The Wisdom of the Business Crowd

Jeff Howe, the writer who coined the term 'crowdsourcing,' explains how businesses can put the social-network gang to work

Editor's Rating:

The Good: A well-written playbook for execs looking to harness the wisdom of online crowds.

The Bad: Some of the examples may be familiar to business readers.

The Bottom Line: A welcome look at a burgeoning phenomenon

Crowdsourcing:Why the Power of the Crowd isDriving the Future of BusinessBy Jeff HoweCrown Business; 311 pp; $26.95

It's nearly impossible for an executive to wander the halls at a conference or flip through a research report these days without receiving words of wisdom about the power of the crowd. Consumers are using wikis, blogs, and social networks to make an impact on brand building, publishing, and even product creation. Working together—often unwittingly—by adding material to Wikipedia or by rating songs on music site, they're creating a vast shadow workforce. All this is clear. What may be less obvious to businesspeople is just how to get the crowd to work for them.

Jeff Howe is a Wired magazine writer who first analyzed the phenomenon from the outside and coined the word "crowdsourcing" for how business was enlisting the masses to help stoke a popular trend. In a neat trick, he is now offering advice on how businesses can adapt. In Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business, he explains how companies, from startups such as iStockphoto to established giants including Hewlett-Packard (HWP) and Dell (DELL), are embracing the digital herd.

Books about the crowd are becoming a crowd unto themselves. Four years ago, James Surowiecki provocatively argued in The Wisdom of Crowds that the masses are often better problem solvers than the experts. Earlier this year, Clay Shirky's Here Comes Everybody updated that theme, explaining how Web 2.0 social networking is reshaping conventional organizations. What sets Howe's book apart is his focus on business, an examination of different crowdsourcing models, and a deep dive into academic research to explain why people work together. It's a welcome and well-written corporate playbook for confusing times, even though some of Howe's examples may be familiar to business readers.

The blueprint for crowdsourcing, Howe explains, is the open source movement, a community of developers who work together to create software alternatives to Microsoft's (MSFT) products. Much has been written about open source, but the topic is worth revisiting, since it helps explain the motivations of crowdsourcing participants. Like the open source geeks, many who work on crowdsourcing projects are amateurs or at best part-timers in the field to which they contribute.

Howe breaks crowdsourcing into four models, laying out examples that businesses can tailor to their own circumstances. In the first, "collective intelligence," companies including Dell and gold-mining group Goldcorp (GG) ask people inside and outside the company to help solve problems and suggest new products, such as Dell's Linux-based computers. The second model, "crowd creation," is used by businesses such as Current TV and Frito-Lay (PEP) to create news segments and video ads. People vote for their favorite T-shirt design at apparel maker Threadless' Web site, thereby illustrating "crowd voting." Startups SellaBand and Kiva use the last model, "crowdfunding," to underwrite new music labels and fund microloans to individuals.

Howe's best example is iStockphoto, a startup that is undermining the established stock-photo business. The community began in 2000 as a vehicle for hobbyists who wanted to trade their pics. Two years later, iStock began selling photos for 25 cents each to cover bandwidth costs. Clients flocked in, and in 2006, Getty Images bought the enterprise. Now, with 60,000 part-time photographers and illustrators on board, 3.5 million images in the bank, and 2 million customers, iStock is the world's third-largest dealer of images.

Howe sweeps away certain misapprehensions about such activity. While it's true that most people who are involved don't get paid, they still need incentives. At iStockphoto, that comes in the form of workshops in which people meet and share expertise. And Howe warns that not all crowds are created equal. For example, he suggests that sports teams would do better to use fantasy-league enthusiasts rather than scientists to handicap up-and-coming athletes. Perhaps the hardest lesson for businesses is the importance of including people with whom you don't ordinarily work. Organizations reinforce similar approaches and inside-the-box thinking. When you're looking for something truly different, the crowd can lead you down a less traveled path.

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