[MUSIC] As you can see from my videos, I often wear T-shirts. I like them for lots of reasons. They're comfortable, inexpensive, and usually easy to clean. On top of that, t-shirts are also a form of self-expression. Many of us wear t-shirts that contain a name or image of things we like, places we've been, or causes we support. For example, my favorite t-shirt contains the logo of the Illinois MakerLab, the world's first 3D printing lab in the Business School which is located right upstairs here in the business instructional facility in Champagne, Illinois. Now, although this is my favorite t-shirt, my favorite t-shirt manufacturer is a company called Threadless. Which is located just a few hours North of here in Chicago. If you've seen the co-creation lecture, you already know now that the designs that Threadless makes and prints on this t-shirts have been co-created by people like you and me. I like lots of their designs and have purchased several Threadless t-shirts over the years. For example, here's a flashback to a Threadless t-shirt I wore for a video in a earlier version of this course. [MUSIC] Now the purpose of this case study is to illustrate and apply the concept of co-creation to an actual business, in this case, Threadless. Threadless is an online retailer that sells t-shirts as well as other types of clothing and accessories. They all contain unique designs. Now all these designs are submitted and selected by the crowd. The winners of their weekly design contest obtain the satisfaction of having their design and their name featured on the Threadless website and they also get to share in the monetary rewards. Threadless was established back in 2000 by two young men, Jake Nickell and Jacob Dehart, they were both in their early 20s and had interest in both computers and art. Now, Jake and Jacob started Threadless because they wanted to provide an online forum for hosting design contest among their friends. This forum was very successful and Threadless quickly expanded in terms of both sales and employees. By 2004, Threadless was earning over $1 million in profits each year and began attracting lots of attention from the business community. Threadless continued its expansion in the physical space and opened up a retail store at the North side of Chicago in 2007, and was named the most innovative small company in America by Inc. Magazine in 2008. So back then, Threadless seemed like an incredible success story. Around 2014, the Threadless magic began to fade, sales had slowed and profits were down. In response, Threadless laid off about 25 percent of its workforce. That's a lot, and closed its retail store in Chicago in an attempt to cut cost. Since then it's social media followers have begun to decline and Threadless is rarely mentioned, if ever, in the business press these days. In attempt to stimulate greater engagement, Threadless has begun to give winning designs a percentage of royalties for each sale rather than a fixed cash prize like they did in the past and they also created a new feature called Artist shops that allows individuals to sell their designs directly to Threadless customers without having to enter a design contest. Threadless was one of the first and best examples of co-creation. However, in recent years it has begun to lose some of its luster. The assigned reading provides an overview of some of its struggles. Although Threadless is still in business and appears to be profitable, it hasn't experienced the runaway growth that many, including me, expected. In brief Threadless appears to be a company in a stage of maturity and it's trying to figure out what to do next. Its business model still relies heavily on co-creation. However, it's unclear if the strategy will enable Threadless to reach the level of growth that many had anticipated. As you think about this case, I'd like you to consider three different groups. First, the Threadless community. As we discussed earlier, all of Threadless' designs come from its community of designers like you and me. Since its inception, Threadless has received nearly 0.5 million submissions and has printed about 10,000 of them. So if you do the math, there was only about a two percent submission acceptance rate. In other words, 98 percent of all submitted designs are rejected by Threadless. Now over time, if an individual's designs keep getting rejected they're probably less lucky to keep on submitting them in the future. So Threadless needs to keep attracting new designers in order to support its co-creation model. In addition to designing t-shirts, Threadless also relies upon its community to help select the winning designs. So maintaining a large and active community is very critical to the success of its co-creation strategy. Second, competition. Given Threadless' widely publicized success, a number of new competitors have entered this market, have begun to sell co-created t-shirts such as Teespring, Tee Fury, and Design by Humans. Several of these competitors offer comparable products at a lower price, so Threadless is no longer as unique as it once was. Third and finally, customers. Now little is known about Threadless' customers since it's a privately held company. However, we do know that its initial customers from way back in the early 2000s are now in their mid 30s or older, so they probably don't wear t-shirts as often as they used to. On top of that, its new younger customers probably view Threadless as just another t-shirt company rather than a new innovative startup. Also, many young people are quite skilled with digital design software, can easily get their own designs printed on a t-shirt, or a mug, or whatever they want through companies such as Cafe Press. Given this information, I'd like you to evaluate Threadless' co-creation strategy by answering the following three questions. First, is Threadless a success or a failure and why do you think that way? Second, how does today's digital world impact both positively and negatively Threadless' co-creation strategy? Finally, how could Threadless improve its co-creation approach? What tactics or tools could they use to enhance their success? I hope you enjoy working on this case. I look forward to seeing your thoughts. [MUSIC] Thanks for sticking around, here is your bonus fact. Did you know that Threadless' former Chief Technology Officer, Harper Reed, left Threadless to become the Chief Technology Officer of President Barack Obama's 2012 reelection campaign. Pretty cool. Good luck with the case.
