Mass Customization in Adidas Presented by: Akash Choudhary Paritosh Sharma Yousra Emara

Contents Adidas Journey. Adidas v/s Nike Mass Customization – Customer Centric Enterprise Modes of customer participation Stages of MC in Adidas Paradox of tie Strength in customer relationship. Mass customization capabilities Future Development in MC Conclusion

Adidas Currently The biggest sportswear company in Europe and the second Worldwide. Adidas sales revenue is €14.49 Billion (in 2013). Total number of employees 50,728 (in 2013). It produced 257 million pair of shoes worldwide and 341 units of sports apparel (in 2013).

Adidas History 1963-1967 Introduction of soccer balls and apparels 1924 ADIDAS founded by Adolf Dassler 1947 Split between brothers. Rudolph Dassler founded Puma 1963-1967 Introduction of soccer balls and apparels 1979 Emergence of new competitors like NIKE and REEBOK 1999 Started mass customization 2006 Acquisition of Reebok After world war 1 Gebrueder Dassler schuhfabrik (Dassler brother shoe factory) [NO ELECTRICITY SUPPLY IN THE TOWN, BROTHERS HAD TO USE PEDAL POWER FROM STATIONERY BICYCLE TO RUN THEIR EQUIPMENT ]

Revenue : 14.49 Billion Euros No of Employees : 50,728 Revenue : 25.3 Billion Euros No of Employees : 48,000 Started in 1920 and implemented mass customization in 1999-2000. Started in 1976 and implemented mass customization in early 1999. Main focus European Market. Manufacturing units in East but designing in Germany. Main focus American market. All manufacturing outsourced. Design and marketing in USA. Only sports brand to offer 3 options in mass customization. Mass Customization focuses on design. Performance based. Design based. Soccer, Tennis, Athletics Basketball, Cross-training, Running, Women and Children’s shoes Aggressively entering Soccer.

Need for Mass Customization Between 1980-2000 variety of shoes increased by 3000 percent. Creating individuality became the necessity. But the cost and risk involved in showcasing new variety was huge. In late 1990s Adidas decided to “go back to the roots”. Customization demanded immense customer relation. One of the great strengths of any successful footwear company is its ability to create a compelling variety of offerings that excite consumers. With high competition, Adidas was compelled to introduce a lot new design every year too. (Nike sold 13000 variety per year) Retail outlets face high overstocks, an increasing fashion risk, and the necessity to provide often large discounts in order to get rid of unwanted products, not to mention lost sales caused by products which have performed better than expected and that are therefore not available in adequate quantities or sizes. “go back to roots” : Like any other old shoe company adidas started with making shoes on order. The motivation to enter mass customization clearly was to find a way to reduce the high complexity of a forecast‐based system of high variety.

Modes of Customer Participation Mode 3 – “Design BY customers” Customers as active co creators Customer participation in innovation For e.g., Include toolkits for user innovation, idea competitions, user workshops etc. Mode 2 – “Design WITH customers” Quasi interaction Company listens to customers but does not engage in a dialogue E.g. Customer surveys, Different solutions to customers for concept testing Mode 1 – “Design FOR customers” Communication is one way Firms use customer information from diverse input channels For e.g. feedback from sales, internet forums, online community etc. Modes of Customer Participation in a firm’s innovation process

Adidas Mass Customization Offerings miAdidas: Program focused on performance shoes and combines fit (measurements), function (climate control, insole), and form (color combination) miTeam: Targeted sports teams, where a coach, for example, can customize sportswear for all team members miOriginals: Allowed consumers to create their own style miCoach: Personalized online training program 1. The program started in 2001 after two years of planning and testing. Today, miadidas is offered both online and in selected flagship stores. 2. also customizable apparel and accessories in addition to shoes. 3. mioriginals cleary is positioned as a fashion product. 4. Customers can provide input on their training objectives and lifestyle habits and receive a personalised suggestion.

miAdidas Fulfillment Process The process starts in a dedicated retail unit where customers and retail personnel interact in an intense co-design process Customisation options include the fit (size and width), performance criteria (insole, cushioning, outsole characteristics), and the aesthetic design (colour combinations, custom embroidery) 2. After an individual order is placed, it is sent to the national sales system where it is forwarded to the international sales system and the manufacturer. 3. After order processing, the custom shoes are made to order in one of several Chinese factories 4. After production, the shoes are shipped to the retailer responsible for informing the customer of its arrival.

Stages of MC in Adidas Piloting First Rollout Growth and Expansion (3rd and 4th Phase) Sustainable Business Model (5th Phase)

Customer Feedback: POSITIVE Stages of MC in Adidas Piloting (Launched in 2000) Evaluated the feasibility of the offering during a two-month trial period. Offered one model of custom (football) trainers at six different events around Europe. The pilot helped evaluate the possible degree of available variety. Knowledge gained in this stage was used to reengineer the sales, product models and backup processes. Customer Feedback: POSITIVE

Stages of MC in Adidas First Rollout (Launched in 2001) Two further models were offered (for running and tennis) Retailers were asked to participate by testing the product offering Out of 1000 retailers, 100 were ultimately selected Evaluation: POSITIVE

Stages of MC in Adidas Growth and Expansion (Launched in 2003-2005) The line of products was enlarged o its current scope of four kinds of sports (football, running, tennis, and indoor) More retail outlets were added (fourth phase, 2005). More attention to the commercial side of miAdidas Evaluation: POSITIVE More attention to the commercial side of miadidas by introducing volume and profit targets for the participating regional sales departments

Stages of MC in Adidas Sustainable business model Support the brand image and enhance the other (inline) products Position itself as an innovative player on the market Improve relationships with its users Evaluation: POSITIVE Can be said after the slide: Miadidas has come up as a marketing tool that is actually generating profits instead of just making a dent in the marketing budget. Today, miadidas is widely accepted as the best brand supporting activity the company has ever had

Paradox of tie strength customer relationship MC Literature says : Strong ties constraints innovation and radical change in an organization. Solution : Ignore customer preference – eg: design and entertainment forms Sustain ties with majority and generate revenue from them while create innovation from the ones with weaker ties.

Mass Customization Capabilities Defining Solution Space Robust Supply Chain Process Design Choice Navigation

Defining Solution Space for miAdidas Step 1 Offered customization on existing inline shoes, mostly of premium products of each category. Step 2 miAdidas engaged in conventional research techniques. But wasn’t effective enough. Step 3 But very soon engaged in pilot prototyping with potential customers from sporting events.

Defining Solution Space for miAdidas – First Customer Feedback 73 % felt good and willing to pay upto 30% more. 80 % understood delivery will take >21 Days. Based on criteria : Fit was mentioned most often Followed by Function/ Performance Then Design Fit – (68 % interested in Custom soccer shoes, 75 % for runnin shoes)

Defining Solution Space for miAdidas – Result Decided to position miAdidas as a performance product with 3 dimensions: miFit (Measurement) miPerformance (Functionality and components) miDesign (Color and graphics) In recent years design has also been very important: In order to go online To target young creative customers Fit – (68 % interested in Custom soccer shoes, 75 % for runnin shoes)

Robust Process Design for miAdidas Customers served within predefined components, company’s solution space Library of predefined casts is used, larger than standard size assortment. Different show sizes for both feet. Same supplier used for custom shoes for corresponding inline products. Flawless Order management system. Value creation within robust processes is the major differentiation of mass customization versus conventional (craft) customization. Same supplier can be convinced because of Adidas’ market position. Manufacturing units in China, Indonesia, Vietnam, Thailand - Based on information from planning and development processes, the order management system automatically identifies the manufacturing facility that offers the best suitable combination of available resources and capacities. Problems related to constant updation

Robust Process Design for miAdidas Distribution : Manufactured in different country and delivered with 21 days. Express courier used. Orders can be tracked.

Choice Navigation for miAdidas Also known as co-design tool. 3 possible place for customer to place order: Flagship Retail stores Events Online Customer data saved and reused.

SWOT Analysis of miAdidas Strength Less fashion risks, discounts, and inventory costs. Adequate financial resources for financing future growth Close customer contact at the miAdidas shop unit. Weakness High logistic costs due to manufacturing in Asia. No configuration system available for online sales. Dependence on external partners in manufacturing and logistics. Opportunities Possibility to build strong customer relationships Access to aggregated market information can continuously improve inline assortment. miAdidas is the only full customization business in the athletic shoe industry. (three customization options: fit, performance, and aesthetic design) Threats Rather long delivery times may hinder growth when new customer segments are targeted. Unknown market potential for custom footwear. Potentially limited willingness-to-pay for custom shoes.

Future Development in Mass Customization Adidas should improve their supply chain in order to decrease their fright cost and time. However, the company must continue to examine and redesign current processes in order to create the best possible fit between its mass customization business and the mass production. Adidas should integrate various functions along the entire value chain, enormous efficiency potential could be leveraged. More incremental innovative ideas could be generated in the future through having strong customer relations and to expand upon its customer interaction processes. .

miAdidas Conclusion The development of miAdidas reveals a long learning path and trial‐and‐error process for implementing and scaling‐up a mass customization offering. Mass customization for Adidas contributed to brand building and positioning the company uniquely on the market as a performance centric product. No other competitor offers a product with such a high degree of customization. They have changed the way world see MC by going against the paradox.