If Paul Revere was making a midnight ride these days to alert you, he’d probably be shouting, “The Millennials are coming, the Millennials are coming!” Actually, they are already here, so get armed to meet them head on. A global market research study by the consulting firm Accenture calls Millennials “a potent force” that spends US $600 billion annually now. By 2020, says Accenture, this will grow to US $1.4 trillion every year. That will represent 30 percent of total retail sales in the U.S., Accenture predicts. What does this mean for businesses like yours?
Likely, it means it’s time to think differently about design and production in your shop, so you can tap into this lucrative market successfully and profitably for years to come. Two words — mass customization — could open or close a lot of doors, depending on how you think about and approach them.
“I have on more than one occasion heard small shop owners proclaim that once a shop goes to CNC they are no longer custom, but become a production shop,” says Matt Krigg, president of the Cabinet Makers Association in Chicago. “I agree that production goes up, but also the ability to customize actually increases and should require less on the shop floor. This creates an amazing advantage when done in a controlled manner.”
You are probably pretty much already there — mass customizing, that is — whether you realize it or not. When you are designing and producing projects on a client-by-client basis — whether they are kitchens or architectural millwork, you are, in business terminology, practicing pure customization. That’s an extreme form of collaborative customization, which, in turn, is one of the forms of mass customization.
McGill University professor Henry Mintzberg, the Cleghorn Professor of Management Studies at McGill, defined pure customization back in 1988: making a product from scratch for individual customers, and having them involved in every step of the process from design to delivery and installation.
Collaborative customization is slightly different: talking with your clients to help them express their needs; identifying a solution; and making a customized product for their needs.
According to David Gardner, a Silicon Valley, Calif.-based management consultant, speaker and author of Mass Customization: An Enterprise-Wide Business Strategy, “Most manufacturers of ‘customized products’ produce them under sub-optimal business models called build-to-order, assemble-to-order, configure-to-order, make-to-order, or engineer-to-order. It is one thing to be a ‘customizer’ — it is quite another to be a ‘mass customizer’.”
He says mass customization is about making a customized product on demand; making it for a specific customer; making it after receiving an order; and making it as efficiently as customers expect from mass-produced items. Other experts define mass customization slightly differently, describing it as giving customers the ability to decide the exact specifications of a product, and then manufacturing it at a price that’s close to what customers would pay for a mass-produced item.
With the Millennials (or Generation Y, born generally between 1977 and 1995) fast-becoming the most influential customer base your shop could potentially have for years, it’s essential to find a middle ground so you produce appealing solutions for their needs and wants.
“The challenge is that high-quality products have materials that cost more, and thus impact the price. You need a happy medium, so materials aren’t so expensive for that it costs too much for the Millennials to buy,” says Dan Schawbel, a Millennial himself and founder of Millennial Branding and WorkplaceTrends.com.
Says Krigg, “Look at a mass-produced cabinet and notice how many pieces are the same size and that the cabinets go together quickly because of the systematic approach. I don’t know a single custom shop owner that has not underestimated the time it takes to accomplish something out of the ordinary. Streamline your process and spend some time learning what your customers’ focus points are, get it done, and move on.”
He adds, “Don’t get caught up in the minutiae. Millennials love short, efficient processes with an outcome that leaves them feeling informed and ready to buy. Outsourcing is a simple answer that comes up over and over amongst CMA members. Rather than invest in equipment and people, get good at ordering from component shops.”
Ken Hutton, a former executive vice-president of the Wood Machinery Manufacturers Association who now runs his own management consulting firm in Kennett Square, Pa., believes mass customization is achievable for small-to-medium shops.
“Today’s highly sophisticated machinery is equipped to do just that,” he says. Hutton says shops can find the balance by “using technology and customized, labour-saving machinery.”
It doesn’t mean you have to, or should, sacrifice quality. Millennials, Schawbel says, are very brand-loyal, putting product quality above all else. “Our research says the quality is by far the most important thing. Even if the service was bad but the product’s good enough, they’ll still buy it,” he says. Schawbel’s company surveyed 1,300 Millennials last January, “it’s all about the quality,” he says.
Adds Hutton, “All the research indicates that Millennials are interested in craftsmanship and something different than mass-produced commodities.”
Says Schawbel, “Millennials want to save time and money. Ikea allows you to save money but not time. If you can satisfy both needs, that’s an effective way of connecting with Millennials. They select quality over everything so if you can provide a high-quality product, they are more likely to buy from you over your competitors.”
It’s important not to confuse mass customization with mass production. If, for example, you are making cabinetry for a new-home builder and there are tailored variations of the basic design for different homes, that’s mass customization. With mass production, the item’s the same for everybody, and they have no input into it.
“Mass customization can mean so many things,” says Krigg. “After all, what specifically makes a cabinet custom? If you don’t have some parameters within your product you are probably re-inventing the proverbial wheel each day.
“If I use a regimented and systematic approach of standardized construction using existing profiles, sizes and colours, you could say I am mass customizing. The reality is the software, appliances, cabinet hardware and building codes dictate a lot of the standards. It’s a lot of extra work to deviate from there.”
Schawbel likes to use the term “micro-customization.” “I’d say micro-customization would work better for smaller companies [at first] and then [move to] mass customization as you scale,” he says. “What I mean by that is, have a few SKUs of one or more products and then based on feedback, add more. As you scale, expand your product portfolio and become more customized.”
Rethinking mass customization and your shop’s processes to capture the Millennials essentially requires three things: understanding the Millennials; having the right mindset; and having enough, or investing in, resources.
There are a few key things to understand about Millennials, Schawbel affirms. There’s that first point — Millennials value quality above all. And they want products tailored to them, because, says Schawbel, “they grew up having their parents tell them they were special all the time.” As well, he explains, Millennials “want to buy from companies that are honest and transparent in their business practices.” If you are involved in your local community, Millennials are more likely to want to do business with you.
Having the right mindset about mass customization is another matter. As one report on entreprenurial-insights.com puts it, “mass customization can bring great business benefits to entrepreneurs if they deal with it in the right manner.”
“There are different approaches and types of mass customization, and hence entrepreneurs can use this production method in the way that suits them best,” the report notes.
Different sectors use different versions of mass customization. In our industry, it’s collaborative customization that probably applies best — again, that is talking with your customers to help them express their needs, and then making a product tailored to them.
“Despite the potential gains to be made through the implementation of mass customization strategies, there are still barriers to the uptake of the trend,” say the authors of Advanced Manufacturing: Mass customization, a 2013 report done by the Business Innovation Observatory for the European Union.
The first thing mass customization requires, notes the report, is “change management as it requires an alteration of a company’s business model and the integration of new skills.”
You also have to have the financial resources to invest in new technology — not just machinery, but also software and website technology that can involve your customers in that collaborative customization. For example, today, many customers — especially Millennials — go online first. Moving more to mass customization may require investing in 3D virtual reality technology that lets potential clients customize a kitchen design on your website and then place an order for production of it.
But it’s perhaps mindset that’s the most important aspect of successfully mastering mass customization and reaching the quality-and-price conscious Millennials. Both Schawbel and Hutton agree the short-to-the-long term business prospects for small-to-medium shops are good — as long as you are willing to change the way your shop operates.
“There’s a natural opportunity here,” says Hutton.
Adds Schawbel, “I think the prospects will be extremely high in the next five years as more Millennials buy houses and condos, and as the economy rebounds. I think some of the competition will come from Millennials who are part of the ‘do-it-yourself’ movement. Many Millennials would create a cabinet from scratch instead of buying one from a shop.”
If you are not savvy, are change-resistant and don’t adapt, believing you can still rely on old business, design and production practices for your shop’s continued success in the 21st century, Schawbel and Hutton both say you are severely limiting your potential. They both agree you are perhaps closing a door that could eventually lead to having to close your doors.
“You’ll still attract older customers, but miss out on the largest demographic of customers who are going to be the top consumers in the next few years,” says Schawbel. Hutton puts the consequences of cabinetry shop owners resisting the shift more bluntly: “They are dinosaurs walking and they don’t realize it. Following a painful
decline, life expectancy will be short.”