Design Contests vs Mass Production – Crowdsourcing Q&A

Some long time readers of this blog might know that I used to have another t-shirt blog with more of an industry focus, called HipHipUK. With that blog now out to pasture, and this blog becoming less sale focused I thought I’d post that content here now.

If you are new to the concepts of Crowdsourcing and Open Innovation I recommend you start here – Crowdsourcing, Open Innovation

Aaron  got in touch after reading my dissertation on Threadless (available here) and asked:

“I am a student studying business at Indiana University. As a project, my team and I have been assigned to find a way for Target Corporation to attract and maintain more customers aged 10-26 (“Millennials”). The idea we have generated is to have Target implement a clothing line similar to www.threadless.com and www.designbyhumans.com.

During my research, I came across your dissertation regarding Threadless. The paper contained a lot of useful information that my team has consulted thus far in our analysis. I would love the chance to discuss the topic with you further.”

Here are his questions and my answers, I hope there might be a few people reading interested so I’m publishing them here

1. What age groups do Threadless and other businesses with a similar model typically appeal to?

I wouldn’t like to say there is a specific age group that’s most open to crowdsourcing or mass customisation. But I would guess it’s most likely your community would end up being made up of 15-30 year olds (that was certainly the case when I looked at the Threadless community). This generation is the most technology literate and is more likely to have the time required to invest in such a process. We’ve also been brought up to be pushy, ask questions and challenge everything and we’re comfortably with sharing our wishes and connecting with other people online.

But I don’t think as a concept its restricted to 15-30yrs old, I guess you need to think about what problem situation you are solving. Take a look at the work of Eric Von Hippel (some good papers are referenced in my dissertation). He has studied many niche interest groups, and you can see really high engagement and phenomenal time investment from participants in these groups, which are usually working collectively to solve a specific problem. If your crowdsourcing project can unite people with a similar problem it’ll be appealing to everyone with that problem regardless of their age.

2. How effective or profitable is mass customization as opposed to normal apparel offerings? What are the advantages and disadvantages of each approach?

It’s very effective, depending on the metrics you are using to define effectiveness (which I’m going to guess is revenue). Let’s look at the options:

Mass Customisation e.g. Zazzle/Spreadshirt

Adv: Can offer a product that is virtually 100% tailored to the specific desire of your customer. Can keep a smaller inventory, just need enough of each component (e.g. blank shirt) in stock. Less likely to lose money through having to discount, as a product is only created when it is demanded.

Dis-adv: Resource intensive production process. Much more complicated sales process, customer education required to get the best out of their online configurator.Not as easy to benefit from economies of scale – same resource and cost required to make every product.

Mass Production e.g. Busted Tees

Adv: Economies of scale. Simple production process requiring no specialist equipment. You can get a screenprinter to deliver to a drop-shipper and never touch a shirt if you wanted, there is very little that can go wrong.

Dis-adv: Hard to estimate demand, you’ve scored today’s hot meme but by the time you urgently reprint another 1000 shirts people have moved on to something else and you’ve 1000 expensive dishcloths sitting in stock. Getting people interested in your brand, there’s just so much competition.

Crowdsourcing e.g. Threadless/DBH

Adv: Ability to estimate demand in advance, lowers $ sitting in stock and discounting required. Free, highly qualified market research. Potential (not heavily researched, but my gut feel) link between involvement and willingness to purchase. Customer can shape the brand, which is likely to produce a very passionate community of fans to evangelize your brand.

Dis-adv: The biggest being this only works well for simple tasks, it’s applicable to all industries but only likely to be a massive financial success in a small number, where the product creation process is simple (e.g. t-shirts). All the other advantages are mostly related to community management, your community whether its designers or voters are your firms main IP, so you’ll only be as effective as that IP resource is managed. Communities expect a huge amount and if you get wrong there are a lot of competitors they can go to. For a new service starting the big problem is competition, there are just so many sites out there you’ll have to work hard to carve out your niche.

3. Do you think a large corporation such as Target could benefit from incorporating the Threadless business model into its product line?

Yep, it might not be able to copy it per say but the basic concept of – the more customer involvement you can get, the earlier in the product development lifecycle, is valid for any business.

But it might all look like fun and games, checking out new submissions and waiting for the votes to roll in, buts it’s really hard work. Supervising one person is hard work, supervising 100 is really hard, supervising a community of thousands all with their own ideas, goals, backgrounds and personalities? Really hard work, Target would need to make sure they’ve people knowledgeable or at least interested in this area who are up for the challenge (and sleepless nights).

A company such as Target would really have to be ready to be open and transparent about their decisions, or goals for the service if it’s not genuine, just a me-to everyone else is having a go at Open Innovation let’s throw out hat in the participants will smell a rat pretty quick. Don’t attempt Open Innovation if you aren’t ready to be open, you can’t expect to take, if you don’t first give and that’s not just $ – but time, insight, briefings, feedback, encouragement and support, like most things in life and to borrow a terribly overused cliche – you’ll only get out what you put in.

I managed a logo design contest for my former employer Spreadshirt, the project review I did covers a lot of the difficulties of managing a design contest – OLP 1.6 review (background to the contest – About the OLP 1.6)

4. What supply chain matters are there to consider in starting up a Threadless-like operation?

The first one that springs to mind is keeping a steady stream of good products coming out. Some weeks you might be inundated with great designs, other times will be slow as designers move around the contests or take seasonal breaks (in the summer for example people are spending less time indoors making speculative t-shirt designs). So you have to keep a steady stream of new products flowing through and get the balance right between output and quality.

The only other problems which are maybe not supply chain specific, but that might cause problems there (surplus stock mainly) would be Target specific, assuming you planned to sell the products in Target stores as well as offline. I’ve only talked about selling online, so the place where you source ideas is the place you offer back the product that resulted from that idea, ideally back to the people that told you they liked that idea in the first place. Easy, $sale$, peasy. If we’re talking about Target selling offline, back in their stores that would open up a whole loads of potential questions:

- How much of peoples’ involvement is based on exclusivity? Will they spend time giving feedback and shaping a product that will be mass produced and therefore not offer them any level of perceived exclusivity?

- Does the online group adequately represent the offline buying public? If not would you still be able to accurately gauge demand.

- How do you tell the products’ creation story in Target stores? The comments it received, who designed it, what else they’ve designed, how they came up with the design, the score it got in the voting etc etc this is all interesting information, a story you can present online but would be hard to recreate offline, where its more likely to become a t-shirt on a rack.

Agree with these points? Dis-agree? Let us know in the comments.

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