Crowdsourcing: What It Means for Innovation

Some have predicted that crowdsourcing is the future of the marketing, advertising, and industrial design industries. The phenomenon, they argue, will accelerate creativity across a larger network.

Others, meanwhile, have predicted this practice of opening up a task to the public instead of keeping it in-house or using a contractor will be the demise of those businesses because of the downward pressure on prices. If LG crowdsources a new cell phone design on CrowdSpring for $20,000, as it did recently, what happens to the old model of paying a design firm millions of dollars for the same project?

So which is it? Does crowdsourcing represent the beginning of the end of creative organizations? Or does it herald the beginning of something bigger and transformational for those agencies—and for business in general?

Here's my take on why crowdsourcing's here to stay:

The current global economic conditions have forced all of us to do more with less. Unemployed workers now look for new ways to participate. They may not be able to find traditional paid work in their chosen field, so they're turning to crowdsourcing marketplaces such as InnoCentive, TopCoder, uTest, and CrowdSpring. Participants sharpen their creative skills, stay involved with the things they love to do and—most important—get noticed. While these crowdsourcing marketplaces do pay the winners of contests—InnoCentive rewards of up to $50,000—the real point is that the traditional forms of compensation connecting corporations to creativity are splintering beyond money to include fame and community.

Harnessing the Crowd

Some might think once the global financial crisis has come to an end these marketplaces will dwindle as people go back to work. Instead, I believe that they will evolve further, supplying a more efficient and creative way for companies to engage with and harness the crowd for help.

Second, the increasing complexity of problems has caused a rise in mass collaboration. This trend is usually traced to Linus Torvalds and the Linux open source revolution. While Torvalds was the chief architect of the Linux movement, he couldn't have succeeded without the power of the crowd. In the end, he's written a mere 2% of the operating system's code. Similarly, the financial crisis, the threat of global warming, and other huge problems of our time demand a new sense of cooperation and collaboration. As the musician Pete Seeger is fond of saying: "Participation is the only thing that is going to save us."

Customers, of course, are increasingly demanding participation. They expect the ability to co-create and lead innovation, and their volubility has forced companies to devise creative solutions to be competitive in a new bottom-up age. Procter & Gamble (PG), Starbucks (SBUX), Dell (DELL), Best Buy (BBY), Threadless, and Nike (NKE) have all created digital platforms that allow customers to help them create new products and messages. Starbucks received over 17,000 coffee ideas in the first 14 months since the launch of its proprietary online forum,

Jump In and Try

Managing those submissions in an effective manner is, of course, another challenge altogether. And the biggest struggle for companies that dip their toes in crowdsourced water is to shift from having a reactive culture to one that's proactive. There's a delicate balance between encouraging participation and maintaining clarity of overall business objectives. As with any good conversation, a give-and-take dialogue is necessary, and every company will develop its own way of handling that debate. Most excitingly, new forms of social editing will emerge that allow customers, experts, and brand advocates to curate crowd-created ideas to sort through the ideas and stay on strategy. For now, the most important thing is to jump in and try.

Another challenge for anyone entering the co-creation/crowdsourcing arena is how to compensate people fairly for their ideas. While crowdsourcing will take the slack out of the system, it could seriously depress wages for anyone pursuing a career in advertising, graphic design, and industrial design. This worries me a great deal. It also represents a much larger issue that other industries, including journalism and photography, are grappling with as well. I wish I could tell you how it'll be resolved, but no one has figured this out yet.

As crowdsourcing continues to accelerate, the biggest question is how it will affect business writ large. But it will certainly usher in radical changes to business models and business systems. The question for creative agencies is whether they can wake up, react to what's going on, engage the crowd, and make themselves a part of the new reality.

Before it's here, it's on the Bloomberg Terminal.