Innovating with the in-crowd

Crowdsourcing is part of an honorable tradition

Lateral thinking

In the early eighteenth century, an English carpenter and clock maker, John Harrison, was

awarded a phenomenal sum of money – £15,000 – when he made a great scientific and

technological breakthrough.

Harrison invented the marine chronometer which determined ships’ longitude at sea. The

Longitude Prize was established after the likes of Edmond Halley and Isaac Newton had

failed to come up with a solution. Recalling the story in the Harvard Business Review, Kevin

J. Boudreau and Karim R. Lakhari make the point that this is really an early example of what

we now call crowdsourcing – getting ideas or creating new products and services by

enlisting the help of a large body of people.

Wearing different guises, crowdsourcing has been with us for hundreds of years. ‘‘Entire

industries’’, as Boudreau and Lakhari observe, have been kick-started this way and

examples include aviation and personal computing. There might never be anything

genuinely new under the sun but technology has undoubtedly transformed the possibilities

for crowdsourcing. In its online incarnation, huge numbers of people can be brought into the

fold to bring their expertise to bear.

The writers identify four distinct forms of crowdsourcing. All have specific merits, which

mean that they are more suited to specific challenges than others. The four are: contest,

collaborative community, complementor and labor market.

Making a name

The first is perhaps the most straightforward, the one which paved the way for John Harrison

to carve a permanent name for himself in the history of technological advancement. A

sponsor identifies the problem and gives some form of prize, probably cash, to the winner.

The Longitude Prize is just one of many ways in which this approach has been used.

Contests work well with really cold starts to the question. In other words, when no one has

much idea of the skills and approaches that will be needed, and experimentation and

multiple solutions might help. Those asking the questions might not even know what the

solution will look like, such as when pharmaceutical firm Merck wanted to streamline its drug

discovery service. Following a contest which brought more than 2,500 proposals, computer

scientists rather than life sciences professionals came up with the solution.

Crowd collaborative communities are really an extension of internal brainstorming. It is less

cohesive, but more diverse. It also has plenty of history: Bessemer steel and Cornish

pumping engines are just two of the developments aided by collaborative communities.

DOI 10.1108/SD-06-2013-0032 VOL. 29 NO. 8 2013, pp. 9-12, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 9

Modern companies which have used the community approach include Facebook, for

translation services, and Danish toy firm, Lego, which has brought in fans of the product to

come up with new designs and ideas. Information is shared freely but the downside, of

course, is that it is virtually impossible to protect intellectual property.

Apple’s sure touch

Crowd complementors provide an approach through which a new market can be built on to

an existing core product or technology. It is suitable, therefore, for complementary

innovations; iTunes, which developed via Apple’s core mobile products is one example.

Apple has revealed a sure touch through use of crowd complementors, stealing a march on

the likes of Bang & Olufsen and Bose along the way.

The final crowd-sourcing approach matches buyers and sellers of products. Companies use

third-party intermediaries rather than building platform themselves. Effectively, it is an

extension of hiring and outsourcing practises that have long been in existence. While similar

in principle to outsourcing, these tactics offer greater scope for matching talents with the

work than was previously possible. As is so often the case, innovatory practises build on old

practises, rather than supplanting them.

Not many previous generations would have been happy with the term ‘‘crowdsourcing’’.

Mark Wexler views the concept through sociological eyes, arguing that early theories of the

crowd played up its negative side. Crowds could be seen as irrational threats to social order.

Another view acknowledges that crowds can be rational agents of change, and therefore a

problem for anyone wishing to preserve the status quo.

Via more enlightened and lateral (though not necessarily modern, some of these ideas can

be dated back to the nineteenth century) ways of thinking, crowds can be seen as problem

solvers. This turns the ‘‘unthinking mob’’ notion on its head by arguing that crowds can be a

form of collective intelligence. Those responding to the call for help can be motivated by

benefits to volunteer their input to come up with ideas.

Simple but effective

Wexler cites the case of beauty and cosmetics company L’Oreal. Following an appeal for

ideas to viewers of a television station which relied on user-generated content, L’Oreal put

out a simple but highly effective advertisement. The cost was $1,000, as opposed to the

$160,000 or so that might have been used if the company had gone in-house or via a

creative studio.

It’s tempting at this point to do a variation on George Orwell’s Animal Farm: ‘‘New crowd

good, old crown bad’’. However, Wexler asks whether it is really as simple as that. ‘‘Is the

compliant crowd at the start of crowdsourcing likely to remain so or does it learn to increase

its demands as it realizes its value to the crowdsourcer?’’

Advocates for the new crowd frame the crowdsourcer as a champion of change. They do not

recognize the crowdsourcer as either an elite group or those doing the elite’s business.

However, it could be argued that crowdsourcing does create a new elite which ‘‘maintains a

position of powering in which it presents itself virtuously’’. There’s always a cost, someone

winning and someone losing. In the case of L’Oreal, for example, those who might

traditionally have been expected to benefit from that $160,000 advertising project miss out.

’’Apple has revealed a sure touch through use of crowdcomplementors, stealing amarch on the likes of Bang &Olufsenand Bose along the way. ’’

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Under the ‘‘new elite’’ of crowdsourcing the enthusiasm and skill of the person on the street

trumps experts and high-cost professionals. It’s easy to see an eventual backlash to such

ideas. It’s also tempting to go back to Orwell and say that some in the new elite will be more

equal than others.

Ripe for exploitation

The term crowdsourcing was actually coined by Jeff Howe as recently as 2006 in the

computer magazine Wired. Garrigos-Simon et al. include this historical detail in their article,

whose main focus is on the relevance of crowdsourcing, together with the importance of

community managers, in exploiting social networks and Web 3.0.

The new technologies of the Web 3.0 provide a wonderful opportunity for companies to

harvest information. Before, during and after contact with customers they can use

techniques such as data warehousing, data mining and customer relationship management.

Together with the information that comes to them via social networks and the net in general,

this can pave the way for adapting and personalizing products, brands and services by and

for different users or firms.

This is all based on the creation and management of networks. The new technology’s

importance might be indisputable, but it would be nothing without the participation of people

who live, interact, learn and create via the Web. Those personal relationships are the ultimate

source of competitive advantage, not least for the way that Web 3.0 can transform the

customer from a passive individual into an active one who wants to participate in the all the

production processes.

Sophisticated information systems have allowed Spanish-based retailer Zara to achieve

great success with their fast-fashion retail network. This enables the company to gather

information every day on the products bought by customers. Zara can adapt to rapidly

changing markets. The company is able design, produce and deliver new products, and put

them on display in its stores worldwide within 15 days, according to store data and the latest

customer preference trends. Some airlines have used these information systems to help with

their revenue management, allowing them to set prices according to demand and

production factors.

Stakeholders united

The real lesson of recent innovations such as these nevertheless has to be that the new

marketing and management systems promoted by the evolution of Web 3.0 are based on

enhancing participation and collaboration in the development of organizations. Employees,

customers and other stakeholders must all play their part, thereby intensifying the innovative

culture that allows for the creation of new business models and upgrading of those

established in different organizations.

The right strategies are needed, and community managers and crowdsourcing are key parts

of that process. Community managers have overall control of the virtual communities and

liaise between companies and the online communities. They’re the ones with responsibility

for ensuring a good relationship between the two. It’s a role that also involves management

skills and the ability to promote participation and collaborations of stakeholders to improve

some crowdsourcing processes at different points of the value chain. These include

marketing, design and development of products and processes, R&D and solutions for all

kinds of technical problems.

’’The new technologies of the Web 3.0 provide a wonderfulopportunity for companies to harvest information. ’’

VOL. 29 NO. 8 2013 jSTRATEGIC DIRECTIONj PAGE 11

Meanwhile, the precise impact of community managers on organizations and the

appropriate skills for developing their tasks could be the subject of further research. The

fundamental idea behind crowdsourcing is not a new one; but its potential, thanks to the

unprecedented growth of communication technologies, has never been greater.

Comment

This review is based on ‘‘Using the crowd as an innovation partner,’’ by Kevin J. Boudreau

and Karim R. Lakhani (2013); ‘‘Reconfiguring the sociology of the crowd: exploring

crowdsourcing,’’ by Mark N. Wexler (2011); and ‘‘Social networks and Web 3.0: their impact

on the management and marketing of organizations,’’ by Fernando J. Garrigos-Simon,

Rafael Lapiedra Alcami and Teresa Barbera Ribera (2012).

Two of these articles make convincing arguments for the role of crowdsourcing: Boudreau,

through an examination of the differing approaches it permits to innovation; Garrigos-Simon

through the way technology has expanded horizons. Wexler takes an almost maverick

stance with his sociology-based paper, occasionally verging on the recondite but adding an

interesting critical element to the debate.

Keywords:

Collectivism,

Creativity,

Crowdsourcing,

Ideas generation,

Innovation,

Social networks

References

Boudreau, K.J. and Lakhani, K.R. (2013), ‘‘Using the crowd as an innovation partner’’, Harvard Business

Review, Vol. 91 No. 4, pp. 61-69, ISSN 0017-8012.

Wexler, M.N. (2011), ‘‘Reconfiguring the sociology of the crowd: exploring crowdsourcing’’, International

Journal of Sociology and Social Policy, Vol. 31 No. 2, pp. 6-18, ISSN 0144-333X.

Garrigos-Simon, F.J., Laprieda Alcami, R. and Barbera Ribera, T. (2012), ‘‘Social networks and Web 3.0:

their impact on the management and marketing of organizations’’, Management Decision, Vol. 50 No. 10,

pp. 1880-1889, ISSN 0025-1747.

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