The business of Crowdsourcing

Ever since I started studying the impact of megatrends on corporate strategy, two of these trends have been stirring my mind as being the most intriguing and perhaps the most impactful: the Market State and the Global Grid.

Thinking further about the latter one (in its digital form), and its impact on how ‘work’ (in an structural form) gets organized, one quickly gets to the notion of ‘crowdsourcing’.

This term, launched by former Wired editor Jeff Howe, refers to the practice where specific tasks are being performed by an anonymous ‘mass’ of humans, and with a specific goal in mind.

To know a bit more about the subject –or rather, to get more concrete examples of crowdsourcing as a practice and as a business, I bought Jeff’s book ‘Crowdsourcing’ from 2008. My expectations were low given the 3 star ranking on Amazon UK (on 3 reviews, it has to be said).

The book has a structure that has become rather common lately: a thorough theoretical introduction to the subject, followed by a lengthy analysis of concrete examples. Nothing wrong with that, it’s for the examples that I bought the book in the first place, and I always welcome a little theory behind the bones.

The theory is without any doubt interesting. Through a short ‘history of crowdsourcing’ (before it was named like that, humanity already practiced it), Jeff somewhere concludes that an ‘enterprise’ way of organizing work isn’t necessarily the most efficient way. A thought worth deepening, which Jeff unfortunately doesn’t do in the book.

The most revealing part of the theory, however, lies in the areas in which crowds can be more performing or efficient than current organizations:

1. Making predictions – bizarrely, but statistically correct, the opinion of crowds seem to be much more accurate than any expert will ever be –under certain conditions that is. This conclusion basically refers to Surowiecki’s ‘The Wisdom of Crowds: Why the Many Are Smarter Than the Few
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2. Solving problems – dependent on the way the ‘problem solving’ gets organized, better solutions will often come from the anonymous crowd, even more so if it is gets access to the solutions previously submitted, and are permitted to build on top of these. Strong case on point: Linux, but there’s plenty more);
3. Brainstorming and designing things: the core idea here is that you let potential buyers design the products one will produce, but it entails many more forms of business innovation. Case in point: T-shirt e-Tailer Threadless, who lets customers design the t-shirts, vote on the best designs, produces a certain amount of them (which they can quite accurately predict through a ‘I would buy’ button next to the voting button) and sells them to the same audience. Brilliant !
4. Funding: crowdsourcing essentially is about using an excess of time and knowledge resources from the online community. This concept, hence, can be applied to something more tangible as well, such as money. I personally branded this trend as ‘get rid of the middle man’: it can be applied to such things as money lending (get rid of the banks) or music production (get rid of the music labels). Or even TV (get rid of the channels), which Google is working hard on.

Each of these possibilities, and even more so in combination with each other, offer plenty of ways for existing businesses to benefit from and new businesses to emerge. Regardless of its shortcomings (a very tedious history of the organization of work, and somehow a lack of current -2011- examples), the book excels in opening the mind on what will be possible through crowdsourcing in the future.

There’s undoubtedly plenty of excellent case-studies of how companies have improved or innovated their business model using crowdsourcing. One that came into my mind when reading the book: the Lonely Planet in effect always relied on crowdsourcing in the past, enhancing the information in their travel guides with feedback received from travelers using the guide. But going online and creating a travel community –even if it threatened their core product, the book- Lonely Planet was able to unleash a whole set of new services, and produce their core service more efficiently.

My eyes and mind are wide open for other examples…