CloudFab.com is  a new distributed fabrication service that connects buyers who need digital fabrication (3D printing, laser cutting/etching, etc.) to the sellers who have the capacity.  The goal of the project is to provide a central marketplace to connect buyers and sellers in the digital fabrication sector.

The ethos (if that is the right word)  behind CloudFab is that a vast reservoir of spare capacity exists in digital manufacturing resources, waiting to be tapped by latent demand.   Similarly, many people have ideas, and design skills for individualised parts and products, but lack the means to produce them.  Therefore the CloudFab platform has been developed to enable those with the fabrication equipment to share their machines with the greater public.

The founders of CloudFab are Nick Pinkston and Steve Klabnik.  I asked Nick to tell me the story of the founders backgrounds and how CloudFab came into existence.  This is his response:

“My background is  more in making physical things. I started out with Lego, moved to rocketry and when I last had free time I loved developing / tuning automotive turbocharger systems.  My car hobby showed me how difficult / expensive it was to access the equipment that I needed to complete my projects.

Steve has been programming for the vast majority of his life.  He’s used to building digital products as both the current maintainer for the Hackety Hack project and director of the open source operating system XoMB.  When I told him about the digital fabrication scene, he was blown away by the future that the movement was ushering in.  He’s excited to be able to use his computer skills to facilitate “physical compiling” “.

On the origins of CloudFab:

“We started out trying to build something like TechShop in Pittsburgh, but we quickly found that the numbers don’t work very well.  That’s why we started HackPittsburgh – Pittsburgh’s hackerspace – so that we could get a shared workspace up and running locally.  We wanted to tackle the problem on a broader scale though, so we looked into how we could better utilize existing equipment to make it more accessible for the rest of us – the idea was born.

We received some financing from a State program funding technology to give us money to develop the original concept and later were accepted into the AlphaLab program, Pittsburgh’s version of Y-Combinator.”

Now, it’s fair to say that the easiest part of an online venture to match buyers and sellers is the design of the website.  It’s the business of convincing enough of each to register that is the difficult part.  The founders of CloudFab haven’t simply built a website in the hope that business will come.

Beyond the website, they’ve started by forming a local microcosm of the market by signing up all the local fabrication shops and design firms in their local area of Pittsburgh USA, as well as talking to local hobbyists and artists.  Nick Pinkston says:

“In the beginning, we’re focusing on 3D printing processes, and will soon be moving into laser cutting, CNC, etc.   Also, we’ve been building a lot of relationships with others in the industry and maker community.

Now that we’re going into private beta, we’re opening it up for both sides.  We’re excited to hear back from people and interate from there.  Also, there will be some new features and services coming in the following months.”

CloudFab, like any other marketplace matching buyers and sellers, earns income from trade through the website.  It’s current advertised rates are determined by total gross transaction cost, following this schedule:

• $0 – $100: No commission charge.
• $101 – $300: 6% of cost
• $301 – $1,000: 5% of cost
• $1,001 – $3,000: 4% of cost
• $3,000+: Flat rate of $90.

It’s remarkable that two separate services have appeared within a few weeks of each other, linking buyers of digital fabrication services with providers of those services.  Whereas the 100kGarages.com joint venture between Ponoko and ShopBot (see previous post) initially links buyers with providers of CNC routing services, CloudFab’s current focus on 3D printing services means that the two will not be going head-to-head in direct competition for the present.

So, the new age of online trade continues to gather pace.  It could be argued that the inclusion of Microsoft Internet Explorer with the Windows 95 operating system was the tipping point for the explosive growth in the World Wide Web that occurred from the mid-1990′s.  The big question is, what will be the tipping point for digital manufacturing?  It may be the growth of online marketplaces like CloudFab, but no-one really knows.  That’s the thing about tipping points, they only become obvious after they happen.

The most interesting extract from my viewpoint is from Chapter 6, which describes ‘characteristics of the new business model’. The characteristics on the list reflect in particular the evolution of the computer games sector in recent years, but read like a manifesto for a culture of customer-empowerment in any sector of economic activity.

I’ve reproduced an abbrevated version of these characteristics below:

1. The lines between producer and consumer are blurred.
2. The company moves from being the producer or distributor of goods or the provider of services to the aggregator of products, services, tools and experiences to allow the customer to meet the needs of their personal agenda, or in bizbuzz, their personal value chain.
3. The users and producers are engaged in the co-creation of value.
4. The users have the tools to configure and/or customize their personal experience with the product.
5. The users and the producers encourage each other and mutually define the future directions of the specific products.
6. Even though the users are working on the product changes for their own experience, the changes to the product have universal and commercial value and drive the sales of the product.
7. The producer is not just the publisher/manufacturer but operates as an aggregator for the user’s creative interactivity.
8. The user is not just a purchaser but also an advocate of the experience around the product and by extension, the company.
9. There is a collaborative customer experience that provides transparency for the customer into the inner workings of the companies themselves.
10. The companies encourage the customization and personalization of the experience of the customer.
11. The companies and the customers jointly create and provide the tools to make this collaboration successful.
12. In fact, the customization effort itself, not just the result, is part of the experience, thus enhancing the producer/consumer collaboration all the more.
13. The overall effort involves a corporate culture that is defined by the voice of the customer first.
14. The model uses and provides the most advanced technological tools that exist vis a vis the use of the Internet for these globally matriced communities that are interactive and real time.
15. The company and the customer each get value in ways that are appropriate and satisfying to them.
16. The company’s revenues increase accordingly, as does their profitability, given that their customers are doing something freely – and for free.

The full version of the list above, with the context from the games sector, was published by Paul Greenberg last August but only came to my attention very recently. The full version is in his blog post Chapter 6: New Business Models.

The list is a something of a reminder of the 1999 Cluetrain Manifesto written by Rick Levine, Christopher Locke, Doc Searls, and David Weinberger, consisting of a set of 95 theses organized and put forward as a call to action, for all businesses operating within what is suggested to be a newly-connected marketplace. The ideas put forward within the Cluetrain Manifesto aimed to examine the impact of the Internet on both markets (consumers) and organizations.

Paul Greenberg’s ‘Characteristics of the New Business Model’ are the best and most comprehensive description I have seen of the trend towards growing customer/user involvement in the activities of the enterprise.

While the Characteristics were written as a description, they may also turn out to become a set of principles – a goal to be achieved by any enterprise that hopes to thrive in the new reality of an customer-empowered environment. However, while the list is an accurate and comprehensive assessment of the current state of the games sector, it has one omission if it were to be employed as a set of principles for a new business model – it does not foresee a business relationship where the customer benefits in a financial or other tangible way for their contribution towards the increased revenues and profitability referred to in point number 16.

I trust that Paul Greenberg will not object if, in the context of using the list as a set of principles rather than a description of the trend as it currently exists, I would propose dropping the last three words (“and for free”) from point number 16 add a seventeenth point:

17. “The company, in a desire to maintain the long term strength of the relationship, will provide a structure by which the customers whose contributions most significantly benefit its revenues and profitability will receive tangible benefit for their efforts in recognition of their contributions, or where the contributions are of a suitable form, facilitate and encourage their free trade directly between customers.”

I have to declare a point of view here – I am strongly of the opinion that customers, who may contribute significant effort towards the development of a product or service, should have something to show for their effort in addition to the intrinsic benefits that flow from their participation in user creativity.

Yerzies has been founded by Scott Killian and Tim Brule. The press release announcing the launch of Yerzies refers to the founders also having “helped pioneer online apparel mass customization with FanBuzz in 1996″.

Beyond printed tee shirts, Yerzies enables the creation of stitched sweatshirts and mixed-media designs that include metallic foils, glitters and other processes to create apparel which more closely resembles the design trends seen at retail. This includes printing on dark garments, metallic foils, flocks, glitters, glow-in-the-dark materials and stitched processes.

When they’re finished, users can purchase a single piece or set-up shop at Yerzies and sell their creations to other users. Where Yerzies, to my knowledge, has gone one step beyond the other players in this marketplace, is through a feature called “Make it Yerz”, that allows users to mix and match product options and in some cases, even make modifications to the content created by other users. This is very much a reflection of the ‘remix’ culture that has been present for some years in the area of user-generated content in areas such as music and film. It is probably a natural progression for this culture to migrate to the apparel sector, which is already characterised by a high level of creativity.

A quick road test of the Yerzies website shows that they even refer to designs which can be modified as a “Mashable design”, meaning that the original designer has decided to allow other users to modify their original design to create something entirely new.  However, mashed up designs cannot be re-sold by the person who uses this facility.

The configurator uses the concept of ‘layers’, which will be familiar to anyone that has worked with photo editing software. Users can upload their own images to a new layer, or use layers to add extra features from Yerzies range of options. Each design element can be saved as a separate layer within the Yerzies configurator and modified independently of the others. Therefore, if the user wants to go back and modify some part of a design, they can select the layer in question and work on it without disturbing the other aspects of the overall design. It’s a very clever adaptation of the layers concept,

While users can re-size or re-position the original design, and add additional elements to it in new layers, it appears however that there is not the option to actually change the ‘core’ of the original design. For example, I experimented with one design called ‘Rock God’, and found that it was not possible to change the colouring of the text or vary the text itself.

Yerzies says that it is also rolling out a series of robust tools for users to share and market the content they create including widgets that can be placed on their website, blog or favorite social networking site without any programming expertise. In the press release, Scott Killian is quoted as saying: “We allow anybody to create and sell their own designs. Each user decides how much they want to mark them up and they keep the profits.”

In addition to providing a platform for user-generated content, Yerzies has also licensed content from third-parties including typefaces from designers such as Ray Larabie which users can incorporate into their designs. “Helvetica and Times Roman might work nicely for writing a novel” said Killian, “but they don’t necessarily look great on a hooded sweatshirt. We’ve licensed trend-right typefaces that will actually look cool on a tee shirt or hoodie.”

Last year, Yerzies also engaged The Wildlfower Group, a New York-based licensing agency to assist the company with securing licenses with various entertainment and lifestyle properties. In addition to creating their own apparel, users will also have the option to purchase licensed apparel bearing the trademarks of various brands. “Over 20 properties have granted licenses to Yerzies including lifestyle brands David & Goliath, Ripple Junction, ODM and Changes, entertainment and media brands Pink Panther, Planet Earth and Speed Racer and consumer products brands such as Dubble Bubble and Jolt Cola.

The facility to re-use and modify existing designs certainly gives Yerzies an unique selling point compared with other online marketplaces for custom clothing.  Although very new, the website seems to have no difficulty in attracting members.  One to watch.

The book opens by telling the story of Goldcorp Inc., a mining company that was on a downward slope due to strikes, lingering debts, and an exceedingly high cost of production. The company’s fifty year old mine in Ontario was presumed to be nearly exhausted. Goldcorp CEO Rob McEwen, a newcomer to the mining sector, approved $10M of investment in additional exploration. Results were positive, with test drilling suggesting large new deposits of gold, but pinpointing the exact locations of the gold was proving to be an insurmountable challenge for Goldcorp’s employees. By coincidence, McEwen attended a conference where the subject of Linux, the open source computer operating system, came up for discussion. McEwen had an epiphany – why not adopt the open source model for Goldcorp’s mining activities? This is exactly what he did. In March 2000, the “Goldcorp Challenge” was launched with $575,000 in prize money. All of Goldcorp’s geological data was published on the company website, with an invitation for anyone to contribute their knowledge on how the gold might be located within the 55,000 acre property.

By the time the process was completed, entries arrived from geologists, graduate students, consultants, mathematicians and military officers. The contestants had identified 110 possible targets on the property, of which over 80% proved correct. Since the challenge was inititated, eight million ounces of new gold deposits have been found, and Goldcorp has moved from being a $100M company to being a $9Bn company.

Goldcorp is perhaps one of the best examples of how a business can benefit from breaking down the walls which exist between it and the outside world. The traditional thinking has always been that research is secret, and only trusted employees should be involved. However, the success of community-based activity for non-commercial projects like Linux and Mozilla has presented new possibilities and a new outlook for many companies, who are re-thinking their traditional viewpoints on how they interact with customers, competitors, and the world at large.

Don Tapscott and Anthony D. Williams, the authors of Wikinomics, build a convincing case for the benefits of breaking down barriers between business and potential outside sources of competitive advantage. They highlight the growth of new movements that are both a cause and a reflection of this new thinking. Firstly, the Peer Pioneers, most typically associated with free software projects such as Linux, but who have applied open source principles to create a multitude of products made of bits – in other words, information products. These include the many millions of contributors to open encyclopedia Wikipedia, and collaborative projects in many different areas of software development and scientific research.

Another development gathering pace is the ‘Ideagora’ – a marketplace for ideas, where questions can find solutions and solutions can find questions. Williams and Tapscott suggest that it is comparable to a classifieds site like craigslist.com, except rather than job ads and personals it posts a list of ideas and inventions that are ‘for sale’ or ‘wanted’. Examples of ideagoras are Yet2.com (which was new to me) and Fellowforce.com (featured on this site here recently (and again).

The next trend highlighted in Wikinomics is the growth of ‘Prosumers’. This term will be familiar to anyone who has studied mass customization. Originally the term was coined by Alvin Toffler in his book ‘The First Wave’, and referred to the ‘producer and consumer acting in concert’. It was sometimes used to label those customers who sought out mass customized products. However, Williams and Tapscott use the term differently, to describe the growing number of customers who are prepared to ‘hack’ products and adapt them in ways never envisaged by the producers. Wikinomics notes that the idea of amateur innovation goes back many years.  A perfect example is the story of how hot-rodding of cars developed in the late 1940′s and 1950′s.  Today’s amateur innovators have the advantage of the web where, instead of just sharing an idea with their neighbour, they can share it with thousands of fellow product hackers through online communities.

Examples of prosumerism today include communities that have grown around platforms such as Lego Mindstorms, the Apple iPod, and the Toyota Prius.  In many cases, after initial reluctance, the producer has engaged with these communities and involved them in the official innovation process.

Next up in this gallery of trends are a group of people called ‘The New Alexandrians’.  The original Great Library of Alexandria is reputed to have contained volumes on all the scientific knowledge then known.  Now, in the period of the fastest and broadest accumulation of human knowledge ever known, there is a new generation of Alexandrians who are again collating all the knowledge that exists.  These Alexandrians range from Google to librarians at institutions such as Harvard, Oxford and Stanford, who are scanning thousands of books and turning them into bits.  Along with media of all varieties, these digitized books will be sewn together into a universal library of knowledge and human culture.

This Alexandrian culture is also giving rise to a new age of collaborative science.  As Tapscott and Williams state:

“The emergence of open-access publishing and new Web services will place infinite reams of knowledge in the hands of individuals and help weave globally distributed communities of peers.  The rise of large-scale collaborations in domains such as earth sciences and biology, meanwhile, will help scientific communities launch an uprecedented attack on problems such as global warming and HIV/AIDS.  All considered, leading scientific observers expect more change in the next fifty years of science than in the last four hundred years of enquiry.”

Many different examples of scientific collaboration projects are described in the book.  Projects like the Human Genome Project, and Bioinformatics.org all use collaborative open source techniques to advance biological and medical research.  In  documenting this trend for a wider audience, Tapscott and Williams are providing a very effective rebuttal to those who have suggested that participants in open source initiatives are only interested in electronic gadgets.

Wikinomics also examines the ‘Platforms for Participation’ – the technical environments that have been developed to facilitate user innovation and interaction.  In many cases, these are application programming interfaces (API’s), developed by the likes of Google, Amazon and eBay, that enable small businesses and individuals to build innovative applications never envisaged by the companies themselves.  Such platforms do not just exist in the commercial sector.  Many not-for-profit organisations have built systems that examine publicly available data (in the U.S. at least) on pollution, crime and social cohesion.

The book also looks at what the authors call ‘The Global Plant Floor’.  This examines the possibilities for digital fabrication.  It also examines the possibilities for open architectures (i.e. an open basic design to which components of various kinds can be added, such as that used in personal computers) to be used in many other industries.  The book profiles the Lifan motorcycle company, that uses an open basic architecture on its motorcycles, which means that components from many different sources can be used without changing the basic design.  Tapscott and Williams use the example of Lifan to dismiss the idea that peer production is only suited to creating information-based goods.  They note that if physical products are designed to be modular, then, theoretically at least, large numbers of lightly co-ordinated supplies can engage in designing and building components for the product, much like the thousands of Wikipedians add to and modify Wikipedia’s entries.

The book rounds off with an examination of the ‘Wiki Workplace’.  This, as you can imagine, is a working environment which places far greater levels of reliance on staff to contribute towards organisational development and innovation in business process.  It is very hard to argue with the ideas put forward, especially when one reads the the account of how Geek Squad, an IT home-assistance service, has applied them to its business.

Personally, I have found books that deal with the trend towards peer production and open collaboration models to be interesting, but sometimes lacking in flow and not always easy to read.  Wikinomics is both informative and entertaining – it’s actually enjoyable to read.  I must admit that I got a little bit of satisfaction from the account of Lifan’s use of open architectures on motorcycles, as I had suggested something similar for the auto industry a few months ago.  Of course, few would believe me when I say I hadn’t read the book first.

Business books tend to go out of date quickly.  However, I expect that Wikinomics will be read for generations to come as a chronicle of how many of the existing assumptions about business fell away to be replaced by a new, distributed and collaborative approach  in the early 21st Century.
The authors and publishers of Wikinomics have adopted the open collaborative strategy themselves:  An addition to the book, called the Wikinomics Playbook, has been compiled using peer production techniques and is expected to be published shortly.

Ponoko is the brainchild of software entrepreneurs Dave ten Have and Derek Elley. The business was founded on ‘the disappointing experience people face when making (individualized) products’, citing complexity and high financial and environmental costs.

Encouraged by the rise of what they call the Internet connected ‘creative-class’, along with smarter, faster, smaller and cheaper digital manufacturing hardware (laser cutters, CNC routers and 3D printers that connect to your everyday PC), they formed Ponoko, to make real the idea of mass-individualized products created by the Web community and made on a globally distributed network of manufacturing hardware, controlled from any PC.

Users create product designs which they upload to the Ponoko site, and select the materials to be used in manufacturing. Ponoko then makes and delivers the product, or the product parts. This making process can be used to perfect the design.

The next step is to make the final design available for sale through Ponoko, by posting it in the Ponoko showroom for people to view and buy. Ponoko can make the product and deliver it to the customer or, alternatively, deliver the parts to the user for final assembly and delivery to the customer. Ponoko handles the payments between customers and the user whose design is purchased.

The other possibility is that customers could buy a design and make it themselves, using desktop manufacturing systems (laser cutters, CNC routers and 3D printers). While 3D printing systems are currently very expensive and impractical for home use, a number of separate projects are currently underway on 3D printers that would be affordable for home users.

Ponoko’s founders take the view that today’s product making and distribution model is financially and environmentally unsustainable. It is also under pressure to digitize like the music and video industries. The hold the view that because today’s 100-year old product making and distribution system is so ingrained into our every day lives and delivers so much benefit, problems are not so obvious. However, they make a number of points in relation to industrialised manufacturing:

1) Making and delivering (individualized) products is a time consuming, complex and expensive process. This pain does not fit well in a world that increasingly demands instant satisfaction from mass personalized and customized products at low cost.

2) Product making and distribution is cost prohibitive for new entrants without relatively deep financial reserves. This is stifling mass creativity of real products and the progress of humanity on unimaginable fronts.

3) Low cost mass production and global distribution relies upon using lots of cheap energy and labour. But these two resources are running out.

4) Product making and distribution is a major contributor to the global warming problem (according to the WRI, perhaps 20% of the problem). Being environmentally unsustainable, the increasing ‘carbon currency’ costs also make the current model financially unsustainable.

5) Finding individualized products is very difficult and buying such products is a time consuming, relatively complex and expensive burden.

Many of these are very valid points. For existing businesses that use mass customization model, there is already a saving of working capital in not carrying finished goods inventory. However, working capital must continue to be used for raw materials or components.

Ponoko proposes to eventually use a business model where product design data is sold digitally, and downloaded by customers for manufacture at home. If a business (or individual) can move to a situation where it can sell designs as data, it immediately becomes a seller of digital information rather than a manufacturer. All of the expenses related to manufacturing can be eliminated completely, as the company moves towards a purely digital trading model. Ponoko is attempting to position itself as a broker that joins digital design vendors with customers who will become ‘end-manufacturers’ as well as ‘end-users’.

However, it does not automatically follow that a distributed model will provide large reductions in carbon emissions. The energy expended in moving finished goods around the world might simply be replaced by energy expended in distributing raw materials more widely in a distributed manufacturing model. However, this does not take away from the potential of the Ponoko business model to actually bring about the ‘post-industrial revolution’.

A distributed model significantly lowers the barriers to entry for new product creators, and reduces the financial risk. With Ponoko, creators can ship digital product designs with the click of a mouse, rather than physical products requiring costly handling and delivery. And because product designs can be sold to a large global audience from day one, pay back periods can be shortened.

In addition, Ponoko’s proposed distributed manufacturing model means that the marginal cost of selling each additional example of a design is practically zero. (Once the design is completed and on the market, it costs almost nothing extra to the creator to sell one extra copy. There is no requirement to use up materials or components, only the need to transmit the design data to each new customer.)

Because no physical product exists until purchase, product design collaboration makes it possible for everyone to co-create and personalize ‘almost anything’ they need and want. Ponoko says that, as adoption increases, prices for their design-to-order and made-to-order commodity type products will become unrecognisably low.

Ponoko is currently in the beta testing phase. The first manufactured product made by Ponoko from a user’s design was recently unveiled on the Ponoko blog.

While Ponoko is positioning itself as a broker of digital designs in the longer term, if it is successful in the medium term, it implies that significant investment in manufacturing capacity will be required by the company to fulfill orders for finished goods placed through the site. Ironically, if Ponoko is to be successful it may need to become a big manufacturer before it can become the ‘iTunes of design’.

According to an article by Victor Rozek in ITJungle.com, Songdo will be

A place where everything is tracked, every action recorded, every service personalized, and every transaction automated.

The developers of Songdo are investing $25 billion to raise the city, which will become a testing ground for new technologies. According to Victor Rozek:

“Songdo is projected to be an international commercial center and the first true U-city (“U” being the shorthand for ubiquitous computing). It will allow all IT systems, whether belonging to government agencies, corporations, healthcare providers, or private citizens, to share data. Every street, every house, every office will be wired (or rather wireless). It will, its developers hope, become a ubiquitous-computing paradise that demonstrates the benefits of living a digital lifestyle. An array of new RFID-based services will be introduced, tested, and refined before being unleashed on the rest of the world.”

Songdo is built on 1,500 Acres of reclaimed land and will soon to be connected to Incheon International Airport via a new bridge. Currently under construction, the city will include a 100-acre Central Park, International School, International Hospital, Ecotarium, and Museum amongst its many amenities.

The city’s plan includes fifty million square feet of office space – including a landmark 65-story Tower and Convention Center, thirty million square feet of residential space, ten million square feet of retail, five million square feet of hotel space, and ten million square feet of green space. The developers hope that Songdo will become the business hub for multinational companies in Northeast Asia, due to its central location within the Yellow Sea Economic Basin – which comprises an economically active population of more than 200 million with a GDP of USD 1.3 trillion.

Perhaps it is not surprising that Songdo has been compared to Brasilia by some commentators. Brasilia was constructed from scratch in Brazil during the 1960′s. Website The Next American City notes that planned city developments, such as Brasilia, are not usually successful. Personally speaking, I would keep an open mind on the prospects for Songdo. One difference between Songdo and previous ‘planned’ cities is that Songdo is very much focused around business and technology, rather than social planning. However, this does not guarantee success.

The new city is of interest to this website because it appears to be designed with the intention of personalizing every aspect of life around the needs of the individual. This could be called ‘ubiquitous customization’ – using ubiquitous computing to tailor every aspect of everyday life to individual needs. Examples given by Victor Rozek include:

“…intelligent recycling bins that use RFID technology to credit recyclers when they drop in a bottle or a can; to the inspired, like smart-card house keys that can also be used for a wide range of services. A house key will allow residents to borrow a city-owned bicycle, access the subway, use the library, plug the parking meter, and who knows what else, maybe even order a pizza. Videoconferencing, whether between business enterprises or neighbors, will be available, as will video on demand.”

Some possible services take the ubiquitous customization a step further, to the point where the physical environment can change in real time to fit the needs of the individual at a particular moment. Rozek provides the example of “pressure sensitive floors for the elderly that can detect a fall and summon help”.

There are many reasons why Songdo might succeed, and many why it might not. These are examined in detail in both the IT Jungle and New American City articles. The principal concerns relate to the ability of Songdo to persuade residents to stay long term, and the issue of how to accomodate the many people who will be needed to fill lower-income jobs in the new city.

Ubiquitous customization, and real time ubiquitous customization, are a natural extension of ubiquitous computing. While the initial wave of services that are based on UC will be those that are purely digital, it is only a matter of time before UC is combined with intelligent materials to create a world where physical objects can change their characteristics in real time to fit the users needs, not just when they buy something, but each time they use it.

via Putting People First

Initiatives like IdeaStorm are a starting point. Most companies still equate “prosumption”—the process of making consumers an active part of the creative process—with “customer-centricity,” in which companies set the basic elements and let customers modify others, such as choosing options for a new car. In our view, customer-centricity is pretty much business as usual. In the new model, customers participate in the creation of products in an active and ongoing way. They do more than customize or personalize; they add value throughout the product life cycle, from ideation and design through aftermarket opportunities.

While IdeaStorm may be held up as an example of co-creation, it is difficult to get away from the belief that it is really just free market research.  Participants gain no privileges from their membership of the community, other than the vague possibility that their idea might be taken up if it is popular enough.  There are no discounts or other benefits for those who suggest successful ideas.  In fact, Dell make it clear that there is absolutely nothing in it for the customer, in licence section of the IdeaStorm terms of use:

You grant to Dell and its designees a perpetual, irrevocable, non-exclusive fully-paid up and royalty free license to use any ideas, expression of ideas or other materials you submit (collectively, “Materials”) to IdeaStorm without restrictions of any kind and without any payment or other consideration of any kind, or permission or notification, to you or any third party. The license shall include, without limitation, the irrevocable right to reproduce, prepare derivative works, combine with other works, alter, translate, distribute copies, display, perform, license the Materials, and all rights therein, in the name of Dell, or its designees throughout the universe in perpetuity in any and all media now or hereafter known.

The license shall also permit Dell and its designees to use portions of the Materials you submit, rerecord or modify any audio tracks or visual images you provide, rewrite any Materials you submit, and/or incorporate other materials, either created by Dell and its designees or licensed from third parties, with the Materials you submit. Any such works shall be deemed Materials owned by Dell and shall not be subject to your approval or payment by Dell of any compensation to you…..You acknowledge and agree that the relationship between you and Dell is not a confidential, fiduciary, or other special relationship. We shall have the right, but not the obligation, to use your name, likeness, biography and other information about you in connection with any use of the Materials you submit.

By making a submission, you acknowledge and agree that Dell and its designees may create on their own or obtain many submissions that may be similar or identical to the Materials you submit through IdeaStorm or other channels and means. You hereby waive any and all claims you may have had, may have, and/or may have in the future, that the Materials accepted, reviewed and/or used by Dell and its designees may be similar to your Materials.

Pretty emphatic.  While the co-creation concept doesn’t specifically include a reference to tangible benefits flowing to the customer as a result of their participation in the process, it is very obvious that Dell expects the benefits of IdeaStorm to flow in one direction only.

Update: Lionel David at the Crowdspirit Blog had written about this issue before I did.

Von Hippel notes that:

“In an array of industries, producer-centered innovation is being eclipsed by user-centered innovation—the dreaming up, development, prototyping, and even production of new products by consumers. These users aren’t just voicing their needs to companies that are willing to listen; they’re inventing and often building what they want.”

He notes that many items that are commonplace today were invented by users, such as heart-lung machine and automated drug pumps (invented by doctors), energy drinks and gels (invented by athletes).

Von Hippel notes that “70% to 80% of new product development that fails does so not for lack of advanced technology but because of a failure to understand users’ needs.”

He finds a new trend in government moving to encourage user-centric technological research. In 2005, the Danish government became the first in the world to establish as a national priority, in the words of a government policy statement, “strengthening user-centered innovation.”

Ways in which this is done include:

“Programs that improve manufacturers’ understanding of users’ needs (through ethnographic research, for example) to techniques for identifying user-developed innovations that manufacturers can produce. Successful approaches will be studied in Danish business schools and shared with interested Danish firms.”

Von Hippel believes that, if this paradigm shift is successful in Denmark, many other nations will follow their example.

Part of the initiative is the Danish User-Centered Innovation Lab. This is hosted by Copenhagen Business School and staffed by professors from both CBS and the Aarhus School of Business. The goal of the Danish User-Centered Innovation Lab is to help bring Danish firms to the world forefront with respect to the profitable exploitation of leading-edge user-centered methods for product and service development.

Firms initially participating in the Danish User-Centered Innovation Lab are Bang & Olufsen, Coloplast, Danisco, Lego, Novo Nordisk and IO Interactive. From May 2006, innovation experts from these firms and Danish and MIT academics have been working collaboratively to develop and implement world-class user-centered innovation practices. Best practices that are developed will then be diffused broadly to any interested Danish firms – ranging from the largest to small and medium-sized enterprises.

The Lab is modeled on the functioning of the MIT Innovation Lab, which has been directed by Professor von Hippel himself since 1995.

Hod Lipson notes that rapid prototyping machines currently cost from US$20,000 to US$1.5 million, whereas the standard version of their Freeform fabricator can be assembled for around US$2400.   But the researchers are not intending to commercialise the venture – quite the opposite in fact.  Full documentation on how to build and operate the machine, along with all the software required, are available on the Fab@Home website, and all designs, documents and software have been released for free.

The article quotes Evan Malone:

“We are trying to get this technology into as many hands as possible,” Malone told New Scientist. “The kit is designed to be as simple as possible.” Once the parts have been bought, a normal soldering iron and a few screwdrivers are enough to put it together. “It’s probably the cheapest machine of this kind out there,” he adds.

It uses additive processes to create objects layer-by-layer.  This involves squeezing material from a mechanically-controlled syringe. It is also designed to be used with more than one material, which is not always the case with rapid prototyping machines, even the more expensive ones.  The article describes how the process has been made almost as simple as adding paper to a printer:

So far it has been tested with silicone, plaster, play-doh and even chocolate and icing. Different materials can also be used to make a single object – the control software prompts the user when to load new material into the machine.

The researchers have clearly aligned themselves with the open source approach with the Fab@Home project.  They are hopeful that it will grow into a community of enthusiasts who share designs for 3D objects and even modify the machines for themselves, aiding the emergence of widespread personal fabrication.

The New Scientist Article also looks at the research being carried out on low cost rapid prototyping machines at Bath University.  This research was described in an earlier post on this site.  Adrian Bowyer, head of the Bath University rapid prototyping programme (the RepRap project), is complementary to the Fab@Home project.  The Bath University programme also envisages machines being distributed freely, and one of their examples is even intended to replicate copies of itself.

Adrian Bowyer is quoted as saying “I can imagine people swapping plans of things to make online, or paying to download them instead of going to the shop.”  This is the Long Tail of Everything made real, which Chris Anderson discussed in the final chapter of his book ‘The Long Tail‘.  It was also discussed in the One Word For Many Trends article on this website in November 2006.

It is interesting that both the Fab@Home and RepRap teams have used the open source model in their projects.  The big question mark which remains is whether the idea of an accessible home fabricator can generate enough momentum to become a self-sustaining community.  Perhaps the best chance of success is to encourage those engaged in web and software development to try their hands at this more three-dimensional type of development.  By reaching out to software developer communities, these projects may find a willing audience who will bring the lessons learned from open source software development to this new area.  In fact, the Fab@Home website indicates that this approach is already being taken.

The next step for me is to study the Fab@Home website and see if I can figure out how to put one of these rapid prototyping machines together.  I’m not sure how well I will get on.  They say man is separated from the apes by his ability to use tools.  They never thought about the blogger with a soldering iron!

See also: Reference article on digital manufacturing on this site from 2004.

It occurred to me that, while there has been extensive analysis of these various concepts, there has not been as much examination of how they have influenced and interacted with each other. To a certain degree, individual conceptual ideas overlap with each other, which may sometimes lead to a degree of confusion among those who are developing their understanding of mass customization and related business strategies. I hope that this article will shed some light on the origins of various concepts that have developed. It is probably fair to say that the terminology can come across as “management-speak” to many people, so it may be a good idea to come up with a more accessible description which can apply to them as a group.

An essential component in the evolution of these customer-centric business strategies from concept to reality has been the development of the web, firstly in the form of the world wide web itself, and more recently the ‘social internet’, sometimes referred to as “Web 2.0″. The role of information systems in the growth of the customer-centred business models will also be explained.

As is often the case when explaining something like this, a diagram helps. I have, to the best of my ability, mapped the evolution of mass customization and its ‘cousins’, such as user innovation and customer innovation. Towards the end, I’ll show a cumulative diagram which displays how all the different trends fit into the ‘big picture’.

From the first mention of the ‘prosumer’ in Alvin Toffler’s 1970 book ‘Future Shock’, right through to the current use of customer-driven innovation processes, there have been a great many significant events, which may at first appear unrelated to each other, but all of which have played a role in getting us to where we are today.

The ‘history’ of Mass Customization (it may seem strange to use the word history for something that is still developing) is likely to be familiar to readers of this website, but to quickly recap, the concept is generally traced back to Alvin Toffler’s 1970 book ‘Future Shock’ which referred to the producer and consumer working in concert. (It has recently come to light that an un-named lecturer at IBM’s System Research Institute outlined the mass customization idea as far back as 1963). Toffler used the term ‘prosumer’ to describe this type of interaction. The first use of the term mass customization occurred in Stan Davis’ 1987 book, ‘Future Perfect’, which was followed in 1993 by Joseph Pine’s landmark book ‘Mass Customization – The New Frontier in Business Competition’, which set out how this new strategy could be deployed in an enterprise.

Developments in supply chain management during the 1980′s and 1990′s, such as Just-in-Time delivery, made it feasible to dispense with large inventories of parts, and instead order frequent smaller deliveries to match demand. This made it more feasible to offer products built to order, as part order quantities could be based on actual customer orders.

The major impediment to widespread adoption of mass customization in the early 1990′s was the absence of an efficient communication channel for customers to describe their requirements. Telephone ordering existed, but it was not an efficient method for taking large numbers of orders for a customized product. However, two separate strands of information systems research were about to combine supply the right tool: the Product Configurator.

I’m open to correction on this, but my research suggests that the earliest work on what would be considered a product configurator was carried out by Ron Brachman at Harvard University in 1977. At that time, the term used was ‘knowledge representation’. In the mid-1980′s, Brachman worked at the Artificial Intelligence Principles Research Department at American Telephone and Telegraph (ATT) which developed the PROSE product configuration system for use in the telecoms industry. A few years later, unrelated research by Tim Berners-Lee would produce the first web-browser. By 1996, Dell had combined these two technological innovations into the first web-based product configuration system, that would allow anyone to specify their requirements when purchasing a computer. The idea of allowing customers to configure products on a website and then purchase the product was now no longer just a theoretical idea, but a reality.

Technological developments continued through the late 1990′s, with product configurators being developed by many different IT companies, but the general business concept of mass customization was largely unchanged during this period: companies would offer a basic product that could be configured in numerous ways by the customer at the time of purchase. The first two examples of how mass customization could be the catalyst for new business models came about at the turn of the Century. These can be summarised under the headings of Manufacturing Service Provider and Micro Manufacturing.

A manufacturing service provider is one who manufactures mass customized products, and also provides software to allow other brands to sell these customized products under their own name. The term ‘Manufacturing Service Provider’ is a variation on the well-known phrase ‘Application Service Provider’ which describes companies that provide business software as a service on the internet. The manufacturing service provider is simply offering custom manufacturing as a service to other companies through the internet. The best known exponent of this business model is Bivolino, a Belgium-based manufacturer of custom-made shirts. Customers can design and purchase made-to-measure shirts on Bivolino’s own website. However, Bivolino also provide other retailers with their expertise in custom shirt making, through an associated company, Shirtsdotnet. Retailers can set up their own website with their ‘branded’ version of the shirtsdotnet product configurator installed. They can also install a Shirtsdotnet kiosk in their stores, which their customers can use to configure a shirt while they are in the shop. Like on the retailers website, the retailer’s own branding appears on the kiosk version of the product configurator. The completed order is then manufactured and delivered by Shirtsdotnet/Bivolino, but under the brand name of the retailer.

The second of these business models, micro manufacturing, is exemplified by two companies: Zazzle and CafePress. Both of these companies offered conventional personalization of everyday products – you could upload your picture and they would print it on items like t-shirts and mouse mats. However, the most important aspect of their business was that they were also ‘micro-manufacturers’. Micro-manufacturing works like this: You have a website and you would like to earn money from it by selling merchandise. You have some interesting logo, photos or artwork that you want to put on t-shirts or other everyday items, but you have no factory, employees, suppliers or budget. No problem – sign up with a micro manufacturer. Upload your artwork to their website, then fill in a few details and copy some code to your own website. You are an instant retailer of your own collection. Manufacturing, distribution and payment are all dealt with entirely by the micro-manufacturer. All you have to do is run your site and wait for your share of the revenue to arrive from the micro-manufacturer. The idea has been a huge success, with Zazzle and Cafepress both having signed up hundreds of thousands of webmasters as members.

The growth of these companies was important in that it showed how the mass customization idea could be adapted to create completely new business models.

In conventional mass customization, the customer had, as yet, no role beyond specifying their requirements and making the purchase. However, it was obvious from the success of micro-manufacturing that there were a great many people who wanted to jump across from being customers to being developers of products themselves.

Ideas about involving the customer in the innovation process had been around since the late 1980′s. This area of research has a number of slightly different strands that have gradually come closer to each other over the years. User Innovation is the earliest of these concepts, devised by Eric Von Hippel at the Massachusetts Institute of Technology (MIT). Von Hippel discovered that most products and services are actually developed by users, who then give ideas to manufacturers. This is because products are developed to meet the widest possible need; when individual users face problems that the majority of consumers do not, they have no choice but to develop their own modifications to existing products, or entirely new products, to solve their issues. Often, user innovations will share their ideas with manufacturers in hopes of having them produce the product, a process called free revealing.

In 1986, Von Hippel introduced the Lead User method that can be used to systematically learn about user innovation in order to apply it in new product development. A Lead User is someone who faces needs that will be general in a marketplace – but faces them months or years before the bulk of that marketplace encounters them. Lead users are also positioned to benefit significantly by obtaining a solution to those needs. So user innovation can be combined with mass customization so that the customer is directly involved in the lifecycle of the product, from the design stage through to the configuration and purchasing stage.

Later, the idea of Open Innovation was devised by Henry Chesbrough, a professor and executive director at the Center for Open Innovation at Berkeley. The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license ideas (i.e. patents) from other companies. In addition, internal ideas not being used in a firm’s business should be taken outside the company (e.g., through licensing, joint ventures, spin offs). While Open Innovation encourages greater openness in a company’s research and development, it doesn’t specifically encourage interaction with end-customers. Therefore it is quite different in this respect to User Innovation.

Another approach to this area is referred to as ‘co-creation’. This originated in the 1994 book ‘Designing Interactive Strategy – From Value Chain to Value Constellation’ by Richard Normann and Rafael Ramírez. They they proposed a model of ‘co-production’ between ‘actors’ in the business environment, coming together in a ‘value constellation’. The co-creation idea was later expanded upon by management writer C K Prahalad, who argues value is increasingly being co-created by the firm and the customer, rather than being created entirely inside the firm. Co-creation is at the heart of the open source software movement, where users have full access to the source code and are empowered to make their own changes and improvements to it. Open source software is the inspiration for other new business models, which I will come back to later.

Most recently, Patricia Seybold has updated the User Innovation idea in her book ‘Outside Innovation‘. This recent book brings right up-to-date the idea of customer involvement in the innovation process, and some of the concepts described in this article are explored in detail in ‘Outside Innovation’. Therefore, I would strongly recommend Outside Innovation as reading for anyone interested in exploring these ideas further.

Just as the first generation world wide web had allowed businesses to sell customized products to consumers, Web 2.0, or the social internet, enables new methods of interaction between business and customers. (The correct usage of the term Web 2.0 is sometimes subject to a certain amount of debate and argument about particular technologies. Therefore for this article I will stick with the more generic term of ‘social internet’).

The social internet is the name given to web-based activities that involve two-way conversations, where the consumer of information (the website reader) can also become a contributor of information to that same site. Examples of the social internet include blogging, where the reader can leave comments on an article, and wikis, where the reader can join a community and contribute to authoritative content on a particular topic. In the world of mass customization, the social internet has been adopted by some businesses to integrate their customers into proposing designs for products. In the business-to-consumer sector, companies like Threadless and Innertee have adopted this strategy, referred to as ‘Crowdsourcing’.

Crowdsourcing involves the use of discussion and debate among participants to arrive at a solution which satisfies the requirement. In some cases, such as Threadless, there is a formal ‘voting’ process. Designs submitted by members are voted upon and the most popular are then marketed by the business. In a crowdsourcing model, the designers whose ideas have been selected sometimes receive a commission on each example of their design that is subsequently sold.

An alternative approach in crowdsourcing for deciding the correct solution is a process of discussion and review. This is generally moderated by people within the enterprise who eventually decide what solution will be used based on a consensus among the contributors.

While crowdsourcing, to date, has been used mostly in the area of visual design, it could easily be adapted to issues of technical design also. Who is to say that an electronic equipment company could not use crowdsourcing to develop new products? There could be thousands of engineers itching to submit designs for new devices or contribute to the design of a new product. Indeed, Patricia Seybold’s Outside Innovation describes just such a case, that of National Semiconductor, which empowers design engineers to reach their desired outcomes with a comprehensive software toolkit.

Crowdsourcing can generally be described as commercial organisations encouraging customers or users to contribute knowledge or ideas, that it can then use to its own benefit, and the contributors may or may not share financially in the benefits. However, the possibility of using crowdsourcing for technical development inevitably hits a stumbling block due to the traditional concerns regarding the protection of intellectual property rights. Very few CEO’s would be willing to have their intellectual property and product designs discussed openly. However, the same viewpoint has been significantly challenged in the publishing sector, with the growth of the Open Source software movement. If open source can be accepted in relation to copyright, it might also be more accepted in other forms of intellectual property.

The general view among publishers of all kinds (including software) for many years was that it was essential to maintain copyright over the work to protect the financial benefits for the author and publisher. However, the growth of open source software changed attitudes to copyright, and it was only a matter of time before similar open distribution models would appear in other areas of activity. The first very significant development in this regard was Creative Commons licensing. This concept was devised by Lawrence Lessig in 2001, and it enables copyright holders to grant some of their rights to the public while retaining others through a variety of licensing and contract schemes, including dedication to the public domain or open content licensing terms. Creative Commons was adopted by many websites as a means of allowing the content to be distributed while giving a degree of recognition to the original publisher.

If you combine creative commons with user innovation, the result closely resembles another concept, Peer Production. Commons-based peer production is a term coined by Yale’s Law professor Yochai Benkler to describe a new model of economic production in which the creative energy of large numbers of people is coordinated (usually with the aid of the internet) into large, meaningful projects, mostly without traditional hierarchical organization or financial compensation. He compares this to firm production (where a centralized decision process decides what has to be done and by whom) and market-based production (when tagging different prices to different jobs serves as an attractor to anyone interested in doing the job). Peer production to date has been limited mostly to information technology projects, a good example of which is the open source Mozilla Firefox web browser.

The Outside Innovation book describes how this project is run on a non-profit basis, but has generated significant financial surpluses due to sponsorship arrangements with other technology companies. The Mozilla organisation is reported in Outside Innovation as looking at ways of distributing part of its surplus back to those who took part in its development. This gives rise to an interesting question – just as today’s public companies are listed on the stock market, distributing surpluses to shareholders in the form of dividends, might there in the future be a ‘stakemarket’ where peer production projects are listed and distribute surpluses to stakeholders who have contributed to them intellectually? Exploring this question is probably one for another day.

Getting back to our discussion, if you combine crowdsourcing with a type of creative commons intellectual property arrangement, you could have a business model where products are developed by users under creative commons licensing, which would in turn allow other businesses to use the intellectual property subject to conditions (financial or otherwise). This presents the potential to massively advance countless areas of technology, by opening them up to faster development by sheer weight of numbers.

Another part of our jigsaw is digital manufacturing (or digital fabrication – ‘fabbing’). This originated with CNC milling machines and the like in the 1980’s, but took a step forward technologically with the development of additive fabrication during the 1990’s. Without going into too much technical detail, additive fabrication is three-dimensional printing. Design data is read from a file, and a three-dimensional object is created by depositing materials in successive layers to create the shape contained in the design.

A company called eMachineShop combined digital manufacturing with the world wide web to create an ‘online factory’ which can make almost anything from a designs submitted by customers. Customers download eMachineShop’s own design software, an easy-to-learn CAD application. They then use this software on their own computers to compose their design, before uploading it to the eMachineShop website and place the order for it to be manufactured by the company.

eMachineShop’s design software is a type of ‘user toolkit’- the name given to software that assists users to design new products for manufacture by the company concerned. Although eMachineShop customers mostly design and purchase items for themselves, user toolkits are most often associated with open innovation, where they are used to contribute design knowledge to a project. User toolkits are to open innovation what product configurators are to mass customization. Of course, a user toolkit may exist as a web application or a software download.

It is also possible to combine one or more of these business concepts with digital manufacturing. There is already one example of Creative Commons and digital manufacturing being combined for the purpose of allowing customers to ‘download designs’ for products. Ronen Kadushin, a lecturer in furniture design at the Shenkar School of Engineering and Design in Israel, has published a collection of lighting and accessories, where the product designs available for download under the principles of ‘Open Design’.

In explaining many of these concepts, it is difficult to state definitively if a particular project belongs to one or the other concept, as it may display attributes taken from many or all of them. So, while all of these ideas and concepts for new ways of doing business were devised separately, they do overlap to a signficant extent. Patricia Seybold has devised a ‘continuum of customization’, showing many of these ideas on a scale of customer involvement, beginning with the most basic level of product customization and moving towards ever increasing involvement of customers as stakeholders in the business, through their contribution to product design and development.

Looking to the future, in the event that hardware manufacturers were to produce an affordable digital manufacturing system for home use, the popularity of downloading designs would grow exponentially. Chris Anderson discussed this idea in the final chapter of his recent book ‘The Long Tail‘ .

Combining user-friendly digital manufacturing with mass customization and the other concepts described above would enable a host of new business models to gain popularity, from the Creative Commons distribution example used by Ronen Kadushin, to ‘shareware’ style examples (get a basic product design for free, pay a fee for a more advanced version), through to standard commercial agreements. And, of course, any of these business models for digital products could be combined with all of the other ideas discussed above, for example:

• User innovation – users contribute to the design of a digital product design which is then made available for download by other customers;
• Crowdsourcing – users upload designs of their own for peer review and possible resale by a digital manufacturing business;
• Custom marketplaces – webmasters upload three dimensional product designs to a custom digital manufacturing marketplace (a sort of combination of eMachineShop with Zazzle or Cafepress).

One other technology development that may yet be a significant factor in the development of customerism is digital identity management. Inputting personal details, and especially personal measurements or other preferences, is a chore for most people. What if you could store all of your personal details in a manner where they could be retrieved instantly, to be used whenever you are purchasing a customized product, contributing to an open innovation process, or just about anything else? An open source project currently underway, called the Higgins Project, may be the path towards having a single overall digital identity for every web user. This project is still at the development stage, but could be a major leap forward in the way that personal data is accessed on the web. While its impact cannot be predicted with certainty, if successful it could make filling out detailed order forms on the web look quaint in years to come.

This is the overall diagram (set your browser to full-screen view for best results) which shows how the various events and trends described above have interacted with each other. In the diagram , the event flows sometimes originate at a great distance from each other, not so much in the geographic sense, but rather in their field of research or activity. However, each new development feeds off everything that has gone before, and differences between the concepts tend to be eroded as ideas become adapted to real-world applications.

This is where we are now then: a collection of separate business concepts and enabling technologies, that encourage user/customer participation, whose attributes overlap with one another to a significant extent. I have given some thought as to whether they can be labelled collectively as a group. While there is no single word that can take in all of them (‘masspeercustomizationcommonsmarketplace’ doesn’t roll off the tongue!), my personal opinion is that there is one word to describe a series of ideas that empower the customer with a greater level of participation in deciding how products are designed and how they are produced. It has been used before in a couple of places, more so to describe the general growth of consumer power, rather than in the context I am describing here. However, “..isms” generally refer to a collection of ideas, so it seems appropriate to use it for this purpose.

It’s called ‘Customerism’.

Note: Some information for this article, particularly the definitions of some concepts, was sourced on Wikipedia. Logos of companies are shown in diagrams to illustrate an event or trend only.

It might be appropriate to namecheck those people who have used the term ‘customerism’ in other contexts previously. Firstly, Dan Gillmor wrote an article in SiliconValley.com some years ago which used the term (unfortunately this article seems to be no longer available online), and more recently, Jeff Jarvis titled a posting “The Age of Customerism and Producerism”. This article discussed at length the merits of the blogging approach to communication with customers.