I recently had an interesting conversation with Karim Lakhani, a professor at Harvard Business School, and the author of an HBS case study on Threadless, which Max Chafkin wrote about in our June issue. I continue to be fascinated by the subject of community/user innovation since it's a topic I'm covering in my book, and one that I think is especially relevant to Generation Y entrepreneurs. "Gen Y has grown up with IM, Facebook, MySpace, and all these platforms, so it's a natural thing for them to think about business models that involve community, " says Lakhani. "In my generation, GenX, the geeks have been doing it for a long time. The mental switch for Gen Y is that we can leverage communities for a range of economic opportunity. You see a lot of experimentation. They're just trying to get a community going and then they figure out the business."
That seems to be Ben Kaufman's approach to Kluster (see Democratizing Innovation) -- a venture that's fun and instructive to watch for anyone interested in this topic, since there's lots of experimenting going on. Kluster's first project, Knewsroom, a community-created online newspaper, folded after just 38 days. "We realized that to make this work, there needed to be an editing process and as soon as you do that, it becomes too complicated. We watched it, tweaked it and made the decision that it was not for us." So Kaufman killed Knewsroom unsentimentally at around the same time he launched NameThis.com, where you can pay $99 for the community (about 11,000 strong but growing) to christen your new product or service with a new name. $80 of the $99 goes to community members who contribute ideas. So far, the company seems to be getting some traction, as does the other element of Kaufman's business model: selling customized and subscription-based versions of the Kluster platform to companies that will use it for internal reward-driven idea generation and problem solving.
Another new company that's worth watching is Local Motors, an "automotive 3.0 company" that will use an open source platform to design innovative, fuel efficient cars, to be manufactured in local "micro-factories" that will also sell and service the cars. Like Threadless, it's both a collaborative design community and a social network. Weekly design contests pay out $1500 to winners; if a car is actually built, the designer gets $10,000. In addition to "cool car" appeal, the company makes lofty promises: greener automobiles; and local economic growth through the creation of small manufacturing facilities. Take that, GM.
It seems to me that while companies like Threadless, Kluster and Local Motors do have the potential to be industry disrupters; it's really the process of user innovation that I find more interesting than the result. It's messy, unpredictable, and demands that you throw yourself into experimental mode, and declare yourself willing to fail. In the meantime, though, you've succeeded in assembling an engaged global community of members who talk to and collaborate with one another under your watchful eye, and who just may generate the spark for your next great success.
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.