The New American Makers

What artisanal brands can teach us about using technology to humanize business

By Randy Komisar

Never before have consumers had so much power to direct their dollars toward brands that offer products and services that are of value and deliver a unique experience. But a process of innovating and manufacturing personalized goods at a scale that makes sound business sense has so far eluded companies. So what’s the solution in a hyper-connected world? Randy Komisar, a principal at the venture capital firm Kleiner, Perkins, Caufield & Byers, suggests it's an emerging new manufacturing model that values quality over quantity.

Bayard Winthrop made a big bet with a small idea a few years ago. When the San Francisco–based entrepreneur set out to design, make and sell a high-quality sweatshirt at a low-end price ($70), he didn’t go the simple route — he didn’t hop a plane to Mumbai or Bangalore to outsource production and open a storefront in a trendy shopping district. Instead, he contracted with a small factory in San Francisco and put up a Website.

More important, his focus on absolute product excellence, not promotional externalities — he claims that 80 cents of every dollar invested in retail is unrelated to the product itself — paid off months later when one journalist declared his product “the greatest hoodie ever made.” Within 36 hours, Winthrop’s direct-to-consumer business, called American Giant, was humming. Within months, he had sold thousands of sweatshirts and was swamped with back orders.

Winthrop’s idea, of course, isn’t a small one any longer — it’s tightly linked to the same dynamic driving the farm-to-table movement and the boom in artisanal manufacturing. In each of these new models, consumers are embracing the idea of having more personal and direct connections to the products that inhabit their lives. The great irony of these back-to-basic principles? Technology is playing a critical role as an enabler of a more personalized way of doing business — one that allows consumers to connect with brands as their father’s father once did at the local country store.

In an increasingly automated world of interconnected everything, consumers are craving new products with which they can make an emotional connection.

The trend underscores one of the great paradoxes of the digital age: In an increasingly automated world of interconnected everything, consumers are craving new products with which they can make an emotional connection, and customized to their personalities and tastes — and beginning to look beyond markets driven by mass-production and low cost, for everything from clothes to cars. Across dozens of industries, Winthrop and other entrepreneurs are creating new “made-to-order” personalization platforms, cutting out as many middlemen as possible and relying heavily on social and mobile technologies to forge lasting relationships with new customers.

Three core principles are driving success for companies like American Giant and many others. Here’s my take on what those principles are and why they matter.

Embrace extreme authenticity

When it comes to consumer products, a complex web of manufacturers, wholesalers, retailers, advertisers and marketers factor heavily into the ultimate price of a good. All of these third parties add layers of complexity and cost between when and where the product is made and how and where it is sold. Manufacturers might produce higher-quality products, but in the retail sector they typically sell them at higher prices (as high as 13 percent, in some cases) in order to account for distribution and marketing.

How can companies remove these costs — and spark new connections with consumers? First, they can source locally and use the Internet as a primary storefront. By contracting with a San Francisco factory (and, later, adding three more plants in North Carolina) and sourcing his cotton and other supplies in the U.S., Winthrop has eliminated the high cost of producing sweatshirts overseas. And he keeps real estate costs low by selling his apparel online only and spends very little on marketing. With the extra capital freed up by lower distribution and marketing costs, Winthrop can afford to buy quality cotton and pay workers a relatively generous wage — $17 per hour.

Zappos and Amazon may have built massive online stores that scale, but they remain product curators — not makers — at their core. Companies like Warby Parker took this model a step further by not only delivering items purchased online, but also creating them in-house. By offering to deliver its own product (in this case, eyeglass frames) to customers with the added bonus of no obligation to actually buy them, Warby put choice in the hands of the customer while saving on the real estate costs of an in-store experience.

Let customers be the voice of your brand

Artisanal manufacturers are giving consumers amazing new products they can love and share with their vast online networks — and through social media, they serve as authentic cheerleaders to drive sales. By relying on customers to become the collective voice of their brands, companies free up capital that would otherwise be spent on expensive marketing and distribution processes.

Dozens of companies are tapping into this concept to build and scale promising new businesses. Brewers and distillers like New Belgium Brewing and Woodinville Whiskey have made big strides in advancing the quality of craft-made beverages while relying on the consumer to spread the word. Crowdsourced creation has also used technology and online platforms to create great products. Take Arizona-based Local Motors, for example. The company provides a space for customers to design, build and sell custom-made vehicles and parts online.

Extreme honesty is the new policy of successful business in the 21st century.

All of them perhaps owe a portion of their success to the farm-to-table innovators of the last decade, who showed how the quality of home-grown produce wasn’t just better, but connected to consumers’ core values in ways that supermarkets simply can’t. Hundreds of other industries and sub-industries in our economy are next in line to undergo the same transformation.

Practice extreme honesty 

Transparency is integral to lasting relationships with customers today — and allows for focus on creating a great product. Technology gives consumers a window into the day-to-day operations of most organizations with which they interact. Successful brands can’t hide mistakes or internal goings-on like they once could. Extreme honesty is the new policy of successful business in the 21st century. The days of cover-ups and pushing issues under the rug are gone. Humans are fallible and so are companies — admitting this will take a brand a long way with its advocates.

At American Giant, Winthrop has been very open about the company’s inability to meet demand; some customers have waited months for a hoodie. In the end, this level of transparency guarantees that quality products will get the recognition they deserve from the customers who love them.

The artisanal movement certainly won’t fill the hole left by the decline in U.S. manufacturing over the last 30 years, but it’s helping to forge a new model that allows some companies to marry the best that technology can offer with the human values and sense of individuality that consumers increasingly crave. In the end, the melding of these elements really will put the greatest [fill in the blank] ever made just one click away.

Randy Komisar, a partner at venture capital firm Kleiner Perkins Caufield & Byers, is dedicated to partnering with entrepreneurs to create businesses with leading-edge technology. Komisar is also the author of best-seller "The Monk and the Riddle," which tackles how we can make work pay not only in cash, but also in satisfaction and experience.