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5 ways crowdsourcing delivers business value

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How to approach your CEO about going to the crowd for innovation, and overcome any major objections.

Technology-enabled crowdsourcing is still relatively new on the scene, but the potential is impressive. Ross Dawson and Steve Bynghall, in their latest work, Getting Results From Crowds: The Definitive Guide to Using Crowdsourcing to Grow Your Business, build the business case for looking to talent and innovation outside the walls of the enterprise. "Those organizations that have the skills and competences to draw on external crowds, as well as in tapping the best ideas from their 'internal crowds,' have an immense advantage over those companies that rely solely on their internal resources and traditional service firms," Dawson observes in a recent post.

If you are approaching your CEO about opening up your company to innovation from outside your enterprise, Dawson outlines five business cases to be made:

1. Increase flexibility: Crowd work is "available on demand, and so is fully scalable from nothing to extremely high levels as required," Dawson says. New projects can be initiated on a moment's notice, or quickly shut down.  Smaller organizations and startups, especially, "do not need to hire people into specific roles when they do not need a full-time person in that function."

2. Access talent and ideas via a market system: "The ideas you need probably already exist; now you have the mechanisms to access them," says Dawson. "One of the principles of crowdsourcing is that market mechanisms can help match needs and solutions."

3. Reduce costs: This is an important benefit, of course, but Dawson cautions that this shouldn't be the only benefit sought. "It is important to note that there can also be costs associated with tapping crowds," he says. "Focusing solely on cost reduction is unlikely to lead to the best outcomes." Nonetheless, "there are a variety of ways in which using crowds can reduce costs, including substituting expensive professional service firms with lower cost service providers, ensuring simple, low-level tasks are not being done by high-cost internal staff, and lowering the costs involved in innovation and product development."

4. Increase capabilities: "Microtasks enable tasks and service that simply would not have been possible previously," Dawson observes. "For example, services that require a pool of specialists or need to be rapidly scaled can only be delivered by large companies, or those with flexible access to crowds."

5. Reduce time to market: "While the transaction costs of dealing with crowds limit how quickly resources can be brought in to projects, those companies with experience using crowds and established relationships can often support substantially faster project delivery," Dawson says. "These can be applied to both product development work and project management functions, as well as the myriad administrative and marketing tasks that are required."

In their work, Dawson and Steve Bynghall also note the five key objections to crowdsourcing, and how those objections can be overcome in a crowdsourcing proposal:

Regulation: Objection: "If regulation restricts the external disclosure of information e.g.
privacy. Workaround: "In many cases if data is encrypted then work and analysis can be done externally."

Confidentiality: Objection: "If information is proprietary and there are substantial risks if it is made available to competitors or others." Workaround: "This is fundamentally an issue of trust. Some information is sufficiently sensitive never to share externally. Most confidential information can be shared with external providers once there is a strong enough relationship and sufficient trust. Contractual and legal remedies can help, but do not substitute for trust.

Understanding of context: Objection: "If work requires a significant understanding of the context and issues surrounding the work to be performed effectively." Workaround: "External providers can develop a sufficient understanding of context, however this takes time and is developed over the course of an extended relationship."

Teamwork: Objection: "If work requires significant ongoing unstructured interaction within loosely defined teams." Workaround: "External providers that over time have established trust and have good communication skills can perform effectively in distributed teams."

Core competence: Objection: "If capabilities are central to the strategic positioning of the organization and should be continually developed. Workaround: "The scope of an organization’s core competences needs to be regularly reviewed."

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure