Principles of Distributed Innovation
Essay: Karim R. Lakhani and Jill A. Panetta. The Principles of Distributed Innovation. Innovations, Summer 2007.
URL = http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2007.2.3.97
Excellent review of the principles of Open Innovation, with 3 cases studies: community-based (Linux), mixed commerce-community model (Threadless); crowdsourcing outside innovation (Innocentive.
Abstract
"In this article, we first provide an overview of distributed innovation systems that are achieving success in three different industries with three different organizational models.We then consider in the context of these three examples questions and concerns related to why people participate, the organizing principles of production, and the implications for intellectual property. We close our discussion with a review of potential extensions and limitations of this alternative model of innovation."
Excerpts
Threadless: Blending Community and Commerce
Karim R. Lakhani and Jill A. Panetta:
"Threadless.com, an online t-shirt company, foreshadows the commercial enter- prise of the future that is built to leverage community-based distributed innova- tion. Firms in the apparel and fashion business face two critical challenges, (1) to attract the right designer talent at the right time to create recurring fashion hits, and (2) to forecast sales so as to be better able to match production cycles with demand cycles. Threadless solves these problems by letting its international com- munity of customers take over such core functions as innovation, new product development, sales forecasting, and marketing.
Threadless was started in 2000 by friends Jake Nickell and Jacob DeHart who were active participants in a Chicago-based online community of designers called Dreamless. The experience of winning a t-shirt design competition sponsored by the Dreamless community exposed Nickell, and by association his friend DeHart, to the idea that co-creation with a community was a relatively untapped market. Both were amazed by the variety and high quality of submissions received by the Dreamles community organizers. As budding designers, they realized early on that the fashion industry was fickle and they had no monopoly on good design ideas. But a platform that solicited design ideas from anyone and provided for commu- nity-based selection of submitted designs might overcome their own limitations. Hence Threadless was formed.
Threadless.com’s business model revolves around an ongoing competition to which anyone, professional graphic designers and amateurs alike, can submit designs for new t-shirts. The community is polled on both the designs (which are rated using a scale of zero to five) and willingness to buy. Threadless uses this information to select for production six to ten new designs each week. Winning designs’ creators receive cash and prizes worth $2,500, are recognized for their accomplishment on the company’s Web site, and have their screen name printed on the t-shirt label. Community members also critique submitted designs and pro- vide feedback to help designers improve their ideas going forward. Threadless also populates its online catalog with photographs of community members wearing t- shirts bearing winning designs.
Threadless has become both a commercial and community success story. In 2006, it sold more than 1.5 million t-shirts to customers around the world, and its active community exceeds 600,000 members. Threadless receives more than 800 new design submissions per week, each of which is typically rated and assigned a demand signal indicating intent to purchase by more than 500 community mem- bers. More than half of purchasers have, at one time or another, voted on t-shirt designs. The online community is vibrant, logging in excess of 1,000 new member posts per day discussing design and art and submitting music and video inspired by designs. All of this has been accomplished with no reliance on traditional forms of advertising and customer recruitment. Such has been its success that the com- pany has on many occasions declined overtures by large-scale retailers to sell Threadless t-shirts in stores around the world." (http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2007.2.3.97)