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After studying this section you should be able to do the following:
- Understand the value of crowdsourcing.
- Identify firms that have used crowdsourcing successfully.
The power of Web 2.0 also offers several examples of the democratization of production and innovation. Need a problem solved? Offer it up to the crowd and see if any of their wisdom offers a decent result. This phenomenon, known as crowdsourcing, has been defined by Jeff Howe, founder of the blog crowdsourcing.com and an associate editor at Wired, as “the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call” (Howe, 2006).
Can the crowd really do better than experts inside a firm? At least one company has literally struck gold using crowdsourcing. As told by Don Tapscott and Anthony Williams in their book Wikinomics, mining firm Goldcorp was struggling to gain a return from its 55,000-acre Canadian property holdings. Executives were convinced there was gold “in them thar hills,” but despite years of efforts, the firm struggled to strike any new pay dirt. CEO Rob McEwen, a former mutual fund manager without geology experience who unexpectedly ended up running Goldcorp after a takeover battle, then made what seemed a Hail Mary pass—he offered up all the firm’s data, on the company’s Web site. Along with the data, McEwen ponied up $575,000 from the firm as prize money for the Goldcorp Challenge to anyone who came up with the best methods and estimates for reaping golden riches. Releasing data was seen as sacrilege in the intensely secretive mining industry, but it brought in ideas the firm had never considered. Taking the challenge was a wildly diverse group of “graduate students, consultants, mathematicians, and military officers.” Eighty percent of the new targets identified by entrants yielded “substantial quantities of gold.” The financial payoff? In just a few years a one-hundred-million-dollar firm grew into a nine-billion-dollar titan. For Goldcorp, the crowd coughed up serious coin.
Netflix followed Goldcorp’s lead, offering anonymous data to any takers, along with a one-million-dollar prize to the first team that could improve the accuracy of movie recommendations by 10 percent. Top performers among the over thirty thousand entrants included research scientists from AT&T Labs, researchers from the University of Toronto, a team of Princeton undergrads, and the proverbial “guy in a garage” (and yes, that was his team name). Frustrated for nearly three years, it took a coalition of four teams from Austria, Canada, Israel, and the United States to finally cross the 10 percent threshold. The winning team represented an astonishing brain trust that Netflix would never have been able to harness on its own (Lohr, 2009).
Other crowdsourcers include Threadless.com, which produces limited run t-shirts with designs users submit and vote on. Marketocracy runs stock market games and has created a mutual fund based on picks from the 100 top-performing portfolios. Just under seven years into the effort, the firm’s m100 Index reports a 75 percent return versus 35 percent for the S&P 500. The St. Louis Cardinals baseball team is even crowdsourcing. The club’s One for the Birds contest calls for the fans to submit scouting reports on promising players, as the team hopes to broaden its recruiting radar beyond its classic recruiting pool of Division I colleges.
There are several public markets for leveraging crowdsourcing for innovation, or as an alternative to standard means of production. Waltham, Massachusetts–based InnoCentive allows “seekers” to offer cash prizes ranging from ten to one hundred thousand dollars. Over one hundred twenty thousand “solvers” have registered to seek solutions for tasks put forward by seekers that include Dow Chemical, Eli Lilly, and Procter & Gamble. Among the findings offered by the InnoCentive crowd are a biomarker that measures progression of ALS. Amazon.com has even created an online marketplace for crowdsourcing called Mechanical Turk. Anyone with a task to be completed or problem to be solved can put it up for Amazon, setting their price for completion or solution. For its role, Amazon takes a small cut of the transaction. And alpha geeks looking to prove their code chops can turn to TopCoder, a firm that stages coding competitions that deliver real results for commercial clients such as ESPN. By 2009, TopCoder contests had attracted over 175,000 participants from 200 countries1 (Brandel, 2007; Brandel, 2008).
Not all crowdsourcers are financially motivated. Some benefit by helping to create a better service. Facebook leveraged crowd wisdom to develop versions of its site localized in various languages. Facebook engineers designated each of the site’s English words or phrases as a separate translatable object. Members were then invited to translate the English into other languages, and rated the translations to determine which was best. Using this form of crowdsourcing, fifteen hundred volunteers cranked out Spanish Facebook in a month. It took two weeks for two thousand German speakers to draft Deutsch Facebook. How does the Facebook concept of “poke” translate around the world? The Spaniards decided on “dar un toque,” Germans settled on “anklopfen,” and the French went with “envoyer un poke” (Kirkpatrick, 2008). Vive le crowd!
- Crowdsourcing tackles challenges through an open call to a broader community of potential problem solvers. Examples include Goldcorp’s discovering of optimal mining locations in land it already held, Facebook’s leverage of its users to create translations of the site for various international markets, and Netflix’s solicitation of improvements to its movie recommendation software.
- Several firms run third-party crowdsourcing forums, among them InnoCentive for scientific R&D, TopCoder for programming tasks, and Amazon’s Mechanical Turk for general work.
Questions and Exercises
- What is crowdsourcing? Give examples of organizations that are taking advantage of crowdsourcing and be prepared to describe these efforts.
- What ethical issues should firms be aware of when considering crowdsourcing? Are there other concerns firms may have when leveraging this technique?
- Assume the role of a manager or consultant. Recommend a firm and a task that would be appropriate for crowdsourcing. Justify your choice, citing factors such as cost, breadth of innovation, time, constrained resources, or other factors. How would you recommend the firm conduct this crowdsourcing effort?
1TopCoder, 2009, http://topcoder.com/home.
Brandel, M., “Crowdsourcing: Are You Ready to Ask the World for Answers?” Computerworld, March 3, 2008.
Brandel, M., “Should Your Company ‘Crowdsource’ Its Next Project?” Computerworld, December 6, 2007.
Howe, J., “The Rise of Crowdsourcing,” Wired, June 2006.
D. Kirkpatrick, “Help Wanted: Adults on Facebook,” Fortune, March 21, 2008.
Lohr, S., “And the Winner of the $1 Million Netflix Prize (Probably) Is…” New York Times, June 26, 2009.