Markets of One: Creating Customer-Unique Value through Mass Customization (a Harvard Business Review Book)

Overview

Through this collection of ten articles from "Harvard Business Review, " the editors show how companies are increasingly customizing their offerings to meet the unique needs of individual customers, resulting in a shift from mass markets to markets of one.
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Overview

Through this collection of ten articles from "Harvard Business Review, " the editors show how companies are increasingly customizing their offerings to meet the unique needs of individual customers, resulting in a shift from mass markets to markets of one.
Read More Show Less

Product Details

  • ISBN-13: 9781578512386
  • Publisher: Harvard Business Review Press
  • Publication date: 3/1/2000
  • Series: Harvard Business Review Book
  • Pages: 210
  • Product dimensions: 6.42 (w) x 9.44 (h) x 0.89 (d)

Read an Excerpt

Chapter 1: The Emerging Theory of Manufacturing

We cannot build it yet. But already we can specify the "postmodern" factory of 1999. Its essence will not be mechanical, though there will be plenty of machines. Its essence will be conceptual-the product of four principles and practices that together constitute a new approach to manufacturing.

Each of these concepts is being developed separately, by different people with different starting points and different agendas. Each concept has its own objectives and its own kinds of impact. Statistical Quality Control is changing the social organization of the factory. The new manufacturing accounting lets us make production decisions as business decisions. The "flotilla," or module, organization of the manufacturing process promises to combine the advantages of standardization and flexibility. Finally, the systems approach embeds the physical process of making things, that is, manufacturing, in the economic process of business, that is, the business of creating value.

As these four concepts develop, they are transforming how we think about manufacturing and how we manage it. Most manufacturing people in the United States now know we need a new theory of manufacturing. We know that patching up old theories has not worked and that further patching will only push us further behind.

Together these concepts give us the foundation for the new theory we so badly need.

The most widely publicized of these concepts, Statistical Quality Control (SQC), is actually not new at all. It rests on statistical theory formulated 70 years ago by Sir Ronald Fisher. Walter Shewhart, a Bell Laboratories physicist, designed the originalversion of SQC in the 1930s for the zero-defects mass production of complex telephone exchanges and telephone sets. During World War II, W. Edwards Deming and Joseph Juran, both former members of Shewhart's circle, separately developed the versions used today.

The Japanese owe their leadership in manufacturing quality largely to their embrace of Deming's precepts in the 1950s and 1960s. Juran too had great impact in Japan. But U.S. industry ignored their contributions for 40 years and is only now converting to SQC, with companies such as Ford, General Motors, and Xerox among the new disciples. Western Europe also has largely ignored the concept. More important, even SQC's most successful practitioners do not thoroughly understand what it really does. Generally, it is considered a production tool. Actually, its greatest impact is on the factory's social organization.

By now, everyone with an interest in manufacturing knows that SQC is a rigorous, scientific method of identifying the quality and productivity that can be expected from a given production process in its current form so that control of both attributes can be built into the process itself. In addition, SQC can instantly spot malfunctions and show where they occur-a worn tool, a dirty spray gun, an overheating furnace. And because it can do this with a small sample, malfunctions are reported almost immediately, allowing machine operators to correct problems in real time. Further, SQC quickly identifies the impact of any change on the performance of the entire process. (Indeed, in some applications developed by Deming's Japanese disciples, computers can simulate the effects of a proposed change in advance.) Finally, SQC identifies where, and often how, the quality and productivity of the entire process can be continuously improved. This used to be called the "Shewhart Cycle" and then the "Deming Cycle"; now it is kaizen, the Japanese term for continuous improvement.

But these engineering characteristics explain only a fraction of SQC's results. Above all, they do not explain the productivity gap between Japanese and U.S. factories. Even after adjusting for their far greater reliance on outside suppliers, Toyota, Honda, and Nissan turn out two or three times more cars per worker than comparable U.S. or European plants do. Building quality into the process accounts for no more than one-third of this difference. Japan's major productivity gains are the result of social changes brought about by SQC. The Japanese employ proportionately more machine operators in direct production work than Ford or GM. In fact, the introduction of SQC almost always increases the number of machine operators. But this increase is offset many times over by the sharp drop in the number of nonoperators: inspectors, above all, but also the people who do not do but fix, like repair crews and "fire fighters" of all kinds. In U.S. factories, especially mass-production plants, such nonoperating, blue-collar employees substantially outnumber operators. In some plants, the ratio is two to one. Few of these workers are needed under SQC. Moreover, first-line supervisors also are gradually eliminated, with only a handful of trainers taking their place. In other words, not only does SQC make it possible for machine operators to be in control of their work, it makes such control almost mandatory. No one else has the hands-on knowledge needed to act effectively on the information that SQC constantly feeds back.

By aligning information with accountability, SQC resolves a heretofore irresolvable conflict. For more than a century, two basic approaches to manufacturing have prevailed, especially in the United States. One is the engineering approach pioneered by Frederick Winslow Taylor's "scientific management." The other is the "human relations" (or "human resources") approach developed before World War I by Andrew Carnegie, Julius Rosenwald of Sears Roebuck, and Hugo Munsterberg, a Harvard psychologist. The two approaches have always been considered antitheses, indeed, mutually exclusive. In SQC, they come together.

Taylor and his disciples were just as determined as Deming to build quality and productivity into the manufacturing process. Taylor asserted that his "one right way" guaranteed zero-defects quality; he was as vehemently opposed to inspectors as Deming is today. So was Henry Ford, who claimed that his assembly line built quality and productivity into the process (though he was otherwise untouched by Taylor's scientific management and probably did not even know about it). But without SQC's rigorous methodology, neither scientific management nor the assembly line could actually deliver built-in process control...

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Table of Contents

Introduction: Customization That Counts
1 The Emerging Theory of Manufacturing 3
2 Marketing in an Age of Diversity 17
3 Managing in an Age of Modularity 35
4 Do You Want to Keep Your Customers Forever? 53
5 Is Your Company Ready for One-to-One Marketing? 75
6 Breaking Compromise, Breakaway Growth 99
7 The Four Faces of Mass Customization 115
8 Versioning: The Smart Way to Sell Information 133
9 Making Mass Customization Work 149
10 Managing by Wire 167
Executive Summaries 185
About the Contributors 193
Index 199
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