This rabid engagement propelled the company through four years of phenomenal growth, beginning around 2004. The user base grew tenfold, from 70,000 members at the end of 2004 to more than 700,000 today. Sales in 2006 hit $18 million -- with profits of roughly $6 million. In 2007, growth continued at more than 200 percent, with similar margins. Though Nickell refuses to disclose the exact revenue number -- perhaps because he now counts Insight Venture Partners, a New York venture capital firm, as a minority shareholder -- it seems fair to assume that Threadless sold more than $30 million in T-shirts last year.
Ask Nickell what he makes of his company's whirlwind success, and he will respond rather sheepishly. "I think of it as common sense," he says. "Why wouldn't you want to make the products that people want you to make?" Indeed, the idea that the users of products are often best equipped to innovate is something many entrepreneurs know intuitively. And it is supported by a growing body of research. A study published last year in the Strategic Entrepreneurship Journal suggested that the vast majority of companies are founded by "user-entrepreneurs" -- people who went into business to improve a product they used. Meanwhile, studies by von Hippel and others show that in industries as diverse as scientific instruments and snowboard equipment, more than half the innovations generally come from users, not from research labs.
Some major corporations are beginning to experiment with these ideas. Pitney Bowes is building an online social network for direct marketers who use its mail machines, and Ford now allows drivers of its Focus sedan to add third-party hardware and software to their vehicles' navigation and entertainment systems. But most companies still prefer what von Hippel calls the "find-a-need-and-fill-it" paradigm -- which involves market research, focus groups, testing, reworking, and retesting. Not only is this method extremely costly, but it fails to capitalize on a company's most dedicated customers -- who often are already improving existing products to fit their needs. Think of the hacker who tweaks his iPhone to allow it to run Skype, the mountain biker who builds an improved chain guard, the teenage girl who cuts the collar off her Gap T-shirt.
Some companies actually punish these people by cracking down on unauthorized innovations. Apple has famously "bricked" -- that is, electronically disabled -- iPhones that have been enhanced by their owners. Other companies pay lip service to user innovation but have trouble following through on the concept. "Companies are very good at creating platforms for external input, but they're very bad at using this input," says Piller, who has studied BMW's use of an innovation portal, a website that invites consumers to submit ideas. "BMW gets a thousand good ideas each year," he says. "Maybe they use one every two years." In other words, no matter how much technology goes into prettying up the suggestion box, the suggestions tend to get dumped in the trash at the end of the week.
Threadless is an exception to this. "You could say that what Threadless does is trivial, but it's not," says Harvard's Lakhani. In fact, the very triviality of Threadless's product -- something as low tech and as commoditized as a T-shirt -- proves that vibrant online communities can drive all sorts of nontechnical businesses. This should be encouraging news to entrepreneurs. Customer communities have become exceedingly inexpensive to build and manage; blogging software and social network platforms, for example, are now available for free from a handful of start-ups. "We thought that open source could only work in software, and now it's being successfully applied to a product as mundane as a T-shirt," Lakhani says.
Threadless's headquarters is in a former printing plant on Chicago's Ravenswood Avenue. The 25,000-square-foot office is open to customers, a dozen of whom stop by every day to pick up shirts in person. They sometimes stick around for hours and hang out in a space that resembles a college dorm room constructed on an impossibly large scale. There are video game consoles, go-carts, a giant television, beanbag chairs, action figures, a singing-buck trophy, a Ping-Pong table, and a full-size Airstream trailer that the company uses as a studio in which to produce podcasts.
These diversions and many others are captured in a host of videos published at Threadless's website. There's the one of Nickell smashing a television with a homemade potato gun, the Halloween video with employees throwing pumpkins off the roof, and the one that depicts Threadless employees in a fierce pillow fight. Many videos depict employees dancing, often in ridiculous costumes. In short, the impression is of a teenage paradise -- a company that has nothing but fun.
But take a closer look, and the company is suspiciously companylike. The go-carts generally stay parked, the buck stays mute, and the Ping-Pong table serves as a gathering place for impromptu meetings. "When I started, we spent half the day playing," says Lance Curran, a bearded 29-year-old wearing a beanie, jeans, and a flannel shirt. "That doesn't happen anymore." This is not to say Curran doesn't like his job. On the contrary, he nearly glows when he talks about his rise from a temporary warehouse worker in 2005 to the warehouse manager in charge of a staff of 18 today. When Curran arrived, the average time from an order to shipment was a full month during peak season. Today, it's one day, thanks to a system by which the warehouse is regularly reorganized based on what is selling well. Hot products are placed near the packaging area, which means that packers, who will often walk three miles in the course of a shift, don't have to travel as far to get shirts. "Visitors come in here with degrees, and they can't believe how this place has evolved without any outside help," says Curran.
