Australian Innovation

Crowdsourcing - Open Innovation Strategy

Crowdsourcing refers to the outsourcing of tasks and activities, traditionally performed internally by an employee or an external contractor, to a large group of people (a crowd), through an open innovation approach or an open call.

In their book Wikinomics Don Tapscott and Anthony Williams discuss how mass collaboration can impact big changes in business. They also present a number of case studies of successful outsourcing and collaboration, including Goldcorp and Proctor & Gamble. In the case of Goldcorp, a Canadian gold mining company, after internal reports and advice from technical staff indicated that the gold mine had run out of gold, the CEO placed all the geological studies, surveys and reports related to the gold mine into the public domain via the Internet and offered a sum of money to whoever could come up with new information or leads for new gold deposits. The CEO’s strategy was successful. New computer modelling technology located in another small organization was able to predict the location of new gold deposits using the existing geological survey data.

By utilizing an open call to an undefined group of people (generally through the Internet), the call brings together people who are in the best position to be able to solve complex problems, provide new ideas and develop new opportunities.

Crowdsourcing has a number of advantages, however, it can also result in intellectual property (IP) issues, including ownership issues and confidentiality of IP. An appropriate governance process is required to ensure the disadvantages of crowdsourcing are minimized. Some of the advantages of using a crowdsourcing approach can include:

•       Reducing transaction costs of organisations
•       Finding new business opportunities
•       Building appropriate teams by finding the right  external people
•       Re-using previous work
•       Building user defined products and services
•       Solving difficult problems

If you have a need or you want to solve a problem then you can use a number of crowdsourcing sites. Alternatively you can also ask a question through one of your online network sites such as facebook or LinkedIn. A selection of crowdsourcing sites of interest are outlined below: 

•       Chaordix – Business innovation – Engaging crowds through the web to solve your business problem
•       kluster – Brainstorming / feedback – Harness the power of your own hand-picked crowd to brainstorm ideas
•       namethis – Brand names – A 48 hour competition site to find a suitable brand name for your venture
•       innocentive -  Problem solving – Brings together seekers who have a problem together with solvers from around the world who may be able to help
•       Rent A Coder – Software development – International marketplace to locate software coders
•       Global Ideas Bank - Social innovation – A site which collects social inventions that can change the world, which are rated by online voters.

One specific type of crowdsourcing strategy is crowdfunding which is also referred to as crowdlending. Crowdfunding is the collective cooperation,  attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations. For example, crowdfunding has been used to fund open source software projects, online services, music, independent films, charity and social enterprises.

A number of online crowdfunding and crowdlending websites are available that can be used to raise funds for specific projects or for charitable work. A number of websites are described below: 

• – record albums and music
• – creative projects – funding platform for artists, designers, filmmakers, musicians, journalists, inventors & explorers
• – social fund raising
• – change lives through small loans (similar to the Grameen Bank example)
• â€“ peer lending personal loans
• – online fund raising
• – collaborative ways to fund ideas

An entrepreneur seeking seed funding for a new venture, who has not been successful sourcing funds through either government funding programs or through traditional angel investors or venture capitalists, could use crowdfunding from online communities to solicit pledges of small amounts of money from individuals who typically would not be professional financiers. The amounts pledged are usually so small people tend to support a venture that has the right value proposition for the people donating. Confirming a threshold value also ensures that all pledges will not be used unless a threshold target amount is reached.

Crowdfunding, therefore, has the potential to help launch simple ideas, through low investment, resulting in faster outcomes and the development of new products or services, particularly for social enterprises.

Dr John Kapeleris, Deputy CEO, Australian Institute for Commercialisation. To read more of John's blog entries, visit his site.

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