The Company as Community: Threadless Puts Everyone in Charge

We continue our examination of the new business book Practically Radical with author William C. Taylor's discussion of Threadless. How does a clothes company run by the customer manage to exceed expectations?

ThreadlessIn an era of huge dislocations and scarce resources, fewer and fewer companies are in a position to hire lots of new people or devote big budgets to new projects as a way of moving forward. But most companies are surrounded by customers, suppliers, fans, advocates, and interested parties of all kinds who are passionate about what they do, bursting with ideas, and eager to be more involved. Why not invite them to demonstrate their creativity to you, share their best ideas with you, and collaborate to solve your toughest problems or deliver on your most promising opportunities? That's one of the great mind-flips for leaders today: The performance of your organization can draw on talented "players" who may never work for you but are eager to work with you, especially if you, as a leader, work to keep them excited and engaged. It's a mind-flip that challenges how most executives define their jobs, but that improves the odds that they will succeed in the job of making real progress in difficult circumstances

That's one of many lessons to be learned from Threadless, a small company whose meteoric growth offers big ideas for how organizations and their leaders may work in the future. Threadless is in a pretty old-fashioned business—selling T-shirts (and a few other clothing items). But the company, which has become a full-blown Internet sensation, approaches the business in a completely new-fangled way.

All of the designs in its online catalog come from its customers, who submit original artwork to the site. Threadless has more than a million registered members and adds more than 20,000 members per month. It receives an average of 150-200 new designs per day—that's more than a thousand designs a week. Members rate the submissions on a zero-to-five scale, and the most popular submissions, as determined by visitors to the site, become candidates to be made into actual shirts. (A team of Threadless employees makes the final decisions, based on a variety of creative and commercial criteria.) The company selects seven new designs (and reprints two old designs) each week and sells the shirts for $15 to $17 each. The winning designers receive $2,000 in cash and $500 in store credit for their designs, plus an additional fee if their designs get reprinted later.

This is an organization where, in the words of a headline in Inc. magazine, which has spent three decades chronicling how lone-genius entrepreneurs experience the thrill of victory and the agony of defeat, "The Customer is the Company." Threadless "churns out dozens of new items a month—with no advertising, no professional designers, [and] no sales force," the magazine marveled. "And it's never produced a flop." All told, Threadless sells more than 100,00 shirts per month—that's more than a million shirts a year—with just 35 employees. (It also sells "hoodies," children's shirts and onesies, and, most recently, it added user-generated art prints to its catalog

The brand is as hot as can be—young people around the world know and embrace Threadless as a company, a sensibility, and an online community. Since its inception in November 2000, according to an elaborate, multi-media Harvard Business School case study (yes, this free-spirited Internet outfit has gained the imprimatur of the West Point of Capitalism), Threadless has attracted nearly 150,000 submission from 42,000 aspiring designers—with more than 80 million votes cast by members to express their preferences. The company has nearly 1.5 million followers on Twitter (almost as many as Tony Hsieh of Zappos), and has launched what it calls Twitter Tees, in which Threadless members nominate actual "tweets" to be turned into shirts, and other members vote on their favorites. Threadless turns the most popular tweets—"Ironic, self-aware narcissism is still narcissism," or "Note to self: Actually read notes"—into nicely designed shirts.

I asked Jacob DeHart, one of the company's cofounders, what leadership principles he and his colleagues have developed to guide the company's growth—without interfering with the guidance provided by its one million members. "We've got four rules we follow," he said. "We let the community create the content. We let the community build itself—no advertising. We let the community help with the business; we add features based on user feedback. And we reward members of the community for participating." In other words, Threadless doesn't just attract ideas for shirts—it provides opportunities for people with all sorts of skills to engage the company and each other, and for good ideas to emerge from all this interaction. "Most of the energy comes from how fast the product line is changing," cofounder Jake Nickell explained to me. "There's something for users to do every day—see which new designs are out, score the latest submissions, post a blog entry. It's just a very active community."

Practically RadicalSo what are the here-and-now lessons for leaders from this fashion-forward Internet phenomenon? First, you don't need a huge staff to do big things—particularly if you create a community of deeply engaged fans and allies who are willing and eager to do a lot of the work for you. What traditional design department could possibly match the creativity and energy of thousands, even tens of thousands, of talented young designers submitting their best work, and of visitors casting millions of votes to react to those designs? And these designers, it should be said, love to strut their stuff. Indeed, a few of them are so good, and have won so many times, that they've become mini-celebrities in their own right, complete with devoted fans and vocal supporters who tout the virtue of their work.

Glenn Jones, a 35-year-old designer based in Auckland, New Zealand, is one of the all-time Threadless champions. He has submitted more than 100 designs since 2004 , of which 20 have been printed—a remarkable track record given the number of designs from which users can select their favorites. He's been the subject of profiles in newspapers and magazines around the world, and recently started his own shirt-design and greeting-card company by virtue of his talent and visibility on Threadless. Ross Zietz, a young designer who grew up in Baton Rouge, Louisiana, is one of the few artists whose work rivals that of Glenn Jones in terms of its popularity—and he, like Jones, has put his Threadless celebrity to good use. Zeitz submitted his first design in the summer of 2003 and has had 25 of them printed since then. As a result of his visibility, he's designed T-shirts for Dashboard Confessional, Dave Matthews Band, Phish, and other big acts. What's more, he now works full time at Threadless as the company's art director. Talk about a virtuous leadership circle: One of the company's most prolific outside designers has become one of its most valuable executives.

There's another big lesson for leaders: Different people with different talents can contribute to your organization in many different ways. At Threadless, individual members don't just get rewarded for their artistic prowess. The company offers a collection of Type Tees (a forerunner to Twitter Tees) in which members who are clever with words submit pithy slogans ("Rock is Dead, and Paper Killed It" or "To Err is Human, to Arr is Pirate") that get voted on and made into shirts. Meanwhile, members with a flair for marketing earn points (good for store credit) for referring new buyers and for submitting photos of themselves wearing Threadless shirts, evidence of their commitment to viral promotion. And since Threadless produces fixed amounts of each shirt, and does not add to the print run even if a particular design or slogan surges in popularity, members as a whole conduct a form of shared inventory control. One neat feature of the site is the constantly updated inventory bar, which shows how many shirts remain available in each size for each design—a warning for indecisive buyers to place an order before the supply runs out. Members can also vote to reprint a shirt that has gone out of stock as a Threadless classic.

Why doesn't the company sell unlimited quantities of its most popular offerings? "We're not like a traditional company that says, 'Oh this is selling really well, let's make it our meal ticket until people don't want to buy it anymore," answers cofounder Jake Nickell. "That doesn't do anything for the artist, and it doesn't do anything for our community. We've set the guidelines for how the company is going to run, and by staying within those guidelines, we foster and maintain trust with the people who participate. Trust is a very fragile thing. The most overlooked element of our company is how protective we are of our community, and how much we value having its trust."

Finally, it's worth emphasizing that these new ways of building and leading an organization don't just apply to the virtual world of the Internet. In September 2007, Threadless opened its first-ever physical store on the North Side of Chicago. The store stocks just 20 different T-shirt designs at a time, and no shirt stays on sale for more than two weeks—ways to evoke the sense of creative excitement and fast-changing selection that infuses the online catalog. But the real value of the store is not as a 21st-century version of the Gap. It is as a hangout, a community center, a social scene. The company and its members host art exhibits, run Photoshop seminars, and, in general, engage with and teach each other. They interact in the real world in the same spirit that they interact online—with a clear sense of grassroots participation and a commitment to distributed leadership.

Why does such a vibrant online enterprise need a physical manifestation of its brand, in the form of a store? (The company has since opened a second location in Chicago, this one focused on children's clothing.) "We wanted to have a physical place where people could learn about Threadless," says Jake Nickell. "We wanted to do in a brick-and-mortar space everything you could do on the site. That's why we don't think of it just as a store. It's an ever-evolving gallery space that shows what's new with our company and our members. Like everything else we do, we're putting everything in the hands of our customers."

Excerpted from the new book Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself by William C. Taylor (HarperCollins). Taylor is cofounder of Fast Company magazine and coauthor of Mavericks at Work. Follow him at twitter.com/practicallyrad or at the official site for Practically Radical.

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