Will 2009 Be The Year of Crowdsourcing?
Ultra Light Startups is a new meetup group in Boston that holds panel events to discuss concepts, ideas, and models that help startups launch more quickly and cheaply. I organized the first event earlier this May to discuss crowdsourcing and how companies can leverage the model. The following are ideas that emerged from the pitches and the panel discussion.
Crowdsourcing is proving to be a disruptive model that can displace antiquated business practices by utilizing the power of communities. The heart of crowdsourcing lives within a framework of collective, decentralized intelligence that harnesses people’s knowledge to solve problems, build products, predict future outcomes, and direct strategy, among many other benefits. Ultimately, diversity within crowds enables groups to outperform experts. This has already had profound impacts on the businesses using a crowdsourcing model, including companies in the software, design, clothing, and automotive industries.
The Internet has acted as a catalyst for this new model by giving companies access to a pool of highly specialized individuals, but crowdsourcing’s roots are intertwined with those of the open source movement. In Jeff Howe’s book, Crowdsourcing: Why the power of the crowd is driving the future of business, he explains how “the development of the Linux operating system proved that a community of like-minded peers was capable of creating a better product than a corporate behemoth like Microsoft.” The concept of open source has since evolved into other applications across multiple industries. Sharing contributed modules and code enables everyone in the crowd to leverage each other’s work. It’s the power of collective intelligence both within open source and crowdsourcing that enables the group to create something larger than the sum of its parts.
For its first event, Ultra Light Startups brought together the co-founders of Acquia, uTest, Local Motors, and the marketing director of GeniusRocket, for a panel discussion on how startups, and companies in general, can utilize crowdsourcing as a new business model. The startups provided the group with diverse examples of how software testing, automotive design, and marketing content can be crowdsourced, and Acquia (where I work in sales) stood as a testament to crowdsourcing’s shared roots with open source.
So, what is crowdsourcing exactly? Ultimately, it’s the process of defining a problem or task, putting an open call out on the market, and providing an opportunity for members of the crowd to solve that problem in exchange for some level of incentive. Jeff Howe couldn’t have explained the dynamic of crowdsourcing any better: “The best person to do a job is the one who most wants to do that job; and the best people to evaluate their performance are their friends and peers who, by the way, will enthusiastically pitch in to improve the final product, simply for the sheer pleasure of helping one another and creating something beautiful from which they all will benefit.”
Usually, these members of the crowd are compensated in some way. For example, uTest enables software companies to tap its global network of software testers and pays each individual for the bugs they find. Since there are many more testers in uTest’s crowdsourced model than what you’d usually find at a quality assurance firm or internal testing staff, companies are able to receive quicker, less expensive results on a pay-per-performance based model. A company also receives a more comprehensive test of its software because testers are bombarding their code from multiple angles at once. The same type of concept is applied to marketing content with GeniusRocket. Individuals in the crowd submit design proposals in a competition to win a final prize. Local Motors, while very similar, is taking an even more ambitious approach for crowdsourcing the design of new cars with the aim of opening up local factories that produce small batches of very unique cars.
How can startups and business use crowdsourcing? John B. Rogers, co-founder of Local Motors, explains that you need to ask yourself two questions: “Who’s your customer? And, who’s your crowd? If you can identify that as a business, and have some notion of what that is, then you can start to build a strategy around that.” The key to building a successful business with a crowdsourcing model is in the creation of a marketplace that attracts both individuals with a passion for using your product and individuals with a specific skill set to help you build the best version of that product.
Participants in crowdsourcing are willing to engage in this model because its a source of extra income, fame, and provides new opportunities. “Within our community of 10,000, we polled and found out that roughly 67 percent of the people joined to make money. The next largest percentage is for people who joined and wanted access to types of clients they wouldn’t have otherwise,” explained Peter LaMotte, who leads marketing for GeniusRocket.
It begs the question of whether crowdsourcing is a new labor model. “Absolutely, yes.” Doron Reuveni, the co-founder of uTest, remarked. Some of his testers are making $2,000 to $3,000 a month working part time. However, John continued to say that it’s much more than just a labor model. “I don’t like the whole labor argument that much. Because even though its inextricably tied to people who are part of crowdsourcing, providing solutions, and are equitable to a labor pool, it’s really an unintended consequence of the fact that you’re really looking for are great ideas.” It’s the same concept that has enabled Threadless to sell out of all its t-shirts. The crowd submits designs, but also chooses the overall best. Of course they’ll sell out, the crowd is predicting future demand before manufacturing even starts.
However, incentives are different in the open source world. Contributed work doesn’t necessarily have to be tied financial reward. Jay Batson, co-founder of Acquia, explains that “the Drupal community completely motivates itself, we don’t pay anyone, and yet we get one of the best pieces of Web technology and software…there are already over 900 contributors to Drupal 7, the current release in development. And, that’s just the core. There are over 4,000 Drupal contributed models. That number doubles every year. When I first started raising money it was close to 2,000 and the year before that there were about 1,000.” The important takeaway there is that the everyone gets to benefit from each others’ work.
The conclusion of the panel certainly pointed in the direction that crowdsourcing and community based models are very attractive. The combination of those benefits and current economic conditions support an argument that this trend will continue. Doron Reuveni believes so and thinks “2009 will be the year of crowdsourcing.”
If you are interested, you can find the full transcript of the crowdsourcing panel discussion on College Mogul. Or, feel free to sign up for the Ultra Light Startups mailing list to attend similar events.
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