HOW CORPORATE AMERICA HAS USED 'CROWDSOURCING' FOR IDEA GENERATION, CORPORATE TASKS AND SOCIAL CAUSES

Crowdsourcing is all the rage these days, another aspect of the cloud computing proliferation that has companies doing crazy things.  Even if you have never heard of it, you have probably purchased a product that was developed using crowdsourcing or have been directly involved yourself.  

DEFINITION: Crowdsourcing is the outsourcing of idea generation or tasks that would normally be tackled by employed workers or contractors for a particular company. The task or idea is outsourced to the masses via the Internet or social media technology.

Crowdsourcing can be more than just a task or an idea. In general, if it brings benefit by bringing together many people for a common cause, there has been some successful crowdsourcing. One such example is daily discount provider Groupon. The upstart Web-based business sends daily emails to subscribers who can purchase a coupon for a particular service or product. So what's the hitch? The discount only kicks in if a set number of customers purchase the coupon, bringing together the purchasing power of many through crowdsourcing. Groupon is not a public company, but it was recently valued at more than $1 billion by Blue Sky Technologies, a Russian venture capital firm that purchased a small share of the business.  [NOTE:  See my previous post about Groupon]

See, crowdsourcing is fun and it can be very profitable and cost favorable for many companies. This is why the trend continues to grow. Let's have a look at how some other companies are using crowdsourcing to their benefit:

• salesforce.com (Nasdaq: CRM) - Salesforce.com is one of the undisputed leaders in the cloud computing space, and it has used its expertise to build and acquire successful crowdsourcing ideas and applications. The company recently purchased Jigsaw, a large crowdsourced business contact database. Salesforce.com has combined the platform with its popular Chatter application to provide clients with a Facebook-like community for the business world. It updates in real time contact information, projects, data reports, etc. The application has more than 4 million company profiles and 22 million business contacts. The application is kept up to date daily by a community of more than 1.4 million users. Companies such as Nokia and Dell have used Chatter for years to help the companies become more profitable. 
• General Electric (NYSE: GE) - General Electric's Ecomagination Challenge is using crowdsourcing to create eco-friendly business ideas. According to the company website, "GE's Ecomagination Challenge is a $200 million call to action for businesses, entrepreneurs, innovators, and students to share their best ideas and come together to take on one of the world's toughest challenges – building the next-generation power grid to meet the needs of the 21st century." The company has received almost 3,000 entries so far, and the site has more than 38,000 users competing for the $200 million prize. The contest ends this week. It is not certain how General Electric will ultimately select the winners of the challenge, but  the company has set up user voting on the site that may play a role in the final determination  of winners. Sony (NYSE: SNE) recently launched a similar crowdsourcing effort with the World Wildlife Fund. Their contest does not involve creating new products and ideas, but to  use existing products in more efficient and environmentally friendly ways. It should be interesting to see what type of participation there is for this contest because no prize is being offered.
• Omnicom (NYSE: OMC) - Omnicom-owned public-relations firm Ketchum is using the brainpower of communications and digitally savvy college students across the world to help the company solve client, as well as internal, problems.  Ketchum and selected clients will reward students who participate with career coaching and developments, job alerts and contacts, as well as offer monetary rewards for selected ideas.  Crowdsourcing has created a way for companies like Ketchum to receive extremely low-cost consulting efforts, while helping students in a terrible job environment make connections and gain experience. The first crowdsourcing opportunity is designed to  help Wendy's/Arby's(NYSE: WEN) find the most creative ideas for a new product launch.

The Foolish bottom line - Crowdsourcing has created a way for companies to generate new business ideas at a low cost, while also providing opportunities for people with different skill sets in a very slow economy. It is a win-win for just about everyone involved in the process. I like companies that use crowdsourcing as it shows it is connected to the community and willing to work outside the corporate box to generate ideas. In the ego-filled, slow-to-change corporate world that may be saying more than you think.

COMMENTARY:  I like crowdsourcing so long as corporations do not rely on this type of social forum for creating competitive advantage at the expense of the individuals who contribute valuable ideas, work for free (like interns) and generate buzz for the corporation.  It's a sort of corporate "pick your brains" strategy.  

The practice of "picking your brains", a form of "free riding", is encountered in the consulting industry, with individuals pretending to be interested in a consultants professional services, but are really interested in utilizing the consultant to help them gain answers to their marketing, manufacturing, operations, and funding strategies.  Once you bring up the issue of charging for your input, you never hear from them again. I just severed relationships with a business acquaintance, a supposed venture capitalist, for trying to get some free deal flow and advice on structuring some deals.        

I am surprised that LinkedIn, one of the biggest sites for crowdsourcing, was not mentioned.   Professionals, even consultants like myself are often "brain picked" for answers to business and marketing issues.   I am a LinkedIn member, have been for years, and am not opposed to crowdsourcing, but I often encounter the same cast of characters asking for ideas and answers to questions that we often charge professional fees for.

Crowdsourcing has also given way to crowdfunding, where an entrepreneur can raise capital through small donations through a social group of fans, investors and philanthropists.  Some entrepreneurs have been able to raise as much as $100,000 through crowdfunding.

Courtesy of an article dated September 28, 2010 appearing in The Motley Fool

Comments

[Nikki @ corporate box]

Crowdsourcing is a helpful option so that companies would know what the masses want. It’s similar to hiring consultants—only that the costs are minimal and the ideas are fairly practical.