Dion Hinchcliffe's Next-Generation Enterprises

Dion Hinchcliffe

Crowdsourcing: 5 Reasons It's Not Just For Startups Any More

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Next-generation enterprises looking to drive efficiency and innovation have recently been able to tap into online communities to offload work. For the first time since outsourcing became prevalent in the 90s -- making it easier to move tasks out to partners that could do something better or more cheaply than you could -- businesses now have a new, potent, and often far cheaper option thanks to the Web.

Frequently referred to as crowdsourcing, and a darling of the Web 2.0 industry, it has recently come of age as the tools and marketplaces for on-demand work capacity on the network have expanded far beyond the early volunteer communities that originally proved out the concepts. These pioneers, which include the world of open source software and online services such as YouTube and Threadless, get most of their value from a large group of people or community through the simple use of an open invitation.

How Crowdsourcing Works in 6 Easy Steps

While Internet startups have had considerable success with crowdsourcing over the last few years, including with its more serious cousin peer production, it's only recently that they've focused on creating the tools and communities that can be readily consumed by enterprises. One of my favorites is Crowdspring, an online design service. I've submitted work there in the past and was amazed at the number of community responses I received (well over 40 for a single design request) for the smallest fraction of what it would cost using traditional services. LG recently designed one of its new phones this way for a paltry $20k (details and submissions here). The economics and results of crowdsourcing are thus often compelling.

Related: Crowdsourcing is one of 18 key topics for IT and business leaders this year.

Now we're beginning to see a more complete picture emerge as various providers begin filling in the blanks in terms of the type of work that can be done. I've been tracking early providers such as Amazon's excellent Mechanical Turk and Innocentive for years, but there now both more specialized providers across more aspects of what we do in business. This includes idea generation, design work, execution of business processes, testing services, and even customer support. All of these can now be connected, often programmatically, directly to a company's supply chain.

While some companies, notably Netflix (the just renewed the Netflix Prize) and Emporis (real estate data), have built their own crowdsourcing capabilities internally, this is not something most companies are experienced with or prepared to do themselves. It also often doesn't make sense to build a crowdsourcing environment in-house unless the work to be done is strategic to the business. For these organizations there are now commercial services available which have all the necessary ingredients to begin using them right away to crowdsource. These including configurable architectures of participation, legal constructs, customer support, as well as communities of users ready to contribute. Depending on the kind of work required, organizations that use crowdsourcing typically pay by the unit of work (such as a successfully completed task) or for a successful solution to a problem, usually in the form of a prize.

Crowdsourcing for Business: Now Usable Broadly Across Functional Units

The reasons that a business would use crowdsourcing is varied. They include ability to offload peak demand, access to cheaper business inputs, generating better results, and tackling problems that would have been too difficult to do otherwise. Often the challenge is that the contributions from the community can be large. This richness and variety is wonderful to have but sometimes requires considerable review to find the best one. Such a swamping of inputs led to early problems, such as when Amazon's Mechanical Turk was used to try to find Steve Fosset's plane using an army of 50,000 volunteers a few years ago. Newer more mature crowdsourcing services now have filters and controls, such as Kluster's ability to more readily tune the "relative influence" of various types of participants.

Five Functional Business Areas Suitable for Crowdsourcing

A number of crowdsourcing services have become available over the last few years. Some of these are well-known players but there are also many interesting new entrants. What is clear now is that most companies have ready access to crowdsourcing across a wide set of functional areas, to the extent that it's often the easiest thing for them to try before going the more expensive outsourcing route. This has implications for business agility as well that can't be ignored and with opportunity costs so low, I expect more and more busineses will be experimenting with these tools over the next year to find out what they can do.

Here is how the major types of crowdsourcing break down today with examples of some of the providers operating currently for business use:

  1. Problem Solving. The leading service in the area of open innovation is almost certainly Innocentive, which has over 180,000 contributors that can work on problems in science, manufacturing, biotech, medicine and many other fields. They offer rewards ranging from $5,000 up to $1 million for solutions to submitted problems. Does this model really work better for solving difficult business challenges? A new article in The Economist says it does, reporting up to a 74% ROI for crowdsourcing over central production methods. Other options include GuruStorms, Philoptima and PlanetEureka.
  2. Design. Today crowdsourced design often means Web design and leading offerings like Crowdspring provide marketplaces to crowdsource Web designs cheaply and quickly. That doesn't mean that's all there is and some marketplaces, like Denook, offer design for other things as well, such as apparel. BootB, for example, will help you crowdsource marketing and creative work, and general purpose tools like Kluster can help you strategically farm specific design decisions across your own private or public community. More traditional services such as Elance also provide on-demand design work, but are less structured to create multiple competing inputs.
  3. Work. For many kinds of simple tasks, particulary if they are small, there have emerged highly granular on-demand work marketplaces. While Mechanical Turk is one of the top solutions in this space, there are others including the new CrowdFlower. You can't outsource complex tasks to these platforms, they're primarily designed for simple things. A good example of a service built on top of these types of crowdsourcing tools is CastingWords, one of the best audio transacription services on the Web. It breaks up recordings into tiny pieces and distributes them across the world to Mechanical Turk workers for conversion to text. For IT shops there is even crowdsourcing for software development from TopCoder, the "world's largest competitive software development community with 220,326 developers representing over 200 countries."
  4. Testing. "Users as testers" has been a growing meme for assuring user input from customers is broadbased and thorough. However services such as the popular uTest are bringing crowdsourcing to testing of software and other services.
  5. Support. Online customer communities have been a steadily growing source of crowdsourced customer service and support for companies that understand how to grow and nurture them. For everyone else, there are services such as Fixya, which crowdsource customer support to get the answers you need, often much better and more accurate than what you can get from the companies that make the products themselves. Other options include the terrific GetSatisfaction and CrossLoop.

Like many aspects of digital business, crowdsourcing is a strange and foreign creature to most non-Internet businesses. While it's very early days for this approach, the evidence is beginning to show there can indeed be significant operational and sometimes direct competitive advantage to using them. Successful next-generation enterprises will carefully pilot crowdsourcing approaches and technologies, cultivate competencies in the techniques, and begin applying them edge to center in their organizations whenever it makes sense.

29 Comments

Dion - thank you very much for using 'terrific' along with us, CrossLoop! :)
Great post on crowdsourcing - we love it.
If you or your users have any questions on CrossLoop, you can email me at anytime or catch me on twitter: http://www.twitter.com/mrinaldesai

Excellent article, Dion. You cover a wide range of service categories in a pretty short read.

And you're 100% correct that "crowdsourcing" as a concept is still in its formative stages. But it's exciting to see companies of all sizes and industries beginning to tap into crowds & communities all across the value chain -- from idea generation, to research, to design, to development to testing.

I know for uTest (software testing), we launched in 2008 and were working mostly with startups and SMBs. But now, Fortune 500 software giants are one of our fastest growing segments.

Keep up the good work!

Matt J.
uTest
http://www.utest.com

Hi Dion-
Thanks for this great article on crowdsourcing. I''m so glad to hear crowdSPRING is one of your favorite crowdsourcing sites! We get excited every time we hear about a different industry that's adapting to this business model. It's become a great option for the small business, entrepreneur or mom and pop shop that simply can't afford a consultant or agency. And it's even more thrilling to see large corporations like LG supporting this method.
Thanks again for keeping your crowd informed of this very clever solution. If you or any of your readers ever need help with branding, come on over to www.crowdspring.com.

All the best,
Bethany
crowdSPRING

One of the more detailed articles on crowdsourcing. You may also want to examine 'managed crowdsourcing' and a new breed of crowdsourced conglomerates - using the energy of synergistic, focused crowds.

For example see http://blurgroup.com.

Dion,

Just wanted you to know, I found your article to be outstanding and immensely helpful.

I'm working on a start up and am looking for great, emerging companies to collaborate with.

I spent over 2 hours today clicking on at least 5-6 of the companies you listed...and will probably use a few of them as I launch my business.

Thanks for publishing such a strong article with an amazing amount of useful information and links.

bob

Nice article.

To your list of crowdsource functional areas I might add: training & elearning. For software companies making technical tools (think Adobe Photoshop or Microsoft SQL Server), user-generated tutorials and how-to's are often *far* superior to those produced by the parent company.

Nice post!

Frank J.

Thanks Don - Very informative! Curious, would you draw a distinction between Crowdsourcing and Employeesourcing; or, are they one in the same???

Also, the products mentioned for "problem solving" seem to be all external based... what about for behind the firewall / enterprise 2.0 implementations?

Finally, Is it possible there's a 6th functional base? Perhaps "Idea Innovation / Brainstorming" or do you include this in "problem solving"?

thanks!
http://twitter.com/schonek

Dion,

I appreciate your take on what crowdsourcing can offer. It seems as though "crowdsourcing" and "design contest" have become interchangeable terms and I am glad that this doesn't have to be the case. My company just recently beta launched www.freshlybranded.com and we focus on a variety of crowdsourced solutions for small businesses. We obviously feel that crowdsourcing can be a great tool, especially for businesses.

Dion, thank you for an excellent article and for pulling together the landscape in one picture. What is most exciting to me is that we are only at the beginning of how these technologies will be used. Our creativity and necessity will drive yet to be dreamt of innovations.
I am grateful to have a framework for talking to others about the path forward by describing where we are today. Great stuff.

The crowdsourcing debate seems to be ignoring a couple of points. 1) With the real time web, value can be created both from the process (engagement) and the final product (creative result). 2) Agencies seem to be once again missing the opportunity to embrace a new model in its early stages. More on this in a recent article on DigitalPopuli, would love your thoughts - http://digitalpopuli.com/crowdsourcing/whats-being-ignored-in-the-crowdsourcing-debate/

Dion,

This is a great article! I like how you categorize the 5 functional areas suitable for crowdsourcing. One more area, if I may add is the initiation phase for any startup. Specifically, leveraging the wisdom of crowds to find a good domain name for a startup. Our recent startup http://www.squadhelp.com offers the ability for companies to engage the "crowd" to help find cool domain name suggestions for as low as $10. Sorry about the blatant plug but I think it is relevant to your article.

Rachel

Great post. All the points you mentioned are very relevant as to how crowdsourcing is reshaping the world. While many argue that it devalues professional, especially in the design industry, I say... Crowdsourcing - Why Not? The truth is that is offering so many people with brilliant and affordable solutions.

I very interestiong article on crowdsourcing!

I have recently read a related post at http://www.innovatrs.com/blog/5-ways-start-ups-should-use-crowdsourcing/ on why start - ups should use crowdsourcing.

Thanks for publishing such a strong article with an amazing amount of useful information and links.

Good article though I think crowdsourcing is becoming more obsolete as the internet ages

Great article, I really think crowdsourcing is the wave of the future.

I think it is relevant to your article.

A number of crowdsourcing services have become available over the last few years. Some of these are well-known players but there are also many interesting new entrants. car shipping and auto transport company with safe car transport service for your needs car transport.

It is really interesting and beautiful,what you have said and described is just what I am dreaming for,I am happy to see this.

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This has implications for business agility as well that can't be ignored and with opportunity costs so low, I expect more and more busineses will be experimenting with these tools over the next year to find out what they can do.

I think it is relevant to your article

Themes, but some of the links thanks

This is a brilliant concept. The web has really opened up endless possibilities.

Successful next-generation enterprises will carefully pilot crowdsourcing approaches and technologies, cultivate competencies in the techniques, and begin applying them edge to center in their organizations whenever it makes sense.

Dion Hinchcliffe

Dion Hinchcliffe is an internationally recognized business strategist and enterprise architect View more

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