PERSONALIZATION BROUGHT TO LIFE - IMD

PERSONALIZATION BROUGHT TO LIFE
IS YOUR ORGANIZATION READY TO BOND WITH CONSUMERS?
By Professor Ralf W. Seifert and Research Associate Fang Liu – September 2012
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PERSONALIZATION BROUGHT TO LIFE I is your organization ready to bond with consumers?
Bonding with consumers in concrete terms is the Holy Grail for most consumer brands. But
operating in today’s world, technology has drastically impacted both the number of messages a
consumer receives and how well communications are digested. Companies looking to develop new
bonds through differentiation, advertising and event marketing must play in a highly competitive
market. But there are still unique ways to reach out to consumers, namely through customization.
Adidas group, the Herzogenaurach-based German sportswear maker, provides a noteworthy
example of customization in action. The company recently launched its new mi team initiative and
will now rollout a full remake of their mi adidas product customization experience. The new
miteam.com site has been exclusively conceived to offer customized sportswear products –
including shoes, clothing and accessories – to schools, universities, leagues and teams who want to
create a team-customized adidas sports kit. Similarly, the miadidas.com site engages consumers
with personalized design and a unique purchasing experience and is expanding on shoe offerings,
while introducing customizable graphic tees starting in October 2012.
Adidas builds on its prior experience in mass customization – a concept which gained traction
during the emergence of the internet economy when early entrants were convinced that the internet
would revolutionize the customization industry by connecting individual customer information with a
computerized global supply chain. Trek Bicycle, a major bicycle manufacture in the US, introduced
its Project One initiative in 2001, which gave consumers the opportunity to customize their Trek bike
online by selecting the bike’s color and components. Grundfos, the world’s largest pump
manufacture from Denmark, also demonstrated how mass customization could work in B2B
markets 1 . Facing the competition from emerging countries, Grundfos customized its product offering
into four categories. The customization strategy improved Grundfos’ inventory turnover and allowed
the company to outperform its initial ROI target.
But offering flexible individual customization to consumers on a volume scale and at a low price is
not an easy task. The mass customization market seemed promising, yet took most market players
much longer than expected to make it work. Some companies even withdrew from the market. Levi
Strauss closed its “Original Spin” operations producing customized jeans in 2004. In the same year,
Customatix.com, offering made-to-order shoes, went off-line after only four years in business. And
after nearly six years of investment, in 2005, Procter & Gamble shut down Reflect.com – a website
selling personalized health and beauty products. Even Dell, the iconic mass customization brand
which used to dominate the US computer market, was hit hard by the emergence of strong players
such as Apple, HP and Lenovo. Today, Dell’s customization options are rather limited.
Even for adidas, enabling mass customization constituted an endeavour not without its difficulties.
At IMD we have been following its evolution over the past ten years. Our award-winning case study,
The “mi adidas” Mass Customization Initiative 2 , showcasing adidas' original "mi adidas" initiative
1 Grundfos, Winter Nie and Thomas E. Vollmann, IMD-6-0312.
2 “The “mi adidas” Mass Customization Initiative, by Ralf Seifert, IMD-6-0249.
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PERSONALIZATION BROUGHT TO LIFE I is your organization ready to bond with consumers?
that aimed to deliver customized athletic footwear to retail customers, documents the embedded
cross-functional challenges of making mass customization work. It gives an overview of the
interlinking set of issues – from marketing, retailer selection, and information management, through
to production and distribution, project management and strategic fit – that made expanding adidas’
trial initiative a daunting task. But over time, this very initiative became a cornerstone of adidas’
personalization strategy to fight commoditization risks.
Since the original IMD case was written, adidas has gone through a tremendous journey. The
grandiose mi innovation Center on the Champs Elysées in Paris opened in 2007 to offer consumers
the most authentic shoe customization experience using 3D technology. In 2009, as part of its group
strategy “Route 2015,” adidas group announced its “Innovation leadership through personalization”
strategy in which it declared that personalization will be the brand’s lead innovation concept and a
driving force of the adidas business as the company aims to become the most personal sports
brand by 2015. This marked an important milestone and was followed by an expansion at adidas –
mi team products are now available for eleven sports categories and have moved into 16 countries
across North America, Europe and Asia.
However, these achievements were accompanied with pressure from the marketplace. During the
same period, Nike iD, the biggest competitor of mi adidas having also entered the mass
customization game in 2000, grew its business by investing heavily in e-commerce in 2005. In 2010,
Nike iD announced revenues of $100 million for fiscal year 2009. 3
Adidas in turn is stepping up its efforts as a new generation of consumers embraces smart apps
and becomes more at ease with online applications – making the concept even more relevant
today. Driving mass customization experience, mi team is one of the first in the marketplace to
launch the team business, accompanied with the launch of a smart device app. Likewise, mi adidas
designs can now readily be shared among consumers through Facebook, Twitter or e-mail and are
fully integrated into adidas’ e-commerce markets in the US, France, Germany, UK and the
Netherlands.
Today, adidas is able to leverage its hands-on experience and make an important step towards the
future by enabling a consumer-centric supply chain.
With adidas taking a futuristic step forward to engage its consumers, many other players in the field
might suddenly find themselves unprepared, and unable to customize. What makes it so
complicated?
Our research shows that standalone mass customization businesses and mass customization units
in well-established incumbents such as adidas face different challenges. While the incumbent can
provide the mass customization unit with strong resources, brand reputation, and existing
processes, the standalone businesses are more agile in decision making and are more likely to
exert commitment into the business. For many companies that are embarking on a similar journey,
the story of mi adidas can shed some light on their future operations. At the very early stage of
3 http://www.huffingtonpost.com/danny-wong/nikeid-makes-100m-co-crea_b_652214.html
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PERSONALIZATION BROUGHT TO LIFE I is your organization ready to bond with consumers?
development, while mi adidas received excellent feedback from consumers and saw great market
potential, challenges in information technology, supply chain and distribution turned out to be more
complex than expected. Internally, it required strong leadership and a commitment from top-down
for a clear positioning of the initiative.
Mass customization represents a new paradigm. Yet getting its front and back-end to work is a
challenging task. Is your organization ready to bond with millions of consumers?
Ralf Seifert is a Professor of Operations Management. His primary research and teaching interests
relate to operations management, supply chain strategy and technology network management.
Fang Liu is a Research Associate at IMD.
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PERSONALIZATION BROUGHT TO LIFE I is your organization ready to bond with consumers?
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