Crowd Sourcing Turns Business On Its Head What happens when a company lets customers design and vote on their own products? Some Web-based outfits are finding success by doing just that. And the new business model is really catching on.
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Crowd Sourcing Turns Business On Its Head

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Crowd Sourcing Turns Business On Its Head

Crowd Sourcing Turns Business On Its Head

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Some companies are trying entirely new ways of doing business to cut back on front-end costs to help the bottom-line. Take the t-shirt company Threadless. It's generated millions of dollars in profits using designs created online by its customers. That business model is known as community-based design. Now other companies are exploring how it might work for them.

NPR's Wendy Kaufman reports on one of those companies.

WENDY KAUFMAN: Rob Langstaff used to head Adidas North America. Today he's the founder and CEO of a startup known as RYZ. It makes high-end sneakers using a community design model. Langstaff and his tiny staff work in an aging commercial building that's practically under the freeway in Portland, Oregon.

He doesn't need designers or a large marketing staff. He's relying on would-be customers for that.

Mr. ROB LANGSTAFF (CEO, RYZ): When you open up your design ideas to the community, you can move much quicker. And so the companies that don't adapt this method will be much slower to market.

KAUFMAN: In a traditional footwear company, he continues, it might take 12 months and a substantial investment to get a new design to market. RYZ says it takes them about six weeks to create a new shoe.

Mr. LANGSTAFF: You have internal decision making that happens. You have to show it to your sales force. The sales force have to show it to the buyers of department stores. And then you get feedback and you have to implement the feedback. And all of that takes time. And what we've done is we've compressed this time using the Internet.

Mr. SCOTT TANAKA(ph) (Technology Chief, RYZ): Let me show you what the actual template looks like.

KAUFMAN: Scott Tanaka, the company's technology chief, explains that would-be designers go to the company's Web site and download a blank canvas, a deconstructed high-top sneaker.

Mr. TANAKA: So here we have the seven pieces of the shoe that we allow people to customize. And so you have the inside panel, the outside, which is called...

KAUFMAN: Individuals post their designs online and consumers vote on which ones they like. Winning designs will get made into sneakers, and the designer will get $1,000 plus 1 percent royalties. The company has practically no design overhead or marketing costs.

MIT professor Eric von Hippel, an expert in innovation management, says online design is becoming a substitute for in-house research and development while voting substitutes for conventional market research.

Professor ERIC VON HIPPEL (Massachusetts Institute of Technology): This is really the biggest paradigm shift in innovation since the Industrial Revolution.

KAUFMAN: The community-based model, of course, makes more sense and will be easier to adapt in some industries than others. Still, von Hipple says lots of firms see the handwriting on the wall and some are turning to the Internet for customer feedback and ideas. But the MIT professor says most big firms are not yet comfortable with the idea that users want manufacturers to listen to them, not just the other way around.

He recounts a meeting where auto industry officials were proudly laying out the company's design plans for the next ten years. Car buffs in the audience were not impressed.

Prof. VON HIPPEL: Users in the audience stood up and said we've already designed everything you're talking about. And the company engineers got very upset. You know, that's not the user's job. They should wait until we design something for them.

KAUFMAN: But a generation used to creating its own content online and elsewhere isn't about to wait, says RYZ CEO Langstaff. He says giving consumers control is humbling and risky, but...

Mr. LANGSTAFF: It's almost less risky to invite the most talented actors up on your stage than to try to do it yourself.

KAUFMAN: Still, he admits that for his business to take off, consumers will have to take a leap of faith - from voting and talking about a shoe design to actually plunking down a sizable chunk of change to buy a pair of sneakers.

Wendy Kaufman, NPR News.

MONTAGNE: And that Oregon company RYZ has designed a special NPR sneaker. The shoe is not for sale, but you can see it at

(Soundbite of laughter)

MONTAGNE: Just take a look, you know, that's all. They're just going to look.

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