Books: What collectivism can do for capitalism

Jeff Howe explains how companies are tapping the problem-solving skills of their customers. Review by Roger Parry.

by
Last Updated: 31 Aug 2010

Crowdsourcing: How the power of the crowd is driving the future of
business
Jeff Howe
Random House
£17.99

When does a buzzword become a 'big business idea'? When it moves from the pages of a specialist magazine to that of a heavily promoted book. From Wired to Waterstones: if you have not yet heard of 'crowdsourcing', you soon will. It is going to tell you that the mass, the 'crowd', of a business's customers may be its best resource.

The cafes of Palo Alto have hummed with conversations about crowdsourcing since journalist Jeff Howe coined the term in Wired magazine in June 2006. Now Random House has commissioned him to do a heavyweight book that will make it a hot topic in every boardroom, office and business school.

Howe defines his term as 'the coming together of people to perform tasks, usually for little or no money, that were once the sole province of employees'.

Crowdsourcing is not an internet technology but it is a growing social and economic trend made possible by web-based connections. It is a way of getting your consumers to design and make things for you. As Howe says: 'Crowdsourcing capitalises on the fact that our interests are more diverse than our business cards would have one believe.'

Threadless.com is a website that encourages its users to design T-shirts. Users vote and the favourite designs are then available to buy. And they do buy, in their tens of thousands. The winning designer gets a small cash prize. And Threadless makes a fortune, as it has few retail distribution costs and knows which shirts will be the most popular before they are even made.

iStockphoto.com gets photographers, amateur and professional, to take and upload stock images - eg, the London skyline or cute kittens - which cost hundreds of dollars to license from a photo library but are now available for a few dollars online. Their originators' main reward is recognition by the iStockphoto community. And the only reward for contributors to online encyclopedia Wikipedia is intellectual satisfaction ...

The idea of using the crowd to solve problems is hardly new. In 1714, the British government offered a prize of £20,000 to anyone who could come up with a method to determine a ship's longitude at sea. Thousands tried, but the money went (eventually) to John Harrison, an English clockmaker, rather than a scientist or seaman.

InnoCentive.com is a present-day version of the longitude competition. Firms with a scientific problem (seekers) describe it online and anyone, anywhere in the world, can offer an answer (solvers). Successful solutions get financial rewards and publicity. A US firm making solar-powered lamps for Africa hit a technical issue that was solved by an engineer in New Zealand via the InnoCentive.com system. Involving so many people uncovers hidden skills and is a greater resource than any company could ever assemble in its R&D department.

Crowdsourcing - getting your customers to work for you - is a close cousin to 'user-generated content'. The success of CincyMoms.com will send a shiver down the spine of many traditional newspaper owners. The Ohio Cincinnati Enquirer had suffered the slump in advertising and circulation experienced by most local newpapers. It started CincyMoms as a forum to give local mothers a way to talk about raising kids. Contributors (mothers rather than professional journalists) are paid minimal amounts but are passionate and expert. The site has been a huge hit in advertising and page-views. Says Howe: 'The newspaper industry looks finally ready to mould itself to the new media ... The paper becomes merely the room in which the conversation takes place.'

Crowdsourcing poses a profound challenge to the conventional notions of the structure of the firm as a fundamental economic unit. It suggests that the traditional demarcations between suppliers, contractors, employees, distributors and customers are breaking down.

The ideas in this book are not all new. But it does bring the concept alive with rich and detailed case histories. It is the product of a well-connected and talented journalist. It is carefully researched and crisply written, and the phenomenon it describes is here to stay. Reading it will save you the airfare to Palo Alto and might just help you make your own business a better one.

- Roger Parry is chair of the online polling company YouGov, the newspaper group Johnston Press and the magazine publisher Future.

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