Analyzing the Customer Co-design System Considering Product Complexity and System Investment

We study a firm that provides a customer co-design system to potential customers, with the customers then using this system to design their own products, resulting in customized products. Within the context of co-design businesses, one of the important factors is the scope of the system, meaning the choice variety customers can exercise their creativity during the design process. We build an analytical model that analyzes the impact of the scope on the demand and profits. Our model describes a situation in which potential customers attempt to use a co-design system, with some of them successfully purchasing their own products, and others abandoning the co-design tasks midway through, with these outcomes dependent on the scope and the heterogeneous customers. Our model also analyzes how product complexity and system investment influence the demand and profits, along with the scope of the system. The result represents the firm is better off providing as a wide scope as possible, regardless of both product complexity and system investment. However, the firm might experience a decrease in profits during widening the co-design scope. After making further efforts to widen the scope, the profit will then continue to increase. We also find the firm may gain higher profits as it offers a product with higher complexity, where higher levels of system investment may accelerate the profit increase.