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Crowdsourcing

Definition

Development of software1) solutions to sophisticated problems, such that the customer himself solves problems according to his needs, instead of being offered solutions by providers. So solutions are designed to match the customers needs to the greatest extent. In this democratic approach, the public is invited to participate in tayloring solutions and is rewarded by being offered demand-fitting products. Moreover, the approach rewards those customers that are participating most actively. Thus, it is incentive-driven.

Economic perspective

Linguistically, the term derives from sourcing from the public, i.e. the crowd. Open Innovation2) is sometimes used synonymously. Economically, crowdsourcing provides a new mechanism to coordinate supply and demand. Its revolutionary character is due to the fact that the coordination starts with the customers need (demand) instead of the producers capacity and price-setting targets. It enables suppliers to produce in accordance to their customers' needs.

A contemporaneous phenomenon

It's hard to define a concrete date to when confidence in the public’s ability to develop solutions for problems of concern startet growing. But crowdsourcing based on internet technology is a recent phenomenon, i.e. one of the 2k years. In 2003, Henry Chesborough shed academic light on the concept and introduced it to the public3).

Examples of interest

Crowdsourcing is not yet a standard for service or product development. But popular examples rise hope it might become one. An early example is going back to the 80’s, when German car manufacturer OPEL4) started rewarding improvements proposed by its employees. However, this approach can be seen as an early predecessor, rather than crowdsourcing. This approach was not open to the crowd, as sourcing from the public took place only on limited and internal scale. DELL5) fostered crowdsourcing based on IT and thus enabled its breakthrough. The company started running a platform where users were invited to contribute improvement proposals. Major companies followed Dell. The most popular example is that of FIAT6) do Brazil, which developed its Mio7) car based on a crowdsourcing platform.

Spuring old and spawning new industries

Within old industries (such as manufacturing), crowdsourcing facilitates the emerging of enterprises that are open to the world, co-innovate with everyone and share resources. It encourages old industries to practice openness, peering, sharing and acting globally8) Crowdsourcing is even spawning a new type of industry: Engineering entrepreneurs are setting up crowdsourcing platforms in order to taylor solutions to their customers' problems, using and relying on the public's innovative contributions. An example is the swiss based company Atizo9), currently running platforms for BMW10)’s future Motorcycles and Swiss Federal Railway11). Atizo rewards contributers of successful ideas with 3.333 CHF on average12), so monetary incentives are at stake, hence contributions are not solely idealistic. Moreover, contributers are competing.

Criticism and scepticism

Yet there is little empirical evidence on the efficiency of crowdsourcing's power compared to traditional methods of problem solving13). Still from an economic view, it remains being very effective. Since it helps matching demand and supply, it adresses a basic economic problem: that of effective allocation of resources. From a practical view it can be observed that few firms are yet open to crowdsourcing, most likely when older persons are in charge14). Also, the ideas gained from crowdsourcing platforms are not used 1:1, but are used alongside with internal ideas.15)

Summary and outlook

Based on a participative, transparent and democratic idea, this kind of reverse engineering has established itself within a short period to a remarkable extent. It convinces its critiques through the quality of contributions and its impact on production rather than through exorbitant growth numbers. Having initiated the rise of a new kind of industry, crowdsourcing’s future is promising.

3)
Roth, Steffen: Open Innovation Aross The Prosperity Gap: An Essay On Getting The Caucasus Back Into The European Innovation Society. IBSU Scientific Journal 2008, 2(2), p.7
8)
D. Tapscott, A.-D. Williams: Innovation in the Age of Mass Collaboration. Blommberg Businessweek 2007, Feb.-01, www.businessweek.com
12)
Roth, Steffen: Open Innovation Aross The Prosperity Gap: An Essay On Getting The Caucasus Back Into The European Innovation Society. IBSU Scientific Journal 2008, 2(2), p.15
13)
Karim R. Lakhani, Lars Bo Jeppesen, Peter A. Lohse & Jill A. Panetta. (2007). The value of openness in scientific problem solving (Harvard Business School Working Paper No. 07-050)
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strategies/crowdsourcing_for_providers.txt · Last modified: 2014/10/19 13:28 (external edit)