Crowdsourcing

Asking the crowd for startup business help

You have a great idea for a startup but need research, development and innovation to make it happen. Stumped? Don’t be. Just ask the crowd.

With the Internet constantly making business easier and more accessible, the time is ripe. Crowdsourcing – the term was coined by Wired contributing editor Jeff Howe – happens when a company relies on outside volunteers and low-paid amateurs for ideas, direction, content, problem-solving and sometimes even product launch.

“It’s a model for the creation of intellectual property, although you also see it in the sciences,” Howe says.

Case in point: Cambrianhouse.com. Self-defined as “crowdsourced software,” Cambrian House’s mission is “to discover and commercialize software ideas through the wisdom and participation of crowds.” Contributors earn royalties.

Another good example: Lego Mindstorms NXT. The robotics toolset lets users build, program and personalize robots. Looking to develop a new version of Mindstorms, the company asked its “most enthusiastic users and consumers” to help develop the next product generation, says Michael McNally, brand relations director for Lego Systems, Inc.

The company’s always had an involved consumer base, McNally says. “We knew that the people who were still passionate Lego robotic hobbyists – spending hours per week – could best speak to the improvements we could make to reignite consumer excitement.

“Even though they were not compensated, our original Mindstorms User Panel was directly responsible for significant components of the new set.”

Something for Nothing?

“You could build a company around the crowdsourcing concept,” says Karim Lakhani, a Harvard Business School professor who’s studied open-source software. The sports industry is full of startups based on the concept. “All the innovations in sporting equipment come not from the firm, but from people doing the sports. They’ll make the thing happen [because] they’re in competition to win, so they say, ‘I need to solve this problem now.’

“Often startups come about because the [entrepreneurs] have been users of the technology and could not get any company to do what they wanted, so they did it themselves.”

Creative Control is the Key

It would be easy for a company to exploit the community. But Howe cautions, “All of these models drive out of community. There are a lot of reasons people are willing to work for little or no money. Anyone who’s starting a business needs to be mindful of that.

“You may not be paying them very much money, but they get things in return – they get control – at least they should get control, creative control, to the extent you would never give to employees.”

The Japanese company Cuusoo.com bases its product line, from electronics to tote bags, on consumer input. Procter & Gamble also crowdsources. Its 10 staff chemists reach out to the world of 200,000 or more others for their input and help with internal product problems, Lakhani says. “Those jobs won’t go away because they still have to define the problems, analyze them and implement solutions.”

Controlled Chaos

Crowdsourcing emerged from the business world of the 1990s, when young-ish techies operated with “a lot of idealism and also a lot of misgivings about corporate structures as they had existed pre-1995,” Howe says. “This incoming generation of entrepreneur is much less insistent on maintaining absolute control – control over the brand, over their product.”

Lego’s McNally continues the thought. “You can always benefit from directly interacting with your most ardent consumers,” he says. “Who knows your product or service better than you do? The people who use it most. So why not ask the consumer experts for insight on how the experience could be better, stronger, more engaging, more intuitive?

“Especially in today’s Internet Age, [this] concept can apply to emerging and established brands alike. Furthering a person’s passion by involving them at a higher level is a win-win for you and your consumer base.”

With the interactive nature of the blogsphere and other online interactivity, it’s increasingly apparent that consumers want to be involved. Says McNally: “Inviting them in to help design and produce the future of their favorite brands not only makes them stronger loyalists, but will drive frequency as well as evangelism.” All the better for your bottom line.

“Many industries are moving in this direction,” Lakhani says. “We see it in software, but it’s happening in pharmaceuticals, biology, technology. There’s a ton of opportunity for startups to show up and create value.”

Lynne Meredith Schreiber is a freelance writer for StartupNation.

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