Monday, April 14, 2014

BRIDGING: Product strategies and the product life cycle curve, opening up Mass Customization (including for tourism) . . . implications for a region on the wrong side of Kondratiev wave Schumpeterian creative destruction

As a footnote on the life cycle curve in the context of the Boston Consultants Group Growth/Share Matrix, let us observe a model of "typical" S-curve market growth and saturation patterns for strategic business units and their major products:

 A further perspective on strategic choices and patterns is here. It brings out how innovation creates value and head room for pricing across the range from penetration to skimming the cream . . . and thus for product ranges with basic to luxury features and customisation, across price points.

First, the Porter value-producing chain sets a context:

 Then, we look at key competitive advantage factors that make best use of this chain, through enhancing value to customers and controlling costs, thus opening up pricing room for a product range across price-points:

Also, cf. below on the "stuck in the middle and/or stuck with high cost undifferentiated goods or services problem (i.e. overly costly "commodities")  -- a problem not without relevance to the Caribbean . . . just say, sugar and bananas:

This pattern can be extended to considering the market for a key technology innovation, and how it can dominate the world, starting from one or a few initial centres then diffusing across the world along trade routes. This leads on to the K-wave (Kondratiev wave) pattern as seen previously. Simplifying the curve and summing as a series of cumulative Solow production functions joined up as successive S-curves, we can see how major innovations would naturally give rise to a long wave growth pattern:

 A more complex model would bring out recessions and depressions, as well as shorter cycles that "ride" on the long wave pattern, creating a much more typical bouncy or jerky pattern, and shocks and general noise would also create further disturbances. Thus, on the whole there is an underlying cumulative trend of progress, but there are also periods of boom and recession. 

For instance:

In this context, while we can hardly expect the Caribbean region to dominate the world economically, we can probably find profitable niches . . . and a challenge is to allow BCG problem children or question-mark products and dogs to develop into profitable niche markets . . . that give us sufficient prosperity and stability to have a base for sustainable development.

It is noteworthy that in a networked world with automated, computer controlled manufacturing systems, mass customisation offers a potentially decisive advantage of high differentiation and penetration pricing . . . "value [for money]" pricing. 

Wiki summarises usefully:
Mass customization, in marketing, manufacturing, call centres and management, is the use of flexible computer-aided manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization.

Mass customization is the new frontier in business competition for both manufacturing and service industries. At its core is a tremendous increase in variety and customization without a corresponding increase in costs. At its limit, it is the mass production of individually customized goods and services. At its best, it provides strategic advantage and economic value . . . .
The concept of mass customization is attributed to Stan Davis in Future Perfect[2] and was defined by Tseng & Jiao (2001, p. 685) as "producing goods and services to meet individual customer's needs with near mass production efficiency". Kaplan & Haenlein (2006) concurred, calling it "a strategy that creates value by some form of company-customer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products". Similarly, McCarthy (2004, p. 348) highlight that mass customization involves balancing operational drivers by defining it as "the capability to manufacture a relatively high volume of product options for a relatively large market (or collection of niche markets) that demands customization, without tradeoffs in cost, delivery and quality".
For instance, our region has ever so many clothing factories, which (HT: Emerald Insight) are subject to mass customisation approaches, once relevant barriers. . . mostly digital system and network development related . . . can be crossed:

And just as a thought sparker, let's look at mass customising tourism -- said to currently be 50% of GDP and 40% of employment in some Caribbean islands, with special reference to Montserrat: 
  • how could we use high security server side web technologies and fibre optic bit pipe technologies to market and customise tourism services such as day tours for excursionists and/or activities and events for those undertaking longer stays? 
  • Including, cycles of festivals and celebrations, a nature heritage trail, adventures [e.g. the volcano park] and a cultural heritage trail?
  • Could we create an "online virtual tour" or at least a" virtual shopping Mall" experience,  and set up options in a game-like format?
  • Could we then convert that into a package deal that can be bought on a schedule and paid for by credit or debit card, up-front?
  • Could we then organise ourselves to deliver on time, on cost? 
  • What about taking care of  visa, customs and immigration issues online, tied to this?
  • Could we set this up and support such a customised tourism product as a freebie game-style App, for the iPhone, iPad, Android Smartphone/Tablet, and Windows 8 PC markets?
  • Support and promote it in the social media space?
  • Set up an Amazon Mall? (As well, our own e-Mall?)
  • Etc.?
At any rate, this interview with a former head of the Caribbean Tourism Organisation (CTO) should give us pause:

Caribbean Journal Presents: A Conversation With Vincent Vanderpool-Wallace from Caribbean Journal on Vimeo.

Back on track . . . 

To go towards the emergent mass customisation sweet spot . . . one that clearly has potential to be one of the emerging cluster of dominant technology innovations for the next K-wave . . . our region's workforce has to be retooled towards digital productivity, which implies first a transformation of our education system with Computer Science -- as opposed to "IT" (AKA how to use MS Office products . . . ) -- at the heart of the transformation.

DV, let's go there next, as we look at the other wing of the required strategic thrust for sustainability transformation, Education [to unlock the almost infinite potential in our heads, hearts and hands . . . ], population issues and welfare:

For reference, as a footnote and bridging post. END 

PS: Cf KF pamphlet on Economics challenges facing the Caribbean here.