Know your neighbor (The virtues of crowdsourcing)

friendly-neighbors

Before I turn to the virtues of crowdsourcing, let me tell you a story that happened 7-8 years ago. I worked with a client, a statistician in the consumer product field. (To tell this story freely, I changed the industry affiliation of my client. It doesn’t really matter here). My client felt that an analytical algorithm he used to process the data was suboptimal. He also had a hunch that there may be someone, somewhere, who has an idea on how to improve this algorithm. So we decided to run a crowdsourcing campaign asking for improvements to the old algorithm. The brief that we posted online was unavoidably technical in nature, but in essence what it was saying was that: “Here is what I do and here is my algorithm. Here is what I dislike about it. Here is what I’d consider a substantial improvement to it. If you do that, I’ll pay you $20,000.”

I have to admit that initially I had doubts about the potential success of this campaign: I simply wasn’t sure that the crowd of people we were approaching had enough individuals capable of dealing with such a specific topic. To my pleasant surprise, the problem posted by my client was met with high interest and enthusiasm. Educated questions followed, which is always a good sign, and by the posting deadline, we had a respectable number of submitted solutions.

I had no clue with regards to the quality of these proposals. In many cases, I can “feel” good ones–I don’t know how, perhaps, just by a manner a submission looks and reads. Alas, not in the case of descriptions full of mathematical formulas. But my client liked what we got. He initially focused on three most promising solutions and then rapidly singled out one that he announced a winner.

I proceeded with paperwork, a set of formalities needed to move money from one party to another. At this point, I could disclose the identity of the winning solver to my client, and when sending this information, I noticed with some amusement that both my client and the solver lived in the same state.

A few days later, I received a phone call from my client. “Are you kidding me?” he was yelling in my ear, “Are you kidding me with this guy?” I froze. “What? What’s wrong?” (However unlikely, but theoretically speaking, people may turn out to be ineligible to receive an award after completing their part of paperwork.) “Are you kidding me or what? This guy is my neighbor!”

As it turned out, my client and the gentleman who solved his problem were indeed living a few houses apart on the same street in a small Mid-Western town. They were meeting regularly outside, exchanging greetings and opinions about weather while walking their dogs, but never had a chance (or need?) to formally introduce each other. (Do you really know names and occupation of all of your neighbors?) So the irony was that my client has been struggling with this problem for years, and the person who solved it in less than two months lived down the same street.

What is the moral of this story? When facing a complex technical or business problem, many organizations have a natural inclination to engage experts in finding a solution. In order to do that, they first need to know who the experts are and then choose supposedly the best–and most of large organization already have a stable of pre-selected consultants for each area of potential interest. The expert of choice then provides his or her personal opinion. Sure, organizations may ask for a second opinion, but this is rear because experts, especially the elite ones, command high consulting fees. In other words, asking for an expert opinion requires organizations to know in advance where to go for a solution.

Crowdsourcing is different. When posting your problem online, you become agnostic on the sources of potential solutions. They may come from any direction, and you don’t have to do anything to “target” your search–given, of course, that you’re approaching a large and sufficiently diversified crowd. In other words, when you crowdsource, you don’t have to know where to go; you just announce to the world that you have a problem, and then solutions come to find you. That’s why properly designed crowdsourcing campaigns are so cost-effective.

And then, there is a question of diversity of responses. If you’re approaching a person, who is an expert in Method A, don’t expect him or her to tell you that using Method B might be a better option to deal with your problem. And if you’re approaching an expert in Method B, don’t expect him or her to tell you that this method won’t work–you’ll get at least some solution using Method B. And then, there is always a possibility that there exist Methods C, D or E, but you never heard about them and therefore know no appropriate experts. In other words, when asking for an expert opinion, you narrow the scope of potential solutions to what you already know.

Crowdsourcing is different again. Crowdsourcing is not only agnostic on the source of responses, but also on their nature. Unless you specifically indicate that you’re interested only in Methods A or B (and sometimes, you have to do that for some specific reasons), incoming solutions will be focused on solving your problem, not the way of solving it. That’s why the best praise I can get from my clients is hearing them say: “Wow, we never even thought about that!”

In summary, a properly designed crowdsourcing campaign will allow you to significantly simplify your search for a solution to your problem, reduce cost of the problem-solving process and result in diversified, original and sometimes even unexpected solutions. Especially if you don’t really care whether the solution will come from your neighbor or a person on the other side of the globe.

Image credit: Henry John Yeend King “Friendly Neighbors” (http://www.paintinghere.com/painting/henry_john_yeend_king_friendly_neighbors_26898.html)

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Is crowdsourcing pitting “experts” against “amateurs”?

Two Men Engaged in an Argument_ One Manifesting Anger the Other Trying to Calm Him Down

In my previous post, I argued that one of the reasons crowdsourcing hasn’t yet become a mainstream innovation tool is the uncertainty over what crowdsourcing can (or can’t) do, meaning that many organizations struggle with identifying problems that can be successfully solved by crowdsourcing. There is another reason slowing down the acceptance of crowdsourcing: the lack of trust in the intellectual power of a crowd, its ability to tackle complex technological or business problems. Sure, everyone would agree that the wisdom of crowds can be successfully applied to accomplishing “simple” tasks, such as reporting potholes in the City of Boston, but when it comes to answering a question requiring special knowledge…well, let ask the experts.

The reluctance to replace experts with a crowd naturally sits well with the experts themselves, who’re often scornful of the very idea that someone with no immediate experience in their field can solve a problem that they couldn’t. This sentiment was nicely expressed by James Euchner who, with a tangible dose of bitterness and disdain, wrote back in 2010: “Our trust in the expert appears to be increasingly supplanted by a willingness to rely on the knowledge derived from crowds of amateurs. In this new world, the motives and competence of experts are at best suspect and presumed to be inferior to the wisdom of crowds.”

“Crowds of amateurs.” Pretty harsh words, eh?

The fundamental flaw of the notion that people participating in crowdsourcing campaigns are just a bunch of “amateurs” lies in the fact that in real life, crowds are composed of…experts. They simply are not experts working for your company, or in your industry, or in your country–or having your immediate area of expertise. But they’re experts nonetheless. Take, for example, InnoCentive, a commercially available crowdsourcing platform with a solid track record of solving difficult scientific and business problems for corporate and non-profit clients. The InnoCentive proprietary crowd is composed of 375,000+ solvers, with 66% of them holding advanced degrees. Moreover, academic research shows that a solver’s likelihood of solving a problem increases with the distance between the solver’s own field of technical expertise and the problem’s domain. So much for a crowd of “amateurs”!

Some experts, of course, are not outright dismissive of crowdsourcing; they’re trying to justify their negative attitude toward the technique. A recent example of this attitude was on display in a recent Boston Globe article written by Dr. Joshua Liao, a resident physician in the Department of Medicine at Brigham and Women’s Hospital and a clinical fellow in medicine at Harvard Medical School. Dr. Liao was approached by a gentleman, a son of a Dr. Liao’s patient, who asked him whether Dr. Liao would be willing to use CrowdMed to help establishing diagnosis for the patient’s mother.  CrowdMed is a recently launched company using crowdsourcing to provide online medical diagnosis, particularly diagnosis of rare conditions that have been missed by doctors.

Dr. Liao, response was no. He explained that a solid diagnosis requires not only patient’s medical history, which supposedly can be provided to a crowd, but, more importantly, direct medical examination of the patient, which can be not. For this reason, in his opinion, services like CrowdMed “produce more questions than answers, and more confusion than direction.”

I see Dr. Liao’s point, for I do understand the value of a close, in-person, medical examination. What troubles me in his argument is that the CrowdMed website features at least a dozen of “patient success stories”, the testimonies by the people who were apparently helped by the crowd after their own doctors failed to do so. What are then these “success stories”? Are they fake? Are they fluke? Or are they the examples that in some cases, in spite of what Dr. Liao says, crowdsourcing can really deliver something that a single expert, however accomplished and experienced, can’t? Would it not be better if medical professionals stopped dismissing new approaches as “confusing” and started instead a serious discussion on what crowdsourcing can (or can’t) do in the healthcare practice?

(By the way, I could easily find another online service, Sherpaa, that provides its subscribers, among other things, with medical diagnoses).

The irony of the pitting experts against crowds is that crowdsourcing is impossible without experts. It’s only experts who can identify and properly formulate your company’s most important problems; it’s only experts who can go through incoming external submissions to select those that make sense; it’s only experts who can integrate the external information with what is already available in-house.

So, the next time your organization has a pressing problem, ask your internal experts first, and if they can’t come with a suitable solution right away, launch a crowdsourcing campaign. Use the wisdom of the experts who don’t work for you.

Image credit: John Collier “Two Men Engaged in an Argument” (http://www.paintinghere.com/buy/john_collier_two_men_engaged_in_an_argument_one_manifesting_anger_the_other_trying_to_calm_him_down_art_painting_27641.html)

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Can crowdsourcing fix your marriage problems?

 

fighting couple

I think that one of the reasons crowdsourcing hasn’t yet become a mainstream innovation tool is the uncertainty over what crowdsourcing can (or can’t) do. I’m often asked the same question: can crowdsourcing solve this problem; what about that problem? My answer to these questions is always the same: yes, it can. Although sounding almost like a joke, the answer reflects my strong belief that crowdsourcing is first and foremost a question, a question that you pose to a large crowd of people. It doesn’t really matter what this question is about, for as long as it is well-thought-out, properly defined and clearly articulated.

For example, can crowdsourcing fix marriage problems? Imagine a married couple with their relationship in disarray. If both spouses are serious about fixing it, they will most likely approach a marriage counselor. The counselor will ask the couple a lot of questions and, based on their responses, emotional state and body language–and also on his or her own professional knowledge and experience–will suggest some measures to improve the situation.

How much can the couple trust the opinion of one single individual, however supposedly experienced? What if this particular counselor has gotten it completely wrong? Can the couple ask for a “second opinion,” like it happens in case of a life-threatening medical condition? Well, marriage counseling isn’t cheap: a 45-min session may cost the couple around $200–and, obviously, you won’t solve your problems in one single session. Besides, whereas most health insurance plans will pay for at least part of the cost of a second opinion (and Medicare will pay 80% of it), no one but the couple itself will have to pay for their counseling, first opinion or second.

Now, let’s imagine that the very same couple brings its troubles to a crowdsourcing platform. It will present to the crowd pretty much all the information it would divulge to the counselor and it’ll be ready to answer additional questions the crowd may ask. And then the crowd begins delivering opinions of its members–all based on the real-life experience of dozens, if not hundreds, of different individuals, many of whom might have gone (successfully or not) through exactly the same situation as our troubled couple. After all, isn’t this what professional marriage counselors do: giving opinions based on their prior experience of listening to dozens, if not hundreds, of troubled married couples?

Of course, the process of crowdsourcing solutions to marriage problems won’t be exactly free to the users; however, available methodologies of running crowdsourcing platforms would keep the price at a fraction of what the counseling would cost.

There is one potential problem to this scenario. Will the couple be willing to provide all the information the crowd requires it to divulge? It’s one thing to disclose very intimate–and often embarrassing details–of your personal life to a certified professional who, in addition, is strictly bound by a confidentiality agreement. It’s another to tell the same to a crowd of strangers, some of whom may appear unsympathetic or even openly hostile.

Part of these concerns can be adequately addressed by, first, protecting the anonymity of the couple itself (although some potentially identifying information, such as age, location, occupation, etc. is impossible to withdraw) and, second, by appropriate moderation of the online conversation. Besides, the idea of revealing your marriage problems to a stranger–instead of a person in flesh across the desk–may be quite appealing to some. This seems to be a rationale behind BetterHelp, an online mental health counseling service. The site boasts having onboard over 2,000 counselors who have worked “with over 200,000 people through more than two million sessions.” As typical for online services, counseling with BetterHelp is based on a flat membership fee that covers both the use of the platform and unlimited counseling; membership plans start as low as $35/week.

Back to corporate crowdsourcing. Companies often display the same emotion as our troubled married couple going online: the fear of revealing sensitive (in this case, proprietary) information to a crowd of “strangers.” That’s the reason why among the most difficult crowdsourcing campaigns to run–and the least successful in the final outcome–are those dealing with “internal” processes. Companies are just intrinsically hesitant to provide the crowd with relevant details about the nature of the problem and the signs (or, better, the origin) of the troubles. Yes, we understand that this particular process is inefficient and too costly; yes, we realize that we must improve it and, for this reason, are ready to ask for a help from outside; but no, we’re not going to tell you what this process is all about: it’s proprietary. So when I say that crowdsourcing is first and foremost a question, I ought to add: and also your willingness to provide as much information as needed (no more, but no less) to ensure that this question is solvable by a crowd.

I have to say that the fear of revealing proprietary corporate information through crowdsourcing is vastly overblown. Available techniques allow you to prepare your online question in a way that will make it “solvable”, yet leaving aside any information pointing to the source of the question. I’ll touch upon this topic in my following posts.

Image credit: http://quotesgram.com/couples-fighting-quotes-on-facebook/

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What do you need to innovate? Freedom! Yes, freedom.

Freedom-Series-Logo-720x388We love talking about nurturing a culture of innovation; yet, our list of practical measures to promote entrepreneurial spirit is depressingly short. For this reason, I’ve set out to create a list of specific corporate policies that organizations may try in order to establish the culture of innovation.

One entry on this list could initially appear as not immediately related to innovation at all: labor laws. A 2001 study showed that labor laws making it more difficult to fire employees increase their participation in corporate innovation activities. The authors of the study argued that the lower threat of termination produced by stronger anti-dismissal laws decreased the “cost of failure” for employees to engage in potentially risky innovation projects. Another study, published by MIT researches, found that companies in 34 U.S. states having the so-called constituency statues produce more high-quality patents than those in 16 states lacking the statues. A constituency statue encourages corporate directors to consider non-shareholder (e.g., employees) interests when making business decisions, therefore forcing them to think of the long-term interests of their companies rather than the short-term profits. The both studies strongly suggest that removing the proverbial Sword of Damocles of punishment for innovation failure encourages risk-taking and experimentation. In other words, providing employees with freedom to fail is a great way to promote innovation activities.

The effect of personnel policies on innovation has again been brought into the spotlight in a recent study described in an August 17, 2016 Harvard Business Review article. The study shows that U.S. state-level employment nondiscrimination acts (ENDAs)—laws that prohibit discrimination based on sexual orientation and gender identity—spur innovation. More specifically, the study found that U.S. public companies headquartered in states that have passed ENDAs experienced an 8% increase in the number of patents and an 11% increase in the number of patent citations relative to companies headquartered in states that have not. Interestingly, the result was more pronounced for companies that previously have not implemented nondiscrimination policies, for companies in states with a LGBT population and for companies in human capital-intensive industries. The authors of the study argued that ENDAs positively affect innovation by matching more creative employees with innovative companies.

I’m not going to argue, of course, that in order to be more innovative, you have to be a gay, lesbian or permanently employed (as opposed to employment at will). What I do want to argue is that innovation implies certain level of freedom, be it freedom from fear of failure or freedom from being discriminated for whatever reason.

Sounds too farfetched? Hold on. Last week, the 2016 version of the Global Innovation Index (GII) was revealed. The GII gauges the world economies based on infrastructure, market and business sophistication and research. As in the previous years, Switzerland took the title of the world most innovative country; Sweden was second, the United Kingdom third and the U.S. fourth.

Back in 2014, I made a notion that the top of the GII ranking was heavily populated by countries representing developed democracies, the societies with strongly upheld political and individual freedoms. (And to make sure that this observation had any statistical meaning, I compared the 2013 GII with the 2013 Freedom of the World Report published by Freedom House, a U.S.-based non-government organization that monitors democratic developments around the world.) Nothing seems to have changed on the innovation Olympus since then. Moreover, it’s so tempting to argue–in the light of the findings discussed above–that it’s not by sheer coincidence that among the 10 most innovative countries in the 2016 GII, there are eight Western European countries with strong labor and antidiscrimination laws.

Are we watching a growing body of empirical evidence to what many of us always intuitively knew: in order to innovate, you need freedom? Do we need any further proof to this thesis at all?

Image credit: http://crossroadswaunakee.org/event/celebrating-freedom/

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Crowdsourcing: two approaches, two different outcomes

In my July 16 post, I set out to prove that crowdsourcing is a very cost-effective tool allowing solving problems at much less cost compared to other innovation tools, and, therefore, the low popularity of crowdsourcing, of which I wrote earlier, can’t be explained by its being prohibitively expensive. In this post, I’ll continue the comparison exercise and talk about effectiveness of two different crowdsourcing approaches.

I like saying that one needs only two things to run a crowdsourcing campaign: a question and a crowd. The topic of selecting and formulating a proper question to crowdsource is of immense importance, and I’ll take on this topic later. Today let me deal with crowds.

There are two principal ways to acquire a crowd: to build it from scratch (I call this approach “build-the-crowd”) or to use proprietary crowds already assembled by a number of commercially available crowdsourcing platforms (I call this approach “rent-a-crowd”). Companies build their own crowds usually by creating the so-called External Innovation Portals (or something similarly called). A typical EIP is essentially a website that invites anyone from the outside of the company to register on the site and then submit innovative ideas in the areas of the company’s corporate interests.

Examples of EIPs are numerous. They’re especially popular among consumer-oriented companies: Starbucks runs My Starbucks Idea, General Mills has G-WIN, and Clorox came up with CloroxConnect. Tech companies, including pharmaceutical and medical device, don’t stay on the sidelines, either: Medtronic invites you to Innovate with Medtronic and AkzoNobel suggests that you Enter our Open Space. Energy giant Shell lures you into its own portal modestly named Shell GameChanger.

How effective EIPs are? Unfortunately, hard numbers are difficult to come by: companies are predictably reluctant to publicly discuss the efficiency of their open innovation programs, EIPs being no exception. Yet a brave one, Dell, does provide stats on how its EIP, IdeaStorm, is performing. IdeaStorm’s front page says that all in all, over 24,948 ideas were submitted, of which 549+ ideas have been implemented. Leaving aside the vagueness of the word “implemented,” the success ratio of the project barely exceeds 2%. Not a fountain of innovative ideas for Dell, to say the very least, and as my own involvement with corporate EIPs suggests, other corporate portals aren’t doing any better.

The apparent low efficiency of EIPs stems from the way they crowdsource knowledge from the outside. Many EIPs just ask for “ideas” without clearly defining what represents a valuable idea for this particular company. (I call this approach “bottom-up” and have criticized it on a number of occasions; see, for example, here and here). As a result, a lot of irrelevant or low-quality ideas are being submitted, dramatically decreasing the signal-to-noise ratio but at the same time significantly increasing the amount of resources the company needs to allocate for the initial screening of submissions.

Some companies have recognized this shortcoming and began including descriptions of the areas where innovations are especially welcome. For example, AstraZeneca lists “R&D Focus Areas” on the front page of its OpenInnovation portal; similar descriptions can be seen on Philips’ SimplyInnovate.

Even further went Unilever. Its The Unilever Foundry portal features Challenges, which are reasonably well-defined problems in a few product/services categories. Each Challenge explains the context of the problem and describes what exactly Unilever is looking for. Challenges have a submission deadline and a budget. Unfortunately, I have no data on how successful Unilever’s Challenges are and I’d appreciate any information on this topic.

Unilever’s Challenges almost exactly adhere to the Challenge concept introduced back in 2001 by InnoCentive, an open innovation service provider specializing in crowdsourcing. Instead of asking for “ideas,” InnoCentive’s clients post well-defined technical or business problems (“Challenges”), time-bound and having an “award tag” attached to it descriptions, to the InnoCentive website. Then a huge crowd of InnoCentive “Solvers” (375,000+ from 200 countries) that InnoCentive has assembled over the years and now “rents-out” works on finding solutions to these problems. Submitted solutions are then collected by the InnoCentive staff and delivered to the client. The client has a fixed amount of time to review all the submissions and announce a “winner” who is receiving the money award.

The solution rate of the InnoCentive Challenges is very impressive. Although I failed to find the precise number on the company’s recently redesigned website, about a year ago InnoCentive claimed this value being 85%. Similar high level of success of its crowdsourcing campaigns, up to 90%, was reported by another open innovation service provider, IdeaConnection. Just compare these numbers to about 2% success rate claimed by Dell’s IdeaStorm!

The InnoCentive (and IdeaConnection) mode of crowdsourcing is an example of what I call the “top-down” approach, a process in which a well-defined problem is offered to a pool of potential solvers, after which submitted solutions are reviewed–and successful ones identified–based on a number of criteria articulated in advance. (Again, I already wrote about the benefits of the “top-down” approach: here and here).

The available numbers therefore strongly suggest that the top-down mode of crowdsourcing–from the problem to a solution–is much more effective than the bottom-up mode–from “ideas” to potential implementation. At the same time, I do see a value for a large company (and I emphasize: large) to spend time and money for creating its own online crowd–instead of paying fees to the providers of crowdsourcing platforms, like InnoCentive (IdeaConnection doesn’t charge an upfront fee). So from this point of view, the business model adopted by Unilever with its Challenges, a combination of the top-down approach plus its own crowd of solvers, looks to me as an optimal way to conduct corporate crowdsourcing campaigns.

Image credit: http://www.huffingtonpost.ca/ashley-redmond/gap-year-canada_b_5948708.html

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Now, what about money?

marinus_van_reymerswale_007

In my previous post, I wondered why as efficient innovation tool as it is, crowdsourcing is still seldom used by organizations. I offered two answers to this question. First, formulating a question to crowdsource requires careful deconstruction of the underlying technological or business problem, a skill that many organizations simply don’t possess. Second, there are so many different commercially available crowdsourcing platforms that just navigating this marketplace makes your head spin. And make no mistake: choosing ‘wrong’ platform will almost certainly derail your crowdsourcing campaign.

A friend of mine, who read the post, made a shrewd comment. Before complaining that crowdsourcing is seldom used, he said, you should first prove that crowdsourcing is really efficient and, better yet, cost efficient enough for organizations to want using it.

My friend is right. I too strongly believe that crowdsourcing must prove its economic worth to become a mainstream innovation tool. In other words, we need a proof that crowdsourcing can solve problems in more cost-effective way than other innovation approaches. That turns out to be not as easy as it might seem: economic analyses of crowdsourcing campaigns, whether successful or not, are almost never publicly disclosed. That’s why it’s so important to review a couple of publicly available case studies.

A 2010 case study analyzed the return on investment (ROI) realized by a multinational agricultural company Syngenta when using a crowdsourcing platform provided by InnoCentive, an open innovation intermediary. The analysis identified a number of benefits gained by Syngenta from the cooperation with InnoCentive, including cost savings from finding solutions to R&D problems and reduction in intellectual property transfer time. The total value of these benefits was estimated at $11,861,688 over three years. Given that the total cost of using the InnoCentive services over the same period amounted to $4,200,567, a three-year, risk-adjusted ROI for Syngenta was 182%, with a payback period of fewer than two months. Not bad.

More recently, a showcase for the economic prowess of crowdsourcing came from Harvard Medical School. For one of their research projects, the HMS scientists used the MegaBLAST algorithm to process DNA sequencing information; the working capacity of the algorithm was 100,000 sequences processed in 4 hours and 20 minutes. In order to increase the speed of processing, HMS hired a full-time developer (with the annual salary of $120,000), who lowered the processing time to 47 minutes, a 5.5-fold improvement. Because this was still too slow, HMS launched a crowdsourcing campaign offering $6,000 in prize money for further improvements of the algorithm. The campaign that lasted only two weeks resulted in 122 submissions coming from 69 countries. The winning algorithm was capable of processing 100,000 sequences in 16 seconds, a 1,000-fold improvement over the original MegaBLAST algorithm and a 180-fold improvement over the algorithm developed in-house. Taken into account a 20-fold difference in labor expenses ($120,000 vs. $6,000), the HMS crowdsourcing campaign was overall 3,600-fold more cost-effective than the internal approach. Think about it: 3,600-fold more cost-effective than the internal approach.

There are at least two factors making crowdsourcing so cost-effective. First, every organization has limited resources to allocate to solving a particular problem. As a result, the problem is solved in a sequential manner, with only one or a few approaches being tried at the same time, which increase the total project time. In contrast, when crowdsourcing, you engage a large number of independent “teams,” all of them working in parallel. As a result, shorter time is needed to try a large number of solutions to identify the correct one.

Second, and much more importantly, organizations must pay for any attempt at solving a problem, whether successful or not, which drives the cost of the internal problem-solving. In contrast, when running a crowdsourcing campaigns, you pay only for the successful solution, ignoring the cost of unsuccessful attempts.

This combination of running in parallel a large number of problem-solving tries with paying only for the successful try makes crowdsourcing so cost-effective.

Image credit: “The Moneychanger and His Wife” by Marinus van Reymerswaele (https://themathematicaltourist.wordpress.com/tag/counting/page/3/)

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A Performance Paradox: Why Is Crowdsourcing So Seldom Used?

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Call it a performance paradox: while being an effective innovation tool, crowdsourcing is seldom used by organizations. A fresh example of this paradox came in the recent Gartner 2016 CIO Agenda Report (highlighted in a June 27, 2016 Forbes article). The Report showed that although crowdsourcing was the most impactful among ten digital innovation platforms, it was actually the least used (by fewer than 10% of surveyed businesses).

The Gartner Report finding might be the latest, but hardly the only indication that crowdsourcing is slow to become a major innovation tool. A 2013 study by Henry Chesbrough and Sabine Brunswicker looked at specific open innovation tools used by large companies in Europe and the U.S. The study showed that the most popular approaches were customer co-creation and informal networking, while crowdsourcing (along with using open innovation intermediaries) was considered the least important.

The Chesbrough and Brunswicker study echoes yet another report by Robert Cooper and Scott Edgett published back in 2008. Cooper and Edgett reviewed techniques that 160 companies used for product innovation, more specifically, at the front (‘ideation’) end of the product innovation process. They found that the most popular methods were customer visits and focus groups. In contrast, crowdsourcing was unpopular and perceived ineffective.

It thus appears that crowdsourcing still doesn’t find its proper place in the corporate innovation toolbox, and the situation doesn’t seem to be getting better over time.

What’s going on? I think that the roots of the performance paradox lie in the superficial simplicity of crowdsourcing as an innovation tool. At first glance, in order to run a crowdsourcing campaign you need only two things: a question to ask the crowd and a crowd to answer this question. And here the problems begin. First, as any crowdsourcing practitioner would tell you, formulating a ‘question’ to crowdsource requires careful deconstruction of the underlying technological or business problem, something that many organizations are actually quite bad at.

And then, there is a ‘crowd’, an audience you assemble to broadcast your question to. You either build your own crowd, a process requiring time and patience, or you ‘rent’ a crowd by hiring an appropriate open innovation intermediary. And here one encounters another hurdle: there are so many different commercially available crowdsourcing platforms–some estimates put this number at around 200 worldwide–that just navigating this crowded marketplace is a daunting job. Besides, the stakes are high: choosing ‘wrong’ platform will likely doom your crowdsourcing campaign to failure.

So I don’t see any easy way to make crowdsourcing performing at the top of its potential any time soon. A lot of work needs to be done on educating companies how to use crowdsourcing effectively. Again, two questions are critical here: how to choose the problem to crowdsource and how you assemble effective crowd (embedded in the latter is a question about appropriate digital platform). I’m going to address these questions in my future posts.

Image credit: “In the Crowd” by Francesca Bifulco (http://www.mymodernmet.com/profiles/blogs/francesca-bifulco-in-the-crowd)

 

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