The public participates in running the company; is this what you call a buyocracy?

Fluevog Mary Janes, 2005
Originally uploaded by selfmademug.

June 18, 2006
Under New Management
To Charge Up Customers, Put Customers in Charge
By WILLIAM C. TAYLOR / NY Times

FOR more than three decades, the designer John Fluevog has been selling colorful and distinctive shoes that win raves among rock stars and fashion models, have adorned an Absolut Vodka ad and attract legions of loyal customers that his company calls "Fluevogers."

Over the last few years, though, Mr. Fluevog hasn't just been presenting ideas about shoes and style to customers; he has also been soliciting ideas from them — encouraging brand enthusiasts to submit their own sketches for leather boots, high-heeled dress shoes, even sneakers with flair. He posts the submissions on his company's Web site (fluevog.com/files_2/os-1.html), invites visitors to vote for their favorites and manufactures and sells the most promising designs. He calls it all "open source footwear."

"Customers want to express themselves, to be involved with the brand," Mr. Fluevog said in an interview at the John Fluevog Shoes boutique on Newbury Street in Boston. (His company, based in Vancouver, British Columbia, has shops in nine major cities, including New York, Los Angeles and Melbourne, Australia.) "For so long, people would hand me a drawing of their personal design for a shoe or ask if I had considered an idea they liked. This program is a natural outgrowth of that desire for connection."

To date, the company has chosen nearly 300 finalists from the flow of sketches into Vancouver — and introduced 10 shoes based on customer designs. On the day Mr. Fluevog visited Boston, the Newbury Street store was selling five of the most popular customer-inspired models, including the Urban Angel Traffic, a walking shoe (retail price, $179) designed by a customer in Moscow, and the Fellowship Hi Merrilee, a vintage-style pump ($189) designed by a customer in Provo, Utah.

"Some of the ideas from customers are striking, but impossible to make," Mr. Fluevog said. What tends to work best, he explained, are intriguing twists on design themes that he and his colleagues are already exploring. "But even submissions we can't make add to the stimulation," he added. "Our customers get more involved, and we get insights into who they are and what they're doing. It's better for both of us."

Eric von Hippel, head of the innovation and entrepreneurship group at the Sloan School of Management at the Massachusetts Institute of Technology, calls this bottom-up phenomenon "lead-user innovation," and has studied its effects in industries from extreme-sports gear to medical equipment.

In a time of ever more talented technology enthusiasts, hobbyists and do-it-yourselfers, all connected by Internet-enabled communication, he says, the most intensely engaged users of a product often find new ways to enhance it long before its manufacturer does. Thus, he argues, companies that aspire to stand out in fast-moving markets would be wise to invite their smartest users into the product design process.

"It's getting cheaper and cheaper for users to innovate on their own," Professor von Hippel said. "This is not traditional market research — asking customers what they want. This is identifying what your most advanced users are already doing and understanding what their innovations mean for the future of your business."

Peter van Stolk, the founder and chief executive of Jones Soda, a fast-growing soft-drink company based in Seattle, doesn't expect his customers to invent new drinks or to reinvent any of his existing line of organic teas, energy drinks and carbonated beverages in offbeat flavors like Blue Bubblegum, Fufu Berry and Lemon Drop. But he does rely on customers to infuse his company's brand image and retail presence, and to exercise their voice in shaping a message to the marketplace.

"We started this company with the philosophy that the world does not need another soda," he said. "That forced us to look at things differently: How could we create a new kind of connection with customers, let them play with the brand, let them take ownership of it? Everything at this company is about sharing ownership of the brand with our customers. This is not my brand. This is not our soda. It belongs to our customers."

Mr. van Stolk makes his products more memorable by making their marketing more social. A key to the company's identity — what separates it from giants like Coke and Pepsi and keeps the buzz going among its 12- to 24-year-old consumer demographic — is its packaging on store shelves. Jones Soda comes in 12-ounce glass bottles with labels as distinctive as the flavors are exotic. The labels are designed around striking photography — mainly black and white, but some in color — of landscapes, children, cars, street scenes and so on.

The labels change regularly, and many customers eagerly await the debut of each new batch of photographs. Why? Because the photos come from customers. Over the years, Jones has received millions of photos from its customers. Its Web site, jonessoda.com, displays a selection of images that have been sent by mail or e-mail to Seattle.

Visitors to the site vote on which pictures should go on the labels. When a photo is selected, the label includes the name and hometown of the person who submitted it.

It's a clever grass-roots branding technique. Customers also vote on music posted to the Jones site by independent bands, and photos of popular bands go on labels. Customers can even order a 12-pack featuring their own photographs — a form of Internet-enabled personalization that is the company's highest-margin business. The personalized 12-pack costs $34.95.

"So what is Jones?" Mr. van Stolk asked rhetorically. "Are we a soda company? Are we an Internet company? Are we a social networking company? We're all of that. Our goal is to keep creating more ways for customers to exercise ownership of the brand."

Jake Nickell and Jacob DeHart, co-founders of Threadless.com, based in Chicago, are developing an even more radical model of shared ownership with customers. Threadless, which has become something of an Internet sensation, is in a decidedly old-fashioned business: selling T-shirts. But the designs in its huge online catalog all come from the company's customers, who submit their artwork to the site.

Visitors rate submissions on a one-to-five scale. The company selects five to seven designs a week and sells them for $15 apiece. Winners of the design competition receive $1,500 in cash and $500 worth of merchandise. Other customers earn points — good for store credit — for referring new buyers and for submitting photos of themselves wearing Threadless shirts.

All of this online participation has built a group of deeply engaged users who design, select, market and buy products — an enterprise whose customers are, in effect, the company. Threadless has 300,000 registered users and adds 20,000 a month. It receives as many as 150 new design submissions a day and sells up to 80,000 shirts a month.

WE'VE got four rules we follow," Mr. DeHart said. "We let the community create the content. We let the community build itself — no advertising. We let the community help with the business; we add features based on user feedback. And we reward members of the community for participating."

It's a low-cost, high-involvement formula with plenty of room for growth. Indeed, Mr. DeHart and Mr. Nickell have started several related lines, from one for customer-designed T-shirts for children (which made its debut Monday on Threadless) to another for customer-designed fabrics for neckties. (The ties are available at a companion site, www.nakedandangry.com.)

"Most of the energy comes from how fast the product line is changing," Mr. Nickell said. "There's something for users to do every day — see which new designs are out, score the latest submissions, post a blog entry. It's just a very active community."