High product variety and company performance - organization and configuration of strategic capabilities

Wellige, Moritz; Piller, Frank Thomas (Thesis advisor); Schmitt, Robert (Thesis advisor)

Aachen : Publikationsserver der RWTH Aachen University (2015)
Dissertation / PhD Thesis

Aachen, Techn. Hochsch., Diss., 2015

Abstract

Today, business environments are oftentimes characterized by ever-changing market conditions. Major drivers of these changes are increasingly heterogeneous customer needs due in particular to regionally differing requirements, continuously rising demand for new product functionalities and features, and shortening product life cycles and time-to-market periods. Mass customization – more generally referred to as high-variety product strategies – are seen as promising strategic orientations for companies to deal with such dynamic environmental conditions. The objective of these strategies is to efficiently offer high variety to meet the heterogeneous needs of customers. However, increasing the number of available product variants is usually also associated with rising levels of complexity and uncertainty with regard to processes and products. Companies pursuing a mass customization strategy are thus forced to create suitable organizational conditions that enable them to cope with these challenges.The existing research emphasizes that companies pursuing a mass customization strategy need to develop and implement distinct strategic capabilities to be able to achieve a sustainable competitive position. For example, there is a large amount of literature addressing the issue of how manufacturing systems and product architectures need to be designed to enable companies to efficiently offer customers high variety. Here, flexible automation technologies and modular product architecture are important enablers helping to increase the stability and resilience as well as the efficiency of manufacturing systems. The literature also reveals that companies need to invest in a capability that enables them to efficiently handle the internal and external information transfers necessary for product customization. Moreover, a capability related to product development is required that enables companies to develop and continuously revise a high-variety product offering in order to meet market requirements as precisely as possible.Although the research on mass customization provides valuable insights and implications for companies, most of the studies are focused on single aspects of the capabilities required to successfully pursue mass customization. The research does not provide a profound theoretical and comprehensive conceptualization of the necessary capabilities for mass customization, nor have the interrelations between these capabilities or their impact on company performance been investigated in an empirical manner. Furthermore, there is no measurement approach available that allows companies and researchers to evaluate and benchmark a company’s ability to efficiently deliver customized products on a large scale. Besides this, it is suggested in the literature that non-customization companies that are confronted with dynamic market conditions might also benefit from implementing distinct mass customization capabilities. However, this has hardly been studied. By addressing these research gaps, this dissertation aims to help practitioners and researchers gain a better understanding of mass customization and its relationship with and impact on company performance.This dissertation consists of two parts. The first part provides a general introduction into the field of mass customization based on recent research and related theory, followed by the identification of the research gaps that represent the motivation for the research papers of this dissertation, presented subsequently. After a general discussion of the results, the implications, limitations, and potential avenues for future research are suggested. In the second part, the three research papers are presented in stand-alone chapters. Brief summaries of these papers are presented in the following:The starting point of the first research paper is the theoretical assumption that even non-customization companies in dynamic business environments need to achieve a strategic flexibility in order to be able to flexibly reallocate organizational resources to remain competitive. However, increasing flexibility is frequently associated with a loss of efficiency on an operational level. Using survey data, I provide empirical evidence that a mass customization capability, i.e., a capability dedicated to flexible but efficient manufacturing processes, helps to reduce the tradeoff between strategic flexibility and organizational efficiency. This paper thus provides a first insight into the relevance of such an operational capability for company performance.The second research paper provides two major contributions to research and practice. First, building on a literature review and interviews with experts of the field, a comprehensive conceptualization of three strategic capabilities for mass customization was derived. Second, a formative measurement index was constructed for each of the three capabilities and evaluated using data from a survey among companies pursuing a mass customization strategy. The formative indices consist of 71 managerial activities and organizational resources related to the capabilities for mass customization. These indices not only allow researchers and managers to evaluate a company’s ability to efficiently offer high variety, they can also be applied to identify potential for improvements within a company.In the third research paper, the interrelations between the three capabilities for mass customization conceptualized in the second research paper are related to each other and to company performance. Based on the literature and the contingency theory, an organizational configuration is proposed consisting of the three strategic capabilities for mass customization. The derived organizational configuration for mass customization was empirically evaluated using survey and financial data from 193 European mass customization companies. The results emphasize the suggested organizational configuration as well as the relevance of all three mass customization capabilities for company success. This helps to improve our understanding of mass customization and its drivers of success. The results also provide implications for companies intending to improve their mass customization capabilities.Overall, the results of the three research papers help to improve our understanding of the organizational capabilities required to successfully pursue mass customization as well as the relationships among them and their impact on company performance.