Crowdsourcing has emerged as a popular strategy for businesses and startups seeking to harness the power of collective intelligence and resources. By leveraging external contributions, companies can drive innovation and build stronger connections with their target audience. As part of a broader innovation management services approach, crowdsourcing supports the creation and improvement of new products while engaging potential customers early in the development process.
Crowdsourcing is an activity that involves using people’s intellectual resources to develop, improve, and realize a new product. It plays a crucial role in the innovation process by allowing companies to tap into external ideas, funding, and expertise. Let’s explore when this strategy is used and which companies can benefit from it.
Let’s find out when this strategy is used and which companies it is suitable for.
What is crowdsourcing for?
This strategy is actively used by companies or startups that want to introduce new products to the market. In order to launch a new product, you need startup capital to establish production, advertising, promotion and often it is impossible to find a large amount of money in a short period of time.
To overcome this stage, many young companies make prototypes of their products, place their project on special crowdfunding platforms, and announce the collection of a specific amount for realization. In addition to fundraising, crowdsourcing involves collecting ideas and suggestions for improving the product. For example, NASA resorts to such a strategy, offering people from all over the world to come up with a name for the next Mars rover. This strategy is especially effective when integrated into a company’s innovation management framework, where collecting and refining ideas from external sources plays a key role.
In cases where a company has a well-built relationship with its customers, it can ask people for their opinions on new priorities for brand development. For example, this tactic is often used by bloggers and ticktockers who ask subscribers what content they would be interested in seeing in new releases. This helps to better understand subscribers’ desires and interests and increase their level of engagement.
Let’s find out what advantages crowdsourcing has over classic business models.
Advantages and disadvantages of crowdsourcing
Crowdsourcing has the following advantages.
- Is an alternative business model. Companies that resort to crowdsourcing rely on close relationships with the target audience and their direct interest. It complements traditional innovation management strategies by focusing on community-driven development. While in classic business, the key role is played by money and the amount of potential profit that the company can offer to suppliers or producers of raw materials.
- Helps build trusting relationships. In this model, companies ask for help from people who, after participating and investing money and time, feel more attached and interested in the success of the company. Involving them in this innovational process, as a result, the brand can have many loyal customers and brand advocates.
- Complementing classic business models. Crowdsourcing helps to enrich a company’s marketing strategy and bring in new ways to interact with the public, find new points of interest and refresh the brand’s communication and content.
- It helps to evaluate the company’s activities with fresh eyes. By having people who do not work for the company collaborate with the company and have a fresh perspective from outside, the company’s management can gain many useful insights and improve brand positioning. This feedback can be integrated into broader innovation management services, helping to refine products and processes.
Crowdsourcing has the following disadvantages:
- Possible only in the early stage of the company’s life cycle. Asking people for financial help or advice is appropriate for young companies and startups that are doing something new that others are not doing. If a brand already has a name, experience in the market, and is successfully trading other products, the crowdsourcing model becomes irrelevant and may require more sophisticated innovation management strategies.
- Crowdsourcing does not forgive mistakes. If a company has raised funds but failed to launch a product, people will lose trust in it and it will be incredibly difficult to find funds for a new project through crowdsourcing. Failure also will affect future innovation processes.
- Implies a complicated procedure. The fact that crowdsourcing allows you to raise funds to launch a project bypassing classical financial relations does not mean that it is easy. It is necessary to at least create a prototype of the product and shoot an attractive promo video, which also requires financial investment, time, and effort. In addition, you need to consider all the legal nuances to obtain the required licenses and permits that will confirm the reliability of the company in the eyes of crowdfunding platforms and donors.
Let’s find out what types of crowdsourcing exist.
Types of crowdsourcing
Alright, let’s talk about the different types of crowdsourcing. There are quite a few, and each one can help a business in its own unique way. Ready? Let’s dive in!
1. Crowdfunding
You have most definitely heard of crowdfunding. When a company or startup asks regular people—like you and me—to donate money to enable the realization of their idea. They might raise money using websites like Indiegogo or Kickboard. People sometimes also get something cool in exchange, such as early access to goods or special offers. There is a benefit for both sides. It’s also a great way to find out if the market is really ready before squandering a lot of money. The innovation process depends much on crowdfunding since it enables companies to adjust their products depending on actual comments.
2. Crowd Creation
Now, crowd creation is pretty awesome. Instead of doing all the creative work themselves, companies ask people for ideas or designs. They could ask for a new logo or maybe even suggestions for a product feature. One company that does this a lot is LEGO. They let their fans design new sets! How cool is that? It’s a fun way for businesses to bring in fresh ideas, and it gets their community involved. Plus, it helps the company stay creative while keeping their fans engaged. That’s why crowd creation is a key part of innovation management.
3. Crowd Voting
Next up is crowd voting. It’s exactly what it sounds like—you get to vote! Companies present a few options, like a new flavor of chips or a product design, and they let the crowd decide. This way, they know they’re making something people actually want. And it’s fun for the customers too! Who doesn’t like having a say? Plus, it’s a great way to build hype before the product even launches.
4. Crowd Wisdom
Crowd wisdom is when a company taps into the collective brainpower of a big group. So, instead of just relying on their in-house team, they ask people with different expertise to pitch in. This is especially useful in fields like science or tech. Imagine having thousands of experts helping you solve a tricky problem! That’s what crowd wisdom is all about. It speeds things up and brings in ideas that the internal team might miss. Pretty smart, right?
5. Crowd Recruiting
This one’s for finding talent—crowd recruiting. Instead of just posting a job ad, companies ask their community or use social media to find people. It’s like, “Hey, know anyone who’d be perfect for this project?” This works really well for startups who need to find skilled people quickly. And because it’s all through word-of-mouth or social networks, it often brings in fresh, motivated talent.
6. Open Innovation
Finally, we have open innovation. This one’s pretty cool. Basically, a company invites outside ideas into their business. They might work with other businesses, universities, or even competitors to get new perspectives. It’s a way of saying, “Hey, we don’t have all the answers, but together, we can create something amazing.” Big companies like Procter & Gamble do this all the time to stay innovative and competitive.
Congratulations! Now that you know what crowdsourcing is, you have familiarized yourself with its advantages and disadvantages.
Wrap-Up
Incorporating crowdsourcing into the innovation process offers businesses a unique way to gather fresh ideas, reduce costs, and foster customer loyalty. However, it is not without challenges, especially when managing expectations and ensuring success in product delivery. For young companies, crowdsourcing can be a powerful tool within innovation management. By understanding its advantages and limitations, businesses can decide when and how to utilize crowdsourcing for sustainable growth and continuous improvement.
