By Alan Sipress
Washington Post Staff Writer
Monday, June 18, 2007; Page A01
The two teenagers were short of nearly everything when they kick-started their Chicago T-shirt business seven years ago. Jake Nickell and Jacob DeHart each chipped in $500. They ran it out of Nickell's apartment since DeHart still lived with his mother. For shipping, they enlisted friends to carry the shirts to the post office.
But they had a killer design team: the Web. They solicited designs from thousands of Internet users and then had them vote on which to manufacture. Outsourcing design work to the Web's mass audience has built the company, now called Threadless, into one of the country's hottest T-shirt retailers, with estimated annual revenue of about $15 million.
In a similar fashion, Fortune 500 companies such as Procter & Gamble, Dow AgroSciences and General Mills now turn to the Internet to solve some of their thorniest research problems. They post them on a Web site called InnoCentive, which links up companies and scientists, promising a reward often worth tens of thousands of dollars in exchange for the best answer.
From quirky Internet start-ups to industrial titans, companies are increasingly outsourcing segments of their business to sources in cyberspace -- much as they began shifting production overseas a generation earlier. This process, known as crowdsourcing, means that work once done in-house, from design and research to information-related services and customer support, can now be farmed out, tapping new expertise, cutting costs and freeing company employees to do what they do best.
The trend is gaining pace as corporate executives embrace the openness of the Web. Analysts said the promising gains in productivity will ultimately benefit the wider economy.
"It's a way to access the distributed knowledge that is out there on the Web," said Karim R. Lakhani, a professor at Harvard Business School who has studied the trend. "You can now basically focus on your core business."
This approach exploits the vast human wisdom and expertise available via the Internet. But crowdsourcing is less of a collaborative endeavor than a means of finding individuals with the right skills for the right price.
Companies are still sorting through a raft of new challenges. While executives worry about sharing too much proprietary information with outside contractors, lawyers wrestle with concerns over who owns the rights to contributions from the crowd. Managers are also evaluating how to assure quality control and are assessing which tasks are best suited for outsourcing to the Web.
Publishers that once hired their own photographers are turning to sites like iStockphoto, which offers nearly 1.8 million images shot by thousands of amateurs and are available royalty-free for as little as a dollar per picture or $5 for a video clip. Elance.com offering freelance services, said its writers complete about 300 jobs a week for an average $500 each. Feedback for the writers is posted on the Elance site along with their credentials, which in some cases are verified by an outside company.
One of the Web's premier sellers, Amazon.com, has become a broker for the Internet labor force. Amazon's Mechanical Turk service enables "requesters" to post tasks online and facilitates payment once they're finished.
Using Amazon's two-year-old service, PriceGrabber.com finds Internet users to collect images of products and related information for its catalogue, according to Peter Cohen, director of Mechanical Turk. (The program is named for the ploy of an 18th-century Hungarian nobleman who built a turbaned mannequin and claimed it was a mechanical automaton capable of beating anyone in chess. Hidden inside was an actual chess master.) Another company, which makes games, turned to Amazon to hire people who can write trivia questions and then verify the answers. Cohen said more than 100,000 people have performed work through Mechanical Turk since it was introduced in late 2005.
For Threadless, the Internet has been part of the company's fiber from its founding.
DeHart and Nickell both grew up with an artistic bent. DeHart, now 25, drew and painted. Nickell, 26, did graffiti. They met through an Internet discussion group about design, according to Jeffrey Kalmikoff, who later joined the company as chief creative officer. They stumbled across the idea for Threadless after entering an online competition to design a shirt for a conference in London. Nickell won.
"They said, 'Isn't this really fun and really cool? Let's do it again,' " Kalmikoff said. "It was never like, 'When we grow up, we want to own a T-shirt company.' "
So they held an online T-shirt competition of their own and produced the winning design. The contest was so popular they decided to convert it into a business .
The company, which now employs 30 people, receives about 150 design submissions a day. Each one remains posted on the Web site for a week and those winning the most votes from more than a half-million registered users are chosen. Winning designers get $1,500 in cash and $500 worth of merchandise.
By turning to the Web, the company has been able to market designs far better than what Kalmikoff says he and his two colleagues could have created. Over the company's life, he said, the competition has grown so fierce that Threadless has received 150,000 submissions, only 1 percent of which are chosen for production. Even famous designers who have entered the contest have failed to win.
In contrast with the accidental genesis of Threadless, InnoCentive was the creation of a carefully considered strategy by Eli Lilly, the 131-year-old pharmaceutical giant.
"There was a recognition that there's a richness and diversity out there that's difficult to capture in full-time head count," said Dwayne Spradlin, InnoCentive's chief executive.
InnoCentive soon opened the site to other companies, which can pay more than $100,000 to join. About 10 percent of Fortune 500 corporations have posted challenges, especially in chemistry and life science, Spradlin said. Crowdsourcing research has proven cost-effective because companies pay only for problems solved rather than their own hit-and-miss R&D efforts, he said.
More than 500 challenges have been posted to InnoCentive in the past six years and about a third successfully answered, he said. The solvers include more than 120,000 scientists, with about half from China, Russia and India.
In one instance, Colgate Palmolive asked for a more efficient way to put toothpaste into a tube. The creator of the solution, which involved using an electrical charge on the paste powder, was rewarded with $25,000.
Another query posted by an anonymous company asked for a method to prevent one of its food preservatives from deteriorating and discoloring. Michael S. Leonard, a chemistry professor at Washington & Jefferson College near Pittsburgh, took two days to develop a way to tweak the molecules to prevent the preservative from breaking down. His solution won him $10,000.
Leonard acknowledged that some colleagues frown on InnoCentive.
"Some people think I'm selling myself short, giving up my expertise for relatively little," Leonard said. But, he added, "I enjoy the intellectual challenge, and any compensation I get is compensation I wouldn't have gotten otherwise."
