Analysing Threadless's Innovative Business and Management Model

This essay provides a critical analysis of Threadless's innovation model, focusing on its unique approach to organizing and managing innovation. Threadless, an online community-based platform for creative artwork, leverages crowdsourcing by involving customers in idea generation, marketing, and sales. The essay explores how Threadless's business model, which centers around an ongoing t-shirt design competition, has enabled it to achieve a competitive advantage. It contrasts Threadless's crowdsourcing strategy with other innovation types like service, open, social, user, and business model innovation, arguing that Threadless combines aspects of open and user innovation with its core crowdsourcing approach. The essay also highlights the importance of organization and management of innovation, emphasizing how Threadless effectively empowers its community to drive design choices and reduce operational costs, ultimately leading to a successful and sustainable business model.

Running head: ORGANISING AND MANAGING INNOVATION
Organising and Managing Innovation
Name of the Student:
Name of the University:
Author note:

1ORGANISING AND MANAGING INNOVATION
Threadless is a popular online community, which creates, supports and purchases great
pieces of creative or innovative artworks. The online platform allows millions of independent
artists across the world to submit their designs to be selected by popular choice. The designs
which get maximum votes are printed on t-shirts, wall art, bags, and a wide range of apparel,
home and accessories. The company was founded in 2000 by Jake Nickell and Jacob DeHart as a
t-shirt design competition and later on, the founders established the website with this innovative
idea of printing t-shirts and other products with the designs that got maximum votes
(threadless.com 2018). As highlighted by Lakhani and King (2013), the customers play a
significant role in Threadless’s business operations, such as, idea generation, marketing, sales
forecasting as well as sales. This essay critically reflects and analyses the innovation model of
Threadless in the context of organisation and management of innovation. This will highlight
various aspects of the innovation business model of the company and how it has helped to
achieve Threadless a competitive advantage in the market.
Threadless offers an innovative service that includes the clients as the business
generators. It invites people to submit their designs or artworks, and the ones that get the most
votes for popularity, are chosen to be printed on t-shirts and other items. Those items are then
sold online and in their only retail store in Chicago. The artists whose designs are selected get the
royalties and bonus prizes from Threadless. The service or the business model is termed as an
ongoing t-shirt design competition (threadless.com 2018). The target market of the company is
the wide community with an access to the internet. Mostly the young generation is the target of
Threadless, who are active users of social media, have knowledge of art and a knack for
creativity. The company provides the t-shirts at a lower price within a range between USD 10 to
USD 20 and the other accessories range from USD 5 to USD 50. Thus, the company provides a

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good value for the customized products. At the same time, it also offers limited edition products,
that is, once a design is sold out, they print a new design and if the customers want a previous
design, they have to place a request (Lim 2014). Hence, there is exclusivity in their products
which is a value proposition factor. The competitive environment of Threadless includes direct
competitions from DesignByHumans and Teespring, however, the unique selling proposition of
Threadless is that the customers are the designers and the unique voting system to pick out the
most popular design. The competitors are more profit driven than Threadless (Lim 2014).
Threadless was established as an online t-shirt design competition and from that the
founders, Jacob DeHart and Jake Nickell have moved forward to make the business into a
community engagement on an art and technology based product service. The initial idea of
Threadless was to provide an opportunity and platform to people for showcasing and selling the
works online, which had no other business plan, marketing strategies or profit motive. With
growing popularity, the website was created and the profit of Threadless jumped to $6.5 million
in 2006 from $1.5 million in 2004 (Lakhani and King 2013). Jeff Howe termed this type of
innovation as ‘crowdsourcing’ in his ‘Wired’ article in 2006 (Estellés-Arolas and González-
Ladrón-De-Guevara 2012). This type of innovation involves the customers in all the business
activities, starting from idea generation to marketing and selling of products, which helps to
grow the interest among the customers and hence, contributes in growth (Afuah and Tucci 2012).
This innovation model, that is, crowdsourcing has helped Threadless to earn a
competitive position in the market. It was established in 2000, when there was no other company
or venture that provided any such creative platform to the customers for creating and selling their
own artworks. The USP of the business innovation is that it is not profit driven and it engages the
customers to become creative and have a product printed with their designs (Chao 2012). This

3ORGANISING AND MANAGING INNOVATION
unique idea started to attract the customers. Moreover, it also started a voting option to pick a
design from the submitted collection to control the endless designs submitted and encourage
more creativity and innovations in designs and technology. The competitors of Threadless do not
have the voting system and they have a set of their own designers. Co-Creation is the marketing
strategy that is followed by Threadless, in which the customers are the product designers or
developers (Marjanovic, Fry and Chataway 2012).
As mentioned above, the innovation framework that is used in Threadless is known as
crowdsourcing. As stated by Brabham (2013), crowdsourcing refers to practice of involving the
crowd for a common goal, such as, innovation, fund raising, problem solving etc. In other words,
Doan, Ramakrishnan and Halevy (2011) highlighted that according to Howe, crowdsourcing
represents the idea of outsourcing an activity to the crowd. Some other types of innovation are
service innovation, open innovation, social innovation, user innovation, and business model
innovation. Service innovation refers to implementation of innovative ways to serve the
customers for the purpose of delivering greater value proposition to the customers and generating
more revenues (Witell et al. 2016). IT hardware, investment in marketing, human resource
development and R&D are different forms of service innovations (Lexicon.ft.com 2017). As
opined by Hippel and Euchner (2013), user innovation refers to the innovation done by the
intermediate users or the consumers without the help of the producers. In other words, the new
products or services that are developed by the individual users or firms for their own benefit,
rather than involving the producers or suppliers for assistance are known as user innovations. It
is a very common innovation type, mostly found in the industrial sector and sports. The sports
enthusiasts often develop new type of sports or equipment for their own benefit or use and then
those are produced for the mass. Another type on innovation is the social innovation. As stated

4ORGANISING AND MANAGING INNOVATION
by Cajaiba-Santana (2014), social innovation refers to the formulation, development or adoption
and the integration of the new as well as renewed systems, ideas and practices for the
improvement of society and environment. The innovative CSR activities undertaken by
individuals and corporate houses for the benefit of the community and environment are known as
the social innovation. Business model innovation refers to a big scale change, that is,
reinvention in the business model of an organization for staying competitive in the market and
fostering growth and sustainability. It involves the practice of realizing or developing new
revenue sources through the improvement of products or changing the delivery style to deliver
more values to the customers and generating more revenues (Casadesus‐Masanell and Zhu
2013). This is a very common type of innovation framework that is used by the corporate houses.
Lastly, as defined by Chesbrough (2012), open innovation refers to the purposive inflow and
outflow of knowledge in an organisation for speeding up the internal innovation and expanding
the markets for the external use of innovations. Thus, open innovation is the process, which
encourages and accepts the participation by third party for the growth of the product or services
and the business. Strategic alliances, joint ventures etc. are examples of open innovation.
Customer co-creation strategies are sometimes adopted for internal innovation by implementing
external technologies (West et al. 2014).
Threadless uses crowdsourcing innovation as its business model or strategy. It has a clear
objective of promoting the talents through innovations. The contributors in this strategy gain
satisfaction from the appreciation and recognition of their talents, challenge to enhance their
creativity and skills, and from the royalties and prize benefits. However, it can also be stated that
the company combines the some of the aspects of open innovation strategy and user innovation
strategy with its original crowdsourcing innovation strategy. The only difference between the

5ORGANISING AND MANAGING INNOVATION
open innovation and crowdsourcing is the type of audience or customers (Seltzer and Mahmoudi
2013). In the open innovation, a company can reach out to another company, sometimes the
rivals for developing and implementing innovations, on the other hand, in crowdsourcing, a
company must involve its entire pool of customers for getting ideas and performing the tasks (Ye
et al. 2012). However, the basic principle of both these types of innovation is the help from
external source. Since, the operations of Threadless are completely based on the creativity of the
customers, they have successfully engaged them in not only creating new designs, but also
choosing a design through voting and then prints the most popular design. Thus, this business
strategy involves the facets of both types of innovations. Similarly, by implementing the user
innovation strategy, it allows the users the design the t-shirts that they would like to buy, gets the
opinion about the best designs as per the consumers’ choice and then manufactures that product
and sells those to the people who themselves picked those designs at a very reasonable price.
Organization and management of innovation is an essential operation of Threadless.
As stated by Mortara and Minshall (2011), innovation management includes tools that help in
improving the operational systems and enhancing the value and features of the products or
services for the end-users. Hence, organization and management of innovation in an organisation
involves the activities that can trigger the creative capabilities of the employees and it can be
seen as evolutionary integration of the organizational processes, business strategy, technology
and marketing techniques to deliver greater values to the consumers.
Igartua and Albors (2011) highlighted that managers are the only actors, who play the
most crucial role in innovation organization and management. It is argued that, managers set the
priorities as well as the strategies for the organizations and control the resources. The managers
set the tone for almost all the discussions and actions regarding managing innovations and

6ORGANISING AND MANAGING INNOVATION
resources in the organizations, and they focus on filtering the information, theories and ideas
from academic research, governments reports etc. while planning the strategies for innovation
organization and management (Geiger et al. 2011). However, according to Chesbrough and
Brunswicker (2013), the management of this type of innovation faces challenges regarding the
decisions of whether to open the idea-generating process and/or idea-selection process to the
public.
On the other hand, according to Chao (2014), Threadless was able to manage the
innovation efficiently as it introduced a new idea of adopting a community based business
model. Crowdsourcing or open innovation allows the company to give operational priorities to
the consumers. For example, when Kraft Foods launched a vegemite-based cheese snack in
Australia, it hosted a naming competition for the public. This strategy not only engaged the
public and created brand awareness among them, but also reduced the operational burden of
company of naming the product (Lakhani and King 2013). Since, name of a product must be
catchy to attract the consumers, the open innovation or crowdsourcing enabled Kraft foods to
involve the consumers directly in the marketing of the product. In this context, it can be said that
Threadless was able to organize and manage the innovation efficiently by involving their
consumers. The managers, that is, the owners in case of Threadless, did not take control of the
resources and printing decisions. Rather, they implemented the crowdsourcing or open
innovation and user innovation technique and left the choice of design on the consumers.
These strategic actions regarding open and user innovation are successful in case of
Threadless. This allowed the online community to reduce the designing cost (Blohm, Leimeister
and Krcmar 2013). The executives measure the total scores, distribution of those scores, that is,
fan intensity and own sense of fashion and style aesthetics while narrowing down the pool for

7ORGANISING AND MANAGING INNOVATION
voting. Through residual control the executives reject inappropriate or offensive designs. This
process also helps in reducing wastes. The process of design selection is fair and transparent,
which adds to its credibility among the customers. The royalty and prizes for the artist, whose
design is selected is also helpful in attracting more people to the community.
The strengths of this platform are: i) the platform operates free-of-charge for the users.
The members of the community can submit their designs and vote for them free-of-charge; ii)
there is no geographical barrier artists all over the world can submit the designs, vote for them
and purchase the products; iii) it has a user friendly website, which makes browsing and
payments easier; and iv) Threadless maintains transparency in its systems and policies and its
provides reasons and explanations of the rejections it made to make people understand about the
selections.
The weaknesses of the platform are: i) according to many users, the products that are
delivered, often are of poor quality. The customers complained that the printing quality is
inconsistent, material is too much thin, and the designs get pixelated during printing, leading to
customer dissatisfaction; ii) unfairness in the voting system, as some designers might ask their
friends and family to vote for their designs to win the competition; and iii) the customer service
of Threadless is very slow as per the reviews of many customers. It was said that the company
takes a lot of time in addressing customer queries or complaints, which also increases customer
dissatisfaction (Lim 2014).
The challenges in the participation and engagement are that there could be a saturation
point in designs and due to popular demand, same designs would be reprinted, leading to lack of
creativity and uniqueness. There might be copyright issues and the low barriers to entry create

8ORGANISING AND MANAGING INNOVATION
threats for the company. On the other hand, after some days, people might get bored with this
voting idea as they would not prefer to browse 100 designs every week to vote for their choice
(Lim 2014).
Thus, in the end, it can be concluded that crowdsourcing or open innovation is the most
user friendly and user accepted form of innovation and efficient organization and management of
innovation can lead to success. Involvement of the consumers directly in the product choices,
and design creation has helped it to operate at a low cost, increase brand awareness as well
loyalty. However, the managers using this innovation must have the skill to identify the scope for
involving the consumers and knowledge about the potential consequences and how to manage
those. Digital implementation of innovations has benefits and costs. On one hand, people across
the world can access such platforms like Threadless through internet, on the other hand, some
people try to take undue advantage of the system by casting unfair and more votes for their
favorite persons. At the same time, low barriers to entry often encourage many start ups and
smaller companies to venture in this innovation market, which would affect the profit of
Threadless significantly. However, it can be concluded that the innovation strategies adopted by
Threadless are quite beneficial for them to run an innovative business.

9ORGANISING AND MANAGING INNOVATION
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