Strategy & Leadership

Following the crowd

October 30, 2014


October 30, 2014

Ana Nicholls

Managing editor of Industry Briefing

Ana Nicholls oversees the Economist Intelligence Unit's Industry Briefing services, helped by a team of country and industry analysts. She has worked as a journalist at The Economist Group for 18 years, covering a variety of business sectors, as well as reporting on economic development in. Eastern Europe. She previously edited EMAP business magazines in London before moving to Lithuania to work as an editor at the UN. Ana has a BA and MA in English from Trinity College, Cambridge.

Ana Nicholls, managing editor of Industry Briefing at The Economist Intelligence Unit, explains what crowdsourcing entails and discusses recent success stories.

In the near-decade since the term was coined, crowdsourcing has become an established way of generating designs, collecting information, testing ideas or simply getting labour-intensive tasks done. Ana Nicholls, managing editor of Industry Briefing at The Economist Intelligence Unit, explains what crowdsourcing entails and discusses recent success stories.

Companies across sectors have seized on the idea of crowdsourcing enthusiastically in the past decade: in September alone, GE has announced that it is using crowdsourcing to develop its next-generation appliances; McDonald’s has said that it is crowdsourcing its next burger; and US retailer, Macy’s, has outlined plans to use a crowdsourced delivery service.

The possible benefits in terms of cost-cutting, idea generation and time-savings are clear, but not everyone is a fan. Criticisms of crowdsourcing range from the disputes that it can cause over intellectual property rights, to the sheer workload of sorting through mountains of often amateur submissions. Professions affected by the trend are also concerned by the way it drives down prices and (they argue) quality. A recent study, meanwhile, found that competitive crowdsourcing can lead to malicious behaviour by participants, which may even jeopardise the project.

Perhaps the biggest dispute, though, is over what crowdsourcing actually is. The definition has become stretched to cover an ever-widening array of tasks and business models, including competitions with prizes, piecework drawing on mass labour, or collaborative projects based around communities, says Kevin Boudreau, assistant professor of Strategy and Entrepreneurship at London Business School. Fortunately for the growing number of companies that make their money from facilitating crowdsourcing, that means there are now several sizeable markets for them to choose from.

Take design competitions. 99designs, founded by Mark Harbottle of Australia and Matt Mickiewicz of Canada, started out as a free site where web designers could offer their services, but now claims to be the global leader in hosting design competitions. Companies use it to outline what they need, whether it is a new logo, a website or a t-shirt, and invite designers to compete for a cash prize. 99designs has paid out nearly US$84m in prizes so far, and in doing so has helped to create a market niche that others—such as DesignCrowd—have entered.

Yet even together, these companies are far from cornering the crowdsourced design market. Threadless, a t-shirt design site, uses an alternative competition model targeted at a different audience. Designs are submitted to win a public vote and a prize, and only the most popular designs get made into t-shirts for sale on the website. Yet other design competitions use peer reviews, or a pre-vetting process, to ensure that quality is kept high. McDonald’s, with its burger design, is using a combination of the two, with both a public vote and a panel of professional chefs to judge the recipes concocted by restaurant-goers.

When it comes to open innovation there are also plenty of options. Innocentive relies on companies or organisations setting challenges for researchers and scientists, while Wazoku sells software that allows for a more collaborative approach based on continuous feedback. For information-gathering and labour-intensive work, meanwhile, Samasource allows companies to request work from hundreds of people in low-income countries. It is a not-for-profit organisation, but Zhubajie of China (and its US-based subsidiary, Witmart) plays a similar role on a commercial basis.

The challenge, given all these possible models, is knowing which techniques to use when. Different approaches will work for different tasks or companies, and choosing correctly could make the difference between success and failure. Over time, of course, the most successful models will become clearer, attracting the most clients and the greatest number of participants, and creating successful crowdsourcing suppliers in the process. Then, for newcomers to the field, it really will just be a case of following the crowd.

This blog is part of a series managed by The Economist Intelligence Unit for HSBC Commercial Banking. Visit HSBC Global Connections for more insight on international business. 

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.

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