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Crowdsourcing: why the power of crowd is driving the future of business

Analysis of the book "Crowdsourcing" (written by Jeff Howe)

Yoann Pinet

on 6 April 2011

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Transcript of Crowdsourcing: why the power of crowd is driving the future of business

How we got here? Two features of crowdsourcing projects:
1) Participants NOT motivated by money
2) Performed during “spare cycles” – an individual’s free time
Crowdsourcing capitalizes on economic value of amateur class
Examples: InnoCentive & YourEncore
Shadow workforce Amateur renaissance & crowdsourcing Importance of open source “A large and diverse labor pool will consistently come up with better solutions than the most talented, specialized work force”
Narrowing the gap between “producer” and “consumer”
User-generated content

Democratizing Education
Enormous potential for amateurs to learn skills that were once only offered via traditional schooling

A template for Revolutions to Come
“Desktop publishing was a small but irrevocable step to placing creative power in the hands of the crowd” The revolution that started with Apple and Adobe Democratizing the tools
Movies, music, and product design are all becoming “faster, cheaper, and easier to create”->The Burgs

Democratizing Distribution
Shift in distribution trends: big companies vs. small players -> The Hawthorne Heights Faster, Cheaper, Smarter, Easier: Democratizing the Means of Production Faster, Cheaper, Smarter, Easier: Democratizing the Means of Production The Rise and Fall of the Firm: Turning Community into Commerce The company vs. the Community
Outsourcing has led to a dramatic decrease in the average firm size.
Such companies as Facebook and Youtube are valued much higher than their tangible assets. Contributions of the end-user have now become essential components in the true valuation of a company.
Who is the largest employer in the US? Not IBM or Wal-Mart: Manpower, Inc. with 4.4 million employees as of 2008. The Rise and Fall of the Firm: Turning Community into Commerce The Community at Work
When pulled together, online communities posses an outstanding potential to increase normal productivity. Example: Jack Hughes’ TopCoder

Turning Readers into Writers
The age of the Internet ha begun to transform newspapers from a monopoly on ides and opinions into a conversation “room” in which readers can comment and add to stories with their own ideas, opinions, and experiences. Example: The Cincinnati Enquirer Participatory media: the emerging rule What the crow creates: the iStockphoto example iStockphoto undercut its competitors by 99%
they are excelling in an industry which has entered the "post-scarcity" economy
Profit margin: 55% !

But: the crowd doesn't want to feel exploited But how? The community is the company Bruce Livingstone:
"they don't work for us, we work for them"
They managed to built a community: "iStockers", "iStockalypses", cult around Livingstone, etc.
Almost no financial reward
Creative production that has a meaning
The community has the ability to identify and highlight the most talented Sturgeon law: "90% of everything is crap" Crowdfunding Kiva: the "world's first person to person micro-lending website"
$25m raised
225,000 businesses funded

Turning fans into believers:
Politics, Obama
Sellaband, Mymajorcompany
Myfootball Club The Most Universal Quality—Why Diversity Trumps Ability Diversity Trumps Ability Theorem
Who wants to be Millionaire?
Open source
Economic side of the crowd sourcing

Basic characteristic to succeed for diversity to trump
Pickle of a problem
Some qualifications
Each individual’s contribution processed
Contestants from natural diverse pool
What The Crowd Knows: Collective Intelligence In Action Determine longitude
Future of corporate R&D
US program of innovation Tomorrow’s Crowd: The Age of the Digital Native The New Fluency:Digital Natives vs. Digital Immigrants

Kids Today
Teens are more likely to work on another person’s blog or website than they are to create their own.
What happens when kids today enter the workforce?-> Obsolescence 1) Pick the right model - 4 types: crowd sourcing, crowd creation, crowd voting, crowd funding
2) Pick the right crowd
3) Offer the right incentives
4) Keep the pink slips in the drawer
5) The dumbness of crowds, or the benevolent dictator principle
6) Keep it simple and break it down
7) Remember Sturgeon's law
8) Remember the 10%, the antidote to Sturgeon's law
9) The community's always right
10) Ask not what you can do for you, but what you can do for the crowd
In short: "Computers are incredibly fast, accurate, and stupid. Human beings are incredibly slow, inaccurate, and brilliant. Together they are powerful beyond imagination." Albert Einstein Aditya Khurana
Blair Lilek
Jennifer Rollins
Yoann Pinet

ISTM 613
April 6, 2011
Full transcript