In the olden days, the only sources of home electronic entertainment were the Radio and the Gramophone. We used to have a weekly half-hour radio program that dealt with in-house mundane problems mailed to the host of that program by faceless people unable to reach a solution, asking for advice. My friend's widowed mother would make it a point to listen to that weekly program without fail. I still remember one question: How does one get rid of the yellow stains left on clothes by a commonly used spice, Turmeric, without physically damaging the stained garment? Those days, people used to bash the dirt out of all wash with heavy batons, like exorcists excising demons. Actually, there were two questions in one−Getting rid of that stain and not damaging clothing. The host confessed that he had no single solution and requested public assistance, to be mailed on a postcard (costing less than one US cent). Next week, the host began his program with that very question. Thanking his audience profusely for responding, he stated that he had been buried under the deluge of postcards mailed to him and finally, divulged the most commonly utilized solution sent in by thousands of listeners from all over the country.
A few months later, we were stunned to hear a first-time ad on the radio. It was for a detergent powder that removed Turmeric stains without damaging the fabric, which had received rave reviews by the people who had used that detergent in an experiment. Some wise owl had made use of the inputs of thousands of housewives and quickly gone commercial. As a matter of interest, this person became a millionaire within two months of his launch. Whoever
he was, he owed his success to a faceless crowd. Although I did not know it, I had just been exposed to a potential marketing phenomenon called ‘Crowdsourcing’.
According to David Whitfield, from CNNMoney.com, the term was coined by Jeff Howe,
writing in Wired magazine in 2006, wherein he described it as, "the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call." This has been disputed by many, who believe that projects which make use of group intelligence, such as the LazyWeb or the ESP Game, predate Jeff Howe’s coinage of that word by several years. Jeff Howe adds, “Crowdsourcing allows the power of the crowd to accomplish tasks that were once the province of just a specialized few. Or to put it another way, crowdsourcing is to take the principles which have worked for open source software projects and apply them right across the entire spectrum of the business world.”
Extraneous dispute aside, Gaurav Mishra, of Gauravonomics fame, brings in another well known entity, saying, “James Surowiecki wrote his brilliant book ‘The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations’ two years earlier in 2004.” He argues that the theme is similar, in that “a diverse collection (crowd) of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts.” This begs the question: Is Crowdsourcing a new phenomenon or was it in use earlier, but not widely known simply because communications were, relatively speaking, through The Phantom’s drums? Is it due to the advent of the Internet? Should we journey back in time to find out?
When Moses went up the hill to receive the Ten Commandments, he did not return for forty days. Towards the end of this period, the Israelites he had led out of bondage in Egypt grew weary of his absence and went up to Aaron, Moses’ elder brother and querulously demanded to know what was happening, saying, “Have we been led out of our life in Egypt to die here in the wilderness? We do not even have a God to pray to.” Aaron managed to assuage their feelings for some time, but caved in under pressure. He asked the crowds, “What should I do?”
As their leader, he was nonplussed and asked the crowds to map the way ahead. The crowds answered, “Build us a God.” A further question elicited, after lengthy discussion, the answer, “Make us a God of a golden calf.” Aaron ordered them, "Take off the gold earrings that your wives, your sons and your daughters are wearing, and bring them to me" (Exodus 32,2). So all the people took off their earrings and brought them to Aaron (Exodus 32,3). The Calf God made of gold was sourced from the Crowds! Perhaps this allegory may not fit into the modern scheme of things, but it has all the ingredients of Crowdsourcing: A problem, no apparent solution, an input thrown to the crowd and a response that led to a solution, albeit amoral.
There are quite a few examples of crowdsourcing projects three hundred years ago. In 1714, the British Government offered a public prize for a solution to the longitude problem. In the 1800s, the Oxford English Dictionary was written from volunteer contributions of millions of slips of paper. (Recently, the Internet has been used in crowdsourcing projects. Wikipedia has become an online encyclopedia 23 times the size of the Encyclopedia Britannica, though recalcitrant pedants refuse to acknowledge it as a source of knowledge).
According to the Encyclopedia at www.statemaster.com, in 1707, Admiral Cloudesley Shovell and his fleet were afloat in fog and thought they were in the middle of the ocean; they ran aground and over 2000 men died. That incident caused a furore in British maritime circles which led to the establishment of a prize for finding a method of measuring longitude. Moreover, the measurement of longitude was a problem that came into sharp focus as people had begun making transoceanic voyages. The British government, through an Act of Parliament in 1714 CE, offered a prize, The Longitude Prize, for the precise determination of a ship's longitude. Longitude describes the location of a place on Earth east or west of a north-south line called the Prime Meridian. Latitude gives the location of a place on Earth north or south of the Equator. Determining latitude was relatively easy in that the angular subtended on the eye by Polaris, the Northern Pole Star, as measured by a sextant, was equal to the observer's latitude. But two lines of position are needed to determine location, or create a fix, nautically speaking. The most desirable second position line was a line of longitude.
Parliament (1714) voted to offer a reward of £10,000 for any method capable of determining a ship's longitude within one degree; £15,000, within 40 minutes, and £20,000 within one half a degree, ‘for such person or persons as shall discover the Longitude.’ So we have the makings of a Case Study in Crowdsourcing: a problem; no readily available answer, even by world renowned authorities like Isaac Newton (1642-1727); the query thrown open to the world.
It was one John Harrison who solved the problem of measuring longitude in 1761, with a determination of better than half a degree. Dava Sobel's 1996 bestseller ‘Longitude’ (ISBN 0140258795) recounts Harrison's story. Today, almost anybody can determine his location (Longitude, Latitude, and Altitude) to within five meters using the Global Positioning System.
Terry S. Reynolds writes about another success of the olden days, the Fourneyron Turbine, in his book ‘Stronger than a Hundred Men: A History of the Vertical Water Wheel’ (1983, ISBN 0-8018-2554-7). Designed by a Frenchman named, Benoit Fourneyron in 1834, it was the end result of much effort by the French to design more efficient equipment to harness their streams to power their growing industry. Fourneyron built in 1827, at the age of 25 years, his first prototype for a new type of waterwheel, called a ‘turbine’. In Fourneyron's design, the wheel was horizontal, unlike the traditional vertical waterwheels. This 6 horsepower (4.5 kW) turbine used two sets of blades, curved in opposite directions, to get as much power as possible from the water's motion. Fourneyron won a 6,000 franc prize from by the French Society for the Encouragement of Industry for the development of the first commercial hydraulic turbine. It could handle any head from less than a foot up to many hundreds of feet efficiently; much more water flow than the open vertical wheels and it turned many times faster.
The common factors determined so far are:
· A problem.
· No foreseeable solution despite the most advanced technological gadgetry.
· Thrown open to the hoi polloi, not the intelligentsia.
· Someone unknown entity finds the key to the solution.
James Surowiecki writes about Charles Darwin’s half-cousin Sir Francis Galton, a statistician as well as a specialist in multiple fields, carrying out a survey to support his theory that genius was hereditary. At a cattle fair, he asked all and sundry to guess the weight of an ox. Thereafter, he called upon experts on cattle to guess the weight of that ox. He was astonished to find that the average weight, as judged by the motley groups of indifferent passersby was far more accurate than both the average and individual weights listed by the experts.
Jon Husband, in his blog ‘Wirearchy’ has a few differences with the general opinion. He believes that everyone understands the concept stated by the title. “Regardless of whether they agree with Surowiecki or not, there’s a fundamental attraction, and empirical evidence, to the concept. A crowd, faced with a question or a problem, or an idea, is made up of a wide range of different diverse people with as many perspectives as there are people. Yet there often seems to be a wisdom, a coalescing of sense, that can be deduced or extracted, or "condensed" from the crowd using a range of known processes. The crowd takes on a consciousness, and adopts a perspective/ position on an issue, which represents its ‘wisdom’.”
“The workforce in any given organization is a crowd of sorts (a crowd that is likely to be more homogenous than a general crowd, to be sure, and homogeneity is a constraint as will be seen later). Organizations have cultures, and have personalities that flow from or are representative of that culture, as individuals in the organization relate outwards towards customer, suppliers, vendors and other external stakeholders. Indeed, many organizations go to significant lengths to ensure that their workforces are aligned, hold a shared vision, speak as one. And the inspiration, the catalyst, the creator enabling the construction of that shared vision, the alignment, the culture in which the vision takes shape and is made manifest, is the job of the leader or the leadership team.”
“But there is a significant tension in this process between structurally-induced learned behavior and the sense people have of engaging and channeling the energy of a culture. For quite a few years now there have been sustained and loud calls for the development of learning organizations, for changes to fundamental assumptions and models of leadership and effective management and hundreds of thousands, if not millions, of dollars spent on culture change initiatives, coaching, better internal communications. We all know it.”
“There are masses of organizational development and a wide range of other assessment, diagnostic and developmental tools and processes aimed at harnessing the employees’ and the organizations potential. The structure of most organizations of any size is still clearly hierarchical. Most leaders, executives and senior managers are still of an age where they have been steeped in industrial-era management science assumptions, and have reached the levels of senior decision-making and leadership with the help of the models of leadership and management effectiveness that preceded this digital and hyperlinked environment that includes the Internet and wide, deep and rapid access to information and other people. They are to inspire culture, shape and direct the organization’s personality and use power, access knowledge and acumen wisely. But most still know best how to operate top-down, even if their personal leadership or management style is not coercive or directive.”
“By and large, the people in today’s organizational structures charged with accountability for leading to results, still like and know how to use the power of hierarchy. Hence there remains in my opinion fundamental dissonance between these critical human attributes, the actual dynamics that demonstrate their use, and the social architecture in which they are used.”
The Economist’s ‘The New Organization’ of February 2007 says, “We’ve probably all worked in jobs in sizeable hierarchical organizations. Many others have maintained for a long time now that the adroit, open and sincere use of social software in an organization, and the listening and the tapping into wisdom … the wisdom of a given organization’s crowd … will help leaders and managers develop and grow as quickly, or more so, into leaders who do not rely on charisma or positional power or coercion or dishonest political manipulation, but rather face and embrace the crowd they are part of with humility. The job of a leader in today’s hyperlinked and transparent organizational world is to instantiate the crowd’s wisdom with a clearly-stated and purposeful mission and objective, and then listen... and this is where social software can shine, can replace or augment even the most sophisticated culture or internal communications surveys and diagnostics.”
In ‘Putting Our Differences to Work: The Fastest Way to Innovation, Leadership,’ Debbe Kennedy (2008) says that “there has been quite a buzz about James Surowiecki's book, The Wisdom of Crowds, which does a fascinating job exploring what is described as a ‘deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant- better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.’ What I most appreciate about Surowiecki’s book is that it serves as a reawakening about what has been there all along: people. In small, medium-sized, and worldwide groups, infuse them with shared vision and environment of inclusion, and they can do amazing breakthrough work. Somehow, all this seems déjà vu. As Mark Twain wryly observed, ‘The ancients stole all our good ideas.’ So what’s new? For one, as Surowiecki confirms, we have new technology tools with web 2.0 and beyond that are opening up possibilities at breakneck speed for us to participate and communicate with one another.”
Surowiecki breaks down the advantages he sees in disorganized decisions into three main types, which he classifies as:
· Cognition: Market judgment, which he argues can be much faster, more reliable, and less subject to political forces than the deliberations of experts, or expert committees
· Coordination: Coordination of behavior includes optimizing the utilization of a popular gathering and not colliding in moving traffic flows. The book is replete with examples from experimental economics, but this section relies more on naturally occurring experiments such as pedestrians optimizing the pavement flow. He examines how common understanding within a culture allows remarkably accurate judgments about specific reactions of other members of the culture.
· Cooperation: How groups of people can form networks of trust without a central system controlling their behavior or directly enforcing their compliance. This section is especially pro-free market.
What is a Market?
The term Market features either directly or indirectly in all three Cs described supra. A requirement exists therefore, to define what a market is, what happens in it and the economies involved. According to the Encyclopedia at www.statemaster.com, a Market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. It is one of the two key institutions that organize trade, along with the right to own property. In everyday usage, the word "market" may refer to the location where goods are traded.
Function: The function of a market requires, at a minimum, that both parties expect to gain from the result of the transaction. Markets usually rely on price adjustments to provide information to parties engaged in a transaction, so that each may accurately gauge the subsequent change of their welfare. Markets are efficient when the price of a good or service attracts exactly as much demand as the market can currently supply.
The chief function of a market, then, is to adjust prices to accommodate fluctuations in supply and demand. An economic system in which goods and services are exchanged by market functions is called a market economy. A system in which non-market forces determine prices are called planned or command economies. The attempt to combine socialist ideals with the incentive system of a market is known as market socialism. A free market is a market where prices of goods and services are arranged completely by the mutual non-coerced consent of sellers and buyers, determined generally by the supply and demand law with no government interference in the regulation of costs, supply and demand.
According to Surowiecki, FOUR key criteria separate wise crowds from irrational ones:
Diversity of opinion: Each person should have private information even if it's just an eccentric interpretation of the known facts.
Independence: People make up their own free opinions, without external interference.
Decentralization: People are allowed to become specialists, drawing on endemic knowledge.
Aggregation: The ability to convert private judgments into a group decision.
This was best shown in the Sony TV serial, The Power of 10. Here a contestant is asked to predict a range in percentage slabs to questions like, “How many people believe in ghosts?” The answer of the audience in the studio is always given to the contestant and, statistically, the audience proved correct at 89%, much higher than the 50% result of the contestants.
Jeff Howe throws in a long-standing enigma: “What if the solutions to our greatest problems weren’t waiting to be conceived, but already existed somewhere, just waiting to be found, in the vast maze of human network”? He believes that an answer could well lie in Crowdsourcing.
What many people do not realize is that education is a widespread accumulation of general knowledge ingrained into the back of one’s mind and rarely, if ever, forgotten. They often come to mind when under duress. Gene Bellinger explains that “The idea is that information, knowledge, and wisdom are more than simply collections. Rather, the whole represents more than the sum of its parts and has a synergy of its own.” As Jeff Howe elaborates, “A new breed of amateurs has arisen – people who are knowledgeable, educated, committed and networked.
Crowdsourcing directly attracts this new breed of amateurs who typically have two shared attributes:
1. These are people who are not primarily motivated by money directly, although they’re happy to make a few extra bucks if the chance arises.
2. These are also the kind of people who are working on their own dime (sic) and who dedicate their leisure time to something they feel passionate about, something they love to do rather
than have to do.”
However, smallhomebusiness.suite101.com has a slightly different view. They believe that “in some cases, the labor is well-compensated. In other cases the only rewards may be kudos or
Intellectual satisfaction. Crowdsourcing may produce solutions from amateurs or volunteers working in their spare time, or from small businesses which were unknown to the initiating organization. Perceived benefits of crowdsourcing include:
* Problems can be explored at comparatively little cost.
* Payment is by results.
* The organization can tap a wider range of talent than might be present in its own
Steve Andriole also has a similar perspective, but differs on the commercial angle. Writing on Crowdsourcing, he takes the concept further. With training budgets just about gone these days, he asks what the learning strategy is. Now that very few companies are hiring pros the way they did five years ago, there’s a need for a strategy around problem-solving beyond your in-house gurus. One idea that comes to mind is crowdsourcing. For those who have not yet discovered crowdsourcing, he says its time to reach for the Web. This makes intellectual and financial sense. Crowdsourcing assumes that there’s brainpower on the Web that can be leveraged on to your problems in some creative, cost-effective ways. He believes that crowdsourcing is an alternative technology acquisition model whose costs can be closely managed. In fact, business cases can be used to define crowdsourcing opportunities. For example, if a $75.00 ROI is necessary for project success, then crowdsourcing fees can be set accordingly.
“This pricing model places control in the hands of the companies that post the problems, set the fees and protects them from the cost overrun that forces ‘adjustments’ to the budget.”
He adds that “other crowdsourcing projects are more process-driven. Brand management, new product effectiveness, customer service and even personal reputation management are also crowdsourcing targets. Here the outcome is not a specific problem solution but information, opinion and insight valuable to marketers, product developers and customer service representatives, insight that can be interpreted as positive or negative sentiment.” So what are some of the options? First, there are the well known InnoCentive and Nine Sigma sites, both of which perform, by and large, the same function. We shall study both a bit later.
“These sites let you post tough problems for people on the Web to solve. If they don’t solve the problem, they don’t get paid. Therefore they’re motivated. The companies that post problems only pay for success. If your company invests in research and development (R&D), it’s time to go to the Web for help. Why not at least pilot R&D crowdsourcing?”
The crowd can do much more for you. There are all kinds of problems that the crowd can help you solve and information it can help you gather and interpret. IdeaScale, for example, can help you organize feedback from the crowd regarding old and new products, concepts and service, among other areas. Ideascale organizes the process on your behalf and interprets the feedback.
All said and done, there is scope for the amateur in the crowd to contribute to crowdsourcing!
Failures of Crowd Intelligence
Surowiecki studies situations (such as rational bubbles) in which the crowd produces very bad judgment. “A rational bubble would involve a self-confirming belief that an asset price depends on information that includes variables or parameters that are not part of market fundamentals. The existing literature shows that, if market fundamentals are economically interesting, i.e., forward looking, any rational bubbles would be either explosive or implosive. Further arguments rule out both positive and negative rational bubbles, except for the possibility of rational inflationary bubbles.”
“Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink and herd behavior. Bubbles occur not only in real-world markets, with their inherent uncertainty and noise, but also in highly predictable experimental markets. In the laboratory, uncertainty is eliminated and calculating the expected returns should be a simple mathematical exercise, because participants are endowed with assets that are defined to have a finite lifespan and a known probability distribution of dividends.”
Surowiecki argues that in these types of situations their cognition or cooperation (the three Cs) failed because (in one way or another) the members of the crowd were too conscious of the opinions of others and began to emulate each other rather than think differently. Although he gives experimental details of crowds collectively swayed by a persuasive speaker, he says that the main reason that groups of people intellectually conform is that the system for making decisions has a systematic flaw. He asserts that what happens when the decision making environment is not set up to accept the crowd, is that the benefits of individual judgments and private information are lost and that the crowd can only do as well as its smartest member, rather than perform better. Detailed case histories of such failures include:
Crowdsourcing and Outsourcing: The difference between crowdsourcing and ordinary outsourcing is that a task or problem is outsourced to the public, rather than another body. The difference between crowdsourcing and open source is that the program must include source code, and must allow distribution in source code as well as compiled form. The license shall not restrict any party from selling or giving away the software as a component of an aggregate software distribution containing programs from several different sources. The license shall not require a royalty or other fee for such sale. A client initiates crowdsourcing activity, and the work may be undertaken solo, as well as collectively.
Crowdsourcing may also be done on the Internet, as the two examples infra show:
Recent Examples of Crowdsourcing Using the Internet
· Wikipedia is a free encyclopedia edited by volunteers. The English Wikipedia currently contains over 2,000,000 articles.
· InnoCentive, started in 2001, crowdsources research and development for biomedical and pharmaceutical companies, among other companies in other industries. It describes itself as the global innovation marketplace where creative minds solve some of the world's most important problems. Commercial, governmental and humanitarian organizations engage with InnoCentive to solve problems that can impact humankind in areas ranging from the environment to medical advancements. InnoCentive, one of the largest commercial examples of crowdsourcing, provides connection and relationship management services between "Seekers" and "Solvers." Seekers are the companies conducting R&D, hunting for solutions to critical challenges. Solvers are the 125,000 registered members of the InnoCentive crowd who volunteer their solutions to the Seekers. Anyone, anywhere, with interest and internet access can become a Solver member. Solvers whose solutions are selected by the Seekers are compensated for their ideas by InnoCentive. InnoCentive recently partnered with the Rockefeller Foundation to target solutions from InnoCentive's Solver crowd for orphan diseases and other philanthropic social initiatives. Companies like DuPont, Procter & Gamble and BASF post problems their own in-house research teams cannot solve on InnoCentive, offering rewards that go up to seven figures.
The Netflix Prize, offered by Netflix, an online DVD-rental service, was an open competition for the best collaborative filtering algorithm to predict user ratings for films, based on previous ratings. The requirement was for devising an algorithm at least 10% better than Netflix's own algorithm for predicting ratings. This was won in September 2009 by BellKor's Pragmatic Chaos team through Innocentive.
Innocentive is burgeoning on the strength its impressive record of success in solving supposedly intractable challenges. It lists its latest projects on its website, and is currently offering $20,000 for a solution to Long-term Preservation of Multicellular Organisms in a Recoverable Latent State.
There is definitely a case for Howe’s analysis of why Crowdsourcing works. “It works for two very fundamental reasons:
Crowdsourcing draws from a vast interdenominational pool of talent, much of which has never before been tapped effectively.
Crowdsourcing allows genuine merit-based concepts emerge –where people are acknowledged for the quality of their ideas rather than for their formal academic qualifications. All that matters is the end product, not the antecedents of those who contributed to it. The amount of knowledge and talent dispersed among the growing numerous members of our species has always vastly outstripped our capacity to harness those invaluable quantities, a capacity that is also growing by the day and faster, if anything.”
Open Sourcing: A query comes to mind immediately. How is it that solutions are being provided in the software industry without providing the budding solver access to extant source codes? The answer is, at first, difficult to digest. Source codes are made accessible to the solver at large! Secrets once held close to one’s chest are being given out freely. Opensource.org is the face page of the Open Source Initiative (OSI), declaring that OSI is a non-profit corporation formed to educate about and advocate for the benefits of open source and to build bridges among different constituencies in the open-source community. “Open source is a development method for software that harnesses the power of distributed peer review and transparency of process. The promise of open source is better quality, higher reliability, more flexibility, lower cost, and an end to predatory vendor lock-in.” It also guarantees a certain minimum standard.
OSI argues that the global economy spent $3.4T USD on Information and Communication Technologies in 2008, of which over $1T USD was wasted on "bad software". Such a loss is an unsustainable cost and undeniable evidence that something in the dominant design of the proprietary software industry is deeply flawed. This is why the Italian Constitutional Court has approved a law as recently as 29 March 2010, giving preference to open sourcing, ruling that it is not anti-competitive.
Jay Lyman reported in Linux.com that “armed with some of NASA's most sophisticated gear and the space agency's biggest use of open source software and development ever, the Spirit and Opportunity Mars rovers had received clearance for an extended tour of the Red Planet. The mission extension was a steal for taxpayers, whose space and research support had shrunk along with NASA budgets. Open source software is not necessarily onboard the Martian rovers, but is instead here on Earth controlling them and communicating with the rovers.” He explained that during development, NASA engineers were able to focus on their mission rather than those components that were going to rely on open source. He called it :
‘A small step for software, giant leap for open source’.
And the success story of Linux itself is well known!
Easy Availability of Means
Every passing day throws up some advancement or the other, or how to monetize existing channels. Websites exist which allow you to post your product free, but charge a commission on every sale. Sites like Elance, Freelancer and Academia-Research post requirements of people who want articles or essays written for them, at a recompense of a small percentage of what a professional writer would charge.
Just yesterday, You Tube was a ghastly stuttering channel on the web, whereby people were making an attempt at self-propagation or showing off, creating home films using video cameras. Today it is one of the leading modes at marketing virtually anything, from a goose to a gander. Google provides you the means for a quasi-professional production which it hosts and with its unlimited access to ads of a nature similar to the content, posts those most likely to be clicked through. Audio-visual marketing is so appealing that results have risen by over 100%. Rachel strolls into so many websites that she has become the affiliate marketer’s dream girl. The digital world is working wonders with digits, bringing costs down as competition mounts. Software is just a download away, at speeds that never cease to amaze you and at costs that keep dropping.
The web has become an adept instructor. I sometimes wonder whether my grandchildren will ever have to go to school to learn! As Jeff Howe puts it, “In virtually every field imaginable, technology is making everything cheaper, faster, smaller and easier to use. All of this is having the combined effect of placing creative power in the hands of the crowd rather than in the hands of professionals.”
Reaching the crowd is imperative, which is where distributive channels play an important role. Tutor2u states that “a Distribution Channel is the route by which a product or service is moved from a producer or supplier to customers. A distribution channel usually consists of a chain of intermediaries, like wholesalers, retailers, and distributors that is designed to transport goods from the point of production to the point of consumption in the most efficient way.
An important market factor is "buyer behavior"; how do buyer's want to purchase the product? Do they prefer to buy from retailers, locally, via mail order or perhaps over the Net? Another important factor is buyer needs for product information, installation and servicing. Which channels are best served to provide the customer with the information they need before buying? Does the product need specific technical assistance either to install or service a product? Intermediaries are often best placed to provide servicing rather than the original producer - for example in the case of motor cars. “
“There are three broad options - intensive, selective and exclusive distribution.
1. Intensive distribution aims to provide saturation coverage of the market by using all available outlets.
2. Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products.
3. Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.”
The cost of the item to be sold varies according to the method to be employed, and in the example supra, inversely with its rank. Distribution channels are, therefore, part of a company's marketing mix and online stores, using e-commerce, are gaining momentum.
According to In-Stat’s research on online music and video, “new distribution channels are set to emerge. The popularity of single track downloading, expanding digital catalogs, and the rising demand for music videos are factors contributing to the growth in the digital music market.” In-Stat expects that by 2011, “online sales of digital music will represent 26% of all music purchased worldwide. The Internet is now an essential distribution channel for digital music; and over the next year, online social networking sites, such as YouTube and MySpace, will develop as key drivers of online music and video. Music downloaded to mobile phones is also a key development in the delivery of digital music.”
Online Sites Offering Both Music and Video
· Real Networks
Video-centric Online Sites
· BitTorrent + Warner Brothers
· EchoStar + Archos
The 3-D Magic Mirror
In clothing stores, mirrors help customers make their decision to buy well-fitting garments and looking good. Customers commonly try on many items and spend a lot of time to don and doff to purchase garments. It is inconvenient for them to take garment items they want to try on to a dressing room, put on and then take off garments appealing to them. It also takes several minutes to measure their body size by hand with a measuring tape to get made-to- measure garments.
In this sense, the magic mirror can answer all questions about the size-fit of garments without physical don and doff time. It enables people to have their avatars, which are same sized and animated with the users’ body movement through motion capture systems, try on garment items. Moreover, shop owners can save costs, because they do not need dressing rooms any more.
Custom fabricators are next on the anvil, with downloadable 3-D software for home manufacturing of utility items.
The Internet as a Commonality Search Machine
Over the last few years, a large number of social networking sites have come up, with
Facebook, MySpace, Twitter, Skyrock, StudiVZ, Vkontakte, Windows Live Spaces, Sonico, Ozone, etc., in various nations and languages. Apart from purely social networking, they also bring together like-minded people who can progress into a common workable project. Divided by nationality and geographical borders, each individual contributing his bit, which would, in all probability be local-environment based. One example is the unknown email@example.com which is a horse-racing buff’s site. Members from all over the country (India) post their views on this website, which has a moderator who splits inputs into tips on races in Mumbai, Pune, Mysore, Bangalore, Hyderabad and Kolkata racecourses. It has a hit rate of 61%, where the breakeven rate is a straightforward 33.3%. Membership is through expertise contribution.
Today, there are 153 companies that are into crowdsourcing, not counting China. Their numbers are increasing and they are all popular and profitable concerns. However, there is an unusual trend in other well-known companies, which, though happily in the black, are cutting back on staff, that too when Wall Street bonuses have returned to their previous highs. To our good fortune, their policies are being counterbalanced by Online Communities.
An online community is a virtual community that exists online whose members enable its existence through taking part in membership rituals (Amy Jo Kim, 2000). She adds that “an online community can take the form of an information system where anyone can post content, such as a Bulletin board system or one where only a restricted number of people can initiate posts, such as Weblogs. Online communities have also become a supplemental form of communication between people who know each other primarily in real life. “
Online communities are used for a variety of social and professional groups interacting via the Internet and members may remain relative strangers. Some of the earliest forms of online community websites included TheGlobe.com, GeoCities, and Tripod.com, which focused on bringing people together to interact with each other through chat rooms, and share personal information and ideas around any topics via personal homepage publishing tools, a precursor to the blogging and social networking phenomena of today. These communities including BigTent, Yahoo! Groups, Google Groups, LISTSERV, Microsoft SharePoint and IBM Lotus Connections.
Jeff Howe says that online communities work for a number of reasons:
· They are self-policing.
· People get things done in a community by persuasion and collaboration rather than by issuing edicts.
· When a hundred thousand people pool their spare time in a collaborative community initiative, that’s a pool of two or three hundred thousand man hours that can be gainfully applied.
· In a community environment, recognition and the respect of others can be far more motivational.
But a post in the eMagazine Online Community Report takes three policies apart:
· You don’t own the community, the community owns the community. What this means is that no ownership = absolution of responsibility, and weak or no long term stewardship.
· Start by listening. My recommendation to clients is to start with a conversation about your goals for engaging on the social web. A listening strategy is key to managing a successful online presence, but brands and organizations also need to interact.
· Go where your community is. Many organizations are doing a poor job of evaluating the opportunity for community on their own domain, and are setting up outposts on large social sites like Facebook because it is relatively easy and (initially) inexpensive.
NineSigma is a highly experienced and advanced Open Innovation service provider in the world. Founded in 2000, NineSigma has been offering open innovation solutions long before it became common practice. In fact, “NineSigma is responsible for a large part of how open innovation is practiced today, and continues to evolve its services and organization to ensure that your organization will be prepared to move to the next level of open innovation capability, regardless of where you are today.”
NineSigma Engages companies across all industry sectors with the global innovation community, and Enable their organizations to leverage external resources to solve immediate challenges, fill product pipelines and integrate new knowledge and capabilities into their organizations. Some of their latest subjects are:
· Non-Invasive Determination of Water or Voids Surrounding Mineshafts
· Short-Range Detection of Liquid/Gaseous CO2 in Mineral Deposits
· Improving the Production Yield of Pure MgSO4.7H2O from Kieserite
· Electrochemical Gas Sensor
· Production Management and Product Composition Software
· Seeking a Reversible Joining Method for Battery Cell Terminals
NineSigma’s open network of solution providers is the largest in the world, and spans all industries, geographies and technical disciplines, offering unparalleled access to both patented and pre-patented knowledge and intelligence capabilities.
Netflix Prize A “Turning Point” For Open Innovation
With Netflix Inc. paying out a $1 million prize on September 22, 2009 to a team of outside researchers that improved its movie recommendation algorithm, two venture-backed start-ups are overjoyed that the ‘open innovation’ model is spreading. Open innovation “like any big change in business takes time to promulgate,” said David Ritter, the chief technology officer of InnoCentive Inc., the winning open sourcing company “The Netflix prize is a turning point.”
NineSigma Inc. is similar to InnoCentive, except that it takes a more active role in helping corporations find the individuals or groups best suited to solve particular problems. It’s also selective about the researchers included in its network, whereas InnoCentive will let anyone join. The idea is to make the open-innovation process more efficient and cost-effective. NineSigma doesn’t make inventors register in advance to send in proposals, and it doesn’t set prizes in advance, but instead lets its clients and the inventors negotiate the price of the intellectual property and determine the relationship the two will have. Besides Netflix, a handful of major companies like Clorox Co., Kraft Foods Inc. and Procter & Gamble Co. have now built these practices into their businesses. That’s caused NineSigma to adjust its product offerings to meet the needs of customers who have fully embraced open innovation, rather than those who are looking to experiment, Heim said. NineSigma, backed by Blue Chip Venture Company and River Cities Capital, charges the companies a fee for searching and a larger fee if a proposal is accepted.
“If you want to go quickly, go alone. If you want to go far, go together.” African Proverb
Crowdsourcing is well past its formative stage and has one foot firmly planted into the cement of expansion. Where are we headed next? Yes, one can expect refinement of past products, but is that all? Can we extend online communities into group intelligence? Can we, like IBM, ideate? Get together via the net and produce something creative? If so, who will moderate the inputs, collate and reference them, or can we automate the last part? Will funding be required and do we have any philanthropists amongst us? Or should it be a collection of individual donations, masterminded openly by economists? All these programs seem feasible, so we can look into a few. We could start with Collective Intelligence.
Collective intelligence is a shared or group intelligence that emerges from the collaboration and competition of many individuals.
Collective intelligence (CI) is also known as a form of networking enabled by the rise of communications technology, namely the Internet. Web 2.0 has enabled interactivity and thus, users are able to generate their own content. Collective Intelligence also draws on this ability to enhance the social pool of existing knowledge.
The best-known collective intelligence projects are political parties, which mobilize large numbers of people to form policy, select candidates and to finance and run election campaigns. Agencies like ‘BootB’ are great examples of collective intelligence. ‘BootB’ is an online market- place that allows anyone, anywhere, with access to the Internet to pitch their ideas in response to companies’ specific creative needs". The concept, based on a crowdsourcing model, is also known as a “Pitching Engine”. The BootB tagline is that it is the Pitching Engine that brings Brand Builders and Creative Brains together. All around the Planet! To quote them:
“What is the usual way for Brands to quest for Creativity? If they have the opportunity to choose, they start a pitch and select the best proposal from a limited number of participants. BootB is designed as an online alternative to that process that has no offline limitations. The
BootB platform is built to run Pitches. You can start your own Pitch and get Solutions from an unlimited number of Creators from anywhere on the entire planet. In this case we will call you a Brand Builder. Or you can participate in any Pitch you like and publish your Solutions that will be received directly by a Brand. Then we will call you a Creator.”
As a result - instant access to Unlimited Creativity for everyone on the planet!
Design Bay is a similar project. Their tagline is: ‘Get 100+ designs. You name the price.’ To quote them, “Post a project, get 50 to 100+ custom designs then choose and download your favorite.’ They claim to be:
· More creative. Receive designs from 14,285 competing designers.
· Worldwide. Harness talent from Dallas to Mumbai, Quebec to Seoul.
· Fast. Post your project in minutes and receive first designs while you relax or snooze.
· Cheap. Set your own budget and access freelance designers.
· Simple. It's really, really easy.
The Economist’s ‘The New Organization’ of February 2007, referred to on page 8 says, "the wisdom of a given organization’s crowd can help leaders and managers learn to really listen, and to respond in intelligent and mature ways to the conversations that will carry the wisdomcollective (sic) intelligence of the organizational crowd. It can help them engage with that wisdom intelligence through leading and managing by blogging around.
These days (and certainly "tomorrow") it’s less and less about charisma, command and control, and more and more about conversations and championing, catalyzing and coordinating the wisdom collective intelligence of any given organizational crowd (and increasingly that crowd includes the customers, the suppliers, the vendors) i.e., everybody.”
Aaron Saenz, writing in March this year in Singularity Hub, says "Forget IQ, Collective Intelligence is the New Measure of Smart. Individual intelligence is old news, collective intelligence is the future. And it’s already here. Google lets you access the collective records of the world via internet searches. Wikipedia assembles the shared knowledge of humanity in an ever refined research tool that anyone can access. These systems have their limits, to be sure, but they allow an individual to quickly leverage the expertise of millions in just a few seconds. That’s incredible, and that’s the promise of CI.”
The Center for Collective Intelligence (CCI) at MIT was formed in 2006 by Thomas Malone and his colleagues. CCI tries to answer a guiding question: how can people and computers be connected so that collectively they act more intelligently than any individual, group, or computer has ever done before?
Distributed Computing: Saenz adds, “Collective intelligence can include distributed computing. We’ve seen how a complex problem can be solved by using millions of connected computers working in tandem. So too can any task be divided among a set of human peers. You do this all the time at work, or at home with your family. CI takes the same phenomenon and spreads it among thousands or millions. Linux is an example of CI. Similarly, OpenWetWare is a synthetic biology resource maintained by a group of users, generally with expertise in the field. Future CI may rely on cultivating expertise or harness the statistical genius of a collective of average people. “
The great advantage of CI as opposed to IQ, is that CI is growing rapidly, exponentially! Individual intelligence is hard to measure – there are many critiques of IQ testing. Still, it seems that the average IQ is slowly growing at a rate of 3 points per decade – the so-called Flynn Effect. But it’s just too slow to really matter. “A slight rise in individual intelligence can’t be compared with hundreds of millions of people going online in the next decade. Internet connectivity is increasing quicker than biology could ever hope to keep up with,” adds Saenz.
“Another reason why CI will dominate IQ is that individual intelligence is subsumed by the collective. An expert or genius can participate in a group task as easily as an average person. Collective intelligence reflects the group work of the smart, the average, and the dull. While this may seem to average out, a wise application of CI will be able to filter out the dross while saving the best work – no matter where it comes from,” concludes Saenz.
“Given certain conditions, randomly selected collections of problem solvers beat the best individual problem solvers. Diversity trumps ability.” Scott E. Page
To this end, CCI at MIT is working to understand and guide collective intelligence. Their research includes way to measure CI, studies of how CI is already used in organizations, and tracking how individuals interact in a group. They are also working on applications for collective intelligence: they’re looking into how groups may generate solutions to climate change, make accurate predictions about the future, or find ways to improve healthcare.
CI as collective art. Collective intelligence can also take the form of collective art or creativity. Do you play a massively multiplayer online role playing game (MMORPG)? Games like World of Warcraft allow millions of users to create a shared entertainment experience within a controlled virtual environment. Little Big Planet and similar games actually have users build levels for other users to explore. The best levels get shared and enjoyed more – CI creates a better video game.
Kim-Ung Yong might be the world’s smartest man, his IQ is reportedly 210. Marilyn Vos Savant may have an IQ of 186 or even 230 (depends on how you measure it). But these are just evanescent stars in a galaxy of intelligence. As many average computers can be harnessed into doing the work of a supercomputer (or many such supercomputers), so too will we harness our individual minds for a shared goal through the internet. In fact, CI is really a combination of both these trends. Distributed computing and distributed human problem solving will become one and the same as man and machine become more connected. Every bit of intelligence (human or artificial) will be needed to solve humanity’s grand challenges and take advantage of our growing technologies (www.smartplanet.com).
Ideate and Produce Something Creative
IBM’s short ad on TV about ideating proved to be an instant hit, even though it dwelt on something abstract. From there to produce something creative is a short trip, if you take it.
Some well-known mass created sites are:
· Google AdWords and AdSense programs.
· Yahoo Answers.com, where you bung in a question and somebody from a worldwide audience gives you an answer/answers. It is a neat way to find, share knowledge & information on any topic. You can also contribute by providing answers to existing questions on any topic from real life. All that the site asks is: Share what you know, be courteous, be a good citizen, cite your sources and ask clearly, categorize correctly.
· Answers.com is a similar site, a Wiki Q&A combined with free online dictionary, thesaurus, and encyclopedias.
· christiananswers.net, which gives you answers by recognized authorities on the Bible within 24 hours.
· Zazzle: Zazzle is an online retailer that allows users to upload images and create their own merchandise (clothing, posters, etc.), or buy merchandise created by other users, similar to CafePress.com or Propell.com, as well as use images from participating companies such as The Walt Disney Company. Users are allowed to open their own shop for free and set the profit they wish to make on each item.
· Flickr: “Flickr is an image and video hosting website, web services suite, and online community. In addition to being a popular website for users to share and embed personal photographs, the service is widely used by bloggers to host images that they embed in blogs and social media. As of October ‘09, it claims to host more than 4 billion images. Flickr later created a new license which identified them as ‘United States Government Work’, which does not carry any copyright restrictions” (www.flickr.com).
· You Tube, which allows you to post your video clip on their site.
· iStockphoto – which has a vast collection of photos contributed by more than fifty thousand part-time photographers and graphic artists for sale.
What you need to remember is that the first glimpse of your product must be like the Capture Page of websites, short enough to intrigue and long enough to excite.
As this concept catches on and grows, where will so much data be stored. I remember when I bought my first PC. It had a 2GB hard disc and the vendor told me that I had more space than I could exhaust in one lifetime. Today, my son, who is a Consultant has a 320 GB installed hard drive and a one TB attachable hard disc.
You may have noticed that almost all blogs/websites ask you to rate the content, suggest an improvement if any deficiency is noted, add content if possible and so on. This gives the visitor an opportunity to assess the site, which he rarely does. E-marketers say that a visitor takes seven looks at an online product before he buys it. E-marketing sites like Commission Junction,
ClickBank and Paydotcom.com show you how many times a product has been seen and the conversion rate. It is, therefore, possible to assess anything online. Popularity of sites can be read off Google page rankings, Whois trends, Alexa rankings, number of times downloaded, etc.
Crafty vendors always add, “Those who downloaded this song, also downloaded xxxx song,” just tickling your fancy. Many people fall for this gimmick. As sites or products lose their sheen, they are relegated and finally archived. The Indian Idol, a program based on the US The American Idol ran into unusual problems: ethnicity and employer related. A singer, employed by the 1.6 million strong Indian Railways received votes from fellow employees, on a command issued verbally from the bosses. Another singer, from North-east India, with distinct Mongoloid features, received over twenty million votes from all of North-east India, comprising 8 states.
Statistically, it has been shown that Pareto’s Law holds good here as well. Only 20% of visitors took up 80% of the time something was read. Of these 20%, 5% (one) bought the product, 45% added comments of value and 50% did nothing other than read. Some sites ask you to undertake a 3 silly-question test and write a slogan in 10-15 words or so. One in a thousand is given a token prize, but then the program has carted off 1000 slogans! Threadless, a T-shirt maker, makes voting fun, cannily extracting data from volunteers to figure out how many shirts it should be making. This is a very smart way to do business, says Jeff Howe. And then we have Google, which is reorganizing a database of over fifteen billion pages. (Imagine the task that plagiarism detection software is called upon to undertake)!
Crowdsourcing also involves crowdfinancing. There are agencies locatable through websites like the CGAP’s microfinancegateway.org and Kiva.org. Bangladesh and South India are prominent microfinancing world zones. Grameen Bank provides credit to the poorest of the poor in rural Bangladesh without any collateral. Moreover, microfinancing in Tirupur and Kolar in South India were accepted forms of daily existence. But in Islam, women are not allowed to dabble in money and an edict was issued by the local Anjuman (Committee) that women were to stop repayment of all loans. The MFIs are in deep trouble as over $15 million is involved. Some microfinancing banks in the Middle East are www.sfd-yemen.org, www.agfund.org, www.sanabelnetwork.org, www.microsave.org, www.cgap.org and www.mixmarket.org.
The Kapipalist principles of crowdfunding are:
· Your Friends Are Your Capital.
· Your Friends Make Your Dreams Come True.
· Your Capital Depends on the Number of Friends.
· Your Capital Depends on Trust.
· Your Capital Grows by Word Of Mouth
Crowdfunding: Crowdfunding, inspired by crowdsourcing, describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations. Crowdfunding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns (www.facebook.com).
Crowdfunding can replace the need for specialized grant applications or other more formal and traditional fundraising techniques with that of a more casual, yet powerful, approach based on crowd participation. Examples of the basis of Crowdfunding can be seen in Cooperatives (co-ops) around the world. However, the Internet can provide new streamlined approaches to quickly imitating the co-op model for low-level and/or sudden needs (ie. disaster relief, travel expenses, legal fees and so on.). It is this reason that a term be used to encompass the act of informally generating and distributing funds, usually online, by groups of people for specific social, personal, entertainment or other purposes (crowdfunding.pbworks.com).
1. Artemis Eternal - Short sci-fi film being produced independently by Jessica Mae Stover. The user is invited, in a cross-platform web experience, to donate (from $1 to $100) and join "The Wingmen" (whose members hail from students to homemakers to NASA employees and filmmakers) and help to fundraise the project.
2. ActBlue is a Federal PAC that enables anyone — individuals, local groups, and national organizations — to fundraise for the Democratic candidates of their choice. Previously, only the most well-funded and technologically-savvy groups have employed these powerful fundraising methods. But with ActBlue, groups and individuals need only choose their candidates and make their solicitations. By providing all the technical, financial, and compliance systems, ActBlue enables every progressive organization and individual to make the most of their networks - rapidly raising otherwise untapped millions for Democrats in the closest races (crowdfunding.pbworks.com).
3. Akamusic is a community site that gives artists the possibility of having an album or a single produced by producer internet users. It is free for artists & producers. Producers buy 5€ shares of a potential production. When the goal is reached, each producer receives a collector's CD and the profits are split as follows: 40% for the artist, 40% for the producers, and 20% for Akamusic.
4. Cameesa is the first site breaking into 'Crowdfunding Fashion,' where it encourages participation in the clothing creation process. Members decide which designs to print on T-shirts by supporting them financially. Once a design is 100% funded, members who supported the design, get a special edition of the T-shirt and earn whenever it is sold.
5. Bon Bon Kakku is a clever online marketplace for textile artists to upload images of their fabrics to be viewed and rated; the designs with the highest votes are sold on the site. Bon Bon Kakku expands the crowdsourcing phenomenon into home decor, allowing readers’ votes to determine the fabrics sold on the site. Bon Bon Kakku allows small-scale textile artisans to reach a far larger audience. Since viewers can vote and comment on each design, artists also have access to interactive feedback and important market
Quo Vadis: What Does the Future Hold for Mankind?
"Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs." Peter Drucker
Innovation is no easy task. Depending on the industry, about 80% of new products fail on introduction in the market. And up to 60% fail on reintroduction. Try and look back over this past decade or two, and list the advancements we have seen. While old fogeys like today’s 60-year olds grew up in an environment where telephone directories rarely crossed ten pages in normal sized print, where the record changer was a marvel of technology, the car a status symbol, today’s child will be born into a world where technology is taken for granted. They will converse tete-a-tete over an electronic patch up and have thousands of e-pals. Surgeons will assist each other in tricky cases. There will be no limits to expansion and modernization, in an age where the moment something is manufactured and sold, it turns obsolete. It might also be possible to integrate crowdsourcing in a more effective manner with the advantages that improved communications have on offer.
· Collaboratition: Collaboratition is a neologism to describe a type of crowdsourcing used for problems that require a collaborative or cooperative effort to be successful, but use competition as a motivator for participation or performance, like the 2009 DARPA experiment in collaboratition. DARPA placed 10 balloon markers across the United States and challenged teams to compete to be the first to report the location of all the balloons. Collaboration of efforts was required to complete the challenge quickly and in addition to the competitive motivation of the contest as a whole, the winning team established its own “collaborapetitive” environment to generate participation in their team.
· Smartsourcing. Graham Hill looked at turning Crowdsourcing into Smartsourcing. The first of these was Dell with its Ideastorm program. Anyone could come up with a computer-related idea, post it on the Ideastorm website, vote for the best ideas, comment about them and hopefully, see them implemented. Why not harness ideas from customers? Unfortunately, crowdsourcing has its own problems. The first problem is that customers, even large numbers of them, typically produce average, mundane, unremarkable and incremental innovations, rather than the logarithmic innovations that companies hope for. Although 12,483 ideas were posted on the website since Ideastorm started in February 2007, only 366 have been implemented to-date, a miserly 2.9% of the total. And most of the implemented ideas provide only incremental improvements to Dell's business. Ideastorm was a failure as a source of winning new innovations.
1. Starbucks with its My Starbucks Idea, again Graham Hill’s Smartsourcing concept. My Starbucks Idea allows any registered customer to post an idea, vote for the best ideas, and comment on them and see them implemented. Or not as the case may be. My Starbucks Idea, despite receiving over 75,653 ideas, has only implemented 315 ideas to-date, an even more miserly 0.4% of the total. In crowdsourcing, customers have no idea of how the business works, what business capabilities it has and thus, no idea whether even the simplest of ideas can realistically be implemented.
2. Toyota implements over 1,000,000 employee ideas every year, 95% of them within 10 days of being submitted. But unlike Starbucks's customers, Toyota's employees know exactly where the best innovation opportunities lie, what can actually be implemented and the profit-impact of doing so. Coming up with innovations like this is part of the Toyota Way. It's what makes Toyota such a unique company, even if it had to recall over a hundred thousand cars for defective brakes.
3. Cisco. One company that got it right is Cisco with its I-Prize competition, somewhat like Netflix. Starting in late 2007, Cisco asked innovators to come up with ideas that could it turn into the next billion dollar business. Cisco collected over 1,200 ideas from 2,500 innovators in 104 countries across the globe. The ideas were initially filtered to see if Cisco could make money from implementing those plans. The best 40 ideas were then assigned a mentor to help the innovators turn their idea into a workable business plan. The final 10 ideas were then selected, and taken though an interview and further filtering process to find the eventual winner. A single idea—for a smart electricity grid—by a German/Russian team was selected to collect the $250,000 prize. Netflix went one better, doling out a one million dollar prize.
Cisco's success at smartsourcing shows the importance of focusing ideas on particular pain points or opportunities. Rather than just let innovators come up with ideas, it is much better to focus their creativity on just those opportunities where they can produce a breakthrough. As innovation gurus Tony Ulwick of Strategyn and Prof. Clayton Christensen have shown, in today's customer-centric business environment, this means understanding the jobs customers are trying to do and the outcomes they want from doing them. And not only functional 'doing' jobs, but also emotional jobs that describe how the customer feels about what they are doing and social jobs that describe how the customer relates to their peers too. Once you understand customer jobs and outcomes, they should be prioritized to find the areas where the importance to customers is highest but satisfaction with current solutions is lowest. This is the innovation sweet spot. Experience suggests that focusing on the innovation sweet spot can produce an 80% success rate for new products; far better than the 80% failure rate we commonly see.
Graham Hill goes one step further. He says that only when you know where the innovation sweet spot is should you seek to harness the creativity of customers. And not just any old customers either. As Dell and Starbucks' experience with crowdsourcing showed, harvesting ideas from the mass of customers proved counterproductive. Recent research on emergent customers suggests that by screening potential customer innovators for their ability to imagine how innovations can be developed that will be successful in the market, the quality of ideas generated is significantly increased. Emergent customers produce much better ideas than the mass of customers, better ideas even than the lead-customers who are already pushing products beyond where they were designed to go.
Think of what being able to identify the best innovators from the broad customer base could mean for companies- they could harvest a smaller number of high quality ideas, freeing up resources to help develop the best ideas together with customers. And more ideas would make it successfully to market. It would enable companies to turn inefficient, wasteful crowdsourcing into much more productive smartsourcing. As the failure of Dell and Starbucks' crowdsourcing programs, and the success Cisco's smartsourcing one shows, understanding customer jobs provides a solid foundation for targeted open innovation, whilst identifying emergent customers provides the best way to harness just those customers whose ideas will help produce winning innovations: new products that help customers get important jobs done well and create profit for the company too (www.15inno.com).
What this would entail is a smorgasbord of ideation. This would start with strategies.
Strategies. Four strategies suggest themselves:
1. Harnessing the collective intelligence or crowdwisdom.
2. Using the crowd to read through ideas and rate them.
3. Using crowdwisdom to decide what is to be sold.
4. Getting into crowdfunding.
Be selective and offer motivation. While you cannot pick and choose your crowd, use Graham Hill’s ideas. You simply cannot afford to work with Starbucks 0.4% or Dell’s 2.9%. To repeat, ‘think of what being able to identify the best innovators from the broad customer base could mean for companies- they could harvest a smaller number of high quality ideas, freeing up resources to help develop the best ideas together with customers’. Motivation should be in the form of a cash prize plus elevation in status. Cater to the recipient’s immediate needs. This would need you to know what his urgent needs are. Devise a system to find out and update it.
Maintain a continuous plan and control it. Don’t be sporadic. There will be ups and downs, but don’t let the downs put you off. A non-stop interaction will invariably work. Those elevated in status could also be given the job of monitors to ensure that output didn’t flag. Lateral interaction would also increase.
Go with the flow. Don’t forget this is crowdsourcing we are talking about and not a group of employees. Our work is based on the principle that the crowd collectively knows more than you and is better in many forms. They will find the best route to take and all that you have to do is go along, while throwing in subtle hints if you sense any deviation from the critical path. Never forget that we base our entire treatise on the saying, “The crowd is always right.”
Be generous. If handled well, the crowd output will be a money-spinner. You can afford to be magnanimous, both in cash and praise. A happy worker is a good performer. Words cost nothing, so why be reticent? If your investment is reaping good dividends, pay out handsomely. Once the crowd gets fully involved, they will find amidst themselves a natural leader. Accept the collective judgment and utilize it optimally.
Be straightforward and direct. Communications fail whenever there is any ambiguity. Keep it simple and to the point and check that you have been understood in the right spirit.
The greater the difficulty the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests." Epictetus
Justus Daniel Eapen is a policy level Organizational Transformation Consultant with over 25 years experience in Banking & Government.