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Crowdsourcing

Università Bocconi 8 Marzo 2011

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INTRODUCTION Crowdsourcing

Participatory Value is the new fronteer of business management. Crowdsourcing is one emerging model which leverages on external resources in order to create participatory value. In the near future any company and organization must recognize where its participatory value lies and how to create/activate it.

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DEFINITION

CROWDSOURCING is when a

COMPANY takes a job that was ONCE

PERFORMED BY EMPLOYEES and outsources it in

a form of an open call to a LARGE

UNDEFINED GROUP OF PEOPLE generally

using the internet

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CROWSOURCING AND OTHER TYPES OF CO-CREATION

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THE ORIGIN OF CO-CREATION

The origin of crowdsourcing are to be found in the early work of Eric von Hippel (MIT) in late ’70: Users as innovators (1979) or Get new products from customers (1982) For me, the 1991 book of Salvatore Vicari “L’impresa Vivente” highlighted sharply that enterprises must open their boundaries if they want to fight the entropia and win the competition. More recently, Ramaswamy and Prahalad (Co-Opting Customer Competence, 2000 HBR) have defined some key pillars of the co-creation model.

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CROWDSOURCING MODEL

A first generic categorization of crowdsourcing sees two basic models: Corporate Crowdsourcing happens when crowdsourcing is started by a company Crowdsourcing Vendors are enterprises whose business model is entirely built on crowdsourcing

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CROWDSOURCING TURNOVER IN 2009

Accounting for overlap, and using some very general assumptions relative to work type, category and company revenue model, we’d estimate that over 1 million workers have earned $1 – 2 billion over the past 10 years via crowdsourced work allocation. The revenues earned by the paid crowdsourcing vendors themselves are subject to a wider margin of error in estimation, but are likely around $500 million per year among all vendors. Vendor Revenues will pass $1B in 5 Years

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CASE STUDIES Crowdsourcing

“No matter who you are, most of the smartest people work for someone else” Attributed to Sun Microsystems cofounder Bill Joy, this “law” emphasizes the essential knowledge problem that faces many enterprises today, that is, that in any given sphere of activity most of the pertinent knowledge will reside outside the boundaries of any one organization, and the central challenge for those charged with the innovation mission is to find ways to access that knowledge.

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INERNATIONAL CROWDSOURCING MAP www.crowdsourcingresult.com

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ITALIAN CROWDSOURCING MAP www.crowdsourcingnetwork.it

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CROWDSOURCING HISTORY

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CROWDSOURCING CASE STUDIES CORPORATE INNOVATION: P&G Connect

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CROWDSOURCING CASE STUDIES CORPORATE INNOVATION: Dell / Starbucks

DELL IDEA STORM Since 2007, DELL has received 15.400 ideas and implemented 432

MYSTARBUCKSIDEAS StarBucks has received more than 100.000 ideas in 2 years (more than 400)

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CROWDSOURCING CASE STUDIES CORPORATE INNOVATION: Mulino Bianco / Nesquick

NELMULINOCHEVORREI In 2010 MulinoBianco receives almost 5.000 ideas and are implemented 4.

NESQUIK – SAI COME ME LO IMMAGINO In 2010 Nesquik engaged mothers to develop a new concept for its website

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CROWDSOURCING CASE STUDIES INNOVATION VENDORS: Innocentive / YourEncore

INNOCENTIVE The site aggregate more than 200.000 scientists from 200 countries. Since 2003 more than $7mln prizes have been assigned.

YOURENCORE The characteristic of this platform is to “keep retires in the game” allowing them to participate to crowdsourcing projects for top customers.

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CROWDSOURCING CASE STUDIES CREATIVITY VENDORS: BootB / Crowdspring

BOOTB Born in 2009 it allows brand to engage a community of creatives

CROWDSPRING Together with 99design it is the most famous creativity crowdsourcing vendor in US

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CROWDSOURCING CASE STUDIES CONTENT VENDORS: UserFarm / Associated Content

USERFARM Since 2009 more than 80 content crowdsourcing project have been launched on the platform

ASSOCIATED CONTENT Yahoo bought AC in 2010 for almost $100mln in order to integrate its model in the content making process.

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CROWDSOURCING CASE STUDIES CORPORATE CONTENT: RAI / France24

CITIZEN REPORT - RAI The first time Rai opens to user generated content, a participatory TV Show aired on 2010 with excellent audience results.

FRANCE 24 – LES OBSERVATEURS

CNN – I REPORT

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CROWDSOURCING CASE STUDIES CROWDFUNDING VENDORS: SellaBand / FashionStake

SELLABAND Born in 2006, it helps new music bands to raise money and get visibility

FASHIONSTAKE Since 2010 it gives young designer a chance to enter in the fashion world

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CROWDSOURCING CASE STUDIES CROWDFUNDING: Kapipal / Kiva

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CUSTOMER CARE Vodafone / Crowdengineering

VODAFONELAB Since 2007 more than 100.000 Vodafone users subscribed and participate to the lab.

CROWDENGINEERING A white label customer care crowdsourcing platform used by many international customers.

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MARKETING CORPORATE CSR: Pepsi / WWF

A sizable 44 percent have used crowdsourcing – asking customers to provide ideas and help in decision-making on how to tackle issues. Of these, 95 percent found it valuable to their company. Regardless of use, 83% see the potential. The perceived value of crowdsourcing is that it surfaces new perspectives, builds engagement with key audiences, invites clients and customers from nontraditional sources to contribute ideas and it brings new energy to the process of generating ideas and content.

Weber Shandwick – October 2010 – 216 Fortune 2000 Corporate Executives with Program or Communications Oversight for Corporate Philanthropy, Social Responsibility & Community Relations

PEPSI – REFRESH YOUR PROJECT SONY/WWF – OPEN PLANET IDEAS

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CROWDSOURCING CASE STUDIES I Pad and Iphone applications

On my opinion one of the most interesting crowdsourcing example is the Iphone and Ipad AppStore. Here the concept of “becoming a platform to harness the participatory value” is fully exploited. Letting anyone to develop and sell their applications has led to 250.000 apps building a critical mass far above any competitors.

APPLE APPLICATION STORE

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GUIDELINES Crowdsourcing

“Choose the best” “… To achieve the objective of leveraging the knowledge of the masses, business must realise that to get the best answers, it is necessary to attract those who can give them, and these are the people who also best know the value of the knowledge they hold.” Donal Reddington

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CO-CREATION GUIDING PRINCIPLES

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CROWDSOURCING 5 KEY SUCCESS FACTORS

1.  Crowd Responsiveness - What each vendor seeks to achieve is enough volume, breadth and quality in their on-demand workforce to provide the payers a good chance of getting results in a timely fashion. They also seek to provide the most lucrative experience for their workers as the barrier to working for alternative vendors is low.

2.  Ease of Use - A well designed on-demand service will hand hold a work requester through the process of creating a work definition and proposal. It'll provide a mechanism for the provider to keep tabs on the progress of the work all the way through to approving the results delivered and the subsequent payment of the worker.

3.  Satisfactory Results – Low quality or unexpected results are the single biggest factor in companies choosing to abandon paid crowdsourcing as a viable outsourcing option. Many of the business people surveyed were willing to invest the time and effort to submit trial work through a paid crowd vendor, but unwilling to give it a second chance when the initial results were below their expectations.

4.  Cost Advantage - Cost benefits run second to results quality in determining business interest in paid crowdsourcing. Cost advantages over traditionally sourced work range from orders of magnitude difference to similarly priced. Some work types can only be done economically via paid crowdsourcing. Some examples:

Traditional Outsourcing Paid Crowdsourcing Transcription $2 – 6/minute $0.75/minute Company Research* $3 - 10/hr $1.85/hour Image Tagging Feasible? $0.02/image

5.  Security / Privacy – The option for autonomy and the assurance of security is a built in feature for most categories of paid crowdsourcing. In addition, vendors have developed sophisticated procedures that utilize accounts, escrows, and modern payment processors like Paypal along with approval procedures that work fairly well in protecting both the provider and the worker when settling the bill.

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CASH REWARD IS NOT EVERYTHING

In the case of output that is not needed by the contributor, a cash reward might be tendered for substantial contributions. Such efforts are not undertaken with any ex-ante guarantee that they will be rewarded. Rather, payment is at the discretion of the sponsoring organization, made after the work has been completed and evaluated as meeting a certain criteria, and is usually attended by the formal transfer of intellectual property between contributor and sponsor. Beyond pecuniary benefits, extrinsic reasons for participation include job market signaling and skill and reputation building. Distributed innovation communities provide a relatively open and transparent platform for exhibiting skills and talents to prospective employers. Participants don’t need high-level credentials to directly demonstrate their abilities in highly specialized domains, and employers can screen and hire talent by directly observing or soliciting third-party verification of skills. The intrinsic and extrinsic motivations to participate in distributed innovation systems are not intuitively obvious to new observers of the phenomenon. Most, in fact, find to be counterintuitive the association of fun, enjoyment, and a personal sense of identity with the accomplishment of complex technical tasks. But the research findings strongly suggest that the functioning of these systems is driven by mixed and heterogeneous motivations. Consequently, optimizing on only one dimension might have the effect of limiting participation.

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IMPACT OF CROWDSOURCING

1)  GLOBAL RE-DISTRIBUTION OF KNOWLEDGE WORK

2)  DISINTERMEDIATION OF TRADITIONAL AGENCIES

3)  FOCUS ON VALUE CREATION

4)  VALUE IS NOT ONLY ECONOMIC

5)  VALUE WILL BE EQUALLY SHARED