Wednesday, April 18th, 2012

Interview: Chris Anderson on Innovation, Kickstarter and the Freemium Business Model

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We’re just a week away from our /bin event in New York, and we’re all very much looking the keynote from Chris Anderson, Editor-in-Chief of Wired. We couldn’t wait until the event to hear from him, so we decided to talk innovation with him beforehand.

For those of you who can’t make the event, don’t forget that we’re livestreaming it at http://sites.box.com/binnyc/ – you can sign up now to get a reminder email on April 25. Share it with your friends by Tweeting with the hashtag #boxnyc – or just Tweet at @BoxPlatform with your thoughts on Chris Anderson, innovation or how great New York is!

What does innovation mean to you?

Needless to say, that’s a book-length question! But I will mention one kind of innovation that I spend a lot of time on but is typically overlooked, and that’s process innovation. One example is getting the “architecture of participation” right in innovation communities such as open source projects, by making it easy for people to contribute and rewarding for them to continue doing so. Another is simply finding ways to manufacture something faster, better and cheaper by innovating in production technology or factory technology, as the Japanese did in the 1980s and the Chinese are doing today.

Consumers may not see that sort of innovation directly, but to my mind it’s the most important differentiator between companies or projects that continue to excel, year after year, and those that are a flash in the pan (or worse).

Apple gets a lot of credit, rightfully, for its product innovation, but its process innovation, from supply chain management to QA, is to my mind even more impressive.

You’ve had a hand in innovation in both New York and Silicon Valley. What’s different about the tech communities there, and how do environmental factors shape those differences?

I don’t know as much about the NY tech scene as I do that of Silicon Valley where I live, but there is one domain I do watch closely where NYC really excels, and that’s in the Maker Movement. Etsy, Kickstarter, Makerbot, Adafruit, LittleBits and others are all based in NYC, which is not where you’d expect to find the future of American manufacturing!

I think the reason for this is that barriers to making things are now falling so fast, thanks to desktop fabrication (3D printers, laser cutters, CNC machines and the like) and digital product design tools. They allow you to manufacture even if you don’t have a big factory or cheap labor. The really important thing now is design skills and talent, and that’s something NYC has more of than any other city in America.

In both areas, we see forces actively trying to create innovation, like VCs and incubators – what do you think are the benefits of trying to make innovation happen in this way as opposed to letting it occur naturally?

The most exciting advance in funding innovation I’ve seen is Kickstarter. It’s genius: simply make it easy for people to pre-order a product, and you’ll provide enough capital for the product to be made, along with market testing how popular it will be. By simply moving the cash flow forward from after the product is made to before it exists, you hugely “de-risk” entrepreneurship and allow innovators to create companies without having to lose control to investors or put an investor’s financial interests ahead of the founders.

Just this week, a smart watch project raised more than $2.5m in two days on Kickstarter. If the founders do decide to seek VC funding, think how much of a stronger position they’ll be in with this sort of demonstrated consumer interest.

We consistently see people trying to innovate in many of the same areas – managing content in the cloud, daily deals, and online sample sales, for example. What areas remain untouched and ripe for innovation, and why?

I think Open Source Hardware is going to be as big or bigger than Open Source Software. We’ve just seen the beginnings of its with Makerbot, Arduino, Sparkfun and my own 3D Robotics, but the world of physical goods is so much bigger than the world of software. Applying the Web’s innovation models to the manufacturing and product design is going to be revolutionary.

In 2009, you wrote Free: The Future of a Radical Price (needless to say, we’re big fans). How do you feel about the success of the freemium model since then?

When I wrote Free, Apple’s app store had just started and most games were still sold on plastic disks. Today, freemium has become the dominant business model in both the app economy and online games, and it’s spawned multi-billion dollar companies such as Zynga. Increasingly, it’s the way media is going, too, thanks to the iPad. As I argued in the book, freemium is the “first 21st Century business model,” and I think the evidence is now pretty clear that it’s one of the best ones, too.