Should your company 'crowdsource' its next project?

Whether it's to increase loyalty among customers speed up development time or cast outward for innovative ideas, companies are trying on many styles of 'crowdsourcing'

If an InnoCentive participant's idea is selected, he can be rewarded up to US$100,000 for it. "It's not your average crowd," Edwards says. "Companies aren't just extending their labs to the masses and if it works, we'll give it a whirl."

Another downside, Edwards says, is that the audience who's participating may not be very diverse, trending toward the upscale, educated, technically savvy crowd. Companies need to be careful not to let these narrow groups overly sway their decision-making.

For instance, he says, Dell has decided to install Linux on its PCs as a result of high demand for the open-source operating system on IdeaStorm. "The suggestion got multiple thousands of votes, but [Dell] had to be careful that it wasn't just 10,000 Linux enthusiasts who don't represent the mass market," he says. "You can't let the crowd drive your entire product or service line."

Others worry that some crowdsourcing models will end up exploiting people for cheap labor. For instance, on iStock International Inc.'s iStockphoto, companies can buy stock photography from amateur photographers for a fraction of what they'd pay a professional.

At the same time, Howe argues on his blog, "Crowdsourcing is enabled by communities, and communities are held together through shared passion. I just can't square that with any concept of exploitation." Contributors to iStockphoto are thrilled to have their photos selected, he says, as are contributors to Threadless.com, which crowdsources T-shirt designs.

Allred points to some downsides of using crowdsourcing for system development. For instance, it can require developing additional skills on staff, he says. Allred had to create a role inside his IT group to assemble the components into a finished product.

Schwaber agrees that questions remain around this development approach. "TopCoder has done a good job of providing visibility into the process, but it's still exotic," she says.

Another caution is to be careful not to give away competitive information. For instance, after breaking the system design into several hundred component pieces, Allred says, his organization retained 250 components to design in-house because they required using business logic and rules that Constellation believes give it a competitive advantage.

Intellectual property theft is another concern. Anyone who contributes an idea through a crowdsourcing platform has to be careful not to hand over a great idea on a public forum and never get credit for it. Who's to say that a company that doesn't pick your solution as the "winner" won't nevertheless take your idea and run with it anyway? InnoCentive handles this by requiring all participants to sign an agreement protecting confidential information, and it prevents third parties from seeing and stealing others' ideas by allowing only the organization that posted the problem to see proposed solutions.

Despite these downsides, Edwards encourages companies to try their hand at different crowdsourcing approaches. "It's a gray area, but that's a good thing because it enables companies to take on what they're comfortable with," he says. Particularly with increasingly competitive marketplaces, he says, "You really have to try these things today."

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