People are creative by nature and will seek to better their environment. This theory applies to the objects and services we encounter in consumer society. If asked we will give input to make things better. Given the right environment, the crowd can undertake tremendous tasks.

Contests

Probably the most simple and oldest crowdsourcing tool. Contests are simply the promise of a prize for solving a problem.

Examples:

• In 1714, British Parliament established a prize of £20,000 to anyone who could accurately determine the position of a ship by longitude. John Harrison, a working class joiner from Lincolnshire who had scant formal education built and repaired clocks in his spare time. Mr. Harrison won the longitude prize by producing the first portable and reasonably accurate chronometer. He took on the scientific establishment of his time and won the prize through his gifted mechanical insight and pure determination.
• Niagara Suspension Bridge (1847). Engineers on the project were out of ideas on how to get the first line strung between the US and Canada. The 800 foot gorge under Niagara Falls could not traversed by boat (the typical method), other ideas included: shooting arrows with lines attached, rockets, cannons, etc. A steel worker suggested a kite contest to deliver the line. The bridge company accepted the contest idea, and a fifteen year-old boy by the name of Homan Walsh won the contest by landing his kite on the opposite side. This crowdsourced project cost the bridge company a grand total of $10.
• Netflix Prize. In October 2006, Netflix announced it would give 1 million dollars to whomever created a movie-recommending algorithm 10 percent better than its own, opening its database in the process. Over 8,000 teams are competing for the prize: University of Toronto, Budapest University, AT&T labs, Princeton University, University of Toronto. Gavin Potter AKA “Just a guy in a garage”, a British psychologist and his high school senior daughter are currently the winning entrants. Potter claims the key to his success is the rest of the mathematicians and statisticians in the contest suffer from groupthink. Their models do not take into account human behavior. Netflix has enjoyed tremendous press regarding the contest and already improved its recommendation service 8.5%.
  

Ideagora

Literally a marketplace for ideas. Ideagoras function as extended staff to an organization. When an organization encounters a problem that can not be addressed by internal staff, because of time constraints or talent, the ideagora serves as an open call to qualified people who can solve the problem. Typically ideagoras consist of detailed problem statement, a reward for solving the problem, and in some cases an area for people to exchange information or team up to collaboratively solve the problem.

Open Source

Open source software is created by many programmers who share a common need (e.g., a better operating system). Programmers work on small aspects of a project and when complete, offer the package to the general public without typical restrictions of proprietary software. Users can copy and change the software to their own needs.

The operating principles of the open source movement also relate to crowdsourcing: many people working in an open environment, new features are added democratically, resultant output is available to the general public.

Examples:

• Linux operating system
• Firefox web browser

Prediction:A complex system such as the outcome of a sporting event or how well a company's sales might perform involves inputs from a wide range of people. A maintenance worker at the event venue might know the condition of the field, a warehouse worker might be aware of conditions that would limit a company's ability to ship product. When all theses points of view are taken into account the crowd can be an excellent predictor of the future. Bayes TheoremIn layman's terms, Bayes Theorem states that probabilities change as we learn more about a given situation. Bayes Theorem has been used successfully to calculate probabilities of group observations. One of the most famous examples was in the prediction of the final resting place of the USS Scorpion, lost at sea in 1968. Using multiple interviews of people with knowledge of submarine operations, researches were able to piece together a probable outcome for the Scorpion. This same process can be used to predict complex outcomes for business, government & education.Decision MarketA decision market is a stock market for ideas. Examples include: tradesports.com, Iowa Electronic Markets, Yahoo Buzz Game.Often set up as a parimutuel where winners share amount bet.Examples: The king of all decision markets in terms of numbers of participants and money wagered is sports betting. Mirage betting line is 75% accurate, tradesports.com is 65%.1996, HP and Charles Plott, an economist from the California Institute of Technology, set out on a joint research project whose aim was to set up a software trading platform for a prediction market at HP.The participants selected for the research project consisted of 30 product and finance managers from HP. They were each given $50 in a trading account and allowed to sell and purchase contracts on the levels they estimated quarterly sales would reach. For instance, if a manager thought sales would be in the range of $201 million and $210 million, he could buy a contract that would pay at the end of the quarter if his prediction was correct. If he revised his personal estimate throughout the quarter, he would likely try to sell the first contract and buy another based on the new estimate. These markets were open during lunch breaks and after business hours, and lasted for a week. The managers were allowed to keep profits earned from owning paying contracts (correct estimates) at the end of the market. When trading stopped, the contract with the highest price (i.e., under the highest demand from the managers) was deemed the ﾒestimateﾓ of the market. The HP marketing manager estimated simultaneously and independently estimated quarterly sales, as usual. 30 managers from various departments, given $50At quarter end, highest priced contract was deemed the market estimate.Traditional sales estimates had a 13% average error.Decision market estimates had a 6% average error.The United States government attempted to put information markets to use. In 2001, the Defense Advanced Research Projects Agency (DARPA), a research think tank within the Department of Defense, began funding a project called FutureMAP (later under the name Policy Analysis Market, or PAM).Organization:One of the most disliked tasks for individuals, the crowd is very good at organizing huge amounts of data.Examples:Google’s winning search technology is a radical departure from other Internet search engines. Google interprets links on web pages as votes. The more links that point to a page, the more likely it is, that page contains what you are searching for. Google also analyzes pages and ranks them by ‘importance’, links from important pages carry more weight than unimportant pagesGoogle’s page rank technology explained http://www.google.com/technology/