I have blogged before about the general trend towards standardisation and globalisation with what, seems to me, to introduce the inevitable question; ‘what about differentiation?’ There are a series of, please forgive the pun, standard answers to this question and at the top of the list seems to be the use of price. To give you your low price means I have to master still further cost efficiency and that means more standardisation and more use of globalisation to find the right cost base, and so on in a never ending spiral.
It’s not an encouraging thought, especially when you realise that the only way you will have made the money to buy from me will be by your own never ending efforts at the same game in your industry sector. In amongst the differentiation possibilities are some factors that were quoted in the first age of the Internet, the one that really didn’t work when some basic business rules were ignored. The one that really interests me is ‘customisation’, the idea that by a fully connected and interoperable business world it would be possible to deliver exactly what was wanted by connecting the consumer directly through the manufacturing or services ecosystem.
In the current age of the Internet; Web Services, SOA and Web 2.0, this is looking like the way things are going in the financial sector, where customisation in Retail Banking services just keeps on getting more and more personalised. What really got me fired up was to really see how well this is working out in the car industry led by the biggest mass producer of all: Toyota.
Three years ago Toyota set up a new division, only serving California, (don’t those guys get everything? From Sunshine to Arnie Schwarzenegger), called Scion, and targeting Generation Y buyers. These are demarcated by Toyota as being born between 1977 and 1994, but I would define them as the generation that grew up with the PC, the cell phone, gaming, and of course the Internet, the generation for whom these technologies are a life skill. The idea of Scion was to test out in the region with the most advanced generation Y group a whole new way of selling cars, and of course being able to build them.
Scion doesn’t make special versions of Toyota cars as would be the normal, or improved way, of handling differentiation and customisation, instead it makes extreme basic versions on the Toyota production line. The change point is in the ecosystem it has created with the vast array of body shops and tuners that exist in California that allows its customers to really create their own customised car. It’s not Toyota that makes the car, they stick to what they do best, volume production, it’s the buyer and the market that creates the car.
It took the first year to catch on but now using three very very ordinary base models Scion is selling 150,000 cars a year, and that’s more than parent Toyota sells in the UK after having to offer a much wider range with the consequential costs and issues. The tag line on all the advertising is ‘unavailable soon’ and the pictures show heavily customised cars that create a ‘wow factor’, but as the advert says, can’t be bought.
When everything is available now, and at lower prices, it takes a real genius to figure out that the differentiation is to make it so it can’t be bought from stock as a standardised model! May be we are closer to differentiation than we realise, and the link is specialisation and ecosystems.