Collaborating with Consumers

Natarajan Venkatakrishnan (Venkat) carries two business cards. One identifies him as director of R&D for GE Appliances. The other identifies him as director of FirstBuild. It gives the impression that Venkat is working for two employers. The truth is, Venkat’s roles at GE Appliances and FirstBuild are interdependent. Each benefits from the other.

FirstBuild is a partnership between GE Appliances and Local Motors. It’s intended to be, in FirstBuild’s own description, “a new model for inventing, building and bringing the next generation of major appliances to the market.” With a community of idea contributors and crowd-funded projects, FirstBuild looks and feels more like a startup than a traditional manufacturer.

Manufacturers don’t always have the best ideas. Nor are they in a position to pursue good ideas that don’t appeal to a broad spectrum. They revolve around mass production. They rely on failsafe, foolproof ideas for revenues. They lack an essential ingredient in innovation: an appetite for risk.

Through FirstBuild, GE wants to harvest the energy of a new kind of manufacturer—those driven by an entrepreneurial spirit, crowd funding and small-scale production.

Shifting Strategies

“Manufacturing used to be highly capital intensive. It doesn’t need to be anymore,” says Duleesha Kulasooriya, head of Strategy and principal author for Deloitte Center for the Edge. “A kid in San Francisco can come up with an idea, prototype it at TechShop [a membership-driven network of production facilities], fund it on Indiegogo and produce it in Shenzhen through HAX [a hardware production accelerator site].”

The change is also reflected in the R&D strategies of software vendors catering to manufacturers. “The range [of production] from zero to a thousand has been historically very difficult to fill,” says Diego Tamburini, Autodesk’s manufacturing industry strategist. “That has never been economically feasible. Everything has to be produced in at least several thousands [of units].”

Today, to accommodate low-volume production, Autodesk and other design software vendors have begun adding support for 3D printing in their mainstream CAD software. Leading PLM (product lifecycle management) system vendors are incorporating social media-style collaboration features into their framework, in a recognition that concept generation, brainstorming and idea evaluation must extend beyond the enterprise to include outside communities and enthusiasts. And many vendors are offering subscription software licensing models with lower upfront costs.

A Standard Bearer Falls

Enthusiasm for the new micro-manufacturing economy and maker movement is high. But the rise and fall of Quirky serves as a cautionary tale. Once hailed as a success story of crowd-sourced inventions, Quirky admitted defeat late last year with a Chapter 11 bankruptcy filing. In an onstage interview with Fortune magazine at Fortune Brainstorm Tech, former Quirky CEO Ben Kaufman attributed the failure in part to the company’s over-reliance on big box stores for distribution.

“[Quirky products] were in so many retail stores—just last year, we were in 50,000—that, just to fill the shelves, we were making tens of thousands of units,” Kaufman said. “The very basis of Quirky—that we can prove an idea is good and stage-gate it in the development process—broke largely because of the traditional bounds of brick and motor retail.”

Success is the double-edged sword that rewards and punishes promising ideas from the maker community. Without the supply chain and distribution strength of a traditional manufacturer, a crowd-funded project that succeeds could face scaling challenges.

“If you crowd-source a project, you get a lot of ideas, but [idea contributors] don’t necessarily know how to turn them into products,” Venkat says. “Your company’s internal team has the domain knowledge, but they may not have the best ideas. The best approach is to pair crowd-sourced ideas and domain knowledge from experts.”

According to “The Future of Manufacturing,” a Deloitte Center for the Edge report co-authored by Kulasooriya, “While large-scale production will always dominate some segments of the value chain, innovative manufacturing models—distributed small-scale local manufacturing, loosely coupled manufacturing ecosystems and agile manufacturing—are arising to take advantage of these new opportunities.”

In the past, engineers were responsible for innovation—to come up with breakthrough inventions and new products. The rise of crowd-sourced projects puts a new spin on their role. In the new co-creation model—a loose partnership between consumers with bright ideas and enterprises with prototyping and manufacturing capacity—engineers are innovation enablers. Whether this change is a blessing or a curse is up for debate.