Is it better for your business to be Standard? Custom? Or someplace in-between?
The answer depends in part on your business—the industry and services you provide both play a part in determining what’s best. However, there is a tendency across all industries for businesses owners to have a bias towards the Custom side of the continuum. Their mindset is that their business is unique or special, so it must be Custom.
This article, based on concepts from the book Business Model, explains the concept of the Standard-Custom Continuum. Keep reading to learn what it is and how using it can make your business more scalable.
The Standard-Custom Continuum
The level of customization that a company offers its customers informs its design and operational structures. A business that is more Custom requires a greater degree of operational flexibility than a business that is more Standard. There are many different degrees of customization, which is why a continuum is used to represent this concept.
The three categories of the Standard-Custom Continuum are Standard, Semi-Custom, and Custom. A business can land anywhere along the range between Standard and Custom.
Standard – A business that provides products and services that are generally the same for every customer.
Semi-Custom – A business that provides some degree of configuration or personalization of products and services to its customers.
Custom – A business that provides products or services that are unique or almost infinitely configurable for a customer.
The more standard the business, the more easily it can scale, because the work it performs is more routine and can be leveraged across a greater number of employees. A company that is further right on the continuum by providing custom products or services will face a barrier to growth in being dependent on specialists who possess particular skills.
The Effect of the Standard-Custom Continuum on a Business
The Standard-Custom Continuum concept is traditionally applied to a business as a whole, with implications for the overall strategy for that business:
A Standard business will focus its strategy on creating efficiencies and cost advantages through processes, systems, and scalability.
A Semi-Custom business will be drawn to strategies that provide for configurability of its products and services in an efficient manner to provide customers tailored products while generating higher margins.
A Custom business will be attracted to strategies that generate superior margins by providing unique solutions to the client while using flexible quality control methods to ensure some degree of consistency.
A fast-food restaurant is a good example of a Standard business. It keeps its prices competitive through efficiency and earns customer loyalty by providing a consistent experience, regardless of the location. Businesses on this end of the spectrum are highly scalable and rely heavily on uniform processes and systems.
An example of a Semi-Custom business is a luxury automobile brand. It provides a fixed number of makes and models, which would put it on the Standard side of the continuum, but it also offers a wide range of options for its customers to select from, moving it towards the middle of the continuum. Mid-market automobile brands are also Semi-Custom, but since customers have fewer options to customize these vehicles, they would be further to the left on the continuum than luxury manufacturers.
Very few businesses are purely Custom because it is rare to successfully create a completely unique product or service for every client. An artist is an example of a true Custom business, in that the artist can be commissioned to create a unique piece. More commonly, though, businesses are further to the Custom side of the continuum without being purely so. A high-end consulting company would fit this definition. Its clients have unique needs that often require custom solutions. While the consulting company may develop solutions that can be reused across a vertical market or functional area, the majority of its work will be Custom.
Placing Portions of a Company on the Standard-Custom Continuum
While it is helpful to place the overall company on the Standard-Custom Continuum, it is often more revealing to identify the percentage of the business that fits in each category. Many business owners see their business as unique—no other business is quite like theirs. When placing their business on the Standard-Custom Continuum, business owners tend to exaggerate to the right. Being intimately familiar with the details of their business, all they see are the nuances, and it biases their assessment of the business to being more Custom than it actually is.
The problem with this mindset is that it prevents standardization in cases where it would be beneficial to the business. Taking a custom approach, when a semi-custom or configurable approach would be suitable, results in increased variability in the processes and execution of the work. This in turn leads to inconsistent quality and varied customer experiences.
The reality is that some portions of every business can and should be Standard (e.g., onboarding new customers, processing invoices, payroll, etc.). If every aspect of a business is brand new each time, it’s nearly impossible to maintain a consistent client experience, track and improve operations, or train new employees. Considering what portions of a business fall into Standard, Semi-Custom, and Custom helps business leaders combat a bias toward uniqueness. They can start to see areas of the business that are currently treated as semi-custom or custom but could be standard, or things that are custom but could be semi-custom.
Remember, the more Standard a business is, the more scalable. Standardized processes and procedures create efficiency and help a business sustain higher profit margins.
The concepts in this article were taken from Business Model: Architecting a resilient, profitable business. Available through The ReWild Group and Amazon, the book explores in depth this and other concepts while providing illustrations to help business leaders incorporate the ideas into their organizations. Get your copy today, and don’t forget to download the free workbook that serves as a companion guide to the book.