To answer the most vexing innovation and research questions, crowds are becoming the partner of choice. Apple has turned to large numbers of users and developers distributed around the world to propel its growth by creating apps and podcasts that enhance its products. Biologists at the University of Washington used crowds of external contributors to map the structure of an AIDS-related virus that had stumped academic and industry experts for more than 15 years. Despite a growing list of success stories, only a few companies use crowds effectively—or much at all.
Managers remain understandably cautious. Pushing problems out to a vast group of strangers seems risky and even unnatural, particularly to organizations built on internal innovation. How, for example, can a company protect its intellectual property? Isn’t integrating a crowdsourced solution into corporate operations an administrative nightmare? What about the costs? And how can you be sure you’ll get an appropriate solution?
These concerns are all reasonable, but excluding crowdsourcing from the corporate innovation tool kit means losing an opportunity. The main reason companies resist crowds is that managers don’t clearly understand what kinds of problems a crowd really can handle better and how to manage the process. Over the past decade we’ve studied dozens of company interactions with crowds on innovation projects, in areas as diverse as genomics, engineering, operations research, predictive analytics, enterprise software development, video games, mobile apps, and marketing. On the basis of that work, the supporting body of economic theory, and rigorous empirical testing, we’ve identified when crowds tend to outperform the internal organization and, equally important, when they don’t. In this article we offer guidance on choosing the best form of crowdsourcing for a given situation. We also review how technology is helping managers address these concerns. Crowds are moving into the mainstream; even if you don’t take advantage of them, your competitors surely will.
Beyond “Make or Buy”
Let’s start by noting the fundamental differences between crowd-powered problem solving and traditional organizational models. Companies are relatively well-coordinated environments for amassing and marshaling specialized knowledge to address problems and innovation opportunities. In contrast, a well-functioning crowd is loose and decentralized. It exposes a problem to widely diverse individuals with varied skills, experience, and perspectives. And it can operate at a scale that exceeds even that of the biggest and most complex global corporation, bringing in many more individuals to focus on a given challenge.
In certain situations, that means we can solve problems more efficiently. For example, we worked with the Harvard Clinical and Translational Science Center (known as Harvard Catalyst) to design a contest to solve a tough computational biology problem that had immediate research and commercial implications. To provide a platform for the contest, we enlisted TopCoder, a company that administers computer programming competitions. The two-week contest attracted viable solutions from 122 solvers—a staggering number. Many of the solutions surpassed the quality of those developed over the years by the school’s own scientists and by experts at the National Institutes of Health.
In addition to benefits of scale and diversity, crowds offer incentives that companies find difficult to match. Companies operate on traditional incentives—namely, salary and bonuses—and employees are assigned clearly delineated roles and specific responsibilities, which discourages them from seeking challenges outside their purview. But crowds, research shows, are energized by intrinsic motivations—such as the desire to learn—that are more likely to come into play when people decide for themselves what problems to attack. (Can you imagine any company paying a salary to an employee who’s just floating around looking for a problem to solve?) The opportunity to burnish one’s reputation among a large community of peers is another strong motivator (as is money, to be sure). Also, crowds are often more cost-effective per output or per worker than traditional company solutions.
So although internal, crowdlike approaches to creativity and idea generation, such as “jams,” “idea marketplaces,” and “personal entrepreneurial projects,” may increase the scope for exploration and flexibility inside companies, they are qualitatively different from and fall short of the full capability of external crowds. At the same time, it should be said that the benefits of the crowd do nothing on their own to offset the management worries mentioned above. We will describe the safeguards and other mechanisms that address those worries.
Crowdsourcing as a way to deal with innovation problems has existed in one form or another for centuries. Communities of innovators have helped kick-start entire industries, including aviation and personal computing. The difference today lies in technology. Over the past decade tools for development, design, and collaboration have been radically transformed; they’re getting more powerful and easier to use all the time, even as their prices plummet. At least as important, online crowdsourcing platforms have become much more sophisticated, making it ever simpler to manage, support, and mediate among distributed workers. Companies can reinvigorate (with incentive systems, for example) and redeploy crowds across a continual stream of problems. In essence, the crowd has become a fixed institution available on demand.
Having determined that you face a challenge your company cannot or should not solve on its own, you must figure out how to actually work with the crowd. At first glance, the landscape of possibilities may seem bewildering. But at a high level, crowdsourcing generally takes one of four distinct forms—contest, collaborative community, complementor, or labor market—each best suited to a specific kind of challenge. Let’s examine each one.