By Duncan Kinney
In 1714, the British government used the power of crowds to solve one of its most bedevilling problems: how to navigate ships across oceans and seas. Any competent sailor could use the sun to tell latitude, but determining longitude was a bit tougher. This was pre-GPS, when captains relied on dead reckoning. That’s the official term. In other words, they launched into vast dark waters with little more than educated guesses to guide their ways. The government offered 20,000 pounds to anyone who could reliably determine the longitude of a ship at sea. This was an early form of what we have come to call crowdsourcing. Back then it went by a name you might expect in a Herman Melville story: the Longitude Prize.
Fast forward roughly 300 years to 2006, when writer-turned-media clairvoyant Jeff Howe coined the term crowdsourcing in an article for Wired, and then wrote a book on the topic. Quick definition: Crowdsourcing takes a job traditionally performed by an individual or small team and outsources it to the “crowd,” a large, undefined group of interested people. (Howe has a much more exact definition on his website.)
Ever since Howe introduced the idea, companies have been refining their techniques to harness the power of crowds. The following organizations have used crowdsourcing to improve the customer experience, find gold and, of course, make money. They’ve done it through cash rewards, appealing to a vocal niche of people who wanted a hand in creating the products they consumed and by building vital online communities.
Threadless
Nobody makes money off of T-shirts, right? Well, Threadless does. Members of its online community submit T-shirt designs that are put to a public vote. A small per cent of the most popular designs are selected for printing and sold through the organization’s online store. Designers of those T-shirts receive cash, store credits and positive reinforcement from their peers (go, team, go!). Threadless has sold out every line of T-shirts it has produced and generated $17 million in revenue since 2006. It sells an average of 90,000 T-shirts a month. In fact, the Calgary-based crowdsourcing platform Chaordix gave them a perfect rating in its case studies of crowdsourcing campaigns.
Why it worked: Threadless has a built-in positive feedback loop. A designer who has their design chosen not only gets the cash but he or she tell anyone who will listen about the achievement. The company’s advertising and new customers come from the people who design the product they sell. Simplicity itself.
TomTom Map Share
GPS navigation system TomTom uses the wisdom of the crowds to provide a better map for customers. Its Map Share program lets users collectively update and fix maps. Changes are submitted, verified by TomTom and sent to Map Share community members, improving the quality of the maps that TomTom customers use. In December of 2008, Map Share recorded its five millionth map improvement. “To put this five million milestone in perspective: a one-hour trip made anywhere in North America or Europe will be influenced by 20 to 30 Map Share updates,” president Jocelyn Vigreux said.
Why it worked: Map Share has a simple interface that pays it forward – if everyone fixes problems, everyone gets a better map.
The Goldcorp Challenge
Goldcorp was a struggling Toronto based gold mining company beset by labour trouble, high costs due to mining inefficiencies and anxious shareholders, until CEO Rob McEwen did something no other mining company had ever done. McEwen published the geological data of Goldcorp’s 22,260 hectare Red Lake Gold Mine on the web and ran a contest with $575,000 in prize money to participants who submitted the best speculation about where to look for gold. The challenge spread throughout the geological community and more than 1,000 people participated. Contestants identified 110 possible targets and more than 80 per cent led to gold for both the company and contestants. Since the challenge started, Goldcorp has found eight million ounces of gold – an excellent return on its $575,000 investment.
Why it worked: This hefty cash prize captured the imagination of thousands of online prospectors. If we were talking about, say, molybdenum instead of gold, we probably wouldn’t be having this conversation.
Dell – IdeaStorm
Dell asked customers how to improve its products and service via Ideastorm.com. The Linux community responded with a loud, organized cry for computers without Windows. Dell listened and now it has a foothold in a small but growing market. The company has sold computers with Linux for the past two years, and while Dell hasn’t released exact numbers, “If the program wasn’t successful, we wouldn’t be able to continue it,” its Linux expert Matt Domsch told Computerworld.
Why it worked: The company listened and followed through on the ideas its customers presented. Ideastorm website also has an area that keeps tabs on the progress of its crowdsourced suggestions.
Netflix Prize
This movie rental company wanted to improve the predictive software that recommends movies to customers based on their preferences so it turned to the masses with a challenge: design a program that is 10 per cent better than Netflix’s in-house software and earn $1 million. Over three years, thousands of teams tried to solve the problem. The final winner saw multiple team mergers and the prize came down to one submission being in 20 minutes earlier than the other. Netflix immediately announced a second contest.
Why it worked: The prize of US$1 million brought out the software developers, but the leaderboard and vibrant online community built around the challenge kept their interest.
iStockPhoto
Stock photography was an expensive, time-consuming way to purchase photos until upstart iStockPhoto came along. With the proliferation of high-speed networks capable of handling larger files and easy-to-use digital cameras, iStock jumped in with a $1 price point and thousands of photographers eager to contribute and make money from what was often just a hobby. iStockphoto was eventually sold to Getty Images in February 2006 for US$50 million in cash.
Why it worked: It invented the microstock industry, fostering a loyal and active community through forums, emails and face-to-face events. Startup Review suggests its success is thanks to “the financial livelihood of a segment of [its] users. One reason that iStockphoto has such an active community is that their power users have personal, financial ties to the overall success of the company.”
What did I miss? Tell me your best examples of businesses using the power of crowdsourcing in the comments. U
Category: Entrepreneurship, Work
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Other great examples of company’s using open innovation and crowdsourcing: Adobe- http://www.ideas.acrobat.com and Fortune-http://fortune.brightidea.com/BrainStormGreen. Both these sites are powered by Brightidea’s innovation management software.
Hey, thanks for the Chaordix props. We’d love to mention that is anyone is interested in bringing crowdsourcing into their company, we can help :)
If you are looking for more information on what crowdsourcing is, how it works and how to implement it, please email me at blue [at] chaordix [dot] com.
Thanks!