Digital platforms vol. 2: Mass Customisation Strategies

The digital development towards connected products, or IoT, and platforms has led to realisation of a relatively new concept within the context of supply chain management known as mass customisation. Essentially mass customisation is creation of personalised and “customized products with production cost and monetary price simi-lar to those of mass-produced products’’ . In general, there are two main strategy approaches for achieving mass customisation, which are a tailoring strategy or a platform strategy.

Tailoring Strategy

A tailoring strategy implies that detailed information is analysed in order to create customised and personalised products for each individual user before entering the consumption space. An example of this are shoe manufacturers Nike and Adidas, with their tailoring platforms NIKEiD and miadidas (see featureing picture of this blog post). This means that intel on the real needs of the customer could be understood and utilised to fullest extent, in order to generate maximum value for the end user. This concept is obviously much more effective and valuable compared to how the traditional tailoring is done and performed, where the tailoring process is simply based on suggestion about existing varieties. However, note that the tailoring strategy is in this context closely related to the goods-dominant logic approach because of the focus on value-exchange.

Platform Strategy

A platform strategy distinguishes in that sense that it takes more of a service dominant logic, or value-in-use, approach compared to the tailoring strategy and that the customi-sation process can occur in the customisation space or postponed indefinitely. Thus the fundamental principle of a platform strategy is that the provider offers a standardized, or a “incomplete product”, that can flexibly be updated and boosted later on after the product has transferred and is being used by the consumer.

So What Are Incomplete products Then?

The concept of an incomplete product is an extension of a postponement strategy, which strives for producing standardized products and delaying much of the movement or configuration of the final product within the frame of the supply chain. The difference between postponement and incomplete products is that the customisation process can be executed even when the product has exited the traditional supply chain domain. In other words, the customisation takes place in the consumption space, which has been made possible thanks to the recent digital advancements. Thus an incomplete product is defined as “a physical product, design with a modular architecture, capable of dynamic reconfigurability allowing for the offering to obtain an optimal fit within the actors’ dynamic and ever changing context of use where the transaction boundaries are aligned with the context of use”. In the previous context the concept of “dynamic reconfigurability” for an incomplete product is referred to “the capability to modify their functionalities, adding or removing components and modify interconnec-tions among them”.That is to say, a software platform is the holistic core that provides with these new configuration features and customisations possibilities for the incomplete product.

An example of an incomplete product is Tesla cars. In 2013, there were concerns that the Tesla cars were to low, which resulted that the litium batteries could ignite and catch fire because of the heat. The solution to this problem was a code fix over “the air” which lifted the springs of the car by a few inches, so that the risk was fully prevented.


It can be concluded that both presented strategies may use a software platform for offering products and services with different variety. The actual distinction is in how the custom-isation and variety is executed: is it before the consumption space or in it? Therefore, the current school of mass customisation is mostly focused around tailoring strategies, despite the fact that numerous successful platform strategies already exist and has proven to be very profitable and effective, such as Apples iPhones in combination with the iTunes platform. Therefore, one can expect that more platform strategies and incomplete products concept will be applied on a greater scale in the future.


Digital Platforms

The word platform is defined by Oxford English Dictionary as:

 “a raised level surface on which people or things can stand, usually a discrete structure intended for a particular activity or operation”

The modern and present understanding of the concept has evolved through three different chronological, though overlapping, waves that focuses on prod-ucts, technological systems and transactions.
The first wave emerged from product developers, who used the term for product genera-tions or families for a specific firm, such as Samsung’s Galaxy phone series. This view meant that the platform functioned as a foundation for various customer segments, service and product variations. Therefore, the platform characteristics focuses on the high degree of modularisation and variation.
The second wave was brought by technological strategist who “identified platforms as valuable points of control (and rent extraction) in an industry”. This indicate that income was generated without producing any actual value, but instead at the expense of the whole economy network. One example of this was operating system Windows decision to make their own web browser a default, which distorted the browser competition remarkably.
The third wave is formulated by industrial economists, who describes the platform as a marketplace for products, services, firms, or institutions that mediate transactions among two or more parties. An example of this is Amazon, an e-commerce retailing company, who connects sellers and buyers of retail products.

Network Effects

In literature there are a lot of different interpretations regarding the term “platform”, but two perspectives remain predominant that is external and internal platforms. Gawer and Cusumano defines internal platform as a “set of assets organized in a common structure from which a company can efficiently develop and produce a stream of derivative products”, while external platform is “products, services, or technologies that act as a foundation upon which external innovators, organized as an innovative business ecosystem, can develop their own complementary products, technologies, or services”.
It is evident that the external platforms face challenges in terms of creating fruitful network effects. Network effects are defined as the additional utility that an economic agent benefit and gains when other agents are consuming the same good or service. Also network effect give cause to a “generativity” phenomenon, which is defined as “a technology’s overall capacity to produce unprompted change driven by large, varied and uncoordinated audiences” (Elaluf-Calderwood et al., 2011). In a platform context this refers to its ability to produce, create, and generate new content, without input or addi-tional help from its original creators.

Direct and Indirect Network effects

Network effects can further be categorised into direct and indirect effects, where:

“direct network effects are generated through a direct physical effect from the number of purchasers, whereas indirect network effects are market mediated effects”.

The generation of network effects is a very crucial and essential factor from a platform perspective, because without users the platform appears useless. This paradox gives rise to “chicken-and-egg” problem which all platforms need to tackle before their establishment.
Finally, a digital platform can be defined as a “IT systems and their common operating standards who different stakeholders – users, providers and other stakeholders across or-ganizational boundaries – together realise and embodies for value generating activities”. Also these platforms are characterized by its different actors whom create, provide, and maintain complementary products and services through different dis-tribution channels, but within the frame of common established platform rules and user experience requirements. In addition, a typical characteristic for these digital platform administrators is to encourage, attract, and commit various stakeholders to the platform; in order to generate network effects that produces overall economic gains for all interact-ing parties.
It can be concluded that in recent decade there has emerged loads of digital platforms that has proven to be extremely valuable. For example, half of the twenty most valuable cor-porations on the New York Stock Exchange (NYSE) considers themselves as digital plat-form companies. Henceforth, three main shifts in the aspect of competition that digital platforms are reckoned that are causing:

from resource control to resource orchestration; from internal optimization to external interaction; and focuses shifting from customer value to focus on ecosystem value.

Because of these shifts the digital platforms are showing the way for a new emerging economy, that is a platform focused digital economy.

Digital Platform Structure and Classification

There are identified four basic structural types of interacting actors that can be found in every platform ecosystem. The structure is divided into owners, providers, producers, and consumers. Where the platform actors are: the owner, exhibits control over the intellectual property and governance; the providers, who “serve as the platforms interface with users”; and producers, who create offerings that the final consumers use. Thus in order to manage digital platforms, it is of great importance to understand each of the different actors and their dynamic relationships.
Evans and Gawer (2016) introduces a framework that classifies platforms into four different types, or groups. These platform types can further be ordered and visualised into a 2×2 matrix illustrated in Figure 8, whose vertical axis refer to the amount of knowledge is known about the end customer and correspondingly the horizontal axis refer to the required network effects.

Figure. Matrix illustrating the classification of platforms.
The transaction platform can be a product, service, or technology that functions as an intermediary for exchanging transactions between different users, buyers, or suppliers. The basic principle is that the transactions result in reorganiza-tion of both resources and assets by digital means and that these platforms are character-ized by its tendency to monopolise its customers. For example, Uber and PayPal are transaction platforms.
An innovation platform is a “product, service or technology that serves as foundation for which other firms can develop complementary technologies, products or services”, for example both Amazon and Google are innovation platforms. In essential this means that anyone can use the platforms resources freely and no one are eligible to own the platforms customers.
Investment platforms are owned by companies that are developing “a platform strategy and act as a holding company, active platform investor or both”. The idea is to provide with a broader solution offering to its customers, e.g., Santander and Naspers.
The integration platform “is a technology, product or service that is both a transaction and innovation platform”. A typical characteristic for integration plat-forms is that it attempts to convince and attract various parties to join the platform because of its plausible economical gains from the arising network effects. The Apple iStore concept is an example of an integration platform.

Connecting People and Economics – A Bad thing?

Are the new emerging platforms a trampoline for growth and opprotunites, or more like a malevolent spider-webb with negative and polarlizing side-effects for the society as a whole? Platfoms, such as Apple; Amazon; and Ebay, surely makes our lives more practical/easier and improves the classical functionality of a market for exchanging goods. However, I am not so sure about the new platforms that concerns with intangibles, such as Facebook and Google. Do these improve our everyday life? The answer is clear as mud. On short term these do provide with improvements, but what about long term effects? Are an overflow of “bad” information and cyber-relationships good for us?

Time will tell, but one thing is sure that these issues needs more attention and discussion. Regardless, my strong personal view is that some intangible cyber platform “relationships” are align with the follwing qoute:

“F**in’ see why they call this bullshit a “relationship” – ships sink”