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Each time you visit Amazon.com, the Web site makes surprisingly accurate suggestions of products you might find interesting. The company has developed its entire IT infrastructure and operational processes around microcustomization as a tool to meet its strategic objectives. You might not think of it this way, but Amazon.com is a microcustomization master. Many companies have shied away from implementing microcustomization because of the perception that it requires costly custom IT systems and major business restructuring. To take advantage of microcustomization, or the ability to customize products and services as close to customer preferences as possible, a CIO needs to look at the target market, business processes, and IT infrastructure to determine whether existing systems can be used or major investments will be required to implement the strategy. With careful planning, many enterprises can use existing IT infrastructure and business processes to deliver microcustomization to serve each customer's desires cost-effectively. For the CIO, the challenge is educating peers and recruiting supporters for specific opportunities, and leveraging systems, without overselling the immediate impact of the overall microcustomization strategy.

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Each time you visit Amazon.com, the Web site makes surprisingly accurate suggestions of products you might find interesting. The company has developed its entire IT infrastructure and operational processes around microcustomization as a tool to meet its strategic objectives. You might not think of it this way, but Amazon.com is a microcustomization master.

Many companies have shied away from implementing microcustomization because of the perception that it requires costly custom IT systems and major business restructuring. However, for every Lands' End or Dell that pours millions of dollars into developing the necessary infrastructure, there's a Home Depot or Best Buy that has implemented mass customization without a large capital outlay. As businesses continue searching for competitive advantage in the marketplace, service interfaces with customers will remain critical.

To take advantage of microcustomization, or the ability to customize products and services as close to customer preferences as possible, a CIO needs to look at the target market, business processes, and IT infrastructure to determine whether existing systems can be used or major investments will be required to implement the strategy. With careful planning, many enterprises can use existing IT infrastructure and business processes to deliver microcustomization to serve each customer's desires cost-effectively. For the CIO, the challenge is educating peers and recruiting supporters for specific opportunities, and leveraging systems, without overselling the immediate impact of the overall microcustomization strategy.

Price competition is intense, and channel partners can be ruthless. Commoditization has become rampant in the global economy, and market segments appear and disappear daily. Product life cycles are getting ever shorter. With marketing and promotional campaigns that reach tinier fractions of an increasingly distracted and jaded audience, the maxim that revenue is earned one customer at a time is truer than ever. Companies can use or leverage microcustomization initiatives to attack market segments customer by customer, while achieving economies of scale that directly add to the bottom line (for another viewpoint, see "The High Cost Of High Touch," p. 34).

For the CIO, the objective is to successfully navigate through the competing forces for more efficient IT spending and the massive data-processing requirements of microcustomization. This requires the capacity to deliver customized value at commodity prices. Imagine constantly adjusting each of the four P's of marketing-price, product, place, and promotion-at every level, from market segment, subsegment, and individual customer, down to a specific transaction. The effort can pay off handsomely. Companies introducing microcustomization are growing faster and more profitably than their competitors.

By now, everyone knows that one of Wal-Mart's strongest competitive weapons is its ability to customize its merchandise mix at the individual-store level. Best Buy builds computers and home-entertainment systems in the store, yet still undercuts its competitors on price. Home Depot offers kitchen and bathroom remodeling services, traditionally the province of small contractors. Previously, local businesses were the only companies that could offer the personalized service and specialized work required in the home-remodeling business. These giants have all made microcustomization a priority by deploying their resources to satisfy distinct customer needs with customized value propositions.

Though much of the published literature focuses on retail markets, microcustomization isn't only a consumer-product phenomenon. It affects the entire supply chain. The most dramatic changes will occur in collaborative design and the integrated supply of intermediate goods and components. Look at Autodesk's Web site to see leading-edge thinking in this area. The company's collaborative product-design offerings are transforming the nuts and bolts of business collaboration in real time. A CIO can leverage the Autodesk hosting environment to engage partners in the earliest stages of collaborative marketing and design.

Mobilizing operations

Microcustomization requires introducing tightly focused business rules in extremely short time frames. After an opportunity is identified for implementation, daily operations must be mobilized to exploit the new ideas. But with the current set of tools and business processes, the vast majority of companies aren't nimble enough to take advantage of opportunities as they present themselves.

For example, overall retail industry stock-out rates for promotional items exceed 20%. That's an unacceptable level for executing microcustomization effectively. It's little wonder that the retail industry is investing billions of dollars to deploy radio-frequency identification (RFID) and business synchronization systems so that supply-chain activity can be tightly monitored and then accelerated as microcustomization becomes more prevalent.

Even with small investments in infrastructure, companies are implementing microcustomization just by keeping end-to-end processes in-house. For example, one test-instrumentation company has successfully implemented microcustomization by performing the majority of its manufacturing and assembly inhouse. With a 15-year-old MIS system and a paper catalog of 40,000 options on 10 basic test-instrument product lines, the business has slashed prices and continues to deliver highly specialized tools to suit individual customer needs by operating efficiently.

Yet, the company could further improve its microcustomization efficiencies by deploying smarter IT applications to track products as they move through the system. Smarter IT applications with embedded business rules would let the company outsource more component manufacturing and further modularize subassemblies.

Others, such as package-delivery companies, capitalize on their physical infrastructure, logistics capabilities, and customer-service facilities. For example, United Parcel Service of America routinely co-ventures with customers and vendor partners to develop industry-specific solutions to streamline supply chains and "synchronize the world of business." The package-distribution industry has been an early adopter of microcustomization, because it already had a strong service-value focus. The challenge that DHL, FedEx, and UPS face is that as they microcustomize services, they must maintain world-class operational efficiency and low costs (see "The Value Of Moving Atoms," p. 37).

The keys to success for the CIO are IT systems, process, and staff flexibility within tight parameters. This combination keeps costs down while delivering the desired customized product. The capabilities that a business needs to support microcustomization are well-defined IT architectures with embedded business rules, solid logistics, well-integrated business processes, and a flexible organization.

If you have a tightly coupled supply chain, you're well on the way to delivering on the promise of microcustomization. For the CIO, that means delivering flexible and sophisticated IT tools, such as data warehouses, business intelligence, and smarter ERP systems, to support logistics and operations, as well as traditional IT functions, such as payroll, human resources, and financial applications.

One example of IT's enabling microcustomization is the addition or expansion of a custom product by the streamlined reuse of standard designs, parts, assembly processes, and customer-service capabilities. This has been used by diverse industries ranging from furniture manufacturing-such as Brayton International, a subsidiary of Steelcase-for fulfilling orders for custom-designed furniture, to retailers efficiently assembling user-specified PCs, as Best Buy does. This model typically requires a middleware infrastructure to enable integration of inventory management, order management, fulfillment, and customer-support services.

On the other hand, microcustomization strategies may require the CIO to introduce new information-gathering technologies, such as RFID, Wi-Fi, business-activity monitoring, and business-synchronization hubs, and integrate them with business-intelligence engines to allow the management team to determine whether opportunities are economically viable.

The team needs to plan the project with the intention of using existing infrastructure whenever possible. After an initiative or set of initiatives has been selected for implementation, take full advantage of the existing IT infrastructure to achieve optimal return on the investment. For example, applications such as ERP, CRM, ?-business, or supply-chain management can often be integrated by using a service-oriented architecture or middleware capability. Data about customers, products, and suppliers will be accessible through existing data-warehousing or business-intelligence tools. If you've integrated your IT systems with those of your suppliers, taking the next step toward microcustomization will be that much easier.

Microcustomization has already forever changed the logistics and retail mail-order industries. Using existing tools and organizational efficiencies, your company can join the industry leaders without the large capital outlays and corporate restructuring the leaders went through.

See Related Articles: "How Profitable Are Your Customers?" April 2003, p. 24; www.optimizemag.com/issue/018/ customer.htm * "Customer Metrics That Matter," April 2003, p. 44; www. optimizemag.com/issue/018/roi.htm.

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Did You Know?

When companies adapt and align their customer-strategy and fulfillment operations while controlling costs, they outperform the industry two-toone in revenue growth and have 5% to 10% higher profit margins, Booz Allen Hamilton found in a study of 50 companies with sales from $1 billion to more than $20 billion. The study, conducted over six months in late 2003, included stalwarts Campbell Soup, Time Warner, and Unilever. Some best practices: Understand the sources of value that customization provides customers and align business streams to the sources of demand, to provide customer value at least cost.