Consulting

The Pros and Cons of Crowdsourcing as a Road to Innovation

Topics
Crowdsourcing, Crowdsource, Twitter Chat, Digital Disruption, Innovation

The speed and scale of digital disruption is placing businesses large and small under unprecedented pressure to transform the way they operate, to innovate, and to respond to and anticipate the new challenges and opportunities that massive technological change brings. Companies don’t necessarily have the internal resources to help them to do this or the time or budgets to hire external resource.

Crowdsourcing allows businesses to use the input of a much wider group of people than their own R&D or innovation experts such as all employees, customers, students, to help address some or all of the issues raised by digital disruption. Diverse individuals from outside the business can bring varied skills, backgrounds and perspectives to address a company’s needs in completely new and fresh ways. Companies can ask crowds to find solutions to specific problems or to figure out what kind of problems can be solved within certain contexts. Crowdsourcing innovation is also very closely connected with open innovation and co-creation. While it has many advantages, crowdsourcing also brings risks that need to be addressed.

I had the privilege of hosting Business Value Exchange’s Twitter Chat session: Crowdsourcing: a Risky Road to Innovation?, to discuss some of the issues around crowdsourcing innovation:

The session was structured around three main questions:

  1. What are the applications of crowdsourcing? e.g. sourcing innovation/R&D

There are many different applications of crowdsourcing innovation such as hackathons to build prototypes within a defined context. A slightly different method is to use an open API approach which allows others to build new services and products on top of a company’s own service in order to extend the core offering. Meanwhile co-creation is one type of crowdsourcing where customers are part of the innovation process.

Crowds can be used for different kinds of problem solving whether it is a specific problem looking for a solution or whether companies are seeking new ideas on ways to add value to their customers for example. As a general point, crowdsourcing is useful for companies seeking help in executing ideas especiallly when the crowds concerned are groups of expert developers, data scientists or designers. After all, ideas on their own aren’t especially valuable.

2. What is the collateral of crowdsourcing? (Iterative prototyping of ideas, crowd feedback)

The experimental nature of crowdsourcing means that there is an element of surprise in terms of what it will deliver. When it comes to the additional unforeseen advantages of crowdsourcing, these can range from obtaining new market insights into your sector, generating business leads, discovering new talent you can hire, to softer wins such as building a sense of community around a product or service or sharing responsibility for a big decision (the wisdom of the crowds).

3. What are the risks, for example losing control of IP?

Like most approaches, crowdsourcing also has tradeoffs that need to be addressed. Naturally due to the nature of crowdsourcing, there isn’t the same degree of confidentiality that is typical of inhouse R&D. In addition, companies are likely to struggle to protect their own IP.

Crowdsourcing can also involve reputational risk to companies in cases where inventors don’t feel they have been compensated fairly for their efforts. Meanwhile, the diverse nature of crowdsourcing can also cause challenges for companies wanting to ensure the work is aligned to particular targets or to other internal projects.

Crowdsourcing and especially an open API approach, also carries the risk that competitors may piggyback the company’s original service in order to win users and customers and then try to overshadow the original service with their own.

Ultimately any group approach to problem solving comes with challenges. Crowdsourcing has its strengths and weaknesses and comes with trade-offs which have to be thought through and managed in advance. In the end though, crowds expand the capabilities of companies and so they should be viewed as another tool for organizational problem solving.