Easing the Transition from ETO to CTO with Configuration Lifecycle Management

Customization is now the norm for complex manufacturers, but it stretches teams, systems and margins. Many manufacturers have adopted a Make-to-Stock (MTS) product variant strategy but see the variant count explode as complexity increases, leading to duplicates, repeated work and lack of manageable overview. 

Others rely on an Engineer-to-Order (ETO) strategy and gain flexibility, but at the cost of heavy engineering involvement, high operational complexity and difficult-to-manage delivery commitments. In both cases, configuration knowledge becomes fragmented across engineering, sales and operations.

The modern manufacturing landscape is extremely competitive, and a company wins or loses based on its capacity to quickly and profitably offer customized products. For manufacturers of complex products, the standard operating procedure is ETO and MTS. Yet more and more manufacturers have found that the Configure-to-Order (CTO) model provides significant benefits.

CTO: A Model for Our Times

Configure-to-Order is an updated approach in which the product design process includes configurability from the start. Rather than using ETO, customers and salespeople choose from pre-engineered modules and options that create valid configurations that can be manufactured. But that doesn’t mean customization is impossible. Instead, CTO enables smart customization with guardrails so that each configuration is technically viable and profitable – without the wait time of ETO.

Many global manufacturers settle on a combination of CTO and ETO, enabling them to turn part of their product lines into products that are easy to configure as they retain the benefit of providing ETO solutions for customers who truly need them. This leads to substantial cost savings end to end.

CTO’s Strategic Benefits

Using a CTO approach gives manufacturers numerous benefits:

• Significantly lower time-to-market – The ETO process can drag out production timelines because each custom specification needs design work, validation, and approval cycles. But CTO’s configurability has already been engineered, so a company can generate quotes in minutes, not weeks.

• Major cost reduction – CTO improves engineering efficiency because configurability has already been built into the design. Engineers don’t need to repeatedly rework similar solutions; they can instead focus on increasing configurability and creating new product modules.

• Engineering savings – Quality issues, inventory requirements and manufacturing complexity are all reduced by standardized configurations. Manufacturers regularly enjoy a reduction in engineering costs of 20% to 40% when they switch to CTO.

• Greater productivity – Instead of doing repetitive customization work, engineers are able to focus on developing innovative new products. 

• Engineered validation – Each potential combination is pre-validated when proper configuration technology is used. It’s impossible to create invalid configurations and, therefore, to sell unbuildable products.

• No more configuration mistakes – The ETO process requires manual engineering, which is intrinsically prone to error. Just one misconfiguration can lead to unmanufacturable products or ones that fail during use or don’t meet specs. This results in expensive rework and harms customer relationships. Manufacturers that use advanced configuration systems say there are no configuration errors resulting from their sales process.

• Enables agentic AI workflows – A modern configurator provides structured product logic and validated decision pathways that AI agents can reliably execute. This allows agentic AI systems to autonomously generate quotes, validate configurations, and orchestrate end-to-end sales and engineering workflows, without risking invalid outputs —thereby unlocking scalable, trustworthy automation across the value chain.

• Better customer experience – Customers get correct pricing and delivery information instantly instead of waiting days or weeks for engineering estimates.

• Reliability – No matter who handles the customer inquiry, each interaction yields the same correct, high-quality information.

• New self-service possibilities – With an online configurator, customers can independently consider options so that they understand pricing and trade-offs.

• Scalability – When configuration systems have been implemented, companies can increase revenue without also increasing engineering resources. Customers can serve themselves via the above-mentioned online configurators, and sales staff have greater confidence in dealing with more complex products.

Tying it All Together with Configuration Lifecycle Management

Transitioning successfully to a CTO approach demands more than mere good intentions; it requires hardy technology infrastructure. This is what Configuration Lifecycle Management (CLM) brings to the table.

Legacy configuration engines have a hard time dealing with complex products, which requires manufacturers to “dumb down” their products. Advanced configuration systems work differently; they compute every possible valid configuration ahead of time and condense that information into dense, portable files.

Companies can gather product configuration data stored throughout the corporate environment – from engineering to sales to manufacturing and service – into a single source of truth. This gives companies the clarity and transparency they need to find their most- and least-ordered product combinations.

The primary benefits of advanced CLM include: 

• Real-time validation for any configuration

• No errors due to the impossibility of invalid combinations 

• Customers and sales staff get perfect guidance

• The ability to handle millions of combinations, supporting near-infinite complexity

Make the CTO Transition

In the current consumer mindset of customization demand and instant everything, ETO becomes a slow behemoth that can’t satisfy customers. Adopting a CLM approach enables manufacturers to transition to a CTO strategy based on modularized architectures. Combining 

CTO with a partial ETO strategy supports the reality that manufacturers face today in a scalable and profitable way.

For manufacturers of complex products, switching from an ETO-only model to at least some CTO is one of the most important moves to solidify a competitive edge. Companies that have already adopted CTO are gaining market share by achieving the seemingly unachievable: large-scale customization at the price and speed of mass production.

About the Author: Henrik Hulgaard is the vice president of product management and co-founder of Configit, the global leader in Configuration Lifecycle Management (CLM) solutions and a supplier of business-critical software for the configuration of complex products. He holds a doctorate in computer science from the University of Washington and is an associate professor of computer science. He has published more than 25 articles internationally.