{"id":6224,"date":"2018-01-22T05:23:54","date_gmt":"2018-01-22T13:23:54","guid":{"rendered":"http:\/\/evergreensmallbusiness.com\/?p=6224"},"modified":"2018-01-19T06:43:48","modified_gmt":"2018-01-19T14:43:48","slug":"henry-ford-problem-customer-ization","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/henry-ford-problem-customer-ization\/","title":{"rendered":"Henry Ford and the Problem of Customer-ization"},"content":{"rendered":"<p><a href=\"http:\/\/evergreensmallbusiness.com\/wp-content\/uploads\/2017\/12\/iStock-612252772.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-6228 alignleft\" src=\"http:\/\/evergreensmallbusiness.com\/wp-content\/uploads\/2017\/12\/iStock-612252772-300x200.jpg\" alt=\"Henry Ford demonstrated how to avoid the problem of customer-ization\" width=\"300\" height=\"200\" srcset=\"https:\/\/evergreensmallbusiness.com\/wp-content\/uploads\/2017\/12\/iStock-612252772-300x200.jpg 300w, https:\/\/evergreensmallbusiness.com\/wp-content\/uploads\/2017\/12\/iStock-612252772.jpg 724w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Last month, while on vacation, I read Bhu Srinivasan\u2019s excellent book, <cite>Americana: A 400-year History of American Capitalism<\/cite>.<\/p>\n<p>Srinivasan\u2019s epic work paints a panoramic picture of U.S. capitalism and entrepreneurship. And for small businesses, two big insights jump out at you. One, I discuss in this blog post\u2014the problem of customer-ization which Henry Ford solved.<\/p>\n<p>The other insight, about the intersection of technology and entrepreneurship, I discuss next week.<\/p>\n<h2>Henry Ford\u2019s Giant Insight<\/h2>\n<p>Rather than paraphrase, let me just quote Srinivasan\u2019s description of Ford\u2019s gigantic insight:<\/p>\n<blockquote><p>\u2026 Ford didn\u2019t believe that the customer is always right. Indeed, he attributed the difficulties of his early competitors to their slavish need to listen to customers. To Ford this was a trap. The customers willing to pay the absolute most for a car were the ones who wanted customization. But an auto maker willing to customize, to cater to individual requests, lost the opportunity to scale his operation\u2026 To reduce the cost of production, a manufacturer needed to standardize components and processes\u2026<\/p><\/blockquote>\n<p>Ford\u2019s insight, as richly detailed by Srinivasan, led him down a path a century ago that ultimately ended with giant business success.<\/p>\n<p>But here\u2019s the thing\u2026 A century later, we small business people still need to follow Ford\u2019s game plan where we can.<\/p>\n<p>In other words, we need to avoid custom-tailoring products and services. Instead, we need to design and deliver high-quality, high-value items which we can produce in volume.<\/p>\n<p>If we don\u2019t, bad problems appear.<\/p>\n<h2>First Problem of Customer-ization: Lower-Quality Product Design<\/h2>\n<p>A first problem? Customers and clients typically lack the technical skills and lack the inside understanding of your firm and industry necessary to design quality products and services.<\/p>\n<p>Gosh, no surprise there, right? Product design takes hard work, advanced skills, knowledge in the relevant subject matter, and creativity.<\/p>\n<p>Customers and clients of course know what they want. But they simply don\u2019t know enough to design good, high-quality products.<\/p>\n<p>And this low-quality thing undermines you, undermines me, from the very beginning.<\/p>\n<h2>Second Problem of Customer-ization: No Scalability<\/h2>\n<p>A second problem flows from the first problem: No scalability.<\/p>\n<p>You and I can\u2019t <em>profitably<\/em> deliver products and services except at decent volumes. One can\u2019t amortize fixed costs over one or two (or four) customers usually.<\/p>\n<p>Yet customization, or what I\u2019m calling customer-ization, pushes the small business owner to deliver new, usually untested creations. And to create and deliver these one-off creations again and again.<\/p>\n<p>Surely, no scalability counts as another serious problem stemming from customer-ization.<\/p>\n<h2>Third Problem of Customer-ization: Low Profit Margins<\/h2>\n<p>A third problem flows from the first and second problems as naturally as water runs downhill.<\/p>\n<p>With customers designing products that often suffer from lower quality, and products which usually can\u2019t be delivered in volume at high efficiency, the customized product or service probably doesn\u2019t generate adequate profit margins.<\/p>\n<p>A portfolio of customized products and services, in fact, probably won\u2019t generate enough profit to fairly compensate employees, pay for the cost of the capital used in the firm, and reasonably reward the business owner for her or his efforts.<\/p>\n<p>Marcus Lemonis, in a wonderful recent episode of <a href=\"http:\/\/www.cnbc.com\/live-tv\/the-profit\">his popular TV show, <cite>The Profit<\/cite>,<\/a> highlights this. He observes about a tiny home manufacturer that a firm can\u2019t be profitable by selling\u00a0customization and price. Rather, Lemonis says you and I want to sell <em>value and experience<\/em>.<\/p>\n<p>I think he\u2019s right\u2026 don\u2019t you?<\/p>\n<h2>Two Wrap-up Comments<\/h2>\n<p>If any of this rings familiar, can I throw out a couple of suggestions?<\/p>\n<p>First, I highly recommend Srinivasan\u2019s <cite><a href=\"https:\/\/www.penguinrandomhouse.com\/books\/536770\/americana-by-bhu-srinivasan\/9780399563799\/\">Americana<\/a><\/cite> book. I\u2019d also say consider this book a holiday or birthday gift idea for any small business owner.<\/p>\n<p>Second, if you\u2019re running a small business confronted with the problem of customer-ization, watch the Tumbleweeds Tiny Homes episode of <cite>The Profit<\/cite>. No joke, I had everybody in my CPA firm watch the episode at work\u2026 and then we had a group discussion of how and where customer-ization hurts our product quality and profit margins.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Last month, while on vacation, I read Bhu Srinivasan\u2019s excellent book, Americana: A 400-year History of American Capitalism. Srinivasan\u2019s epic work paints a panoramic picture of U.S. capitalism and entrepreneurship. And for small businesses, two big insights jump out at you. One, I discuss in this blog post\u2014the problem of customer-ization which Henry Ford solved. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6228,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[12,16],"tags":[],"class_list":{"0":"post-6224","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-management","8":"category-strategy","9":"entry"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Henry Ford and the Problem of Customer-ization - Evergreen Small Business<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/evergreensmallbusiness.com\/henry-ford-problem-customer-ization\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Henry Ford and the Problem of Customer-ization\" \/>\n<meta property=\"og:description\" content=\"Last month, while on vacation, I read Bhu Srinivasan\u2019s excellent book, Americana: A 400-year History of American Capitalism. 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