You're Crowdsourcing Innovation Wrong

by Hutch Carpenter

ComMetrics is a social media analytics company, a division of CyTRAP Labs GmbH. ComMetrics is well-known in the industry, including its FT ComMetrics Blog Index.

The company published a useful piece, Crowd-wisdom fails businesses. The basic premise is that crowds do not innovate. It's useful, because it contains both truths and misconceptions about the role of communities in the innovation process.

Let's break it down.

Innovation via a stadium crowd?

The initial point of the post is that "Crowds Innovate - NOT". And it's true in its literal sense.

This may be one of my favorite misconceptions about the role of communities in innovation. That crowdsourcing is some sort of mind meld where innovations spring from a collective brain wave.

This quote by ComMetrics both sums up the truth, and the common misconception:


"It seems a bit naive to think that going to Dodger Stadium or the LA Coliseum in the hope that crowdsourcing will show people exhibiting the above [innovation] behaviors, and therefore help us innovate faster..."


Really now...

Actually, it wouldn't be naive if you were soliciting the stadium's feedback on ways to improve the sport event experience. Understand the different "jobs" the sport event is supposed to do:

• Outlet for aging or non-practicing athletes


• Family adventure


• Business social events and networking

You mean you wouldn't solicit the stadium crowd for ideas related to what they'd like to see on those fronts? How about their feedback on the stadium management's and others' ideas?

The stadium example is a good one, because it offers a chance to parse out the role of crowdsourcing into three dynamics:

1. Crowdsourcing involves collecting ideas in aggregate


2. Community feedback brings a diversity of viewpoints to the ideas


3. Crowdsourcing does mean 100% of the world's population

Collecting ideas in aggregate. Stop for a moment and consider that. I'm contrasting that view of crowdsourcing from the hivemind singularity that operates off a single brain wave. While the employees of a business have more of a vested in its success, the actual users of a product or service have a pretty good sense of what they want to accomplish.

Diversity of feedback. Research demonstrates the power of information diversity in increasing the quality of ideas. And crowdsourcing is a marvelous way to capture a broad spectrum of opinion and understanding. If you're going to get a range of opinions, including wild cards that you weren't expecting, soliciting a community's feedback is a powerful approach.

Crowdsourcing doesn't mean the whole world. When I read the stadium crowd quote, I get a subtle 'dis' in it. Namely, that there some serious nimrods in the crowd, and what the hell would they know about your business? But that's a stereotype. For instance, look at the open source operating system Linux. Linux is a great example of crowdsourcing. But you're not going to find me contributing anything there. I have no knowledge, opinion or interest in it. Crowdsourcing attracts parties interested in the product/service being examined. It'd be too demanding to participate otherwise.

The problems with popularity

The ComMetrics post has two separate points around the problems with popularity. First, is the issue of superusers having too much control over crowd opinion:


"The notion that a book might be a must-read because it is highly ranked by many on Amazon does not make it Nobel prize material. The earth did not stand still just because Galileo fell out of favor, nor has evolution been shown to be false due to the faith of believers.

Hence, product reviews driven by superusers and crowds who follow just means that the wisdom of crowds can only be conventional. Volume against quality."


The second point is that simple votes don't provide enough input on an idea's value:


"Thumbs Up or Down works but fails to explain why: Crowds do not drive and bring innovation to successful fruition in the form of a marketable product. Nor are they the best source for assessing quality - the one that shouts the loudest is heard the most."


Nevertheless, crowds can tell you if they like or dislike something.

There are truths in both of these observations. Amazon superusers are the modern equivalent of tastemakers in pre-Internet society. The people the crowd followed to find the best of things, often read in the newspapers. There are cases where the opinion of an A-Lister can have too much sway.

One key difference is this: today, people have to re-earn their influence over time. If over a sustained period someone falls down and no longer looks forward to the fresh, to the new, they lose their influence. The crowd moves on to someone else who is at the leading edge. Humans have a natural affinity for the new.

Perhaps more importantly, one cannot argue that no one has solid authority over a particular innovation domain. We don't all wake up as blank slates every morning, having to relearn expertise during that day's work cycle. There are bona fide, honest-to-goodness authorities on subjects who are motivated for improvement.

Which brings me to the second point about simple up-down votes. These votes do provide valuable feedback. You get an early read on what is resonating with the crowd, which is a valuable filter. But they lack nuances that can help identify the best among ideas that are resonating.

Microsoft's Wilson Haddow's observation is spot-on. Companies ought to be able to leverage both the wisdom of the crowd in getting feedback, but also leverage the opinion of authorities as well. Going back to what I wrote earlier...

• The crowd can provide ideas in aggregate


• The crowd can collectively weigh in on ideas' merits


• Individual authorities are generally needed at later stages of evaluation

And the role of these authorities should include finding valuable ideas the crowd overlooks.

In the blog post Corporate Innovation Is Not a Popularity Contest, I argue that binary feedback mechanisms - up-down votes - fall short. They are valuable, but not enough. And this is something Spigit does with its integration of reputation scores into the innovation process.

ComMetrics makes good points here. And kudos to ComMetrics for taking the time to weigh in on this topic. Their post provides a good framework for considering both the problems and opportunities of working with communities in the innovation process.

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Hutch Carpenter is the Vice President of Product at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

Innovation - Elite Unit or Crowdsource?

by Hutch Carpenter

A classic dilemma for companies is determining the best way to foster innovation. There are many good books with different approaches. Clayton Christensen's "Innovator's Dilemma" has influenced a generation's thinking about innovation. He focuses management and entrepreneurs' attention on the Big I: 'disruptive innovation'.

One outcome of the popularity of Christensen's book is the awareness people have that entrenched business practices can inhibit companies' ability to recognize and address discontinuous innovations from new market entrants. Motorola, for example, is often held up as an example of this. The company continued to develop only analog cell phones even as the digital phones were getting traction. In clinging to analog, which it dominated, it fell far behind in the mobile phone market.

A key practice espoused by Christensen is for companies to tackle discontinuous innovations by creating separate divisions. These divisions have an R&D profile, meaning they are funded without requiring a financial return. They do not have to prove themselves to sales or other parts of the organization. This gives them the room they need to figure out how to approach the impending market shift.

The issue with the popularization of this framework is that it sets up a binary approach to innovation. You're either addressing disruptive or discontinuous innovations, or you're executing on yesterday's business. It's this dichotomy that obscures the value of innovations that move organizations forward, competing to increase market share and profits.

To that end, let's examine two ways companies create work structures for innovation.

Integrated or Separate Innovation

The graphic below highlight two very different ways to approach innovation. And that's a good thing.


Separate Division

• As advised by Clayton Christensen, this approach is best for companies that need to address disruptive innovations. And all companies need to address disruptive innovations.These days, it's not a matter of if, but when. For fundamental market shifts, too much is invested in the current operations for companies to address changes. Freeing a group of people from these constraints is critical, if the corporate culture is not open to big-bet innovations.

A couple examples of interest here. First, let's go back to Motorola. Yes, the company muffed it badly on the transition from analog to digital. But there was something that it did right years before. Motorola researcher Jim Mikulski could see in the 1960s that existing cellular technology was insufficient for the emerging uses of the mobile technology. He had a new technology to replace it, and asked the head of Motorola's communications division, John Mitchell to fund its development. Mitchell said "no,"


Arguing that 400MHz technology offered sufficient capacity and met consumer needs. The Communications Division current product line was the market leader, and a new product, which would likely cannibalize the current system, was deemed to be both unnecessary and potentially harmful to this business line.


So Mikulski found refuge in Motorola's Corporate Research Laboratory. He worked on the new technology there, receiving funding for its development. When his view of the coming changes proved to be true, Motorola was ready with its new technology.

In other words, he addressed innovation that affected the communications division in a completely separate division.

Microsoft, on the other had, has programmatically set up a separate division for innovation. The Microsoft Research group works on ideas that may never have commercial appeal. But some of their work has resulted in product features and direction for its new Natal gaming system, its Bing search engine, and an upcoming release of Outlook email.

They have a separate division, but the innovations arguably are of the sustaining variety, not disruptive.


Integrated into Daily Work

• In this work structure, everyone is involved in innovation. The company sets expectations, and encourages employees' to share ideas. Done right, this is in-the-flow stuff. Employees are encountering issues to be addressed daily, and they're hearing new customer feedback all the time. They are well-positioned to come up with innovative solutions and products, if senior management makes that a priority.

Whirlpool is a good example of this. In 1999, then-CEO David R. Whitwam made the determination that Whirlpool needed to stop competing on price, and make innovation its central strategy. Fast forward to today, and the results have been stellar. Whirlpool has escaped competing as a commodity vendor, with $4 billion in revenue (21% of total sales) generated from its innovation efforts. Are they satisfied? No. CEO Jeff Fettig stated that while participation in innovation from 5,000 employees is good, he's looking to increase it to 15,000.

That's integrating innovation into employees' daily work for sustaining innovation. In this case, sustaining innovation has been the source of growth and profits.

Another company where innovation is part of everyday work is 3M. The company is legendary for its innovation. And clearly, the encouragement of all employees to be part of innovation has taken hold. For instance, there was this story recently in Fast Company:


3M told a great innovation story at the ARF annual conference about a new product that started with a complaint call into customer care. The representative did his own research online, came up with a solution, filmed a video that he put on YouTube and re-contacted the customer to see if that is what he was looking for.


The sheer volume of ideas that employees have to improve companies' existing businesses puts a premium on crowdsourcing ideas. And inevitably, some of that culture and the ideas emerging from sustaining innovation will relate to discontinuous or disruptive innovations.

Why Not Do Both?

Google is a good example of a company that does both. Its 20% time for employees to devote to innovation is the stuff of business legend. And according to the company, half of its new products result from this employee time.

But then look at Google Wave. This project was done beyond 20% time. It was actually a completely separate project developed by a 5-person 'startup' team in Australia, far from the company's Mountain View, CA headquarters. Google Wave is transformative, and will likely usher new design principles into a host of software applications.

Google is a good example of an innovation-led company. They mix the elite unit approach to innovation with the everyday encouragement for employees to innovate.

There's not this dichotomy of "all disruptive/discontinuous innovation, or you're just falling behind." Rather, it's a smart blend of the strategies.

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Hutch Carpenter is the Director of Marketing at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

Crowdsourcing Delivers Personalized Innovation

The new dimension of innovation is about having customer as an integral part of the system. Firms can no longer afford to stay separate from customers and still come up with great innovations. The success of social media websites (like Facebook) is frequently attributed to engaging customers in the creation of new innovations - also referred to as crowdsourcing.



The topic of innovation is multi-dimensional, which no firm in the globe can afford to ignore today. Being innovative is necessary to stay competitive in the business. The new age of innovation has a lot to do with making the customer an integral part of the innovation system by engaging and involving them with the product or service that the firm is working on.

This is all the more true with consumer-targeted social networking sites like Facebook, where the users drive how the product should look. The customer-centric innovation started off with creating and opening up a software development kit (SDK) for anyone to create and host their applications.

Want to get a real experience with what we are talking about? Just login to your Facebook or Orkut profile and click on the "applications" link. You will see an array of cool stuff in the form of quizzes, music, games, etc. Who do you think has developed them? Do you think Facebook or Orkut has enough employees to develop thousands of these applications? Definitely not!

It is done by enthusiastic folks around the globe with decent web programming knowledge. They downloaded the SDK, developed the app and hosted it all for free. The buck doesn't stop there. After it gets uploaded, the importance of these applications is decided by other users. As more folks add a particular application to their profile, its rating goes up. If the application is not interesting enough for the community, it gets automatically pushed down the stack. From the user's perspective, they can choose and install applications of interest to them, thereby 'personalizing' their profile. This is the real power of crowdsourcing - consumers as creators.

According to Wikipedia, crowdsourcing is a neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people or community in the form of an open call. In the context of social networking, the crowdsourcing goes beyond outsourcing, where users become voluntary creators to benefit of the community.

By democratizing their SDK, firms like Facebook benefit greatly by harnessing the innovative ability of anybody in the world. This breadth of innovation is impossible to groom and sustain within the confines of the firm's employees. Also, the cost of making such innovation happen inside the organization is extremely high compared to crowdsourcing.

On a larger scale, the idea of crowdsourcing has been harnessed by Apple (iPhone) and Google (Android) - these firms designed a monetization model allowing developers to host their applications and quote a price. When users download the developer's application a portion of payment goes to the developer.

In his recent work on 'New age of Innovation', renowned management thinker C.K.Prahalad calls this phenomenon as 'N = 1 R = G'. In order to provide one unique user experience (N = 1) firms need to leverage resources (R) globally (G). It is mainly because every consumer has his unique preferences when using a product, which cannot be satisfied by the firm hiring more people. This new school of thought is much different from the previous generation of technology products where every feature was developed by the firm in a closed development environment. In this new age, the role of the firm is to create a platform and leave it open for consumers to create the applications they want.

So, next time you are set out to innovate something, ask yourself: 'Am I involving my customers in the process?'

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Jayakumar Balasubramanian is an engineer by profession. This article originally appeared on MyBangalore.

Interview - IdeaConnection CEO - Scott Wurtele

I had the opportunity to meet interview Scott Wurtele, CEO of IdeaConnection when he was down from Canada this week. I also had the opportunity to meet his lovely wife Wendy Wurtele, VP of Design for the company.

They started IdeaConnection part-time a couple of years ago and began focusing on it full-time about eight months ago when they sold their last online business LawyersandSettlements.com. Scott and Wendy also started and sold WorldBid.com - which counted Alibaba.com as a competitor.

I sat down with Scott to discuss his latest venture, IdeaConnection, a company looking "To give businesses access to the world's most creative and innovative minds, who work collaboratively to solve problems and develop innovations."

IdeaConnection offers individuals the opportunity to sign up to solve problems for pay, and corporations the opportunity to submit challenges to hand-picked teams of diverse experts. At the same time IdeaConnection is also using crowdsourcing to build up a directory of innovation-related resources and information, with listings for conferences, blogs, consultants, etc.


What inspired you to start IdeaConnection?

IdeaConnection is one of the many ideas I've had over the years, and it just started to make more and more sense as I continued to stress test it with myself and others.

What does IdeaConnection offer that nobody else does?

We're providing a lot of free services including buying and selling of ideas. Nobody is doing what we are doing.

Here is how it works:

Companies give us problems or challenges, they set the price, IdeaConnection chooses the group of problem solvers and invites them to the challenge. At this point, they've already signed one level of NDA, and they are showed the first level of the problem and are shown what the solution seeker will accept. Problem solvers only get paid if the solution seeker accepts their answer to the challenge.

People tell us why they are interested and are evaluated against previous performance and we select a very diverse group of 4-8 people. We also have a pool of 75 world-class facilitators to choose from for facilitating each group. They then select another level of NDA and rights assignment and the challenge begins.

Group members can go into a patented ThinkSpaceTM (you can see part of this online), and can either work alone or as a group. Each time they come back they can see what is new. Features include: audio, video, thinking tools, and a whiteboard (launching soon). The final part of the solution is a wiki where the group presents their solution. During the challenge they can ask questions of IdeaConnection or the solution seeker.

We are currently exploring having teams with a mix of solution seeker employees and our problem solvers. Or potentially the solution seeker could use ThinkSpaceTM for internal use.

How is IdeaConnection different from Innocentive?

Innocentive will issue a challenge and get lots of people working on it. We know a bit about Innocentive because we have two advisers that came from there. Innocentive goes for the Fortune 500, and Idea Connection is going for the other 99.9% of businesses.

Our competition is focused on personal relationship selling, and we are focused on internet selling. We are attracting our problem solvers at probably 25% of the cost.

Innocentive also makes the challenge public, we don't. This gives our clients a greater degree of confidentiality - companies can even come in blind if they want to hide who they are.

One final way we are different from Innocentive is that we only have one group working on the challenge. Innocentive could have 100 groups working on a challenge, but only one gets paid. We think we can attract a higher quality of problem solver.

How do you sell against true crowdsourcing like MyStarbucksIdea?

Sites like MyStarbucksIdea are great because they are educating people on the concept, which makes it easier for us to recruit problem solvers and solution seekers.

Why should a CIO (Chief Innovation Officer) choose IdeaConnection over Innocentive, one of your other competitors, or running their own crowdsourcing effort?

My advice would be for Chief Innovation Officers to try them all and see which ones work best for their organization. The proof will be in the results. We are less expensive and faster. Innocentive asks for $25k up-front and takes a long time to run a challenge. We have experience doing things fast.

Along those lines, we also just started offering something called Rapid Response on the site to serve clients that have urgent needs. Clients e-mail in their challenge and we will send out to 10-20 people who have registered to be “on call” and they all get paid if they answer within the tight deadline

Is crowdsourcing a fad?

I think it is not, and I think the growth will happen very fast.

What is the future of crowdsourcing?

Crowdsourcing can be used in politics, market research, and of course problem solving. This type of activity has always been happening, but now it is internet-enabled and the internet will facilitate its growth. It is now going to happen on a bigger scale, especially as smart phone and ad-sponsored phone usage spreads.

For example - Imagine receiving a message on your phone "Do you like the new Starbucks Via design? Yes/No"

Do you see evidence of companies cutting their innovation budgets?

No. Companies are increasing their focus on innovation. Their budget may be down, but probably in a smaller percentage than the rest of the budget.

What advice do you have for companies out there trying to innovate?

Get rid of any arrogance. Be infinitely curious.

We need a new word for "failure" - there is no such thing - it is more data - more education. The real failure would be the failure to learn.

What is your favorite innovation book? Why?

Any book that stirs my curiosity is my favorite. There is no book that I re-read. I read a lot of different things (probably two books a week).

People throw around the word "innovation" a lot. When it comes to innovation, what is the biggest misconception?

It is not necessarily pleasant. It can hurt to innovate. It is a change. It takes work. It means structural change. It means entertaining ideas you've rejected.
We want to see companies start to understand that they can throw out a section of a problem to us for solving. We recently had a consulting company of 25 people sign up with us. We are exploring relationships with larger consultancies too. Consultants might have 90% of the answers. Why shouldn't they throw us the other 10% of the problem to solve?

Conclusion

Thanks again to Scott for making time for this interview.

If you are a corporate innovator or Chief Innovation Officer and would like to be interviewed in print for Blogging Innovation or on video for Innovation Interviews (launching in April), please contact us.


What do you think of what Scott Wurtele of IdeaConnection had to say?

@innovate

Institutions versus Collaboration - Value of Loose Networks

Back in 2005 Clay Shirky spoke at Ted about how closed groups and companies will give way to looser networks where small contributions can deliver big value and fluid cooperation replaces rigid oversight. Even though it was delivered four years ago, the video is still worth the time:



What do you think?

@innovate

Is Crowdsourcing a Fad or a Foundational Element?

Much has been written about 'crowdsourcing' and the 'wisdom of the crowd' over the past couple of years, including "Crowdsourcing" by Jeff Howe - a contributing editor at Wired magazine, and "Wisdom of the Crowd" by James Surowiecki - a staff writer at The New Yorker.

Crowdsourcing - "The act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call." - Jeff Howe

'Wisdom of the Crowd' - "Refers to the process of taking into account the collective opinion of a group of individuals rather than a single expert to answer a question." - Wikipedia

For those of you not familiar with crowdsourcing, here is a good video from Jeff Howe:



So, what will happen to 'crowdsourcing' and 'wisdom of the crowd' as more and more companies start to employ these techniques.

Will the crowd remain wise or lose its predictive powers?

One thing is certain. Organizations will continue to use 'crowdsourcing' and 'wisdom of the crowd' together to help them find ideas that will resonate with their targets.

Organizations will, however, have to work harder to market their initiatives as the competition increases for people's time, if they are to maximize the value they accrue from the effort.

What do you think?

@innovate