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Wednesday, April 28, 2010

Why Crowdsourcing Often Fails

And what you may not know about crowdsourcing


by Idris Mootee

Why Crowdsourcing Often FailsInnovation is hard. It is not about getting the idea at all, it is about managing ideas. So you've have a few great ideas, so what? There is a lot of art and science behind moving ideas along corporate decision chain as well as in managing the unknowns. I remember I used to teach an in-house program for my strategists on "managing the unknowns." These MBAs would struggle with not finding enough data points and get stuck in the innovation process. How often do these big world-changing ideas come from people with MBAs?

But then there are so many ideas such as Google, Twitter, Facebook, OnStar, Kindle, Blackberry and the X-37B space plane launched this week... that turned into innovations that change the way we work and play forever, stirred new competition, and created new wealth. The future is never about the future, it is about now.

What changed our life, work and business? I will say automation, digital technologies, social media, modern medicines, jet engines, fast food, mass manufacturing, the marginal productivity theory of wages, consumerism and modernism. Many of these ideas grew in a world with fundamental economic convictions, namely the mass-production and mass-consumption of goods.

But these assumptions are fast changing. Spend a few days around the world stopping over in Shenzen, Shanghai, Mumbai and Seoul and you know what's really happening out there. Companies are getting desperate and now reaching out to suppliers and customers for ideas. Some even go to the extreme of sourcing ideas from everyone - the crowd.

There's this naive belief that the crowd is smarter than individual. This is a dangerous theory. Engaging suppliers, advanced users and front-end employees are good practices, but not letting them do your job.

There is one recent book about crowdsourcing suggesting that companies should stir things up. Just look at the current state of US politics, and ask yourself, is that what you want to happen for your company?

Furthermore, let me tell you the secret of success for open innovation (this is a better word than crowdsourcing). It is not the ideas, the breadth of the ideas, the quality of ideas, etc. It is about building a team that believes in it and is empowered to make it happen. Crowdsourcing and futurecasting are all great tools to help you get inspired, but they are not innovation. The most important part of innovation is the managing, mobilizing and aligning the ideas to strategic intent. At idea couture, we have the toolkits and processes and have repeatedly applied them effectively in large organizational settings. Unfortunately that's not something we can share here.

Another way to explain what I am trying to say - Karim R. Lakhani, a pro at Harvard Business School, calls what most people refer to as crowdsourcing "broadcast search." A problem statement is broadcast along with associated incentives, and people with expertise apply their talent to solving the problem. I like the term virtuoso search better. But, whatever term we use, let's not call it crowdsourcing and pretend that 10,000 average joes invent better products than Steve Jobs.

The example of Cambrian House provides learnings for everyone. It was a very innovative idea. They were followed by the Kluster, CrowdSpirit, CrowdSpring, and FellowForce. Cambrian House was a pioneer in putting crowdsourcing to work. The company doesn't really exist today and the technology was sold to another company for a fraction of the original investment. This other company now offers their technology solution as a software service.

Cambrian House's CEO Michael Sikorsky reflected on Tech Crunch a few years back about lessons learned (excerpt):

Indeed, our model failed. In short: we became a destination people loved to bookmark more than they loved to actively visit (our traffic pattern was scarily VC-ish). The limiting reagent in the start-up equation is not ideas, but amazing founding teams.

A key assumption for us, which proved out NOT true: given a great idea with great community support and great market test data, we would be able to find (crowdsource) a team willing to execute it OR we could execute it ourselves. We needed amazing founding teams for each of the ideas - this is where our model fell short.

What we learned: it would have been better to back great teams with horrible ideas because most of the heavy lifting kept falling back on us, or a few select community members. A vicious cycle was created leading all of us to get more and more diffuse. Hence: the wisdom of crowds worked well in the model, but it was our participation of crowds aspect which broke down. Trying to find people willing or capable to take on the offspring (our outputs) of the CH model was hard and/or incredibly time consuming.



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Idris MooteeIdris Mootee is the CEO of idea couture, a strategic innovation and experience design firm. He is the author of four books, tens of published articles, and a frequent speaker at business conferences and executive retreats.

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