Every business has customers who are convinced they can design a new product that is better than the product they are being sold. So the question is why not let them? Crowdsourcing is an innovative research methodology that allows customers to help design the products they want online. It’s a methodology that is saving companies thousands of pounds on research bills and is proving highly effective because customers are getting the chance to mould and shape the products they are going to be buying. And because products are not being designed by remote head office R&D teams the chances of product flops are greatly reduced.
Forecasting the demand for new products is becoming increasingly difficult in many markets. But collective customer commitment or crowdsourcing, can decrease the flop rate of new products by integrating customers deeply in the innovation process and asking for their commitment to purchase before development is finalized and manufacturing starts.
The benefit in cost savings, creativity and innovation, by getting your customers to design the products they want and having them pre-order the product before it’s manufactured in huge. This is collaboration with customers at its finest.
Two companies have embraced crowdsourcing. The first, Threadless, a T-shirt maker. Each week the company receives hundreds of new designs. Threadless posts these to its Web site, where anyone in the Threadless community can assign the design a score. The four to six highest-rated designs each week are put into production, but not before enough customers have pre-ordered the design to ensure it won’t be a money-loser. And the motivation for the designer? Threadless puts the designer’s name on the label of each shirt and £1000 goes to the best designer each week. And the commercial/customer benefits? For designers, it’s a creative outlet and a potential revenue stream. For customers, they get to choose the T-shirts they want from a wide range of choices. From Threadless’ point of view, the company doesn’t have to hire a design staff, and only commits financially to shirts with proven, pre-ordered, appeal.
The other example is Japanese furniture retailer Muji, and competitor to IKEA who has recently been opening stores in the UK and rest of Europe. Through its web community site with access to over half a million people, Muji receives product ideas and then gets members to assess each idea or design. A short list of the best rated ideas is given to the R&D team, who develop the final product specifications. Then rather than conducting expensive focus groups or other traditional research methodologies, Muji determines market demand by the number of pre-orders it gets. Basically, if 300 or more customers pre-order an item online, it goes into production. Muji claims that customer designed products outsell the rest of their models fifty times over!
These two companies manufacture T-Shirts and furniture. But could the concept work just as well for a bank or an insurance company, who’s products are far more complex. Our research shows that crowdsourcing is possible even in complex industries, and potentially even more important for these companies due to the high cost of product production and risk of product failure. Also the younger customers Generation X and Gen Y want a relationship even partnerships. New social media technologies enable even companies to engage the customers in a two way dialogue with customers helping them design and development new products and services. More companies should embrace crowdsourcing. I’m surprised this isn’t a hotter trend.