Mass Customization & Open Innovation News

Open Innovation at OSRAM: User Idea Contest Open on LED technology

Siemens finally has entered the open innovation landscape. They started late with a dedicated and focused initiative, but now have a full-scale open innovation program that shall explore and pilot various new methods of open innovation among their different business units.

One of the first projects is at OSRAM, part of the industry sector of Siemens AG and one of the two leading lighting manufacturers in the world. According to Wikipedia, the name is derived from osmium and Wolfram (German for tungsten), as both these elements were commonly used for lighting filaments at the time the company was founded. Today, OSRAM is a high-tech company in the lighting industry.

And now they step ahead with a user idea contest, which again has been planned and implemented by Hyve AG (Disclosure: I am a member of the board of directors of Hyve AG).

For more than the weeks, the new Innovation Contest is online. OSRAM and Hyve invite designers and other interested persons worldwide to join the "LED-Emotionalize your light"-Idea Contest and to create innovative light solutions with the latest LED technology.

Have a look on the contest at www.led-emotionalize.com

The contest's tagline: "Are you creative? Does technology inspires you? Do you like puzzles? If so, enter the “LED – Emotionalize your light” idea contest today and create your own light concept using the latest LED technology!"

Since the beginning of the contest two weeks ago, the community has already grown up to 200 active users. The participants can submit their own ideas and designs and present them to the community. More than 70 ideas have been submitted, some of them with a really high potential. The community also intensively uses the possibility to discuss and evaluate the contributions.

With the help of this platform a well-established company like OSRAM (respectively Siemens) deliberately considers the creativity of customers and actively integrates them into the development of new products.

The contest is organized in two stages:

• Phase 1: The ideas of all participants are collected and discussed.
• Phase 2: The best designs are jointly advanced by the community.

At the end of each phase a professional jury will evaluate the contributions and select the winners. The winners will receive attractive monetary and non-monetary prizes amounting to 7000€ (again a contest where money is not seen as the core driver of innovation :-)

For more information, head to www.LED-emotionalize.com

Interview: Joel Yatscoff of Joy de Vivre on Microfinanced Crowdsourcing and How He Helps Creative Designers to Get Their Products Out to Consumers

I recently wrote in this blog about Joy de Vivre, the Toronto based company that lets consumers vote on its product assortments. In this interview, founder Joel Yatscoff provides us more information about his vision, how the idea got started (Joy de Vivre seems to be again a typical case of an user innovation, originating from a frustrated user), about first successes and challenges, and what is coming next. His basic motive of democratizing the process how designers can get their products out to consumers, bypassing the power of traditional manufacturers of choosing and investing in designs, reminds me of Ronen Kadushi's idea of open design – different approach to the same problem.

Joel Yatscoff is a Toronto-based product designer. Originally from Beaumont, a small French Community in Alberta, he later studied at the University of Alberta and received his Bachelor of Design with Distinction in 2003.  Currently working in a product development consultancy in Toronto, Joel has also interned at Karim Rashid in New York City in 2002.  He has been recognized nationally and internationally for his roles as a freelance, collaborating, and supporting designer by the Chicago Athenaeum Good Design Award, IDEA, and Conduit National Design Competition.  Joel is also pursuing post-graduate studies in design management at Ryerson University.

Frank T. Piller: Joel, what was the insight and inspiration that motivated you to start Joy de Vivre?

Joel Yatscoff: I had been tinkering around with this concept since about 2006.  I had been out of post-secondary studies for 3 years and had been pitching some really great ideas [of product designs] to companies in New York with my good friend and business partner Bradley Price.  As I remember, it was about our 3rd consecutive year of pitching concepts with limited success.  I was getting really frustrated with how our great ideas were only receiving lukewarm reception but the company was producing real garbage.  We were biased towards our work of course, but it really seemed like frustrating process where we were acting more like salesmen than designers.  This was really the start, thinking there must be a better way for designer to get their great ideas to market.

At some point I remember hearing about Muhammad Yunus’ Nobel prize for micro-loans.  I found the concept of raising money through small increments very inspiring.  I think that lodged somewhere in my head and I thought it made sense to raise the great sums of money required for consumer product manufacturing.

I slowly formulated the business structure in my head and was encouraged to write a business plan to clarify and refine my concept.  I also began to notice that a few companies were really starting to use crowdsourcing to develop goods and it was only a matter of time until someone decided to apply it to consumer products.  As I didn’t want to regret not giving it a shot, I plunged in.  I took the fall of 2008 off from my continuing education studies in design management to devote time towards setting up the business.  And here we are now, 2 months in.

FTP: What are the first experiences with Joy de Vivre? Which reactions did you get, and what are your early users saying?

JY: The first experiences are very, very positive.  Everyone is very excited about the idea and really hope that it works out for us.  Our sales and traffic are slowly increasing, but am impressed with the impact we have made in just over 60 days.  Most interesting is following we have developed from Australia, Germany, and Israel.

FTP: Can you tell us a bit more about yourself? Do you have any personal experience with crowdsourcing?

JY: By education and experience I am a product design that has been practicing since I graduated from University in 2003.  I’ve had the opportunity to work as an in-house, freelance, and consultancy-based designer.  These jobs have allowed me to work on projects that range from municipal water treatment products and peritoneal dialysis machines, to dog toys and water bottles.  I have a real passion for well designed products and love the industry.  Other than that, I’m getting married in July and realized a year ago that I should have been sailing my entire life.

I don’t have any real first hand experiences with crowdsourcing other than my fiancé buying shirts from Threadless.com.  I wouldn’t say I’ve studied crowdsourcing or anything, I just find it a natural process.  As the old adage goes, “many hands make light work.”  The internet has allowed many more “hands” to get involved than would have been possible in the past.

FTP: How do you think Joy de Vivre is different to similar crowdsourcing companies? How do you want to make it special?

JY: Currently, no one else is using crowdsourcing to procure new ideas for consumer products and fund them.  Some sites are using crowdsourcing to spotlight products or designers, to source all their designs like threadless.com, or fund the upcoming albums of new bands, but no one has applied this to capital intensive projects like consumer products.   This is the biggest difference.  

Threadless does a great job procuring really great graphic designs and then has a small investment to bring them to market (buying the shirts, creating the silk screens, etc...). But consumer products are quite different.  We still have to procure the ideas but we also have to pay for substantial costs upfront before anything is made.  Tooling costs for consumer products start in the tens of thousands of dollars and can get into the hundreds of thousands of ideas very quickly.  This is why we pre-sell the products: we raise the money to pay for all the capital costs.  It significantly reduces any financial risk we take on and eliminates the risk for the consumer as we refund any money if the product is not fully funded.

We really want to make Joy de Vivre special by offering designers an outlet where they are encouraged to submit their ideas (not rejected like at most traditional manufacturers), offered fair, competitive compensation, sell really well designed, beautiful, and functional products, and reward our community by compensating them for helping to fund the product’s development.

FTP: What is the source of the designs? Who are your first designers?

JY: The first product we made available for funding, Cellule, was designed by Bradley Price and myself.  We had designed this modular lattice a long time ago and I always thought it was great idea and was puzzled why no manufacturers had jumped on it.  It seemed natural to launch with this product as it seemed symbolic of why I founded the company.  The second product, Terence Cooke’s “Fruity Bowl”, was a submission (full disclosure, I’ve known Terence for several years).  From this point, we will only be making products available for purchase that proves popular from our community.  This is in keeping with our crowdsourced model and will really help ensure whatever is made available for purchase will sell really well.

We should have no shortage of good ideas that will be submitted to our website.  Most product designers are always tinkering in their spare time to either build up their portfolios, create submissions for design competitions, or to pitch new concepts to manufacturers.  In time we hope that designers will be designing product just for us and then we will have a steady stream of product ideas.
 We will hopefully be giving all these beautiful, orphaned ideas a good home.

FTP: You also announced an open design competition. How will this take work?

JY: Yes, in a sense we are running an ongoing design competition.  Unlike traditional manufacturers, we are encouraging designers and innovators to send in their product ideas.  Normally, it is very difficult to make a good contact in an organization to pitch your ideas and most of the times they don’t accept design submissions if they have not asked for them.

We have now setup a submissions and voting platform where designers can submit their product ideas and our community can vote on them.  Popular ideas rise and less popular ideas sink.  We will be closely monitoring the submissions and ideas that do really well be chosen for production.  The submission process is really easy: all a designer has to do is upload a short description of the product and a few nice images.  The onus is on them to clearly communicate what the product is and really sell to the community.

FTP: A critical success factor for your business will be to gather a large enough crowd that follows the proposals and votes for them (with their money). How do you plan to create this movement?

JY: I couldn’t agree more, a big crowd makes or breaks this model.  We have a promotion strategy that has several fronts to get the crowds to us.

First, if a designer has a product made available for funding or voting, he/she has an incentive to spread the message to friends and family.  The more votes or purchases of that designer’s product the better its chances getting picked for production or become fully funded respectively.  We also hope that our consumers will spread the message.  Since we are rewarding everyone who helps to fund a product’s development, there is an incentive on the purchaser to tell friends and family about their purchase and encourage them to also buy.  More sales greatly increase the likelihood of a product being manufactured.  It is word of mouth advertising and is very potent.  We’ve already had purchasers of our first product promote the product and generate additional sales.

Second, we promote all the products that are made available for funding.  We have begun developing an extensive network of online and traditional media to publicize our new product offerings.  We are now able to send out a press release to a few select blogs and be quite confident of receiving a posting.  This allows us to very quickly disseminate a press release and really ramp the site traffic up.

Finally, we will be complementing the product promotion with our blog.  The blog highlights emerging designers and great products which are not being manufactured.  The blog combined with the submission/voting forum will slowly build up the community and make us a hub for emerging designers and products are not in production.  We are aware of how long this may take, but we are slowly getting there and have been surpassing all our site traffic targets to date.

FTP: In general, what are recent trends you see with regard to crowdsourcing and open innovation? What will be next?

JY: I see many more companies forming like us but for specialized products and services.  You already see many bands raising the funds to record their next albums through crowdsourcing models.  I’ve heard most recently of over $75,000 being raised for a female artist to record her latest album.  Her last track on the album has her singing out all the names of the people who helped raise the funds.  

With this kind of money able to be raised, it really opens doors to many more types of products and services.  The effect will likely be thousands of smaller companies using crowdsourcing and micro-financing to make product and services.  While I don’t believe the traditional Ikea’s will ever disappear, the consumer will have a lot more available to them because they will be helping to define what they want.

For more information, visit joydevivre.org or contact Joel Yatscoff at
joel (at) joydevivre.org or 364 King St. East, Toronto, Ontario M5A-1K9, Canada

Joy de Vivre: Collective Customer Commitment and Crowdsourcing in action at this Canadian startup

Via Burkhard Schneider's Blog, I got notice of Toronto, Canada, based Joy de Vivre. The start-up opened its doors last month and is entirely based on the concept of "collective customer commitment" that I described in 2006 in a MIT Sloan Management Review Article with Susumu Ogawa: Get the commitment of customers via crowdsourcing first before you invest in final product development and production.

On their website, Joy de Vivre descirbe their concept as follows:

"Product development is very expensive due to the high capital costs involved with prototyping, tooling, marketing, and distribution of products. Thousands of great ideas never make it to market because a manufacturer is not willing to risk money on development costs.

Using the crowdsourcing potential of the internet, these costs can be distributed over many people, making the individual costs affordable. We raise the capital required to manufacture a product by pre-selling its production. The retail price paid by you, our community of engaged consumers, is placed a development fund. This small figure, multiplied by hundreds or thousands of people, fully funds the product development costs. Designers get their idea made, you receive your product, and we all share in bringing a great idea to life. If the product doesn’t get fully funded, you get your money back."

One of the two products recently listed on the site is the "Fruity Bowl", a -- surprise -- Fruit Bowl for $34.00. Designed by Terence Cooke, the company calculated that they have to pre-sell 1500 units of this product to go into production, The clock is ticking, 105 days to go. Remember: While the pictures look great, Fruity has not yet been manufactured. In order to bring Fruity to life, customers have to fund it. The funding period for Fruity lasts for 16 weeks beginning from its first sale. Within this time period, Fruity needs to sell a minimum of 1500 units to be manufactured. If Fruity is not fully funded within the 16 week period, all purchases are refunded within 4 days.

For a more comprehensive description of their approach, go here: http://www.joydevivre.org/pages/how-this-works

I am curious to see whether this will work. Its success strongly will depend from (1) the buzz the company can create to generate traffic and bring potential customer-investors to their site; and (2) the quality and appeal of the designs. But Threadless has shown that the basic model works! So let's follow how Joy de Vivre is doing.

Crowdsourcing at Mervis Diamond Importers: A nice case of open innovation at a s small company with one big question

In a just published contribution on msnbc.com, Emma Johnson provides a good introduction into Crowdsourcing ("Free Problem-Solving for Your Biz: Tapping the masses for brighter ideas and bigger margins").

In the article, she brings the simple case of Mervis Diamond Importers, a small chain of jewelry stores in the Washington, D.C., area. This company employed crowdsourcing to generate a series of successful newspaper advertisements with the help of a crowdsourcing facilitator, Genius Rocket; a site is specialized on broadcasting ideas for ads. The description of this case is nothing special, but the questions Jonathan Mervis, the owner of the jewelry stores, asks at the end are very interesting:

For a $500 fee, Mervis sent out a query looking for one-line ad copy to accompany the front page of the local edition of satirical newspaper The Onion, which is popular with young adults. Genius Rocket publicized the contest, and Mervis spread the word through his company's blog and his own contacts.

The query netted more than 500 responses, many of which were outstanding, Mervis says. He personally read all of them and wrote checks to 10 entrants, which were "brilliant" and many of which are often quoted by customers in his store and strangers on the street.

Standouts include, "She likes the Beatles, but she loves the Stones," and "Conflict-free diamonds for a conflict-free bedroom."

"This doesn't even compare with working with my usual ad agency," Mervis says. "If I just sit down with my agency to discuss an ad in The Onion, it costs me $1,000 and it doesn't get me 500 options, it only gets me two or three. Often I don't really love those two or three, but I don't want to pay for more so I just go for it."

He says the return on investment is tough to calculate, but he plans to launch more crowdsourcing queries. The time and monetary investment were minimal, quality of responses phenomenal, and the ability to control the creative process rewarding and productive, he says. "It's almost like a free shot."

Tips include giving potential responders lots of information about your company, the type of responses that you're looking for, and your target audience. Also be careful to attach an appropriate fee. Mervis sponsored a second crowdsourcing competition for an online video advertisement he hoped would go viral. The eight responses were so-so, and Mervis wonders if the $1,000 reward was too small to attract top talent.

"What if I doubled the reward money? Would I get double the number of good videos?" he asks. "That's the thing: There are no statistics to support any of this."

Here, Mr. Mervis has hit one of the largest open spots in the open innovation literature. Empirical evidence on the divers of efficiency and effectiveness of open innovation initiatives. A great field for further study -- and one that is in the focus of our Aachen research group in a couple of projects.

Open Innovation Speaker Series at UC Berkeley

Henry Chesbrough, Author and Executive Director of the Center for Open Innovation, and Adjunct Professor at the Haas School of Business, UC Berkeley, is propably the best known figure in the world on the new paradigm of open innovation. So it is no wonder that he is able to get some of the most interesting people in the world to contribute to his weekly "Open Innovation Speaker Series" (Mondays, 12:30 - 2:00 pm).

Every monday during lunch time, the Open Innovation Speaker Series provides both academic and managerial perspectives on open innovation and related subjects. It is open to students, faculty, staff, and the general public.

I am delighted to have been invited to join this elite crowd, and will present in Berkeley on April 13.  My talk will be on "Customer Co-Design and Co-Creation: Mastering Long-Tail-Markets by Integrating Customers in the New Product Creation Process". The presentation will introduce a number of strategies that help companies to profit from heterogeneous customer demand.

But before, there are many more interesting presentations. In case you can not join, there is a video download of all presentations. But if you are living in the Bay area, I would be pleased to meet with you at my presentation in Berkeley!

Here is the full Spring 2009 Series Schedule

Mondays, 12:30 - 2 pm (Refreshments provided)
Cheit Hall, Room 330, Haas School of Business, UC Berkeley

• Feb. 9 - Wim Vanhaverbeke, Professor, Hasselt University, Belgium, "Broadening the scope of Open Innovation"
• Feb. 23 - Steve Goers, Kraft Foods, VP Open Innovation, "Applying the principles of open innovation to drive growth"
• Mar.  2 - Peter Williams, IBM, CTO, Big Green Innovations, "Case Studies in Environmental Innovation at IBM"
• Mar. 9 - Dan’l Lewin, Microsoft, Corporate VP, Strategic & Emerging Business Dev.
• Mar. 16 - Marko Torkelli, Professor, Lappeenranta University of Technology, Finland    
• Mar. 30 - Alex Osterwalder, Business Model Advisor
• April  6 - Tony Singarayar, Founder, Analogy Growth Partners
• April 13 - Frank Piller, Professor, RWTH Aachen University, and MIT Smart Customization Group
• April 20 - Francesco Sandulli, Professor, Complutense University of Madrid
• April 27 - Andrew Davies, Professor, Imperial College, London
• May 4 - Rich Friedrich, HP Labs, Director, Open Innovation Office

For more information, and also to download the videos and presentations from the Fall 2008 series, head here. http://openinnovation.haas.berkeley.edu

Crowdsourcing for a Good Cause: How InnoCentive's Utilized an Untapped Pool of Altruism to Work on Non-Profit Challenges

Putting together the donations you want to give for a good cause at this time of the year? Think again about just giving money. How about earning big money why doing good? Just solve one of InnoCentive's challenges for non-profit organizations.

FastCompany, a US business magazine, recently had a very good interview (conducted by Kermit Pattison) with Dwayne Spradlin, CEO of InnoCentive. At InnoCentive, corporations post research problems and a global network of 160,000 solvers takes a crack at solving them for cash rewards. Increasingly, non-profit organizations are beginning to consider crowdsourced innovation as a strategy for humanitarian causes too, such as developing medicines to fight tuberculosis in the developing world, cleaning up oil spills, or designing solar technologies for villages in rural India and Africa. Non-profit challenges have grown to about 20 percent of the InnoCentive portfolio, up from virtually none only two years ago.

For Dwayne Spradlin, this is not just is a way to "to tap technical expertise around the world, it also seems to be an untapped pool of altruism". For the solver community, oftentimes participating in a non-profit challenge is the vehicle by which they’re able to contribute (note: while the solutions are used for non-profit causes, prices are real and pay the usual 20-50K for a winning solution). Solvers may not have the financial resources, but they may have the know-how to solve problems that no one else can. That gives them great satisfaction. Here are some excerpts from the interview:

Dwayne Spradlin provides an example of Non-Profit Crowdsourcing in the FastCompany interview:

"We ran a challenge for the Oil Spill Recovery Institute out of Cordova, Alaska. They needed to find a new and novel way to get oil of the bottom of Prince William Sound from the Exxon Valdez spill. For 15 years, that oil has been sitting down there at the bottom of the ocean. They could get the oil off the bottom and onto the barges, but the surface temperature drops so dramatically that the oil almost solidifies and they can’t pump it through the barge system.

The solver ended up being an engineer out of the Midwest and he recognized a way to solve that problem using technology that’s fairly common in the construction industry. He recognized that was very similar to the problem of keeping cement liquid when you’re pouring a foundation. They used commercial-grade vibrating equipment on the barges to keep the oil fluid enough so they could process it through the system.

Anyway, the moral of the story is he won $20,000 for solving the challenge and he spent part of that money to fly himself to Cordova, Alaska because he wanted to meet the people from the foundation he was most directly associated with helping. He’s now made himself available to do work for them pro bono on future projects. There’s very little likelihood he would have had an opportunity to use his skills and resources in this philanthropic way without InnoCentive."

How for-profit and not-for-profit challenges differ

Openness: "In the commercial space, we’re not able to be as open. Commercial entities oftentimes are running challenges anonymously. … But in the not-for-profit space, the rules change entirely. It’s much more about openness. It’s much more about trying to drive collaboration and almost a planetary learning to drive something that ultimately benefits humankind in general."

Handling intellectual property:  "In the commercial space, we’re typically transferring intellectual property and trade secrets. In the not-for-profit space, it really is much more about an open source form of licensing and putting into the public domain the learning and outcomes of the challenges."

Success rates: "40 percent of challenges on the network are solved in general. But of the philanthropic challenges, the success rate is closer to 60 percent, as (1) the fundamental desire for people to work on problems that are important to the global good. (2) Not-for-profits in general have not had access to the same kinds of innovation, research and development tools as commercial enterprises. With InnoCentive, these organizations can access to the same kinds of brilliant people around the world on demand that companies have for years."

From crowdsourcing to crowdfunding.

Interestingly, InnoCentive also already thinks of the next big step.

"Imagine challenges to which people can vote and contribute with their donations—prize amounts that grow in relation to public interest. This approach could focus millions of dollars and an extraordinary amount of attention in a way that merges free market activist philanthropy with the power of prizes.

Perhaps 100,000 people could speak with their hearts, minds, and wallets to bring a challenge related to climate change into the forefront more easily than industry or government. We call the idea "crowd-funding meets crowd-sourcing" and could represent the truest form of democratic engagement in the process of innovation. This is an idea we are spending a lot of time developing ..."

Context: Read the entire interview here.

DemandMade launches YERZIES.com, extending apparel customization beyond screen printing by providing users access to advanced manufacturing methods

News from DemandMade and Scott Killian. Scott, together with his business partner Tim Brule, launched Yerzies.com, an online marketplace that "allows anyone to create, purchase or sell their own customized tee shirts, hoodies and other apparel items."  

Sounds familiar? Yes, Zazzle, Spreadshirt, Cafepress, any many more offer the same. But the differences are in the detail.  

Asked how Yerzies is different, Scott answers: "Although other Websites exist that allow you to design a tee shirt, we've dramatically expanded the variety of creative options and developed new approaches to the way users can profit from their creations."

Read an interview with Scott Killian in the next posting in this blog!

Beyond printed tee shirts, Yerzies enables the creation of stitched sweatshirts and mixed-media designs that include many advanced processes to create apparel which more closely resembles the design trends seen at retail. Yerzies' innovative product configurator allows users to access an unprecedented array of creative options including printing on dark garments, metallic foils, flocks, glitters, glow-in-the-dark materials, and stitched processes.

Buyers are also invited to "Make it Yerz", a feature that allows users to mix and match product options and in some cases, even make modifications to the content created by other users. Yerzies has also reengineered the way user-generated content is marketed.

When users are finished, they can purchase as little as one piece or sell their creations to the Yerzies community and keep the profits. All products are produced on-demand.

Yerzies thus combines advanced new manufacturing techniques with an innovative approach to crowd sourcing. It is another example of the developing trend of user manufacturing and my hypothesis that users are getting more and more advanced manufacturing technology in their hands.

In addition to providing a platform for user-generated content, Yerzies has also licensed content from third-parties including typefaces from designers such as Ray Larabie which users can incorporate into their designs.

Scott: "Helvetica and Times Roman might work nicely for writing a novel, but they don't necessarily look great on a hooded sweatshirt. We've licensed trend-right typefaces that will actually look cool on a tee shirt or hoodie."

The story behind Yerzies: An interview with Scott Killian.

The next generation of user design: Forget about CAD, just handdraw your design, and Ponoko will make it

While this may be small step for mankind, it is a large step for user co-design and customization. Until today, users who wanted to get a custom product had to be able to use at least an online configurator, or, in case they wanted larger freedom of creation as offered by user manufacturing sites like Ponoko, eMachineshop, Shapeways, Fabidoo, or others, they had to be able to use some graphik design software.

Now Ponoko makes co-designing even more intuitive and easier. The crew today launched their service Photomake. It turns digital photos of hand drawings into real products simply by uploading them to the Ponoko website.

The company is again one step further to its mission of making "it super simple for anyone to make anything that is on their mind, at low cost."

Previously at Techcrunch40, Ponoko launched Designmake for designers to make things on demand – over 10,000 have signed up. Earlier this year, they also launched Ponoko ID for shoppers to request goods to be made just for them by these designers. Now with Photomake they're inviting creative people who don't know how to use design software to participate simply by sketching what they want on a piece of paper and uploading a photo of it to get it made.

Derek Elley from Ponoko said in an e-mail that "One of the cool things about Photomake is the quality of the result – it's truly hand drawn. Because digital making is so very precise every tiny bump in the hand drawn creation is picked up and made for real. This gives a very natural and human feel to the things you make."

The trick behind Photomake is some very clever file conversion technology that is more accurate than anything that has come before it. It is designed so that what you draw is what is made, without any touching up required in a design software program.

This is a major revolution in the democratization of design and innovation. We know from empirical research that many users innovate and have creative ideas ahead of the market. Up to today, they either needed a manufacturer listening to them and turning their ideas into products. Or they had to have specific skills to turn their ideas by themselves into a design and get it produced. The later process was made much easier in the last few years, but still required skills in using design software and how to place a design on a machine. Now, even this hurdle blurs ... driven by new technology that allows this process at rather low cost.

So, go ahead and just hand draw your next Christmas presents.

Context:
- Press release by Ponoko on their new service.
- Video showing the entire process: http://www.ponoko.com/photomake
- On the upcoming MIT Smart Customization seminar, Cathy Lewis, CEO of Desktop Factory, will present what will be next: Transfer your custom designs into products in your home as easy as today printing a document.

Redesign of RedesignMe: Dutch user innovation catalyst starts new service

Everybody knows about some product he or she struggles with once in a while. Maybe you even thought of a solution. Now you can upload these solutions to a website and share them with the world.

RedesignMe is a great Dutch company focusing on open innovation and user co-design, It was founded by designer Maxim Schram who was frustrated that he had some great ideas how to improve existing products, but had not opportunity to get companies listen to his ideas.

So he started his own web site posting his ideas for improvements – and inviting others to do the same. 

His company, RedesignMe, aims to improve the products and services around us by collectively rethinking bad products into better products and good ideas into great ideas. The offering is called Design Critique. Maxim even came up with a simple toolkit so that users are able to quickly capture ideas. Actually it is not more than a simple, easy to use drawing tool that allows you to draw on a photo of a product. But is a great help to really express what you are going to say.

With Design Critique, RedesignMe collects the best product improvements based on their users input and communicates that back to the original product designers & producers.

RedesignMe contacts the companies behind the products in question to show them the feedback and encourages them to reply directly to the users and eventually fix the problems.

RedesignMe also encourages the companies to work more closely with their end-users by setting up RDM Challanges, their second product.

RDM Challenges are conceptual or design-driven challenges initiated by companies that want to involve their customers more closely into their product development process. RDM Challenges clearly describe a (design) problem and participating users are rewarded for their input through their RDM system. Feedback can be in form of a comment, sketch, set of pictures, mood-board, movie, prototype or total redesign. They just started the first RDM Challenge for the DECT Forum, for concepts based around their new CAT-iq technology: http://cat-iq.redesignme.com

As an incentive, participants can earn points (RDMs) by co-designing products with manufacturers. They can redeem these RDMs in their online shop.

In a short while, RedsignMe also plans to introduce the "RDM Challenge Pro", where they invite people to come to our office to co-design products, and discuss with manufacturers.

So another opportunity for you, the consumer, to place your creative ideas.

RYZwear.com: Applying the Threadless Concept to Footwear

"At RYZ we’ve set out to create a people’s brand – a community of designers, sneakerheads and anyone that cares enough about art, fashion or sneakers to speak up. Together we’ll create sneakers that are designed and chosen, not by some big, faceless corporation, but by you.

Think of RYZ as a stage for designers to showcase their creativity and a forum for people to define what great sneaker design means. In other words, we just make comfortable sneakers – the rest is up to you."

This is how Rob Langstaff announced his new business just one month ago, ryzwear.com The hope of RYZ is to become the Threadless of footwear, connecting people who design custom sneakers with those that vote on the designs and purchase. I am wondering since long what could be good fields where the extremely profitable Threadless idea can be applied to, and footwear could be one option.

Rob Langstaff is not an outsider of the sneaker world. The former Adidas America Inc. president has turned the business model of its former employer upside down, Instead of assigning design jobs to inhouse designers, he is relying on online clusters of consumers to design products and figure out which ones to sell. "In Ryz's case, it's MySpace meets "American Idol," with footwear as the unit of expression", as an online report called the business model.

"The corporate design team is limited by its walls," Langstaff is quoted in the news report, "The corporation shouldn't be dictating what the consumer wears. The consumers should."

This is how RYZ works:

• Each month, Ryz will post a different standardized shoe silhouette on its Web site (a high-top shoe and a low-top shoe were the first two). Users can download the template and, using Adobe Photoshop, illustrate or add images across the shoe.
  
  
• Site visitors can rate and comment on submissions. After a month, a winner will be declared and Ryz will order a run of the winning design -- 100 pairs to start and 1,000 pairs by next year -- from a contract manufacturer in China.
  
  
• The winning designer will get $1000 for the start, plus royalties of $1/piece on ongoing sales, and get their profiles attached to each pair and a listing in Ryzwear.com's Hall of Fame.
  
  
• Two weeks after the contest ends, Ryz will sell the winning shoes on the Web and, for now, in Xebio Co., a leading Japanese sporting-goods retailer that owns a stake in Ryz. The retail price: $75 to $90 a pair.

By 2012, Langstaff hopes to allow users to design the entire shoe, from the shape of the sole to the shape of the eyestay. He also hopes to get into athletic wear. He expects to rely on customers to do most of his marketing.

Rob Langstaff is putting $4 million into his shoe startup, saying there is too great a disconnect between businesses and consumers. He expects to do $40 million in revenue by 2012 (which would be about half the time of Threadless' way to scale, but could work given his larger experience in the market and the higher price tags).

Interestingly, among some of the people helping Langstaff to set to the business is Mikal Peveto, a former footwear executive who started design-your-own shoe site Customatix in 2000. In case you have followed mass customization since its beginning, you should know Customatix. The company got much attention and had one of the best online configurators of its time. But it also did offer too much of a good thing, giving users really zillions of choices at a time when consumers were not really educated in mass customization configurators.

But Peveto believes Ryzwear can succeed where Customatix failed because consumers today are more comfortable interacting and purchasing online from less-established companies.  "Our timing wasn't great. We couldn't get people to buy because they didn't trust the brand," Peveto said. "Now is a completely different time than in 2000 because there are so many different brands that are valid."

So I am curious to see whether Mikal Peveto and Rob Langstaff's predictions come true. They took some serious modifications of adopting the Threadless models for their industry. But Threadless' customers are as much purchasing the membership in a club, a community, by purchasing t-shirts frequently at $15 a pop. I am not quite sure that this will work with $90 sneakers.

To develop however a great (and profitable) underground line of sneakers with a great story, their approach may work will. They may want to learn from Muji, the Japanese's retailer, and its approach to the model. Muji is not just letting customers vote on new designs, but also asks them to make a small cash payment on the item they really want to have in stores. Thus, they can much better predict what
people will purchase later. Such an approach also could benefit RYZ as it would connect the voting process closer with purchasing..

Context information:

A good article in Oregonlive told me first about RYZ

A recent article in the San Francisco Chronicle on crowdsourcing and user idea competitions is featuring RYZ, Threadless, and a number of other companies.

My previous reports about the CEC User Co-Design Competitionand Open Source Footwear.

Threadless - the full story: Inc. Magazine Feature on Threadless

Max Chafkin, a staff writer the US Entrepreneurship journal Inc. Magazine, has written a great report on Threadless  for the June 2008 issue of the magazine. It is available in a free online pre-press version now.

Max tells the entire story of Threadless, starting with the episode of a meeting at MIT where the Threadless guys gave one of their first public presentations. I had the privilege to be part of this meeting, and it is fun to read about it in paper (especially as I am at MIT in the moment, writing these lines from the same building where we had the initial meeting with Threadless).

Max did a great job in documenting the history and genesis of Threadless, but also reflecting on its future. Here are some quotes of Max' analysis of the case, but head to the website to read the entire article:

On Threadless' Size and Development

This rapid engagement propelled the company through four years of phenomenal growth, beginning around 2004. The user base grew tenfold, from 70,000 members at the end of 2004 to more than 700,000 today. Sales in 2006 hit $18 million -- with profits of roughly $6 million. In 2007, growth continued at more than 200 percent, with similar margins. Though Nickell refuses to disclose the exact revenue number -- perhaps because he now counts Insight Venture Partners, a New York venture capital firm, as a minority shareholder -- it seems fair to assume that Threadless sold more than $30 million in T-shirts last year.

Ask Nickell what he makes of his company's whirlwind success, and he will respond rather sheepishly. "I think of it as common sense," he says. "Why wouldn't you want to make the products that people want you to make?" Indeed, the idea that the users of products are often best equipped to innovate is something many entrepreneurs know intuitively.

And it is supported by a growing body of research. A study published last year in the Strategic Entrepreneurship Journal suggested that the vast majority of companies are founded by "user-entrepreneurs" -- people who went into business to improve a product they used. Meanwhile, studies by von Hippel and others show that in industries as diverse as scientific instruments and snowboard equipment, more than half the innovations generally come from users, not from research labs.

On user innovation and the resistance of traditional companies to adopt it

Some companies actually punish these people by cracking down on unauthorized innovations. Apple has famously "bricked" -- that is, electronically disabled -- iPhones that have been enhanced by their owners. Other companies pay lip service to user innovation but have trouble following through on the concept. "Companies are very good at creating platforms for external input, but they're very bad at using this input," says Frank Piller …

Threadless is an exception to this. "You could say that what Threadless does is trivial, but it's not," says Harvard's Lakhani. In fact, the very triviality of Threadless's product -- something as low tech and as commoditized as a T-shirt -- proves that vibrant online communities can drive all sorts of nontechnical businesses. This should be encouraging news to entrepreneurs. Customer communities have become exceedingly inexpensive to build and manage; blogging software and social network platforms, for example, are now available for free from a handful of start-ups. "We thought that open source could only work in software, and now it's being successfully applied to a product as mundane as a T-shirt," Lakhani says.

On Threadless' Corporate Culture and Work Style

[Today], the company is suspiciously companylike. The go-carts generally stay parked, the buck stays mute, and the Ping-Pong table serves as a gathering place for impromptu meetings. "When I started, we spent half the day playing," says Lance Curran, a bearded 29-year-old wearing a beanie, jeans, and a flannel shirt. "That doesn't happen anymore." This is not to say Curran doesn't like his job. On the contrary, he nearly glows when he talks about his rise from a temporary warehouse worker in 2005 to the warehouse manager in charge of a staff of 18 today. ...

Like Curran, most of Threadless's employees come with no obvious qualifications for their jobs. The oldest staff member is 33, and many are under 25. The employees do, however, arrive with a deep and abiding love of Threadless, having joined the community long before they entered the work force.

Joe Van Wetering, a 21-year-old illustrator who works in the production department, was a frequent visitor to Threadless's offices as a teenager before taking a job in the warehouse in 2006. Ross Zietz had won seven competitions while studying art at Louisiana State University before he took a job as the company's janitor in 2004. He has since been promoted to art director, charged with helping the winning designers get their entries ready for printing. In fact, 75 percent of the company's 50 employees were community members before they were hired.

On other product categories Threadless is exploring

Now, Nickell is set to let his club loose on other businesses. In addition to expanding to children's clothing and retail, Threadless will begin selling prints and posters online. And later this year, the company will add a range of products, including handbags, wallets, and dinnerware, under the brand Naked & Angry. Each item will be adorned with patterns submitted by users, with a new product launched each month. "I think Naked & Angry, if handled properly, has the potential to be way bigger than Threadless, because we have the flexibility to do everything," says Kalmikoff, who envisions moving into high-end clothing as well as housewares. Jeff Lieberman, managing director of Insight Venture Partners and a board member, is even more bullish. "To say it's just a T-shirt company is absurd," he says. "I look at it as a community company that happens to use T-shirts as a canvas."

 
And Max' final evaluation of Threadless' Business Model: A fundamental economic shift

The way Eric von Hippel sees it, Threadless has tapped into a fundamental economic shift, a movement away from passive consumerism. One day in the not-too-distant future, he says, citizen inventors using computer design programs and three-dimensional printers will exchange physical prototypes in much the same way Nickell and cohorts played Photoshop tennis.

Eventually, Threadless-like communities could form around industries as diverse as semiconductors, auto parts, and toys. "Threadless is one of the first firms to systematically mine a community for designs, but everything is moving in this direction," says von Hippel. He foresees research labs and product-design divisions at manufacturing companies being outstripped by an "innovation commons" made up of tinkerers, hackers, and other devout customers freely sharing their ideas. The companies that win will be the ones that listen.

This may or may not come to pass, but the lesson of Threadless is more basic. Its success demonstrates what happens when you allow your company to become what your customers want it to be, when you make something as basic and quaint as "trust" a core competency. Threadless succeeds by asking more than any modern retail company has ever asked of its customers -- to design the products, to serve as the sales force, to become the employees. Nickell has pioneered a new kind of innovation. It doesn't require huge research budgets or creative brilliance -- just a willingness to keep looking outward.

Context:
- My earlier reports on Threadless are here and here.
- The full Inc. Magazin article

Spreadshirt Reveals New Crowdsourced Logo

Remember the Spreadshirt Crowdsourcing contest to get a new logo from its community, the Open Logo Project 1.6 (OLP) ? I was part of the judging panel, and it was a fun activity to do. "We wanted to take this to the community who use, create and live our product, rather than to an agency", Jana Eggers, Spreadshirt CEO, is quoted in a press release.

The results were in at the end of the year, and now finally the winning logo has been placed on the site and all CI materials. Kim Larsen’s ‘Love Tab’ was the winning design, chosen from 2,800 submissions (from 45 countries). Kim is a 23 year old graphic and interactive media designer from Sweden.

"I wanted to make personal branding visually simple and to embed a symbol everyone can relate to.", he says, "The heart resonates with the feeling of love you have for something you’ve created and the stitching with the hand-crafted nature of the product."

Context:
- My previous report about the contest.
- The official contest site
- Press release at Spreadshirt (and I do not know whether being a web 2.0 guru is a good thing or not today).

Update: Fashion Crowdsourcing Project Nvohk Set to Launch on June 5, 2008

Some weeks ago, I reported about nvohk (pronounced ‘invoke’), a company that puts our "collective customer commitment" model into action: Get 5000 members who pay 50$ each of funding, use the money to create an eco-friendly line of clothes, and then sell the clothes to a wider public and share the profits with the original members. Members, as part of their pre-payment, get the right to vote on new designs and co-manage some of nvohk's business decisions.

In a press release today, the company reported that since December 4, 2007, nvohk could recruit 2,800 members worldwide – enough that the company will officially activate membership and launch its brand on June 5, 2008.

I am curious to see how the project will develop and if it reaches its threshold of 5000 members. It seems a bit more difficult then the founders officially expected. In January they were talking about 20,000 people to be recruited. to start the project. Now they are down to 5000, and still 40% away from this target.

Perhaps the founders should just position nvohk in the "pimp my C.V." domain. For just 50$ investment, you honestly can say you run your own eco-business and are investing in the sustainability revolution ...

Context:
- Website: www.projectnvohk.com
- My previous posting about the company

Fujitsu Siemens Computers Goes Open Innovation: User Innovation Contest Started

You create the next IT Services for Tomorrow’s Data Center

Fujitsu Siemens Computers (FSC), a large IT infrastructure provider, just started their first community-based innovation contest this week. The contest asks everyone with a clever idea to develop ideas around the Data Center of the future.

They ask the questions how data centers will work in the future, what services will be required by users, and which topics will be of strategic importance for their business.

The contest has been created by a business team within FSC with the help of HYVE AG, a Munich based open innovation accelerator. On the platform, users not just become a source of ideas, but a member of an Innovation Community. This shall enhance their ideas with the help of other contest participants and the internal experts from Fujitsu Siemens Computers.

Every idea can be evaluated and commented by every contestant. As a consequence, ideas become vital elements which can be formed and developed by many spirits and thereby have the chance to gain excellence. While the original spin doctor competes for one of the prizes for one specific idea, the contestant’s activity within the community is rewarded as well.

In order to enable the contestants to actively interact beside the discussions on ideas, several additional functions are available to the participants. Weekly chats with other participants and Fujitsu Siemens Computers Professionals are dedicated to specific topics which are defined according to eminent issues within the pool of ideas. Not to mention the forum and other features.

Every contestant can contribute several ideas. The essence of the ideas is described through a handful of uniform parameters such as target group and basic functionality. The idea can also be enriched by any attachment such as diagrams or mind maps. In order to compare and rank the ideas, the contributions are evaluated along some criteria such as market potential, value to the customer or novelty to the market. Contestants evaluate their own as well as any other idea by these criteria.

The contest consists of different phases:

First, ideas are contributed and evaluated by the community. After two weeks the contest went on, FSC experts will come into play and start the expert evaluation phase were ideas are evaluated along similar criteria as the community evaluated the ideas. A tag cloud helps to explore the pool of ideas intuitively and your favorite ideas can be added to your personal list in order to keep an eye on their progress. And in the end, the winning idea gets 5000 Euro, plus there are several of the latest FSC laptops to win.

So if you are interested in data centers services, here is the opportunity to shape the future of this industry. http://innovation-contest.fujitsu-siemens.com. I am curiuous to see how this company-driven innovation contest works and which people come up to submit ideas.

Zapfab: User-generated content meets 3D Printing

A new Ponoko-alike company is coming from Manchester in the UK! Zapfab Ltd is a user manufacturing start up that offers a new way of delivering individualized, customized products. As other companies in this field, they are combining the creativity of user-generated content with the power of 3D Printing (fabbing).

In a press release I got today, the company is described as follows:

"User-generated content is ubiquitous throughout the internet, from weblogs to YouTube videos. Zapfab builds on this trend, by providing a website where users can easily generate unique designs for 3D objects.

3D Printing is rapidly gaining ground as a way of creating real, physical objects from 3D design data. Zapfab provides an easy way to access this technology: Once you have generated a 3D design you can choose to have it 3D printed: Zapfab will 3D print the design and deliver the finished object to you.

The Zapfab website has two main areas: the Design Catalog and the 3D Customizer. The Design Catalog contains all the designs on the site and is a repository like Google's 3D warehouse. The 3D Customizer is where the customizing takes place: Each design can be customized in different ways: color, size, pattern, etc. and the 3D Customizer contains simple controls for each of the options. So, once a user has customized a design, she can save it back into the catalog for other people to see. And then they in turn can customize and build on her design.

“We see three main groups of users for Zapfab.com,” said Julie Wood, Zapfab Director, in the press release “First, we have made the 3D Customizer really easy to use, so that anyone can create a unique, customized design in just a few minutes.

Second, there are a range of users with 3D modelling skills, who will be able to upload their designs to the site; and we aim to make it easy for them to add customizations to those designs.

Third, users with programming or scripting skill will be able to create new, highly-customizable designs. And all the designs, from the simplest to the most complex, are customizable through the same easy-to-use 3D Customizer.”

At the moment, Zapfab’s Design Catalog contains over 100 customized designs, ranging from bowls to boxes and bangles. All of the designs can be 3D printed “as is”, or freely customized. It is a nice, but at this stage not too creative collection of things. But I hope to see much more activity on their side, and given that they are located in Europe, I also will try this service by myself in the next weeks and let you know about my experiences.

Great Report on User Manufacturing, Mass Customization, and How a New Infrastructure is Providing New Opportunities for SMEs

Last week, I got a note by Steve King, a research affiliate with the Institute for the Future. This is a non-profit research group based in Silicon Valley. Founded in 1968 by a group of former RAND Corporation researchers with a grant from the Ford Foundation to take leading-edge research methodologies into the public and business sectors, the IFTF today publishes reports to help people and companies to understand what is coming next.

They recently released a forecast report that is part of a series on the future of small business. In this report, they stress that small businesses will actively take advantage and use new manufacturing methods to create mass customized goods.

The report was sponsored by Intuit and can be downloaded on their website: http://www.intuit.com/futureofsmallbusiness/ (download Report #3)

In the report, IFTF writes about a new artisan economy that is the result of new manufacturing technologies, enabling individuals to access similar production technologies as large corporations (crafters using Ponoko, see previous posting, are a perfect example). It is a very nice summary of many of the recent trends that I have discussed here. Fabbing, blogging, user manufacturing, customization, open innovation -- it's all there and brought into a nice and coherent framework.

I especially liked the part about the new infrastructure that is enabling these developments:

"Plug-and-play infrastructures will make small businesses more competitive and successful. The ability of small businesses to take advantage of large-scale infrastructures and leverage new technologies will allow them to enter and compete in industries formerly served only by big business."

As an example, they refer to a great service that is enabling moms to become entrepreneurs, Mom Inventors, Inc.:

"For those who want to avoid teh hassle of assembling these services, firms are available to do everything for an entrepreneur. Mom Inventors Ic., for example, weill develop, manufacture, and sell quality Mom invented products throughout the United States and Europe. The mom (entrepreneur) only needs to come up with the idea, Mom Inventors will do the rest."

So I am expecting to these many more knitted marvels and clever kitchen aids on the shelves, invented by "Lead Moms".

In an e-mail exchange, Steve told me more about the background of the report, and stressed another implication from their research:

"A major issue we are trying to figure out is how small business relates to mass customization and user innovation. This was originally prompted by our work looking at consumer generated media - specifically blogs.

We found that the blogs with the most traffic were not authored by consumers, but by professionals. The professionals tended to fall into two categories: (1) small or independent businesses trying to build a small publishing business; or (2) professionals using blogs to promote either themselves or the goods and services of their company. Looking deeper at the second group, we found that most of them worked for small businesses.

Based on this work (which we did several years ago), we started looking at other categories. We quickly found a similar pattern of small business participation across a broad range of categories, including media (YouTube videos, etc.), open source software, crafts and small scale manufacturing (a lot of Makers at Maker Faire are small businesses, for example), financial services, etc.

Basically, we saw small businesses playing a role in almost every category where niche products and/or services were being built or highly customized. We also found a pattern of category "power users" moving from being hobbyists to starting their own small businesses. We kept seeing "prosumers" turning into small businesses, and we kept seeing small businesses somewhere in the customization value chain."

Accordingly, another area indicated in the report where small businesses will grow in the future is to serve as an innovation lab for larger corporations. Platforms like Innocentive or P&G's connect and develop program will help small businesses to sell their creativity to larger corporations in an efficient way. This may be the next wave of contract research.

Overall, a nice summary of recent trends that is worthwhile reading due its focus on small businesses.

Context: Get the full report here. http://www.intuit.com/futureofsmallbusiness/ (download Report #3)

Ponoko: Design Contest and Latest Press on User Manufacturing Enabler Ponoko

Ponoko (see earlier report) gave one of the favorite presentations at the MCPC 2007 in Boston. The company is a perfect example of user manufacturing. Nic from Ponoko just informed me about their 10-day design challenge series, running from today until March 10. Each day, they ask for designs within a special category.

Being a small company, prices are not that big, but it will be lots of fun and it seems to be an easy way to test Ponoko. The Ponoko crew also can fill its assortment of user design with this project -- and thus, even if you do not win, chances are that other people like your design and you can sell it though their on-demand manufacturing system. The winner gets $1,000. 10 get $300. 25 get their designs made for free ...

For more details on the contest, go here.

Ponoko also got plenty of press in the last weeks, here is a review:

The New York Times – Tinkering at Home, Selling on the Web

The Economist – Bespoke Manufacturing – I made it my way

BBC News – The shape of things to come

Wired – (multiple articles)

MIT Technology Review – Automated Custom Manufacturing

TechCrunch – (multiple articles)

Engadget – Ponoko now live to make, market your gizmo

TrendWatching – 8 important consumer trends for 2008

Treehugger – (multiple articles)

Crowd F(o)unding an Eco-Clothing Label: nvohk explores the collective customer commitment method to create a new fashion line

In a press release today, nvohk (pronounced ‘invoke’) announced that it has signed up over 1,250 future members for its crowdsourcing-based business model. Its founders, Brendan T. Lynch and Sergio Salas, claim that it is the "first community-managed, eco-friendly, surf-inspired clothing company."

Their idea places our "collective customer commitment" model into action: Get 5000 members who pay 50$ each of funding, use the money to create an eco-friendly line of clothes, and then sell the clothes to a wider public and share the profits with the original members. Members, as part of their pre-payment, get the right to vote on new designs and co-manage some of nvohk's business decisions. Members, for example, can decide about the logo design, web design, product design, advertising, etc. In addition, nvohk will donate 10% of net profits to environmental organizations selected by its members. In the mid-term, the company wants to recruit up to 40,000 members.

The idea has some appeal. It indeed "fills a gap in the lifestyle brand arena," as the press release says. Nvohk enables consumers to get involved and participate in business decision-making and environmental causes. It also provides consumers with an entertaining platform for making a perceived positive impact on the environment.

But it also is a clever business model building on customer integration. For the 50$, customers will get a special t-shirt and 25% off all nvohk products. They also get kind of a dividend: 35% of nvohk’s net profits will be transferred into reward points that can be redeemed by members to purchase products. This all sounds like a slef-sustaining business cycle.

If you want to invest 50$ as well, go here: www.projectnvohk.com.

Crowdsourcing methods are McKinsey's Prime Business Technology Trends to Watch In 2008

In the recent issue of McKinsey Quarterly, the business journal of strategy consultants McKinsey & Co, James Manyika, Roger Roberts and Kara Sprague discuss Eight Business Technology Trends to Watch In 2008. Five of those eight relate directly to the topics of this blog:

Four trends, Distributing Cocreation, Using consumers as innovators, Tapping into a world of talent, and Extracting more value from interactions are sub-sets of the larger Crowdsourcing idea.

(1) Distributing co-creation is just another term for our own "interactive value creation" or Benkler's "commons-based peer production" or Don Tapscott's "Wikinomics". No doubt that this is a mega-trend which has been described widely in the last years but which practical implementation just has started. In consequence, McKinsey estimates that 12% of all labor activity could be transformed by more distributed and networked innovation:

"Outsiders offer insights that help shape product development, but companies typically control the innovation process. Technology now allows companies to delegate substantial control to outsiders -- co-creation -- in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control."

Interestingly, however, in the entire McKinsey article is no word on open source or open licensing models ("commons-based") which are a main driver for the efficiency of distributed open systems of value co-creation. This may be perhaps too much for the typical reader of McKinsey Quarterly.

(2) Using consumers as innovators: Well, not really a new trend, Eric von Hippel is saying this since the 1970s, and since the beginning of industrial production consumers are inventing new products. The new trend, however, is that firms are seeing this potential and they increasingly are utilizing the capabilities for innovation. They are not just asking for feedback on their own creations, but they are integrating consumers actively in the creation of something new. MyKinsey is quoting Threadless here, but this is not a correct example for this trend as most the creators at Threadless are no consumers but experts!

A better example, quoted by the iRise Blog in a posting on the McKinsey article, is Dell's IdeaStorm, and, on the B2B front, Salesforce.com. This software company is using an application for users to make suggestions to improve their CRM software. The top ideas from this contest is receiving executive-level visibility.

(3) Tapping into a world of talent is the consequence of opening your innovation and value creation process:. The people reacting on an open call for participation in the " Distributing co-creation" idea are those who are the most talented to do this work (as they have relatively lower cost to fulfill the job):

"As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks."

This leads to a further consequence, and their next trend: (4) Extracting more value from interactions. The more a company is relying for value creation in its periphery, the higher is its costs for coordination compared to production cost.

"As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration—tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today. Europe and Japan will experience similar changes in the composition of their workforces."

This is nothing new at all, the fact, that the so-called transaction cost are dominating the overall cost in a modern economy is known since several decades. But it is good that McKinsey are stressing this relationship again – as mastering these cost will become a major capability for firms which want to profit from crowdsourcing. Technology is leading this path:

"Technology tools that promote tacit interactions, such as wikis, virtual team environments, and videoconferencing, may become no less ubiquitous than computers are now. As companies learn to use these tools, they will develop managerial innovations—smarter and faster ways for individuals and teams to create value through interactions—that will be difficult for their rivals to replicate. Companies in sectors such as health care and banking are already moving down this road. […] But: Creating the business case for investing in interactions will be challenging—but critical—for managers."

(5) A last trend from their report is "Putting more science into management". Technology is continuously helping managers exploit ever-greater amounts of data in real-time to make smarter decisions. One of the business models which are enabled by this data-driven management is mass customization, named by McKinsey as "the holy grail of deep customer insight":

"The amount of information and a manager’s ability to use it have increased explosively not only for internal processes but also for the engagement of customers. The more a company knows about them, the better able it is to create offerings they want, to target them with messages that get a response, and to extract the value that an offering gives them. The holy grail of deep customer insight—more granular segmentation, low-cost experimentation, and mass customization—becomes increasingly accessible through technological innovations in data collection and processing and in manufacturing."

Go to the original article which has plenty of good references for further reading (requires registration, for a version of the full text of this paper, go to ZDnet).

Trendcamp Open Innovation by Net Culture Lab Austria

Net Culture Lab Austria is an initiative that wants to explore what "internet culture is" and how a large corporation, Telekom Austria, its main sponsor, can learn from it. The project was initiated in May 2007. It supports small projects of innovative people all around Austria who want to build, experiment, create, or craft in the broad area of "net culture" (remember that Austria is one of the world's leading countries with regard to multimedia and electronic arts).

Recently, I was invited to one of their regular "trend camp" gatherings, and it was a great experience for me. The topic of my 1.5 day workshop was open innovation, and we were a mixed crowd of managers of Telekom Austria (a typical former monopolist in the telecommunication industry, now under pressure in a deregulated market) and young artists, web programmers, lecturers in the area, and consultants. Organizer was Thomas Fundneider from a small innovation consultancy in Vienna.

The day was a great surprise for me: I frequently do this kind of workshops with companies, and regularly the reaction is one of fascination for the opportunities of open innovation, but always paired with a very strong resistance towards change and how this could work in their own corporation.

Not this time, however. The Telekom managers seemed to be even more open on the topic then the "net people", and thus it was a very refreshing experience, one that really filled me with hope that Crowdsourcing and open innovation really can change large corporations fundamentally.

In many small presentations by everyone from the group, and two large structures open table discussions, we generated lots of ideas and great input. I also learned a lot – and mow I am curious to see what Telekom Austria will do with our results.

More reports on this Trendcamp can be found (all in GERMAN language) at Polymatic, digitalks.at, the Telekom Austria Blog and at Thomas Fundneider's Blog

Video interview on mass customization and open innovation

In case you understand German and prefer to watch a video instead of reading a paper or book, this video is for you: Förderland, a large German Blog on Entrepreneurship, has conducted a nice video interview where I explain the basic concepts of mass customization, user innovation, co-creation and how this all belongs to each other (for a more detailed version of this, read our book).

In the video, I define the the basic concepts, give some examples, talk about the challenges, discuss, how entrepreneurs and start-ups can profit from these concepts, and name my personal best practice of a company in this area. And: The video also offers a view into my not really tidy and organized university office (note: I recently have ordered nice new office furniture, but as this industry is not doing any mass customization at all, delivery times for this are more than two months ...)

Here is the video (or go here to the full link and summary):
Thanks to the Exciting Commerce Blog where I noticed that my interview has been published first!

Create the Shoe of you Dreams - Participate in the CEC Shoe Design Contest

Open Innovation and crowdsourcing finally is arriving in the footwear industry

Crowdsourced logos were yesterday, now it is all about shoes. The CEC project is a large European research project dedicated to nothing smaller than reinventing the footwear industry. My old research group at TUM is a major partner in the project, and as part of the work, they are now running the first European Consumer Shoe Design Contest where everyone can become a shoe designer.

Your task is to design a shoe model along a theme called “Original Origin”. This category of aesthetic trends expresses cultural values, regional roots and techniques and at the same time uses authentic materials and innovative shapes. The contest asks everyone to play with the theme and interpret it in the most creative, but still feasible way.

More details on the contest can be found in the CEC Contest briefing which also has the exact rules of the design contest.

Submissions are evaluated by a top-class jury consisting of international shoe and design experts from companies like Hugo Boss, CallagHan, Liitto, Future Concept Lab, and Frau. The jury's criteria for the assessment will be design, innovativeness, feasibility, task alignment, and an overall score for excellence. In addition, also the public can vote on their favorite design and nominate a public winner.

Awards are a bit technical but provide a nice opportunity for everyone interested in footwear:

The first price is a site visit with Hugo Boss in Morrovalle/Italy to get a prototype of your design as well as to gain insight into prototyping process.

The second price is a real working prototype of your design, manufactured according to your design and mailed to you

The third price is a free participation at the “Future Vision Workshops” dedicated to the aesthetic trends in Milan (also, winners of the first and second price are invited to participate).

How to participate:

Register on cec-designcontest.net and enter the “Design Studio” to upload your design. All what you have to do is to provide a sketch or rendering of your design (and a short description). All further information can be found in the design briefing.

Submissions are accepted until December 31st, 2007. Winners will be announced on February 29th, 2008.

Now, start designing!

A personal comment at the end: The footwear industry is an extremely conservative industry far behind many other industries with regard to open innovation and customer driven value creation. So it is a real revolution that they now start such a competition. I am curious to see how this contest may change their attitude and expectations – and if the wining design ever will be produced. However, the rather long contest rules and the not too fancy prices already show how difficult it is to get their commitment. But it is a great start – and hopefully more initiatives like this will follow!)

Context information:

- The contest web site: http://www.cec-designcontest.net
- Earlier post on the CEC-made Shoe Research Project
- Similar ongoing competition (open source footwear)

Webinar: The Next Gen of Mass Customization: User Manufacturing, Instant Companies, and Customer Co-Creation (Nov 29, 2007 on your desktop)

How a new infrastructure is enabling consumers to become instant manufacturers – and your future competitor -- 10% discount for MC&OI Blog readers

I am coming back to your desktop. After the large success of an earlier webinar on mass customization, London based Pure Inisghts is organizing a second webinar on the theme, this time around my new favorite topic of user manufacturing.

The topic: We are used to have a networked laser printer on every desk in our office and in every home, enabling us to print documents on the spot which a few decades ago demanded a specialized manufacturer. The same may be happening with the production of many other goods. Today new production technologies ("fabbing") and advanced design software allow average users to produce almost everything – on their own desk. Welcome to the factory in your kitchen.

This session will discuss the upcoming user manufacturing trend, a development that recently is taking shape in larger scope and scale: User manufacturing refers to a public available software, manufacturing, and distribution infrastructure that enables creative users and customers to design, build, and sell own creations to a larger public – without the traditional investments in setting up a business. User manufacturing supplements – or substitutes – mass customization strategies which many companies have implemented. It also may become the most efficient strategy to serve the long tail of variants in many industries.

Consider Spreadshirt, one of the world's largest producers of graphic t-shirts. This company just allows everyone to create an own assortment of designs, and then sell this assortments in highly targeted retail outlets, online and offline, to a small market segment the user knows best. Thus, Spreadshirt does not have to predict the long tail of heterogeneity of fashion products, but just focuses on allowing users to create and sell this assortment by their own.

User manufacturing is enabled by three main technologies: (1) Easy-to-operate design software that allows users to transfer their ideas into a design. (2) Design repositories where users upload, search, and share designs with other users. This allows a community of loosely connected users to develop a large range of applications. (3) Easy-to-access flexible manufacturing technology. New rapid manufacturing technologies ("fabbing") finally deliver the dream of translating any 3-D data files into physical products -- even in you living room. Combining this technology with recent web technologies can open a radical new way to provide custom products along the entire "long tail" of demand.

User manufacturing builds on the notion that users are not just able to configure a good within the given solution space (mass customization), but also to develop such a solution space by their own and utilize it by producing custom products. As a result, customers are becoming not only co-designers, but also manufacturers, using an infrastructure provided by some specialized companies.

The webinar will discuss recent trends and case examples of the user manufacturing trend. We also will compare the business models of companies which are building on the user manufacturing trend and which implement and operate the underlying infrastructure ´for creative users to become manufacturers.

Planned session outline:

- A short review of conventional mass customization thinking

- Which recent trends and developments enhance these strategies and how mass customization is related to “The Long Tail” phenomena

- What is user manufacturing, and which trends does this strategy support?

- What are the components of an infrastructure that supports user manufacturing?

- A review of business models of established companies and recent startups which already successfully benefit from the opportunities of user manufacturing

- A discussion of the major challenges and open issues in this domain

- Session wrap-up: Idea for further action

To register, please go to http://www.pure-insight.com/webinars/mass-customization-next-generation and use promotional code aix (case sensitive!) wenn registering for a 10% discount.

Note: You also can download the webinar after its initial live broadcast – but only when joining live, you can interact and ask direct questions.

All further information can be found here.

Context information

- If you prefer to see the content of this webinar in action, a seminar on Fabbing and User generated Manufacturing in Essen, Germany, provides a great opportunity on Nov 22.

- My earlier posts on user manufacturing

- Article in CNN online on the fabbing trend

- Article in New Scientist on the fabbing trend

- Article in Make magazine on how to use a fabbing device

Udate: Crowdlogoing the New Spreadshirt Tagline: New Design Competition Launched -- and finalized

(Update of the original posting from Sept 2007 -- now with the project's final result at the end of this post!).

Hey, you designers of the world. Treat me nice: I am on the panel of the new Spreadshirt Open Logo competition :-). Coined the Open Logo Project (OLP) 1.6, this is the second time that the company has started a crowdsourcing contest for its new logo. Anyone can submit a draft logo for comment and evaluation by an expert panel, other designers and the Spreadshirt community. Each week during the contest, the top entries will win awards and a place in the overall grand final.

The last contest (hosted 1.6 years ago) received over 1000 submissions from more than 600 designers mainly in Germany and France. This time, the entire world shall participate. The contest will run from the 27th August - 14th October. To take part in the contest - with submissions, comments, voting or just lurking - head to http://olp.spreadshirt.net.

Every branding textbook, however, will tell you not to change your logo every two (or even 1.6) years. But “…this is not a publicity stunt," said Jana Eggers, Spreadshirt’s new CEO. "We found a tagline that better represents what we do, and now is the right time to change our current logo to support it".

The new tagline, resulting from working with an international branding firm: "Your own label" shall reflect Spreadshirt's mission to be "the world's creative apparel platform". After deciding on the new tagline, the natural step for Spreadshirt was to turn to its community again for a logo that better supports the new tagline.

The cool thing: Adam Fletcher, who is coordinating the competition at Spreadshirt, even allowed me to pick my own prize. So: I will award a first price for the most innovative design, one, that really demonstrates uniqueness and out of the box thinking. And this price will be truly innovative and unique as well: You can win an entire mass customized outfit. More on the website!

But beyond the innovative prices, also the OLP idea competition itself has some nice features which make it a great example of open innovation and sets it ahead to other design contests on the web:

They have ten different awards and prizes for different categories which also honor not only WHAT, but HOW you design, awarding good competition citizenship. There are prices for community involvement, memorability, branding excellence, etc …

This also allows Spreadshirt to think of those that offer input but can't design (I would be a perfect candidate for this). Anyone who actively contributes to the OLP community by ratings, commenting, offering feedback, starting discussions etc can win one of every shirt that Spreadshirt’s “La Fraise” prints for the next year (should be around 100 shirts – so if you win, buy a new closet).

"We [want] to recognize out-of-the-box thinking, collaboration, community favorites and more," adds Adam Fletcher. "Even if you're not the winning designer, you can scoop a number of other prizes, or just waste a lot of your time, learn a lot from looking at the work of the other designers."

For real winning designers, they also provide more than cash, but help with the most valuable good for artists, recognition. Along with a MacBook pro and €3,000 cash, the winner will be featured with a photo and an interview in he “Computer Arts” magazine, an interview on “Computerlove” and a permanent “thank-you-page” at Spreadshirt.com

So, now get your creative fluids working … and submit a nice logo so that I have something to judge next week !!

------------

UPDATE: The project is over -- and it was an interesting experience for me to be on the panel of such an open innovation competition. Here some observations:

First: The winner: While Spreadshirt selected two first prices for their new logo (see the designs here) and is now working with the community on improving the designs. My personal short list looked a bit different, see it here.

Second: My winner: As written above, I could award my very special price for the most innovative design. My clear favorite was Labelhead, not just a logo but an entire logo configurator. Here is my long description why this is the most innovative (and in any case customizable) logo! (and this posting also gives you a rare view of my living room :-)

Third: Participants of an open innovation project get engaged and personal: The entire competition drew more than 2800 entires, generated millions of hits and views, a lot of postings and good press for Spreadshirt -- and did not cost really too much compared to the cost of getting a professional new logo (and PR campaign) from a regular agency (cost were about 10 K Euro for prices, Adam Fletcher's salary of running the contest, and some web site programming etc ..). The best insight into the enthusiasm and engagement of the participants can be found in the comments to the posts, just browse through some of the winning designs or see the comment on the selection of the winners (example).

For me, it was was interesting to read what people really thought about my selections (more comments here). I think I really do not look like a designer or pretend to know much about graphic design -- my task was to provide a business and customization perspective for the panel. But participants expected my real feedback on their designs ... learning_ pick panelists that really know what they are writing about.

Fourth: I learned a lot about customized toilets :) See comments in the middle of this stream.

User Innovation in the Catholic Church: Dioceses of Cologne launches idea competition platform

This is the last sign that there is something behind user & open innovation: The Catholic Church has started an online open innovation idea competition (well, one could say that the entire church IS a lead user invention anyway).

KJG, the Catholic youth organization of Cologne, one of Germany’s largest dioceses, just launched a web site where young people are encouraged to submit ideas what they want to change at the Catholic Church.

The website aenderwas.de (German for „Make a change“) broadly asks for ideas and suggestions. You can either submit a short idea or comment, or upload a long suggestion (perhaps for a real innovative interior design of a Church that you would like to see; or the tunes of a song you would like to sing …). Interestingly, they also ask one of the easiest but often neglected questions: If you don’t go to church, why?

People who submit the best and most innovative ideas will be invited to a kind of lead user workshop to build on these ideas and to transfer them into more concrete offerings. But the people behind the initiative also know about the limits of this approach and acknowledge in a disclaimer that not all change requests can be incorporated immediately.

It all started, by the way, when one of the organizers was in an Executive MBA class I taught on open innovation a while ago. She immediately saw the opportunities of improving the offerings directed towards younger people by the Church, and later transferred her learning into this project.

I am very curious to see what comes out of this initiative and what will be the experiences of this project. Will such a broad call for input generate real innovative ideas? I will keep you posted – and if you have an idea what to change with the Catholic Church (from the perspective of you, the user), the opportunity is there: www.aenderwas.de (note: While God speaks all languages, you need German language skills for this).

Open Innovation Widget -- Fellowforce creates open line between users and companies

As of today organizations can integrate an widget into their websites to enable consumer-generated innovation, a solution to solicit ideas, suggestions and innovation proposals.

The widget has been developed by FellowForce. Their founder and Head of Marketing, Ruben Robert, will be a presenter at the MCPC 2007 conference.

In a press announcement, Jeff Crites from Fellowforce North America explains:

"We started our platform for Open Innovation two months ago, and since then we've received ideas and suggestions for leading brands worldwide. The idea for this new service is due in large part to a submission in our own innovation box. A Fellowforce 'Fellow', Marcel Heinkens of the Netherlands, suggested we offer an Open Innovation widget for websites. Today, four weeks later, we're introducing the 'Innovate Us' button, enabling any business to welcome ideas from a global force of innovators".

The 'Innovate Us' button is like a 'Digg-this' application for innovation, empowering and encouraging consumers to submit ideas to company controlled (Fellowforce enabled) innovation boxes. "We prefer to call them Innovation Boxes because consumer participation is more than just a feedback tool", adds Crites, "it's a driver for innovation. And for companies, this is like having a souped-up RSS aggregator to manage idea feeds."

What is the effect of such a widget?

Well, I think it is not largest innovation of innovation. But it is a great signal that companies are taking their users more and more seriously. Companies are making a statement that they believe in open innovation and value ideas from the outside. And I am curious to hear on Ruben's MCPC 2007 presentation how this will
work out.

Context: Have a look in the updated MCPC 2007 program to find more then 20 other presentations on open innovation: http://www.mcpc07.com/draft_program_MCPC2007.pdf

Threadless in Numbers

Rob Walker finally reports in his ‘Consumed’ column in the New York Times Magazine on Threadless, and finally I recognize (thanks to Exciting Commerce) this article that already was published on July 8. Rob’s column is one of my favorite pieces of journalism, but since I returned to Germany, I do not find the time to read it every week.

While in an e-mail conversation Rob told me about 1.5 years ago that he does not consider Threadless as a unique phenomenon, he – luckily – changed his mind and brings a nice analysis of the company and shares with us a number of interesting numbers on Threadless. So here is Threadless in numbers (all quotes from Rob's article)

2000: Year of founding Threadless.

125: Number of submissions received by Threadless each day.

“Millions”: Dollars earned by selling T-shirts” not by hiring star designers but by asking anybody to design them.

Hundreds of thousands: Number of user voting each day.

6: Number of new T-shirt offerings per week.

1,500: Typical size of a batch of each new design.

2,000: Dollars paid to winning designers.

“Almost everything”: Number of items that sell out.

1: Number of Threadless stores, the first opened in the Lakeview neighborhood of Chicago in July 2007.

2.6 or higher: Score of most winning designs (on the rating scale from 0 to 5).

2.0: Lowest rank of a winning design.

x*n/z: “The final decision about which T’s actually get made and sold has always involved a bit of nonpublic number crunching. For example, Threadless looks at how many 0s and 5s a design gets; designs that inspire passionate disagreement often get printed because they tend to sell”.

1: There is a surprising degree of consistency — maybe even similarity — in the designs. “It’s a barometer of what’s going on in art and design right now,” Threadless director Kalmikoff suggests.

17: Number of winning designs submitted by Glenn Jones, a New Zealand designer.

Context:
- Rob Walker’s NYT Magazine article on Threadless.
- My original report on Threadless (includes many more links with reports).

Assignment Zero Interview on Mass Customization, Crowdsourcing, and the Demand for Change Management

Dave Butler and I talk about the latest trends in mass customization, crowdsourcing, and why this all depends from the ability of firms to master change

Assignment Zero is a large project on crowdsourcing journalism. Inspired by the open-source movement, Assignment Zero is an attempt to bring journalists together with people in the public who can help cover a story. It's a collaboration among NewAssignment.Net, Wired, and those who choose to participate. Facilitated by Jeff Howe, the Wired reporter who coined the phrase crowdsourcing, and coordinated by editor David Cohn the project wants to create a repository of the state of the art of the crowdsourcing movement.

This is how Assignment Zero works:

“The investigation takes place in the open, not behind newsroom walls. Participation is voluntary; contributors are welcome from across the Web. The people getting, telling and vetting the story are a mix of professional journalists and members of the public -- also known as citizen journalists. This is a model I describe as "pro-am."

The "ams" are simply people getting together on their own time to contribute to a project in journalism that for their own reasons they support. The "pros" are journalists guiding and editing the story, setting standards, overseeing fact-checking, and publishing a final version.

In this project, we're trying to crowdsource a single story, and debut a site that makes other such reports possible down the road. But we don't know yet how well our site and our methods work. Our ideas are crude because they are untested. By participating, you can help us figure this puzzle out.

… Assignment Zero is a starting point, a base line. Who knows where we will end up. But if reporting in the open style ever comes into its own -- at our site or someone else's -- that might very well change journalism and expand what's humanly possible with the instrument of a free press.”

The project’s web site is a huge, although sometimes confusing to navigate, collection of links, definitions, articles, and interviews on crowdsourcing.

The interviews form the core of this project. The community identified a few tens of people worldwide who contributed to crowdsourcing by either starting one of the projects or businesses utilizing this concept, or by thinking and writing about it. I am very proud that I was identified by this community as one of those 50 persons who matter most in crowdsourcing.

Now, this interview with me on crowdsourcing has been published in full length online. An abbreviated version may also end up in an upcoming Wired magazine article on the topic. In this long interview, we talked about a number of exciting topics, including:

- What is crowdsourcing 2.0?
- How do business-to-business (B2B) relationships change as a result of crowdsourcing?
- What is the major roadblock to crowdsourcing? What is the largest hurdle?
- What is the new function of a company when its core activities can be crowdsourced to its periphery?
- Why does crowdsourcing demand change management?
- What is the connection between crowdsourcing and instant companies?
- In an interview with mass customization pioneer Joseph Pine, Joe noted that Henry Ford was the father of mass production, but Michael Dell is the Henry Ford of mass customization. So who’s the Henry Ford of crowdsourcing?

As described before, interview assignments are crowdsourced. Contributors select their favorite subject from the list of interview partners, and contact the person to be interviewed. In my case, I had the pleasure to speak with Dave Butler of WorkLife, a consultancy that has a great twist on customer integration: Integrating employees in corporate change processes by theater and cultural experiences.

This is a less covered application of applying the principles of integrating the periphery in value creation. Don Tapscott has a very good chapter about this mode in his book Wikinomics, and David Butler is living this in his consultancy. He combines his initial career as a professional actor and stage director with his extensive experience in personal and corporate transformation initiatives.

So if you want to read extensively what David and my thoughts are about the recent state of mass customization, crowdsourcing, open innovation, and customer integration, read the full interview here.

Context: Other great Assignment Zero Interviews on Crowdsourcing with:
- Lawrence Lessing on Creative Commons
- Howard Rheingold on virtual communities,
- Sydney Poore aka FloNight, a Wikipedia super-contributor, and Jimmy Wales, WikiPedia founder
- NYTimes.com Design Director Khoi Vinh on MicroStock Photography
- Alpheus Bingham, co-founder of Innocentive
- David Lionel, founder of Crowdspirit
- Eric von Hippel and Karim Lakhani on User Innovation

All interviews are published under a Creative Commons license, and are available for re-use in your own texts, as editor David Cohn writes:

"The reporting found in this blog can be mixed and mashed to write your own story on crowdsourcing. Perhaps you want to write about a specific topic -- there are plenty of interviews that cover microstock photography, open source movies, conferences, etc. Or for a real challenge, try to write a big feature that encompasses all the different aspects of crowdsourcing."

User Manufacturing and Crowdsourcing in New Zealand: How Ponoko enables creative users to create, manufacture, and sell digital products online

Ponoko is a user manufacturing platform based in Wellington, New Zealand, where anyone can click to make, buy and sell digital products. Users upload designs, Ponoko manufactures them for them using rapid manufacturing technology, and send the result to users. If they like and approve the result, users then can start to sell their designs (and products) to others using Ponoko’s online shop and distribution system. And as in many ventures, the initiator of the business was a frustrated user who could not buy what he wanted to fulfill his needs. After reading about the idea of personal fabrication by Neil Gershenfield at MIT, a business was born.

I asked Dave ten Have, Ponoko's founder and CEO, to describe how the company was founded and what the team wants to achieve. With the help of Steven Kempton , Ponoko’s chief blogging officer, the following guest article came in:

Ponoko was founded on the idea that making or buying individualized products shouldn't be so complex, time-consuming and at a high cost, both financially and environmentally. It should be an enjoyable experience, where you can focus on the design and not be overly limited to what resources, materials or tools you may or may not have or know about.

The idea for Ponoko came from software entrepreneurs Dave ten Have and Derek Elley, both of whom have made a number of things where each experience left a sour taste. A particularly disappointing project was Dave's experience in designing some wall art - a skateboard shape made of dark rich wood with mother of pearl inset designs. This small project took way too much time than Dave had anticipated – two years in fact. It took an incredible amount of phone calls and emails to multiple parties (mostly engineers who didn't have an interest in creativity/art). In the end, it cost a huge amount for an unpleasant making / buying experience – and when it turned up, it was wrong and had to be sent back. The worst part was having to go through the horrid process all over again. (You can see Dave's personal blog for pictures). After this and other disappointing experiences in making individualized projects, they founded Ponoko.

Encouraged by the rise of the Internet connected 'creative-class' along with smarter, faster, smaller and cheaper digital manufacturing hardware (laser cutters, CNC routers and 3D printers that connect to your everyday PC), Dave and Derek formed a plan to solve these problems. They started with the premise that the personal computing and the personal manufacturing industries have strong parallels, realizing that one day everyone will be able to create and make any product from their own home. This led to the idea of mass-individualized products created by the Web community and made on a globally distributed network of manufacturing hardware controlled from any PC.

Today's product making and distribution model is financially and environmentally unsustainable. It's also under pressure to digitize like the music and video industries have. Because today's 100-year old product making and distribution system is so ingrained into our every day lives and delivers so much benefit, problems are not so obvious. But when was the last time you made something?

Making products today does not come easy – some major problems exist:

* Making and delivering (individualized) products is a time consuming, complex and expensive process. This pain does not fit well in a world that is increasingly in demand for instant satisfaction from mass personalized and customized products at low cost.

* Product making and distribution is cost prohibitive for new entrants without relatively deep financial reserves. This is stifling mass creativity of real products and the progress of humanity on unimaginable fronts.

* Low cost mass production and global distribution relies upon using lots of cheap energy and labor. But these two resources are running out.

* Product making and distribution is a major contributor to the global warming problem (according to the WRI, perhaps 20% of the problem). Being environmentally unsustainable, the increasing 'carbon currency' costs also make the current model financially unsustainable.

* Finding individualized products is very difficult and buying such products is a time consuming, relatively complex and expensive burden. Why is there no easy to find supplier of low cost personalized products?

These pressing problems illustrate that a new product making and distribution process is required. Our solution is made possible given the rise of the Internet connected 'creative class' along with digital manufacturing hardware (laser cutters, CNC routers and 3D printers that connect to your everyday PC), and production materials.

The idea of Ponoko is to address these challenges and to deliver the future of product making and distribution to the mass market, today. Ponoko shall deliver the following benefits:

Less risk. On-demand design and manufacture is made possible, so work does not need to be commenced until a consumer makes a purchase. And because product designs can be sold to a large global audience from day one, pay back periods can be shortened.

Lower costs. With Ponoko, creators can now ship digital product designs with the click of a mouse, not physical products requiring a pocket full of cash. This is Apple iTunes for products, but with YouTube style user-generated content.

Instant scalability without cost. Ponoko's distributed manufacturing model means the creator's cost and time frame to manufacture a product for 1 customer is the same as for 1 million customers. Creators can sell millions of products on-demand at 'no' extra cost.

Increased control. Ponoko is specifically designed to provide end-to-end visibility & control over the entire product making and distribution process.

Less complexity. By connecting creators direct with consumers, the traditional supply chain complexity involving a manufacturer, distributor, wholesaler and retailer is eliminated.

But also for consumers, the system has a number of benefits. The main advantage are low cost individualized products. Because no physical product exists until purchase, product design collaboration makes it possible for everyone to co-create and personalize 'almost anything' they need & want. As adoption increases, prices for Ponoko's design-to-order and made-to-order commodity type products will become unrecognizably low.

We are in beta phase at the moment, so if you're interested to find out how this all works and to help us make it the best making/buying experience you've had, please sign up.

Context:
- Ponoko Blog
- Previous posts on the user manufacturing trend
- Neil Gershenfield on personal fabrication

Nike is Trying Threadless' Crowdsourcing Model

More Co-Creation at Nike

Coolhunting has an interesting small report on an upcoming NikeID project: They are offering their top-end (fashion) shoe, Nike Air Force 1, in a special co-design version. Starting 6 March 2007, users can design a custom Nike Air Force 1 using the NikeID configurator (how it works in detail). Designs are exhibited on the web, other users vote on the winning designs, and the winning design will then be specially made only for the winner, complete with bling sneaker jewelry.

For this project, Nike is collaborating with Sneakerplay, a social networking site of sneaker enthusiasts (only Sneakerplay members can particpate). While this sounds a bit like Threadless' collective customer commitment (crowdsourcing) model, it is different:

Nike takes the community, co-creation, and community evaluation idea, adds an easy-to-use toolkit to enable easier co-design (at Threadless, you have to know Photoshop), but then produces the winning design in a custom manufacturing step just for the winner.

[UPDATE: Just after I wrote this post, Bill commented on this post, saying that this is a good old design contest and not a new crowdsourcing model. And I agree! ]

Why not for everyone? Don't ask me ... it seems to be more like a clever PR pilot then a new business model. But at least it is a start and great idea to live their new "The consumer decides" philosophy with a different twist.

InnoCentive launches nonprofit unit: Crowdsourcing solutions for the world's problems

Now this is a good idea: Innocentive, one of the major examples of crowdsourcing innovation using the principles of "interactive value creation", today announced that it has teamed-up with The Rockefeller Foundation to launch a "nonprofit" application of its distributed innovation tool.

InnoCentive should be known to most readers of my blog, even if I never reported extensively about them (as they are not based on the input of customers or users): In brief: Innocentive is a company based here in the neighborhood of MIT that specializes in matching scientists with corporate clients to solve research and development problems.

It has been shown that this "broadcasting" of problems instead of seeking for a problem internally is a highly efficient mechanism. So using it not only for commercial firms, but to generate science and technology solutions to pressing development problems, is a great idea.

The non-profit Rockefeller Foundation area on InnoCentive's scientific platform will bring to bear the talent of thousands of world-class scientists, innovators and entrepreneurs in solving the most pressing and complex humanitarian challenges posed by non-profit entities selected by the Foundation.

Under the agreement announced today, The Rockefeller Foundation will select non-profit entities and others with charitable intent eligible to use the InnoCentive platform under preferred conditions, and will pay access, posting and service fees on their behalf to InnoCentive, as well as challenge awards to those researchers solving the technology problems the non-profits pose. The Foundation will launch a new area on its own Web site, www.rockfound.org, to recruit and screen organizations seeking this subsidy to use the InnoCentive platform.

The new agreement is the first step in a larger Rockefeller Foundation initiative aimed at promoting innovation in a manner that spurs development, and that specifically increases access to proven innovation models for work on behalf of poor or vulnerable populations around the world. In some cases, the initiative will also help to advance access to, or distribution of, specific innovations that can be of important benefit to poor or vulnerable people.

The foundation will screen the problem seeker and pay for that company to register on the Web site. If a problem solver is matched with the seeker, Peter Costiglio, director of communications for foundation said. The foundation would then fund the award for the problem that's solved, provided that it is solved satisfactorily.

"It is difficult for us to give a specific dollar amount in terms of what type of funding we're talking about," said Peter Costiglio. "What we want to do is have problem seekers matched with problem solvers. This is a platform to enable that to happen."

I think this is a very promising new approach for solving social problems. It has been shown that many solvers at Innocentive are motivated by the spirit of solving the problem as much as by the cash reward. Working on a social problem may spur this behavior. This seems a much better model to find answers for fields where commercial solutions will not come up easily (as the market potential is too small, as, e.g., in the field of Malaria treatment) then the usual direct funding structure.

Buzzword Collection: Wikinomics Is the New Crowdsourcing

Don Tapscott has been one of my favorite authors for a long time with regard to everything on the digital economy. Finally, he is also jumping on the co-creation and crowdsourcing trend and comes up with a new book on the topic with the wonderful title 'Wikinomics: How Mass Collaboration Changes Everything'. Together with co-author Anthony Williams from New Paradigm, a think tank focused on business innovation, the book promises to provide an easy-to-read discussion along the line of Benkler's Wealth of Networks thinking.

The book will be published at the end of the month, and once I have it, I will post a review. But I already wanted to provide you today one more buzzword to impress your colleagues at the next holiday party: The next trend in business is Wikinomics.

From the announcement of Wikinomics:

"Smart firms can harness collective capability and genius to spur innovation, growth, and success. ... Wikinomics builds on this research elucidating a new age where thanks to the Web 2.0 masses of people can participate in the economy like never before—creating a TV news story, sequencing the human genome, remixing their favorite music, designing software, finding a cure for disease, editing a school text, inventing a new cosmetic, or even building a motorcycle."

Along the promised case studies, only the first in this list is new to me, but sounds very interesting:

• Rob McEwen, the Goldcorp, Inc. CEO, former investment banker, and gold mining newbie, who used open source tactics and an online competition to breathe new life into a struggling business cobbled by the rules of an old-fashioned industry.

• Flickr, Second Life, YouTube, and other thriving online communities that transcend social networking to pioneer a new form of collaborative production that will revolutionize markets and firms.

• Smart, multibillion dollar companies like Procter & Gamble that cultivate nimble, trust-based relationships with external collaborators to form vibrant business ecosystems that create value more effectively than hierarchically organized businesses.

There is also a web site with some more information. And Dan Farber of ZDnet has a video interview with Don Tapscott.

Donal Reddington on Customerism: Great Analysis of Recent Developments Along the Active Customer

Many of you will know the great blog of Donal Reddington, who regularly reports about developments, company announcements, and new technologies in the mass customization and personalization domain.

Recently, he posted a great feature on "Customerism", explaining different recent trends in business and technology seem to be converging into a new business model, that includes mass customization but also user innovation, crowdsourcing, and other developments.

His main arguments in brief (but read the entire post – there is also a great picture summarizing his thoughts):

Customer Empowerment: "The idea of empowering customers with a higher degree of control over their relationship with business has gained widespread acceptance. Various terms have been devised to describe different approaches or strategies that empower the customer."

The Rise of Mass Customization & History of Product Configuration: "The major impediment to wide adoption of mass customization in the early 1990's was the absence of an efficient communication channel for customers to describe their requirements. But than, the right tools cane up: The Product Configurator. My research suggests that the earliest work on what would be considered a product configurator was carried out by Ron Brachman at Harvard University in 1977. ... In the mid-1980's, Brachman worked at the Artificial Intelligence Principles Research Department at American Telephone and Telegraph (ATT) which developed the PROSE product configuration system for use in the telecoms industry. A few years later, unrelated research by Tim Berners-Lee would produce the first web-browser. By 1996, Dell had combined these two technological innovations into the first web-based product configuration system, that would allow anyone to specify their requirements when purchasing a computer."

Micro-Manufacturing: "The first examples of how mass customization could be the catalyst for new business models came about at the turn of the Century, with the launch of two companies: Zazzle and CafePress. Both of these companies offered conventional personalization of everyday products ... However, the most important aspect of their business was that they were also 'micro-manufacturers'" – allowing creative users to sell their creations to others.

User Innovation: "Ideas about involving the customer in the innovation process had been around since the late 1980's, … devised by Eric Von Hippel at the MIT. Von Hippel discovered that most products and services are actually developed by users, who then give ideas to manufacturers. This is because products are developed to meet the widest possible need; when individual users face problems that the majority of consumers do not, they have no choice but to develop their own modifications to existing products, or entirely new products, to solve their issues."

Crowdsouring as an alternative model of MC: After discussing Threadless etc., Donal concludes: "While to date crowdsourcing has been used mostly in the area of visual design, it could easily be adapted to issues of technical design also. Who is to say that an electronic equipment company could not use crowdsourcing to develop new products? There could be thousands of engineers itching to submit designs for new devices or contribute to the design of a new product. ...

Customerism: This is where we are now then: "A collection of separate business concepts and enabling technologies, that encourage user/customer participation, whose attributes overlap with one another to a significant extent. ... While there is no single word that can take in all of them ('masspeercustomizationcommonsmarketplace' doesn't roll off the tongue!), my personal opinion is that the term 'Customerism' is probably the most suitable word to describe a series of ideas that empower the customer ... "

Great observations and conclusions, again: read his entire post! I asked Donal what motivates him to spend so much time and effort to documenting mass customization and Customerism with this dedication. And his answer was a typical example for the motivation of empowered users in the new market space:

"As regards motivation, I guess you could say it is mainly interest in the topic. I researched MC as part of a master's degree a few years ago. I couldn't use my MC knowledge in my 'day job' (working for the Irish Government), so I set up the website as an outlet to pursue these ideas further. My view at the time was that if I did nothing, my work on the topic would 'go to waste'."

It is only through the great contributions of people like Donal that mass customization is really catching up. There are very few consultants or people who do mass customization professionally that have contributed so much back to the community – and doing this with so much modesty and intellectual generosity. Thank you, Donal!

DNA Style Lab goes Beta: A new model for the custom t-shirt economy that also looks beyond the internet

If the number of new ventures started around one idea is an indicator for the strength of this trend, then custom t-shirts and related fashion items are the hottest area of mass customization in the moment. I lost track of all the recent announcements of new sites where users can co-design their t-shirts. Next to "established" forerunners like Spreadshirt, Cafepress, or Threadless numerous start-ups entered the customization world recently. Have a look on Adam Fletscher's t-shirt blog to get an overview in form of his great interviews with the founders of the players in this custom t-shirt economy.

So just let me introduce you to one of these upcoming sites: DNA Style Lab, the brainchild of Samantha McDermott, who got first experience with customized handbags in the late 1990s. Her idea is to combine elements of some of the existing systems of the custom t-shirt economy with new ideas.

The core idea is that the company commissions a number of artists from around the world. These artists are in varying stages of their careers, some are already more established, others are just getting known. Artists will contribute design elements which consumers than can place freely on different apparel products and accessories. Pricing of the products is modular: the more graphic elements an user selects, the more expensive the final product gets.

If artists allow, consumers can also change certain aspects of the supplied art. The company itself makes its profit from selling the core products (US $10-20 for American Apparel garments), artists get the full price users pay for the graphic elements they select (about $5).

Sounds very much like Stagr or Innertee ... sites which do not leave the entire co-design process in the hands of the consumer but propose to split the process: Experts provide the input and variety by basic designs, individual consumers get the freedom to combine these elements, providing them the experience but not the pain of a co-design process.

But what makes Ms. McDermott's venture really special is her plan to stay not just in the online world, but to move also to brick & mortar stores where customers can actually leave the store with an item they designed. I think this is what it requires to grow and scale the idea of aesthetically customized fashion products. In the end, the major value of a custom t-shirt or similar product is not additional ergonomic value due to better fit or function, but the hedonistic value of experiencing the co-design process itself and the rewarding feeling of the final product.

Mass customization pioneer Nike also discovered that just offering custom shoes online is not enough and thus opened its NIKEID Lab in New York's Elizabeth Street, and Puma even started offline with its great Mongolian BBQ. And one of the largest mass customizers – and a real role model for me – Build-a-Bear, has founded its fantastic growth story entirely on offline customization, selling in the end more the process of customizing a toy than the custom product itself.

Given the joy of shopping for fashion products for many consumers, a business model based on providing co-design in an offline environment could become a large success. There are some local players in this area (like Neighborhoodies in New York or George&Frank in Munich), but not really scalable and thought-though system that could replicate Build-a-Bear's success in the toy industry for the fashion industry.

For a start, however, DMA Style Lab is still an online business only. Its present toolkit is obviously very beta and demands a few minutes to learn, but then is easy to operate. The company told me that this will be improved very soon, including the order taking process. But you get already a good idea about the basic elements of the concept: The main focus today is on the artists who provide the work. This is a great combination of the co-design trend with its countertrend: strong orientation at external peers and idols.

They will be adding a "Soundlab" function soon -- discover independent artists (bands) so that you can listen to their music while designing you new t-shirts. As with all of these sites, functionalities to support the community of users and artists are crucial for success. Here, the usual tools like customer pages, upload of user photos, sharing of designs, forums, etc. will be implemented.

I am curious to see how these ideas will come into place and which segment of the market DNA Style Lab will be able to capture. The traditional market for custom graphic t-shirts (fashionable late teens and young tweens) has been occupied by the existing labels (many of them working in the traditional way without any customization). But Samantha McDermott and DNA Style Lab may be able to create a new market of custom customers, older and perhaps more sophisticated, also more interested in art than in music.

Context information: Here are some links to recent news around the custom t-shirt economy:

- Innertee (see my previous post) went beta last month
- STAGR plans to allow the customization of top brands (Great three-part interview on HipHipUK)
- And (if you speak German) a collection of recent posts on Exciting Commerce on Custom T-Shirts and related products,

Outside Innovation: New book by Patricia Seybold builds a bridge between open innovation & mass customization

Outside Innovation: How Your Customers Will Co-Design Your Company's Future, by Patricia B. Seybold. New York: Collins, October 2006. ISBN: 0061135909, about 26$.

This book review has been overdue for more than two months when I got the pre-version of Patricia Seybold's new book, "Outside Innovation". I immediately read it with very large interest, as Seybold is one of the authors I have quoted often in my own books. In her bestselling title 'Customer.com', she provided a great analysis of how the internet is changing consumer markets. So meeting her here in Boston for several occasions in the past year and discussing with her some ideas of her new book was a great opportunity. Here is the result of her recent research: In "Outside Innovation", Patricia Seybold provides one of the first general-management books on co-creation of value between firms and customers.

Well, there have been other books on this topic before (starting with the great, but today almost forgotten book by Rafael Ramirez and Richard Norman on Value Co-Creation [1994: 'Designing Interactive Strategy'], Prahald & Ramaswamy's [2003] highly abstract book on customer co-creation, and of course Eric von Hippel's [2005] fantastic review of three decades of academic research on user innovation in 'Democratizing Innovation'.

But Patricia Seybold's book is full of great and very up-to-date case studies that make the idea of value co-creation really lively and accessible. She describes (in great detail and with plenty of background information) many classic examples like Lego's co-development of the new Mindstorm toy, Threadless, Flickr, BBC Backstage or National Semiconductor, but has also some great new (at least for me) examples of customer-centric innovation like the development of a new fitness machine (Koko Fitness – great story and concept) or SEI Wealth Networks.

And her pitch line why her book is important tackles one of the main problems of integrating customer and users in a firm's innovation process:

"The good news is that customer-led innovation is one of the most predictably successful innovation processes. The bad news is that many managers and executives don’t yet believe in it. Today, that’s their loss. Ultimately, it may be their downfall."

I hope that her books can support more mangers to consider customer/user integration not only as a nice add-on pilot initiative, but to make it a crucial part of the company's core strategy. The book, however, offers no recipes or frameworks how a manager could do so. Its core contribution is to document and describe what is happening in a world that is not any longer dominated by companies creating things FOR users. And as Seybold does this in great detail and style, this record of promising practices may convince managers to turn away from old prejudices.

Patricia Seybold bridges in her book between innovation and operation, between users and customers, between leading edge contributors and average customers. Eric von Hippel strongly differentiates between these levels. He argues that for functional novel innovation, firms have not to listen to their present customers but to search for "lead users" who face a specific need ahead of the market and have turned this need already into a solution for themselves. In many cases, these lead users are in a different domain than the manufacturer and are not its present customers. Gathering input from lead users thus is totally different to market research methods of any kind.

Seybold uses the term "lead customer" to describe a group of a firm's current customers who are truly innovative: "These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about." Getting their input may also be the result of a more conventional market research approach.

This distinction is worthwhile to note when you read the book. Otherwise, without previous knowledge, you may get a bit confused where in her cases real innovation starts and more general customer-focused business strategies end. But as she argues, this is exactly the beauty of co-designing with customers: You start with some small steps, perhaps within the context of a mass-customization-toolkit, and suddenly your customers want more and get motivated to innovate on their own.

My conclusion: A book very worthwhile to buy and read. Its great collection of case studies will inspire you to look for more and deeper information on this topic – or to start to brainstorm immediately how you can benefit from the creative potential of your customers.

For abstracts from the book and an insight into the cases, have a look in Patricia Seybold's blog, http://outsideinnovation.blogs.com.

SAP Info on Open Innovation & Innocentive

While this is an audacious act of self promotion, I still want to guide you to a nice interview I did with SAP Info, the global customer magazine of Software Company SAP. The topic was the U.S. company Innocentive that specializes in Open Innovation. Karim Lakhani, who worked as a Ph.D. researcher in the same group at MIT that I am visiting, got some fascinating performance data on Innocentive, on which I comment in this interview.

The interview answers questions like:

From Open Innovation, it is only a small step to companies developing products with the help of their own customers. Does this mean that manufacturers and customers are once again communicating directly with each other about the products, like in the good old days of the corner shop? Is it possible to prevent submitted entries, even those that haven't won, from being used commercially, patented as someone's own idea or sold on?

Isn't it still more lucrative for someone with good ideas to secure themselves a patent rather than accepting a comparatively small amount of money anonymously from Innocentive?

Does Innocentive have a monopoly at the moment or are other companies already copying its business idea?

How could external and internal innovation specialists usefully share out the work in future?

Open Innovation has been called the "Ebay of ideas". Do you see a danger of people's gift for invention being sold off cheap?

Read the answers and the full interview in English here (the translation from German is not always very good). There is also a version in German language.

Printing T-Shirts and Money – Inside Story in the Chicago Tribune on Threadless

The Magazine of the Chicago Tribune, one of the large US quality newspapers, recently featured a LARGE (7 page) cover story on Threadless and their user-design t-shirt business. I talked extensively with Steve Johnson, the article's author, some weeks ago about the business idea behind Threadless. He did a great job in documenting the past, present, and future of Threadless. Read the entire story here.

Here are some interesting quotes from this article:

The Art-Gallery Model.

"They [Threadless] have this innate understanding that what they are really selling isn't a T-shirt so much as the tale of how it came to be, a narrative that involves an artist, a community and a company that sets itself among, rather than above, that community.

"I always compare it to an art gallery," says Nickell, who's 26 and holds the title of president because, in addition to programming the site … and doing designs of his own, he deals with the lawyers and accountants and landlords. "You have people who come in and look at the art, people who made the art, people who are buying the art."

User manufacturing. In the article, Jim Coudal, a Chicago based consultant, summarizes the Threadless model with the great phrase "If they come, we will build it." And indeed, that is some of the quintessence of the Threadshirt business model -- and of other businesses which focus on providing manufacturing capabilities to users:

Threadless is "not building something and selling it to an audience. They're building an audience and selling them what they say they want. .. The Internet has also helped Threadless find and take advantage of the world's "distributed creativity." Just as there are great writers who now have an outlet via blogging, there are great designers who have an outlet via things like the Threadless competition."

Interactive value creation. Steve Johnson then quoted me very neatly, summarizing why Threadless is a perfect example of "interactive value creation":

Distributed creativity "is a very difficult thing to get. In a normal company, you identify the coolest artist and commission him or hire him. What they do is they broadcast their problem: Who makes me the best T-shirt? From an economic point of view, you don't have to know who is the best person. You let them self select. Of course, it only worked because, in their case, they have a lot of desperate artists out there. You have a lot of unemployed graphic design graduates. And they somehow exploited this, but to mutual benefit."

Fashion as Pop-Songs. Patric King, a prominent Chicago designer, compares in the article the Threadless model with a pop song:

"What [Threadless is] doing is just sort of building the wearable equivalent of the pop song," King says. "They throw it up and see what climbs up the Top 40. I've run across a couple of other companies trying to do the same thing, but the work's just not as good. For some reason they just get prettier stuff. Their community has just sort of trained themselves that that's their standard."

A new support industry. Share of labor is the oldest economic principle. And it also helps at Threadless. The article reports about Cody Petruk, a graphic designer for a Canadian software company who owns "about 60" Threadless tees and has seen three of the 13 designs he's submitted get printed. But Petruk also runs a web-site, threadies.org, which supports user designers to participate and win in the Threadless contests. A consultancy for t-shirt designer (McKinsey and BCG, listen!).

The limits of the Threadless model.

"But there are also questions about how much growth a community can endure before it stops feeling like a community. Right now the site is a free-flowing and very entertaining mix of design submissions, which registered users grade on a scale of one to five, blog postings about the designs, links back to other projects and, of course, the store. In a recent week, Nickell says, they had almost 10 million page views from just 500,000 unique visitors.

But already, some longtime site users grumble that as the group has grown, the designs have moved away from their artsy roots and become too cutesy, too clever or too pop. The all-time best-selling Threadless shirt certainly isn't cute. Called "Flowers in the Attic," it depicts a svelte young woman shooting herself in the head, causing birds to fly out. The company has sold 30,000 already, compared to a typical first printing of 1,200 shirts, and is printing another 10,000 for the holiday sales rush."

And the article finishes with a job offer: The Threadless founders are currently considering to hire a COO to run the daily business of the company. Condition: a suit and no t-shirts.

After the article has been published, the Threadless users commented quite enthusiastically. One comment, posted by Radioactivejosh a few hours after the article was published, provides a great perspective why users love Threadless:

"The article hit it right on point; we don't just buy the shirts for the design, but for the story, the meaning, the explanation and the excitement of new prints. It all plays a factor. If I didn't read the explanation of Poet-Trees and I just saw it in Target, it would mean nothing to me. ...

I LOVE when i see people with Threadless tees, because i feel like I know them. They understand the shirts, they visited the site and browsed and saw something they liked. They weren't just trying to be trendy and went into Urban Outfitters ad bought a tee shirt they saw. Threadless tees have a lot more going into them than just buying them."

More information:
- The entire Chicago Tribune article in full text.
- The article with all pictures as an user scan.
- Discussion about the article at Threadless with more customer voices.
- My report on Threadless in this blog
- How Look-Zippy developed the Threadless model further

PS: If you want to know EVERYTHING about the upcoming T-Shirt-Economy: Adam Fletcher, who wrote his master thesis about Threadless and is now working for Spreadshirt, maintains a great blog about t-shirts, with plenty of references to mass customization and user co-design: www.hiphipuk.co.uk

Consumer Created Branding: Rob Walker on Minibrand Entrepreneurs, The T-Shirt Economy and Why This Is an Alternative to Mass Customization

The NYT Magazine (July 30, 2006 issue) has an interesting cover story on ("The Brand Underground"). It provides a great insight study in the world of consumer created branding, the minibrand entrepreneurs. In great detail, NYT columnists Rob Walker draws the picture of leading-edge consumers who turn their lifestyle into business.

Trendwatching.com called these consumers minipreneurs. Their scope of activity is broad, "Some design furniture and housewares or leverage do-it-yourself-craft skills into businesses or simply convert their consumer taste into blog-enabled trend-spotting careers." Walker writes. "Some make toys, paint sneakers or open gallery like boutiques that specialize in the offerings of product-artists." All of them produce products which are a perfect illustration of the Long Tail.

Most of them also serve the need for uniqueness for the people buying them. You don't purchase (often for a large amount of money) a product from a small sub-brand because you want to look like every teenager in Urban-Outfitter clothing. This makes these minibrand entrepreneurs an interesting alternative model to mass customization: Instead of co-designing an own product, a consumer may turn to one of the minibrands to feel individual. Interestingly, the categories where minibrand entrepreneurs are most active, t-shirts and sneakers, are also two of the largest categories of mass customization in the consumer good field.

Rob Walker's main theme in the article is how corporate or anti-corporate these consumer-generated brands are. On the one hand, their founders see their brands as a "cool" way to earn a decent living. But still:

"Many of them clearly see what they are doing as not only noncorporate but also somehow anticorporate: making statements against the materialistic mainstream — but doing it with different forms of materialism. In other words, they see products and brands as viable forms of creative expression."

To look into this paradox and generate a better understanding of the minipreneurs, Walker focuses on the t-shirt economy. He quotes three trends or enabling factors that helped small t-shirt labels, which pop up in an enormous variety, to become one of the largest categories of consumer-generated brands:

"One thing that has changed since the days when they [the first sub-culture t-shirt labels of the 1980s] scrambled to make a living is that Japanese consumers have embraced certain small New York brands as something culturally significant and worth a price premium. Nigo, a Japanese designer, built a fanatical following for his A Bathing Ape brand partly because he collaborated with so many graffiti writers and others who had an aura of authenticity that impressed young, hip Japanese consumers.

The second change is technology, which has allowed production to become more accessible. (It is easier than you think for a two-person brand to work with factories overseas, using computer files and the occasional package.) The technology of the Internet has also acted as an amplifier. … There are blogs like Hypebeast and Slam X Hype dedicated to this practice, reporting dozens of new products or design collaborations from the brand underground every day.

There is a third factor: manufactured commodities have in fact become accepted as quasi art objects, and there is no more stark example than the sneaker. Hunting for unusual sneakers and modifying them with markers or different laces has been cool for decades, a phenomenon defined in Harlem and the Bronx."

While other minipreneurs may not build on the willingness-to-pay of Japanese teenagers, the two other factors are main enablers of many co-creation products as well. After reviewing the story of several user-created t-shirt labels (an world that sometimes even Walker as an expert admints not to understand totally), Walker comes to his conclusion -- and provides a great insight into the motivation of consumers to become active producers:

"If the dance between subculture and mainstream has always been more compromised than it appears and if every iteration of the bohemian idea is steadily more entrepreneurial than the last, then maybe a product-based counterculture is inevitable. Maybe subcultures are always about turning lifestyles into business — or the very similar goal of never having to grow up.

And I have to admit, the more time I spent with the minibrand entrepreneurs, the more I had to concede that what they have been up to is more complicated than simply imitating the culture they claim to be rebelling against. They believe what they are doing has meaning beyond simple commercial success. For them, there is something fully legitimate about taking the traditional sense of branding and reversing it: instead of dreaming up ideas to attach to products, they are starting with ideas and then dreaming up the products to express them."

Site note: Rob Walker has a regular column in the NY Times Magazine, where he often writes about a other great minipreneur, mass customization and customer co-creation businesses. He also has a great new blog site that should be worthwhile reading for you. This blog regularly links to his latest column, follows up on issues and ideas raised there, and "wants to advance the conversation about matters relating to what we buy and who we are": http://www.murketing.com/journal.

Collective Customer Commitment and Crowdsourcing: How Look-Zippy is bringing the Threadless model to the next level

A recent report in Business Week about our SMR paper on Threadless and Muji's strategy to use early customer commitment to reduce the new product development risk brought us some good feedback and comments on the concept (see the updated original post ). [And of course we are just proud that after The New York Times and Der Spiegel another major publication refers to our work :-)]

Threadless uses crowdsourcing in three ways: (1) To generate new designs, (2) to evaluate submitted designs, and (3) to sell its products via an affiliate marketing system and social network.

But the market is already progressing faster. As you may already have read in other blogs, Spreadshirt, the German T-Shirt Customizer working like Zazzle or Cafepress, just announced a take-over of LaFraise, the French Threadless clone. This will provide Spreadshirt the ability to integrate its users even further in the design process and to supplement its highly flexible, but expensive on-demand printing concept with the business model of screening demand before (mass) production. I am curious to see which innovative business models will be resulting from this merger.

Another company however has already brought the Threadless concept to the next level: Look-Zippy, a Sénergues, France, based t-shirt seller (thanks to Jochen Krisch for the link).

Remember that the key aspect of Threadless' model is the aggregation of commitment of its customers. Threadless does not face the conventional risk of a fashion company whether new design variants will become a hit or miss. This risk is reduced tremendously by the participation of its customer community in the assortment planning process.

The evaluation of new designs by its customers helps Threadless to pick exactly those new designs which find the highest appeal in its community. On top, customers express their informal commitment to purchase a design variant in case it would be selected and printed by ticking a small box. While this works very well, some uncertainty remains for Threadless: Exactly how many t-shirts they shall print, and in which size dispersion. This decision can be only based on forecasting and rule-of-thumb guessing.

Even if t-shirts are a product with high margins and low inventory-cost, the "special sales" periods at Threadless indicate that there are some overstocks of t-shirts which do not sell as well as the customer evaluation predicted, or where Threadless' management ordered too many of the wrong sizes.

This is where Look-Zippy has perfectioned the Threadless business model. At the beginning of the process, these French entrepreneurs crowdsource everything like Threadless: An open design competition captures the distributed creativity of creative users, and the selection of the best designs builds on the evaluation capability of the entire community.

But then the process differs: Instead of scheduling the winning designs immediately for production, Look-Zippy starts selling first by taking binding orders. Selected new designs are listed for exactly two weeks on the web site (a ticker prominently shows the remaining time – Woot.com pioneered this strategy online). Customers can place an order only during this period, once the time is up, no more orders are possible -- and only then production starts.

The result: The shirts are produced in exactly the right volume and size dispersion. This binding commitment of customers allows Look-Zippy to mass produce only the products that really fit their customers' needs – a marketer's dream. This model is much closer to the original model of collective customer commitment which was developed by Elephant Design and Muji in Japan at the end of the 1990s (more info on Muji): The risk of new product development and planning is outsourced to the customers.

The disadvantage for customers of this model however is a slightly longer waiting time/ But this may be counterbalanced by the "limited edition" feeling of the shirts. Also prices should remain low on the long run, as an successful product has not to cover the wrong forecasting of other variants.

Combining the creative talents of the crowd (open innovation), the commitment of a community for a new product (collective customer commitment method), and the limited edition approach of consumer markteters seems like a winning strategy for other industries as well. I am curious to see in which other consumer good industries this model will catch up first. Please leave a comment or e-mail me if you have any candidates or examples!

Open Source Footwear -- bringing customer co-design to a traditional industry

How the EU-funded CEC project wants to foster customer co-design in the footwear industry -- and why star designer John Fluevog is already doing it.

When people talk about open innovation, in most case it is related to high tech or science products as in the case of Innocentive, or software as with open source software. Then you have hip youth products like T-shirts, as in the case of Threadless' user innovation model [Threadless seems to be omni-present in the press and blog world today (I introduced Threadless in in this blog in August 2005; see for some updates on Threadless Business 2.0, Exciting Commerce, Crowdsouring, Innovation Lab DK, and of course at Threadless themselves).

But can the open source / user innovation idea also work with rather conventional products like, say, shoes? No high-tech sports shoes (see here for a recent paper on user innovation at Adidas, working paper version here), but good ol' dress shoes?

This is one of the issues Angelika Bullinger wants to find out as part of the "CEC-made shoes" project, a large integrated project funded by the European Community (PDF with project info) to modernize the European footwear sector. Angelika, who is a colleague at our TUM Research Group on Customer-Driven Value Creation (my permanent academic home besides my present residency at MIT), explores with researchers from Fraunhofer IAO and other institutions how footwear companies can become more competitive by fostering user innovation in this industry.

One way to do so is to install internet platforms (innovation toolkits) where users can evaluate new designs, give feedback or even create totally new designs. Given that shoes are one of the most common products we use, and also a very emotional one, I believe that there is a lot of potential to do so (mass customization, another concept that is also evaluated in the CEC project, is already getting more common in the footwear industry industry).

And some innovative shoe companies are already doing it: William C. Taylor reports in the New York Times today how Canadian shoe designer John Fluevog, one of the stars of his profession (loyal customers call themselves ''Fluevogers"), has been soliciting ideas from its customers -- encouraging brand enthusiasts to submit their own sketches for leather boots, high-heeled dress shoes, even sneakers with flair. He posts the submissions on his company's Web site, invites visitors to vote for their favorites and manufactures and sells the most promising designs.

''Customers want to express themselves, to be involved with the brand,'' Mr. Fluevog is quoted in the article. ''For so long, people would hand me a drawing of their personal design for a shoe or ask if I had considered an idea they liked. This program is a natural outgrowth of that desire for connection.''

As the NYT reports, until today the company has chosen nearly 300 finalists from the flow of sketches into its headquarters -- and introduced ten shoes based on customer designs, including the Urban Angel Traffic, a walking shoe (retail price, $179) designed by a customer in Moscow, and the Fellowship Hi Merrilee, a vintage-style pump ($189) designed by a customer in Provo, Utah.

Introducing customers in footwear design may have its limits: ''Some of the ideas from customers are striking, but impossible to make,'' Mr. Fluevog sayz in the article. What tends to work best, he explained, are intriguing twists on design themes that he and his colleagues are already exploring. ''But even submissions we can't make add to the stimulation,'' he added. ''Our customers get more involved, and we get insights into who they are and what they're doing. It's better for both of us.''

This is exactly where we want to extend the user innovation process with the research we do for the CEC project. Instead of asking consumers for sketches with a very wide solution space, sometimes representing impossible designs, the idea of an internet based toolkit for user innovation is that customers are guided and are designing within the capabilities of a specific company.

Eric von Hippel, head of the innovation and entrepreneurship group at the MIT Sloan School of Management, has described this method for more high tech goods like semiconductors, food flavors, or plastics, before:

"In a time of ever more talented technology enthusiasts, hobbyists and do-it-yourselfers, all connected by Internet-enabled communication," he is quoted in the same NYT article, "the most intensely engaged users of a product often find new ways to enhance it long before its manufacturer does. Thus, companies that aspire to stand out in fast-moving markets would be wise to invite their smartest users into the product design process."

''It's getting cheaper and cheaper for users to innovate on their own,'' Professor von Hippel said. ''This is not traditional market research -- asking customers what they want. This is identifying what your most advanced users are already doing and understanding what their innovations mean for the future of your business.''

The fact that a successful designer like John Fluevog is thinking this way now as well is very promising – as it are often the internal designers or engineers of a manufacturer who oppose the idea that users and customers can be a source for innovation as well.

It will take for the very conservative European footwear industry some more years to think in such a way – judged by my experience from working with this industry (see my earlier comments on the slow adoption of mass customization there). Hopefully their customers, support by some clever Asian manufacturers, have not pushed them out of business until them. But we hope to contribute a bit with the CEC project that this will not happen.

I will keep you posted on the outcomes and progress in this research project. If you are from the footwear industry and want to explore user innovation (or are already doing so), let us know! We are permanently looking for further exploration partners from this industry.

Kraft Foods Crowdsources its Innovation Process to its Customer

Procter&Gamble recently got much publicity about its open innovation strategy. Now also Kraft Foods, a competitor in some markets, announced its new source of inspiration for new ideas: its customers, as the Wall Street Journal reports today.

Kraft is the largest food company in the US. Like many large packed goods retailers, it was pretty much disconnected from its individual customers for a long time (although the company did a number of pilots in mass customization, namely custom Kraft Lunchables, lunch boxes for kids). But for innovation, the old thinking ruled: We know what customers want.

Of course, like all other consumer goods companies, Kraft has an open line to its customers, toll free numbers where customers can call with questions, complains – or ideas for new products or improvements. In the past, however, nothing happened with this input. The WSJ quotes Mary Kay Haben, Senior Vice President for Open Innovation (sic!) at the company, "we would have said, `Thank you, but we're not accepting ideas.' "

This has changed now with the launch of a new consumer web site where everyone can submit ideas for new products, processes, advertising or whatever. Kraft in the moment is in the desperate move to re-invent itself. While the company owns some of the best known brands, including Oreo cookies, Philadelphia Cheese, Milka chocolate, and Jell-o, it has struggled in the last years to generate the profits it used to have in the past.

And like many companies, after a first stage of heavy cost cutting, Kraft is now focusing on innovation. And realizes that it will miss too many opportunities by just relying on its internal resources. So it is turning outwards, starting first to engage professional solution providers from its periphery. The first effort to open its innovation process was designed to swap ideas with outside partners, even competitors, to improve products, packaging and business systems. Open Innovation, in this understanding, has wide parameters and includes licensing deals and new technology. For example, Kraft today is one of the clients of Innocentive, a company that helps solution seekers to broadcast problems to its network of 90,000 solvers around the world (see here or here for a report on Innocentive).

As Promo Magazine reports, this kind of cooperation is nothing new per-se for Kraft. In marketing, partnering with other brands to establish new product categories has been established since a long time (for example, Kraft has a license from Starbucks for its coffee products, and, well, one of Taco Bells for Mexican Food). But the open innovation strategy should bring this to a new level.

"We rely on our own R&D folks for their ideas, but also are looking outside our own walls, like Procter & Gamble does. Kraft New Product Development will continue to focus on organic growth and product extensions, while Open Innovation will primarily focus externally.", the magazine quotes a company spokesman.

The latest step in open innovation of Kraft is opening its company walls to its largest resource base: its customers and users of its products. A new (still pretty basic) web site facilitates the submission of ideas. There is also a nice phone number (credits to Kraft to get this vanity number): 1-800-OPN IDEA.

Their web site (http://www.kraftfoods.com/innovatewithkraft) is an example for a simple toolkit for customer idea competitions, a method for new product development that I have described with my co-author Dominik Walcher in a recent paper (published, by the way, in a great special issue of R&D Management, an academic journal, on open innovation; you find a pre-version of our paper also on userinnovation.mit.edu).

But before you can submit your idea, you have to accept a long list of rules. Quite annoying, as also the folks at Kraft have realized:

"At Kraft, our Innovations Team welcomes new ideas, and sincerely hopes that you choose to share your ideas with us. That said, we want to make sure you fully understand Kraft’s process and rules about receiving such ideas. While we understand that these rules might appear strict, they are necessary to protect both you and Kraft. Therefore, we ask you to carefully review all the information provided below and only send us your idea if you are comfortable with our rules."

(Note: If you take open innovation seriously at your company, engage a professional agency for the copy texts, as you do it with all your advertising materials).

And what are they looking for?

"Kraft is accepting ideas under this policy for new products, packaging, and business / processes / systems only. We are most interested in ideas that are more that a concept, in particular new products & packages that are ready to be brought to market (or can be brought to market quickly)."

An existing patent of the information provider is a plus in this regard. When the idea is protected — or protectible — by a patent or copyright, they may negotiate with the provider appropriate license rights. If Kraft is interested in an idea that it is not protected (or protectible) by a patent or copyright, but new to Kraft, the company may grant a nominal award. But: "In no case will that nominal award exceed $5000."

So you better speak to your patent lawyer before contacting Kraft! And in case you are reading this posting and want to submit your bright idea (I am just dreaming of Instant Sushi), you better are a resident of the United States: Even if Kraft opens its innovation process, its openness end at the borders of the US. Only US residents can submit ideas.

But what can we expect. While the web site may look simple and the rules restrictive, this is the very first attempt of a company, that was internally focused for its entire existence, to open its boundaries for input from its periphery. It took Kraft many decades to get its internal innovation management organized and optimized. It will also take them a wile to experiment and learn by trial-and-error to create a proper infrastructure and organizational framework for open innovation with their customers and users. But it is great that they have started.

Threadless.com – when mass customization meets user innovation meets online communities (Updated)

(Update of the original post from August 2005) Threadless.com is a young Chicago-based fashion company that follows an innovative business model mixing customization with new ways of customer interaction to create high variety products without risks. Started in 2000 by Jake Nickell and Jacob DeHart, Threadless.com focuses on a hot fashion item, t-shirts with colorful custom graphics. All products sold by Threadless.com are created by some if its users and inspected and approved by user consensus of the entire community before any larger investment is made in a new product. Customers evaluate potential new designs before the production process starts. Top-rated submissions are transferred into final products and produced in limited editions (their creators get $2000 as reward, and their name is printed on the particular t-shirt’s label).

Since its launch, over 400 winning designs have been chosen for print from more than 40,000 submissions. The company builds on a large pool of talent and ideas to get new designs (much larger than it could pay if the design process would have been internalized), enabling it to identify new trends early and transfer those into a product design. The Threadless community is thriving with over 300,000 users signed up to score designs (in 2005, an average of 1,500 new users were signing up per week).

Compare this idea to traditional customization: Instead of investing in highly flexible manufacturing systems and dealing with individual custom designs, the company focuses its energy to draw creative designers to submit new designs, and to facilitate the evaluation and voting process by its customer community. The often costly elicitation process of a mass customization system is substituted by the pre-order taking and a voting mechanism of a large number of customers.

Instead of customizing individual products, Threadless.com has a system of “custom mass production”, building on the early involvement of some (expert) customers in the development process of new product designs and the refinement of their ideas by a larger customer groups (this idea has been described already in 1998 by G. Elofson and W. Robinson in a paper for Comm. of the ACM, but has never took off in practice).

Motivated by its success in the young fashion market, the founders of the company have recently extended their categories to formal wear like ties or polo shirts (http://NakedandAngry.com) or music (http://15MegsofFame.com). It will be interesting to see how sustainable this business idea is. In the moment, it is highly successful and a very interesting alternative to conventional mass customization.

More information:

In a recent paper with Susumu Ogawa, we looked into more detail on the Threadless model. The paper has been published in MIT Sloan Management Review, Issue Winter (January) 2006, pp. 65-71. Abstract & Download here.

In a second paper, Petra Schubert, Michael Koch, Kathrin Moeslein and I comment on the possibilities how communities can support customer co-design: Journal of Computer-Mediated Communication, Vol. 10 (2005) 4 (August).
[http://jcmc.indiana.edu/vol10/issue4/piller.html]

Recent good posts on Threadless with more information can be found here:
Business 2.0,
Exciting Commerce,
Crowdsouring,
Innovation Lab DK,
a good interview with jacke Nickell
and of course at Threadless themselves.

Crowdsourcing is the new outsourcing: WIRED on value co-creation

Wired has run a number of nice feature articles on co-creation of value between companies and their customers in the past issues, but now they also coined a new, cool and really appropriate term for this trend: Crowdsourcing.

Jeff Howe's great article "The Rise of Crowdsourcing" in the new Wired Magazine (June 2006) provides a nice summary and many examples of firms who explicitly build strategies to co-create with their users and customers. In our new (German) book, we called this "interactive value creation", building on -- but not equal to -- Benkler's idea of "commons-based peer-production". Earlier notions of active customers focused on customers working autonomously, i.e. innovating, hacking, modifying, servicing, or selling a company's goods without any formal relationship or, in most case, the company's notion.

[Update: See here for a debate why Crowdsourcing is different to commons-based peer-production, and I agree to this argument. In this posting, Jeff Howe also provides a more formal definition of the term crowdsourcing:

"Crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call. This can take the form of peer-production (when the job is performed collaboratively), but is also often undertaken by sole individuals. The crucial prerequisite is the use of the open call format and the large network of potential laborers."

End of Update.]

Croudsourcing or interactive value creation, however, builds on the notion that clever firms are setting up platforms for users to co-create with them. They initiate, manage, and provide incentives for peer-production among users and customers. Or as Jeff Howe puts it:

"Remember outsourcing? Sending jobs to India and China is so 2003. The new pool of cheap labor: everyday people using their spare cycles to create content, solve problems, even do corporate R & D. …

Many companies growing up in the internet age were designed to take advantage of the networked world. But now the productive potential of millions of plugged-in enthusiasts is attracting the attention of old-line businesses, too. … Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn’t always free, but it costs a lot less than paying traditional employees. It’s not outsourcing; it’s crowdsourcing."

The articles describes four kinds of crowdsourcers: Professional freelancers and hobbyists, who now very easily can contribute their talents (like photo enthusiasts competing again professional stock photographers); Packagers, who create new material by mixing own and re-used existing content and package it for a specific (niche) audience (like amateur videographers); Tinkerers, who get involved in a company's R&D process (open innovation as in the case of Innocentive); and finally the Masses, micro-freelancers who just participate a tiny bit of work to create something big with thousands of collaborators (like contributors to Amazon's Mechanical Trunk).

Amazon's Mechanical Turk is a web-based marketplace that helps companies find people to perform tasks which are difficult to automate, like identifying items in a photograph, skimming real estate documents to find identifying information, writing short product descriptions. Amazon calls these tasks Human Intelligence Tasks (HIT); they’re designed to require very little time, and consequently they offer very little compensation – most from a few cents to a few dollars. The article provides some nice insight into this Amazon service, which got a lot of hype when it was launched, but was not mentioned much in the last months:

"Just about anyone possessing basic literacy can find something to do on Mechanical Turk. It’s crowdsourcing for the masses. So far, the program has a mixed track record: After an initial burst of activity, the amount of work available from requesters – companies offering work on the site – has dropped significantly. … A few companies, however, are already taking full advantage of the Turkers.

Sunny Gupta runs a software company called iConclude just outside Seattle. The firm creates programs that streamline tech support tasks for large companies … Most problems that iConclude’s software addresses aren’t complicated or time-consuming, Gupta explains. But only people with experience in Java and Microsoft systems have the knowledge required to write these repair flows. Finding and hiring them is a big and expensive challenge. “We had been outsourcing the writing of our repair flows to a firm in Boise, Idaho … We were paying $2,000 for each one.”

As soon as Gupta heard about Mechanical Turk, he suspected he could use it to find people with the sort of tech support background he needed. … iConclude was able to identify about 80 qualified Turkers, all of whom were eager to work on iConclude’s HITs. “Two of them had quit their jobs to raise their kids,” Gupta says. “They might have been making six figures in their previous lives, but now they were happy just to put their skills to some use.” … Gupta turns his laptop around to show me a flowchart on his screen. “This is what we were paying $2,000 for. But this one,” he says, “was authored by one of our Turkers.” I ask how much he paid. His answer: “Five dollars.”

The articles summarizes its findings in five rules of the new labor pool:

1. The crowd is dispersed: People spread around the world can perform a range of tasks – from the most rote to the highly specialized – but this would-be workforce needs to be able to complete the job remotely.

2. The crowd has a short attention span: These new workers find time after dinner and on weekends. So jobs need to be broken into “micro-chunks.” Most tasks on Amazon Mechanical Turk, for example, take less than 30 minutes to complete.

3. The crowd is full of specialists: For Procter & Gamble, the crowd is the world’s scientific community; for VH1 it’s any ham with a camcorder; for iConclude it’s the handful of professionals with experience troubleshooting Microsoft’s server software.

4. The crowd produces mostly crap: Networks like InnoCentive, Mechanical Turk, and iStockphoto don’t increase the amount of talent – they make it possible to find and leverage that talent. Any open call for submissions will elicit mostly junk. Smart companies install cheap, effective filters to separate the wheat from the chaff.

5. The crowd finds the best stuff: Even as a networked community produces tons of crap, it ferrets out the best material and corrects errors. Wikipedia enthusiasts quickly fix inaccuracies in the online encyclopedia.

Read the full article here: http://www.wired.com/wired/archive/14.06/crowds.html
Many of the examples named in the article have been described in my Blog before, see here for a list.

And Jeff Howe also has a new blog on Crowdsourcing with updated information and all links of the original article.

Deutsche Mass Customization Community -- A Special for the German Mass Customization Community (in German Language)

(The following posting is in German language only as it covers German events and publications. Sorry! Continue to read in English here.)
Neue deutsche Publikationen zu Mass Customization und Open Innovation, neue deutsche Fallstudien und ein Hinweis auf eine spannende Veranstaltung vom 21-24. Juni bei Stuttgart.

(1) Interaktive Wertschöpfung: Open Innovation, Individualisierung und neue Formen der Arbeitsteilung Unser neues Buch zum Thema dieses Blogs ist erschienen !!

Das Thema: Open Innovation, Social Commerce und Mass Customization sind aktuelle Strategien, bei denen die Kunden eine neue Rolle bekommen: Sie sind nicht mehr nur passive Konsumenten, sondern aktive Wertschöpfungspartner. Kunden gestalten heute Produkte oder Dienstleistungen aktiv mit und übernehmen teilweise sogar deren gesamte Entwicklung oder Herstellung.

Aus betriebswirtschaftlicher Sicht kommt es damit zu neuen Formen der Arbeitsteilung. Das Konzept "Interaktive Wertschöpfung" (IWS) diskutiert die daraus resultierenden Strategien und Prinzipien und stellt eine neue ökonomische Theorie vor, die die neuen Formen der Arbeitsteilung erklären soll.

Das Buch steht in weiten Auszuegen kostenlos zum Download zur Verfuegung (Open Access). Mehr Informationen auf einer eigenen Web-Site: www.open-innovation.com/iws

(2) Mass Customization Buch bei Gabler in 4. Auflage erschienen

Mein "blaues Buch", das Mass Customization aus einer wissenschaftlichen Perspektive betrachtet, ist nun in der vierten, vollständig aktualisierten Auflage erschienen. Vor allem die Fallstudienübersicht im Anhang und die Literatur wurden überarbeitet, aber auch z.B. die Definition von Mass Customization konkretisiert. Wenn Sie eine der früheren Auflagen schon haben, lohnt sich der Kauf eher nicht (angesichts des hohen Preises, den der Verlag fordert), ansonsten freue ich mich über den Kauf.
Einen Auszug aus dem Buch als Download hier (PDF von Vorwort, Inhaltsverzeichnis, Leseprobe).

(3) Neue Fallstudien zu Mass Customization beim Symposion Verlag erschienen

Während das vorangehend erwähnte Buch eher wissenschaftlich ist, habe ich zusammen mit meinen Co-Autor Christof Stotko in unserem Buch "Neue Wege zum innovativen Produkt: Mass Customization und Kundenintegration" eine eher praxisbezogene Herangehensweise gewählt. Dieses Buch behandelt auch ausführlich die Verbindung zwischen Mass Customization und Open Innovation (Mehr Infos zum Buch, das Ende 2003 erschienen ist).

Eine Besonderheit dieses Buchs ist, dass sich jeder Leser dieses selbst konfigurieren und individualisieren kann. Dazu dient neben dem Grundtext vor allem ein ausführlicher Fallstudienanhang, geschrieben von verschiedenen Fachexperten. Dieser wurde nun um 10 neue Fallstudien ergänzt.

Die NEUEN Fallstudien im Überblick (teilweise handelt es sich um Aktualisierungen):

- My Personal Channel: Kundenindividuelle Fernsehangebote
- IKEA: Die individuelle Lösung für Ihre Küche
- InVIDO GmbH: Mass Customization in der Möbelindustrie
- Kfz-Versicherungen: Kann man Kundentarife individualisieren?
- Kreditkarten: Die eigene Wunschkarte konfigurieren
- Lands’ End Custom: Hosen und Hemden maßgeschneidert
- Karstadt und Maile: Zwei Konzepte für Herrenmode nach Maß
- NIKEiD: Individuelles Design von Sportschuhen
- Dynamic Packaging: Mass Customization in der Reisebranche
- Linel: Mass Customization in der Wasseraufbereitungsbranche

Alle Fallbeispiele können Sie zum günstigen Preis zwischen 4 und 6 Euro direkt beim Verlag beziehen. Die Auswahl erleichtert Ihnen dabei unser Fallstudien-Konfigurator (einfach "alle Beiträge anzeigen" lassen, die neuen sind eindeutig gekennzeichnet). Dort bekommen Sie auch mehr Informationen zu den einzelnen Fallstudien. Natürlich können Sie sich auch einzelne Abschnitte des Grundtextes des Buchs einzeln als PDF-Download erwerben.

(4) Open Innovation, Mass Customization und Innovationskommunikation – ein Executive Training im Communicate-Programm der TU München

21. bis 24. Juni 2006 im Schlosshotel Liebenstein, Neckarwestheim bei Stuttgart (Info)

Aus der Ankündigung: "Andere sprechen von Innovationskommunikation – wir nennen es „Communication and Leadership“. Denn Leadership heißt: Neue Dienstleistungen und Produkte entdecken, entwickeln und erfolgreich einführen. Und dazu gehört Kommunikation. Wollen Sie Innovationen zum Schlüssel des Erfolgs Ihres Unternehmens werden lassen? Kennen Sie die wichtigsten Prinzipien der Gestaltung erfolgreicher Innovationsprozesse? Haben Sie die Nase vorn bei der Kommunikation neuer Entwicklungen?"

Als Teil der Veranstaltung wird TUM Business School Professor Joachim Henkel eine ausführliche Einführung in Open Innovation und den Lead-User-Ansatz. geben. Ich werde einen Nachmittag zum Thema .Mass Customization. gestalten, mit besonderem Schwerpunkt auf Kommunikation und innovative Kundeninteraktion.

Die Teilnahmegebühr für ein Executive Training beträgt 2.350 € (zzgl. MwSt.). Bei einer Anmeldung bis zum 29. Mai 2006 zahlen Sie einen reduzierten Teilnehmerbeitrag in Höhe von 1.850 € (zzgl. MwSt.). Im Preis enthalten sind Tagungsgetränke, Mittag- und Abendessen sowie Trainingsunterlagen.

Das vollständige Programm finden Sie hier: http://www.communicate-program.de/580.0.html
Info-Telefon: +49 (0) 89 - 289 28481

Hinweis: Leider zeitgleich zu dieser Veranstaltung findet in Hamburg die wissenschaftliche Mass-Customization-Tagung imcm06+peto06 statt.

US Think Tank CED Demands Openness to Foster Innovation: Open Source Software, Open Standards, and Open Innovation Promote Economic Growth

The discussion of the underlying core principle of open innovation -- free access to existing knowledge to reuse this information for new problem solving in another domain -- interferes very often with the existing regimes of Intellectual Property Law, which are one of the main hurdles of open innovation. Thus, the new report 'Open Standards, Open Source, and Open Innovation: Harnessing the Benefits of Openness' by the Committee for Economic Development (CED), a business-led public policy group, got my interest. In this group, 200 large US corporations (!) demand more openness of intellectual property. This is a very important debate, and if you want to benefit from open innovation, you should care about it!

Here is a summary of the report by PR Newswire :

Increased openness in the creation of computer software and other digital information products is needed to foster further innovation and economic growth for both the United States, and for the global economy, warns CED in a new report.

"Open standards are needed for digital technology to continue to develop and create economic growth in the information age," said Paul Horn, Senior Vice President Research, IBM Corporation. "Additionally, open innovation is propelling change in commerce beyond the borders of software and information technology, even into physical goods," Mr. Horn continued.

The report calls openness "an underlying technical and philosophical tenet of the expansion of electronic commerce" that will "cause transformations in the economy and society." Digitization of information and the growth of the Internet have profoundly expanded the capacity for openness, which can be viewed largely as a function of the accessibility and responsiveness (meaning the ability of anyone to make modifications) of a work or process.

Recommendations of the report include:

OPEN STANDARDS: Governments should encourage the development and use of open standards through processes as open to participation and contribution as possible. The DCC believes that the participation of civil society would be beneficial in the formation of standards with important social consequences. Support for open standards has grown dramatically in recent years, but issues surrounding intellectual property claims threaten their development. Perhaps most troubling, firms have a perverse incentive to wait until an open standard is widely utilized before asserting an intellectual property claim, so as to maximize revenues from licensing or from damages. The DCC recommends that incentives be created to induce the early disclosure of intellectual property claims, and that consideration be given to progressively limiting recovery by a firm asserting infringement as time elapses from the adoption of a standard. ...

OPEN INNOVATION: The combination of the internet and the growing importance of digital information products is changing even the organization of creative enterprises and enabling new processes of innovation. Perhaps most striking is the extraordinary increase in "peer production" of digital information products. Many, if not most, of the pages accessible on the World Wide Web are posted by individuals with no expectation of monetary gain. The online encyclopedia Wikipedia is the result of contributions from thousands of individuals, as are the buyer and seller reviews on eBay. "Open science" is making scientific information available well beyond the subscribers of traditional scientific journals.

To foster open innovation, the report recommends federally funded, unclassified research should be made broadly available. The CED recommends that any legislation or regulation regarding intellectual property rights be weighed with a presumption against the granting of new rights. The burden of proof should be on proponents of new rights to demonstrate with rigorous analysis the necessity of such an extension, because of the benefits to society of further innovation through greater access to technology. Finally, the Council suggests that the National Science Foundation fund research into alternative compensation methods, similar to those created to facilitate the growth of radio, to reward creators of digital information products and accommodate the changes brought about by the digitization and growth of the Internet."

The full report can be downloaded here: http://www.ced.org/docs/report/report_ecom_openstandards.pdf

Innertee: Mashing Up Open Innovation, Distributed Creativity, and Mass Customization

I have written here before about Cafepress, Spreadshirt or Zazzle -- companies that mix peer production, micro-branding, mass customization and viral marketing. Add to this another hot trend of Web 2.0: Remixing. A new web site called Innertee is mixing all these ideas to create something pretty cool: t-shirts remixed. Not yet launched, but open on a beta site and with plenty of information in the founder's blog, Innertee is a site that combines open innovation and mass customization.

It has its own design language: (1) An "element" is defined as any original artwork submitted for sharing. (2) A "design" is any combination or "mix" of elements.

On the element level we have open innovation, something that Threadless.com has perfected in the world of T-Shirts. It allows everyone ("artists") to submit artworks, thus using the talent distributed in an entire design space.

On a second level, however, also users ("mixers") not feeling like a great artist can participate. By mixing elements into an own design, they create a custom product that is then produced on-demand by Innertee. Mixers also can sell their creations to others. In both cases, the originator (artist) of the elements used in teh design gets a provision – and earns respect and attention in the community.

Miles and Jamie, the founders, have been working on the idea of Innertee for the past three years and it’s been an interesting journey. "We stared a business called Scribe Graphics as a traditional screen printing (anti-technology) business in 2003 as a means to be able to hang around in our garage and drink beer without the fear of reprisal from our families and lurkers in the neighborhood", Miles says. Eventually, the screen printing business morphed into a design concept / brand called Red Army Surplus Co. Now, they want to bring it on a next level with Innertee.

I regard Innertee a promising business idea as it both acknowledges that there is great design talent out there, much more than a traditional firm could incorporate behind its walls, but that at the same time most customers are no designers and are not willing to fully customize an aesthetic design. It will be interesting to see how artists develop a new design language suitable for mixing and matching. Not the artist will be most successful who submits the most unique design, but the one who submits the most "mashable" design, i.e. a design that can be used by many "mixers" as a platform or starting point for a new mix.

More information? The founders publish an interesting blog with plenty of information on their project.

And Patty Seybold has a great posting on remixing and "mash up" in general on her blog.

I have to be stupid ... I just PAID to be part of Kettle Chips market research (updated - including a chart what user innovation is not)

I just did it. I just paid 16.90 USD to help a commercial food company with their market research. Instead of receiving free samples, I paid for five new potential flavors of Kettle Chips, the flagship product of Salem, OR, based Kettle Foods Inc. I am also committed to provide my free feedback and input to the company.

After reading about Kettle Foods' initiative [http://straightupflavor.com] on the consumer empowerment blog, I had to give it a try:

"Online Polling as a way of deciding on which new product variant to launch is not new, but Kettle Chips are at it again, and with a twist – the program funds itself. Their People’s Choice initiative involves inviting consumers to pay to order samples of a limited run (read exclusive) of potential new line extensions (new flavors) – and then vote on their favorite, which will then get commercialized! Self funding NPD - now that’s smart!"

This is really about utilizing the consumers' demand to raise their voice and become active. This is somehow a light version of Threadless' business model (see previous postings).

Update: I promised to keep you posted when the sample package arrives. I got it already last week, here it my report:

Well, you don't really suffer too much as a contributing customer for Kettle. What you get are five really big packages of chips. So it seems to be more a way to sell variety with some market testing included... There is plenty of information on the five flavors, 6 voting cards with a very simple scale, and a small pledge to go to their web site and report your favorite variety. I just learned that in regard to chips, I prefer to stay with the good old plain ones.

PS: For all academic readers interested in definitions: This case is a good example to explain what is open/user innovation and what not: Kettle's sample event is NOT open innovation or user innovation -- but good old market research in a new way. Eric von Hippel (MIT) recently put it into this nice chart: User innovators (lead users) develop a product by their own for their own use -- as they have a need not fulfilled sufficiently by the existing manufacturers. Manufacturers may discover this prototype and decide to transfer it into their domain. They may also invest in methods like innovation toolkits to foster user innovation. But the source of the innovation is the user.

Manufacturer innovation, on the other hand, is based on the perception of a manufacturer of what customers may want, in-house development, and market testing to find out if the stuff the engineers developed is really what users wanted. User Innovators focus on needs not perceived by the major market (lead users are trendsetters ahead of the crowd), while manufacturing innovation tend to focus on the major target market.

So, even if Kettle has an innovative way to conduct its market research and integrates users deeper into the process (by letting them pay and thus, perhaps, increasing their commitment to rate the chips better), this process stays within the traditional manufacturing-active paradigm.

Lego Factory hacked by users -- and the company loves it

I have reported in this newsletter on August 30 about the new LEGO mass customization venture, Lego factory. Just a couple of weeks after its launch, the venture got a new drive and development. Here is an update:

At Lego Factory, users can create their own unique Lego models – using interactive software that helps them to overcome the engineering problem of combining basic modular elements (Lego bricks) into a new creation. Also, compared to the conventional building sets of Lego, the users are not restricted to the distribution of bricks in a pre-fabricated kit.

This is where mass customization comes into play: With Lego Factory, the company manufactures the bricks necessary for the model and ships them to users so they can assemble their models. Customers can also buy the bricks necessary to build from other people's designs, which are posted on the site.

Lego Factory is based on a toolkit for user co-design, called Lego Designer, a free, downloadable, 3D modeling program that lets users choose from digital collections of bricks to compose their own unique models. But as in many cases, once a company offers its users an innovative, more interactive way to create new products, some users want even more.

Already 15 days after its launch, the web site was hacked. The problem was that Lego used a simple algorithm to assign bricks to a user's unique creation. Instead of matching the blueprint with the exact number of the correct bricks, the Lego assembly center has pre-packed packages of bricks, and matches a user's designs with these packages.

The result: users got (and paid!) often for far more pieces than they really needed. At the same time, they were missing a few others that were integral to the creations, and had to purchase more packages. That made designing and buying models sometime very costly. While a child using her father's credit card wouldn't bother with this problem, adult fans of Lego, who adopted the Lego Factory rapidly, did.

So the adult Lego community became innovative: They collected information about the exact combination of each brick package (called a palette in Leo Factory language) and compiled this information in a database that lists which bags must be purchased in order to collect specific bricks. On top comes an algorithm that optimizes the number of bricks based on a user's design by making modifications in the design or at least promoting a warning if a user selects a part that would cause an additional order of a package of bricks.

In a great article about this user initiative on CNET Networks, the author Daniel Terdiman quotes Dan Malec, one of the user developers (Malec is a software engineer from Stow, MA):

"You'd see a lot of fan creations [on Lego factory] costing $400 or $500 because fans are not using the bags efficiently. If you could see it at the bag level (instead of the larger digital palettes offered by Lego), maybe you might make a different decision. Maybe (instead of buying) that one piece which takes a whole bag that you're not going to use, you might choose a different bag."

So users created a very beneficial addition to the company's offering, however once that undermines Lego's sales opportunities. But most astonishing, Lego's reaction has been largely positive. Terdiman quotes a Lego executive that "the adult community found out within a few days (of the Lego Factory launch) how these bags were mixed together. It was a puzzle to us. They took us completely by surprise." But the Lego manager added: "We really encourage and embrace some modifications of our software."

And while in the moment Lego has not incorporated the development of the Lego fan community into its proprietary Designer software, it may do so in the future:

"It's not surprising to us that they're doing the hacking, because that was the hope, that they would take the core of what we're doing and own the system" for themselves, Jacob McKee, Lego's global community relations specialist is quoted in the CNET Networks article. "We want to release more and more content and development tools to help that process along. The hope is that they really start to take this on and start to do things we haven't even thought of yet."

This is really an astonishing remark and could serve as a role model for many other companies who often fight against user modifications and do not recognize the input from the company. And will it pay off? I strongly believe so. Just google for user comments on Lego's reaction on this user hack, and you see that customers just love a company that encourages its users to become innovators.

Lego bridges mass customization and open innovation with LEGO-Factory website: Children become toymakers and can design and produce sets of their dreams

Finally another large scale mass customization application: "LEGO Group unveils LEGO Factory, a consumer experience that combines today’s hottest kids trends -- technology, mass customization and community -- to enhance and build relevance for its classic toy offering. Beginning August 29, children of all ages can visit www.LEGOFactory.com to design, share and purchase custom models".

This is the start of a press release (see below for full text) that finalizes a long pilot phase with mass customization at Lego which started several years ago. On our 2003 MCPC conference (www.mcpc2003.com), Marc Hansen from Lego presented some early ideas of mass customization and toolkits for user co-design. The company has experimented with mass customization since 2001. Customers could order customized Lego mosaics build on a uploaded picture, or could customize some of the trains. On the MCPC 2003, we could also get a glimpse of the great new design software, where kids could create Lego models in 3D, a kind of very easy to use CAD program.

But some users wanted much more: The Lego user community LUGNET – totally independent by the company – is one of the best examples of a community where users co-create and co-design based around a manufacturer’s products. Here, users do not only swap parts or share pictures of their individual models, but also build together an open source based design software to create great expert constructions. Also, a whole number of small user shops sell unique models and designs. When Lego introduced its Mindstorms Robotic toys, after several years of development, some users “hacked” the robotic kit and improved the performance of the construction kit and its processing capabilities by several dimensions in just a few weeks (this is one of the best documented and fascinating of user innovation). All these user activities, however, were not facilitated or really utilized by Lego.

But now the company strikes back: I quote below the official press release of Lego where the company announces the opening of LEGO factory, a very advanced toolkit for user (kid) innovation and co-design. With this new business unit, Lego combines its original mass customization pilots, which were able to pick an individual assortment of Lego bricks according to one customer’s order, with its strong software and interaction skills. The Lego Factory seems to combine several trends and developments which were before invented in the user domain, and which are now incorporated into a business model of the company -- also a form of open innovation.

In addition, the site finally features real open innovation at Lego: It highlights the fact that the company is now selling Lego sets which are designed by other Lego users. Children can not only create their own unique designs, and order the corresponding bricks in a customized set with the help of their father’s credit card, but can also submit these designs to the company. Lego may then produce an extraordinary design as a mass product for other children as well. This ideas has been also tested before (in the German Lego catalog, some user designed Lego sets were included since 2003), but never utilized in large scale.

It is too early to share anything about the success of this new Lego mass customization venture. It is a great new application that makes a lot of business sense for the struggling toy manufacturer: It combines a number of trends, but still stays perfectly in the unique selling proposition of Lego: Enabling creativity of children and making them to co-designers of their dreams. This has been the promise of the company since its beginning, and mass customization is just the next step in the evolution of this idea.

Here the official press release with more information. But just try it by your own: http://www.LEGOFactory.com

"August 29, 2005: Celebrating the 50th anniversary of its System of Play, LEGO Group today unveils LEGO Factory, a consumer experience that combines today's hottest kids trends -- technology, mass customization and community -- to enhance and build relevance for its classic toy offering. Beginning today, children of all ages can visit www.LEGOFactory.com to design, share and purchase custom models.

LEGO Factory is powered by LEGO Digital Designer (LDD) -- a proprietary virtual building program available as a free download for PC and MAC users. Drawing upon a virtual warehouse of bricks and elements, children can design 3-D models just like professional LEGO Model Designers. Factory models are micro scale -- smaller than traditional LEGO minifigure proportion (roughly 1:50 life-size) found at retail -- but still provide precise detail and functionality.

LEGO Factory sets arrive in custom packaging that shows a child's model and name, and include all of the LEGO elements needed to build the virtual design in physical form. Every customized LEGO Factory creation will have a unique price dictated by the size of the model and elements used. Custom models will take from 48 hours to a week to arrive, depending on which shipment method consumers choose.

LEGO Factory is also designed to create a community of builders who share their virtual creations with consumers around the world. Children can view other builders' custom creations, add and remove bricks, rotate the 3D view and zoom in on the details, download the building instructions to build from their existing LEGO collection, or even purchase someone else's model for themselves.

"Giving children access to a virtual warehouse of LEGO elements to design their own models is a fantastic extension of everything the LEGO System of Play represents and has provided for the last half century, and marks a rare opportunity for true mass customization and community in today's toy market." says Mark Hansen, director, LEGO Interactive Experiences. "With LEGO Factory we can expand beyond our 100 in-house product designers to marvel at the creativity of more than 300,000 designers worldwide."

During its Beta phase, LEGO Group sponsored a contest to better understand the types of models that consumers would design using LDD. The contest lasted for 11 weeks and 8,000 models were custom designed. Ten models were voted by consumers and LEGO Master Model Builders to become real LEGO sets available exclusively through the company's Shop-at-Home division. Contest winners, whose ages ranged from 9 to 38, will receive royalties based on sales of their winning designs. For more information on these winning designs visit http://www.lego.com/eng/factory/design/bios.asp .

"It's only fitting as we celebrate 50 years of a classic play pattern in an increasingly electronic toy world that we elevate the experience of building what you imagine by blending the best of both the virtual and physical worlds of play," says Soren Torp Laursen, president, LEGO Systems. "We look deep into our compatible system of play to reinvent ourselves year on year, and we only incorporate technology where meaningful and complimentary to the core LEGO building experience."

More information: An article in Fast Company with a nice illustration of the process.

An interview with Eric von Hippel, MIT, on Democratizing Innovation (updated)

I have written several times in this newsletter on connecting mass customization with open or user innovation, i.e. to integrate customers in the innovation process by the means of co-design toolkits. The scholar who has founded this field is Professor Eric von Hippel, Head of the Technological Innovation and Entrepreneurship Group at the MIT Sloan School of Management. I am privileged to work with him here at MIT in the moment.

[Update: As this posting gets plenty of traffic, I have updated this post with the full interview -- the link to the external EURAM site where it had been placed does not work any longer.]

For the occasion of a keynote at the EURAM 2005 conference, where Eric delivered the opening keynote, he shared some thoughts on “democratizing innovation” in this interview. Democratizing Innovation is also the title of his new book (The MIT Press, ISBN 0-262-002744.). The book is available for download from MITPress.com and his website under a Creative Commons license.

The following interview provides a good summary of his thoughts and why this all is important.

Q: Professor von Hippel, what do you mean when you say innovation is becoming democratized?

A: I mean that product and service users – both individuals and firms - are increasingly able to innovate for themselves. Open source software has brought this phenomenon to general academic attention. However, I and my colleagues find that innovation is actually being democratized quite broadly: this is the case for physical products as well as information products like software. I think that this trend is a “good thing.” It seems to me that user-centered innovation processes offer great advantages over the manufacturer-centric innovation development systems that have been the mainstay of commerce for hundreds of years. Users that innovate can develop exactly what they want, rather than relying on manufacturers to act as their (often very imperfect) agents. Moreover, individual users do not have to develop everything they need on their own: they can benefit from innovations developed by others and freely shared within user communities.

Q: Why is user innovation growing?

A: Users develop products for themselves when they cannot find what they want on the market. Available data indicates that user need is highly heterogeneous – many users have “custom” needs. Advances in computing and communication technologies are enabling users with custom needs to design and build what they want for themselves at steadily lower prices. This leads to increasing levels of innovation by users. Indeed, levels of user innovation appear to be remarkably high. Empirical research conducted by Luthje, Franke and Shah and others finds that from 10% to nearly 40% of sampled users engage in developing or modifying products in various fields.

Q: Why does innovation by users matter?

A: Innovation by users matters for two major reasons. First, users that innovate – both individual consumers and user firms - have been found to be “lead users.” That is, relative to other users in their populations they are ahead of the majority with respect to an important marketplace trend and expect to gain relatively high benefits from a solution to their leading-edge needs. The correlations found between innovation by users and these lead user characteristics are highly significant, and the effect sizes found are also very large. This means that the innovations users develop for themselves will be of interest to many users. Second, it has been found that users that innovate often freely reveal what they have developed. This means that other users – and manufacturers – are able to imitate what lead users have developed. The net result is that manufacturers often do produce innovations pioneered by lead users. Indeed, these innovations are a major feedstock for the new products that manufacturers produce and sell to the general marketplace.

Q: You also say that user-centered innovation can “out-compete” manufacturer-centered innovation under some conditions. Can you give us an example?

A: The innovation history of kite surfing is a nice example. Kite surfing is a water sport in which the user stands on a special board somewhat like a surfboard, and is pulled along by holding onto a large, steerable kite. Users were the initial developers of kitesurfing equipment and techniques, and then manufacturers came in as the market grew. By 2003 the market for commercially-produced kitesurfing equipment exceeded $100 million annually, and several manufacturers had entered the business of designing and manufacturing kites for commercial sale.

In about 2001, Saul Griffith, a MIT PhD student with a long-time interest in kite surfing and kite development, decided that kite surfing would benefit from better on-line community interaction. Accordingly, he created an Internet site for the world-wide community of user-innovators in kite surfing. Griffith began by posting patterns for kites he had designed on the site and added helpful hints and tools for kite construction and use. Other user innovators joined in and posted improved designs. Some also posted sophisticated design tools such as aerodynamics modeling software and rapid prototyping software. Many site participants turned out to have top-level technical skills – for example, one was a skilled aerodynamicist employed by an aerospace firm.

The scale and quality of the collective user effort grew to exceed that of equipment manufacturers. Indeed, some designs posted on the site for free downloading were clearly better than the designs developed by manufacturers. As a result, some manufacturers began to shift to downloading and building user designs rather than designing their own. In other words, free user-developed designs began to drive out manufacturer-based development activities. Of course, one can see the same phenomenon in industries that are economically more important – although perhaps less fun to talk about. For example, many manufacturers in the custom integrated circuit industry have become “silicon foundries” that specialize in produce user-designed circuits. Billions of dollars of these are produced each year.

Q: So, do manufacturers like user innovation?

A: Not all of them! The ongoing shift of product development activities from manufacturers to users is painful and difficult for many manufacturers. Open and distributed innovation is "attacking" a major structure of the traditional division of labor. Many firms and industries must make fundamental changes to long-held business models in order to adapt.

Q: These fundamental changes seem to imply also changes for governments and legislation.

A: Yes. Together with Joachim Henkel I have explored the social welfare implications of user innovation. We found that, compared to a world in which only manufacturers innovate, social welfare is very probably increased by the presence of freely-revealed innovation by users. This finding implies that policymaking should support user innovation, or at least should insure that legislation and regulations do not favor manufacturers at the expense of user-innovators. Governmental policy and legislation have long contained the assumption that manufacturers are the developers of new products and services. As a result, innovation-related government incentives have sometimes been directed preferentially to them. Social welfare considerations suggest that this must change. Especially, the workings of the intellectual property system are of special concern. But, despite the difficulties, it seems to me that the goal of a democratized user-centric innovation system appears well worth striving for!

Q: Thank you very much!