June 12, 2011 in Blog, Blogging, Business, Social Media, Strategy, Uncategorized by Stephen Coughlan

CROWDSOURCING: WHAT IS IT ALL ABOUT?

Lately, it seems to be everywhere.  In music, design, advertisement, finance, customer service. In research and development, science, even in love life. With its endless applications and a potential that hasn’t been fully discovered yet, crowdsourcing has become part of our lives, and many of us haven’t even heard this word before. The concept is simple: take a job you would have normally given to an employee and outsource it instead to a large, undefined group of people, usually by publishing the task online and opening participation to anyone who feel they have the right skills.

The fact that crowdsourcing is such a broad concept is its main strength, since it has great flexibility and extraordinary potential, but it is also an important weakness: it’s easy to get lost in a myriad of examples and fail to see how crowdsourcing can be helpful to our business.

So, to start, let’s try to make some order. Jeff Howe, who coined the word “crowdsourcing”, identifies four main categories: collective intelligence, crowd creation, crowd voting and crowd funding. These categories can be mixed and implemented together; in fact, the most successful crowdsourcing projects tend to use a combination of these approaches.

The concept of collective intelligence is based on the idea that the group is smarter than the smartest person within the group itself. There are a number of well-known applications of this concept: for instance, the “ask the audience” option in the TV show “Who wants to be a millionaire”. An increasing number of companies, many of them Fortune 500, have enough trust on collective intelligence that they have open their R&D departments to the crowd and use crowdsourcing to find new ideas or to resolve problems. For instance, Innocentive is a community of over 250,000 scientists from nearly 200 countries, who work on problems of various nature for a prize that can vary from 5,000 to 1 million dollars, depending on the complexity of the challenge (see more stats on www.innocentive.com).

Crowd creation capitalises on the great deal of creativity possessed by the crowd: many companies are now outsourcing the creation of advertisement, logos, web sites, translations, etc., to online communities (see for instance www.zooppa.com, www.bootb.com or www.12designer.com). This allows businesses to receive many more proposals, at a much lower cost, than they would normally get from a traditional advertising agency.

Crowd voting uses the crowd’s opinion to organise large amounts of information. The “vote” can be consciously expressed, as in the iStockphoto rating system, or unconscious, as in Google’s “Page Rank” system.

The last category of crowdsourcing is  crowd funding, in which large groups of individuals effectively replace banks as a source of funds. This system is often used in micro-financing, for instance by organisations such as Kiva, Fundit.ie and Kickstarter.

We have mentioned just a few examples of crowdsourcing, but there are tonnes more out there: feel free to share with us the ones you consider more interesting or more successful!

CROWDSOURCING AND SMEs

Crowdsourcing has been successfully implemented by many Fortune 500 and by many big companies around the world, for instance Dell, Microsoft, Google and L’Oreal, to mention but a few.

But can it work for small and medium-sized enterprises?

The answer is yes, but there is still a lot to do before crowdsourcing becomes a commonly considered alternative for doing business among SMEs. Let’s see why.

From a research conducted by the author on SMEs, it appears that the adoption of crowdsourcing among smaller companies is still very limited. This is due to a number of factors: in the first place, the vast majority of companies are likely to be completely unaware of what crowdsourcing is about. Secondly, non-adopters of crowdsourcing do not seem convinced about the potential benefits of open innovation.

What are these advantages? According to the SMEs that have already implemented crowdsourcing, it contributes to increase the innovativeness of their company, improves their products or services, enhances the quality of communication with their customers, increases the knowledge they have of their clients and reduces costs. Not bad isn’t it?

But even when the advantages of this strategy are acknowledged, there are various factors that can influence the adoption of crowdsourcing in SMEs; in particular, a lot depend on the personality and style of the company’s executives: are they generally inclined to take the risk of doing things differently? Are they afraid of doing something new? Obviously, if the answer is no, then they are more likely to abandon the old ways and add that extra bit of creativity that the crowd will surely bring.

Financial resources are also critical: a proper crowdsourcing strategy is not a way to access “cheap labour”, as it might look at first glance, but it actually requires a significant investment in terms of time and money. According to the particular application chosen (e.g. new product development rather than new advertisement, etc.) the company needs to spend time engaging with the crowd, transforming its processes and internal procedures to allow customers to cooperate in the creation of products and services, writing a brief for people that might not know anything about their brand, going through hundreds of creative proposals, and so on. Before engaging in crowdsourcing activities, the firm must carefully evaluate whether it can afford to have resources specifically dedicated to crowdsourcing, or to train its employees, or to offer adequate prizes to attract the right type of participants to its online contests.

The company’s culture and set of skills will also require adequate familiarity with Internet and the Web 2.0, if we want crowdsourcing to be adopted and successfully implemented.

In essence, there is still a lot to discover about crowdsourcing and many companies might feel these recessionary times are not the best moment to take the risk of doing things differently. Or maybe, there is no better time to try something innovative, and exploit the potential of crowdsourcing to its full.

Written by Lisa Cescon