Although many companies wait until times are rough to take a hard look at themselves, BMW is beginning its makeover in the best of times. A Beemer is still the icon of yuppiedom, and the company can sell every vehicle it makes for the American market as soon as it's available, from the $21,000, standard-equipment 318ti to the fully loaded, $98,000 750il. Sales have nearly doubled over the past five years, to more than 122,000 cars in 1997, and this year BMW of North America reported record first-quarter sales.

But, for the kind of money a BMW costs, the company figures that customers deserve something special—and knows that they will demand it, probably sooner rather than later.

"The average price of a BMW is close to $40,000," says Vic Doolan, president of BMW of North America. "For that, we'd like to make sure that customers can receive exactly the car they want. Under the old way, if they were looking for a red convertible, they might find one—but with a tan interior instead of black. They'd compromise and might be highly satisfied, but with a slight tinge of regret. That creates an element of dissatisfaction. We want the experience to be completely wonderful."

Michael Vadasz, owner of Otto's BMW in West Chester, Pa., says: "Customer expectations are higher than they've ever been in my 25 years with BMW." Mr. Vadasz, one of the six dealers besides Mr. Brentlinger who is involved in the customization pilot project, known as Retail 2000, says that "the average client now who walks in the door knows exactly what he wants. There's a lot of information on the street in the form of paperbacks, magazines in the grocery store, the Internet. It might take him six months while he's working himself up to the point where he'll buy. But when his investigation is done and he's ready, he wants it now."

BMW also knows that if it can't figure out how to mass customize its cars, somebody else will. Competitors ranging from BMW's German luxury rival Mercedes Benz to mass marketer Ford Motor are in flat-out pursuit of quick customization. Ford, for instance, has changed its forecasting and its relations with suppliers so that anyone ordering a custom Mustang can take delivery within 15 days, down from 52 in 1996. Results for Ford's mid-size, flagship Taurus and Sable models are proving almost as good, and the company aims to spread this discipline throughout its car lines by the end of this year.

Oddly enough, Japanese car makers boosted their sales in the U.S. a decade ago by restricting customers to fewer options packages, which reduced production complexity and improved quality. But, these days, buyers are forcing car makers to take on complexity by improving their ability to customize, says Christopher Cedergren, managing director of Nextrend, an automotive consulting firm.

"Never before have car buyers focused more of their attention on image, style, and passion for a vehicle," says Mr. Cedergren, himself BMW driver with a hankering for wider standard color choices on the 7-series cars he leases. "Buyers truly want their car to be an extension of their personality."

Joseph Pine, co-founder of Strategic Horizons, a management-consulting firm, and author of Mass Customization, says, in fact, that just about every industry is moving toward "the notion of 'segments of one'—that every customer is his or her own market segment with specific requirements that must be fulfilled."

To take advantage of the potential of mass customization, BMW must first get its internal operations to move as fast as its cars because, while Europeans typically are content to wait as much as three months for their special order, U.S. consumers are impatient. BMW's research shows that 70% of American buyers would wait four weeks for the car with their name on it, but that only 20% would wait two months. Currently, a special order for a popular BMW can take three months.

BMW's goal is to have a special order available in about 23 days from its German plants, which produce most of the cars for the U.S. market, compared with the 30 days that are now promised. Much of that time, the car is crossing the ocean by ship. The goal is 11-12 days for cars BMW produces in Spartanburg, N.C., where the Z3 roadster is currently assembled.

But to reach those goals BMW has to squeeze all sorts of internal deadlines. For instance, BMW has to be able to start building a car six days after a dealer or customer specifies the kind of powertrain he wants. Currently, that takes five weeks. Making the change will require numerous new arrangements with internal and external suppliers.

Already, BMW has moved engine build-up from Austria to Spartanburg, and it asked some suppliers to set up shop in North Carolina. Plastic Omni, a French company, makes side mirrors, bumpers, and interior trim pieces, and then totes them over to the BMW factory in the exact sequence of colors and styles in which they'll be attached to partially assembled cars.

Even tougher than streamlining manufacturing is signing on its dealer networks. While the company originally had projected that Retail 2000 would involve more than 30 of its 350 dealers by the end of last year, so far it hasn't managed to advance beyond the seven pilots. Dealers have been reluctant to change, especially in good times. They also don't want to bear some of the up-front costs that go along with Retail 2000.

And, even though some companies are using alternative channels such as the Internet for selling cars, BMW is convinced that it needs to work through traditional dealer networks. Why? The company believes they are crucial to promoting lifelong relationships with consumers.

In fact, BMW is trying to enhance the dealers' role. It is helping dealers eliminate the traditional game of tag among sales reps, finance-and-insurance people, and managers by investing the whole sales process in one representative for each customer. "We want the client-adviser to handle the total relationship with the customer," says Mr. Doolan, the president of BMW of North America. "Sell the car, make reservations for service work, provide alternative transport during services, and, through the life of the car, be ready to talk about the prospects of changing the car or even adding to their fleet of BMWs." To bring more people into dealerships more often, BMW recently decided to provide oil changes and other routine maintenance with the purchase of a car. BMW also benefits because two-thirds of its cars are leased these days, giving the dealers a way of knowing just when to try to line a customer up with a new car.

Even if BMW can overcome resistant dealers and reorganize its manufacturing logistics, the company still must deal with information technology's biggest bugaboo: software. BMW needs to provide its dealers with software that provides a sense of seamlessness to the purchase process and allows for customer ordering. The software must also be able to help buyers understand features that can't be demonstrated physically, such as the electronic traction control that steadies BMWs on rough or slick pavement. The task requires cobbling together BMW's existing proprietary communications system with its new "Infobahn" credit-approval software and with the two systems that dominate the dealership-management software market, which are made by ADP and Reynolds & Reynolds. So, as often happens, there are delays.

In this case, dealers fume that ADP and Reynolds & Reynolds are dragging their feet—hard—because BMW isn't as big a customer as the Big Three U.S. auto makers and can't get enough of the vendors' attention.

Reynolds & Reynolds responds that it's moving as fast as it can. Bob Bour, director of special projects for the dealer services group at ADP, says: "These dealers [involved in the pilot] are early adopters. They want to get moving—and right now—but we have to design and plan for what happens when the rest of the group of dealers comes along. Otherwise, you end up with a product nobody wants." A BMW spokeswoman says the two companies are "starting to make progress" that will make it easier to combine their software with BMW's internal systems.

The one issue that BMW won't be able to address is that, for the foreseeable future, some people won't buy a car unless they can drive it off the lot. "I would love to see us get to the point where people just stand in line and order the vehicles they want," says Richard Everett, director of strategic technologies for Chrysler. "But the vast majority are still looking for something they can get today and drive home today, and they want to get rid of the old car today. If you give customers their druthers of ordering or saying, 'I like this one right here,' the vast majority will say, 'I want this one right here.' "

Still, BMW figures that more than enough customers will be interested in customized cars, if they can get them in some reasonable period. In Europe, about two-thirds of BMWs are built to order, but in the U.S. it's only 35%. Industry-wide, only 14% of American car buyers custom-order.

And, while people generally pay more for customized products, expenses for BMW and its dealers will fall. BMW expects to reduce dealers' need for financing by cutting the number of cars they store. BMW also believes that it can reduce the non-productive swapping of cars by dealers as they try to find the right match for customers out of one another's stock, a practice that now affects about one-third of purchases. The company expects the changes will help cut its distribution costs to 24% of the price of a car, from 29%. BMW also hopes to reduce its inventory of assembled cars to a 10-day supply, from the current 20 to 30 days, which is already well below the industry average of 60 days.

Jody Christman, owner of another Retail 2000 pilot dealership, Chris's BMW in Atlanta, believes that there will be an intangible benefit, too: that the move toward multi-functional "counselors" will attract better staff. The new role will be more interesting and will "allow me to go to non-traditional avenues to hire," she says.

BMW and its dealers should also see an increase in customer loyalty. Some 90% of car buyers report themselves as highly satisfied, according to a study by the consulting firm Arthur D. Little, but only 40% buy their next car from the company that "satisfied" them the last time. That should change if BMW can, in fact, give customers just what they want and how they want it.