2,800 crowdsourcing and crowdfunding sites
Articles on crowdsourcing seem to spread one message: every firm should use the ‘power of the mass’ by tapping into a global pool of online voluntary resources. I do not deny that crowdsourcing is a beneficial concept to a number of firms, but there is also a different story to tell. I have observed that little or no attention has been paid to the drawbacks of crowdsourcing. These disadvantages result in unexpected costs that have the potential to wipe out some or all of the benefits of crowdsourcing.
In the first part of this article I describe which types of crowdsourcing currently exist and the benefits of crowdsourcing. In the second part, I explore some of the drawbacks of crowdsourcing.
The term crowdsourcing, coined by Jeff Howe, defined crowdsourcing as “the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people, in the form of an open call” (Howe, 2006). In other words: the outsourcing of traditional business activities to people outside the company. It goes further than outsourcing to external partners; it is an open call for volunteers to engage themselves in a business activity.
Although the term is quite new, outsourcing to volunteers is not new. There is a long history of crowdsourcing contests, customer panels and idea generation from groups and individuals other than employees’ of the firm. The Oxford English Dictionary (OED) may provide one of the earliest examples of crowdsourcing. An open call was made to the community for contributions by volunteers to index all words in the English language and example quotations for each and every one of their usages. In the 70 year project, they received over 6 million submissions. The dimension that modern day crowdsourcing adds to existing practices, is the use of internet which extends the reach in absolute number of people and also in geographic terms. You can also argue that it facilitates the reach of groups of people that are not familiar with or even known by the firm.
When observing crowdsourced activities, it can be concluded that they differ in time spent and skills or knowledge required to provide a contribution. Also the nature of the contributions is also varied (e.g. from a single mouse click to rate a product to complete designs of a new product). Variations in these dimensions result in different crowdsourcing types.
In case of co-creation, idea generation or support in product innovation is requested. The crowdsourcing firm uses knowledge, user experience or creativity of the online volunteers.
The crowd can also be used to provide forecasts (crowd intelligence). It is frequently argued that the accuracy of forecasting by large “non-expert” groups is more accurate than forecasts that rely on a smaller amount of data from a limited number of “experts” however I have not been able to find scientific evidence to support this. I would love to hear from you if you are aware of any research in this area!
Crowdsourcing operational activities, such as the production of user generated content, differs from co-creation in that it is a term that is generally used in reference to R&D activities. The creation and management of tags to annotate and categorize objects (folksonomy) is another example of an operational activity or Galaxy Zoo, where volunteers identify and name luminaries.
Another “crowd” variant used in the context of the collection of financial resources is called crowdfunding. Greatly popularized after Obama’s success during his Presidential election campaign, his party was able to raise a much larger campaign budget through crowdfunding, many organizations have followed (e.g. cultural organizations which are facing subsidies cuts).
The potential benefits of crowdsourcing are numerous: a firm can extend its resources. Crowdsourcing can also result in significant timesaving. When Proctor and Gamble decided they wanted to print on a potato chip, the R&D was estimated to need a year to develop and test. Identifying an existing technology for printing on food developed by an Italian professor, made it possible to launch printed chips for the marketing campaign envisioned at the European Champion League in a few months. In this way, Proctor and Gamble benefitted from sourcing R&D investments that had already been made that were sourced from outside the company through crowdsourcing.
A final benefit is potential cost savings: when online volunteers contribute to firm’s activities, in the case where the firm doesn’t provide a monetary reward, additional benefits could include lower investment and operational costs through savings in labor and production.
While it’s important to value the potential benefits crowdsourcing has to offer, it is equally important however to be aware of some of crowdsourcing’s potential drawbacks!
In part two of this article, Irma discusses some of the potential drawbacks of crowdsourcing.
By Irma Borst
Irma Borst PhD is Principal Consultant at Logica Consulting and Associate Researcher at RSM Erasmus University, Management of Technology and Innovation.
A PhD dissertation, "Understanding Crowdsourcing" by Irma Borst sub-titled "Effects of Motivation and Rewards on Participation and Performance in Voluntary Online activities, was published on 23rd December 2010. The research challenge was to study the effects of intrinsic and extrinsic motivation of online volunteers and how rewards influence this relationship.