In 2001, Apple revolutionized the electronics industry. Apple launched the iPod. Now it's interesting to recall how many product variant of the iPod were there. There were basically two memory sizes, but every iPod looked the same. It was white and looked exactly like this. Ten years later, Apple is making a good chunk of their money by selling iPhones. Now again, there are multiple memory options available, but chances are that your iPhone is exactly the same that I have. The casing around the iPhone makes for an interesting case of delayed differentiation. But in both cases you see that very successful products often times do not require customer choice. In this section, we'll talk about how customers often times can be overwhelmed by choice. Even if we have perfect flexibility, we don't have any of the problems we encountered previously in the production and the distribution in our operation, there are good reasons to limit customer choice. A number of years ago, my friends and colleagues, Taylor Randal, Cower Rick, and I, were involved in an interesting study for computer maker, Dell. We were looking at the customization strategy. Dell has brilliantly overcome the [INAUDIBLE] of mass customization discussed in this module, very short setup times and an amazing made to order distribution system. We are interested to what extent customers are actually able to make good choices when buying Dell computer online. Now, it's important to keep in mind that consumers don't really care about the technical details about a computer but they buy it the computer to maximize their consumer utility. This is driven by things such as supportability of the computer. Let's see price, the performance it has when it plays video games and a couple of other dimensions. When customizing the product, they have to put together a combination of processor, display, memory and a couple of other options including the video card then we'll optimize their utility. This is a really hard problem. There are thousands and thousands of combinations in which you can put together the various Dell models. Will consumers be able to find the computer that is right for them? That was the purpose of our study. So here's what we have done in our study. We took a number of consumers who were in the market of purchasing a Dell laptop. We had them sit behind a computer and configure through the Dell user interface the computer that they felt was right for them. They made choices for the computer, the platform, the disk drives, the processors, the graphic cards, memory and all the other things that you can choose online. Once the choice was complete we took them to a separate room. In this room we had put together a whole assortment of Dell computers. You see here my colleague Carl Ulrich explain to one of our consumers in the study the implications of her choice. We showed them look here is a computer that you just ordered. How did you like it? And we did something else that was interesting. We showed them the other computers that they didn't order but they could have. We asked them now that you see all of the options available, different sizes, different weights, different screen resolutions and different graphic cards, are you happy with your choice? To our great surprise, a large number of people wanted to change their choice. They felt that, really, they could have done a lot better by choosing a computer that was more right for them. This was especially an effect for consumers who hadn't had a lot of computer experience. So as you see in the study here, that even if on the production process side, we can get you exactly the product that you want, and we have overcome the limitations that we discussed in this module, such as setups and demand fragmentation. There exists still a barrier, with respect to variety. That barrier is on the consumer's side. Even with perfect flexibility in the process, even if you're able to change from product a to product b at no cost and infinite speed. Even then, you might consider limiting your product variety. The reason for that is customers oftentimes have a hard time judging which product is right for them. And when you expose them to too much variety and to too much choice, they get nervous and ultimately abstain from purchase. So yes, technology such as mass customizations, the latest trends in 3D printing, they will revolutionize the supply side of product variety. However, the demand side will always remain an issue. Will customers really want more choice and are they willing to pay for it? That's a whole other story.
