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crowdforum — Sun, 08 Mar 2009 09:27:53 CDT

The white papers section is intended for long-form educational pieces on crowdsourcing and open innovation. Please don't let "paper" stop you from adding videos, slide shows etc. to this area.

Crowd Forum is a community of professionals sharing their experiences with crowdsourcing and open innovation. To participate, please join now.

Contents:

Crowdsourcing 101 Video
Crowdsourcing and New Product Development
How the Internet Powers Crowdsourcing
Amateur Economy of Crowdsourcing
"Big Board" Mentality
Natural Born Crowdsourcers
The Crowd Gets into Advertising
Crowdsourcing Business Examples
Crowdsourcing Techniques in Management Consulting
Crowdsourcing at Phillips
Selfsourcing
Business Value of Blogs & Wikis
Social Networking Techniques in Project Management
Once Upon A Time There Were Producers and Consumers
Crowdsourcing: Innovate or Die

Crowdsourcing: Innovate or Die

crowdforum — Sun, 08 Mar 2009 09:25:22 CDT

By Steve Fisher, Microengagement Co-founder

Crowdsourcing is a growing business phenomenon. It is the process of gathering relevant groups of people together with defined characteristics and tapping their knowledge to create something new of value. Related terms include: Mass Collaboration, Peer Production, Wikinomics, Open Sourcing, Wisdom of Crowds, and Open Innovation. Crowdsourcing has been increasingly written about in prominent publications such as Business Week and in Jeff Howe’s 2008 book, “Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business.” The term was first coined by Jeff Howe in a June, 2006 Wired magazine article.

Crowdsourcing in fact can spur increased innovation at greater speed and efficiency than ever. The key driver behind crowrdsourcing is simply that in today’s world innovation more than ever is critical to business success. Business leaders, especially of medium and larger-sized companies, and in any industry that…

is not living largely off the fruits of the past, or in a situation of limited competitive pressure (protected by patents or a unique niche), and
has access to one or more constituencies outside of its normal internal resources to provide new business ideas

…need to be (1) thoroughly familiar with the capabilities of crowdsourcing, (2) the potential opportunities for new business development, and (3) be prepared to take advantage of one or more of several proven approaches to leverage this phenomenon.

Leading-edge companies have and are leveraging this technique successfully. Examples include P&G, Netflix, Electrolux, Phillips and HP (see examples described below), but these not always as part of broader business strategy where crowdsourcing is utilized as a systemic resource for growth, rather often represents opportunistic trials of rising social networks and access capability via Web 2.0. We contend that companies which systematically install crowdsourcing capabilities in their organizations will reap significant rewards that others won’t.

At Microengagment, our goal is to help educate leading-edge organizations, guide an opportunity assessment where we (a) gauge the current value being created through innovation (we call this Total Innovation Value or TIV), (b) assess how crowdsourcing can increase TIV as innovation builds via tapping external knowledge capital, and (c) identify the specific elements, prioritization and proposed scope of projects/programs. In so doing, we work with partners well established in the field of implementing systemic approaches to leveraging external constituencies for new product/service development and growth, including key consumer groups, social networks, B-to-B customers, end users, supplies/vendors, employees and subject matter experts, among others, accessible through business and social media networks.

Our practice focuses on crowdsourcing education, assessment and implementation. We conduct leading-edge research and showcase this on www.crowdforum.org as the first step in providing information to business leaders.

Crowdsourcing Is Taking Hold

History of Crowdsourcing Historical examples of crowdsourcing date back to the 1714 Longitude Prize, a reward offered by the British government through an Act of Parliament for a simple and practical method for the precise determination of a ship's longitude. The prize was up to ₤20,000 for a method that could determine longitude within 30 nautical miles. An unknown inventor by the name of John Harrison ultimately won ₤14,315 for his work on innovative chronometers over a period from 1737 to 1764. As incredible but in a different way was the 1847 Niagara Falls Suspension Bridge contest. In 1847 Charles Ellet Jr. of Philadelphia, an engineer, was awarded the contract to construct a bridge at the chosen site. Ellet was about to begin construction in January of 1848 when he was faced with his first obstacle. The building of a suspension bridge was commenced with the stretching a line or wire across the chasm. Ellet himself proposed the use of a rocket. A bombshell hurled by cannon was also suggested. Some thought a steamer might navigate the rapids, knowing that the Whirlpool Rapids would devour any smaller craft and that ferries were too far upstream. A local ironworker, Theodore G. Hulett, suggested offering a cash prize to the first boy who could fly his kite to the opposite bank. Area youngsters were invited to a kite-flying contest. There was a tremendous turnout for the contest held in January, 1848. The kites began appearing on the Canadian side of the gorge, taking advantage of prevailing winds from West to East. The first to succeed in spanning the gorge with his kite, was a 15-year-old American, Homan Walsh. His cash prize was either five or ten dollars. Imagine solving this enormous problem with something as simple as a kite and a few bucks! The 2008 survey uncovered two startling results: (1) senior executives rated crowdsourcing and consumer collaboration groups as effective as internal R&D staff for developing ideas for new product / services; (2) one-half of the executives believed crowdsourcing would produce cost efficiencies ranging from 10% to 30% over either traditional in-house approaches or external professional services. Fully 90% of the executives indicated that crowdsourcing is attractive based on these findings.

History of Crowdsourcing

Historical examples of crowdsourcing date back to the 1714 Longitude Prize, a reward offered by the British government through an Act of Parliament for a simple and practical method for the precise determination of a ship's longitude. The prize was up to ₤20,000 for a method that could determine longitude within 30 nautical miles. An unknown inventor by the name of John Harrison ultimately won ₤14,315 for his work on innovative chronometers over a period from 1737 to 1764.

As incredible but in a different way was the 1847 Niagara Falls Suspension Bridge contest. In 1847 Charles Ellet Jr. of Philadelphia, an engineer, was awarded the contract to construct a bridge at the chosen site. Ellet was about to begin construction in January of 1848 when he was faced with his first obstacle. The building of a suspension bridge was commenced with the stretching a line or wire across the chasm. Ellet himself proposed the use of a rocket. A bombshell hurled by cannon was also suggested. Some thought a steamer might navigate the rapids, knowing that the Whirlpool Rapids would devour any smaller craft and that ferries were too far upstream. A local ironworker, Theodore G. Hulett, suggested offering a cash prize to the first boy who could fly his kite to the opposite bank. Area youngsters were invited to a kite-flying contest. There was a tremendous turnout for the contest held in January, 1848. The kites began appearing on the Canadian side of the gorge, taking advantage of prevailing winds from West to East. The first to succeed in spanning the gorge with his kite, was a 15-year-old American, Homan Walsh. His cash prize was either five or ten dollars. Imagine solving this enormous problem with something as simple as a kite and a few bucks!
The 2008 survey uncovered two startling results: (1) senior executives rated crowdsourcing and consumer collaboration groups as effective as internal R&D staff for developing ideas for new product / services; (2) one-half of the executives believed crowdsourcing would produce cost efficiencies ranging from 10% to 30% over either traditional in-house approaches or external professional services. Fully 90% of the executives indicated that crowdsourcing is attractive based on these findings.

Our research shows that more and more business executives, over 70% in fact, are increasingly familiar with crowdsourcing as an important avenue for business development, according to a recent survey of 100 senior marketing executives. This is up from just 30% one year ago. (Source: Marketing Executives Networking Group surveys, sponsored by The Crowd Forum, 2007 and 2008). One-half of these executives were Presidents, CEOs, COOs, and CMOs of corporations and professional services firms.

The Imperative for Crowdsourcing

When you look around these days the reality is undeniable: bedrock corporations failing and brands we grew up with going away, replaced by innovative new models and products/services. The world is becoming flatter such that the "blocking" tactics traditionally used by category dominants just don’t work any more. Just think GM, Chrysler, Microsoft, Circuit City, Starbucks among others. They thought they could control distribution and force products and services on consumers they did not want or no longer viewed as compelling. Meanwhile companies such as McDonald’s have flourished by listening to their consumers and introducing innovative new products on the menu.

Rather then preach “innovate, innovate” as so many corporate pundits do, at Microengagement we are focusing on innovation as the product of a healthy relationship with brand constituents. We call this “Constituent-Driven Innovation” (or CDI for short). The brands that are failing today never fully realized the power of working with their

Process Implications for CDI Let’s look at CDI both within a traditional framework of new product development, from idea generation through to marketing and distribution, and also point out how CDI differs. The implications for process redesign are clear: * Idea Generation Opening up the new product design process to the “crowd”, i.e., your customers, vendors, employees, consumers, outside subject matter experts, and even the general public (all of your current and potential business constituencies) places a greater demand on the company to know exactly what it wants and what it is willing to pay for a functioning product. Many companies enter the process hoping consumer studies and focus groups will provide the right product definition. This inevitably leads to a greater risk of failure due to: a) the limited size and breadth of these groups, and b) focus groups for example capture opinion but not actual behavior. Examples from the past and present clearly demonstrate the value of casting the broader net: the British “product” definition said, “Deliver a device capable of locating a ship at sea to within 60 nautical miles and we will pay £20,000.” Today Netflix is running a contest to improve its movie ratings service: “Deliver a ratings service 10% better than our current system and we will pay $1,000,000.”

Process Implications for CDI

Let’s look at CDI both within a traditional framework of new product development, from idea generation through to marketing and distribution, and also point out how CDI differs. The implications for process redesign are clear:

* Idea Generation

Opening up the new product design process to the “crowd”, i.e., your customers, vendors, employees, consumers, outside subject matter experts, and even the general public (all of your current and potential business constituencies) places a greater demand on the company to know exactly what it wants and what it is willing to pay for a functioning product. Many companies enter the process hoping consumer studies and focus groups will provide the right product definition. This inevitably leads to a greater risk of failure due to: a) the limited size and breadth of these groups, and b) focus groups for example capture opinion but not actual behavior.

Examples from the past and present clearly demonstrate the value of casting the broader net: the British “product” definition said, “Deliver a device capable of locating a ship at sea to within 60 nautical miles and we will pay £20,000.” Today Netflix is running a contest to improve its movie ratings service: “Deliver a ratings service 10% better than our current system and we will pay $1,000,000.”

constituents. Brands that continue to thrive in this economy place high value on these
relationships. Companies like Google, Intel, and P&G understand the value of their constituents and will continue to thrive because the critical mass of constituents built up behind them will not allow them to fail. Here are some of the realities driving the movement to CDI:

The days of dominance of traditional major media are over, be it TV, magazines or newspapers. There is no group just waiting around for your brand message on good old Channel 5. It must be created in coordination with your brand constituents, and delivered to where they gather, or they will often not any longer hear it and therefore may no longer buy it.

Consumers are hyper-networked and eager to praise or punish brands on the Internet. The Internet allows people to freely associate, form groups and publish on a scale never seen before. Individuals and groups have the power to get their ideas across at a level once enjoyed only by large organizations and governments. The line between producer and consumer is eroding and so with it have fallen many tenets of traditional business wisdom. With Web 2.0, power has shifted to the users and is starting to eclipse that of paid advertising.

The pace of change in consumer preference is so fast that traditional product development cycles can not keep up. Only by involving customers in the product development process will successful companies be able to make product development a destination rather than an isolated journey.

Most corporations have categorized people into divisions of labor that have not essentially changed despite many efforts to reduce traditional functional “silos”. Yet today people are enabled and empowered to find ways to express themselves outside corporate walls.

There is growing talent moving into the open market. Examples include the rise of crowdsourced consultancies such as Gearson Lehman, and Innocentive, and the havoc open-source software is causing companies like Microsoft. The rapid decentralization of expertise with the growth of business and social networks across the Internet represents an opportunity for project managers. With CDI, companies can attract thousands of talented people to work for them and achieve goals not possible with a fixed staff.

There has been a proliferation of collaborative vendor relationships whereby suppliers play a key role in product development. Boeing is just one example, where several years ago Boeing gave its vendors access to collaborative software that let engineers join together in designing and producing aircraft. With the development of its 787 family of aircraft, Boeing has taken collaboration much farther by making its suppliers responsible for delivering design work as well as components.

• How does one compete against free? Increasingly paid products and services are under attack from “open” products. Examples include Firefox vs. Internet Explorer, Linux vs. Windows, VOIP vs. landline, social media vs. advertising, and Wikipedia vs. Britannica. Winning companies are finding ways to work with open products rather than fight them.

Idea Screening If you believe the best screeners are customers themselves, then you believe in a key aspect of CDI. Many of today’s CDI techniques came from the world of open source computing. If you use the Firefox web browser or visit web sites in general, you are an open-source product consumer. Open-source software products, consumer and financial products following open-source design principles, allow product creators and related communities to perform idea screening via a more democratic process that more accurately reflects what people will do. Cambrian House is a Canadian firm that encourages members of its online community to submit product ideas and vet them through an open system of voting called “Idea Warz”. Winning ideas are matched with financing and put into production. Prosper, an online bank, allows its members to bid on loans they wish to fund. Loan proposals with the best ideas are funded regardless of underwriting risk. The result is that the need for rapid Innovation forces companies to look outside for product development. Examples include P & G, Philips, Electrolux and Lego. The best and sometimes only option for a brand is to work with constituents and innovate to stay ahead of the curve. Anything less can lead to failure.

Idea Screening

If you believe the best screeners are customers themselves, then you believe in a key aspect of CDI. Many of today’s CDI techniques came from the world of open source computing. If you use the Firefox web browser or visit web sites in general, you are an open-source product consumer. Open-source software products, consumer and financial products following open-source design principles, allow product creators and related communities to perform idea screening via a more democratic process that more accurately reflects what people will do. Cambrian House is a Canadian firm that encourages members of its online community to submit product ideas and vet them through an open system of voting called “Idea Warz”. Winning ideas are matched with financing and put into production. Prosper, an online bank, allows its members to bid on loans they wish to fund. Loan proposals with the best ideas are funded regardless of underwriting risk.

The result is that the need for rapid Innovation forces companies to look outside for product development. Examples include P & G, Philips, Electrolux and Lego. The best and sometimes only option for a brand is to work with constituents and innovate to stay ahead of the curve. Anything less can lead to failure.

Constituent Driven Innovation – The Next Big Thing, But It’s Already Here

Simply put, CDI (Constituent Driven Innovation) is any innovation driven by ideas tapped from outside an organization. In the case of new product development, CDI is casting a net for new ideas well beyond the inner sanctum of a modern organization’s typical market research, product development and marketing functions. Major organizations are using CDI as a business practice and are all around us: P&G, Linux, Netflix, Hewlett Packard, Boeing, Phillips, Dell, Lego, Goldcorp, and Threadless T-Shirts. (Again, see “Business Examples” below).

We truly believe CDI is not simply a buzzword or passing fad. Rather it is the next big thing as it can dramatically increase an organizations’ ability to out-innovate its competitors. America will best prosper through more innovation as traditional industries have increasingly moved overseas and been commoditized. Just think Apple and you see that power of innovation – increase market share and at an attractive price that consumers are willing to pay!

While healthcare and education have created most of the new jobs the past several years (the present recession excepted) there is a problem. These industries do not directly produce revenue that we can trade with overseas and reduce the trade deficit. So we will continue as the world's largest debtor nation unless we make more stuff that the rest of the world is willing to buy. The U.S. auto companies once had mighty war chests of dollars (GM used to have over $40 billion just a couple years ago), yet have failed to innovate in a way that captures the fancy of consumers, both U.S. and abroad. This is true for frankly too many U.S. businesses (with Apple, Google and some other notable exceptions).

The ability to leverage CDI, especially as a strategic capability, can add a new completive weapon in the arsenal. If your business needs to innovate, then you need to spend your dollars as wisely as possible. There is very little downside to tapping into CDI as it has a very low cost of entry. What's key is how you use it, and that's where seeing CDI as a necessary strategic capability comes in.

In the 80's without TQM – you risked losing business to better competitors. In the 90's without CRM – you ran greater risk of losing key customers. In the early part of this 21st century, without CDI – you just may risk falling hopelessly behind!

Concept Development and Testing Lego uses CDI for its concept development and testing by sponsoring the online Lego Factory. Here anyone can design virtual Lego scenes, customizing blocks and colors. Rules built into the system prevent customers from building blocks that cannot be reproduced in the physical world. Lego product people now have a lab running 24/7 where they can observe customers developing and purchasing products. Threadless is a T-shirt company that produces shirts created by members of its online community. Every week, member’s vote on which shirts will be produced and the company follows the group’s recommendation. In a business where companies are lucky to sell 20% of their production at full retail, Threadless has never failed to sell out of its shirts.

Concept Development and Testing

Lego uses CDI for its concept development and testing by sponsoring the online Lego Factory. Here anyone can design virtual Lego scenes, customizing blocks and colors. Rules built into the system prevent customers from building blocks that cannot be reproduced in the physical world. Lego product people now have a lab running 24/7 where they can observe customers developing and purchasing products.

Threadless is a T-shirt company that produces shirts created by members of its online community. Every week, member’s vote on which shirts will be produced and the company follows the group’s recommendation. In a business where companies are lucky to sell 20% of their production at full retail, Threadless has never failed to sell out of its shirts.

The How and Why of Constituent Driven Innovation

With the advent of the Internet, CDI began in the form of open source software. People who develop open source projects often receive no compensation for what they do but they derive satisfaction from the challenges and community of the experience. Open source products are challenging proprietary incumbents. Examples include Firefox vs. Internet Explorer, IBM joining Linux, and Wikipedia vs. Britannica. IBM now makes more money selling and servicing open source software than they did selling their proprietary offerings (and scuttled consumer hardware long ago).

Online communities reached a tipping point when enough members were willing to write code, make comments, and organize data to the point where they became market forces. Wikipedia and Linux have become market forces after beginning as open source projects.

This progression occurred from (a) the early web delivering news, entertainment and e-commerce on a one-way basis, to (b) the growth of communities which allowed people to start conversations with each other and the merchants they patronized, and finally (c) to these communities getting into the development of high-value products, a notable example being P&G’s Swiffer®. The result is the beginnings of a parallel economy with virtually unlimited potential!

Google is most likely the largest CDI endeavor in the world, with millions of web-page owners working together to create value. In 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 higher the search rankings (paid placement s aside) and the more likely it is that page contains what one is searching for.

Marketing and Distribution Following the primary tenants of CDI: community, inclusion, and democracy of ideas, marketing and distribution is a breeze right? Right, because companies that take the time to include their customers, vendors, employees and anyone else who would listen in their development process, now have an army of loyal people willing to help market and distribute the products they helped create. Proctor & Gamble, record companies and milk producers all use committed groups of their customers to go out and evangelize their products. You might think mobilizing forces large enough to make a difference would be cost prohibitive, but most of their brand evangelists work for free or supply product samples. It is the uniqueness of a company asking for help that makes the company-to-customer bond stronger and sets the stage for real grass-roots marketing.

Marketing and Distribution

Following the primary tenants of CDI: community, inclusion, and democracy of ideas, marketing and distribution is a breeze right? Right, because companies that take the time to include their customers, vendors, employees and anyone else who would listen in their development process, now have an army of loyal people willing to help market and distribute the products they helped create. Proctor & Gamble, record companies and milk producers all use committed groups of their customers to go out and evangelize their products. You might think mobilizing forces large enough to make a difference would be cost prohibitive, but most of their brand evangelists work for free or supply product samples. It is the uniqueness of a company asking for help that makes the company-to-customer bond stronger and sets the stage for real grass-roots marketing.

CDI Is NOT Just Software and Tech: Other Key Business Examples

CDI has attracted many different organizations, not just software and tech. These leverage external talent pools to deliver value in the form of revolutionary improvements for growth in terms of speed, economy and breadth. Some notable examples:

Striking It Rich! – Goldcorp. Just a few years ago, this Canadian mining company increased its market value from $100 million to $9 billion for a mere $575,000 invested in the “Goldcorp Challenge” to anyone who could use its own mining data to find new sources of the precious metal. Company geologists knew there was gold in its properties but did not know exactly where (and it’s expensive to make mistakes). After hearing of the success of Linux, CEO Rob McEwen had an idea to use CDI to find more gold. Industry protocol is to never release geological data. But the challenge was launched and proprietary data made available. A wide variety of people joined the challenge, including students, military people, physicists, and computer graphics experts. An Australian company, Fractal Graphics, won the competition by applying the science of geographic information systems (GIS) to the “flat” Goldcorp data. Fractal in fact never visited the mine.

New Product Development! – Procter & Gamble, Electrolux and Philips Electronics all have used varying styles of CDI to aid product development. All of these companies have experienced consumer demand at a rate that exceeded their ability to develop products in-house. Simply having a fixed product development staff was not enough. To keep up with market demand, each company formed external networks, and either used these in an advisory role or as a means to execute project work directly. Proctor & Gamble posts sub-tasks directly to a public website including the price they will pay for the project to be completed. Members of P&G’s extended development team respond with proposals, and the work is awarded to the best solution. According to Larry Houston, P&G’s VP of Innovation and Knowledge, P&G now counts 1.5 million people in its extended network. The Swiffer® is but one highly successful new product that has resulted. While some may feel P&G takes a chance every time it allows an outsider to develop a product, not developing the next killer is an even greater risk.

Business Growth! – In October 2006, Netflix announced it would give $1 million dollars to whomever created a movie recommendation algorithm that was 10% better than its own, opening up its database in the process. Over 8,000 teams are competing for the prize: University of Toronto, Budapest University, AT&T labs, and Princeton University among them. 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 that 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 this contest, and has already improved its recommendation service by 8.5%.

Innovative Promotion! – 3M, the maker of Post-it® Notes, has sponsored a contest where customers can upload videos of the various and sometimes odd ways they use the sticky notes. The grand prize: the video with the highest YouTube rating nets $10,000. Once again a relatively small investment provides Post-it® with an enormous public relations return.
Critical Forecasting! – CDI can be applied to forecasting project results by combining the input of many individuals to arrive at a probable outcome. This is called a decision market. Hewlett-Packard predicts printer sales by forming a group of employees from all around the company and provides financial incentives to make accurate predictions. In the 2004 book “The Wisdom of Crowds,” author James Surowiecki profiled decision markets at HP that outperformed traditional sales predictions six out of eight times during experimental trials. Drug marker Eli Lilly used the same strategy to successfully predict clinical trial outcomes.

Characteristics of Organizations Moving to CDI

There is a spectrum that we can define that is useful for understanding the nature of organizations, from those that have a traditional inward focus to those that truly are moving to, or have already adopted, open innovation. Figure 1 below summarizes the characteristics of these across several dimensions. Of particular note is how an organization’s structure evolves from vertical hierarchies that largely must approve efforts at innovation to those which truly become open to some or all constituents. Innovation is not just focused in certain departments, rather a much broader array of disciplines and employees can contribute.

FIGURE 1

Business structures move from inwardly focused vertical forms to flatter organizations as they become more open in how they operate. Functions are less determined by formal bob descriptions than what people are good at and how they form collaborative teams (think Google). Who innovates can become anyone and everyone!

Some examples of how organizations can fit along this spectrum are provided in Figure 2 below.

FIGURE 2

Ford still relies mainly on internal resources to design and develop its products, while Boeing leverages vendor relationships and P&G taps its consumers. Google thrives on peer production while Wikipedia is still represents a penultimate example of open innovation (CDI).

A New Barometer of Business Development: Total Innovation Value

These characteristics have given rise to a new barometer we have developed that assesses the extent of CDI within an organization. We call this barometer Total Innovation Value (or TIV) to measure how much recent innovation has contributed to a businesses bottom line. For example, has the introduction of new products over say the past three years driving the majority of today’s profits or just a small amount? How much profit should innovation be creating? Does the organization have a defined objective for the value of its innovation and a strategy to get there? If so, is CDI part of that strategy and how big a factor is it? How can the organization systemize CDI rather than just tap it opportunistically to maximize its contribution? By implication, the call to action is to increase the share of innovation value (TIV) driven by CDI as a strategic objective and capability. Is a company driving toward the future (Apple) or trying to survive off of past glory (GM)?

Organizations today should have the ability to identify the value of both their current and recent innovation relative to their products and / or services. This is a critical task for senior management as the need for innovation increases in today’s global and competitive marketplace?

We view innovation much like any other corporate core competency, be it TQM, Six Sigma or CRM. The difference between innovation and TQM or Six Sigma is that you simply cannot Six Sigma a company to the top of its category. No matter how efficiently you make your widgets, the company that can make a better widget will always win. For example, there is only a certain point to which a manufacturing process can be made lean, but there is no limit to the power of innovation. Simply put, TIV is the measure of a company’s overall innovation effectiveness, and CDI is that portion that comes from external resources.
The Opportunity: Tap Constituents as Creators and Leverage CDI to Increase Total Innovation Value

Leveraging CDI as a defined business process requires a different paradigm than traditional product development. The word “consumer” historically has carried the connotation of companies producing and marketing while consumers cheerfully “consume.” CDI blurs the lines between consumers, designers and marketers. The person who contributes to a product design one day can turn around and recommend it to a friend the next. Entering into an open conversation with all your business constituencies is the key first step. Even before that, you must understand who these critical constituencies are and how to measure the opportunity. While the process redesign implications are extensive, we will not treat them right here, rather offer them up in the Expanded Information Sidebar that accompanies this paper.

We have cited a number of examples where CDI has been successful in driving new business. Oftentimes though these ventures have been opportunistic, and not part of a concerted strategic effort by companies to leverage CDI to drive forward Total Innovation Value. CDI, according to our recent survey discussed earlier, is seen by senior executives to be as effective as internal processes and more efficient! So why not adopt a strategy to increase not only CDI as a competitive weapon, but set objectives to increase CDI’s share of TIV? We firmly believe that CDI cannot simply be “cherry picked” as a series of individual, disconnected events. It must be installed as a strategic capability to be truly maximized.

For many organizations, the falling price of quality information will act as a major catalyst for change. How successful organizations faced with this challenge are at making necessary changes depends on their willingness to respect the ideas and opinions of all of their relevant constituents. The CDI model can exist within a traditional business. As with any other change agent, it requires the understanding, assessment of opportunity and championing of by senior management.

If your organization lacks this barometer, then you have little or no ability to assess the untapped opportunities that may lie before you! If your competitors do in today’s environment, you risk getting left behind.

A Call to Action

What does all this mean? Is the future mob rule? No! CDI takes advantage of the changing environment via the collective knowledge of many thousands of talented, networked people, accessible with a speed and efficiency that can be truly astounding.

CDI has clearly arrived and is here to stay. Corporate executives should seek to explore ways to leverage an untapped treasure trove of knowledge from all available sources: outside subject matter experts, employees, trade customers, consumers/end users, and even the general public, and not only for new product and service development, but also for optimizing channel management and customer satisfaction.

If your company is not yet considering CDI, you may be missing out. Beyond that, leading-edge companies will next be seeking ways to build CDI as a genuine business process and strategic capability for competitive advantage.

Where to Begin We see three essential steps to get started: 1. Education – with the latest research and new learnings about CDI, we help educate senior executives on this growing phenomenon and its implications and opportunities. The Crowd Forum is a critical gathering point of our ongoing research. 2. Assessment – we help organizations assess the potential for their business to increase TIV more effectively and efficiently, and drive the share of innovation value by instituting CDI. We utilize key assessment tools to measure both TIV and CDI and paint a vivid picture of business opportunities. 3. Project Identification – we work with functions within a company as well as external partners to identify (a) specific projects that implement CDI capabilities, and (b) prioritized programs to use CDI to develop and launch new products and services. The cost of undertaking these learnings and assessment is not high. The potential return is huge. From there, companies can decide what are the critical priorities to pursue, the investment required, and who can best help to develop new business strategies, organizational processes and identify specific opportunities to action Contact us at info@microengagement.com or the Crowd Forum (www.crowdforum.org) and we will be excited to discuss this further!

Where to Begin

We see three essential steps to get started:

1. Education – with the latest research and new learnings about CDI, we help educate senior executives on this growing phenomenon and its implications and opportunities. The Crowd Forum is a critical gathering point of our ongoing research.

2. Assessment – we help organizations assess the potential for their business to increase TIV more effectively and efficiently, and drive the share of innovation value by instituting CDI. We utilize key assessment tools to measure both TIV and CDI and paint a vivid picture of business opportunities.

3. Project Identification – we work with functions within a company as well as external partners to identify (a) specific projects that implement CDI capabilities, and (b) prioritized programs to use CDI to develop and launch new products and services.

The cost of undertaking these learnings and assessment is not high. The potential return is huge.

From there, companies can decide what are the critical priorities to pursue, the investment required, and who can best help to develop new business strategies, organizational processes and identify specific opportunities to action Contact us at info@microengagement.com or the Crowd Forum (www.crowdforum.org) and we will be excited to discuss this further!

Once Upon A Time There Were Producers and Consumers

crowdforum — Sun, 08 Mar 2009 08:39:42 CDT

What started as social media is disrupting traditional producer/consumer roles

By Tim Gilchrist, Microengagement Co-founder

Analog TV, Records, Cassettes, drive-in movies, and trans fat are all artifacts of our recent past. For one reason or another, things that were once mainstays were replaced or eliminated because they did not fit anymore, people moved on to do things differently, changed their rituals, or without ceremony, simply forgot. Soon 35 mm film, VHS, small newspapers, CDs, network television and the big three automakers may go the same way. This is not a revolution, it is a natural a process and we just happen to be at a time when a combination of factors working together makes things change more rapidly than before.

The next step in this evolution is actually a positive step backwards, to a time when there were no “producers” or “consumers”, rather only peers engaged in mutually beneficial commerce. Purchases started with conversations. Imagine how fast products developed in the ancient marketplace/agora. Feedback was instantaneous; there was no room for vendors who were “too big to fail.” If a customer did not like a product, they had a conversation with the vendor or went to the other side of the street and purchased a superior product. The hamburger and ice cream cone are both products of just these types of conversations where someone with money in their hand wanted something different and a quick-thinking vendor met their needs. Over the years, the natural process of connecting with and fulfilling consumer needs has been “corporatized” and sanitized into a disconnected, dislocated process called product development where consumers are examined like bacteria in a Petri dish. Focus groups and customer probes do nothing to directly strengthen brand loyalty, but this is all changing. What customer wants to be “probed” anyway?

Mass production led us into an age of the producer/vendor as a “cathedral”. The ability to produce outweighed conversations with customers in the marketplace. We drove in our cars to giant stores and if you did not like what they were selling, just try and tell the clerk with a cell phone to her ear you are not satisfied.

The Perfect Storm

The recent economic meltdown accelerated change in consumer behavior that was well underway with the widespread adoption of the Internet. Consumers may not be as addicted to consumerism as we thought. They have found a new marketplace in the form of the Internet, and that has allowed consumers to revive the old conversations, make smarter decisions and do something totally new. Create important products and services without going to the traditional producer-cathedral or the agora! It’s called open innovation or crowdsourcing, and three market realities make it a growing economic force:

The Internet allows people to freely associate, form groups and publish on a scale never seen before. Individuals and groups have the power to get their ideas across at a level once enjoyed only by large organizations, corporations and government’s.
Most corporations categorize people into divisions of labor the same way they did during the industrial revolution. This is contrary to human psychology and is the only known antidote to innovation. People can and will find ways to express themselves outside corporate walls and these expressions rapidly turn into competing products e.g., Linux.
The price of knowledge is falling to zero. Anything from powerful server software to how to become a six-sigma black belt can be found on the Internet. A child in India can monitor classes at MIT for free. The quality of this information is getting better all the time.

These three factors contribute to a new parallel economy that few companies have been smart enough to harness. Welcome to the post-consumer, post-producer? era:

50% of all web sites are brought to you by open source software, built and maintained by volunteers.
Google, the world’s most popular search engine and an economy unto itself, relies primarily on the recommendations of web page authors to drive its search engine .
A 2006 Forrester Research study shows 27% of consumer’s research products online before making an offline purchase, up from 19% in 2004. Conversely, the influence of advertising is falling at a similar rate.
IBM now makes twice as much money servicing its Linux open source software customers than it does selling intellectual property and patents ($2 billion in 2003) .

Enter Social Networking

In 1994 Seinfeld and ER were the most dominant shows on TV since I Love Lucy. Advertising and supply chains were effectively targeting and delivering massive amounts of products to waiting consumers who had no effective way to voice their opinions on brands, save the Better Business Bureau or an editorial in the local paper. Consequently, the voice of the consumer was at an all-time low. Along came the web browser and now the web has matured into a medium where average people can broadcast. We call it social media / social networking. Through social networking consumers have a new and powerful voice in their collective conversations:

Conversations are breaking out everywhere. Find a dead mouse in your "luxury" hotel, have the picture, and your experience ready for millions to see in minutes on tripadvisor.com.
Open a Kryptonite lock with a pen, put it on YouTube and millions may pay attention.
If Motrin makes a condescending commercial towards new mothers, moms will strike back in ways the advertising media elite never dreamed of.

Everywhere you look businesses, services and governments are becoming more transparent. This is not to say they did so willingly. Many are dragged kicking and screaming into this new world and some have refused to move at all. We are seeing the rebirth of the bazaar, right in front of our eyes. Only this time, there is a twist. The Internet serves two roles, it is the platform for conversation between customers and producers and it takes the place of the physical marketplace itself. What’s old is new again and people can have conversations sell things and leave a permanent record of these activities all in one place. And now the twist, there is nothing stopping consumers from developing products and services themselves. The line between producer and consumer is eroding and so with it have fallen many tenets of traditional business rules.

The Next Iteration of Social Networking: Open Innovation

How will companies develop products for consumers who increasingly are: able to instantly connect with their friends to complement, complain about or redesign your product; discover your most closely held trade secrets; or influence thousands of people with one click more effectively than a corporation can with a million dollar TV commercial?

The Social Media Landscape

The above chart depicts how social media is evolving and where it intersects with organizations ability to innovate. Starting with news and delivery of entertainment in the mid 90’s, the Internet has matured to deliver increasingly more value in the form of community and commerce and now is moving towards an open innovation delivery model. Online communities reached a tipping point when enough members were willing to write code, make comments, and organize data to the point where they became market forces. Wikipedia, Linux, YouTube, Facebook, and MySpace are all examples of communities using social media to become market forces. Now these communities are creating products, often with the cooperation of formerly proprietary companies such as Sun Microsystems, Google and IBM. Therein lies the intersection between traditional, vertical, publicly traded companies like IBM and the open source, open innovators such as Linux and Mozillia. They can coexist!

A rough time line of this progression is as follows:

The early web delivered news entertainment and commerce in a one way, broadcast.
The addition of community allowed people to start conversations with each other and the merchants they patronized.
The community then organized, developing high value products (Wikipedia & Google).
Using the tools and accumulated knowledge from the community accelerated creative endeavors (Linux, Swiffer).
All components of the system working together make prediction possible (Intrade, Consensus Point). The result: a parallel economy with unlimited potential.

Case Study: The TechCrunch Web Tablet

We all know that computer companies make money by pushing speed, memory and operating systems as points of differentiation. Macs are widely regarded as more intuitive than PCs, Dells often are easier to order than Gateways. Most of these points don’t matter as much as they used to. A growing majority only uses computers to surf the web, with online competitors to Microsoft Office available for document creation (e.g., Google Docs). These market realities are lost on the major computer manufacturers whose paradigms and organizational structures compel them to make computers that run faster, consume more energy, and store more data.

Now a technology blog is spearheading the first open consumer product. TechCrunch proposed to its readership in July of 2008 that they should get together and build a web surfing tablet for $200. It's an interesting idea. How many people use more expensive laptops to do nothing but surf anyway? This tablet could fill an interesting niche as computer manufacturers shy away from inexpensive products that don't need the latest processors. Many people want a device to surf the web while they watch TV.

How Can a Blog Make a Computer? Thought Only Computer Companies Could Do That?

Four points mentioned above in the “Perfect Storm” allow a blog to make a computer:

Software: The operating system for the tablet is Linux, an open source (or free) system with rock-solid dependability, created and supported by millions of volunteers all over the world. BMW automobiles also run on Linux.
Hardware: Advancements in manufacturing and supply chain management created a new class of manufacturing-on-demand companies who will make computing products to your specification at rock-bottom prices.
Distribution: TechCrunch has 1.25 million daily subscribers with many more visiting their site every day. Not surprisingly, TechCrunch achieved this sizable reach using the open source blog software Wordpress to power its web site.
Service: In the open source community, users help each other out via online bulletin boards. Compaq is now running a pilot using this same open service model. This peer-to-peer service model scales perfectly, and keep millions of open source customers happy all over the world. Peer-to-peer customer service is open 24/7/365, and there are no phone queues or automated voice attendants.

Transforming Existing Business Models to Accommodate Open Innovation

For many organizations, the falling price of quality information will be enough to act as a catalyst for change. How successful organizations faced with this challenge are at making necessary changes depends on their willingness to respect the ideas and opinions of all of their constituents, including their: employees, customers, consumers, end users and vendors.

The open innovation model can exist within traditional business. As with any other change agent, it requires the support and understanding of top management. The majority of organizations embrace open innovation gradually through pilot programs, or are forced into the practice because they have exhausted all other alternatives. The chart below, taken from Microengagement, data, shows the continuum of organizational types from those that are inwardly focused to those embracing open innovation, and characterizes the traits of each type by major corporate functions.

After management commitment, self-selection plays the greatest role in transforming a business from inwardly focused to open innovation. Employees already familiar with the organization’s customers, vendors, employees and trade customers (the company’s constituent base) will be best suited to optimize these networks. There is a very good chance that someone in your organization is willing to take on the job of organizing and nurturing customer ideas. Self-selection is a key ingredient to the success of the open source software movement because it is a superior way to match people and tasks. Have you ever heard of someone volunteering for a task for which they were incompetent?

Open Vs. Closed Management Styles

TechCrunch risks much in the traditional view by announcing their web tablet idea and specification before having a viable product. However, the massive advantage of thousands working on the project who will no doubt become customers, and their combined range of expertise and experience, will prevent many gaps left open by the smaller development teams of their competitors. This open strategy flies in the face of most traditional product development models that depend on secrecy. Companies like Google, Intel, and P&G understand the value of their constituents and will continue to thrive because the critical mass of constituents built up behind them will not allow them to fail. Most companies suffer not as victims of corporate espionage but under the weight of their own secrecy. If a business never takes a chance and engages its: experts, customers, shareholders, or any other constituency, mediocrity is almost certain. In short, "You can't win if you don't play."

It is a natural human trait to be proud of our achievements. All too often the achievements are part of an organization’s value chain: software code, business processes, products in development, i.e., all things an organization is afraid to share with the competition. It is this unwillingness to share and be open that prevents many organizations from achieving their goals. Value chain analysis is critical in a hyper-connected "flat" world:

The secrets most businesses think are safe, probably are not.
A competitor, dumb enough to steal and replicate a business process, will likely commit errors in the execution and end up helping the originator (e.g., Microsoft Zune).
The effort expended in developing a value chain such as: a call center, subscription knowledge bank, or, digital rights management system, may end up handicapping the value chain owner as less expensive, disruptive technologies emerge or the manager’s pride of ownership distorts their judgment.

Many public companies such as P&G, Merck, Kimberly-Clark, and The New York Times realized the threat secrecy represented in the form of protected value chains and disposed of them. P&G takes a chance every time it allows an outsider to develop a product, but it realizes not developing the next killer product is an even greater risk. In all of these examples, company employees saw the value of open processes and worked with consultants such as Microengagement to execute pilots and later integrate open innovation to their core business.

Where to Begin

We see three essential steps to get started:

Education – with the latest research and new learnings about open innovation, we help educate senior executives on this growing phenomenon and its implications and opportunities. The Crowd Forum is a critical gathering point of our ongoing research.
Assessment – we help organizations assess the potential for their business to increase their total innovation value via open innovation.
Project Identification – we work with functions within a company as well as external partners to identify (a) specific projects that implement open innovation capabilities, and (b) prioritized programs to use open innovation to develop and launch new products and services.

The cost of undertaking these learnings and assessment is not high. The potential return is huge.

From there, companies can decide what are the critical priorities to pursue, the investment required, and who can best help to develop new business strategies, organizational processes and identify specific opportunities to action. Contact us at info@microengagement.com or the Crowd Forum (www.crowdforum.org) and we will be excited to discuss this further!

Endnotes

Louis Lassen 1900, New Haven, Connecticut. Louis' Lunch. This small establishment, which advertises itself as the oldest hamburger restaurant in the U.S., is credited by some with having invented the classic American hamburger when Louis' sandwiched a hamburger between two pieces of white toast for a busy office worker in 1900.
The ice cream cone was invented in St. Louis, Missouri in 1904 at the Louisiana Purchase Exposition-- not in New Jersey. According to one legend, a Syrian pastry maker, Ernst Hamwi, who was selling zalabia, a crisp pastry cooked in a hot waffle-patterned press came to the aid of a neighboring ice cream vendor (perhaps Arnold Fornachou) who had run out of dishes; Hamwi rolled a warm zalabia into a cone that could hold ice cream.
Netcraft December 2008 Web Survey http://news.netcraft.com/archives/web_server_survey.html
Google’s page rank technology explained http://www.google.com/technology/
Yochai Benkler, The Wealth of Networks, P. 47 http://cyber.law.harvard.edu/wealth_of_networks/Main_Page
YouTube video on kryptonite locks http://www.youtube.com/watch?v=t8XxcOj3Seo
Controversial Motrin Moms Commercial http://www.youtube.com/watch?v=BmykFKjNpdY

Advertising

crowdforum — Wed, 10 Dec 2008 14:56:56 CST

Chevy Tahoe'Make Your Own Tahoe Commercial'

In 2006 GM ran a campaign allowing Chevy Tahoe enthusiasts to create their own TV commercials. The 'Make Your Own Tahoe Commercial' created an avalanche of negative ads many pointing to the Tahoe's impact on the environment. Chevy failed to filter customer creations and many of the ads live on in infamy as a lesson in what not to do when crowdsourcing. One such ad appears below. Wired Magazine did an in depth article on the subject entitled "Commercial Break"

Peer to Peer (P2P) Advertising

According to RIAA (Recording Industry Association of America), more than 2 billion songs are illegally swapped every month. You would think traffic like this would draw the attention of major media. Yet still advertisers continually look to, and compete for much smaller audiences in traditional TV & Cable. The reason may lie in the lack of comfort advertisers have with media that got its start with illegal or racy content. If you recall, it was only a few years ago when porn reigned supreme on the Internet. The fact that a "legal" AD might appear next to a pirated movie in the user's P2P search results may be enough to drive the faint hearted away. A few brave companies such as Coke are experimenting in P2P media.

The folks at Jun Group are starting to tap the enormous audience of P2P networks by teaming up with advertisers to legally distribute their content.

Links:

http://www.jungroup.com/phd/lebron.ht ml
Advertising Lab
Forbes Story

Chipotle

Chipotle Mexican Grill found success with user-generated ads netting 17.3 million views in just three weeks. Chipotle marketing directly to college students to produce the ads and put controls in place to protect against slanderous ads. The contest winners shared $50,000 in prize money, while Chipotle received millions of dollars worth of free advertising and publicity.

A team of students from SMU took first prize in the contest, netting the school $20,000. Oddly, when following the link to the winning video, this message appears " This video has been removed due to terms of use violation." Read about the SMU team here.

One of the contest entrants

Links:

Chipotle Web Site

News

crowdforum — Wed, 10 Dec 2008 11:40:32 CST

News Feeds

Business News (last 30 days)

Yahoo Pipes Beta:

Yahoo Pipes is a powerful composition tool to aggregate, manipulate, and mashup content from around the web. Below are custom searches designed to aggregate crowdsourcing news from all over the web. Please leave a thread below and let us know what you think!

Yahoo Pipes Video Search:

Search for crowdsourcing videos on: Metacafe, Google Video, YouTube, Yahoo! Video, Dailymotion, Break, and Grouper

Crowd Forum

crowdforum — Sun, 22 Jun 2008 15:51:53 CDT

About

Crowd Forum is a social network and wiki where people who share an interest in crowdsourcing and open innovation can share ideas and learn about this emerging phenomenon. Crowd Forum was created by the founders of Microengagement, a consulting practice that helps companies leverage the power of their business/brand constituents. These groups can be used to develop products, accurately predict environmental, product, and sales outcomes, and create new levels of customer intimacy by involving customers in the business processes.

What is Crowdsourcing?

Our view of crowdsourcing is: "A growing phenomenon that describes the process of gathering groups of people together and using their untapped knowledge to create something of value."

Crowd Forum Serves Three Primary Audiences:

Business leaders who are looking to improve their results through crowdsourcing and share what they have learned with others.
Researchers, the media and general public who can use Crowd Forum as an educational tool.
Crowdsourcing practitioners and consultants who share tools & techniques and network with each other.

Crowd Forum is a community of professionals sharing their experiences with crowdsourcing and open innovation. To participate, please join now .

Case Studies

The Crowd Strikes It Rich

Goldcorp - a Canadian mining company – increased its market value from $100 million to $9 billion for $575,000 invested in the “Goldcorp Challenge” to anyone who could use its own publicly offered mining data to find new sources of the precious metal. Goldcorp Challenge

Win a Million Dollars Recommending Videos

Learn how Netflix improved its recommendation service 8.5% by offering a $1 million prize. You will be surprised who is in the lead. Netflix Prize

How to Crowdsource

Significant Advantages with Crowdsourcing Economics

Take a deeper look into how crowdsourced organizations outperform traditional business models in terms of product development and return on investment. The Economics of Crowdsourcing

History The history of crowdsourcing includes many monumental achievements. Empires were built, the English language codified, and massive engineering problems solved, all with crowdsourcing. History

In the News

Long Awaited Crowdsourcing Book Due Out This Summer

Jeff Howe, creator of the term is just completing his book on crowdsourcing. Many of the chapters are published on his site and he promises the most "trenchant" visitor comments will make it into the book's appendix. crowdsourcing.com

Post-it® Notes: One Million Uses & Counting

3M maker of Post-it® Notes, is sponsoring a contest where customers can upload videos of the various and sometimes odd ways they use the sticky notes. The video with the highest YouTube rating will net its creator a $10,000 grand prize. Once again a relatively small investment provides Post-it® with an enormous public relations return. Hopefully 3M learned from the mistakes of Chevy and their infamous Tahoe user video contest. One Million Uses & Counting Contest

Could Wikia do to Google and Yahoo! what Wikipedia did to Britannica?

An open source search engine is poised to threaten the dominance of Google and Yahoo! in the multi-billion dollar search engine market. Wikia has indexed 30 million Websites, and is rolling out a set of editing features that lets searchers reorder, add, remove, rate, annotate, and comment on results.Wikia Search

Smithsonian Turns to the Crowd to Identify Photos

How the Internet - and you - will make history deeper, richer, and more accurate. Boston Globe. Everyone's a Historian Now

Crowdsourcing and New Product Development

How do leading companies use their customers, employees and vendors to develop products that truly reflect customer wants and needs? This new white paper from Microengagement dives into how crowdsourcing companies generate and screen ideas, perform concept development and testing, market, and distribute. New Product Development

Cornerstones of Crowdsourcing

Self Selection - People will do a better job placing themselves than an HR Dept.
Democratic Decision Making - The crowd is unfettered by politics and will (on balance) make objective decisions.
Fresh Perspectives - Experts outside the designated discipline can solve problems in unique ways (triangulation)
Equal Voices - By not meeting physically a greater number of participants will participate
Meritocracy - Those who have consistently contributed the highest quality work will be the best managers

Natural Selection - What works well is absorbed into the whole, what does not work is rejected without malice
Self Healing - Since the producers are themselves consumers, great care is taken to fix problems
Self Organization - Members will seek the help of others and form teams to achieve a goal

If you are interested in learning more about how crowdsourcing can benefit your business, you can call Microengagement in the U.S. at 860 913 5178 or email info@microengagement.com.

Threadless

crowdforum — Sun, 22 Jun 2008 14:04:21 CDT

Threadless is a youth-oriented T-shirt company that allows members of it's on line community to vote on 1,000 different designs submissions each week, and indicate whether they would buy shirts with those designs. Started in 2000, the company heavily relies on their social network of loyal customers. The return on investment is impressive. Threadless is now a $14 million dollar company with every T-shirt they ever produced has selling out within six months. The typical product failure rate in fashion is 80 percent.

Examples of Threadless T-shirts

References

crowdforum — Sun, 22 Jun 2008 12:52:57 CDT

References follow the APA Style Guide

Last Name, First Name. (date). Title. Source. (hyper-linked if possible)
Comments are indented and italicized.

Books:

Benkler, Yochai. (2006). The Wealth of Networks: How Social Production Transforms Markets and Freedom. Yale Press. Available for download.
A deep dive on the legal & economic drivers behind crowdsourcing. Benkler spent 10 years researching this book.

Downs, Larry, Mui, Chunka. (1999). Unleashing the Killer App. Harvard Business School Press. Available for download.
“Cannibalize Value Chains” is the clarion call of this book. Many companies waste time perfecting parts of their business that don’t add customer value.

Janis, Irving L. (1972). Victims of Groupthink. Houghton Mifflin
Provides supporting evidence on why classical, hierarchical management structures are dangerous.

Locke, Christopher, Levine, Rick, Searls, Doc, and, Weinberger, David (1999). The Cluetrain Manifesto: The End of Business as Usual. Perseus Books. Available for download.
Looks at business as a conversation between customers and merchants. Business win by starting conversations with their customers.

Raymond, Eric. S. (2000). The Cathedral and the Bazaar. O’Reilly. Available for download.
Discusses the foundations of why open source software works. Many parallels can be drawn to the crowdsourcing movement.

Surowiecki, James. (2004). The Wisdom of Crowds. Anchor Books
Before there was crowdsourcing, Surowiecki’s book examined how crowds put their heads together and solved big problems.

Tapscott, Don & Williams, Anthony. (2006). Wikinomics. Portfolio
Comprehensive look into how modern companies are using crowdsourcing

Von Hippel, Eric. (2005). Democratizing Innovation. Available for download.

Newspaper / Magazines:

Boutin, Paul. (July 13, 2005). Crowdsourcing: Consumers as Creators. Business Week.

Goldhaber, Michael H. (December 1997). Attention Shoppers! Wired Magazine, issue 5.12.

Howe, Jeff. (June 2006). The Rise of Crowdsourcing. Wired Magazine, issue 14.06.
The article that coined the term “crowdsourcing”. This is a great read for those getting started.

Miller, Kerry. (September 10, 2007). Crowdsourcing Customer Service. Business Week

Rubenstein, Sarah. (January 2005). Companies Tackle Worker Maladies; Faced With Weak Output, More Firms Aim to Treat On-the-Job Aches, Pains. Wall Street Journal.

Simon, Herbert. (1997). The Attention Economy and the Net. First Monday.
The attention economy is a primary driver of the open source movement. Simon postulates that an oversupply of information creates scarcity of attention.

Totty, Michael. (June 19, 2006). How to Decide? Create a Market. The Wall Street Journal.

Unknown. (November 27, 2006). Electrolux Redesigns Itself. Business Week.

West, Lena. (December 10, 2007). Mob wisdom means business. InfoWorld

Blogs:

Caton, Josh. Crowdsourcing: A Million Heads is Better than One.

Howe, Jeff. http://crowdsourcing.typepad.com/

Lowe, Suzanne. Social Networking and Professional Services: an oxymoron?

Web Sites:

Alsever, Jennifer. The New Human Resource. Bnet.

Alsever, Jennifer. What Is Crowdsourcing? Bnet

Crowdsourcingdirectory.com

Crowdpreneur.com

Dye, Renée. (April 2008). The promise of prediction markets: A roundtable. McKinsey Quarterly. Registration required
An in depth look into how leading companies use decision markets. Roundtable members include: Bo Cowgill, from Google, Todd Henderson, an assistant professor at the University of Chicago Law School, Jeff Severts, vice president and general manager of Geek Squad, and James Surowiecki, a staff writer at the New Yorker, and author of The Wisdom of Crowds

Dunay, Paul, Buzz Marketing for Technology.

iCommons. The Open Business Guide

Google’s page rank technology explained

For Business Leaders

crowdforum — Tue, 17 Jun 2008 11:29:47 CDT

Adapted Definition

Crowdsourcing for business is the process of accessing groups of people with desired characteristics and tapping their knowledge to create something of value. This site is a knowledge exchange for those who crowdsource – business people, consultants, researchers, professors, journalists, media/publishers and everyday people interested in expanding their knowledge horizons and those of others.

Crowd Forum helps business leaders understand, tap and leverage the wisdom of their brand constituents and can help discover new opportunities for innovation and growth! These constituents consist of B2B customers, consumers / end users, employees, vendors, SMEs from a variety of business networks, and thousands more people who are members of on line communities pertinent to their business.

The ability to access many new sources of expertise with the explosion of business and social networks across the Internet is creating monumental change, and opportunities, for businesses. Tapping relevant knowledge networks can become powerful tool in the hands of those who know how to mine and harness them effectively.

The Crowd Forums’ mission is to develop and provide critical insights into this dynamic and growing area by researching how leading-edge companies are taking advantage of collective knowledge capital. We give back these key learnings to company leaders who are interested in the vast potential for driving business growth through crowdsourcing. The rapid development of new social media and modes of communication make it possible to access this collective wisdom as never before, and gain a competitive advantage.

Just consider these real world examples:

Goldcorp – a Canadian mining company – increased its market value from $100 million to $9 billion for $575,000 invested in the “Goldcorp Challenge” to anyone who could use its own publicly offered mining data to find new sources of the precious metal. Over 50 new sites were identified with 80% of these producing new gold totaling 8 million ounces.

Netflix increased the effectiveness of its movie recommendations service by nearly 10% for just $1 million offered in a contest – currently being led by a British psychologist and his high school-aged daughter.

P&G now introduces many successful new products resulting in $ millions of new sales through its “Connect and Develop” program.

Lego increased dramatically the sales of its Mindstorms products by opening up its software for users to share and create new features.

Learn More

If you are interested in learning more about how crowdsourcing can benefit your business, you can call Microengagement in the U.S. at 860 913 5178 or email info@microengagement.com.

Take Our Survey

We are currently conducting a survey of how business leaders utilize crowdsourcing. We will share survey results with those who participate

Business

crowdforum — Tue, 17 Jun 2008 08:28:42 CDT

Case examples from the world of business.

Contents:
Goldcorp
Netflix
Proctor & Gamble
Lego

Creation

crowdforum — Mon, 16 Jun 2008 16:33:40 CDT

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

How To Crowdsource

crowdforum — Mon, 16 Jun 2008 16:24:28 CDT

The "How To" section is intended for people who want to implement a crowdsourcing project and need to gain an understanding of crowdsourcing's fundamental principles, how it can be used and the deeper economic and sociological reasons why the practice is on the rise.

As always we encourage the use of our threads feature at the bottom of the page to begin discussions on your crowdsourcing efforts.

In his blog post "Crowdsourcing: A Million Heads is Better than One", Josh Catone theorized that "Crowdsourcing can be broken down in to three categories:"

1. Creation (Wikipedia) Thousands of people contributing what they know. No matter how small the contribution, the sum total is greater than any body of knowledge in history.
2. Prediction (Yahoo! Buzz, Sports Betting) The crowd can be extraordinarily accurate at predicting the future. Everyone has some little kernel of information that helps shape the future (call it inside information). When put together, these kernels often out perform "expert" analysts.
3. Organization (Google) Google relies on the power of the crowd to index the entire Internet through a system of hyper-links, or votes on which page is more relevant than another.

Josh's categorization can then be used to organize the many ways crowdsourcing creates value.

Historical Events

crowdforum — Mon, 16 Jun 2008 14:16:26 CDT

Crowdsourcing examples from history.

Contents:
Niagara Suspension Bridge
Longitude Prize

Case Studies

crowdforum — Mon, 16 Jun 2008 14:13:44 CDT

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Longitude Prize

crowdforum — Mon, 16 Jun 2008 14:11:09 CDT

John Harrison

In 1714, British Parliament established a prize of £20,000 to anyone who could accurately determine the position of a ship by longitude. Today, we can look at low cost GPS device and know exactly where we are at any time. However, in 1714 sailors only had a rough idea of their position north and south, and an even foggier idea about east and west.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.

While £20,000 was a fortune in those days, the government received exactly what it wanted and risked nothing in return. The value of the prize drew the best minds in the world to the challenge and Harrison’s chronometer was quickly improved. The tiny chronometer allowed for accurate navigation and map-making giving the British supremacy of the seas that lasted for decades.

In 2000 A&E produced a four-part miniseries on the Longitude Prize entitled Longitude. Unfortunately, we can not find a web site on the movie, the link goes to Amazon.

Examples of Harrison Chronometers:

A video describing the longitude prize and how Harrison built his clocks:

Niagara Suspension Bridge

crowdforum — Mon, 16 Jun 2008 14:09:05 CDT

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.

Proctor & Gamble

crowdforum — Mon, 16 Jun 2008 11:19:36 CDT

Proctor & Gamble posts product development sub-tasks directly to a public website including the price they will pay for the project to be completed. Members of P&G’s extended development team respond with proposals, and the work is awarded to the best solution. According to Larry Houston P&G’s VP of innovation and knowledge, P&G now counts 1.5 million people in its extended network.

Pringles Prints

“Connect & Develop” is P&G’s crowdsourcing development arm.
The Pringles unit wanted a way to print directly on to chips.
Connect & Develop was engaged to write a spec for the technology and release to its network.
A small bakery in Italy already had the technology which P&G licensed.
Product was launched in less than a year with less invested than developing in-house.

137 products have been brought to market through Connect & Develop including: Olay Regenerist, Swiffer Dusters, and Crest Spinner Brush.

Pringles prints chip

Links:
P & G Connect & Develop\
Pringles Prints

Stlye Guide

crowdforum — Mon, 16 Jun 2008 11:06:31 CDT

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Harrison Chronometer

Lego

crowdforum — Fri, 13 Jun 2008 18:23:09 CDT

At first Lego sued their own customers for hacking Mindstorms software and then embraced them, mainstreaming the "hacked” code by allowing users to share what they had created in a Mindstorms forum.

Lego also crowdsources its concept development and testing by sponsoring the online Lego Factory. Here anyone can design virtual Lego scenes, customizing blocks and colors. Rules built into the system prevent customers from building scenes that cannot be reproduced in the physical world. Lego product people now have a lab running 24/7 where they can observe customers developing and purchasing products.

Links:

Lego Factory
Lego Mindstorms

About Crowd Forum

crowdforum — Fri, 13 Jun 2008 05:55:07 CDT

Crowd Forum is a social network and wiki where people who share an interest in crowdsourcing and open innovation can share ideas and learn about this emerging phenomenon. Crowd Forum was created by the founders of Microengagement, a consulting practice that helps companies leverage the power of their brand constituents. These groups can be used to develop products, accurately predict environmental, product, and sales outcomes, and create new levels of customer intimacy by involving customers in the business processes.

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Case Studies by Type:

Longitude Prize

Niagara Suspension Bridge

Niagara Suspension Bridge(1847)

Proctor & Gamble

Pringles Prints

Stlye Guide

Crowd Forum Style Guide

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Lego

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