My Way
One of the great but difficult thinkers of the twentieth century, the economist and satirist Thorstein Veblen, wrestled with people's interconnected relationships both to what Marx named the means of production and to the consumption of mass produced goods. Veblen attributed a nobility to work that he called the "instinct of workmanship": man the maker "has a sense of the merit of serviceability or efficiency and of the demerit of futility, waste, or incapacity." By contrast, what he memorably named "conspicuous consumption" was "ceremonial" in that it sorted people by reputation, the basis of an ultimately unwinnable competition.
By mentioning Veblen, I raise an unanswerable question. The people who buy mass-produced stuff, often called "consumers," want in some deep-rooted way to shape their environment beyond just piling up purchased goods. How much people want to stand out as unique, and how much they want to create something tangible, is of course impossible to differentiate or quantify, and of course sometimes an artifact embodies both consumption (or conspicuousness) and workmanship. But the current business landscape provides too many examples for this to be a fad: there's something very potent afoot in the rise of personalization and customization.
-Nike's ID (www.nikeid.com) mass-customization site has been up for a long time now. Back in 2000, an MIT grad student wanted his custom label to read "sweatshop," and Nike's refusal turned into a PR bonanza for both the grad student and the site itself. I don't know when it was most recently upgraded, but the current range of product and color options is truly dazzling: the Flash visualization tool is a lot of fun, to the point where designing your own stuff can get addictive. The price points have come down too: you can get a customized bike messenger bag for $50 or a watch for $85, while eligible shoes seem to sell for $10 over retail.
There's a lot of cleverness embedded in the site. The color palettes, for example, are constructed such that it's truly hard to get two adjoining colors to clash. In some shoes, you can order two different sizes - 8 right and 8 1/2 left, for example - at no extra cost. The number of potential configurations is huge, but the volume is sufficiently small to justify the cost with customer "delight" - it's clearly an opportunity to surpass expectations.
Nike in turn plays directly to Veblen: university sports teams and elite athletes frequently get shoes in custom color schemes. It used to be a mark of distinction, or perhaps what Thorstein would call "invidious [unfair] comparison," to have shoes that aren't available in stores. Now, anyone can just do it - and not only with youth-oriented brands either: for the same $10 premium, you can design your own L.L. Bean canvas tote.
-One of the many reasons for Japanese automakers' success in the U.S. relates to their conscious courtship not of the NASCAR audience (which with few exceptions has been offered unmemorable racing-related products to buy by the American Big Three) but of the street-racing subculture central to "The Fast and the Furious." Honda, Mitsubishi, and Subaru have sold inexpensive cars that have serious upgrade and customization potential, and while some offerings such as the Dodge Neon SRT have come from U.S. badges, they're clearly late to the game. The difference between car as finished artifact and car as a platform for creativity was grasped first by some astute observers of Asian-American teenagers.
-Rupert Murdoch recently told the U.S. newspaper industry convention that paper news is in danger of missing the key young adult demographic: circulation numbers are off, so badly that many big papers have been caught padding them to maintain ad revenue. TV news is also in decline: viewership is off by a third since 1993. In contrast, the most comparable online sites are either highly opinionated and interactive, or else highly selectable: Yahoo and Google News are growing far faster than any mainstream online news operation.
-Keeping with the TV theme, TiVo may have made it out of the woods with the Comcast deal. The future of TV ad revenues is being reshaped not by the remote control, which was frequently used to skip advertising, but by an automated device that does the same thing. Broadcasters are accustomed to control over the viewing experience: even mighty Microsoft has its logo disappear at bootup, as do cellular carriers and handset makers, so people can display any pictures or colors they choose on their computer and mobile phone screens. The networks, meanwhile, are fighting time shifting and time compression even as they find new ways to insert logos, promotional announcements, and other reminders of whose interface we're watching. Viewer annoyance with Jim Nance during the NCAA basketball tournament reached new highs, for example. By contrast, the cellular industry has supported customization and is profiting: U.S. ringtone sales were $850 million last year, double the 2003 total.
-One of the most powerful trends in electronic gaming is the creation and maintenance of virtual worlds. SimCity originally went nowhere among distributors because there was no winning and losing. Now, there is a cottage industry of Sims furnishers, not to mention players: in a hot industry, the Sims 2 was 2004's top-selling PC title. In racing games, players often configure their own cars. The examples go on from there.
-Burger King has had over 30 ad slogans, and the chain recently adopted the second, most memorable one: "Have it your way." Returning to that message was part of a turnaround that took average annual franchise sales from $970,000 to $1.3 million.
-At the top of the digital camera mass markets are "prosumer" models that mimic the functionality of the top 35mm film cameras. Canon's Digital Rebel was the first to market at the $1,000 price point, and it has sold 1.2 million units; Nikon's D70, released slightly later, sold over a million units between March 2003 and February 2005. These
single-lens reflex cameras allow the photographer to compose the picture based on what the lens "sees," and, significantly for our discussion, to interchange lenses. These cameras also support file formats that better facilitate complex manipulation software like
Adobe Photoshop. The range of possibilities is a long way from taking film to the neighborhood drugstore for processing.
-The music industry has yet to adjust to a model in which listeners choose what they play and in what order, as opposed to embracing the album or CD as the unit of consumption. Playlists are a textbook example of user customization, and unlike the old Uplister business, which only published playlists, Apple has integrated playlist publishing into the iTunes operation.
-Under the radar, Creative Memories has become a substantial business. Never heard of it? The Minnesota-based company began in 1987 as a spinoff of a photo album-manufacturing company and now uses 90,000 "consultants" to help people build personalized scrapbooks. 2004 sales were roughly $425 million; for comparison in the direct-sales industry, the Longaberger basket company made $1 billion in 2000, at which time it employed 8,000 people - a figure cut in half since then as demand fell with the economic slowdown.
-Not-so-random facts: Do-it-yourself (DIY) has helped drive Home Depot and Lowe’s to strong, sustained growth. As we discussed in February, O'Reilly Media has tapped a nerve with MAKE magazine, aimed at people "who don't mind voiding the warranty." Home entertainment digitization is being led by hobbyists building PCs to serve as music
and video servers. One of the most popular campus and young adult activities is reported to be knitting; celebrity knitters include Julia Roberts and Cameron Diaz.
What does this batch of wide-ranging examples suggest? Companies that fail to understand and market to the customization mentality will face an uphill climb: General Motors and Ford, the paragons of mass production, are in deep financial trouble. Toyota and Honda serve more niches more profitably and are thriving. Subway, where each sandwich is made to order, has severely dented McDonalds' industrial model. Dell's dominance of the PC market begins with customization. Financial services companies that rely on brokers and brokers' commission structures like Merrill Lynch have had to respond to the Schwabs of the world - but now that firm is fighting a two-front battle against lower-cost low-service brokerages and established firms like Fidelity that provide a range of interaction options.
As I noted at the outset, it's difficult but important to separate and identify a number of forces. Daniel Bell identified "The Coming of Post-Industrial Society" thirty years ago, but it took the Internet for us to feel what it's like to transcend factories the way factories had trumped farming roughly a century before Bell. As information about stuff becomes more valuable than stuff, the activities of creation and individualization take on a new shape in both tangible and intangible realms. First, in an economy largely devoted to non-essentials there exists some [essential?] desire to make meaningful stuff, not just ideas and decisions. Secondly, we can see a broad-based quest to differentiate oneself by differentiating one's stuff. Finally, there's a sense of entitlement, related to the "affordable luxury" trend embodied by Starbucks, itself a primo customizer: I want the best (of something) made for me because I'm worth it.
The digital world both contributes to the desire for and enables the fulfillment of customization, but, returning to the theme of last month's "Being Analog," we still have a lot to learn about the boundaries, permeable and otherwise, between the worlds of ether andof earth and its offspring.
--Dr. John M. Jordan
John Jordan is a member of the Guidewire Group Sounding Board.
Posted by John Jordan at May 2, 2005 07:30 AM
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