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HOW ELECTRONIC NETWORK ORGANISATIONS ENABLE
MASS CUSTOMISATION IN FINANCIAL MARKETS
Martin Smits, Roland Toppen, Pieter Ribbers
Center for Research on Information Systems and Management
Tilburg University, P.O. box 90153, 5000 LE Tilburg (Netherlands).
m.t.smits@kub.nl
ABSTRACT
The financial services industry has used Internet technologies to create many standardised services
for consumers. Recent Internet initiatives offer more customised financial products and services.
Traditional market players have responded by evolving standard products to become more client
specific. These forms of mass customisation of financial services are based on an increasing role and
importance of electronic business networks. This paper explores examples of business networks
offering financial services and analyses the criteria for process performance and success.
1. INTRODUCTION
The numbers and volumes of transactions in the financial industry have grown tremendously in the
past years. For instance, the total transaction volume of financial securities was in 1998 already well
over US$ 25,000 billion per year in the US alone [Bernstein, 1998]. Globalization of the industry and
increased competition have lead to differentiation in services offered in B2B and B2C relationships
[Toppen et al, 1998]. The total number of collective investment schemes (CIS) offered to consumers
world-wide is now over 120,000 and the total investments in CIS in Europe has grown from US$ 500
million in 1990 to US$ 4,500 billion (!) in 2000 [FundPartners, 2001].
Wise and Morrison [2000] state that the emerging new financial business landscape will consist of
global ‘mega-exchanges’ with very low or even negative (!) transaction fees and ‘surrounding
symbiotic companies’ adding value as ‘specialist originators’, ‘e-speculators’, ‘solution providers’, or
sell-aside asset exchanges’. Traditional market players have responded by evolving standard products
to become more client specific. These forms of mass customisation of financial services are based on
an increasing role and importance of electronic business networks.
Gulati and Garino [2000] argue that organisations should search for the right mix of bricks and clicks
activities, in stead of separating Internet activities from traditional business. In stead of focusing on an
either-or-choice, executives should be asking ‘what degree of integration makes sense for our
company?’ Advantages of separation are a greater focus, more flexibility, and access to venture
funding. Advantages of integration are established brand, shared information, purchasing advantage,
and distribution efficiency. It might turn out that ‘clicks’ (fully Internet-based organisations) in the
financial industry can provide only highly standardized services and ‘bricks and clicks’ a mix of
customized and standardized services.
The objective of this paper is to identify enabling conditions and success factors for electronic
business networks in the financial industry to offer customised financial services. To find enabling
conditions and success factors, trends and cases are analysed focusing on the following questions:

ECIS 2002 • June 6–8, Gdańsk, Poland — First — Previous — Next — Last — Contents —
How Electronic Network Organisations Enable Mass Customisation in Financial Markets
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1. How are stakeholders involved in the networks, and what are their roles in customisation?
2. What are the network characteristics for different network strategies (low cost, full service, or a
mix)? Will low cost providers vanish and high quality/ full service providers flourish?
3. To what extent can flexible and dynamic networks be realised? What are the requirements for the
network infrastructure in a mass-customized financial services environment?
The case study method was used because it captures reality in more detail, and allows the analysis of a
considerably greater number of variables than other methods [Darke et al, 1998]. Case analysis is
based on the model by Toppen et al [1998], identifying 2 types of electronic business networks
(transaction oriented and process oriented) and 8 factors that influence the performance of electronic
business networks. The paper first reviews theory on mass customisation in the financial industry (2.1,
2.2), then reviews the model by Toppen et al (2.3, 2.4), and analyses two (B2C) cases (3).
2. THEORY
2.1 Mass Customisation
ICT developments and the emergence of network organisations have lead to product offerings being
increasingly tailored to specific client needs in various industries. The Dell website offers clients a
guided choice between 16 million different pc’s [www.dell.com] and Ford offers clients a choice
between 260 car models in 47 different colors [www.ford.com]. Manufacturing and distribution of the
pc’s and cars starts only after the products have been sold, thus reducing inventory costs.
Mass customisation (MC) is not only driven by IT and the emergence of network organisations, but
also by changes in customer’s demand over the last decade. Clients have become more and more
independent, professional, and ever more demanding when it concerns their social wellbeing [Wise
and Morisson, 2000]. MC can be defined broadly as ‘the ability to provide individually designed
products and services to every customer through high processagility, flexibility and integration. MC
systems may thus reach customers as in the mass market economy but treat them individually as in the
pre-industrial economies [Davis, 1989]. A narrower, more practical definition is: ‘MC is a system that
uses IT, flexible processes, and organisational structures to deliver a wide range of products and
services that meet specific needs of individual customers (often defined by a series of options), at a
cost near that of mass-customised items [Da Silveira et al, 2001].
Lampel and Mintzberg [1996] distinguish five degrees or levels of customisation from pure
customisation (including customised design of the product or service), tailored customisation
(customised fabrication), customised standardisation (customised assembly), segmented
standardisation (customised package and distribution), to pure standardisation. MC is traditionally
related to ‘operational customisation’ (e.g., by Lampel and Mintzberg), i.e. related to the stages in the
supply chain from design to packaging and distribution of the product or service. IT has also enabled
another approach to customisation: ‘marketing customisation’, which is transforming the practice of
marketing from being seller-centric to being buyer centric, also called ‘personalisation’ [Wind, 2001].
The combination of personalisation and MC is called customerisation. Companies such as
priceline.com and dealtime.com have customised the price determination process, letting customers
specify their own prices, and then searching providers willing to sell at those prices. Companies like
Dell have established custom web sites (premier pages) for business customers, whose employees can
order computer configurations pre-approved by their companies [Wind, 2001]. MC, personalisation,
and customerisation play an important role, especially for digital products such as music, books, and
financial services [Channon, 1998; Wind 2001].
2.2 Mass customisation in the Financial Industry
Nowadays consumers can choose to allocate savings in four ways: (a) savings accounts and deposits,
(b) self selected securities, (c) private banking, (d) collective investment schemes. The difference for
consumers between money market investments (a) and investing in securities (directly or indirectly