Crowdsourcing the turn of the millennium, Wikipedia, founded by

Crowdsourcing is an
online, distributed problem-solving and production model that was described for
the first time by Jeff Howe and Marc Robinson in 2006 (Brabham, 2008). In his
book: “How the Crowd is driving the power of business”, Jeff Howe defines
“Crowdsourcing” as an act of taking a task traditionally performed by a
designated agent (such as an employee or a contractor) and outsourcing it by
making an open call to an undefined but large group of people. Crowdsourcing,
by definition, relies heavily on usage of internet to interface with ‘crowd’. The
seeds of Crowdsourcing, much before it became a phenomenon, lie in early 1990s
with genesis of Linux Operating system, the most successful open source
software used in computers, cell phones and digital devices (Jeff Howe,
www.summaries.com). At the turn of the millennium, Wikipedia, founded by Larry
Sanger and Jimmy Wales, became the next poster child for open source
collaboration. Launched in January 2001, Wiki had 15,000 articles by end of
2001. Today, it has more than 2 million articles – approximately about 23 times
the number of entries in the Encyclopedia Britannica. The power of crowd has
been successfully harnessed by NASA to identify and measure land forms from
image database of Mars – completing in one month what would normally have taken
two years for a professional planetary geologist. In 2007 US Patent Office
created a ‘Peer to Patent Project’ inviting public to review and comment on
patent applications before the patent is issued. More recently, a whole new
parallel world has been constructed with user generated content in form of
Google’s You Tube and News Corp’s MySpace.

 

What is driving this revolution is the fact that
technology is making everything cheaper, smaller, faster and easier to use
placing tremendous creative power in the hands of the crowd rather than in
hands of professionals. A yet another critical enabler for the crowdsourcing
phenomenon is the rise of vibrant self-organized geographically diverse online
communities around topics of shared interest. These online communities are better
than brick-and-mortar traditional organizations in harnessing talent. They are
self-policing, self-directing and thrive on power of persuasion, collaboration,
recognition and respect rather than hierarchical edicts and financial incentives.
A fundamental tenet of problem-solving through forces of collective wisdom of
crowd is that breakthrough out-of-the-box thinking almost always comes from
someone with no prior experience in the field. Crowd excels not only in
generating ideas but also in sifting through them and voting on them to let the
best idea/solution bubble up to the top. Threadless.com generated more than 17
million USD in 2006 using a ‘design by democracy’ approach allowing people to
submit T-shirt design ideas on which others can vote. Google’s PageRank
algorithm, which determines relevance and importance of a website by counting
number of other websites linked to it, is one of the finest examples of
collaborative filtering powered by the crowd.

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Over the last decade, crowdsourcing has
dimensionally expanded to even using crowd’s collective pocketbook i.e.
crowdfunding. Inspired by Muhammad Yunus, 2006 Nobel Peace Prize winner for
microfinance concept, Kiva.org launched the worlds’ first person-to-person
micro-funding website raising 20 million USD in capital from philanthropically
minded lenders from First World countries to help fund more than 200,000 new
small businesses in Third World countries. Sellaband.com, launched in August
2006, allows bands to create a profile page and upload few of their music
tracks. Listeners have an option to buy a share in band’s future revenue stream
by committing 10 USD. Once the band has attracted 50,000 USD in revenue,
Sellaband connects the band to a producer. By end of 2008, Sellaband had helped
21 bands get a break in music industry.

 

Crowdsourcing has also found its way and utility in
science and healthcare. Scientists from Howard Hughes Medical institute have
successfully used Foldit, a multiplayer online game that engages non-scientists
in solving protein structure prediction problems (Cooper, 2010). Researchers
from Mount Sinai School of Medicine, New York have recently evaluated and
demonstrated the feasibility and utility of using an internet-based
crowdsourcing platform to harness the intellectual and creative capacity of a
large group of physicians, researchers, patients, survivors, and advocates for improving
the study design of a clinical trial exploring an anti-diabetic drug,
metformin, in prostate cancer (Leiter, 2014).

 

The co-creation
approach, in contrast to crowdsourcing, aims to serve the interests of all
stakeholders, internal and external, to develop a win-win solution by focusing on
their cumulative experiences and interactions. A co-creation process is
typically agnostic to the platform used to get the stakeholders together. It
may be digital or physical. The structural framework for co-creation was
described for the first time by Prahalad and Ramaswamy (2004) where they
emphasized the importance of high-quality interactions that enable an individual customer to co-create
unique experiences with the company as the key to unlock new sources of competitive
advantage. In their book ‘The Future of Competition’, they challenged the
hitherto traditional system of company-centric value creation and market as a
place to exchange value with the customers:
“In the conventional value creation process, companies and consumers had
distinct roles of production and consumption. Products and services contained
value, and markets exchanged this value, from the producer to the consumer.
Value creation occurred outside the markets. But as we move toward co-creation,
this distinction disappears. Increasingly, consumers engage in the processes of
both defining and creating value. The co-creation experience of the consumer
becomes the basis of value.” In a world becoming increasing global, with
unprecedented access to information, and formation of thematic customer
communities networking, the traditional top-down pattern of marketing
communication is inverted. Companies can thus no longer act autonomously, designing
products, developing production processes, crafting marketing messages, and
controlling sales channels with little or no interference from consumers. The
use of interaction as a basis for co-creation is at the crux of this emerging
reality.

 

Co-creation activities may span across the value
chain and are relevant to both goods and services: i) the production of their
own individually designed and planned music compilations, movies and videos;
ii) assembling and self-delivering their own furniture bought at IKEA; iii)
designing their own travel packages; iv) and planning their own unique well-being
and health maintenance services. Co-creation reflects a conscious strategic
decision by consumers to become involved in value creation. For each co-creation
situation, there may be customers who do not wish to engage in co-creation
experience. Value that a customer associates with co-creation experience is directly
correlates with his/her ‘individualization need’ and anticipated economic (DIY
services) benefits and inversely correlates with value of customer’s time
required for the value creation process. Focus is not as much on the
transactional aspect of value co-creation; but more on the experience it
creates for the customer. It could be as simple as informing the ice cream
vendor which items to mix or a marketing program giving early access to select
customers to experience and provide feedback on yet-to-be-launched product.

 

Henry Chesbrough, of the Center for Open Innovation
at UC Berkeley, in his book ‘Open
Innovation: The new imperative for
creating and profiting from technology’ (2003) argues that in a connected, networked,
knowledge-based world, an organization cannot rely on its own innovation
capability and capacity but must exploit the thinking of others – by buying or
licensing external intellectual property (IP). Four factors which have eroded
the power of centralized in-house R centers of technology giants are: Increased
mobility of skilled scientists, piled up brilliant research ideas queuing on
the lab shelves for entry into product development cycle, increased availability
of venture capital money to new start-ups and increased capability of external
suppliers. With diffusion of people and ideas into an external world ready with
VC money and capable suppliers, the knowledge landscape has undergone a
paradigm shift forcing the traditionally ‘impervious’ knowledge powerhouses of R
centers to leverage this increased porosity for reverse diffusion of ideas into
the organization. Role of internal researchers in the era of open innovation
has evolved from being a knowledge generator to a knowledge broker – connecting
with external world for sensing new technology and ideas, identifying the gaps
that warrant internal research, creating an architecture for seamless
integration of external and internal knowledge to accelerate the metabolic rate
at which the knowledge is processed. Further, IPs are no longer assets to be
shielded and guarded for the day when they may prove valuable but an instrument
to be licensed extensively to create and extend markets for their technology.

 

IBM and Intel are among the pioneers who led the
way of transition from closed to open innovation in 1990s much before even the
term was formally coined. Up until the PC industry revolution in the 1980s, IBM
was the undisputed industry leader in sales, profits, market capitalization, research
budget, and had the most patents of any company in the industry. IBM exercised
its leadership during this period through the merits of the Closed Innovation
model with a highly advanced but internalized R. By 1992, IBM was facing
huge competitive pressure not only from new entrants in computer industry (HP,
Compaq) but also from revolutions in technology landscape such as advent of
internet (Netscape’s HTML) and Linux’s open operating system. Allowing infusion
of this new technology required a powerful mindset shift within IBM to go
beyond its proud heritage of inventing everything internally. With a change of
guard (Lou Gerstner brought in to lead IBM in 1993), IBM steered its focus from
‘inventing’ to ‘integrating’ disparate technologies available in the market to
create effective solutions aligned with higher ends of customer’s value chain. Secondly,