Crowdsourcing is an effective tool to help entrepreneurs create value that can be applied in many different contexts. Engaging a group of people – the crowd – delivers a more relevant or better result than just getting one person’s view.
Crowdsourcing seeks to utilize skills, ideas and other forms of human capital. It provides early stage companies with easily accessible and affordable resources by tapping into an online community of international consumers, software developers, investors and designers.
Benefits
The value crowdsourcing generates ranges from financial to societal, through its ability to produce more preferable outcomes. Entrepreneurs gain access to a wealth of ideas and insights, far greater and more quickly than a small number of employees can provide. This can shorten the time and costs required to develop a new product. The brand awareness created from crowdsourcing also positively impacts the hours, effort and financial outlay you might have to spend on marketing initially.
A crowd of creativity
Crowdsourcing your business isn’t just about cost reduction, in terms of taking the most competitive bid for the resources you need, it also has a unique ability to harness creativity.
Through its private Crevity platform, Italian firm Mosaicoon helps bring together designers and ideas to produce viral videos. With a need to produce content for European audiences, Mosaicoon understands the freshest, most interesting ideas are often not homegrown. The internet’s global reach means access to concepts and skilled staff from designers across the globe is easy.
Ideas, not things
Crowdsourcing works well for ideas-based services. It’s been used successfully by 99 Designs, “a graphic design marketplace” that utilizes the internet to connect designers with customers. Tongal creates video content through “collaborative contests”, where anyone, including professionals become players in its “prize pool.” Crowdsourcing works less well for physical goods like furniture or clothing as it’s not possible to check quality beforehand.
Branching out
Crowdfunding developed as an offshoot of crowdsourcing; providing entrepreneurs with a novel way to raise finance. It pools small amounts of funding from a large number of individuals, or small groups of people. Latest figures indicate the market to be worth about $5.1 billion in 2013.
Crowdfunding creates a liquid public market where investors have a better chance of finding projects which interest them. Conversely, crowdsourcing aims to gather resources and build communities, helping entrepreneurs and unlisted enterprises solve problems and make their projects operational.
Pick a platform
Entrepreneurs now have a phenomenal amount of crowdsourcing platforms, offering different resources, to choose from. Elance/oDesk is a site for freelancers and contract labor, with two million companies using it to gain access to skilled staff like writers, designers and developers. Nubelo provides a similar service, and is the leading platform for freelancers in Spain and Latin America.
Kickstarter is the world’s largest funding platform for creative projects. It held funding for the virtual reality headset – the Oculus Rift – in 2012, raising $2.4 billion. This became the first billion-dollar exit of a business created through a crowdfunding platform, after being sold to Facebook this year for $2 billion.
Extreme crowdsourcing
Amazon-owned Mechanical Turk demonstrates the extremes crowdsourcing can go to. With an aggressive approach to outsourcing work for low pay, it’s been called a “digital sweatshop”. It often employs workers in developing countries to perform ‘microtasking’ – where work is divided into small, often repetitive tasks requiring human analysis and taking seconds – benefitting entrepreneurs less concerned about social consequences.
Co-creation with customers
To build value, consumer brands must ‘co-create’ with their customers. Markets now serve businesses and customers, where they can “…create value through new forms of interaction and learning.”
Co-creation is influencing larger corporations. Platforms like Cool Bananas act as design shops, where “private independent content platforms” are set up for major brands to connect with a community of contributors who can provide user generated content.
Crowd-consolidation
Marketplaces do best when there is lots of liquidity and generally amalgamate until they can’t grow any bigger, or are non-interchangeable. Buyers and sellers benefit from ease of access to each other by being in one place.
Most crowdsourcing platforms support specific functions, such as funding or recruitment of freelancers, or tasks like graphic design or writing. There is currently little cross-over. Factors like language will continue to keep platforms at a distance, but given its capacity to connect people, tasks and skills it’s inevitable crowdsourcing will consolidate in time.
Use crowdsourcing to develop your business and create value. It’s a great way for companies to experiment and gather the resources needed to try out different ideas cheaply and quickly. The longer you can remain in the market by making your capital last, and the more ideas you can test as a budding entrepreneur, the more likely you are to succeed.
At Vie Carratt, we help companies find the best route and right partners to help them create value and assist development. If you’d like to find out more, please get in touch.
By Tania Vie, Founder and Director, Vie Carratt