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5/8/2008
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The Meaning Of N = 1 And R = G

These concepts go well beyond mass customization and offshore outsourcing.

The Nuance Of N = 1
Is N = 1 the same as mass customization or "the segment of one"? A segment-of-one strategy targets a customer at a time by learning a lot about her--demographics, spending patterns, etc.--but this is still a business-centric view of the consumer. Mass customization allows me, the consumer, to choose from a menu of products, but it's still the company's determination of what I may need. N = 1 changes this business-to-consumer view; it's a consumer-to-business-to-consumer view, if you will.

Consumers are joint problem solvers. Are the 6,000 application developers for Facebook part of a "segment of one"? How about bloggers for the New Age of Innovation site? Are they passive recipients of the knowledge in the book, or co-creators of new knowledge? N = 1 is about "personalized, co-creation of experiences"--not mass customization or a customer of one. These nuances are critical

-- C.K. Prahalad

More Than Cost Benefits
A student raised a central question during my MBA class recently regarding the concepts of N = 1 and R = G. His question: Does R = G mean outsourcing to the Far East? My answer was no, not necessarily, though I understand that the word "global" can be misleading in the current environment.

Let's take the example of a growing, privately held business called Zazzle. This is a U.S. company that allows customers to personalize a variety of products, everything from T-shirts and aprons to posters, coffee mugs, and buttons.

Zazzle provides a unique personalized experience for each customer to participate in the design of his or her product (i.e., "co-create," in the manner of N = 1). It fulfills customers' requests through partnerships with a number of local suppliers. The company also creates a platform for customers to sell their own designs in a market.

Zazzle's vast collection of digital images comes from content partners such as Disney and the Library of Congress, as well as individual artists and creative consumers worldwide. This is R = G at the individual level: Zazzle is leveraging the talent of individual customers.

So you can see why Zazzle's business model is different from conventional models in this domain, where companies usually make bulk purchases of mugs or T-shirts from offshore locations to leverage scale economies and cost benefits. It is the emergence of a new business model that enables co-creation with customers and leverages resources globally.

The power of digitization and imagination is enabling this evolution of new business models. It is not about a myopic cost-based argument for outsourcing to the Far East. It's about building clarity on what N = 1 and R = G mean for my business. Managers need to build internal capabilities in their business processes through social and IT architectures to progress in this New Age of Innovation.

-- M.S. Krishnan

Read InformationWeek's New Age Of Innovation blog at: newageofinnovation.com

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