November 2016 Business SCAN
Although open innovation can help companies tackle complex business problems that they can’t solve on their own, pushing problems to a vast group of strangers can seem risky to many managers. But excluding crowdsourcing from the corporate innovation tool kit could mean losing a great opportunity.
One of the main reasons companies resist crowds is because it is difficult to understand what kinds of problems a crowd can handle better than the organisation. Having determined that you face a challenge your company cannot or should not solve on its own, you must figure out how to work with the crowd and how to manage the process.
Crowdsourcing generally takes one of four distinct forms, each best suited to a specific kind of challenge.
The most straightforward way to engage a crowd is to create a contest. The sponsor identifies a specific problem, offers a cash prize and broadcasts an invitation to submit solutions. Works well when it is not obvious what combination of skills or even which technical approach will lead to the best solution for a problem.
Join forces and reap profits through complementary assets such as hardware and services. Communities marshal the outputs of multiple contributors and aggregate them into a coherent and value-creating whole — much as traditional companies do. In contrast, contests separate contributions and maximise diverse experiments. Works best when participants can accumulate and recombine ideas, sharing information freely.
Enable a market for goods or services to be built on the core product or technology, effectively transforming that product into a platform that generates complementary innovations. Unlike contests or communities, complementors provide solutions to many different problems rather than just one. Works well when companies look for sheer volume of solutions. However, when exposing technology and assets to outsiders, make sure they are protected.
Labour-Markets (Third-party intermediaries):
Instead of matching workers to jobs within companies for long-term employment, these highly flexible platforms serve as spot markets, matching skills to tasks. They often perform on-demand matching to give immediate support at an unprecedented scale. Works when you know what kind of solution you are looking for and what an appropriate solver looks like.
Sources: Xu, Y., Rebeiro-Soriano, D.E., and Gonzales-Garzia, J. (2015) Crowdsourcing, innovation and firm performance, Journal of Management Decision, Vol. 53, Issue 6; Deloitte Institute of Innovation and Entrepreneurship (2014) Use the crowd as your innovation partner, LBSR, Feb 11; Byrum, J. and Bingham, A. (2016) Improving Analytics Capabilities Through Crowdsourcing, MIT, Jun 13
Consider in what way your company benefits, or could benefit, from working with the crowd. Think of a project that would be best suited for each of the four types of crowd-powering innovation described in the table.
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