The central idea behind Quirky, a consumer goods startup aimed at “making invention accessible,” probably sounds familiar: harness the wisdom of crowds to decide which products move forward to commercial production and which products get left behind. T-shirt manufacturer Threadless, for example, utilizes a similar crowdsourcing model. But whereas others only dabble in crowdsourcing, Quirky dove headlong into the trend. The company would either thrive off of the wisdom of crowds or burn out due to the unruliness of mobs.
Quirky was founded Ben Kaufman in 2009 with the idea of revolutionizing the way that products make it to stores’ shelves. Prior to founding Quirky, Kaufman had built his first company, Mophie, from a teenager’s hobby into a sizable retailer of all types of accessories for Apple products. Having endured the many frustrations that plague first time inventors and entrepreneurs, Kaufman dreamed of starting a company that made the process of inventing a product easier. He wanted to find a way to tap into the unused innovative spirit of the masses by providing a glide path from creation to production. “The best products weren’t born in the boardroom,” Kaufman was fond of saying. And so he started Quirky.
Quirky’s unique product development model relies on user and crowd input at each of the most important steps. First, would-be inventors log-on to Quirky’s website, answer a few simple questions about their ideas (i.e. “what problem are you solving”), and attach any files that best explains or details the potential products’ use cases, design, or marketability. Quirky takes these submissions and opens them up for comment and judgement by its base of over 1 million community members. The products that receive the most member votes advance to a rapid product development stage where in-house engineers and designers use feedback from members to guide them as they hammer together a working prototype of a product. This process from initial idea to working prototype typically takes a couple of weeks, a lightning fast pace for new product development. Quirky then produces a marketing video about the prototype and distributes that video to its community in order to determine an acceptable price. Based on user feedback and the cost that it took to actually produce the good, Quirky makes the ultimate determination about what should be mass produced and sold to the public.
Importantly Quirky takes on all of the financial burdens of developing the product once it has been advanced to the product development stage – the cost of actually designing, engineering, prototyping and marketing all products is born by Quirky alone. In return for handing over their early stage ideas, inventors get a small royalty based on the number of their products sold and the knowledge that they invented a mass market product. Quirky keeps the rest.
Initially this business model achieved a fair amount of success. The business had a few hit products that were quickly picked up by major retailers such as Target, Amazon and Bed Bath & Beyond. Quirky received funding to the tune of $185 million, with megawatt names such as GE, Andreessen Horowitz and Kleiner Perkins listed as its backers. And the company even generated substantial revenue (estimated at around $100 million at its peak), a somewhat rare feat in this new age of revenue-less start-ups. Maybe Quirky really had cracked the code on new product development?
Unfortunately, these headline grabbing successes masked an existential problem for the Quirky– its business model was broken and was quickly bleeding the company of cash. Quirky filed for bankruptcy protection this past September with only a couple of month’s capital remaining. The company’s core problem, it appears, is that it fell in love with crowdsourcing and attempted to implement it across all aspects of its business. Relying on the wisdom of crowds to propose, select, refine and price products created a costly (if admittedly quick) product development cycle where Quirky had to pay to prototype an idea that may have no addressable market. And given no boundaries, it turned out that the crowd’s tastes were a little…. quirky. Often times the community would select products that solved interesting but meaningless problems (wheels that turned anything into a remote controlled car) that cost a lot to prototype and could not be sold. This process, repeated over and over, left Quirky holding the bag as the crowd’s imagination ran amok. By overestimating the utility of crowdsourcing, Quirky actually revealed some of its limitations. In fact, the greatest take away from the Quirky experiment is best stated by its founder, Ben Kaufman, “crowdsourcing is a tool, not a silver bullet.”