Using crowdfunding to accelerate disruptive innovation

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While the overwhelming majority of projects on crowdfunding sites like Kickstarter are launched by individuals or small teams trying to convert an idea into reality, some established companies are using crowdsourcing infrastructure and community as a way to create new products, even when the companies don’t ‘need’ the money, per se. In effect, the crowdfunding exercise can become a better way to research the market and test product ideas. And then, potential customers vote with their money.

Jessica Leber, Backers with Benefits: Why Companies Are Outsourcing to Kickstarter

“Crowdfunding is the ultimate form of consumer research,” says Scott Popma, an intellectual-property lawyer who advises companies about crowdfunding. “You are not just asking people’s opinions—you are getting opinions with their money.”

For Securifi [well-established manufacturer of the Almond ‘smart hoome controller’], the campaign is helping it do early marketing and solicit high-quality feedback from enthusiasts while the product is still in development—far preferable to hearing criticism or getting a negative review after it is released. Right now, as a third-party seller on Amazon, Securifi can’t contact most people who have previously bought products to ask about their experience, or to promote future features or products. “We now know very few of our customers,” says [CEO Ram] Malasani. “We’re just removing the layer between ourselves and our customers.” They’ve already received more than 700 comments and messages.

Game companies with huge fan bases are among the largest businesses that have taken to the Kickstarter platform. Double Fine Productions, a decade-old independent studio that has won several awards, raised $3.3 million on the site from 88,000 backers last year, aiming not only to finance a new game but to “develop it in the public eye.”

For Days of Wonder, a maker of digital and board games, using Kickstarter was also not about the money. The campaign it launched in January was primarily meant to help determine whether its employees should devote months’ worth of resources to making an Android tablet app for their popular iPad game. Some customers had been requesting it, but in reality, few people have Android tablets yet.

The company set a goal of raising $190,000, a threshold it felt would establish sufficiently promising demand. The money itself was so beside the point that the company canceled the on-track campaign midway through. CEO Eric Hautemont realized that iPad owners and board-game fans were donating, so it wasn’t helping answer the primary question about Android demand.

This experience points to the challenges of using Kickstarter as a research platform. “We learned a lot,” Hautemont says. “We’re planning to relaunch it in March, focused on Android.”

I can see this becoming a part of the DNA of social businesses. Not necessarily using Kickstarter, but in many cases where companies are planning on rolling out consumer products it could be directly on Kickstarter.

 

The bane of making changes in an established product line is the fear of cannibalizing sales while incurring higher costs. But at the same time, companies have to innovate, or they get lapped by young innovators. This is Clay Christensen’s Innovator’s Dilemma.

Imagine an eager product manager, Kati, who is contemplating a dramatic pivot in an established but dwindling consumer product, a baby carriage. After getting some push back on her ideas internally, she devises a Kickstarter campaign to gain support and feedback on a radical redesign (here I stole one from Evan Garrett and Dan Levin as eye candy).

She touts the features of the Strolla — better springs, doubles as a baby chair because of its height, seat comes off to serve as a bike seat, can be pulled up and down stairs, etc. — and starts gaining support. Hundreds sign up for the seat, and great comments stream in. With that feedback she approaches her management, and makes her case with hard data and $150,000 in pledges.

That could be the tipping point to break the logjam in the corporate mindset. And if her management is too stupid to go along at this point, she can always leave the company and start her own company.

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