use of the intuitive design
technique ‘drag and drop’, but also the multiple-choice principle - that is being used in
many (MC) toolkits - is easy to understand.
Another objective for toolkits is to enable users to design by trail-and-error (Hippel,
2001; Jeppesen, 2002). Thus users must be able to both create and test designs.
According to Franke and Piller (2003:13) “also in a mass customisation system, the
customer takes the role of a co-innovator. Thus, it might be helpful to study how
innovations, specifically user innovation processes, are conducted.” It is therefore
necessary that also MC toolkits include immediate feedback tools that enable trail-anderror and learning-by-doing processes. LDD does this by means of virtual 3D modelling,
so the users see what they are actually creating. Another possibility that is offered by
LDD is to place the design in a gallery where peers can comment on it. Trial-and-error is
especially important when users have to discover their needs. Namely, a customer may
have bought shoes before, but will have to find out his exact needs when he is
confronted for the first time with MC choices such as colour options for ten parts of the
shoe. The necessity that customers should be able to try out different things might
conflict with commercial interests: literature about website design for e-commerce might
recommend a very targeted buying process towards finalising the purchase with a
minimum loss of customers in the process (high conversion).
Finally, a problem that innovators might experience is the so-called ‘blank page
syndrome’, which means that when confronted with infinite choice it is sometimes hard
to get started. Therefore many toolkits offer default configurations and research shows
that these are very popular (Dellaert and Stremersch, 2004). According to Hippel (2001)
it is a requirement for toolkits for innovation to offer a module library. The user can
incorporate these modules into his design and so focus on the truly innovative elements
of his design.
17
See: http://factory.lego.com/
35
§3.5.2 The application and benefits of the toolkit approach
“User toolkits for innovation are applicable to essentially all types of products and
services where heterogeneity of user demand makes customization valuable to buyers.”
(Hippel, 2001:8)
The examples of LSI Logic, LEGO and Nike ID already illustrated that toolkits for codesign and innovation can be used in both industrial and consumer markets. Under what
conditions can they be best applied? Von Hippel (2001) proposes that user toolkits for
innovation will eventually spread to most or all producers creating custom products or
services in markets having heterogeneous customer needs. This can be understood by
looking at the sticky information problem. When heterogeneity is high, a manufacturer
will have to invest more in unsticking the need information through face-to-face
interaction with more customers (Hippel and Katz, 2002). Since many manufacturers are
specialized in only one solution type (e.g. LEGO bricks) they only have to create one
toolkit that can be re-used for all users with unique needs (Hippel, 2001). This can be
seen as ‘economies of scale’. In addition, Von Hippel (2001) reasons that toolkits for
innovation will tend to be most frequently applied and therefore most valuable when the
rate of change in a market is high, since then the information on user needs becomes
quickly outdated and needs to be constantly updated. Namely, when is assumed that the
underlying production technologies that are being used do not change so fast as the
market needs – which is likely in most industries like shoe and fashion industries due to
the long economical lifetime of capital – then a company can serve new needs without
having to change the toolkit. Furthermore, toolkits will deliver greatest value when the
need information is (very) sticky. Then learning-by-doing iterations are necessary for
developing novel functionalities. It doesn’t matter whether the product in question is a
physical or an information good: both can be designed be users (Hippel, 2001).
Franke and Piller (2004) mention several benefits of the toolkit approach compared to
traditional methods of NPD. First and most important is that information obtained is
located at the individual level, leading to higher customer satisfaction and WTP.
Experiments have shown that users are willing to pay a value increment of 100% for
self-designed watches compared to standard watches of the same technical quality
(Franke and Piller, 2004). Second, the interaction is cheaper than that between the
customer and the supplier in traditional market research: it is not done face-to-face.
Third, time can be saved due to the alternative task partitioning between customers and
suppliers and iterative learning by doing can be carried out by the customer alone (more
speed). Fourth, toolkits enable the individual customer to state or specify his preferences
precisely, so sticky need-based information is incorporated in the design and
manufacturers can stop with being frustrated about trying to understand customers.
Finally, first-mover advantages exist with respect to setting a standard for a user design
language. A pioneer can ensure that the toolkit will be perfectly linked to his particular
production facilities. Once an open standard design language has emerged, other
competitors might be forced to use it even when it may not fit their own production
facilities, because customers are already familiar to it (user friendly) (Hippel, 2001).
§3.5.3 High-end versus low-end toolkits
“There is a broad spectrum of toolkits for customer driven product development and
configuration. At one end of the continuum there are simple toolkits where users are just
allowed to choose from different options (color, size, etc.), a good example is Dell
Computers. In such systems, the degree of innovativeness possible is rather limited. At
the other end of the scale, there are toolkits that assign the user a much more active
role. Here, the user actually creates (as opposed to choosing) which allows for radical
innovations.” (Franke and Piller, 2003: 5)
This paragraph has so far used terms like ‘toolkits for innovation’, ‘toolkits for co-design
and innovation’ and ‘MC toolkits’, for both high-end and low-end toolkits. However, it is
important to clarify the distinction between the two, since this is also one of the main
36
differences between MC and open innovation. Franke and Schreier (2002) differentiate
toolkits on basis of their scope: the user's degree of design freedom. In some toolkits the
user can only choose from a (sometimes a very large) number of options. Good examples
are the websites of Nike ID or Converse for the mass customization of shoes. Also the
configurators on websites of car manufacturers such as Mini (“Build Your Own Mini”),
Volvo (“Volvo car Configurator”) and Audi (“Car Configurator”) are examples of low-end
toolkits. It doesn’t matter that these websites enable most objectives that were stated by
Hippel (2001) with very nice dynamic feedback mechanisms etcetera. They are low-end
toolkits, because choosing dominates the design or configuration process. Their scope is
relative narrow: the user can’t actively create new functions or modules, but must
‘passively’ choose components from the options lists which is typical for most MC
websites (this is illustrated by the frequent use of ‘multiple-choice’ principles). On the
other hand, LEGO Digital Designer (LDD) is an example of a high-end toolkit18, since it
enables the user to create something new. Users apply a drag and drop method to build
a LEGO model. The Spreadshirt Designer for making t-shirt designs offers users
possibilities (and an interface) that are very similar to well-known Microsoft drawing
programmes. It can be concluded that a high-end toolkit offers users more creative
freedom and because of that users can create new modules or completely new products
with them.
High-end and low-end toolkits are applied for different purposes in different situations
(Prügl and Schreier, 2006). Low-end toolkits can be used to exploit seemingly mature
markets, thus with a focus on individualization. In order make enough sales, it is
necessary that almost any user can use it. Usability is achieved be confronting users with
a few relatively simple decisions, but this does not exclude the possibility that a lot of
options are offered. Low-end toolkits can be referred to as basic toolkits. High-end
toolkits are expert toolkits. Their focus is on creating innovative new products and
research has shown that this can be done best by experienced users. This group will also
have less problems with a more challenging toolkit: as long as it offers enough design
freedom they will be willing to invest time in learning to use the toolkit. Furthermore,
experts are likely to have gained skills for and experience with toolkits. Prügl and
Schreier (2006: 7) conclude that “there seems to be a trade-off relationship between the
design freedom offered and the costs of use.” Finally, it is important to take notion that
there is a broad spectrum of toolkits as described by the quote of Franke and Piller
(2003).
§3.5.4 Why the toolkits approach is complementary to the lead user method
In practice lead users are the first to use toolkits, since they have most interest in
designing a solution for their needs. Manufacturers can benefit from this, for example by
offering these lead user designs as defaults for the general public (Hippel, 2001; Hippel
and Katz, 2002). Prügl and Schreier (2006) have studied the creation and market of user
created files for the computer game ‘The Sims’ and they find a positive relationship
between the innovativeness of user created files and the demand for it (measured by the
download figures of 2003). Furthermore they discovered that: “the most popular files are
created by experts or leading-edge users” (Prügl and Schreier (2006:21). In addition
they find a threshold pattern instead of a linear relationship between file creation activity
and demand: only user creators that have reached a certain level of experience create
files for which is massive demand. This confirms the idea that companies that want to
commercialise user innovations should focus on the designs created by a small group of
lead users.
However, Prügl and Schreier (2006) also find that lead users are often unsatisfied with
toolkits that are supplied by manufacturers and that they employ user created tools to
push the design possibilities. This process can be described with the concepts of lowerlevel learning and higher level learning (Jeppesen and Molin, 2003). Lower-level learning
LDD might not be the extreme example of a high-end toolkit, perhaps that in the future new toolkits will
come that push design possibilities more than LDD does now.
18
37
is learning to use the toolkit and takes place before higher-level learning, that is
“contesting existing tools. It may give rise to radical innovation and functionalities.
Aiming at expanding the scope of their tools, consumers contest the firm-constructed
design limits. This process can range from demanding a new program language to
creating completely new tools. This type of learning can lead to new versions and
genuinely new products” (Jeppesen and Molin, 2003:17-18). The most innovative file
creators (22,7%) use the most advanced (onofficial) toolkits, whereas the least
innovative users employ the official toolkit (Prügl and Schreier (2006). Furthermore, the
most innovative file creators have more experience, therefore it is concluded that: “there
seems to be a certain life cycle pattern among file creators. The official tools provided by
the developer of The Sims serve as a gateway for inexperienced users who wish to make
minor changes to the game. Once they gain experience in creating files, they tend to
ascend toward more innovative activities, allowing them to adapt the game more
radically to their specific needs. Consequently, a certain fraction of users evolve over
time from amateur status to highly innovative leading-edge users” (Prügl and Schreier,
2006: 18). These findings provide a strong argument why firms with an open innovation
strategy should not alone provide high-end toolkits to lead users, but also low-end – thus
mass customization – toolkits for inexperienced users. A company could build a
sustainable competitive advantage if it breeds its own lead users and somehow binds
them to its community. The company can then stop trying to identify and compete for
lead users with e.g. idea and design contests.
§3.5.5 Toolkit approach versus User Design: a new market research method
Dahan and Hauser (2002) write about an innovative web-based market research method
named ‘User Design’ (UD) and thereby they refer several times to Eric von Hippel and
MC. The main reason to refer to this article is that it clearly illustrates that MC interfaces
can also be used for primarily market research and customer integration into product
development.
To main objective of UD is to learn “which features are most desired by customers, which
features interact, and which features are viewed as ideal by customers” (Dahan and
Hauser, 2002: 11). User Design promises to involve participants much more active and in
depth than traditional market research methods. The main similarity with the toolkit
approach is according to Füller, Bartl, Ernst, and Mühlbacher (2004:2) that “the novelty
of these approaches compared to conventional online market research is is that users are
not only asked about their opinions, wants and needs but also about their creativity and
problem solving skills.” Dahan and Hauser do also admit that the User Design method is
based on the empirical findings of Eric von Hippel that customers can design their own
products. However, they explicitly mention that UD is not alone appropriate for lead
users, but also for normal users.
Dahan and Hauser compare the interface of User Design to that of MC websites. The
method comes namely down to users designing their ideal product, based on their needs,
by selecting design and feature options from a design palette with a drag and drop
mechanism. The interface is easy to use and similar to that of MC websites: “In many
ways UD is similar to product “configurators” used by websites as Dell.com and
Gateway.com, in which customers order products by selecting features from drop-down
menus” (Dahan and Hauser, 2002: 11). An important difference with MC configurators is
that UD uses real and virtual product features. Furthermore do Dahan and Hauser (2002)
comment that MC configurators could learn from the drag-and-drop (DnD) mechanism in
UD, since it easier to use. This argument is probably outdated since many MC websites
do not use drop-downs anymore, but ‘check-boxes’ in their options menus and it is likely
that DnD has been tested. What is more interesting is that they propose that MC
websites use UD to optimize the effectiveness of MC websites. As an example they refer
to empirical findings that subtracting or additive framing lead to different configurations
as an outcome. UD can help to better understand these phenomena and help to identify
a starting configuration (default) that will enhance sales effectiveness.
38
Figure 3.5.5: User Design interface for an instant camera. Source: (Dahan and Hauser, 2002:11)
Dahan and Hauser (2002) do also write about requirements for the UD interface that do
remind to the objectives for effective toolkits by Eric von Hippel (2001). A direct feedback
mechanism in the UD interface is required in order to enable a trail-and-error process:
“As respondents make these choices, tradeoffs such as price, appearance, and
performance are instantly visible and updated. The respondents iteratively and
interactively learn their preferences and reconfigure the design until an “ideal”
configuration is identified” (Dahan and Hauser, 2002: 11). Füller, Bartl, Erst and
Mühlbacher (2004) mention alternative web-based market research methods for
identifying favoured product features and concepts such as internet-based virtual stock
markets or experimental markets for product concepts.
After having read the explanation one should actually visit the website
http://www.fiat500.com/ and look for the Concept Lab. One will find here a configurator
for the Fiat (500) Concept Car, similar as the configurator on e.g. the Mini website. The
main difference is however that the Fiat 500 isn’t on the market yet and that users can
select “experimental not final” colours, sports accessories and lifestyle accessories. After
having configured their favourite car, the user can add it to the gallery by pressing the
button ‘I’d like this one’. If a consumer misses an option, he can send a proposal to FIAT
as well. This website doesn’t apply the favoured DnD method of Dahan and Hauser and
neither does it include pricing for the options, but it shows that configurators are being
used for market research. Of course, the website will probably have the objective to
generate awareness for the coming model, but FIAT shows that they have serious
intentions by also organizing a design contest (in cooperation with Designboom) whereby
the best ideas win 5000 Euro and will be used and become owned by FIAT.
Finally, Dahan and Hauser argue that UD it is an interesting tool for NPD, since it can be
used on a large scale and provide rich data: “Firms and researchers are just beginning to
experiment with UD as a PD tool. Because respondents find the interface easy to use,
enjoyable, and fast, UD has the potential for screening large numbers of features while
highlighting interactions” (Dahan and Hauser, 2002: 13). The toolkit approach has for
the same reasons a great potential for firms that want to adopt an open innovation
strategy.
39
The ideal Open Innovation strategy in consumer markets
Summarising this chapter, the ideal open innovation strategy in b2c industries would
mean that a company establishes and supports a community for people with high interest
in its products. It would provide the users with both high-end and low-end toolkits and
encourage users to share and discuss their outcomes with other members. It would
identify valuable innovations on the basis of diffusion inside the community and then
invite the (lead) user to cooperate in the further development of the innovation into a
product ready for commercialization. The next chapter will describe how an open
innovation strategy can be built on a MC strategy.
40
4. FROM MASS CUSTOMIZATION TO OPEN INNOVATION
§4.1 What principles do MC and Open Innovation have in common?
At first sight it might be unclear to see what these two strategies have in common:
“The objective of mass customization is to deliver goods and services that meet
individual customers’ needs with near mass production efficiency.”
(Pine, 1993; Tseng and Jiao, 2001; Piller, 2005; Berger, Möslein, Piller and Reichwald 2005: 1)
“I use the term "open innovation" to describe a concept of innovation following the
principles of open source development to perform innovation innovatively in many
product categories. The main idea is that customers and users, and communities of
users, are actively integrated into the innovation processes by the means of dedicated
tools and platforms.”
(Piller, 2003: http://www.madeforone.com/Concepts/OpenInnov.html)
Both strategies have gained popularity both in literature in the last decade and in
practice: a lot of b2c companies started with mass customization and/or open innovation
in recent years. The latter is no coincidence, both strategies were enabled by the
availability of new information and communication technologies (ICT), most notable the
emergence of Internet. In the past it was too expensive to interact with each single
customer in the b2c markets, therefore MC and open innovation were most often
practised in b2b markets with relatively few large customers. Both strategies (can) apply
the toolkit method for effective interaction with the customer.
Of course customer integration is the most important principle that both strategies share.
Customer integration is a form of value creation where the customers take part in
activities and processes which used to be seen as the domain of the companies. They are
based on the proven ability of customers to design their own products. The company
cooperates with the customer in value-creating processes (co-design). “Customer codesign describes a process that allows customers to express their product requirements
and carry out product realization processes by mapping the requirements into the
physical domain of the product” (Von Hippel, 1998). Furthermore, efficient interaction
with individual customers is a condition and means to customer integration in both
strategies (the toolkit approach).
Finally, a basic shared principle of both MC and open innovation is that both have the
goal to identify the needs first and then to fulfill them. This principle is regularly attacked
with examples such as “cars would never have been developed if you would only have
asked customers at the end of the 19th century what they needed, because then they
would have demanded a (faster) horse.” Also the Sony Walkman is mentioned as a
product whereby awareness about it generated needs (thus demand) that didn’t exist
before. These examples concerning radical innovations can be challenged with the
argument that perhaps lead users existed already had this need, but that they were not
listened to. Furthermore the need of a ‘faster horse’ can also be rephrased so that it
shows that people needed a better (faster) solution for travelling distances. However,
Rogers (1995) mentions in his book that research hasn’t solved this chicken-or-egg
problem and that it seems that in some industries, such as fashion, needs are created
after gaining knowledge about them.
41
§4.2 The differences between MC and Open Innovation
Differences (in focus) between MC and Open Innovation
Mass Customization
Mature markets:
When
Open Innovation
Mature markets & new markets:
*
Heterogeneous needs, because individualization of
demand and segments-of-one. At least some dynamics.
*
Heterogeneous needs, caused by gradual diffusion of
needs across markets. -> very dynamic markets
*
Price competition: need to differentiate and/or build
customer-relationships in an efficient way
*
Radical (lead) user innovations can transform mature
markets or create new ones.
What
Fulfilling existing, individual needs
Fulfilling future general needs
Who
Integrate every customer (mass market)
Integrate only lead users
Customers are motivated to co-create:
Lead users have very high motivation to co-create
Customer has high product interest / involvement and
* high WTP
*
Customer is not a product expert: does not know
explicitly his precise needs
*
Lead user has learned by trail-and-error his precise
needs and knows available options.
*
Customer needs inspiration (e.g. defaults): has no
novel ideas
*
Lead user has already novel ideas for the solution
(absorptive capacity)
Why
* Customer has not much experience with toolkits
High cognitive costs are reason to drop out the co-
* design process
Customer integration, but not in creative design
(configuration).
Low-end toolkits:
How
Output
Lead user will benefit a lot from a better (custom)
* product through personal use
* Lead user has experience with toolkits
Lead user likes challenges and is willing to invest in
* learning toolkits
Customer integration, focus on creative design.
High-end toolkits: creating
* Focus on usability (narrow solution space)
* Focus on design freedom (broad solution space)
* Guided (lineair) proces with possibilities to choose
* LEGO Bricks)
Customers develop individual solutions
* Only value for the individual customer
Problem
Costs versus benefits
Create/build freely with a given solution type (e.g.
Lead users develop innovative solutions
* Value for a general public
Identification of lead users (and of commercially
valuable ideas)
Figure 4.2 An overview of the differences between MC and Open Innovation.
MC and open innovation differ at least in several important aspects. First, in MC the focus
is on identifying existing needs of every individual customer and then to fulfill them by
mass producing the product with the exact specification. In open innovation the goal is to
identify future general needs and develop innovative solution with commercial value. For
that reason they want to integrate only lead users. Their main problem is the
identification of lead users. Furthermore, users are not equally motivated. Lead users
have more motivation, more knowledge of both their needs and solutions and more
experience with toolkits and can therefore design innovative solutions. However, what
should be kept in mind is that users of a high end toolkit do not per se always develop
innovations. On the contrary, the case study will show that one of the biggest problems
of customer integration in innovation processes is the lack of creativity: consumers
infringe intellectual property rights of others. Another difference is the process itself:
high-end toolkits offer lead users the creative freedom to create what they want, but this
does not necessarily mean that all outcomes are innovative… “Mass customization tries to
deal with the heterogeneity problem without really integrating the consumer in creative
design issues” (Jeppesen and Molin, 2003:19). Besides that, users of a mass
customization configurator already struggle to configure a product for their own needs.
The main problem of MC is probably that often the (cognitive) costs exceed the benefits.
42
§4.3 From Mass Customization to Open Innovation
There are six reasons for combining MC with open innovation, see figure 4.3.
Why it makes sense to combine Mass Customization and Open Innovation
1
Both are appropriate for mature markets that are confronted with
heterogeneity of needs and continuously changing needs.
2
They are complementary: compete better in the current competitive
landscape and transform the market with radical innovations.
3
One toolkit is unlikely to serve all users -> offer both low- and highend toolkits.
4
Companies can’t ignore the phenomenon of user innovation. Risk that
users will use unofficial (high-end) toolkits to create radical
innovations that are incompatible with the manufacturer’s technology.
5
Spill-over effect: use MC as a crèche to breed future lead users for
open innovation. Problem of lead user identification is solved.
6
2nd Spill-over effect: lead-users can continuously design new modules,
that can be made easily accessible for all customers in MC toolkits.
Filter thereby the solutions for which there is general demand from
innovations that are based on ‘a false trend’.
It is discouraged to use one toolkit for both MC and Open Innovation.
Figure 4.3 Six reasons why to offer high-end toolkits besides low-end (MC) toolkits.
First, both are appropriate under the same market circumstances - that is in mature
markets with heterogeneous needs - and both take the (heterogeneous) needs as
starting point. Open innovation addresses heterogeneous needs in a dynamic dimension:
what needs will become more general in the (near) future? This idea is based on the
theory of gradual diffusion of needs. MC approaches heterogeneous needs less dynamic,
it deals with the question: what are the current individual needs? MC does not regard
needs as static, otherwise it would similar to traditional segmentation strategies.
The notion that MC and Open Innovation view heterogeneous needs differently is
interesting, because this points out that they can complement each other. This is clarified
by analysing their strategic objectives. MC is a means to compete better under the
existing market conditions (e.g. price competition). In contrast, Open Innovation helps a
company to develop new products for future market conditions: it can identify new
markets (growth) and/or develop radical innovations in cooperation with lead users and
so transform the market. It seems logically to combine both strategies: “Although mass
customization is a powerful competitive tool, it is not invulnerable. For example, it can be
powerless when confronted with a new major dominant design that makes all previous
versions obsolete.” (Teresko, 1994: 46).
Furthermore, both strategies see the toolkit approach as the solution for the information
stickiness problem in combination of heterogeneous needs, see paragraph 3.5.2.
However, MC employs a low-end toolkit and Open Innovation a high-end toolkit. What is
then the benefit of combining both strategies when two different toolkits should be
offered? First, “…one toolkit is unlikely to serve all users” (Prügl and Schreier, 2006: 23).
On the other hand, it could be argued that the concept of a broad spectrum (continuum)
between low-end and high-end toolkits of Franke and Piller (2003), see §3.5.3, shows
that one toolkit can be used. In this case the design freedom in a MC toolkit would be
gradually increased, provided that technological progress increases the solution space of
production facilities. This way the MC strategy could evolve into an open innovation
strategy. Furthermore, the toolkit will grows in line with its users that gain experience
and skills. However, this reasoning is based on the assumption that the total population
is very homogeneous with regards to skills and experience. We already know that lead
users have more experience and skills than normal customers. In addition, it is unlikely
to assume that the group of normal customers is homogeneous: I estimate that only
innovators (lead users), early adopters and perhaps a part of the early majority have
43
used MC toolkits until now. So, in the future more (inexperienced) normal customers will
adopt MC toolkits, whereas the current users have much experience. The manufacturer
will therefore not be able to find the right balance between usability and design freedom
for all users. It is also an unnecessarily slow approach, since the manufacturer can only
increase the design freedom in small steps: “An excessive openness to design by
consumers is destructive to product innovation, as consumers may not be able to handle
the solution space (it becomes too complicated), and participants may experience
problems that are so diverse that they may not be able to start a focused discussion in
the community simply because no core issues can be identified….After a while, when
consumers have developed design capabilities, they will be able to handle a larger
solution space and thus produce more advanced consumer innovation” (Jeppesen and
Molin, 2003:19). A manufacturer who follows this careful approach and chooses to wait
for ‘the weakest link’ has completely lost the idea of open innovation, namely open
innovation is build around lead users. Lead users must be challenged and not bored with
basic toolkits that change slowly. It is not unlikely that lead users will misuse their role as
opinion leader to criticize and ridicule the MC toolkit (and its users) for its superficial
design possibilities.
For that reason it is necessary to offer also a high-end toolkit that “will also provide the
“design side” that is currently missing for users and producers of mass-customized
products. In effect, user toolkits for innovation can provide users with true design
freedom – as opposed to the mere opportunity to choose from lists of options that is
currently offered by mass-customizers” (Hippel, 2001:2). When a company doesn’t make
a more sophisticated toolkit available, users will take the initiative and develop their own
more elaborate toolkits: “Apparently, the needs of the individual user go far beyond the
individualization possibilities offered by these official toolkits, and users do not content
themselves with them. Users succeeded in overcoming this restriction by developing,
searching for and employing more advanced toolkits which allow them to make more
radical changes to existing standard files” (Prügl and Schreier: 17). Jeppesen and
Frederiksen (2004) describe how users hacked software of Propperhead and two
examples of hacked LEGO products have already been described. For a manufacturer it is
in his own interest to supply official high-end toolkits, since he is namely specialized in a
certain solution type (e.g. LEGO Bricks). He can influence users with an official toolkit so
that they don’t develop radical innovations based on competitive and/or incompatible
technologies (e.g. Meccano). It will also give him some control over the designs that
users create, so can LEGO prevent that users publish obscene LEGO models.
At least two spill-over effects between the toolkits might exist. First, Prügl and Schreier
(2006) discovered that a life cycle for users exists. Inexperienced customers can gain
experience with a basic MC toolkit, and then some of them can evolve to a lead user who
use develops innovative designs with high-end toolkits (see §3.5.4). The biggest hurdle
for the implementation of an open innovation strategy, identifying lead users, can hereby
be solved: “Instead of hunting for this type of user, toolkits can serve as a crèche for
interested but inexperienced users who might evolve into leading-edge users over time”
(Prügl and Schreier: 25). Second, a well known principle of MC is modularization. Lead
users can focus their innovative activities on only one module of a product, since toolkits
for innovation offer a module library (Hippel, 2001). Once a lead user has completed a
new module, he can add it to the module library so that other (lead) users can use it or
even adapt / improve it further. If download figures show that a particular module is
popular, the manufacturer could decide to integrate it in the MC toolkit. Normal
customers have then easy access to it, but can’t modify it. The business model could
include that the module is offered as an upgrade for which normal customers must pay
and from which the innovator receives a royalty.
Finally, it can be concluded that it makes sense to offer both low-end and high-end
toolkits. One toolkit can’t simultaneously fulfil MC and Open Innovation objectives
successfully and runs the risk to get stuck in the middle of it is tried. The next chapter
will introduce hypotheses for the reason why, so far, MC companies haven’t offered a
second toolkit.
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5. STRATEGIC MANAGEMENT OF OPEN INNOVATION
So far, open innovation has been linked to several concepts from literature about the
strategic management of innovation. This was done in from a positive viewpoint: open
innovation can solve issues from the strategic management of innovation, see figure 5.1.
1
2
3
4
5
6
7
Strategic management of innovation issues that are ‘solved’ by open innovation
Customer integration makes it possible to harness disruptive technologies (§3.1). User
innovators play a great role in establishing a dominant design (§3.3.2). Toolkits can
steer them in a direction that is favourable for the manufacturer: radical innovations
that are based on his technology (§4.3).
Co-creation: cooperation in the innovation process with resources outside the company
(§3.1). Knowledge from diverse fields is integrated in the solution. (§3.3.2)
Early adopters and opinion leaders are involved (namely lead users), and this reduces
the risk that the final product will be not adopted. (§3.2 and §3.4)
Only manufacturers have complementary assets needed for the commercialization. For
user innovators it is too costly to protect their creations with IPR and they are even
motivated (e.g. reputation gains) to freely reveal. This favours manufacturers. (§3.3.1)
Re-invention by lead users is encouraged with toolkits for innovation. The value of
their ‘mods’ can be captured by the manufacturer: more sales of the basic product and
extended product lifetime. (§3.3.1 and §3.3.2)
Diffusion of user creations amongst users in a community, thus peer selection,
indicates innovativeness and commercial value and is a reliable forecast of diffusion in
total market. (§3.3.2)
A first mover advantage does exist: set the standard for a design language that is
tightly linked to the particular production facilities of the manufacturer. (§3.5.2)
Figure 5.1 Seven positive effects of open innovation on the strategic management of innovations
However, three problems with regards to the strategic management of open innovations
have been identified and these will be described in this chapter.
§5.1 The distribution of IPR of open innovations
Paragraph 3.3.1 explained that most user innovators do not try to obtain intellectual
property rights (IPR) for their innovations, since it is too costly. This has to be nuanced:
patents are often costly to obtain, especially for minor innovations is it economic
unjustifiable. Research has found that in collective invention settings (Nuvalari, 2004),
such as open source communities, the cumulative effect of minor user innovations is
responsible major technical progress. In addition, patents are seen as ineffective for
excluding imitators and for capturing royalties from licensing in many industries. Only in
a few b2b industries patents can offer strong protection, for example pharmaceuticals,
chemicals and chemical processes (Hippel, 2005), since it is more difficult here to invent
around the patents (Lüthje, Herstatt and Hippel, 2002). On the other hand, copyrights
can just be claimed without cost. The disadvantage of copyrights is that are easy to
circumvent, because they only protect the specific expression and not an idea. For
example, a functionality in software can often by re-created with another code (Lüthje,
Herstatt and Hippel, 2002). It can be concluded that solid legal protection of user
innovations via IPR is hard and that user innovators benefit more from freely revealing
their findings (reputation, improvements by others etc.): “we may conclude that in
practice little profit is being sacrificed by many user-innovator firms or individuals that
choose to forgo the possibility of legally protecting their innovations in favor of free
revealing” (Von Hippel, 2005: 101).
When an user innovation is not protected and in the public domain, it becomes possible
for a firm to commercialise it by integrating it in its products without having to pay
royalties to the inventor. The situation is less clear in the case of co-creation: when a
45
lead user develops an innovation together with the company. Without agreements
beforehand, conflicts about ownership of ideas might emerge: “Another risk involving
know-how is the possible conflict regarding the ownership of ideas which could arise in
the course of the innovation process through the combination of company and customer
knowhow (Hagedoorn, 2003). The company may feel that all the ideas generated during
the innovation process are company property, but unless this was agreed upon
beforehand, a customer may claim a joint, or even the full, ownership of the ideas”
(Enkel, Kausch and Gassmann, 2005:3). This problem might be a reason for MC
companies not to offer more design freedom via high-end toolkits to its customers.
Distribution of IPR can also influence open innovation in another way. User innovators
may namely not protect their creations with IPR, but many companies do. This limits the
freedom of user innovators: they can’t use a picture of Mickey Mouse for a t-shirt design,
because this is infringement of the copyrights of the Walt Disney Company. It is allowed
to create artistic works about Mickey Mouse as long as they are sufficiently different than
the original. However, can every creative consumer appeal to this exception? The Mickey
Mouse example is famous, since the length of copyright protection in the US was
changed when the copyrights on Mickey Mouse were about to expire. The US government
helped the Walt Disney Company to protect the enormous value of its creation against
imitators, but automatically all other creations without commercial value were protected,
since IPR owners do not have to pay a fee to extend their copyright. This is criticized for
limiting the creative freedom of artists and it also exposes companies that co-create to a
threat which will be illustrated by an example. The Dutch boys’ book series ‘Bob Evers’ is
one of the most successful book series in the Netherlands with more than 5 Million copies
sold. It was stopped in 2003 since the series was outdated and sales suffered from the
large installed base that was being sold via websites as eBay. However, a small but
fanatic Bob Evers community had formed and some of these fans were writing their own
writing Bob Evers stories and shared those online with other fans that wanted fresh
stories – despite lower quality. Some fans went a step further: ‘Tante Kee Pocketboots’
published their stories in book form, but this was stopped because of legal threats from
the original publisher. Chris Anderson (2006) writes in his book about the long taill of
books and mentions thereby this phenomenon of self-publishing. Now we have learned
that a DIY-publisher as Lulu.com can be confronted with legal claims from third parties,
although the original works have insignificant commercial value.
Furthermore, when a strong IPR regime is in place, then the manufacturer is legally able
to prohibit re-invention of its products: “There is good reason to assume that the current
tendency towards stronger intellectual property protections (e.g., Gallini, 2002) has a
negative impact on user innovation. In particular, policies that restrict product
modification by users, or that allow manufacturers to do this, must be considered very
carefully” (Henkel and Hippel, 2005: 2). LEGO would have been able to react (legally) on
the users that hacked its proprietary design tool. However, LEGO didn’t do this since
there are also benefits to giving up proprietary control, what LEGO might have learned
from Netscape that gave away its IPR: “What the Internet may have done is to create a
large enough community of “collaborators” to make the gains from collaboration
outweigh the costs perceived in loss of proprietary control (which may, of course, include
loss of market power, technological secrets, trade secrets and so on). There are strong
indications that this is so in the development of computer software. What remains to be
discovered is whether the development of other technologies can benefit in a similar
way” (Cowan and Jonard, 2003: 18).
What can be concluded is that the distribution of IPR can lead to conflicts: both user
innovators and manufacturers can accuse the other party of IPR infringement. The
company may be in a more comfortable position with enough financial and legal
resources to win disputes. Nevertheless, it might have a strong motivation to avoid
accusations of exploiting poor protected user innovations, since this will damage its
reputation.
46
§5.2 Identifying the right value creating partners
Customer integration implies collaborative value creation with the customer. It may be
(best) practice for companies in certain industries to form strategic alliances for their
innovation projects, but finding the right partners is much more difficult when it regards
consumers. The number of potential value creating partners is larger and information
about the capabilities and trustworthiness of them is less available. In the case of open
innovation, a self selection mechanism exists when both low-end and high-end toolkits
are offered. Namely, only the more experienced lead users will use the high-end toolkits
and they are the only ones who can create valuable radical innovations. Amongst each
other, they can select valuable ideas of each other (peer selection), since they perceive
needs ahead of the trend.
A major risk of combining MC and Open Innovation is that the high-end toolkit becomes
too easily accessible. Then the mass of normal customers can flow into the high-end
toolkit and start ‘innovating’. This great amount of customers would ‘pollute’ the highend toolkit with trashy designs. Even worse is that ordinary users hinder the peer
selection system, since they won’t recognize the radical innovations as valuable. This is
also a reason why designers at BMW do not invite customers to comment their innovative
concepts, because “Consumers always will give an opinion based on what they know—
they can say what they like or don't like today. What we're really asking ourselves today
is what cars should be like in 2010.” 19 If a company would let normal customers
participate in the high-end toolkit, then it would create a gatekeepers problem for itself.
It will be difficult or impossible to identify the truly innovative designs: similar to find a
needle in a haystack.
§5.3 Loss of know-how
A major difference of open innovation compared to traditional innovation, is its openness.
Traditionally companies keep their findings as long as possible secret, in order to stay
ahead of competition. Only scientists are an exception, since they publish their findings
as soon as possible so that others can build on their work. Customer integration implies a
risk of loss of know-how and this might be a reason why companies do not want to
cooperate with others, especially not with individual (anonymous) consumers. “Whenever
a customer is integrated into the company’s search field or innovation process, he almost
unavoidably acquires company know-how while contributing his own knowledge or ideas
(Lukas and Ferrell, 2000)” (Enkel, Kausch and Gassmann, 2005:3). Disloyal consumers
could share this know-how with competitors.
See the interview with Adrian van Hooydonk in BusinessWeek Online:
http://www.businessweek.com/magazine/content/06_42/b4005076.htm?chan=autos_sprb_bmw
19
47
6. RESEARCH DESIGN
§6.1 Development of the research question
Chapter 4 has argued that it makes sense to combine a mass customization strategy with
an open innovation strategy. The next step is to see whether this is also in practice the
case. It has already been mentioned before that in consumer markets both the car
industry and the shoe and clothing industry are relatively ahead with the application of
mass customization configurators in their (online) business. Therefore it is most logical to
assume that the chance is biggest that in these businesses high-end toolkits will be found
next to MC configurators. It was chosen here to focus on the shoes and clothing industry,
albeit it is not illogical to say that these are two different industries but by combining
them the chance to identify open innovation initiatives is also bigger. Previous research
has also analysed both in combination:
“Five chapters present lessons learned from the apparel and footwear industry and give
an insight into some specific challenges of mass customization. We have chosen this
industry as a premier example as here many experiments, pilot studies and business
implementations of mass customization principles have already taken place.” (Tseng and
Piller, 2003: 13)
“A growing number of apparel merchants large (e.g. Bob’s Stores, Brooks Brothers,
Lands’ End, Levi Strauss, Nike) and small (e.g. Americanfit.com, Blackfrock.com based
in the UK, IC3D, Second Skin Swimwear) are turning to mass customization.” (Fiore, Lee
and Kunz, 2004: 3)
It was not too difficult to find some MC websites specialized in shoes and/or clothing.
Many are already mentioned in articles or on weblogs about MC, whereby in particular
‘Made For One’20 and ‘MC & Open Innovation News’ by Frank Piller 21 were valuable
sources. This showed that several major shoe and clothing brands offer MC configurators,
e.g. Nike (ID), Reebok, Vans, (My) K-swiss, Timberland, Ralph Lauren and WE (Made by
Me). The next step was to visit websites of major shoe and clothing brands, and using
directories as found on websites such as startpagina, in order to identify more case. This
approach proved not to be successful, since many other major brands do not have
websites that are strongly aimed at consumers (but instead focus on trade). Internet
search engines helped to find more MC suppliers such as (My) etnies, Mejeans, Ujeans,
Shirtcity and Bivolino etcetera. This resulted in a list of 34 mass customizers, whereby
must be mentioned that several insignificant shirtmakers und custom suit tailors have
been omitted.
Surprisingly, a quick tour of website inspection showed that none of these mass
customizers offered two different toolkits on its website. These companies are leading in
their industry, and especially with regards to customer integration! Therefore it was
decided to further investigate this in an exploratory case study on this industry. The
research question was formulated as below:
Research question:
“Why have only a few companies in the shoes and clothing industry, so far, combined a
mass customization strategy with an open innovation strategy?”
The next step was to come with hypotheses from literature.
20
21
Made for One: http://www.madeforone.com/
MC & Open Innovation news by Frank Piller: http://mass-customization.blogs.com/
48
§6.2 Development of hypotheses
Based on the extensive literature review in the preceding chapters, the following
hypotheses can be proposed.
Paragraph 4.3 quoted Hippel (2001) and also Prügl and Scheier (2006) who asserted that
the low-end MC toolkits do not offer enough design freedom for their (lead) users.
Hypothesis 1 assumes that this is not yet the case in the shoes and clothing industry.
There are already a lot of MC customization websites and these offer enough design
freedom for now. Of course it is likely that as the consumers gain experience that they
will start demanding for more design freedom in the (near) future.
H1: The existing MC toolkits in this industry offer enough design freedom for
their lead users.
One might support (and sharpen) hypothesis 1 with the statement that only lead users
are currently using the MC toolkits, since it seems that the adoption of MC toolkits by
consumers is still in an early stage. However, no research about the adoption of MC
toolkits was found - which is a pity – and second it also depends on how the adoption of
MC toolkits is defined. It may be that relatively few consumers have actually bought
customized Nikes, but given the attention of mass media to the Nike ID website is it
unlikely that only lead users have visited this website and tried the configurator.
The second hypothesis doesn’t ‘blame’ the consumers (and their needs) for the lack of
high-end toolkits. It assumes that the shoe and clothing manufacturers reject the idea of
open innovation at all and don’t try – no matter how - to integrate consumers in the
creative design of new products.
H2: Manufacturers in the shoes and clothing industry reject the idea of open
innovation (= customer integration in creative design) at all, therefore they
don’t offer high-end toolkits.
There are different reasons why manufacturers in this industry might reject open
innovation. The first argument is derived from the notion of Rogers (1995) in §4.1 that in
some industries - such as the fashion industry - innovations create needs and not vice
versa. This chicken-or-egg problem is (too) often ignored. It must be seriously
considered that perhaps in the shoes and clothing industry customer integration in the
innovation process doesn’t increase the success of innovation – which is the main
motivation to adopt open innovation – and that therefore manufacturers reject the
concept completely. If this is true, then it might seem illogical that so many
manufacturers in this industry offer mass customized products. Namely both MC and
open innovation share of customer integration whereby needs are identified first and
then a solution is co-created. The answer for this paradox can be found in chapter two,
that provides several motives why companies start with MC. So is MC a novelty for which
some consumers are willing to pay a premium and that enhances the brand image as
well. Other mass customizers have aimed at disintermediation and/or increasing loyalty.
On the other hand, companies that see their MC customers as a life panel for their
market research are obviously more receptive for the concept of open innovation, since
they already identify needs for developing new products.
However, even the latter type of companies might not involve consumers in the creative
design of new products. Of course they might regard consumers as amateurs who are
incapable of creating professional designs. More important is that it could be argued that
the reputation of their famous designers is creating most value, not the designs itself.
This is supported by the fact that not alone haute couture is named after the couturier,
but many (mainstream) fashion brands carry the name of their founder and designer as
well: e.g. Tommy Hilfiger, Gucci, Ralph Lauren, Lacoste and Versace. Furthermore, H&M
doesn’t cooperate with Karl Lagerfeld and Stella McCartney just for their hit-products that
49
are immediately sold out, but their cooperation enhances the brand image (secondary
value creation) too. In addition, sneaker manuafucturers such as Nike have launched in
recent years many (limited) editions that have been ‘designed’ by rappers such as
Eminem, Nelly, Jay-Z or 50Cent or DJs like DJ Tiësto. Manufacturers might assume that a
Nike that is (partly) designed by ‘Average Joe’ (or ‘Otto Normalverbraucher’) will be less
valuable, unless this unknown amateur is turned into a star like in Idols.
The last hypothesis assumes that in principle both the consumer and the manufacturer
are interested in open innovation, but that the manufacturer has serious doubts about
the consequences of offering high-end toolkits.
H3: Companies deter from offering high-end toolkits, because potential conflicts
about the ownership of IPR might arise.
This problem has already been described in paragraph 5.1. It can be supplemented with
the notion that probably designs in the clothing and shoes industry are automatically
protected with copyrights and not with patents, which makes it easier for consumers to
claim IPR ownership.
50
6.3
Sub-research questions & the means of data gathering
In order to validate the hypotheses, it will be necessary to break the research question
up into a set of sub question.
Hypothesis 1: “The existing MC toolkits in this industry offer enough design freedom for
their lead users.”
Q1a: What kind of design freedom is currently being offered by mass
customizers in the shoe and clothing industry?
It is unreasonable to presume that every reader is well informed about all shoe and
clothing MC websites. Therefore it will be explained what kind of design possibilities are
currently being offered. More importantly, this will provide insight into what consumers
can not do with the configurators: the boundaries of the solution space. Hereby is it
necessary to provide some archetypes and to lift out the extraordinary examples of
companies that might be one or more steps ahead of the others with regards to the
integration of customers in the creative designs. The data for answering question 1 has
been gathered by visiting the websites that have been identified before. All the toolkits
have been extensively tried out on their design possibilities. In addition, other
information on the websites such as ‘faq’, ‘news’ and ‘terms of usage’ has been read as
well.
Q1b: Are some consumers employing self-created tools in order to create
designs outside the design freedom that is being offered by the official
MC toolkits?
After having learned about the limitations of current toolkits, it will be necessary to see
whether consumers are creating designs that they clearly can not create with the MC
configurators. If they do, then it will be tried to see whether they use self-created tools
for this, since manufacturers might benefit from this for the development of official highend toolkits. This question has been answered by visiting the biggest community for
sneaker addicts, namely Niketalk, and the weblogs about sneaker news that can be found
in links on this website or with search engines. It is important to note that the visitors of
these websites have not been approached – there haven’t been question posted on the
forum – but instead all the data comes from observation. What is more natural to see
what keeps the consumers busy than by observing their own questions to other
community members and the reactions they receive? This explorative approach has lead
to some findings that can be supported with a number of observations and a few very
interesting anecdotes. Future research might try to confirm these findings by means of
actively approaching community members with e.g. questionnaires.
Hypothesis 2: “Manufacturers in the shoes and clothing industry reject the idea of open
innovation (= customer integration in creative design) at all, therefore they don’t offer
high-end toolkits.”
It was decided to research hypothesis 2 on the basis of two sub-questions:
Q2a: Have companies started offering MC with the (main) objective of
integrating customers’ needs?
This question will try to find out whether companies in this industry have adopted MC as
a means to become more customer-driven, or whether other motives lead to the decision
to adopt a MC strategy. Answers are based on secondary information sources, namely
51
business and scientific articles that had the opportunity to interview (face to face) key
decision makers within companies in this industry.
Q2b: Are companies in this industry integrating consumers in the creative
design in other ways than with high-end toolkits?
If companies are integrating consumers in the creative design of their products, then
hypothesis two can be nullified. This would also automatically mean that something must
be ‘wrong’ about high-end toolkits, because otherwise they would be applied as a means
for customer integration. It was decided here to find out whether companies organize
design competitions with the intention of integrating (elements of) winning designs into
their new products. Search with Google and information already identified on Niketalk
have lead to the identification of more than 40 recent design competitions for shoes!
Don´t be put on the wrong track, since this impressive number does not reveal with what
intent manufacturers are organizing them. This will be described in one of the coming
chapters.
Hypothesis 3: “Companies deter from offering high-end toolkits, because potential
conflicts about the ownership of IPR might arise.”
Q3: Do companies have plans to offer consumers the possibility to create
instead of choosing?
Since companies do not offer high-end toolkits (yet), is it important to find out whether
they intent to do so – thus the current situation will change – or whether they won't. In
the latter case, it will be important to find out why. The best way to get answers to these
questions is to ask them directly to the management responsible for the MC toolkits, but
it is hard to get in touch with them without contacts. Nevertheless, three employees who
are directly involved in the MC projects were interviewed by phone:
 Rodrigo Reinheimer, information system technologist at the e-commerce
department of Vans (a major US sneaker brand) and at that time busy with the
redesign of the configurator.
 Gordon the owner of Routeone-design.com, small supplier of mass customized
sports, leisure and corporate clothing. This company does not aim at the mass
market, but produces in small batches for e.g. sportsteams. This company was
one of the first to provide a professional online 3D design tool and it is the only
MC configurator that used the idea of templates in a toolkit (this will be explained
later).
 Mr. Calder is shirt designer for Robert Talbott Dress Shirts and could tell about the
idea of consumers who create shirt designs.
The interviews were in general very short due to the limitations of research by phone.
Nevertheless, some interesting reactions with regards to hypothesis 3 were given
spontaneously after having only heard about the idea of creating instead of choosing. An
interview held in 2001 with shoe designer John Fluevog, initiator from the ´open source
shoe project´, has also provided some valuable insights with regards to hypothesis 3.
These answers have been complemented with examples from the terms and conditions
on MC websites and for design contest. This all has made it possible to explore the
validity of hypothesis 3, although it will be necessary to confirm this with quantitative
empirical research.
Next, chapter 7 will the first part of the case study. It will answer question Q2a in order
to provide a logical story. The build up of the case study will be:
 Chapter 7: Q2a, the motive for MC in the shoe & clothing industry
 Chapter 8: Q1a, current MC toolkits in the shoe & clothing industry
 Chapter 9: Q1b, consumer design activities in communities
 Chapter 10: Q2b, the organization of design contests
 Chapter 11: Q3, IPR conflicts
52
CASE STUDY
53
7. THE MOTIVE(S) FOR MC IN THE SHOE & CLOTHING INDUSTRY
Q2a: Have companies started offering MC with the (main) objective of integrating
customers’ needs?
§7.1 Needs for perfect fit, unique style and exciting experiences
The main reason why MC is so widely applied in the shoe and clothing industry, is that
their customers have highly differentiated needs (Peppers and Rogers, 1997). The needs
differ in two dimensions: style and fit. First, consumers possess highly varying tastes and
preferences for shoes and clothing, but manufacturers optimized their production
systems with high volumes and long production runs (Pine, 1993). Fiore, Lee and Kunz
(2004) consider the lack of differentiation, uniqueness and novelty as a cause for the
stagnation of consumer demand for apparel products. As a result of the homogeneous
supply, apparel was sold in no-frills retail outlets with the focus on low prices.
Second, consumers have different needs regarding fit for their shoes and clothing, since
it is obvious that all people differ sharply in their physical dimensions. However the
production systems are based on providing a (small) range of standard sizes. Consumers
are often disappointed by the fit of these ‘standard’ 22 sizes. Nevertheless, the reaction of
manufacturers is a classic example for individual-blame as contrast to (production-)
system-blame: “if the shoe doesn’t fit, there’s something wrong with your foot,” (Rogers,
1995: 115). Somehow the consumer has to sacrifice on fit. One difficulty is when the left
foot has a different size than the right foot: only pair of shoes with the same size are
being sold so one foot has to be sacrificed. This is not a rare phenomenon, since Piller
and Müller (2004) report that more than 40 percent of the shoes ordered at Selve and Mi
Adidas are with different sizes for the left and right shoe! For very tall or small persons is
it frustrating to find out that the selection of styles is very limited in their size: e.g. the
small range of shirts with sleeves size 7. MC reduces the sacrifice gap and creates value
for which the consumer is willing to pay more (Gilmore and Pine, 1997; Zipkin, 2001).
1
2
3
4
5
6
7
When customization adds value for shoes and clothing:
Mostly up-market segment, trend of lovers and haters of MC.
Mostly in the fit domain, but style can be important as well.
Women footwear: combination of fashionable (style) and comfort (fit): no compromise
Men footwear: WTP for fit and interest in style options.
Sports shoes: higher premium (+50%) for fit and style than for just style (+10%)
(Women) jeans: perfect fit and fashionable. Special finishing as upgrades.
Suits and formal dresses: custom fit. Special options as upgrades.
Table 7.1 A summary of market research findings about the value created by custom fit and style.
Do mass customizers in the shoes and clothing industry have to offer both individual fit
and style? The answer is no, since both add additional costs and the cost option of MC
demands that only customization is offered where the value created exceeds the costs.
“Thus, the critical question is: which characteristics of a shoe [or clothing] are vital from
the customer’s point of view?” (Piller and Müller, 2004: 7). This differs per individual
consumer and also per product that he buys. However, the findings from several market
researches can help to form some generalizations. First an extreme trend was found by
Piller and Müller (2004), namely that consumers either like customization or completely
reject it. Furthermore, it was identified by the Outsize study23 that customization is most
demanded in the up-market segment. This study also found that when buying shoes and
clothing, fit is the most important issue, although consumers also experienced difficulties
with the aesthetic design. In general, the study confirmed that the variety of shoes and
clothing does not fulfil the heterogeneous needs of consumers. For footwear (excluding
sports shoes) is customization especially for women important. Women demand that
22
23
‘standard’ is a bit overconfident, since sizes aren’t standard across the industry and countries.
The Outsize study itself was not found, the article of Piller and Müller (2004) serves as secondary source.
54
their shoes are fashionable (style) and comfortable (fit), which is often a paradox as
fashion trends dictate high heels etc. Men are often satisfied with standard footwear, but
also for them the fit is vital. Further, they have an interest in style options such as colour
and material choice (Piller and Müller, 2004). This is also reflected in the price premium
that men and women are willing to pay (WTP) for customized shoes. Men are only WTP a
(small) premium price for custom fit, whereas women are WTP for both style (+7 to
+100%) and fit (+ 25%) (Piller, Hönigschmid and Müller, 2002). So, it can be concluded
that mass customization of women shoes is more profitable, which is demonstrated by
Selve that sells mass customized women shoes (fit + style) with a 100% price premium.
The questionnaires of Piller and Müller didn’t apply to sports shoes, but a comparison of
Adidas and Nike shows that for fit and style is more demand than for just individual style.
(Mi) Adidas offers namely both and can charge 50% more, whereas Nike (ID) has price
premiums of only 10% as it only offers style options. For jeans good fit is traditionally
seen as important, but in the recent years jeans have become a very fashionable product
(think for instance at differentiation techniques like stonewashing). Piller, Hönigschmidt
and Müller (2002) find that only women are willing to pay a price premium for individual
jeans with a price premium of 8 to maximum 76%. The researchers comment that in
reality people are WTP even more for customized jeans, since they choose upgrades in
the configuration process. The Zitex study (1999)24 found that 65% of the interviewees
wanted to have custom fit for suits and formal dresses, since 70% of standard suits is
made to fit by a tailor after the purchase. Interesting is that the German mass
customizer of suits Cove found that consumers keep adding upgrades so that they finally
don’t pay the advertised price of 330 Euro, but over 600 Euro (Piller and Müller, 2004).
Fiore, Lee and Kunzl (2004) have researched MC of fashion and have found a third
source for value creation: “Some customers may be satisfied by the value offered by the
customized fit or aesthetic design of the fashion product. Other customers may welcome
the added value provided by the stimulating mass customization experience” (Fiore, Lee
and Kunz, 2004: 2). The MC configurator plays a major role in creating the experience:
“Research (Lee et al., 2002) concluded that consumers preferred advanced technology
features in co-design, such as software to visualize the co-designed product on a form
similar to the customer’s body. Application of such technology to the process of co-design
may not only facilitate the design of the product and ensure customer satisfaction with
the resulting product but also enrich the experience.” (Fiore, Lee and Kunz, 2004: 11).
Decisive is the clothing interest of the individual consumer. Consumers with an
explorative nature – so-called high OSL- are open to novel and surprising things and
therefore they are more inclined to use MC. A high OSL does also predict a high clothing
interest, which can be ‘expressed’ in two ways. The first group of consumers has a
playful orientation and tries mainly new or different clothing to see how it looks: EA (=
experience with appearance). This group will derive value from both the end-product and
the exciting experience. The second group is motivated to create a unique appearance –
that is EI (= experience with individuality) – and is therefore just interested in the unique
end product. More important is that Fiore, Lee and Kunz (2004) link fashion innovators to
a high level of EI. Rogers (1995) has also described that especially early adopters of
fashion are motivated by the desire to gain social status. Once others have adopted it,
they start looking for something different and unique. For this purpose fashion innovators
can use toolkits, but then they should be offered enough design freedom so that they can
truly differentiate themselves from others. Having fashion innovators using the toolkit
has also value for the manufacturer: others will imitate the behaviour of the fashion
innovators to get status as well (Rogers, 1995).
The market conditions that lead to the wide adoption of MC in the shoes and clothing
industries have now been described. Next will be the decision of Adidas to start with MC.
24
The Zitex study itself was not found, the article of Piller and Müller (2004) serves as secondary source.
55
§7.2 Why Adidas has started with mass customization
“The corporate objective for investing in the miAdidas business unit is not primarily to
cope with growing heterogeneity of demand by means of efficient customized production,
but to explore new ways for the company to become more service, experience and
customer orientated.”
(Berger, Möslein, Piller and Reichwald 2005: 6)
Chapter two has already shown that companies have several motives for adopting a MC
strategy. For the validation of hypothesis two is it necessary to know whether companies
in this industry have adopted mass customization as a means to better react to the
customer needs – as described in the previous paragraph – or whether other motives
have lead to the MC strategy. It was chosen to lift out one company in the industry,
Adidas, because this company has cooperated with scholars in research projects and
therefore information about the Adidas MC strategy is already available. The director of
mass customization at Adidas, Christoph Berger, has even written articles in cooperation
with researchers.
Adidas has recognized that (wealthier) consumers tried to express their personality by
means of purchasing unique shoes, so they had to supply more variety. However, the
management recognized that a traditional variety strategy wouldn’t be sufficient: “The
diversification of demand, the increasing speed of demand changes, and the proliferation
of choice, was interpreted by Adidas’ management as requiring new methods of
collaborating with their customers,” (Berger, Möslein, Piller and Reichwald 2005:16). The
management made the strategic decision to become (more) customer-centric and this
was the most important motive to adopt a MC strategy. Adidas was namely serious about
becoming customer-centric and regarded the input from consumers as critical for success
in its industry. The main challenge however was to enlarge the absorptive capacity of the
company. MC would help the company to learn from the consumers’ needs during the codesign process. This objective shows that at least one company in the industry (Adidas)
would be receptive for an open innovation strategy.
1
2
3
4
5
Why Adidas started with Mi Adidas:
Become more customer-centric:
o Increase absorptive capacity with regards to consumer input
Pilot for the new overall strategy of becoming a service provider and manufacturer of
sport shoes technologies:
o Explore new value-creating activities that can be implemented in the established
business.
o Go downstream
o Disintermediation via own shops
Increase brand loyalty, by building closer relationships with customers and enabling
easy re-ordering.
Obtain valuable market research data.
Increase the brand image
Table 7.2 A summary of motives for Adidas to start with MC
There was also another reason why Adidas wanted to start with co-design, the company
had namely to move downstream. Adidas observed that the role of manufacturer was
losing its attractiveness in its industry due to increased competition and a large installed
base of products. Instead selling and servicing products – thus moving downstream - was
becoming more profitable. Mi Adidas served therefore as a pilot project for the new
overall company strategy. Its objective was to explore new value-creating activities that
can be implemented in the existing business of Adidas. The course of the project has also
shown that the company has actually learned from the project. It started namely with
two (offline) sales channels: traditional independent retailers and its own (popup) shops
56
at major sports events. However, Adidas learned that retail personnel was not competent
enough to help the consumers in the co-design process. Furthermore a conflict with the
retailers emerged about the ownership of the customer data (foot scan data and
feedback provided after the sale). Of course is it more profitable for Adidas to deal with
customer directly for re-orders over the internet. If Adidas would own the data, then
consumers could re-order via internet without intervention of the retailer, who has
invested time in explaining the system to the customer and gathering data
(measurements). If the retailer would own the data, then he could also use it for sales of
other brands – like for instance the Dutch intermediary Possen does - and thus Adidas
would lose the advantage of the relationship option. In addition, Adidas would lose the
opportunity to use the data from its MC customers as market research data for its
business: “The mass customization segment can be seen as providing panel-like market
research information. Data such as color combinations selected in the co-design process
are important in order to improve the appeal of standard models,” (Berger, Möslein, Piller
and Reichwald 2005: 5). Adidas initially solved this channel conflict by setting up a
commission system so that the retailers would also benefit from re-orders, no matter
how they were taken. Later, Adidas changed its channel strategy to a consumer-direct
model by opening its own Adidas retail stores that featured Mi Adidas: that is
disintermediation. Additionally the company benefited since it could learn how it is to run
a retail business, but it took a risk here as well. Furthermore, by controlling the entire
system Adidas could ensure that the MC program would also strengthen its brand image
(Berger, Möslein, Piller and Reichwald, 2005).
Finally the last reason why Adidas adopted MC was that the management saw made-toorder production as a cost efficient means for producing more variety.
How representative is the approach of Adidas for its industry? The next chapter will learn
that Adidas differs in many aspects from its competitors, for instance the offline approach
and inclusion of fit customization with usage of foot scanners. Nevertheless, Berger,
Möslein, Piller and Reichwald (2005) find one important similarity between Adidas and its
competitors, namely the decision to choose for a consumer-direct model. Other
established manufacturers like Nike were also willing to risk a channel conflict. The
explanation is as following: “the main motivation behind this decision was to learn, gain
experience and absorb weak market signals by interacting with consumers directly,
usually on the internet,” (Berger, Möslein, Piller and Reichwald 2005: 10). Therefore it
can be concluded that manufacturers in this industry have the goal to integrate the
customers’ needs in their business. Chapter ten will later answer the question whether
companies are also willing to integrate the creative solutions from consumers into the
new product development process. The next chapter will continue with describing the
similarities and differences between the MC toolkits in the shoes and clothing industry.
57
8. CURRENT CUSTOMIZATION IN THE INDUSTRY
Q1a:
What kind of design freedom is currently being offered by mass customizers in the
shoe and clothing industry?
Nine industry-specific archetypes of (mass) customized shoes and clothing have been
identified. They differ from each other in several dimensions, such as the type of product,
whether it is offered online or offline, the domain of customization (fit, style, function)
and the usage of toolkits (and their design freedom).
§8.1. Individual sports performance gear
What do Mi Adidas and Adidas_1 (short shoes), Rocket 7 (cycling shoes), Nunatak
(climbing jackets) and Beyond (outerwear) have in common? All of them offer products
that are being used for sports activities and their customization is mainly focussed at
improving the sportive performances. The Mi Adidas shoes come with self-selected colour
combinations (style) and with individual fit. However the most important and distinctive
feature of this shoe is that it offers “Mi Performance”: the weight pressure of the foot is
measured and the shoe is constructed with materials so that they provide optimal
support for each individual foot. Thus, a sportive consumer can now buy running shoes
that were previously reserved for professional athletes. Nunatak offers the possibility to
include or exclude pockets. This has nothing to do with the appearance of its climbing
jackets, but is aimed at reducing unnecessary weight. Individual sports performance gear
is (very) expensive. In addition, one has to pay for functional upgrades such as custom
cleat mount set ups for Rocket 7 cycling shoes ($70,00), water resistant main zippers
($15,00) or thump loops ($10,00) on Beyond outwear. The products are configured
either offline or online with relatively basic configurators.
§8.2. Adaptive customization of sports shoes / sneakers
The Adidas_1 shoe is individual sports performance gear, but it is even more unique with
regards to its way of customization. The Adidas_1 shoe is namely a good example for
adaptive customization as described by Pine and Gilmore (1997), since one standard
product is sold that is designed so that it can be altered by the customer. The user can
select one of the five preset cushioning options on the interface on the side of the
Adidas_1 shoe (see the exhibits for pictures of all examples in this paragraph). Of course,
this is only possible once the shoe has been switched on. The cushioning is then changed
by a “motor-driven cable system connected to a cushioning cylinder in the heel. If
cushioning is too soft, the cable tightens the cylinder; if it is too firm, the cable allows the
cylinder to relax.” 25
Adaptive customization is also possible in the style domain. The ‘K-Swiss Stripe Shifter’
comes standard with a colour changing system: the user can change the look of the shoe
to suit his/her mood at a certain time by adjusting the colour and height of the side
stripes. The marketing slogan is therefore: “Let the Shoe do the talking.” It is possible to
create codes through different positions of the stripes. K-Swiss has already come up with
some meanings for different codes, e.g. “I’m Single”. Customers can now send in their
ideas for other codes and meanings. Another example is the ‘etnies Clear Cut’ shoe that
“comes with a clear logo window and interchangeable “E” insert options, including one
blank so you can create your own design.” 26 Another example is the Adidas Adicolor.
Already in 1983 Adidas introduced ‘Adicolor’: specially created all-white footwear models
alongside weatherproof and quick drying markers. Adicolor has returned in 2006 in a
sophisticated interpretation of the original concept. Adidas introduced a complete toolkit
that customers can use to create a unique pair of shoes. This is not an online toolkit for
25
http://www.adidas.com
26
http://etniesgirl.com/clearcut-contest/
58
co-design and innovation, but a DIY toolkit. It includes pens (that can be used as paint
as well), white extra fine markers (for keeping the stitching white), acrylic paints,
paintbrushes, spray cans and an art scalpel. Additionally, the customer can download
templates and tutorials (in pdf) for customizing the shoes from the Adicolor website.
Finally, he can share his design in the gallery. Karl Kani has also introduced an all-white
sneaker especially for DIY customization, but without the toolkits. This already hints at
the fact that consumers employ their own toolkits for customization, but this will be
discussed in the next chapter. Very interesting is the question how companies discovered
this need for all-white shoes. Rodrigo Reinheimer of Vans answered this question during
our interview with a noteworthy anecdote. Vans studied the configurations of the shoes
that were bought in its online MC webshop and found out that many consumers bought
totally white shoes. The reason was that the ordinary shoes were a bit yellowish and
therefore not suited for DIY customization. This has lead to the decision to include allwhite shoes in the standard product portfolio of Vans.
All examples have in common that the actual customization takes place offline. Adaptive
customization is not limited to function and style. SOLE Custom Footbeds sends a heat
moldable base layer to its customers so that they self can mold the footbed to fit their
individual foots. An important difference between Adidas_1 and the Stripe Shifter on the
hand and all other examples on the other hand, is that the first can be adapted over and
over again. For the second group is the result after the customization final. The
Adidas_1, Stripe Shifter and Adicolor come with an (innovative) toolkit. Finally, the
Adidas_1 goes actually a step further than adaptive customization, since the user doesn’t
have to change the cushioning himself. The build-in microprocessor analyses the speed,
weight and terrain underfoot and automatically adapts the level of cushioning based on
that. A similar kind of smart shoe has been described long before Adidas started on the
development of this shoe (2002/2003): “The same technology [microchip-controlled
smart products] could be used to create running shoes that automatically change their
shape when the user goes from a walk to a jog to a run.” (Peppers and Rogers, 1997:45). It seems to be a trend that the major sneaker manufacturers focus their innovation
on providing intelligent shoes that are distinctive and better protected against imitation.
This is not limited to mass customized shoes like Adidas_1 and Stripe Shifter, so did Nike
include gear for the iPod in one its shoes.
§8.3. Custom dress shoes
Selve, Otabo and Leftfoot provide fashionable shoe models that can be customized in the
fit and style domains, with a strong focus on custom fit. The best examples are Otabo
and Leftfoot that use 3D footscanners for measuring the foot in many dimensions, e.g.
Leftfoot measures in 15 dimensions. Therefore the customer has to visit a shop before he
can order his custom men’s shoes (e.g. business shoes, casual shoes or golf shoes). He
can re-order pairs via his internet account. There he can choose the type of sole and
perhaps even the colour of the sole. More style features are not being offered and he
won’t see the result as a virtual shoe model. The need to design a shoe is reduced by the
broad range of models that can be customized by Leftfoot (>60) and Otabo (>30).
Selves sells fashionable women’s shoes with custom fit. It doesn’t operate footscanners,
but instead the customer has to answer four questions, whereafter she will be
categorized in a foot type. She can print a sjablone and try whether it fits well. Then she
can select one of about 50 models (that change regularly) and re-design it by choosing
the color of 2 or 3 parts of the shoe and the type of sole (e.g. leather or gummi).
Distinctive is that Selve offers the possibility to choose the type of heel. Nevertheless,
the number of style features that can be customized is relatively limited compared to
custom fashion sneakers. Typical for all three providers is that their products don’t
communicate that they are (expensive) custom shoes, since they don’t show
monograms. Leftfoot will only laser-brand the name of the owner into the leather insole
of the righ shoe. In addition is typical that these companies don’t communicate with the
customer through state-of-art online toolkits, but that the customer has to come to an
offline shop (Leftfoot, Otabo) or is encouraged to call for the design possibilities since the
59
online configurator doesn’t illustrate all possibilities (Selve). These companies are
basically offering shoe tailoring services with modern means (3D scanning, online
customer accounts for re-ordering). Therefore is it likely that more (local) companies
exist that provide similar services.
§8.4. Custom formal shirts & suits
Several companies are offering custom shirts and the supply ranges from cheap to
luxury, see table 8.4. Some of these companies do also provide suits and their approach
to that is very similar as their approach to custom formal shirts.
Discount: < €30,Ziami
Aston
Middle segment:
45 – 60 Euro
We Made By Me
Neckermann
Dolzer
JC Penney
Athletique
Charles Tyrwhitt
Premium
55 – 70 Euro
Bivolino
Land’s End
Luxury
> €150,Liste Rouge
Robert Talbott
Custom Dress Shirts
Table 8.4 Some mass customizers of custom shirts
All mass customizers in this group offer their service (exclusively) online, except for
Ziami that operates through a sales associates system but that takes re-orders online.
Typical for this group is that they all offer fit and style customization. All mass
customizers ask their customers for 7 to 20 measurements. They don’t use (offline) tools
such as 3D bodyscanners.27 Manuals, illustrations and even videos are often made
available to the customer so that he knows how to take the measurements. The
measurements are saved in an online customer account to enable easy re-ordering.
Then, the customer has to select options for about four to seven style features such as
the collar type, the cuff type, the style of the front, the pleat at the backside, the shape
of the belowside and having one or two front pockets. Most mass customizers offer for
each choice 2 to 4 options. The heterogeneity of demand for collar styles seems to be
larger and especially the more expensive suppliers as Bivolino (n=13), Robert Talbott
Shirts (n=11) and Liste Rouge (n=17) provide here more variety. An extraordinary collar
type is probably attractive, since the observability of this MC feature is relatively high
and Rogers (1995) has described that this increases the likelihood of adoption (especially
for fashion products). Fashion innovators can stress their individuality with a unique
collar type: Liste Rouge offers to reproduce any favourite collar for a surcharge of 40
euro. Another feature with high observatibility that is always found in this group is
monogramming (usually with three characters). The customer must often pay for
monogramming a surcharge of 5 dollar/euro. Besides this feature, are upgrades for which
has to be paid not very common; only Bivolino charges for several options a small
amount (2/3 euro). Unique about this group is the high variety of fabrics. All provide at
least 40 different fabrics and about half of them provide more than 100 fabrics. The high
variety for fabrics is in contrast with the number of models that is being offered; it
doesn’t succeed five. Thus, that is opposite of custom dress shoes. Finally, but most
important, is that configurators with dynamic feedback functions such as 3D virtual
modelling are uncommon for this group. Usually the customer is presented with some
illustrations of collars and he selects the one that he likes. He doesn’t see the entire shirt
as he has chosen neither during the process nor at the end.
However, several (offline) tailors use 3D scanners, for example Brook Brothers
(http://www.brooksbrothers.com/digitaltailor.tem#) but they are not included in this research.
27
60
§8.5. Custom casual chinos and jeans
JC Penney, Target and Lands’End do not alone offer formal shirts, but also casual chinos
and jeans. Another company that belongs to this group is Tommy Hilfiger that also sells
custom chinos and jeans. These major companies are connected with each other by the
technology supplier of their MC system: Archetype. A customer that buys jeans and
chinos with custom fit at these companies will always be confronted with a set of
questions and a few measurements. Some of the questions may be a bit peculiar, for
instance asking for the shoe size when one is buying custom jeans. However, Archetype
possesses over a database with millions of body measurements and uses the information
provided for making a mathematical model of the body for the customer. This model is
then used for making chinos and jeans with custom fit. Besides custom fit, can customers
also make a few choices with regards to the style (colour, pockets and cuffs). The
number of products is also very limited (max 9). It seems that the unknown Archetype is
cooperating with wellknown retailers and with a major fashion brand in order to sell a lot
of premium products. Especially this group communicates about successes with regards
to the sales of their MC products (“half of the chinos sold in our shop is MC”). This is also
reflected in the MC process which is focussed on usability. The technology of Archetype
makes it easier to go through the process without the need for help of someone for the
measurements: most people know their weight, length, shoe size and shape of their
stomach. Information overload is prevented by offering just limited choice of style
features and options. The design freedom is very limited in this group and therefore
there is no need to provide dynamic feedback mechanisms in the efficient configurators.
It is not uncommon for major fashion brands to provide very limited design space, the
best example is probably Ralph Lauren. A consumer can select a colour for his RL-polo
(10-25 colours) and the embroidery colour for the pony logo (6-10 colours). He can also
replace the logo with a monogram of three initials, but that’s all.
§8.6. Custom fashion jeans
"The clothing industry is designed for people to fit into the clothing. UJeans does it the
other way around - the clothing is made to fit you."
"Customer-driven, forward-thinking, Mejeans makes what the customer wants….Instead
of an apparel company trying to force our image down our consumers’ throats, we take a
step back and simply make them what they want."
Besides the major retailers and brands, does a group of small companies exist that is
specialized in the customization of jeans. They communicate that they are different than
the clothing industry, see for example the quote of Ujeans and MeJeans. However, the
major distinction is not custom fit, but the large design freedom for consumers.
Companies such as IC3D, Mejeans, UJeans and Tailormade Jeans distinct themselves
from Tommy Hilfiger by providing many custom design features that are often
innovative. The customer can decide into detail how the product should look, see table
8.6 for some examples of design features. Also typical for this group is the large amount
of upgrades, e.g. leather fabrics of IC3D (+€270,00), Jeanshield protection of Mejeans
(+$10,99) or special beltloops of Tailormade Jeans (+$7,99)$ are just examples. Only
Ujeans doesn’t offer upgrades and has relatively few unique design features that can be
customized. It is no surpise that these small companies do not offer 3D dynamic
feedback tools, apart from IC3D that has two configurators (only the one in Flash is
dynamic). Instead do they work with online order forms. In addition does Tailormade
Jeanswear provide a design sheet for consumers with design ideas outside the current
solution space: "Want to send more detail? Why not send us photos', sketches or faxes of
your ideas?...If the Tailormade-Jeanswear Team likes your custom made style well
enough and you agree that we add it to our TJ's Designer's Collection we will ensure the
world recognizes your talents. We will give you credit and also ask you to name your
style." Typical is that this company doesn’t mention anywhere on its site terms regarding
the ownership of designs. Also Mejeans encourages consumers to send in ideas for new
61
features in its idea box: “If you want a certain option for your mejeans, please let us
know and we'll do our best to make sure to include such options in future updates."
Consumers can also win a free pair of Mejeans when they give feedback. Furthermore
does Tailormade Jeans operate a micro merchandising business model since it offers the
possibility to start your own jeans label: “For the serious custom made jeans designer!
This package lets you select from a wide range of features and finishes to your choice of
High Quality Denim. The end result is your unique styling that you can supply to friends,
collegues and your associates. Become re-seller!"
IC3D
Tailormade Jeans
UJeans
MeJeans
Fabrics & finishes: 81
(e.g. denim, corduroy,
suede and even
leather)
Leg style: 3
Applied stencil option:
create an eye catching
effect.
Fabrics: 16
Zipper colour: 4
Whiskers moustache:4
Sandblast: 4
Hand scrapeing: 4
Secondary thread
colour: 9
Decorative stitching
Distressing: 5
Special outseams: 7
Memory stick pocket
Condom pocket
Wash: 3
Trims: 6
Type of pocket flap: 4
Frays: 4
Type of fly: 3
Stitch colour: 10
Rubs: 5
Tints: 5
Bottom cuff: 4
Button on pocket flaps
Ankle style: 3
Beltloops: 4
Label colour: 5
Thread colour: 8
Table 8.6 Some examples of design features, figures are the number of options per feature
Basically are these companies not truly applying MC, which is confirmed by Tailormade
Jeans that communicates that it sells handcrafted jeans. In contrast to traditional tailors
can these companies - that are often based in lowcost countries where all jeans are made
- reach a far wider public. They get regularly attention in fashion magazines due to the
unique nature of their offerings, which will probably generate additional sales. The main
question is whether these companies can exist because they serve the needs of a small
niche at the end of a long tail, or whether a broad (latent) need for this kind of service
exists. If the latter is true, it is likely that the (mainstream) clothing industry will provide
MC with similar design freedom (but with more advanced design tools) in the future.
§8.7. Casual shoes with individual design
The next group consists of MC websites of major brands of casual shoes, mostly
sneakers, such as Nike ID, RBKCustom, Puma Mongolian BBQ, Vans, Timberland
Customboots, My K-swiss, My Etnies, Converse One and Footjoy. These MC websites are
often used as best practice examples for MC. The first reason is simply that they are
wellknown, due to the massive attention they generated with their own major marketing
campaigns. Second, they operate state-of-art configurators that include 3D visualisation,
which the previous described archetypes do not have. Nike (ID) and its competitors have
spent a lot of resources on developing (or buying) ‘slick’ configurators, since the online
experience should enhance their brand image. Further, it seems that selling high
volumes, thus usability and conversion, is important as well. This is illustrated by the
questions of an online vistor questionnaire on the websites of RbKCustom, see table 8.7.
It is also confirmed by the supplier of the configurator technology of Timberland
Customboots and Rbkcustom who stresses several times on its own website that “the
technology improves the customer experience and conversion rate for personalized
products.28”. Troy Brown, the senior director of e-commerce of Timberland, does also
mention that the configurator is very successfull with regards to sales: “We’re getting a
huge return on this, and it has gone through the roof in terms of sales,” Brown says,
28
For the article, see http://www.fluid.com/company/news/20060114_fluid_configurator
62
adding that Timberland plans to apply the configurator to several more products,
including backpacks.”29
Questions of the online visitor questionnaire on RbkCustom
Based on your best online experience, how would you rate www.rbkcustom.com as a site
that…
Usability
Experience
has interactive tools which allows you to enhances your image of RBK?
effectively customize your RBK shoes?
enables you to help yourself?
provides
an
engaging
interactive
experience?
can save you time?
is easy to navigate for you?
encourages you to return?
enables you to find what you’re looking for?
Conversion: Which of the following best describes why you did not make an online
purchase on RBKcustom.com today?
 Cost payment issues
 Product availability
 Not ready to buy
 Usability
Table 8.7 The questions of the RBKCustom visitor questionnaire show that usability, (brand)
experience and conversion are most important for RBKCustom, not design freedom
The last sentence is a good summary for the direction in which these MC configurators
are further developed, namely adding more models, more style features and more style
options (colours). The MC websites have been visited in the spring of 2006 and once
again in the autumn of 2006. At the first visit, the number of models, features and
options has been documented. Because of that it is possible to see that Nike has chosen
to aggressively increase the amount of models available on Nike ID from 47 to 83.
Reebok extended the number of models from 2 to 4. My Etnies mentions on its website,
that additional shoe models, colors and patterns will be added in the coming months.
Reebok states that it is adding colours frequently, Timberland has added 4 new leathers
and gives consumers the possibility to choose the new colours for next year and
Converse has added the possibility to choose a material (leather or suede). The last
extension is interesting, since this feature (material choice) is new in this category.
Furthermore, Converse is asking a surcharge of $15,00 for it, which is also unique within
this group. This step of Converse does also point at a second trend with regards to the
development of configurators, namely to differentiate the configurator from others. In
the beginning, most configurators in this archetype were very similar: all of them offer
monogramming (including personalization policies) and the possibility to chooce the
colour of laces, stripes, logos and soles. Recently Puma launched its online MC
configurator and its process is completely different than the exisiting configurators,
although it basically offers the same style features for customization. Reebok has added
a logo feature: consumers can choose the logo of their favourite team in the National
Football League or the Major League Baseball. Presummably, Reebok has an exclusive
license agreement so that only Reebok can offer this feature. My etnies is not only
offering colours but also a few patterns (e.g. camouflage) for its shoes. Nike ID was the
first to offer different sizes for the right and left shoe. Further, Nike has translated its
offline strategy of providing limited editions to its MC website, since some of the new
models are only available in limited number (although each may be already unique
because of the MC). This might also explain the absence of expensive upgrades in this
29
http://internetretailer.com/dailynews.asp?id=17073 and http://internetretailer.com/article.asp?id=17145
63
category, the business model for skimming value is namely completely different than for
individual sports performance gear and custom fashion jeans. There is demand for
limited editions of Nike shoes, because a large Nike fan base exists.
It can be concluded that mass customizers of casual footwear are further developing
their configurators. The solution space is being enlarged by adding more (unique)
choices, so that each configurator is becoming more differentiated. Consumers are
getting a bit more say, for instance by having the opportunity to choose new colours on
the Timberland website. Rodrigo Reinheimer stated that Vans has the intent to include a
suggestion box in the new configurator. However, developments that consumers get the
possibility to create have not been observed at mass customizers. Interesting is that
O’Neill, that doesn’t offer MC of shoes, operates a website30 with a drag-an-drop toolkit
for shoe design that offers choices and a few possibilities to create, for instance mixing
patterns, logos and using paintbrush to finish shoe designs. Visitors can vote via a hot or
not voting system and the winners receive a price of 1000 dollar.
§8.8. Sneaker ‘Design Labs’
Brick-and-mortar shops that offer MC (e.g. tailored shoes and clothing) fall out of the
scope of this thesis, but for a complete picture it is necessary to describe the so-called
offline ‘design labs’ that have attracted attention in the sneaker industry.
Besides its Nike ID-website, Nike operates the Nike ID Design Lab in New York, Paris,
Berlin and London as well. Some of design labs are temporal: so-called guerrilla or pop
up stores. Customers have to make an appointment, by invitation only, and maximum
three customers at the same time are allowed. Invitations are given to celebrities,
journalists and opinion leaders such as bloggers. Ordinary people can win a visit through
a lottery system for which they can sign up on the Nike ID website. The process of
designing a pair of shoes takes place in an impressive environment due to its modern
architecture and the customer is assisted by a design consultant. However, the consumer
uses the same configurator as on the website, but this one offers exclusive models,
colours and material options. The shoes are delivered three weeks later and one
customer described this as following: “…it is almost like a delayed party favour. Wearing
them is as much an opportunity to express your individuality, as it is a chance to tell the
story of being in the Design Lab.” So, basically the Design Lab offers an exclusive and
highly memorable customization experience. The objective of the Design Lab is not to
integrate designs in its NPD process, but to draw attention to the Nike ID website.
With the same goal has Puma organized the Puma Mongolian BBQ experience, since later
did they open a MC website with the same name and process. “…Puma lets you taste the
art of shoemaking and pick from a generous assortment of pre-cut materials to design
your own personalized shoes.” Thus, the customer selects the materials by hand and
places them physically on a shoe map, while this being done with a computer in the Nike
ID Lab. Adidas Adicolor has also design studios. Karl Kani has introduced an all-white
sneaker for DIY customization and promoted it during the ‘Karl Kani Spraycan Edition
Tour’ which featured popular graffiti artists from New York. Several other sneaker brands
like K-Swiss have hired sneaker artists that give demonstrations in shops.
This trend is not restricted to sneaker brands. For instance, Tommy Hilfiger has
organized the ‘Personalize Your Denim Tour’. This event offers consumers the opportunity
to completely personalize their Hilfiger Denim bottoms by means of stitching, adding
initials or graphics, special applications, distressing and many more. The end result is an
unique pair of jeans with a limited edition serial number. So, two major trends in the
industry are (mass)clusivity and bringing the experience of being a designer. A company
can create more value by staging a show around the MC configurator. Other MC
companies like Build-a-Bear (workshops) and Swatch have done the same.
30
See http://www.oneill-action.com/designyoursneaker/
64
§8.9 T-shirts: micro-merchanding & collective customer commitment method
The phenomenon to customize a t-shirt existed long before the emergence of MC
websites: one could easily go to a copyshop to print a logo of the sports team or student
society on a t-shirt. Nowadays there seems to be a trend to express yourself with the
text or logo on your t-shirt. Several online market places have emerged to supply the
almost exponential growing demand for these designs. Some of the most popular market
places are Cafepress, Zazzle, Spreadshirt, Shirtcity and Threadless. Cafepress calls itself
a ‘marketplace for self-expression’ and claims to have more than 2.5 million members.
All product design activities are outsourced to the community members and Cafepress
takes care of all operational activities, e.g. its print-on-demand and billing service. The
website features more than 22 million designs and new designs are added every day.
Everyone can open a shop and start selling his designs for t-shirts and many other
product categories (e.g. mouse mats, mugs, posters, stickers, hats etc.). For each sale
the shop owner receives a commission that he can set himself, in return Cafepress gets a
nonexclusive license. The designer has to agree with a contract that prohibits selling
“merchandise that infringes third party intellectual property rights (such as copyright,
trademark, trade dress and right of publicity).” The Intellectual Property Rights Policy
shows that Cafepress encourages “intellectual property rights owners to contact us if
they believe that a user of our service has infringed their rights.” Some tests showed that
if you upload pictures of tv-stars or art, you’ll get an email that the content has been
removed because there is doubt about the origins. At the same time, does Cafepress
encourage its members in its guidelines to search for materials in the public domain:
“There are tons of art resources floating about in the public domain, just waiting for
enterprising folks like yourself to bring them to the merchandising forefront. Material in
the ‘public domain’ is freely available to be used by the public because it is not protected
by copyright, the copyright in such material has expired, or the work has been created
for public use. Why not augment your current design collection, or start an entirely new
shop, with long-forgotten art from the ‘good old days’?” This might increase the risk for
copyright infringement, since it may be unclear for some members whether something is
in the public domain or not; despite the warning of Cafepress to do your homework.
Cafepress has also license agreements with owners of popular content such as Snoopy,
Dilbert and Star Trek. Zazzle - that operates in a similar way as Cafepress – has license
agreements for content of Disney, Star Wars, Barbie, Looney Tunes and other popular
figures from comics and cartoons.
Zazzle and Cafepress have a configurator, wherein one sees the blank product. One can
upload a picture and add text, but it is not possible to create an image in the toolkit
itself. The latter is possible with the ‘Spreadshirt Designer’, a design toolkit that features
some functionalities that remind of a basic drawing programme on the PC. In addition,
you can add images from the library in exchange for a surcharge that has been set by
the designer. Every user can select an image from the library and then change the color
of it completely or partly. Spreadshirt describes the difference between their toolkit and
that on other websites as following: “using a drag-and-drop technique, the Spreadshirt
Designer enables anyone to easily create a design or slogan right on the site and then
see how it will look on the item they have selected. Most other competitors require the
design to be completed in another program and then uploaded.”
Threadless doesn’t offer such a toolkit, but is unique for a different reason. The main
difference is that Threadless doesn’t produce the t-shirts piece by piece with print-ondemand technologies, but it produces shirts only in larger batches. This lowers the
production costs, but normally this would also lead to a high (fashion) risk. Hot fashion
items as these t-shirts are namely considered to be hit-or-miss products. Despite the
high risk, products of Threadless have never flopped. This is possible due to the collective
customer commitment method that is operated by Threadless. This method – that is
described in detail in the article by Ogawa and Piller (2005) - includes that every week
community members evaluate between 400 and 600 new designs. Each design is
evaluated by about 1500 persons on a five-point-scale. This can be seen as a substitute
for market research. The involvement of customers goes even beyond voting, since they
are involved in taking the decision whether a design is produced or not as well. This
65
decision is based on the ratings through the ‘normal’ voting system. In addition,
members can express their willingness to buy a design when it will be produced.
Furthermore, comments from members provide the management of Threadless with
information about the originality of the design, whether it is plagiarism and how the
design can be improved. In the end, it is the management that takes the final decision,
but popular designs are only rejected for the following reasons: “the originality of the
design (is it somehow timeless, not too similar to other recent winners), legal issues (are
there any copyright related issues), and assortment policy (will the design contribute to a
wide assortment of products),” (Ogawa and Piller, 2005: 14). Submitted designs are only
produced after a certain large number – a threshold - of customers has expressed its
commitment. “In this way, market research expenditures are turned into early sales,”
(Ogawa and Piller, 2005: 2). The batch that is being produced is then (a bit) higher than
the number of early orders so that additional sales can be made. It takes several weeks
after winning before the t-shirt is ready. Customers that want a t-shirt immediately can
therefore look what is in stock. When a new design has sold out, a waiting list opens
again where customers can sign up for a new batch. Already more than 400 winning
designs have been chosen out of more than 35,000 submissions. The designer of a
winning design – one that is produced - gets a monetary reward of $1500 (plus $300 gift
certificate); “that is higher than the average honorarium paid for a commissioned design
by a conventional clothing company (about $300 to $500),” (Ogawa and Piller, 2005: 910). He or she does also get recognition for the design by means of printing his/her
name on the t-shirt’s label. This exposure can help young professional designers a lot,
since it is hard to enter the relatively closed professional market. A participating designer
does never lose, since he will always get valuable feedback from other community
members. The big rewards come also at a higher price: the designer grants Threadless
an exclusive license agreement. Although he keeps the ownership of the original design,
he can’t reproduce it for commercial purpose without written permission of Threadless.
“The Design must be the participant's own original work and may not have been
previously published”: thus it shouldn’t be in the public domain. The collective customer
commitment method is not restricted to t-shirts, since the owners of Threadless have
also moved into other product categories (e.g. music). The Dutch t-shirt website Buutvrij
has attracted international attention since it operates a system similar to that of
Threadless.
This paragraph showed that it is hard to find a MC website that offers both a toolkit that
meets the requirements of Von Hippel 200131 (immediate feedback tool, module library
etc) and that offers the design freedom to create. The websites of casual shoe
customizers (Nike, Rbk, Puma etc.) have virtual (3D-)models in their toolkits, but allow
only to choose options. The custom fashion jeans websites claim that they can fulfil
almost any creative request, but don’t supply a toolkit with which consumers can create
this design. The t-shirt websites show that creative consumers can make designs that
have value for others as well. Ogawa and Piller (2005) do even state that the Threadless
community of professional and amateur designers shows high lead user characteristics.
Most websites benefit from the value created through nonexclusive license agreements
and the creator receives a royalty of 10%-20% or can set a surcharge. Only Threadless
works with an exclusive license agreement and pays a significant price for the winning
design. These websites do not offer high-end toolkits: their toolkits can only place an
uploaded image to an t-shirt. The image itself has to be made with tools such as
Photoshop. The Spreadshirt Designer is a step in the right direction. Although the
functionalities are basic, it can do more than an ordinary drawing programme on the PC
since you can change the color of the design of someone else. Unfortunately it doesn’t
allow you to further re-invent the images. The next chapter will investigate whether
consumers need more design freedom than in these toolkits is being offered.
31
See paragraph 3.5.1
66
9. USER INNOVATION IN THE NIKETALK COMMUNITY
Q1b:
Are some consumers employing self-created tools in order to create designs
outside the design freedom that is being offered by the official MC toolkits?
People are decorating their shoes since (at least) the eighties. For this research it is more
important to find out whether people are designing shoes with self-created design tools.
The answer is positive.
§9.1 ‘Sneaker Art’ in an online sneaker community
A large group of sneaker ‘addicts’ exists online and one well-known sneaker community
is Niketalk(.com)32, established by Nike fans. This community has more than 62.000
registered members and above 7 million posts. The topics range from news about Nike
footwear and other brands, posts about how to identify fake Nike shoes and pictures of
fans wearing their favourite/newest pair of sneakers. About 10% of the posts can be
found in the category ‘Sneaker Art’ and these posts are related to “customs, designs,
photoshop renderings, and other sneaker related art.” 33 These posts provide good
insight in present design (innovation) activities by consumers.
The category is named after the sneaker artists; that are people who turn their standard
pair of sneakers into something unique and individual by applying techniques like
painting and airbrushing. These techniques require skill, experience and creativity and
therefore the results are regarded as ‘sneaker art’. Members use the website to share
pictures of their handcrafted customized sneakers with other members, who can react on
these. In general, comments are (very) positive and/or members provide constructive
criticism. The community seems to have developed its own design norms, but now and
then they are critized. Member ‘po206po’ with 7963 posts made the following comments:
The observation of ‘po206po’ is true, but there are also talented members. Other
members admire their work and often ask whether they can buy the sneakers. Many
(professional) sneaker artists sell their creations on their own website or on eBay, and
thus they advertise it for free on Niketalk. Nevertheless, companies like Nike haven’t
hired those ‘designers’ (in large numbers) and comments on weblogs show that people
do not understand that. The community offers value for inexperienced members who
frequently use the forum to ask for tips about materials, paints and methods. One needs
to learn by doing, but actual customization costs a lot. Therefore design tools have been
developed and it seems that an entire new subcommunity has formed around it!
32
33
Another similar forum is http://customsnkr.com/forum/
http://www.niketalk.com
67
§9.2 A subcommunity works with sketches, templates and Photoshop
Some members post only designs, without actually creating them. Many dream of a
career as a sneaker designer and therefore they post their designs on Niketalk:
 TrippinonNikes: “I need help guys. I am trying to grow up to be a shoe designer.
It’s hard to get in and I don’t wanna hear about how I have no chance.”
Most designs can be categorized in three groups: sketches, template-based and designs
in Photoshop. Sketches are offline created drawings or they are made in Adobe Illustrator
completely from scratch. Niketalk exhibits many sketches in a special thread. Sketches
are easy to steal/copy, for that reason ‘freshprince757’ advices ‘tokes99’ to “tag your pic.
[You] don’t want anybody to steal your ideas”. To make good sketches one needs to
have drawing skills besides good ideas for a new sneaker design. For that reason this
method cannot be mastered by all.
Left: Sketches on a xiv.5 made by ‘tokes99’, Right: Template of Jumpman Pros made available by legimlugero
More common is the design on templates, usually drawings of the flanks of existing
models. Only a few (experienced) community members create and post (lots of) blank
templates. The others use these colouring pictures for making their design interpretation
of the model with regards to colours and patterns. It is apparent that most members use
drawing programmes like ‘Paint’ on their computer when doing so. Their software can be
seen as toolkit for co-design and innovation.
 GFlower8: “Show Ur Skills, Draw Ur Favorite J’s Using Paint. No not actual paint,
paint tha program…on ur computer. Tha fun(ny) thing about it is that it’s a basic
program..its limited and its weak basically.”
A step further is making designs in ‘Photoshop’. Niketalk does even organise a Photoshop
Contest, whereby members are challenged to make a design based on a given picture.
The results look very realistic:
Entry in Photoshop Contest by ‘hondurican21’
68
Inexperienced members usually start by using templates (a basic toolkit) and after a
while move on using Photoshop (a more advanced toolkit):
 Ak47celtics: “I actually like those Jordan 17s, but try to make real Photoshops,
not ones on templates, but I guess your learning.”
It looks like that the craftsmanship of sneaker artists is higher valued than the creativity
of (Photoshop/template) designers:
 emmanualabor: “I’ve never been a fan of Photoshops…I don’t see the point if the
shoes’s never gonna be made…if you’re making PS’s to see how a custom will turn
out, I’m all for it, but PS’in a shoe just for fun is pointless to me….”
 OP1rd2: “Change the name of the Sneaker Art Forum. All I see is Photoshop in
this forum, no real art.”
Niketalk exhibits some uncommon methods as well, for instance making designs
completely out of cardboard34. A better example of this can be found outside Niketalk.
Shin Tanaka is famous for his artwork on paper models of sneakers, amongst models of
other objects. Shin Tanaka’s Nike Air Force-1 is even permanently exhibited at Vacant
Chicago:
Interesting about the Paper Custom Sneaker Project is that Shin Tanaka invites
everybody, especially graffiti writers and designers, to download a template (pdf), to
color the parts, build the model and to send in a photo. His website35 displays the
designed works.
34
35
Search for bobby99son on Niketalk
http://www.ohashi-lab.bio.kyutech.ac.jp/~shin/pic_index.html
69
§9.3 Self-Created tools have potential to become more innovative
It can be concluded that design tools are being used by a large part of the community.
Templates are regarded as self-created tools, since a few community members have to
make them. Others use these templates and standard software tools like Paint for
making their designs. Similar arguments apply to Photoshopping. The Photoshop contest
wouldn’t be possible, if a few members hadn’t supplied the community with pictures on
which the designs have to be based. Furthermore, there are also several posts in the
community about free software for making designs. The next chapter will show, that the
template method has been adopted in a several design competitions.
Interesting note is that basically all methods are used for reinvention. Only the people
who make sketches come now and then with totally new designs, but it can be doubted
whether these designs are nice to wear. The Niketalk community has the potential to
become very innovative, once the members who make sketches supply these as
templates to the others. At the moment, it is not possible that people actually share their
designs so that others can improve it themselves, instead of making suggestions in the
forum. This would lead to collective design similar as in open source communities.
70
10. DESIGN COMPETITIONS IN THE INDUSTRY
“All you have to do is draw your design for the world’s greatest skate shoe.”
Text from the invitation for a design contest of Etnies Shoes in 1989
Piller and Walcher (2006) describe idea and design contests as a means to integrate
consumers in the new product development process. However, they suggest that design
contests are often just marketing tools. This chapter answers question 2b, by analysing
whether shoe design contests have the objective of customer integration in NPD process.
Q2b: Are companies in this industry integrating consumers in the creative
design in other ways than with high-end toolkits?
§10.1 Search for and analysis of shoe design contests
In total 42 shoe design contests have been found with help of search engines and
messages on forums! In fact, the search learned about the existence of several other
shoe design competitions, but their websites do not exist anymore or are in foreign
languages. A quick search also learned that (many) fashion design competitions exist.36
Only examples for shoes have been analyzed. The analysis was based on contents on the
official contest websites and on forums that wrote about them. The organizers have not
been contacted. It analyzed information about the organizers, the participants, the
selection system, the terms & conditions and prizes. It investigated whether a toolkit was
supplied. Finally, it tried to find out what happened with the (winning) designs.
§10.2 Who is organizing shoe design contest?
In total 20 different shoe brands were identified who invite consumers to (re)design a
shoe, including Nike, Adidas, Puma, Reebok, O’Neil, K-Swiss, Asics, Quiksilver, Circa etc.
Websites and magazines (12) organize contests as well. They cooperate often with a
sneaker brand. The industry organizes contests (3)for students from design schools; in
practice even far more than three. A software company challenged students to design a
new Adidas shoe with its software. Finally, the launch campaign for the new Toyota Yaris
featured a sneaker design contest in order to position the car as young and exciting!
§10.3 Marketing as aim of the shoe design contests?
The Toyota Yaris Sneakerhead vs. Sneakerhead contest is a clear example of how
companies use design contests as a marketing tool. In our interview, Rodrigo Reinheimer
confirmed that Vans has organized design contests "for promotion purposes only."
Contest can be used to engage consumers, especially since many hope of a career as
shoe designer. Websites get enthusiastic reactions from their members when (another)
contest is being organized. Everybody can participate, either by contributing a design or
by voting. Cooperation with a popular brand makes the contest even more interesting,
because then the design can be produced. The brand benefits from the cooperation as
well. Nike seems to use it frequently to create buzz about its NikeiD (mass
customization) website. Nike has namely organized three contests37, in which people had
to design a new shoe by using the NikeiD configurator. The members of Sneakerplay and
IQONS were invited for a closed section of the NikeID website. They could here vote for
the winner (who got a pair of his shoes). The gallery had links that stimulated to buy the
winning designs. In a similar way, Nike invited 20 influential webloggers to create a
design in NikeiD. The participants could (only) win, by writing on their weblog about the
contest and asking their readers to vote for them. The winner received 50 pairs of his
shoe, so that he could distribute those amongst his readers as an incentive. Adidas has
also launched two contests to promote the Adidas Adicolor range. 38
‘Express your style design competition’, ‘The Arts of Fashion Student Design Contest’, ‘Puma Rugby Fashion
Redesign Competition’.
37
‘Nike ID Blog Contest’; ‘Nike the AF1 Playoffs’ (with Sneakerplay); ‘IQONS X NIKEiD’
38
‘Adidas Adicolor Online Competition’ (basically 3 design contests in one!); ‘Vice Scandinavia Adicolor Contest’
36
71
§10.4 Promises about taking the winning design into production
16 organizers stated beforehand that winning designs could be produced:
Contest
Quotes about producing the shoe
1
Iremba.com
2
Globe Design a Shoe contest
3
Art + Sole Competition: Design
Steve’s next fall shoe!
4
Adidas Adicolor Online Competition
5
6
The Brown Shoe Student Design
Contest
K-Spray Shoe Design Competition
7
Möbus Designwettbewerb 2005
8
Sprandi Footwear Design
Competition
9
Asics Design Competition 2007
10
Salomon footwear on-line graphics
contest
Design Erik Ellington’s Double E
Supra Shoe Contest
Rhino Adidas Design Competition
Puma Central Saint Martins
Redesign Competition 2007
Iremba.com is the only site on the web where you can truly
design your own footwear. Enter your shoe in our monthly
contest, and if yours is rated the highest, we’ll make and sell a
limited edition of your design, and YOU will win a 1,000 bucks.
Winning shoes will be produced and sold in West 49 stores
across the country.
The winning shoe will be named after the designer and available
for sale on stevemadden.com and participating Steve Madden
stores across the country.
Become the last official partner of the adicolor concept launched
earlier this year. The winning design will be produced in a
limited production run of 50.
One grand prize winners receives:… Your shoe design put into
production and a sample made.
A once in a lifetime chance to have the shoe design introduced
into the K•Swiss retail market (and receive ongoing royalty
fees)!
The winning design will be taken into production if it satisfies the
requirements of Möbus… Winner will get 5% royalties if the
design is taken into production.
The aim of this competition, in-line with Sprandi’s start of the
Spring Summer 2008 design season, is to look for fresh ideas
from the forumers, and commercial or useable shoes from this
will be a plus…The winner will receive an additional USD 3000,if Sprandi decides to use the design for its Spring Summer 2008
collection.
A sample will be made by Asics, and it may be produced and
sold by Asics, if Asics sees enough potential and if the winning
design meets the needs of Asics.
(Afterwards:) We will be proud to launch the first ever ASICS
Design Winner shoe on the market soon.
The winning designs may be produced, if suitable, as a limited
series.
You will get your design + Supra may even mass produce it.
11
12
13
14
CT Clyde Colourway 3
Competition
15
Reebok Customized Kicks Contest
16
Circa vs. Reload Design Your Own
Shoe Contest
Possibility of having design used by Adidas.
PUMA will produce a limited run of three selected styles to
appear in select retail stores and the fore front window of the
famed Harrods department store with a contribution from the
sales proceeds being donated to the Central Saint Martins PUMA
bursary fund.
The winner will receive 10 free pairs in whatever size/sizes they
require. The winning shoe will be known as Crooked Clyde
'Username'.
(not a quote:) 50 pairs of the winning design have been
produced and sold for charity.
(not a quote:) The shoe has been produced as limited edition
and is for sale in Belgium and Netherlands. The website featured
a follow-up article as proof several months after the end of the
competition.
The first five contests make a solid promise, but sometimes it is weakened in the terms &
conditions: e.g. Brown Shoe is allowed to change the price. Seven contests promise only
to produce a limited edition. Some organizers do not commitment themselves to produce
the winning design beforehand, but attract participants by mentioning it as a possibility.
Whether these winning designs have actually been taken into production is not always
clear. Asics will take the winning design into production. In some cases it is unlikely that
the shoe was taken into production, since it is organized by a third party: e.g. the ‘Rhino
Adidas Design Competition´ had the purpose to “evaluate the student´s ability, skill, and
knowledge of 3D modelling using Robert McNeel´s Rhinoceros.”
72
§10.5 Contests as a source of inspiration and innovation
Some shoe brands organized the contest with the aim to integrate designs and ideas in
their new product development process, but without plans to produce winning designs as
they are. They use the entries as a source of inspiration and innovation:
Contest
Aim
Monetary
Rewards
a
Nike Play Award:
€5000,-
b
Quiksilver Innovation
Contest
c
Adidas Toolkit for Idea
Competitions
O’Neill Design Your
Sneaker
Sprandi Footwear
Design Competition
To get a flow of inspirations and innovations going. (Idea
competition for young, creative-driven designers from all over
Europe)
Through this initiative, the Quiksilver Group aims to recognise
the importance of individual designers as a source of
inspiration, & to promote their involvement in the definition of
its brands.
Concepts of innovative, revolutionary products.
As first initiative towards customer integration in the NPD
process. (sort of lead user approach)
Submissions serve as input for the corporate designers to find
new styles and products.
The aim of this competition, in-line with Sprandi’s start of the
Spring Summer 2008 design season, is to look for fresh ideas
from the forumers, and commercial or useable shoes from this
will be a plus.
The overall spectrum of designs is a great piece of trendscouting… Möbus will also keep all designs in their archives to
fall back on them for future collections in coming seasons.
Due to the target group extension it was decided
to have a customer integration event: a design contest for the
“girlie” target group, which refers to the early idea phase.
d
e
f
Möbus
Designwettbewerb 2005
g
Wexla My Individual
Shoe Design Contest
€5000,-
n.a.
€1000: O’Neill
clothing
$3000,(if produced)
€500 + 5%
royalties
n.a.
The organizers of these contests give young designers – both professionals & amateurs –
the chance to show their creativity without setting to many restrictions beforehand.
Some companies give a broad theme, or they provide the designers with their branding
guidelines so that the entries fit to their brand. The companies take these contests more
seriously than other shoe design contests. First, the prizes on average are higher than in
other shoe design contests. Second, the design manager at Sprandi responsible for the
‘Sprandi Footwear Design Competition’ clearly makes a distinction with another design
contest of his company (‘Create Your Sprandi´): "this is a marketing gimmick on our
website." Third, Möbus released a statement that they were surprised by both the
amount and quality of the contributions. The submissions were in fact so valuable for
Möbus that they decided not to put them online - as they intended beforehand – because
they "couldn´t guarantee that your designs will not be implemented by other
companies."
73
§10.6 Usage of toolkits
The previous chapter described, that shoe designs can be made with several methods.
Most shoe design contests prescribe a format / method. Some contests look for the best
sneaker artists, and request therefore decorated shoes. These submissions are often
exhibited at events. Other companies are searching for innovative ideas, and they
organize a combination of a design and idea contest. The participant has to send
sketches (both on paper or digitally created), or is given complete freedom: “Please
express yourself freely, using your chosen method: model photographs, hand-drawn
sketches, computer generated 3D images, etc. incorporating a brief written description.”
An explanation is in these cases essential. A disadvantage of much freedom is that it is
difficult to translate a winning design directly in a product that can be produced. This
contest format is only suitable for students from design schools who have the required
skills and knowledge. Most companies that focus on creative consumers use the template
format, because it sets some boundaries (solution space) so that it can be produced.
Consumers don’t have to bother with designing a shoe that fits well, but can focus
completely on creating graphics. This method is similar as seen in the Niketalk
community: people download a template in pdf, and color it offline or in Paint. A more
refined version is the digital template: the company provides the template in a filetype
that can be used in Adobe Illustrator or Photoshop. Iremba makes its templates even
available in four different formats and provides links to free software as alternative to
Adobe. The templates of Iremba include a color palet, so that people use only those
colors that are available for production. So, Iremba has found a way to combine the
advantages of low-end MC configurators that set the solution space so that a design can
be produced, and high-end toolkits that allow people to create!
1
2
3a
3b
4
5
7
8
Method
‘Sneaker Art’ / handcrafted shoes
(n=4)
Sketch: completely new design from
scratch (paper or digital) (n=3)
Template: download a format in Pdf
and colour it (n=11)
Digital template: download a format
and create your own graphics in Adobe
Illustrator, Photoshop etc. (n=2)
Configurator: either an existing MC
configurator or a new one with more
freedom to create. (n=6)
Design software: / 3D Modelling (n=1)
Internet-based toolkit for idea
competitions: (n=1)
Any format allowed (n=6)
Example(s)
K-Spray Shoe Design Competition: K-Spray is running a
competition for the most favourable stencilled shoe design

KicksGuide Shoe Design Contests

The Sneaker Nation Design Contest

Circa vs. Reload Design Your Own Shoe Contest

Globe Design a Shoe contest

Iremba.com (templates available in 4 file-types)

Salomon footwear on-line graphics contest


Nike The AF1 Playoffs: NikeiD configurator
Puma Shoe Design Competition: Mongolian Shoe BBQ
Configurator

CT Clyde Colourway 3 Competition: online design tool

O’Neill Design Your Sneaker: more design freedom than
MC configurators: virtual paintbrush etc.
Rhino Adidas Design Competition
Mi Adidas-Und-Ich




Asics Design Competition 2007
Quiksilver Innovation Contest
Sprandi Footwear Design Competition
The Brown Shoe Student Design Contest
The advantage of configurators is that they are easy to use: it is not necessary to open a
template in an offline software programme. Nike organizes contests around its NikeiD
configurator; the special functionalities are a closed community and exclusive colors /
models options. O’Neil doesn’t offer a MC service, but has a professional toolkit that
allows people to create designs online. People have more design freedom, for instance a
paint brush functionality or the possibility to place logo’s on any place of the shoe. The
final format – internet-based toolkitfor idea competitions – will be explained in more
detail, because it combines an idea contest with the lead user approach.
74
§10.7 Internet-based toolkit for idea competitions (TIC) at Adidas
Adidas organized an internet-based toolkit for idea competitions as its first initiative
towards customer integration in the NPD process. One reason for Adidas to open its
closed innovation system was that Nike was experimenting with toolkits for user
innovation. A TIC was developed in cooperation with the researchers from the Technische
Universität München (TUM) and it addressed the following three requirements (Piller and
Walcher, 2006: 11)
Requirements of the Adidas Toolkit for Idea Competitions

Total customer experience process: e.g. pre-sales phase, sales
1. Inspire Creativity


2. Community functionality

3. Increase Efficiency


process, usage process etc.
Several creativity techniques were applied, e.g. future scenarios.
Trail-and-Error learning
Collaborative creation between members
Cross-evaluation of ideas + comments / suggestions
Automated clustering of ideas and evaluations
Adidas invited only customers who purchased top-of-the-line sports shoes, since it was
expected that they would be more able to submit innovative ideas. They could log in for
the TIC during 6 months in 2004. Participants didn’t receive monetary rewards, although
they had to sign a “legal disclaimer (granting all property rights of the submissions to
Adidas). The incentive mechanism of this TIC followed the idea that the fun and
challenge of participating, peer recognition, brand involvement, and awareness of the
company would be the major factors motivating users to contribute (Lakhani and Wolf,
2005; Schreier, 2006),” (Piller and Walcher, 2006: 12).
The participants entered 82 submissions and these were finally evaluated by experts. The
evaluation showed that 80% of the ideas were improvements, thus building on existing
products. “Ten percent of the ideas, however, were evaluated as radical new ideas,
bearing the potential to expand respectively change Adidas' business spectrum,” (Piller
and Walcher, 2006: 15). Two ideas are actually being implemented. Furthermore, the
pilot project showed that idea competitions can be used to identify lead users, since
Adidas invited the winners for lead user workshops. If Adidas uses its Mi Adidas Mass
Customization website for inviting people for this closed innovation lab, then it would be
able to breed its future lead users as suggested in the theoretical part.
75
§10.8 Selection systems
The winner is chosen by experts in at least 24 shoe design contests. A jury with experts
includes often (internationally renowed) shoe designers, industry experts, editors of
sneaker magazines, marketing employees etc. Sometimes leading figures from sport are
involved, for example in the Nike Play Award that is looking for innovations instead of
just graphical designs. Many of the contests with a jury state beforehand the criteria like
originality, creativity, inspiration, theme/concept, usage of materials, execution, fit with
the brand etc. A company can ensure via expert selection, that the winning design fulfils
the requirements. K-Swiss organized a contest via a voting principle, but the winning
design used an image of a popular computer game character of Nintendo. Since the
terms & conditions didn’t prohibited this, it could win and still not be produced. The
winner benefits from the credibility of the contest with a jury.
Voting was in 7 contests the (market / peer) selection method. These contests seem to
have in common, that they serve a marketing purpose. On many forums there are posts
of people who ask others to vote for him. In this way the participants promote the
contest and the brand. The 'Etnies Girl's You're the Designer Clear Cut Contest' used a
voting system, but the participants accussed each other of manipulating the voting:
Finally, there were 9 contests that combined voting and a jury. The selection was often
splitted in two stages. First people vote for the designs, and then a jury makes the final
decision. Or a jury selects a few finalists, and that the public votes for the winner. In this
way, the organizer can ensure that a design wins that fulfils his requirements and that is
liked by the public. For example, Iremba.com uses this combination - that is similar to
the collective customer commitment method of Threadless – to produce a small batch of
the winning shoe with some certaincy that it has enough commercial potential.
76
§10.9 Terms & Conditions with regards to Intellectual Property Rights
As the example of K-Swiss shows, organizers with the intend to integrate entries in the
NPD process need to set some rules with regards to intellectual property rights (IPR).
Shoe design contests with a marketing purpose do in general not regulate issues with
regards to IPR. Many have terms and conditions, but these cover topics such as the
publicity. Furthermore, the analysis identified three contests39 with customer integration
as a goal, that didn’t make rules wrt IPR issues as well. It can be that these companies
send the finalists a contract regulating all IPR issues before the winners announcement.
Möbus promises all participants to contact them if it will use a design – whether it has
won or not: "If the shoe does go into production, a contract will be made between möbus
and the respective designer, legally securing the remuneration." Most serious shoe
design contests have terms and conditions (up to 7 pages) that cover various topics. The
most common conditions regarding IPR are summarized in the table below:
Common terms and conditions wrt intellectual property rights
All design submissions become ownership of the organizer.
1
Declaration that the entrant is the sole creator and owns all right, title and
2
3
4
5
6
7
8
9
10
11
12
13
interest in the design.
The design may not contain the intellectual property, including but not limited to
trademarks, copyrights, design patents, or logos, of any third parties.
Participants are liable for claims from third parties resulting from IPR
infringement.
The creation must not be older than 180 days / not entered somewhere else
before / currently not in production and not previously published or exhibited.
The winners transfers the IPR ownership to the organizer.
The prize money is seen as a fair compensation, for the ownership of all IPR.
The entrant becomes no royalties when the design is reproduced.
The organizer has no obligation to use winning designs.
The organizer has the right to modify the design.
Contestants will not pursue claims when future shoe designs have similarities.
Winners must keep their designs secret.
The organizer is not responsible for the theft and misuse of any work posted or
presented on the site.
The first half of the terms in the table are the most frequently used conditions. Every
organizer demands the transfer of ownership, a declaration that the entrant is the
original creator of the design and a guarantee that it doesn’t infringe third party IPR.
Only three contests regulate that they have the right to modify a winning design, and
two organizers ensure via secrecy, that others can’t copy their designs. The last condition
shows, that it hard to protect designs that are online and accessible for all.
§10.10 Conclusion
The analysis of shoe design contests in this chapter, confirms that companies are
integrating consumers in the creative design. Most prescribe a template as design
language, and users have to apply software programmes like Adobe Illustrator as toolkit.
Many organizers regulate IPR ownership issues via the terms and conditions. It can be
questioned, whether companies safeguard themselves against all possible sorts of IPR
issues. Only the Brown Shoe design contest requires a declaration that participants will
not “pursue claims when future shoe designs have similarities”. The next chapter will
describe, that this is a major threat for companies who are (too) open for ideas from
outside the company.
‘Sprandi Footwear Design Competition’; ‘Design Erik Ellington’s Double E Supra Shoe Contest’‘; Wexla shoe
design contest’
39
77
11. IPR CONFLICTS
This chapter will describe the IPR conflicts that have been identified during the case
study. In addition, employees from the industry have been interviewed – see §6.3 – and
they spontaneously mentioned IPR issues after the suggestion that consumers would get
the opportunity to upload images to products.
Q3: Do companies have plans to offer consumers the possibility to create
instead of choosing?
§11.1 Companies are deterred by third party infringement by users
The Niketalk community exhibits many examples of creative consumers (‘sneaker art’),
but also shows that many consumers lack creativity. A few, less talented, consumers
have found ways to compensate for their lack of talent/inspiration: they incorporate
trademarks like Mercedes-Benz and Heineken in their designs. Shoes with images of
popular comic and computer game characters are also popular. This can be seen as an
expression of fans, but there are also people who sell their designs on eBay.
Furthermore, a few community members have placed pictures of their imitations of
(expensive) limited editions of Nike shoes. These practices have attracted attention of
companies. Not only sneaker manufacturers act against these imitators, but also major
(media) companies act against these ´sneaker artists´.
Rodrigo Reinheimer from Vans (a popular sneaker brand) immediately referred to this
kind of infringement of third party IPR as a reason not to offer an uploading service as an
extension to the mass customization website of Vans. If the copyright problem could be
overcome, "then it would be a go." Vans has also organized design contests 40 in the past,
but the design was not taken into production because of legal issues: "We are liable
when the artwork comes from a third party. We didn’t know where the artwork was
coming from. Neither was it in the scope of the contest to utilize submissions and we
never promised to take it into production."
It seems that the shoe industry is far more afraid for third party infringement by users,
than the t-shirt industry. Almost all major t-shirt customization websites offer an
uploading service and many safeguard themselves with a personalization policy that
prohibits the infringement of third party IPR. 41 It could be, that major shoe
manufacturers are a more attractive target for lawsuits than (relatively) small t-shirt
websites. The pressure on Youtube to deal with copyright infringement on popular
content increased massively, once it was taken over by Google. T-shirt websites
relatively soon discovered, that the issue of third party infringement can be turned into a
major business opportunity by cooperating with owners of popular intellectual property
rights such as Disney. Customers can now select images of Disney characters from a
library for a surcharge. Shoe manufacturers could solve this problem the same way.
Furthermore, they already prohibit in their personalization policies that customers are not
allowed to make MC shoes with a name that is profane, offensive or incorporates famous
trademarks. For that reason it seems that third party IPR infringement, isn´t the major
reason to give user more design freedom in MC configurators.
An internet search didn´t find this contest.
Examples of websites with such a policy include: designashirt.com; t-shirt.com; customink.com; custom
glamgirl; spreadshirt;
40
41
78
§11.2 Problems with (future) design similarities
One difference between shoe brands and t-shirt websites is, that t-shirt websites don´t
commercialize their own designs. Shoe manufacturers worry about the risk that their
designs have similarities with designs that people have shared with them. An interesting
example is Adidas. This company has a strategy to become consumer-driven and has
initiated several projects to experiment with customer integration in the NPD process.
Nevertheless, every visitor of the website can find under ´Legal´ the following policy:
Unsolicited ideas
"Adidas maintains the policy of not reviewing or accepting any unsolicited submissions of ideas,
inventions, designs and/or other materials whether consisting of texts, images, sounds, software,
information or otherwise (the "Materials") from persons external to adidas. You should therefore not post
any Materials on the Site or send these to adidas by e-mail or otherwise."
So, Adidas refuses ideas in general to prevent lawsuits, but occassionaly invites
consumers to submit their ideas in contests if they accept the terms and conditions.
Tommy Hilfiger has another policy to prevent lawsuits resulting from unsolicited ideas.
SUBMISSIONS AND COMMUNICATIONS TO HILFIGER
"Any creative ideas, suggestions, designs, artwork, materials, comments, feedback, and other
communications sent to this Internet site or otherwise to Hilfiger by electronic mail (collectively,
"Submissions") are on a non-confidential basis. Hilfiger is under no obligation to refrain from
reproducing, publishing or otherwise using the Submissions in any way for any purpose. Hilfiger shall be
free to use the content of any such communications, including any ideas, inventions, concepts,
techniques or knowledge disclosed therein, for any purpose, including the developing, manufacturing
and/or marketing of goods or services. Such Submissions shall be and remain Hilfiger property. The
disclosure or offer of any Submissions shall constitute an assignment to Hilfiger of all worldwide rights,
titles and interests in all copyrights and other intellectual properties therein. Hilfiger is under no
obligation to pay user any compensation for any Submissions or to respond to user Submissions."
Even a simple suggestion box can be problem. Rodrigo Reinheimer stated that "when we
add a suggestion box, we would go to the legal department to discuss it." Shoe
manufacturers can refuse designs that come to them, but they can´t prevent that
consumers publish it on Niketalk. Many forumers are convinced that the major sneaker
brands are visiting Niketalk to steal their ideas. The header of the Niketalk website says
all:"Welcome snooping Nike employees!" On the forum you can find severaly people who
believe that a manufacturer has stolen their idea:

SANEMAN120: “lol they probably did. The stars look
like they are in da same place for both of them.”

Emmanuelabor: “not to sound like a hater, but I
know for a fact NUMEROUS people did
red/white/blue customs with very similar star
placement well before you…the idea wasn’t at all
original…to you or Nike.”

5th Platoon: “…And when you post customs here or
any other place on the Internet it’s bound to be
copied in some form or another.”

VicsKicks: “if they did steal it, they did it better.”
The main problem, is not the legal issue – the few similarities are probably coincidence
and the consumer has not enough money to start a lawsuit – but the possible damage to
the reputation of a major brand like Nike.
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§11.3 The Open Source Footwear Project
John Fluevog, a well-known shoe designer, has started a project that is inspired by open
source software. Therefore the project is named ‘Open Source Footwear’. Everybody can
summit ideas for a shoe or a part of a shoe. The website of Fluevog shows the sketches
that have been selected as finalists and peers can vote for them. Whether a design is
chosen to be real shoes depends also on whether Fluevog likes it or not.
Figure: Two winning designs together with the comments of Fluevog
Fluevog can use it as basis for his own design or use only part of it. This has made the
issue of IPR very complicated. Fluevog describes the problems he faced in the beginning:
“In its development, a key concern was the issue of design ownership...In fact, we had to address
ownership to avoid situations where we might be liable for designs we considered to be in the public
domain. The main idea we've presented is that the customer designs the shoe but we've made it clear
there are also other courses of development. What actually happens after the initial sketch can result in
something that might be nearly spot on or might look nothing at all like the original. For instance:
1/ Two people submit similar sketches, but one's better. We make that one, but the other person thinks
it's their design. Whose is it?
2/ We combine different parts of several sketches, maybe adding our own ideas - who designed the
shoe?
3/ We produce a shoe on the understanding that the design is safely in the public domain. The customer
isn't quite as clear on this, however, and when the shoe appears in our stores, the lawyer appears at our
door. Oh boy. Court. Multiply this one by the number of people who might be a little vague and
everything disappears into a black hole.
These are only some examples of the potential rat's nest we faced. It goes on and on. The only effective
measure is to make everything airtight from the beginning. But now, it appears the definition of "airtight"
may be more flexible than we'd originally thought. "
Source: http://www.boingboing.net/2001/10/12/john_fluevog_shoes_h.html
Fluevog worked out a solution in the spirit of the Open Source philosophy. All entrants
need to enter a form with terms and conditions that state: “The submitting party
understands and agrees that submission of this design to John Fluevog Shoes Ltd.
80
releases the design into the public domain, where it is owned by no one and freely
available to all. All claims to compensation in any form are waived.” Since the designs
are in the public domain, Fluevog can legally use it and improve it. A participant doesn’t
receive a monetary reward. Instead, Fluevog promises to give credits to the designer by
naming it after him/her and by putting the name on the shoe or the box. The biggest
reward, is according to Fluevog, that the design can become reality.
Once we began getting your emails and reading your discussion board, we asked ourselves, in light of it
all, what would really be the worst case scenario, if we were to simply shift gears right now and be
completely open with all designs. It immediately became a forehead smacker for us - all we'd have to do
is be equally clear that any submitted design was public domain. This is, of course, also more correctly in
line with true Open Source philosophy.”
So far, the website of Fluevog doesn´t stimulate people to work collectively on designs as
in the open source software community. The website would first need to develop a highend toolkit, so that all designs are not sketches but available in digital format that can be
downloaded and improved. Nevertheless, the legal foundation is there in contrast to the
design contests. A major disadvantage is of course, that a winning design could also be
produced by a competitor. Therefore, it might be possible that future initiatives develop a
propertiary toolkit with a few basic propertiary components that can´t be changed.
§11.4 Conclusion
The case study shows that companies in the shoe industry are aware of issues about
intellectual property rights. Companies try to prevent legal claims and reputation damage
by adopting policies against unsolicited ideas. The major shoe brands seem to fear legal
claims from third parties because of IPR infringement, and reputation damage from
consumers who accusse them of using their ideas – whether true or not. Companies work
with strict terms and conditions when they invite consumers to submit their designs and
ideas in contests. They make a contract with the consumer. This seems to work well,
because they deal with individuals. It will be more difficult to adopt this solution, once a
company decides to make use of the collective innovation power in communities. A
company that has both a MC strategy and a high-end toolkit, would benefit most from it
when it enables consumers to use and improve designs of thirds. Once a design is taken
into production – perhaps even after a modification by the company – it is hard to
identify a sole creator. The solution in that case, would be to declare all submissions in
the public domain as John Fluevog did. However, this would make it possible for
competitors to use the designs as well.
81
CONCLUSION
The case study has described the motives for adopting a mass customization (MC)
strategy in the shoe and clothing industry, the MC archetypes that are most commonly
found in the industry, the shoe design activities of consumers in (independent) online
communities, the organization of shoe design contests in the industry and their
objectives, and the intellectual property right (IPR) conflicts. The conclusion will confirm
or nullify the three hypotheses by answering the sub research questions.
Hypothesis 1: “The existing MC toolkits in this industry offer enough design freedom for
their lead users.”
Q1a: What kind of design freedom is currently being offered by mass
customizers in the shoe and clothing industry?
Many mass customizers in the industry do not offer a configurator with dynamic feedback
functionality – showing a (3D) model of the product. For that reason, users can´t carry
out a complete cycle of trail-and-error learning. Neither do these websites offer a library
with most commonly used modules. These companies work mostly with options lists
where the user goes through. They do not fulfil the five objectives of Hippel (2001) for
effective toolkits for innovation. Only the major sneaker brands operate state-of-art
configurators with dynamic 3D models and defaults to prevent the blank page syndrome.
Nevertheless, these companies offer only choices – especially colors options - and not the
design freedom to create. These companies invest a lot in their configurators, but the
development over the last two years shows that they are mainly focussing on adding
more (unique) choices and options. They improve the usability service in order to make
sales and they differentiate their configurator from other MC configurators. Furthermore,
they try to enhance the design experience – also by operating exclusive ´Design Labs´but without increasing the design freedom. T-shirt-websites like Zazzle and Cafepress are
marketplaces for creative consumers who want to sell (micromerchanding) their designs.
Nevertheless, only Spreadshirt offers the Spreadshirt Designer, an online design toolkit
to create designs. All other websites offer only an uploading service for pictures. So, it
can be concluded that when a mass customizer in this industry offers a toolkit, it offers
mainly a limited solution space with choices.
Q1b: Are some consumers employing self-created tools in order to create
designs outside the design freedom that is being offered by the official
MC toolkits?
The Niketalk community exhibits many creative designs from consumers in its ´Sneaker
Art´ section. The phenomenon that consumers decorate their shoes with paintbrush is
not new. Users have developed their own online design tools to experiment with designs,
before they produce it on their shoes. Experienced forumers create namely templates
and other community members make their graphic designs in it. Many post their designs
in the forum and others give contructive criticism. Users can thereby improve their
design by trial-and-error. A large subcommunity makes only virtual shoe designs. After
some time they start using software programmes like Adobe Illustrator and Photoshop.
The templates may not be the state-of-art toolkits as the MC configurators, but users
have far more design freedom and they create professional designs with their advanced
software. The few comments in the forum about MC websites learn, that people regard
the design possibilities of NikeID as superficial.
It is concluded, that consumers need more design freedom (to create), than the
mass customization configurators in the shoe and clothing industry are
currently offering. The case study found a similar phenomenon as been
described by Prügl and Schreier in chapter 4: users started to employ selfcreated tools (templates) and have searched and found more advanced toolkits
(Photoshop, Illustrator etc.). Hypothesis 1 is thereby rejected.
82
Hypothesis 2: “Manufacturers in the shoes and clothing industry reject the idea of open
innovation (= customer integration in creative design) at all, therefore they don’t offer
high-end toolkits.”
Q2a: Have companies started offering MC with the (main) objective of
integrating customers’ needs?
Several market research studies have shown, that consumers have a more
heterogeneous demand than the existing supply of clothing and shoes. The willingness to
pay (WTP) a premium price is high, although it is more for custom fit than for individual
designs. The main objective of the industry to start with MC is therefore to utilize this
opportunity. Nonetheless, the motives of Adidas show that this company has a strategy
to become more customer-centric. MC is a means to increase the absorptive capacity
with regards to consumer input. Other companies in the industry seem to have similar
objectives, since they have decided for a consumer-direct model for their MC. These
companies were willing to risk a channel conflict, in order to benefit from the direct
interaction with consumers (usually via the internet). Therefore it is reasonable to expect
that the companies in this industry would be interested in an open innovation strategy as
well.
Q2b: Are companies in this industry integrating consumers in the creative
design in other ways than with high-end toolkits?
Piller and Walcher (2006) describe idea and design contests as a means to integrate
consumers in the new product development (NPD) process. The case study has analysed
42 shoe design contests. Not alone the number of contests was impressive, but also it
was found that all major players in the industry organize contests. However, there are
also many third parties like magazines (and even a car brand) who organize shoe design
contests. This confirms that many design contests are used as a marketing gimmick.
Especially Nike focuses on involving opinion leaders and communities in its contests to
create buzz around the brand and its NikeiD website. On the other hand, the analysis
found 16 organizers who stated beforehand that the winning designs could be produced.
Not all promises were made reality, but several organizers clearly had the intent of
integrating consumer ideas and designs in their NPD process. Several winning designs
were actually produced either as a limited edition or as a part of the normal collection.
Other organizers regard the submissions as a valuable source for inspiration and
innovation. The high monetary prizes reflect the importance of these contests. The
serious intents explain why many organizers have (extensive) terms and conditions with
regards to IPR. Many demand that they get the IPR ownership, and they want
guarantees that the submission isn´t already in the public domain or infringes third party
IPR. Only a few organizers safeguard themselves against other possible IPR conflicts, e.g.
the right to modify the design or similarities in future designs. The template is the most
commonly used format for submissions, although idea contests seem to favour sketches.
It can be concluded that companies in the industry are trying to integrate the
creative designs and ideas from consumers in their NPD process. They see
direct interaction with consumers in their mass customization strategy as a
valuable information source about (individual) needs and preferences.
Furthermore, companies are inviting consumers to submit their creative ideas in
design contest. Companies are eager to ensure that they get the IPR so that
they can commercialise the products based on consumer inputs. Companies
accept the idea of open innovation. Hypothesis 2 is therefore rejected.
83
Hypothesis 3: “Companies deter from offering high-end toolkits, because potential
conflicts about the ownership of IPR might arise.”
Q3: Do companies have plans to offer consumers to possibility to create instead
of choosing?
When confronted with the suggestion of giving consumers the possibility to upload
pictures in their current MC configurators, the interviewees reacted negatively and
referred spontaneously to possible IPR conflicts. Companies fear that they are liable
when consumers infringe third party IPR. The Niketalk community exhibits many designs
of consumers who incorporate trademarks, popular game and comic characters and other
IPR in their designs. So, it seems that this fear is justified. On the other hand, t-shirtmasscustomizers offer an uploading service and have strict personalization policies that
explicitly prohibit these practices. They screen the submissions and they reject designs
when they have doubts about the origins. Furthermore, they cooperate with owners of
popular IPR such as Disney and offer a library with these contents for a surcharge. Shoe
brands could follow the same approach. However, one difference is that t-shirt-websites
don´t produce their own designs. Major shoe brands fear the legal disputes resulting
from similarities in their designs with submissions from others. Even Adidas –that is
clearly pro customer integration – has an official policy against ´unsolicited ideas´.
Consumer can only send in ideas and designs, if they are invited by Adidas for a contest
and when they accept the (strict) terms and conditions.
The proposed strategy that companies combine a mass customization strategy and open
innovation via the toolkit method, assumes that there are spillover effects between them.
For instance, experienced members create with high-end toolkits new modules, that 1)
can be modified by other experienced users and 2) become available as option in the MC
configurator for less experienced users. The company could benefit from the collective
design activities in a community. The disadvantage is that it has to deal with multiple
creators. A company can easily negotiate remuneration with the winner of a design
contest. On the other hand, conflicts can arise about the ownership of a collective design.
A solution would be to declare all designs in the pubic domain, as John Fluevog did for his
Open Source Footwear project. Competitors would then be able to benefit from the
designs as well.
Finally, besides the possible IPR conflicts there is another basic reason why companies
don´t offer a second toolkit, namely time and effort. Rodrigo Reinheimer of Vans
spontaneously mentioned in our interview: "in the ideal scenario we have a basic toolkit
for a person who has never bought custom shoes before and an advanced toolkit with
options that are hidden in the basic toolkit, but this is only possible when enough
revenues are coming out of the shoes to justify a second configurator." Mr. Gordon is
the owner from Route One, a company with a sport clothing configurator that is
completely based on templates. After my suggestion that consumers could create new
templates, he answered: "In the moment this is not possible, since the software doesn’t
allow it. The template is in Flash and it takes a long time to produce a new template. It is
all done in code."
It can be concluded, that companies in the industry do not offer a high-end
toolkit because of the potential conflicts about the IPR ownership. A second
reason is that the costs are very high and that the software language of the
configurators demands too much effort to build in more design freedom.
Hypothesis 3 is hereby confirmed. However, it is likely that in the (near) future
these hurdles can be overcome. Next, some recommendations to achieve this
will be given, as well as suggestions for further research.
84
RECOMMENDATIONS AND SUGGESTIONS FOR FURTHER RESEARCH
Research question:
“Why have only a few companies in the shoes and clothing industry, so far, combined a
mass customization strategy with an open innovation strategy?”
Companies in the shoes and clothing industry are combining a mass customization
strategy and open innovation. However, so far they have not chosen for high-end toolkits
as means to integrate the creative ideas and designs of consumers in the NPD process.
Many companies organize design contests, presumably because they can safeguard
themselves against possible IPR conficts via the terms and conditions. In addition, they
have to deal with only one creator. High-end toolkits enable collective design in
communities, but make the IPR issues more complicated. Developing these special
toolkits for a relatively small group of experienced consumers (perhaps even lead users)
is far more costly than organizing a design contest.
Recommendations
Based on the case study, the following application of high-end toolkits can be imagined:
 Companies will adopt a similar approach as in the computer game industry. They
develop a propertiary platform and consumers can develop designs and ideas
around it in the public domain. This approach might not fit with the shoe industry,
but would be interesting for the car industry or the consumer electronics industry.
Basically, the Fiat 500 toolkit was an example of this approach.
 Shoe design companies make license agreements with owners of popular content,
e.g. Disney. Users of the MC toolkit can select images from the image library.
Companies will organize design contests and the winning graphics will become
available in the MC configurator.
 Instead of developing a high-end toolkit in Flash similar as the MC configurators,
companies will provide 3D templates for popular design software programmes.
Users can upload designs to a gallery, and access a module library in Adobe
Illustrator or Photoshop via special plugins. This solution might cost less, and
builds on the current design activities by users.
 Companies will select winners in design contests on the basis of the diffusion of
their ideas in the community, instead of via a jury selection.
 Communities might develop a functionality to manage the IPR ownership: e.g.
others can further develop a design, but have to share prize money.
Future research questions:
 Do other industries favour contests over toolkits, because of IPR conflicts as well?
 Are amateur shoe designers interested in collective design possibilities? Or do
they regard their designs as the artistic expression of an individual?
 Have shoe designs that are designed by a collective more commercial value? 42
 What system is better in selecting ideas and designs with high commercial value –
experts or diffusion amongst peers in a (lead user) community?
 Have participants in design contests lead user characteristics? Have forumers on
Niketalk lead user characteristics?
 What is the added value of famous designers in the shoe and clothing industry
(secondary value creation)? Is this a major hurdle against designs created by
amateurs? What will be the long term effect on the reputation of brands, once
they start to openly commercialize consumer creations?
There are several anecdotical examples in the Niketalk community, of people who make suggestions to
improve the designs of others. For instance, one person posted his design for a ´Forest Gump´ shoe. Another
member contributed a design for the sole of this shoe, namely in the shape of a box full of chocolates. Many
other forumers reactied that they liked this improvement, but the original creator still needs to translate this
suggestion in his design.
42
85
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CONCEPTS AND DEFINITIONS
Adaptive customization
“Adaptive customizers offer one standard, but customizable, product that is designed so
that users can alter it themselves.” (Gilmore and Pine, 1997: 3)
Adoption
“Adoption is a decision to make full use of an innovation as the best course of action
available. Rejection is a decision not to adopt an innovation.” (Rogers, 1995: 171)
Affinity groups
“Peppers and Rogers (1997) use the term "affinity groups" to describe sub-communities
of customers with similar taste. By linking affinity groups with the recorded purchase
transactions of a high number of customers, a knowledge base emerges which can be
used for the forecast of the future buying behavior of individuals.” (Piller, Schubert,
Koch, Möslein, 2005: ?)
Co-design
“In general, the term co-design relates to a cooperation process, that is, a process of
collaborative value creation, between two or more actors (Wikström, 1996a; Ramirez,
1999; Prahalad and Ramaswamy, 2004; Piller, 2005).” (Berger, Möslein, Piller and
Reichwald 2005: 2)
“The term co-design is used in the literature with regard to a cooperation between a firm
and its individual customers during the configuration process of a customized product
(Franke & Piller, 2003, 2004; Franke & Schreier, 2002; Wikström, 1996).” (Piller,
Schubert, Koch, Möslein, 2005: )
Collaborative customization
“Collaborative customizers conduct a dialogue with individual customers to help them
articulate their needs, to identify the precise offering that fulfils those needs, and to
make customized products for them.” (Gilmore and Pine, 1997: 2).
Collective customer commitment method
“This method, which we call collective customer commitment, exploits the commitment of
users to screen, evaluate and score new designs as a powerful mechanism to reduce
flops of new products. The method breaks with the known practices of new product
development. It utilizes the capabilities of customers and users for the innovation
process. The process starts when an idea for a product is posted on a dedicated web site
by either a (potential) customer or the developers of a manufacturer. Second, reactions
and evaluations of other consumers towards the posted idea are encouraged in form of
internet forums and opinion polls. Based on the results of this process, the manufacturer
investigates the possibility of commercialization of the most popular designs. Is this
evaluation positive, the company decides about a minimum amount of purchasers
necessary to produce the item for a given sales price, covering its initial development
and manufacturing costs (and the desired margin). The new product idea is then
presented to the customer community, and interested customers are invited to express
their commitment to this idea by voting for the design or even placing an order.
Accordingly, only if the number of interested purchasers exceeds the minimum necessary
lot size, investments in final product development are made, merchandising is settled
and sales are commenced.” (Ogawa and Piller, 2005: 3)
Commercialization
“Commercialization is the production, manufacturing, packaging, marketing, and
distribution of a product that embodies an innovation.” (Rogers, 1995:143)
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Community sourcing
To use innovative customers as a resource. (Prügl and Schreier: 3) / (Linder et al., 2003)
Configuration
“Configuration means to transfer customers’ wishes into concrete product specifications.”
(Tseng and Piller, 2003: 16)
Cosmetic customization
“Cosmetic customizers present a standard product differently to different customers.”
(Gilmore and Pine, 1997: 3)
Critical mass
“The rate of adoption of interactive media such as electronic messaging systems, fax,
and teleconferencing often displays a certain distinctive quality called the criticla mass.
The critical mass occurs at the point at which enough individuals have adopted an
innovation so that the innovation’s further rate of adoption becomes self-sustaining.”
(Rogers, 1995: 313)
Customer co-design
“Customer co-design describes a process that allows customers to express their product
requirements and carry out product realization processes by mapping the requirements
into the physical domain of the product (Khalid & Helander, 2003; von Hippel, 1998). As
a result, the customer chooses an individualized combination of product specifications
from an infinite set of options. During this process of elicitation, the customer is being
integrated into the value creation of the supplier.
…The term co-design is used in the literature with regard to a cooperation between a firm
and its individual customers during the configuration process of a customized product
(Franke & Piller, 2003, 2004; Franke & Schreier, 2002; Wikström, 1996).” (Piller,
Schubert, Koch, Möslein, 2005: ?)
“Customer co-design describes a process that allows customers to express
their product requirements and carry out product realisation processes by mapping the
requirements into the physical domain of the product [8, 9].” (Franke and Piller, 2003: 2)
“Customer co-design describes a process that allows customers to express their product
requirements and carry out product realization processes by mapping the requirements
into the physical domain of the product [35, 36, 37].” (Tseng and Piller: 8)
Customer-driven
“When we say ‘customer-driven’, we are talking about a business that relies on delivering
highly tailored, individualized products and services to each of its customers –whether
these customers are consumers or other businesses – based on feedback from and
interaction with these customers.” (Peppers and Rogers, 1997:11)
Customer integration
“Customer integration can be defined as a form of industrial value creation where ‘the
consumers take part in activities and processes which used to be seen as the domain of
the companies’ (Wikström 1996: 360).” (Piller, Moeslein & Stotko, 2004:3)
Customer loyalty
“Customer loyalty can be seen as a result of switching costs, opportunity costs, and sunk
costs based on technological, contractual and psychological obligations faced by a
customer (Jackson 1985, Riemer and Totz 2003).” (Piller, Moeslein & Stotko, 2004: 7)
Diffusion
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“Diffusion is the process by which an innovation is communicated through certain
channels over time among the members of a social system. It is a special type of
communication, in that the messages are concerned with new ideas.” (Rogers, 1995:5)
Disintermediation
Trying not to alienate your third-party retailers. (e.g. Reflect.com)
Economies of integration
“Economies of integration go beyond the differentiation advantages of customized
manufacturing which are expressed in a price premium. They represent the efficiency
when a firm gains deeper knowledge about its environment and establishes value
processes that eliminate waste on all level. Unlike economies of scale in a traditional
industrial system, which involve making and moving volumes of products or services and
then selling them often at ever decreasing margins, economies of integration can
generate increasing returns.” (Piller, Moeslein & Stotko, 2004:5)
Elicitation process
“Every transaction implies information and coordination about the customer-specific
product design and is based on a direct communication between the customer and
supplier. Here, the capabilities of the supplier’s solution space are turned into a specific
customer order by using adequate configuration tools. Zipkin (2001) call this process the
‘elicitation’ of a mass customization system. The supplier has to interact with the
customer to obtain specific information in order to define and translate the customers’
needs and desires into a definite product specification. This elicitation process is in many
cases much more than an exchange of information but an act of joint cooperation and cocreation. Elicitation in mass customization systems is resulting in customer integration.”
(Piller, Moeslein & Stotko, 2004:3)
Experience
“Experiences are stimulating events that provide intrinsic pleasure (i.e. pleasure for its
own sake; Hirschman and Holbrook, 1982) rather than the utilitarian benefits derived
from services. To create an experience, a business must engage customers in a
pleasurable, memorable event during the sale of a product and while providing a
service.” (Fiore, Lee and Kunz, 2004: 10)
Freely reveal
“When we say that an innovator freely reveals information about a product or service it
has developed, we mean that all intellectual property rights to that information are
voluntarily given up by the innovator, and all interested parties are given access to it—
the information becomes a public good.” (Von Hippel: XXV)
Gatekeeping
“Gatekeeping is controlling the flow of messages through a communication channel. One
of the most crucial decisions in the entire innovation-development process is the decision
to begin diffusing an innovation to potential adopters.” (Rogers, 1995:148)
Heterogeneity of needs
“If many individual users or user firms want something different in a product type, it is
said that heterogeneity of user need for that product type is high.” (Von Hippel: 49)
Heuristic
“A heuristic is a rule of thumb, a mental shortcut.” (Schwartz, 2004: 57)
Incremental innovations
“…merely extend the current proposition facing consumers. They introduce relatively
minor changes to the product or service, build upon the competences and assets of
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existing competitors, and tend to reinforce the dominance of the established players.”
(Markides and Geroski, 2005:5)
Innovation
“An innovation is an idea, practice, or object that is perceived as new by an individual or
other unit of adoption.” (Rogers, 1995:11)
Innovation attractiveness
“Innovation attractiveness is the sum of the novelty of the innovation and the expected
future generality of market demand.” (Von Hippel: XX)
Lead user
“Lead users are defined as users of a given product or service type who combine two
characteristics: (a) they expect innovation-related benefits from a solution and are
thereby motivated to innovate and (b) they experience the need for a given innovation
earlier than the majority of the target market (von Hippel 1986).” (Jeppesen and
Frederiksen, 2004: 11)
Learning relationship
“A learning relationship between a customer and an enterprise gets smarter and smarter
with every individual interaction, defining in ever more detail the customer’s own
individual needs and tastes.” (Peppers and Rogers, 1997:15)
Local information
“We define local information as that an innovator already has “on site” prior to
innovating, or generates on site during the course of innovation development.” (Luthje,
Herstatt and von Hippel, 2002:2-3)
Mass confusion
“Pine coined the term "mass confusion" (in Teresko, 1994) as a metaphor to describe the
burdens and drawbacks for the consumer as a result of mass customization interaction
processes.” (Piller, Schubert, Koch, Möslein, 2005: ?)
Mass customization
“The objective of mass customization is to deliver goods and services that meet
individual customers’ needs with near mass production efficiency (Pine, 1993; Tseng
and Jiao, 2001; Piller, 2005).” (Berger, Möslein, Piller and Reichwald 2005: 1)
Need
“A need is a state of dissatisfaction or frustration that occurs when ones desires
outweighs one’s actualities, when ‘wants’ outrun ‘gets’.” (Rogers, 1995:164)
Open innovation
“I use the term "open innovation" to describe a concept of innovation following the
principles of open source development to perform innovation innovatively in many
product categories. The main idea is that customers and users, and communities of
users, are actively integrated into the innovation processes by the means of dedicated
tools and platforms.
…In a new book Harvard Professor Henry W. Chesbrough uses the term open innovation
to address the demand to co-operate to innovate. Open innovation in his understanding
draws on technologies from networks of universities, start-ups, suppliers, and even
competitors.” (Piller, 2003: http://www.madeforone.com/Concepts/OpenInnov.html)
Opinion leadership
“Opinion leadership is the degree to which an individual is able to influence other
individuals’ attitudes or overt behavior informally ion a desired way with relative
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frequency. This informal leadership is not a function of the individual’s formal position or
status in the system. Opinion leadership is earned and maintained by the individual’s
technical competence, social accessibility, and confomity to the system’s norms.”
(Rogers, 1995:27)
Postponement
’Postponement means that companies delay production, assembly, or even design until
after customer orders have been received, which increases the ability to fine tune
products to specific customer wishes’ (Van Hoeck et al. 1998:33).” (Piller, Moeslein &
Stotko, 2004:6)
Prosumer
“The customer becomes a ‘co-producer’ respectively a ‘prosumer’ (Toffler, 1970).”
(Piller, Moeslein & Stotko, 2004:3)
Pyramiding
“Networking from innovators to more advanced innovators in this way is called
pyramiding (von Hippel, Thomke, and Sonnack 1999). Pyramiding is a modified version
of the “snowballing” technique sometimes used by sociologists to identify members of a
group or accumulate samples of rare respondents (Bijker 1995). Snowballing relies on
the fact that people with rare interests or attributes tend to know others like themselves.
Pyramiding modifies this idea by assuming that people with a strong interest in a topic
or field can direct an enquiring researcher to people more expert than themselves.
Radical innovation
“Innovations are considered radical if they meet two conditions: first, they introduce
major new value propositions that disrupt existing consumer habits and
behaviours…second, the markets that they create undermine the competences and
complementary assets on which existing competitors have built their success.” (Markides
and Geroski, 2005: 4)
Re-invention
“…the degree to which an innovation is changed or modified by a user in the process of
its adoption and implementation.” (Rogers, 1995:17)
Scope (of a toolkit)
“The scope of a toolkit describes the user's design possibilities, that is, the user's degree
of design freedom (Thomke and von Hippel, 2002).” (Prügl and Schreier: 7)
Solution space
“The solution space is set by the toolkit provider who determines the set of functions
over which consumers have control. In other words, the size of solution space determines
the amount of freedom that consumers have for their creations. When solution space is
large, toolkit use will tend to be more complex, because there will be more functions to
master, and there will be more decisions to make for a given consumer on which
functions to employ in a given situation.” (Jeppesen, 2002: 13)
Stickiness of information:
“The stickiness of a given unit of information is defined as the incremental expenditure
required to transfer that unit from one place to another in a form usable by a given
information seeker. When this cost is low, information stickiness is low; when it is high,
stickiness is high.” (Hippel, 2001:2)
Toolkits for customer co-design
“In the arena where co-design is performed, vendors use so-called toolkits for customer
co-design. Von Hippel (2001) defines these toolkits as a technology that (1) allows users
to design a novel product by trial-and-error experimentation, and (2) delivers immediate
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(simulated) feedback on the potential outcome of their design ideas.” (Piller, Schubert,
Koch, Möslein, 2005: ?)
Toolkits for user innovation and design
“Toolkits for user innovation and design are integrated sets of product design,
prototyping, and design-testing tools intended for use by end users. The goal of a toolkit
is to enable non-specialist users to design high-quality, producible custom products that
exactly meet their needs. Toolkits often contain “user-friendly” features that guide users
as they work. They are specific to a type of product or service and a specific production
system.” (Von Hippel: 163)
Toolkits for user innovation
“Von Hippel (2001) defines toolkits for user innovation as a technology that (1) allows
users to design a novel product by trial-and-error experimentation and (2) delivers
immediate (simulated) feedback on the potential outcome of their design ideas.” (Franke
and Piller, 2004:2)
“Toolkits allow users to undertake innovative work in a way that is structured by the
firm.” (Jeppesen and Frederiksen, 2004: 5)
Transparant customization
“Transparent customizers provide individual customers with unique goods or services
without letting them know explicitly that those products and services have been
customized for them.” (Gilmore and Pine, 1997: 4)
User
“Users, as the term will be used in this book, are firms or individual consumers that
expect to benefit from using a product or a service. In contrast, manufacturers expect to
benefit from selling a product or a service.” (Von Hippel: XiX)
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