I made a summary from a great publication in the Journal for Computer-mediated communication: " Overcoming Mass Confusion: Collaborative Customer Co-Design in Online Communities ". [Paul thanks for the tip!]

In the mass customization concept, goods and services are produced to meet individual customers’ needs with near mass production efficiency. The customer chooses an individualized combination of product specifications from an infinite set of options. During this process of elicitation, the customer is being integrated into the value creation of the supplier. The customer becomes a co-creator or "prosumer".
Co-design activities are the necessary prerequisite of mass customization in order to fulfill the needs of individual customers. However, these activities are also a major driver for complexity, effort, and perceived risk from the customers’ perspective, limiting the current success of mass customization strategies.

When acting as co-designers, customers face new uncertainties and risks, coined "mass confusion". The use of online communities for collaborative customer co-design icould be used in order to reduce the mass confusion phenomenon. In so doing so, we challenge the assumption made by most mass customization researchers that offering customized products requires an individual (one-to-one) relationship between customer and supplier.

read more on affinity groups, participatory communities (PEP), cost vs benefit, peer-group pressure, role model etc…

Research on mass customization addresses different issues around developing, producing, and selling individualized products and services for rather large customer segments. Within a mass customization business, customers are integrated into value creation by defining, configuring, matching, or modifying their individual solution from of a list of options and pre-defined components. These co-design activities are performed in an act of company-to-customer interaction. In the arena where co-design is performed, vendors use so-called toolkits for customer co-design. These toolkits are a technology that (1) allows users to design a novel product by trial-and-error experimentation, and (2) delivers immediate (simulated) feedback on the potential outcome of their design ideas. Today, most of these toolkits are Internet-based (web 2.0 application layer).

 "Participatory Electronic Product Catalogues (PEP), like E-bay and marktplaats, provide a link between the product description (e.g., a book on amazon.com) and contributions from customers (e.g., a rating, review, recommendation of a particular book). Based on the aggregated customer profiles, special community features become feasible. The coordination mechanisms are a necessary instrument to leverage subgroup preferences (e.g., using collaborative filtering) and to exploit the intelligence embedded in prior transaction histories and experiences. To provide such vital pathways, systems must support the notion of these virtual communities of buyers as they cultivate the process of a collective awareness.

Customization with regard to functionality is often defined by the needs of a group of users. Interface requirements, network effects, security standards, etc. ask for a customized solution that exactly matches the solutions of others, and not just that of a single person. Customers do not just follow their own "individual taste" when selecting a customized offer, but are guided by a special design which is likely to appeal to their peers. Often, consumers (especially the younger ones) are trying to copy the look of a role model.

Current work on personalization usually focuses on automatic (collaborative) filtering processes in which a single customer does not get in contact with other customers (e.g., the typical Amazon.com recommendation engine). On the contrary, the community setting for customer co-design empowers an individual design process by sharing knowledge (social navigation), providing a better fitting pre-configuration. Applications which realize personalization strategies based on member profiles represent a key strength of communities or "affinity groups" (sub-communities of customers with similar taste).
By linking affinity groups with the recorded purchase transactions of a high number of customers, a knowledge base emerges which can be used for the forecast of the future buying behavior of individuals. Additionally, aggregation of customer data is not feasible unless there are low barriers of communication among the customers. Communities can facilitate access to this data. Whereas in traditional (electronic) shopping environments users are often skeptical and cautious about revealing personal information, users often are more willing to share such information in an online community.

Benefit & costs:

For customers, the decision to buy a customized product is basically the result of a simple economic equation:

The higher the perceived (expected) benefit (returns) from the product compared to the (expected) cost, the higher the likelihood of a customer employing mass customization. Returns are twofold: First, the value of a customized product, i.e., the increment of utility that a customer gains from a product that fits better to her needs than the best standard product attainable, and second, possible rewards from the design process, such as flow experience or satisfaction with the fulfillment of a co-design task. Individual needs of a customer can relate to one or more of the three generic dimensions of customization:
1) (aesthetic) design/taste,
2) functionality,
3) fit/size

Costs of mass customization for consumers are the premium a customer has to pay for the individualized product compared to a standard offering and the drawbacks of the customers’ active participation in (integration into) value creation during the configuration process:
1) Burden of choice.
2) Matching needs with product specifications.
3) Information gap regarding the behavior of the manufacturer.

Showcases:

Adidas ( online/offline ) miAdidas program to offer customized sports shoes in relation to an individual customer’s feet measurements, customized cushioning, and co-design in regard to the aesthetic design

Lego ( online ) Various programs including soft customization (standard sets with interactive software) and hard customization (user specific pre-packaging of sets in the supply chain) http://www.lugnet.com

My Virtual Model ( online ) Using a virtual model to provide a configuration tool for online apparel retailers (e.g., for Land’s End)

Usertool.com ( online ) Customization and user co-creation of games for mobile phones

American Eagle ( offline ) Customization of ready made garments using after-sales applications (sewing, cutting) in the retail store

Swatch Via Della Spiga ( offline ) Customization of Swatch watches in a build-to-order system where customers are included in the production process in dedicated workshops in the retail store

Een overzicht van diverse onderzoeken naar co-creation in communities: