Friday, April 30, 2010

Dell’s Mass Customization Failure

I want to include various perspectives on mass customization on this blog, not only those that support “Everything about mass customization is great and it’s the only future imaginable”.

Dell recently announced that they are turning away from their mass customization model.

On their company blog, Dell states:

In the past, we utilized a single direct configure to order model and we gave our customers a cascade of options to choose from when configuring a product specifically for their needs.  This was, and still is, a great model for custom configuration where our customers value and will pay for this service but it has become too complex and costly for significant portions of consumer and some portions of our commercial businesses.

Note that they’re saying that it still is a great model, but only at a premium price.

There are two reasons why mass customization might have become too costly for Dell:

a) Cost increased because complexity increased: Maybe, through the introduction of new components or new features, it is too complicated to assemble a computer according to consumer needs. It sounds, in the rest of the blog post, like they’re doing exactly that - they’re simplifying the configuration and will leave that as an option, but not everything will be configurable anymore

b) Demand for configuration decreased because consumers are not willing to pay a premium anymore (maybe due to the recession). That would imply that Dell isn’t creating enough value with their configuration. I think that would be a pity, since they could just offer cheaper components as *options* in their configuration process

However, maybe mass customization never really worked for Dell. For a huge company like Dell, it’s a pain to put flexibility in the production process, and maybe they expected to lower the costs of their mass customization production over time and failed to do so.

I would love to talk to someone from Dell about this.
Again, an example that big companies seem to struggle with mass customization (see my blog post “Why Small Firms Have An Advantage”)

Notes

  1. masscustomization posted this