10 Initiatives using the crowd to generate new ideas

 

The crowd has been used for idea generation for a very long time with idea boxes, surveys and various competitions and awards. Early examples were the reward offered by the British government in 1714 for a simple and practical method for the precise determination of a ship's longitude, with over £100000 given in the form of different encouragements and awards, or the Orteig Prize of $25000 won by Charles Lindbergh offered by hotel owner Raymond Orteig in 1919 to the first allied aviator to fly non-stop from New York City to Paris or vice-versa.

Recently there have been a growing number of initiatives combining awards, the "American Idol" concept with social networking platforms for idea generation, marketing and recruitment purposes. Below are 10 examples of traditional and non-traditional corporate initiatives:

Cisco I-Prize was an idea competition where the winning team got the opportunity to be hired by Cisco to found a new business unit and share a $250000 signing bonus. Cisco also committed it may invest approximately $10 million over three years to staff, develop and go to market with a new business based on the winning idea. Ideas were posted and commented by others and refined by the community, forming new teams of all-stars sharing similar ideas. More than 2500 idea providers from 104 countries presented 1200 ideas. Winners of the different phases were given access to Cisco's collaboration tools and experts and in the end 12 finalist teams presented for a judging panel. The winning team, based in Germany and Russia presented Cisco with a business plan that improves energy efficiency by using the network as a platform for visibility, manageability and control of energy-consuming systems.

Dell IdeaStorm is an initiative and an online community for anyone to share ideas with Dell and vote for the ones they like. Dell's objective is to connect with its users and get ideas for new products, services and "the way we do business". So far, more than 10000 ideas have been submitted and nearly 400 ideas have been implemented. In addition to the open discussion Dell posts specific questions and areas for customers to submit ideas. There are no material rewards associated with IdeaStorm.

Electrolux Design Lab is an annual global design competition open to undergraduate and graduate industrial design students who are invited to present innovative ideas for household appliances of the future. There are different themes every year and visitors of their online webpage can vote for statements to indicate desire for future themes. Finalists are invited to participate and present their ideas to a jury of high-level designers and experts. Electrolux awards three prizes: 1st place is 5000€ and a 6 month paid internship with accommodations at one of Electrolux global design centers. The 2nd place winner receives 3000€ and 3rd place 2000€. The competition is very much promoted as a way to get jobs and business opportunities and several finalists are currently employed by the company.

Goldcorp issued a now famous challenge to the world's geologists when they provided all their data on the Red Lake mine online if the contestants showed them where they would be likely to find the next 6 million ounces of gold. The prize was a total of $575000 with a top award of $105000. More than 1400 scientists, engineers, and geologists from 50 countries downloaded the company's data and started their virtual exploration. The winners, who had never even seen the mine, were a collaboration by two groups in Australia which together developed a 3D graphical depiction of the mine, used geological-modeling software and database mining tools to find the gold. According to Fast Company Goldcorp has drilled four of the winners' top five targets and have hit on all four.

IBM Innovation Jam has become a famous example where the company's researchers, employees and outside experts are invited to join in a virtual brainstorm session, posting their ideas, commenting and voting for their favorites. The jam consists of interlinked bulletin boards and related web pages on IBM's intranet, supported by systems for centrally managing activity and extracting useful answers to important questions. In the 2006 edition, the largest IBM online brainstorming session ever held, there were 150 000 participants from 104 countries and 67 companies. As a result 10 new IBM businesses were launched with seed investment totaling $100 million.

My Starbucks Idea is an initiative and an online community to gather product ideas, experience ideas and involvement ideas from the crowd. Visitors can share their ideas, view other's ideas, comment and vote to make ideas popular. There is also a blog on ideas in action for users to see how Starbucks is putting top ideas into action. Ideas are chosen based on algorithm (number of votes, comments and recency of post) and by "Idea Partners" inside Starbucks. Providers of ideas that get implemented may be given credits on the site but won't be compensated in any other way.

Netflix Prize is an open competition to improve a collaborative filtering algorithm helping Netflix customers find new movies they would like. In the first challenge the company provided a data set of 100 million of the ratings customers previously supplied and made it available to any programmer together with a baseline of prediction accuracy to beat. To win the competition, the programmers needed to share their methods with Netflix, describe the algorithm for the world and provide a non-exclusive license to Netflix. Every suggested algorithm (more than 44000 valid submissions) was broadcasted on a leaderboard to fuel competition. The grand prize, $1000000, was reserved for the entry which could improve Netflix's algorithm for predicting ratings by 10%. As long as no team won the grand prize, a progress prize of $50000 was awarded every year for the best result thus far. The competition took place between October 2006 and July 2009. In August 2009 Netflix announced it would run a second competition with shorter time spans and the challenge based on demographic data rather than previous ratings.

Nokia Mobile Games Innovation Challenge invites developers to submit mobile gaming concepts to any Nokia N-Gage, Java or Symbian-based Series 40 or S60 device. The three most innovative game concepts are offered Nokia Publishing pre-production contracts, targeting publication or winning concepts and the first winner is awarded with 40000€, the second 20000€ and the third 10000€ for further development of game concepts. The winning participant must agree that Nokia has the right to acquire, subject to a mutually acceptable agreement, the intellectual property or exclusive license to the game concept.

P&G Open Innovation Challenge are events that so far have taken place in the UK where design professionals and entrepreneurs are invited to submit propositions for products which fit P&G's criteria and have the potential to build businesses worth over $100m. To protect the idea providers' intellectual property, ideas are not seen by P&G but are reviewed by its partners National Endowment for Science, Technology and the Arts (NESTA), British Design Innovation and Oakland Innovation. Up to ten of the most promising ideas are given access to feedback, advice and up to £25000 in financing to develop the ideas into a stage at which they can demonstrate commercial viability. Up to five of the strongest applicants are then given the chance to present their finalized ideas to P&G which may decide to invest in the idea and sign contracts. If P&G doesn't invest the creator is free to take the proposition to other brands and or investors.

Virgin Earth Challenge is a science and technology prize to find a viable technology which will result in the net removal of anthropogenic, atmospheric greenhouse gases each year for at least ten years without countervailing harmful effects. The individual or group that is able to demonstrate a commercial viable design will be awarded $25 million, making the award the largest science and technology prize in history to be offered. The challenge will initially be open for five years with the judges including Richard Branson and Al Gore, meeting annually to determine whether a design has been submitted during the previous year that should win the prize.

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Using the crowd as a part of the business model

 

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Crowdsourcing or mass collaboration has become popular words for using an external group of people as part of the value creation and value capturing process. Organizations have for a long time used groups of external participants for various contests and market research activities, what is new is the scale, speed and cost of conducting such and other activities.

Enabled by computers and the Internet a virtual crowd of people has the ability to access information and easily interact with organizations to help solving problems, contribute with information and ideas, suggest improved or new designs, comment or vote for new ideas, or test new products or services. Organizations at the same time have the ability to occasionally provide and seek for value in different crowds or integrate it as part of their business models.

Who are the people participating?

Using an external group of people as part of the value creation or value capturing process can take many different forms and the crowd may be big or small, and comprise of amateurs working in their spare time or professionals participating as part of their business model. It is often people that in one way or another are related to the organization or its value network such as customers or community stakeholders, but with the use of intermediary platforms, solutions to an organization's problem might come from people in completely different industries and technology areas.

Money is not important

People partake for different reasons in different activities but also for different reasons within the same activities. A common denominator for partakers is the pleasure and satisfaction to be involved and contribute, to solve challenges, especially when participators have a common vision with the organization. One example is when improving a product or service that the participator wants to use, not only providing value but also receiving value. In addition, recognition and status from the organization or other participants, when showing off creativity, problem solving skills or expertise is often argued highly important incentives for voluntary participation. Other non-financial incentives can be learning from doing, learning from others, and access to exclusive prototypes or versions.

Show me the money!

Organizations seeking help in the crowd often combine different non-financial and financial rewards. Getting an award for solving a problem, a cash bonus for generating a winning design, a price cut on the final product, invitation to exclusive events, gift cards or a royalty based on future product sales are common financial rewards for participation. InnoCentive, an intermediary platform connecting companies, academic institutions, public sector and non-profit organizations, rewards solution providers between $5000 and $1000000 for solving problems.

Some examples where organizations use the crowd to create and capture value:

• Understand and stay relevant to customers; test new ideas, products and services, discover emerging market needs and trends in user behavior, test and assess brand perception and appeal of marketing material. Example: Nokia Concept Lounge
• Funding of new ideas; use community to decide investment strategy for mutual funds, provide means for a crowd to make commitments for future products or services. Example: Sellaband
• Find answers to complex problems not solvable internally; research and discovery and access expertise from other industries. Example: Goldcorp
• Innovate faster and more profitable; using the crowd to rank and prioritize new ideas, detect challenges. Example: Spreadshirt
• Improve current products and enhance customer experience; using power users with high demands, basic users with basic needs, non-users with no current needs, using the crowd to openly review products and services, allowing users to customize their products. Example: Lego Factory
• Create the product or service itself; using user generated content as major part of a value proposition in the business model. Example: iStockPhoto
• Market and distribute ideas and products; using social platforms and the fact that participation often creates a sense of ownership. Example: Business Model Generation Book

Questions before using the crowd

• Will the expected output answer key business needs?
• What will be the value proposition towards participants?
• Will the organization be able to motivate and incentivize participation?
• Are the tasks suitable for distributed activities?
• Can the tasks be broken into small chunks?
• Are there adequate resources and capabilities within the organization to manage the process?
• Are there effective filters, such as the crowd itself that can effectively identify what is valuable and what is crap?
• What will be the added costs and risks from the activity?
• What would happen if other actors in the value network or competitors knew about or participated in the activity?
• Will the organization be able to manage the costs and risks?
• Will the business benefits exceed the added costs and risks?
• Should the invitation be open or closed?
• Can anyone participate or should there be criteria of approval?
• What information should be provided and what should be kept secret?
• Should the participants see each other’s ideas or contributions?
• Should it be possible for participants to build on each other’s ideas?
• How should own and participant's intellectual property rights be managed?

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55 Business Model Patterns. #9 Crowdsourcing

 

The solution of a task or problem is adopted by an anonymous crowd, typically via the Internet. Contributors receive a small reward or have the chance to win a prize if their solution is chosen for production or sale. Customer interaction and inclusion can foster a positive relationship with a company, and subsequently increase sales and revenue.

Examples: Iconic Cases

How they do it: GE set up a crowdsourcing platform on which they published explicit problems there were looking to solve, e.g. in the area of data science. The platform allows independent teams to submit solutions and also collaborate and work jointly with internal and external stakeholders on developing new solutions. This allows the company to acces new impulses and resources.

Top Industries

Pattern Co-Occurrence

Crowdsourcing Business Model

As the name suggests, the crowdsourcing business model refers to when the crowd act as a source for the business – usually some multisided platform. There are many options of crowdsourcing, but all of them involve opening tasks of issues to a large group in order to receive their input for operation. The “crowd’ of this business model may be made up of customers, ordinary citizens, specialists, other entrepreneurs, and business owners/managers, etc. The company is going to employ their knowledge to benefit your business. For this knowledge to be acquired, the business must create solutions for the user to get interested in collaborating, and, at the same time, earn money as a business. Let’s go a little deeper.

What is Crowdsourcing?

Crowdsourcing usually involves getting work, information, and/or opinion from a large group of people, through the Internet, social media, and smartphone apps. Sometimes these people are paid as freelancers, sometimes they do it on a voluntary basis. Quite often, the wisdom of the group is more frequent or assertive when it is applied to solve some problem in an innovative way. For example, the Waze traffic app uses crowdsourcing because it asks for drivers to report accidents and incidents to offer real-time updated information to the users. So, as the users see value in that, they participate, voluntarily.

Why Crowdsourcing?

Although crowdsourcing has basically been there for centuries, the term was first used by Jeff Howe in 2006, when he wrote an article about the crowdsourcing business model. This business model gained popularity first with the internet and, even more, with social media and smartphones. Crowdsourcing is a good practice because it allows the company to raise information and expertise from people all over the world, without having to actually hire them as regular employees – with all the costs involved in that. To make crowdsourcing work well, the business must first break the big project into micro-tasks. So, the company will probably use a digital space (the crowdsourcing platform) to put everything together. And, generally, when the business aims to gather customer data, it may turn to social media to crowdsource information from users.

Benefits of Crowdsourcing

• Accelerated processes: crowdsourcing makes tasks and processes quicker, due to the possibility of breaking up the project among a large group of workers, then accelerating the whole venture.
• Consumer engagement: crowdsourcing asks for consumer participation in solving problems or providing information. This will hold the consumer’s attention for much longer since they feel part of the project. This attention can be turned into earning in a short time.
• Reduced costs: crowdsourcing is also a cheaper way to accomplish the project. Since the workers are not regular employees, with full salaries, training, offices and more. The operational costs are smaller, then.
• Scalability: scaling can cause a company a hard time, especially in the beginning or when the project does not have the necessary resources to start running. Crowdsourcing permits the business to farm out micro-tasks to be completed by remote workers anytime, anywhere.
• Knowledge gaps: crowdsourcing allows the business to access people with skills that are not available among its own human resources because sometimes it is not worthy to hire some specialized professional who will be really useful only for some specific project.

Types of crowdsourcing business models

Crowdsourcing Data

One of the most common forms of crowdsourcing is to crowdsource information to enhance the value of a business product or service. A famous example is the one mentioned above, of mobile GPS apps, such as Waze. In this kind of apps, users can enter data about traffic jams, hazards, police radar and actions, and much more. This will be visible to any other users. So, all of the users will benefit from the information from each other. That turned the traffic app into a community, with engaged users who enhance the value for everyone.

Open-Source Software

Another very common type of crowdsourcing is open-source software. This allows any developers to access the software source code in order to modify or improve it. The result is a lot of people together making the system better. Some famous examples include Linux operating systems and Firefox browsers.

Crowdfunding

Some people don’t agree that crowdfunding is a type of crowdsourcing since seeks information, content, and opinion, whereas crowdfunding seeks money to support some project, charity, startup, individuals, or something like that. Crowdfunding would be basically a donation, with no expectations. On the other side, the process allows people interested in the original idea to raise capital, avoiding banks or investors, for example. A famous example is the Oculus headset.

Crowdsourcing business model

• Value Propositions: Access to Data, Knowledge, Funding, Services or Goods from the Crowd; and Your help in return of some type of compensation (usually monetary or social);
• Customer Segments: a supply (crowd) and demand (customers or users);
• Channels: the company provides its service to the customers via the internet (mobile application and websites) to its digital platform. Word of mouth is usually very strong between users;
• Customer Relationships: digital platforms allow self-service use added of customer service. The strong sense of community is also very present;
• Revenue Streams: in general, the revenue streams are a percentage of the transactions. When there’s no monetary exchange, secondary streams such as advertising are used;
• Key Resources: the most important assets to make the business model work is the information or data the crowd produces as well as the digital platform that enables it;
• Key Activities: the activities are platform development and maintenance, marketing and customer support;
• Key Partners: third-party applications and businesses.
• Cost Structure: usually cheaper than a regular company, but still includes fixed and variable costs, technical development costs, marketing and customer support.

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