Why you should offer customised products to your customers
Company names, such as SAP, Coca-Cola, Apple, BMW and Shell probably ring a bell to you just as much as to most other people worldwide. But what about companies, such as Enercon, SAPPI, Heraeus Electro-Nite, Melexis and Amorim? They are relatively unknown to the public, although these companies are global market leaders as well.
Professor Hermann Simon – founder of the worldwide renowned Strategy and Marketing Consultancy Company Simon-Kucher & Partners – has been researching and analysing these unknown market leaders and their strategies for over 20 years.
He has termed them “Hidden Champions”, referring to them as relatively small but highly successful companies, keeping up extraordinary well with global competition. Throughout the years, Simon’s list of Hidden Champions has grown to about 2.000 entries, 1.200 of those are from Germany. Via the following link you can find a list of companies, selected by Hermann Simon in 2009, to give you an idea of what Hidden Champions are.
One of the most important success factors for an organisation getting the status of Hidden Champion, is a quick and correct response during the offer phase and a successful implementation of the specific customer requirements during the order phase. This is where the difference to the competition is made.
Why customisation is the “next best thing” in Product Strategy
Organisations are increasingly and more urgently asked by their customers to implement very specific requirements. For this, Custom Products are becoming an increasingly important product strategy. This is exactly what a survey of 1.000 online consumers by the American Management Consulting Company Bain & Company suggests. A Custom Products Strategy has not only become important for Consumer Goods Providers but also in Capital Goods Manufacturing Business.
Consumer Goods Providers believe in rather simple product configurations for offering consumers a personalised product, such as for instance M&Ms with your own printed message. Industrial Manufacturing companies, however, need to go a step further: their customers often require products that boost market differentiation and want to achieve a sustainable competitive advantage over the competing products and firms in the market.
The biggest pitfalls of adopting a Custom Products Strategy
Is adopting a Custom Products Strategy really the golden goose? Unfortunately, it is not that simple. A Custom Products Strategy goes hand in hand with a number of (new) challenges to you and your organisation.
The biggest hurdle is that the more flexible a company aligns its own product range to customer requirements, the bigger the organisational challenges become. Offering custom products comes with new product variants that are often poorly implemented in the manufacturer’s ERP system and have chaotic and unpredictable influences on the Master Data Management, the Production Planning, and the coordination between Sales, Engineering and Production.
Normally, each product variant that has been supplied at least once to a customer, has to be recorded in the ERP system as a material master or as a product master. In addition to that, the bills of material and the routings need to be adjusted accordingly.
If this product information is not recorded properly, it is very hard to write a report on which product variants have already been sold at least once. The lack of this information makes the job of a sales person more difficult and increases the response time to customer inquiries dramatically because in this situation each order requires too much valuable time that needs to be invested in a discussion and coordination with other departments, such as Production, for making sure the customer inquiry is feasible or not.
As such, teams, that should work together to deliver the best solution to the customer, spend hours and even days on too long, internal, energy-consuming discussions. The outcome of these meetings often depends on the expertise of the so-called “Master Minds” in Construction and Engineering. This select group of very experienced employees are the only ones who know all the different options and technical possibilities; a knowledge that is not always accessible for the sales department.
In my following blog post, How to successfully implement a Custom Products Strategy, you learn how to overcome these challenges and successfully implement a Custom Products Strategy to your organisation.