Configure to Order: A Business Strategy for the Future
In this Industry 4.0 Club fireside chat, host Michael Ungar and co‑host Mike Yost interview Henrik Holmgard, VP Product Management and co‑founder of Configit, about Configuration Lifecycle Management (CLM) and the evolution of configure‑to‑order (C2O) from a simple sales tool to a strategic differentiator. Holmgard explains how product variability originates in engineering, is enriched by marketing, regulatory and regional rules, and must be captured in a single, deterministic configuration backbone that spans engineering, PLM, CPQ, manufacturing execution, and service. The conversation covers the pitfalls of siloed variant models, the need for modular product modeling, the role of strong governance and change‑management, and the tangible benefits of reduced waste, faster quoting, and accelerated innovation. They also discuss how generative AI—specifically Configit’s ACE Prompt—can help translate semi‑structured data into formal configuration rules, while emphasizing the necessity of human validation as a firewall against AI‑generated errors. The dialogue ends with an invitation to the 11th CLM Summit (May 6‑7, virtual), highlighting the practical insights, customer case studies, and actionable outcomes attendees can expect.
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Welcome to the Industry 4.0 Club's fireside chat. Club's purpose is to engage the power of diverse worldwide talent to accelerate the global evolution to Industry 4.0. We accomplish this by hosting support and supporting respectful, thoughtful, and interdisciplinary open conversations, creating quality content on wide-ranging Industry 4.0 topics to expand the reach of our community. My name is Mike Unger, and I am the CEO of the Industry 4.0 Club. over 40 years of management and leadership experience, most of that in manufacturing at Michelin. I'm joined today by my co-host and chairman of the club, Mike Yost. Mike, would you please introduce yourself further?
Absolutely. Thank you, Mike. Welcome, everybody. As Mike said, my name is Mike Yost, Mike's co-host here on the Fireside Chats. I've spent nearly 40 years myself in industry, largely on the solution provider side. and the last 15 years on the industrial nonprofit side. So my passion is having conversations with people about the value and the fit and the role of technologies in manufacturing. And so we're really super excited today to be joined by Henrik Holmgard talking about a business strategy for the future, which is configuration lifecycle management, or CLM. Henrik leads the strategy and development of solutions that help manufacturers manage complex product configurations with precision and scalability. He has expertise in configuration lifecycle management, or CLM, and focuses on bridging business requirements and technical innovation to deliver deterministic, high-quality outcomes. Henrik has a background in electrical engineering with a master's degree from Danish Technical University and a computer science PhD from the University of Washington. He has developed advanced configuration products and solutions for Configit since 2000. So welcome with us here today, Henrik.
Thank you very much. Thank you for having me.
Well, that's great. But before we dig into some questions, I wanted just to highlight that Configit is going to be hosting the 11th Configuration Lifecycle Management, or what we call CLM, Summit on May 6th and 7th. This event's going to focus on how manufacturers can master customization complexity by establishing a strong data foundation for future growth. This event's held virtually over 2 half days, and we'll be bringing together B2B manufacturing leaders to explore how connecting systems, data, and logic enables organizations to manage complexity more effectively. So we encourage you to join the event and discover how the CLM approach links systems and configuration logic across the enterprise, turning product complexity into confident decisions throughout the product lifecycle. Anyway, Henriques, so thanks again for joining us. Maybe we can just jump right in. And, you know, we've— this— the concept of configure to order is something as a phrase, but That's maybe interesting to dig into. So how does it— how does configure-to-order evolve from an operational model into a true strategic differentiator for manufacturers competing in a really highly customized market?
Yeah, so configure-to-order is basically a way where manufacturers can offer choices and options to their customers. And still maintain sort of a high efficiency in the manufacturing process. So it is trying to balance this sort of the flexibility of choice that you can get your car in different colors and with different engines and different trim levels and whatnot, and at the same time be able to manufacture the products at a very efficient way. So that's sort of from a strategic perspective, you could say configure-to-order is about offering that set of choice to your customers. So you can, you could say the alternative is that you have more fixed products, and what you'll find is that you end up having a lot of fixed products if you have to cover the space of choices that you would like to expose. For many manufacturers, they look at configure-to-order maybe more as a way of selling their products. that they have to put out a sales configurator and then they get an order and then they deliver on that. And I think from our perspective, and when talking about configuration lifecycle management, we look at that wider. We see that the variability of the product gets designed early in the engineering and design space and And that variability then gets further refined when you want to position the product because you have different marketing rules as well. You have different regulatory, you have different regional preferences that you need to accommodate.
Yes.
And eventually you also have to manufacture and eventually service that product. So you cannot just look at it as a CPQ solution of selling the product. you have to look at the whole sort of spectrum from how that variability affects your bill of materials and your delivery capabilities and all the way down so that you can eventually also service and upgrade it. And that's really what CLM is all about, is to make sure that those different functional areas are aligned.
Yeah, I find it really a challenge. I mean, I can I don't know if commend you or empathize with you as a challenge, right? You talk about, you know, different business functions. You just mentioned talking about sales and sales configurators and engineering with PLM systems, and you have your execution systems in manufacturing and all these different solutions and such. And when you're talking about you know, configure to order, you're talking about complexity that potentially touches all of those different domains, all those different solution areas. So I was surprised to learn that this is your 11th summit. And so obviously you do a lot of work from an education perspective and talking people through that. So can you maybe talk a little bit about sort of how you approach that, how you define the space, and, you know, the work that you go through to engage people in those different functional areas?
Yeah, so about the summit, I think we have always had this desire of bringing our customers together so that they can share their experiences and their challenges. So we really prefer that it's not us in Configit who are talking and presenting at the summit, but it really is the customers who we have helped solve various business problems and have them explain how they did it, what challenges did they have, what benefits did they get. And I would say initially we were in the CPQ space as well. I think we— now you said it's the 11th summit, so we've had the summit for more than 10 years now and And it was not until we really started working with some visionary manufacturers that we understood that there's something more to it than just a sales configurator, that you have to get this alignment. Because as you mentioned, there are enterprise systems out there. The engineers, they use PLM systems.
Right.
That's where they manage the bill of material. That's where they manage the CAD and all the engineering artifacts and linking to requirements and all that. And when you talk about configurable products, the variability of a product that starts there, that starts with some requirement that you must be able to choose among these 3 different sizes, or you have the steering wheel is on the left in some countries and to the right in other countries, right? That starts out as some requirements that then has to be engineered into the product.
Right.
So you could say these configurable products, they start in the engineering space. Requirements can come from various places, but they start. And if you look at the standard PLM systems out there, they all have some type of variant module that allows them to express that variability and define configurable BOMs. But it's typically done in a very narrow scope. So, so they only deal with the technical aspect of the product.
Yeah.
They don't deal with the— that marketing would like to have a sports pack that they can offer, and they can price that at a premium price. And when you choose that, you get, you know, these different things. That's not part of your PLM system. They don't deal with the fact that the winter pack of your car is standard in Sweden because it's quite cold, but In Denmark, where we have high taxes, it's optional. And in Australia, it's not available because it makes no sense. So those are more commercial perspectives, and it's the sales and marketing view of the product that gets added there. And traditionally, those have been siloed. So traditionally, engineers have designed the product. At some point, they said, now we're done. We would like you to go and sell it. They basically shift it over to sales and say, here's the product, please sell the next year's model. And then sales, based on, you know, Excel and Word and other information, they start to recreate some of that variability. And they may say, hey, we don't really care about the frequency of the car key. That doesn't matter when I'm going to sell a car. It just has to be the right frequency for the right market. But So you end up with these configuration models in different systems that are sort of connected but not really. And then you run into very basic problems, but that you sell products that you cannot manufacture or that won't work or won't be legal.
And do you see that the companies that you deal with understand how this flexibility, which is a market requirement, right? I mean, it's one of the promises of Industry 4.0 is that we can— manufacturers can be more attuned to the customers and such. But this flexibility turns into complexity that is costly and unmanageable and unwieldy. Do companies recognize that typically by the time they come to you, or are you basically teaching them that if you don't have a handle on managing this complexity, it's at your own peril.
There are different scenarios. There are the companies that are fairly mature in configure-to-order, and they're typically looking for a better system than what they already have to manage these rules that sits behind it and give the better performance and sort of more technical perspective on the configuration solution itself. But then you have manufacturers that are not accustomed to configure-to-order. They try to offer the flexibility by creating a large number of standard variants. Sometimes I refer to that as try to buy a Samsung TV or something, and there are literally hundreds of models, and I as a customer, I need to, you know, try to find the right one for me, and it's really quite difficult to understand all the technical differences. And that's when you create standard products in many different variants.
Sure.
And so that is a type of complexity where when that number of variants grows beyond, you know, a few hundred thousand, then the manufacturers start to realize that this is not sustainable and they have to deal with the material and the, you know, pack everything individually for each of these many variants. So they will come and look for a configure-to-order solution. They may not understand that they really have a variant management problem. They look at it more like they need to have some better selling tools, maybe guided selling with a typical add-on.
Right.
And then with the engineer-to-order, which is offer the flexibility to their customers by being very adaptive. They can do anything. I mean, they basically engineer the solution to your requirements, and they come to us because they realize that that process is too costly, too slow, and they would like to see, can we find places where we can And it doesn't have to be the whole product. It can be a part of the product where we can identify here, we can predetermine the variability. We can create modules and say there are 3 discrete sizes here and sort of establish some subsystems that are configurable.
Right.
And there are different ways of doing that, but generally speaking, They come from a very engineering-heavy process and want to find ways to, yeah, to make it more efficient to sell their products, quicker turnaround times of quotes and things like that.
Yeah, I'm just imagining the impact growing up as an MES guy, just imagining the impact of all those variants basically, you know, ending up being a whole bunch of work-in-process inventory. Because I can just imagine the waste that is there that you would make— you would try to cover for the complexity, making sure that you have all sorts of available options. And so you can just see the impact that that would have if you don't manage that efficiently.
Yeah, and going towards a configure-to-order means that you do some of this work upfront, right? You have to predetermine what are the choices, what are the combinations that I'm gonna allow, and you're gonna create what we call a product model. It's a logical definition of what you can choose. So if it was for a car, it would have parameters about the color and the engine and so forth. And from that, then you drive the parts and the manufacturing and the many other things, the documentation, the CAD drawings, whatever it might be.
Well, it's fascinating. It's fascinating because you talk about the example of the choices the consumer can make. And then, as you mentioned already, you layer onto it maybe the regulation, the regulatory things that the consumer doesn't really know about, but you have to provide as a supplier. It's amazing that the complexity can get very, very large very fast.
It's—
even I was thinking about when you mentioned the vehicles, selling a car in California in the US is different than selling a car in other parts of the country.
Right.
So it's with different rules. So it's amazing to think about managing that when you're a global company. With a plant that maybe manufactures the same vehicle for world consumption. Anyway, that's pretty cool.
You're absolutely right. And of course, we all understand a car and we all understand that there are some differences in different markets. The steering wheel is one obvious one, but there are a lot of them that you don't see. But we also see it for even very standard products. That really is a standard part number, but it's— the content might be different across different regions of the world. Fertilizers, for example, it's a standard part number, it's a standard product, but in the US there are different regulatory rules than Canada and Europe and so forth. The packaging can be different, the way you present the product, what information you put on the product can be different because there are different regulatory requirements to what you need to put on it. So this thing about changes across markets, I mean, if you are a global manufacturer, you have to be able to manage that. It is part of being able to deliver across many different parts of the world.
Yeah, we've talked with some others from your organization. They talk about determinism and having a strong Configuration backbone is really one of the core value propositions that your organization offers. I guess, can you talk a bit about that and how that's such an enabler for this? I mean, I would think of it as innovation as we're taking new products to market and things like that, but even just taking fertilizer to different markets like you just talked about ends up being complex for folks. So, you know, Maybe a little bit about how what you do enables companies to manage this complexity so that they have the accuracy repeatedly.
Yeah, so the strong configuration backbone, I mean, I think it refers to basically making sure that the variability of your product, no matter where it came from, is all captured in one consolidated set of rules. It's a little bit back to what I just talked about, that you do have the technical rules in your PLM maybe, and that's fine, you can maintain them there. You may have some marketing rules sitting in Excel sheets, you have the regulatory rules sitting in documents. So the strong backbone is really that you have to bring all of that together, because only then do you really understand the variability that you have as an engineer working on a bill of material. You need to know what combinations you need to be able to support, and that can change over for different markets, but certainly also over time because of these regulatory requirements. There might be a change by January 1st, and suddenly you have to have a reverse camera in the US or something like that. So So you have to bring it all together in one consolidated model, and that's really, you could say, also from a very practical perspective, what configuration lifecycle management is about, is that you bring in and combine the configuration models for very different domains, and then you expose the relevant information to the different consumers. So your global website or your sales tools or CPQ tool Doesn't need to know all the technical internals, of course, but you have to make sure that when you do a configuration there, and now I configured my car and I go down to the dealer and he wants to enter that as an order, it better be right and it better be manufacturable.
Yes, no, I think that's a really great point. Um, you know, from a B2C perspective or B2B, regardless, this idea that we don't want to make a mistake And how an error or a repeatable error can hurt your reputation in the market and really hurt your your results. So this idea that you have a um a CLM that helps you ensure that you don't have those well that guarantees you don't have those mistakes that you have 100% accuracy is huge. I mean because you know one in this in this day and age especially with social media and And who knows what errors start to begin impact your bottom line. So I think it's really remarkable to think about that.
And, and, and I think one of you mentioned innovation. I think people sometimes think that if you introduce configure-to-order, you reduce your innovation, you don't have the freedom because you have all these rules that constrain you. But, but I would say the opposite actually, because the fact that you know you have all the rules in one system you can change a module and you can immediately validate the impact that change has on the rest of the system. And you can do the validation of your changes before you even make them available for downstream systems. So in many ways, I think a good strong configuration engine with a modularized approach to your product is actually exactly what you need in order to be much more flexible in introducing features quickly across the enterprise.
So I just want to jump in and remind everybody that we are talking with Henrik Hulgaard, who is the Vice President of Product Management for Configit. We're talking about configure-to-order as a business strategy for the future ahead of their upcoming CLM Summit. And Henrik, we did not mentioned earlier that you were one of the co-founders of the company. You've been around since the beginning, so you've obviously seen a lot, learned a lot. And, you know, we typically can't go more than a few minutes talking with people without bringing up the topic of, you know, generative AI and the future of AI and things like that. So could you talk maybe just a little bit about how you see technologies like that, you know, playing into the the topic of configure-to-order and the CLM solutions, and then also maybe the role of the human oversight. You know, what do the humans play and the GenAI technologies play?
Yeah, so Mike, I think everybody is thinking about generative AI and how it's going to affect the world in so many different ways. And you could say when you work with configure-to-order products, you could say there are a couple of places where generative AI definitely will be able to help. One area is to get these rules established. As I mentioned before, you have to bring in, as formal logic, you have to bring in rules from both marketing and engineering, and they come in many shapes and forms— Excel sheets and PDFs and Word and whatnot. And I think generative AI is amazing at being able to take semi-structured, unstructured data and turning into much more rigid logic. And that's actually what we have just recently brought to market, is what we call ACE Prompt. That is a tool that, based on generative AI, can do exactly that. But once you do that, you also have to understand that generative AI is statistics-based by nature. It can make mistakes. It's not accurate. It's a little fluffy. I mean, most of the time it's fine and it's very self-confident. So, you better check what it does. And so we bring in the rules in our system, but then we have strong, solid validation tools on top of that to make sure that the behavior of those configuration models actually are aligned with the expectations. So I think having that knowledge background as fast and accurate configuration knowledge will still be quite important. And then you can glue a generative AI sort of dialogue in front of it. I think it would be great as a modeler to be able to have it explain what does a rule mean. Or also when you're configuring a product, I think it's becoming a little bit old school already to just click around in an application. We get to expect that we can just chat with it.
Right.
I mean, I don't know if you have that way, but I certainly have that feeling with my PowerPoint that I can't find, you know, the damn button to do something. Why can't I just ask it to make the color blue instead of green? And I think there we'll find applications where the configuration process, where you as a customer, I have certain needs, I would like to just chat my way through a configuration process.
Right.
And maybe I want to send out an agent. I mean, I don't necessarily know what supplier to get my parts from. I might need a pump with a certain set of requirements, and I will just ask ChatGPT to go out and search for a product with those requirements, and it will have to then interrogate and interact with the configuration engines of the different vendors to find out can they provide a pump with those capabilities? And it will bring back, you know, there's an offer here, you can get it from Kornfoss, and this is the spec and order here. And I think that will come quite soon. But if you are a manufacturer and you're going to offer this, I mean, you better have to make sure that what you put out there is accurate and validated before you do that. I heard a story about a guy who had negotiated a 95% discount with a chatbot on a service.
Nice.
And then he went to the vendor and said, hey, I had this offer from you.
It's like, yeah, that can be— it's fun to see. Yeah, I think for those that are really crafty with prompting, you can get ChatGPT to do some pretty interesting things, can't you? So Absolutely.
Having this, we believe having a strong configuration engine as the backbone, as sort of the firewall against all this creativeness that generative AI can produce.
Yeah. So as we think about, you know, those getting started on their journey, moving, let's say, from engineering to order to configure to order, what foundational capabilities or maybe mindset shifts are most critical to get to really get right early, you know, as you go down this road?
Yeah, so that, that of course depends a little bit again where you come from. Whether you come from a lot of product variants, then it's one approach. I think the typical one is where you come from more an engineer-to-order approach. There I would say the first approach is to start looking at how to modelize the product into modules that are reused and across different projects. And getting those modules described, we call it with features, some call it options or parameters, but start having some abstract characteristics of the variability of that product. Then you need to start to get that formalized. You have to have a coding of it, a standard language of these features. You need to understand who owns these configuration models. You need to have some processes for changing them, and then you have to make sure that there's an end-to-end sort of consistency across the various systems. So those are some of the steps that you need to do, but if you manage to go through that, then you also get a lot of benefits in terms of For example, you can start optimizing on your variability on your bill of material. You can— Yeah, well, that's— Based on take rates, what people actually order, you can start understanding what combinations are sold a lot and what combinations are sold quite rarely.
Sure.
And maybe we should disallow those that are not sold very often and thereby saving parts and other costs.
I can imagine for a company that's relatively siloed by function, that this is quite a— that can become quite a significant change management challenge. Because you've got— you may need to even change how you— what you call things and what they're labeled and to understand, you know, speak to departments who maybe have spoken to each other less, have to talk to each other more now to understand. And it's quite a— that can be quite a heavy project depending upon where the company is in terms of its journey, you know.
Sure, that definitely can be some inertia in terms of the organizational and cultural ways of working. And of course, engineers are— they like the freedom of being creative, so there might be some resistance from there. They don't get sort of rewarded for building reusable components. Sales might prefer to have open-ended possibilities, not having to lock something down to some more predefined choices. So there definitely are some sort of things you have to overcome. I also heard the fact that if you are an engineer-to-order, company, you are very project-oriented, and the projects are always short on time. They're pressured on the schedule. So there's not really time to sort of generalize what they're doing to be more general than the particular specific project they're working on.
Yeah.
So they keep this clone and own. They copy from something that's similar, and then they work on that. But there's no time to sort of say, let's look at the last 10 projects we did and see if we can Right, build some reusable building blocks.
Well, you end up at the end, you end up at the end, as you describe it, with a much more efficient and productive environment. And, you know, it's, it's an effort to get there. But I think the outcome is gonna be quite dramatic on your bottom line, I'm assuming, as well.
Well, Henrik, we, we've been talking for about half an hour here. You know, we've mentioned a few times that you have your Configuration Lifecycle Management Summit coming up May 6th and 7th. If we gave you the last word here to encourage people to attend, you know, make your pitch as to what they would learn if they haven't been to the summit before, what would you tell folks that are just learning about this opportunity?
Well, I think they— I hope they will learn something about the benefits of configure-to-order solutions can offer them. I hope they will get some practical insights from like-minded people, other manufacturers out there who have been going through this, and get some real sort of background information about what worked, what didn't work, and some of the benefits that they've gotten. And I hope they will get some, some actionable outcomes, something that they will go away with, not just inspirational, but actually This is what we need to do in order to move forward. I think that that's what we're trying to convey in these summits.
Excellent.
I wish they were— they used to be before corona, and that was fantastic having, you know, 200 to 300 people in the same room. But these days they're virtual, unfortunately. But on the other hand, it allows people to participate from across the globe.
Right. No, that's great. Well, first of all, thank you, André, for the time. It's been great to really sit down and discuss with you the idea of Configure to Order and really understand better, you know, what that's all about. We also want to remind our audience that we've been talking about the upcoming summit, and if you'd like to attend the summit, you can register for it here at this, this web address. It takes place on May 6th and 7th. You heard 2 half days virtual. And so please take a moment and and register and join Configit and the entire team at the summit. I think you'll find it quite educational and something that you won't want to miss. So the Industry 4.0 Club would like to encourage you to take action. Attend the summit, read an article, listen to a webinar, maybe even suggest a smart manufacturing roadmap for your factory or your company. We'd like to know what you're doing. We'd like you to share that with us on our website at www.industry4oclub.com or on our LinkedIn page. Again, we'd love to hear from you. We also host broadcasts like this weekly. So if you'd like to be a guest with us on one of our future broadcasts, reach out again on our website or our LinkedIn page and let us know. We'd love to hear from you and hear what you're doing to advance Industry 4.0. So with that, Henrik, thank you so much for joining us today.
Thank you so much for having me.
Mike, thank you as well. We look forward to seeing you at the summit.
Absolutely.
Thanks, everybody. Take care.
Bye.
