Crowdsourcing is Shaking Up the Business Model

Published Nov-28-10

Breakthrough:
Furniture company turns to consumers for original designs.

Company:
Made.com, United Kingdom

The Story:

Open innovation and crowdsourcing are rapidly redefining business models. One such company to take advantage of the wisdom of the crowd is a UK-based furniture retailer.

Made.com is an online only retailer, but what marks it out from many others is that it has no inventory and therefore no need for a warehouse. Instead its products are designed by consumers.

Open Innovation Business Model

So how does this imaginative open innovation business model work?
Visitors to the company’s website are encouraged to submit their furniture designs, anything from sofa beds, tables and chairs, to lights, shelves and sideboards. Members of the Made.com community vote for the best of these which are then made available for order.

The next step for these popular pieces is that they are manufactured in China and then shipped by container and delivered directly to the consumer.

Origins

The idea for the business came to the company’s CEO Ning Li after he had paid out a fortune for his first sofa. He asked himself whether it was really worth such an outrageous sum, and wondered if there was a way to reach a more affordable price without compromising the integrity of the design. An open innovation approach gave him the answers he was looking for and a new company was born.

The designers do not receive any upfront fees, but are paid 5% royalties on successful designs, which Li states is above the average for the industry.

The company formed in 2010 and claims that revenue is doubling month on month.

Huge Customer Savings

By using the crowd to design furniture Li says he can save his customers between 50 and 80% compared to traditional high street retailers. He is able to cut out so many of the middlemen.

Typically when people buy furniture some of their money goes to an importer, who buys from an agent who sources it from somewhere else. And at every stage money has to change hands. Small wonder then that high street prices can sometimes be astronomical.

Advantages of Crowdsourcing

There are so many advantages to crowdsourcing and open innovation approaches that turn consumers into research and creative directors. The first and most obvious benefit is that it is a lot cheaper for companies, by using the passions of the crowd rather than hiring an entire R & D team.

This of course does have its critics where some argue that crowdsourcing companies are just getting their spec work for free. But as with Made.com many offer royalty payments and fees to those designs are selected and are successful.

The second big advantage is that a company can receive hundreds of ideas very quickly and from a huge variety of sources. Sometimes the best ideas will come from places where no one would typically think to look.

A retired gardener or a chef or a student might just have the next best idea that could elevate a company’s profile and fortunes.



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