The Customer is the Company

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Such tension, Nickell says, is inevitable in community-based businesses. "Even before now, we've been losing our core people and gaining new core people," he says. "It's kind of like a band in its infancy: As soon as a lot of people start listening to the band, the core fans go away." Nickell points out that the look of Threadless's T-shirts -- what other clothing companies might call the brand -- has changed drastically as his audience has evolved from a small collection of geeky Web designers to include tens of thousands of teenagers from middle America. Webmaster jokes have been replaced by cultural references; wordplay has given way to painterly richness. The Threadless brand is not the shirts but the community experience. As Nickell puts it, "Our brand is a fun boys' and girls' club."

Now, Nickell is set to let his club loose on other businesses. In addition to expanding to children's clothing and retail, Threadless will begin selling prints and posters online. And later this year, the company will add a range of products, including handbags, wallets, and dinnerware, under the brand Naked & Angry. Each item will be adorned with patterns submitted by users, with a new product launched each month. "I think Naked & Angry, if handled properly, has the potential to be way bigger than Threadless, because we have the flexibility to do everything," says Kalmikoff, who envisions moving into high-end clothing as well as housewares. Jeff Lieberman, managing director of Insight Venture Partners and a board member, is even more bullish. "To say it's just a T-shirt company is absurd," he says. "I look at it as a community company that happens to use T-shirts as a canvas."

That a quirky T-shirt company can elicit such glowing statements from a private equity professional who invests mostly in an industry called software-enabled services is something of an accomplishment in itself. Indeed, nearly everyone who touches Threadless seems to come away feeling a little cooler. The executives and academics who met Nickell and Kalmikoff three years ago at MIT still speak glowingly of the kids from Chicago who bailed out on a group dinner at Legal Seafoods in order to attend a customer meet-up in a Cambridge bar. "They're a bunch of guys in T-shirts, but they're incredibly thoughtful," says Jim Euchner, vice president of growth strategy and innovation at Pitney Bowes. Euchner marvels at the way Threadless has built a defensible business based not on proprietary information or technology but on an extremely loyal group of customers. "It's just a different way to think about business," he says.

The way Eric von Hippel sees it, Threadless has tapped into a fundamental economic shift, a movement away from passive consumerism. One day in the not-too-distant future, he says, citizen inventors using computer design programs and three-dimensional printers will exchange physical prototypes in much the same way Nickell and cohorts played Photoshop tennis.

Eventually, Threadless-like communities could form around industries as diverse as semiconductors, auto parts, and toys. "Threadless is one of the first firms to systematically mine a community for designs, but everything is moving in this direction," says von Hippel. He foresees research labs and product-design divisions at manufacturing companies being outstripped by an "innovation commons" made up of tinkerers, hackers, and other devout customers freely sharing their ideas. The companies that win will be the ones that listen.

This may or may not come to pass, but the lesson of Threadless is more basic. Its success demonstrates what happens when you allow your company to become what your customers want it to be, when you make something as basic and quaint as "trust" a core competency. Threadless succeeds by asking more than any modern retail company has ever asked of its customers -- to design the products, to serve as the sales force, to become the employees. Nickell has pioneered a new kind of innovation. It doesn't require huge research budgets or creative brilliance -- just a willingness to keep looking outward.

Max Chafkin is an Inc. staff writer.

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