Threading The Needle On Customer Empowerment

Threadless is on the cover of Inc.
Jake Nickell and Jeffrey Kalmikoff, two north side of Chicago graphic designers figured out how to create community and a thriving business in the same move. Academics, venture capitalists and the entrepreneurs who read Inc. are paying attention.

Threadless is at the vanguard of a new innovation model that is quietly reshaping a host of industries. Whether it’s called user innovation, crowdsourcing, or open source, it means drastically rethinking your relationship with your customers. “Threadless completely blurs that line of who is a producer and who is a consumer,” says Karim Lakhani, a professor at the Harvard Business School. “The customers end up playing a critical role across all its operations: idea generation, marketing, sales forecasting. All that has been distributed.”

Threadless runs design competitions on their site where members submit their ideas for T-shirts — hundreds each week — and then vote on which ones they like best. Threadless produces the most popular designs and sells them via their online store and at their new retail location in Lakeside.
Revenue is growing 500 percent a year, despite the fact that the company has never advertised, employed no professional designers, used no modeling agency or fashion photographers, has no sales force, and enjoys no retail distribution, except to their own store. Margins run above 30 percent, because community members tell them precisely which shirts to make – and every product eventually sells out. Threadless has never produced a flop.

It’s clear that the limited production of each t-shirt provides the social objects they market the exclusivity needed to appeal to the indie crowd. But there’s more to the Threadless story. Nickell and Kalmikoff conduct themselves like active members of the community, not executives in a growing enterprise. You can even IM them from the Threadless site, if you want.

“Companies are very good at creating platforms for external input, but they’re very bad at using this input,” says Frank Piller, a management professor at Germany’s Aachen University and a researcher at MIT, who has studied BMW’s use of an innovation portal, a website that invites consumers to submit ideas. “BMW gets a thousand good ideas each year,” he says. “Maybe they use one every two years.” In other words, no matter how much technology goes into prettying up the suggestion box, the suggestions tend to get dumped in the trash at the end of the week.

It seems you can’t easily retrofit for community-centered design. It needs to spring up naturally. Yet, there’s talk of how the Threadless model is ready to spill over into other categories and how Threadless itself really isn’t a t-shirt company.

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.”

Inc. says the lesson in Threadless is to look outward, to your customers, for answers. Great, I’m wondering what answers our clients have for us. Do they want to design their own communications, and have us, the agency, “print” them? Might we invite our customers to engage around topics of common interest like the designs we use to build their businesses? It’s possible, but you have to want to share and lay it all out in the open. In the agency and client worlds, sharing isn’t a common practice, competition is. Which isn’t to say there isn’t learning here for the communications industry.
Maybe we’re looking at our “customers” wrong. Aren’t our customers in fact our clients’ customers? Yes. They’re the end users of the communications we produce. If we see the intended, or the “target,” as the person to engage, to ask about our product, might they help us make better products in the future? I believe so but consumer generated media is not the answer. That’s the audience playing us at the brand’s expense and their own. Focus groups are not the answer either. The only thing in focus behind the glass is what a zoo the whole practice is.
If an agency wants to take the radical step of posting their work online and then inviting comments on it, comments that everyone can see, that might improve the work in a hurry. But it might also sour some client relationships and bruise egos up and down the chain. Again, we have a cultural barrier to change imposed by long-standing industry tradition.
What learning from Threadless boils down to is getting people to talk more and to trust each other more. That’s what happens in healthy communities. And, more or less, that’s what we’re working on today, building the systems to facilitate dialogue between all parties; consumer to brand, brand to agency, consumer to agency and between different departments inside the agency. It’s a bit more complex than making ads, but that’s what keeps it interesting.