Crowdsourcing is the new outsourcing: WIRED on value co-creation

Wired has run a number of nice feature articles on co-creation of value between companies and their customers in the past issues, but now they also coined a new, cool and really appropriate term for this trend: Crowdsourcing.

Jeff Howe's great article "The Rise of Crowdsourcing" in the new Wired Magazine (June 2006) provides a nice summary and many examples of firms who explicitly build strategies to co-create with their users and customers. In our new (German) book, we called this "interactive value creation", building on -- but not equal to -- Benkler's idea of "commons-based peer-production". Earlier notions of active customers focused on customers working autonomously, i.e. innovating, hacking, modifying, servicing, or selling a company's goods without any formal relationship or, in most case, the company's notion.

[Update: See here for a debate why Crowdsourcing is different to commons-based peer-production, and I agree to this argument. In this posting, Jeff Howe also provides a more formal definition of the term crowdsourcing:

"Crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call. This can take the form of peer-production (when the job is performed collaboratively), but is also often undertaken by sole individuals. The crucial prerequisite is the use of the open call format and the large network of potential laborers."

End of Update.]

Croudsourcing or interactive value creation, however, builds on the notion that clever firms are setting up platforms for users to co-create with them. They initiate, manage, and provide incentives for peer-production among users and customers. Or as Jeff Howe puts it:

"Remember outsourcing? Sending jobs to India and China is so 2003. The new pool of cheap labor: everyday people using their spare cycles to create content, solve problems, even do corporate R & D. …

Many companies growing up in the internet age were designed to take advantage of the networked world. But now the productive potential of millions of plugged-in enthusiasts is attracting the attention of old-line businesses, too. … Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn’t always free, but it costs a lot less than paying traditional employees. It’s not outsourcing; it’s crowdsourcing."

The articles describes four kinds of crowdsourcers: Professional freelancers and hobbyists, who now very easily can contribute their talents (like photo enthusiasts competing again professional stock photographers); Packagers, who create new material by mixing own and re-used existing content and package it for a specific (niche) audience (like amateur videographers); Tinkerers, who get involved in a company's R&D process (open innovation as in the case of Innocentive); and finally the Masses, micro-freelancers who just participate a tiny bit of work to create something big with thousands of collaborators (like contributors to Amazon's Mechanical Trunk).

Amazon's Mechanical Turk is a web-based marketplace that helps companies find people to perform tasks which are difficult to automate, like identifying items in a photograph, skimming real estate documents to find identifying information, writing short product descriptions. Amazon calls these tasks Human Intelligence Tasks (HIT); they’re designed to require very little time, and consequently they offer very little compensation – most from a few cents to a few dollars. The article provides some nice insight into this Amazon service, which got a lot of hype when it was launched, but was not mentioned much in the last months:

"Just about anyone possessing basic literacy can find something to do on Mechanical Turk. It’s crowdsourcing for the masses. So far, the program has a mixed track record: After an initial burst of activity, the amount of work available from requesters – companies offering work on the site – has dropped significantly. … A few companies, however, are already taking full advantage of the Turkers.

Sunny Gupta runs a software company called iConclude just outside Seattle. The firm creates programs that streamline tech support tasks for large companies … Most problems that iConclude’s software addresses aren’t complicated or time-consuming, Gupta explains. But only people with experience in Java and Microsoft systems have the knowledge required to write these repair flows. Finding and hiring them is a big and expensive challenge. “We had been outsourcing the writing of our repair flows to a firm in Boise, Idaho … We were paying $2,000 for each one.”

As soon as Gupta heard about Mechanical Turk, he suspected he could use it to find people with the sort of tech support background he needed. … iConclude was able to identify about 80 qualified Turkers, all of whom were eager to work on iConclude’s HITs. “Two of them had quit their jobs to raise their kids,” Gupta says. “They might have been making six figures in their previous lives, but now they were happy just to put their skills to some use.” … Gupta turns his laptop around to show me a flowchart on his screen. “This is what we were paying $2,000 for. But this one,” he says, “was authored by one of our Turkers.” I ask how much he paid. His answer: “Five dollars.”

The articles summarizes its findings in five rules of the new labor pool:

1. The crowd is dispersed: People spread around the world can perform a range of tasks – from the most rote to the highly specialized – but this would-be workforce needs to be able to complete the job remotely.

2. The crowd has a short attention span: These new workers find time after dinner and on weekends. So jobs need to be broken into “micro-chunks.” Most tasks on Amazon Mechanical Turk, for example, take less than 30 minutes to complete.

3. The crowd is full of specialists: For Procter & Gamble, the crowd is the world’s scientific community; for VH1 it’s any ham with a camcorder; for iConclude it’s the handful of professionals with experience troubleshooting Microsoft’s server software.

4. The crowd produces mostly crap: Networks like InnoCentive, Mechanical Turk, and iStockphoto don’t increase the amount of talent – they make it possible to find and leverage that talent. Any open call for submissions will elicit mostly junk. Smart companies install cheap, effective filters to separate the wheat from the chaff.

5. The crowd finds the best stuff: Even as a networked community produces tons of crap, it ferrets out the best material and corrects errors. Wikipedia enthusiasts quickly fix inaccuracies in the online encyclopedia.

Read the full article here: http://www.wired.com/wired/archive/14.06/crowds.html
Many of the examples named in the article have been described in my Blog before, see here for a list.

And Jeff Howe also has a new blog on Crowdsourcing with updated information and all links of the original article.

Comments

[Ventus]

Hello,

in the same concept, look at this website that I've just noticed http://cecrowdsourcing.blogspot.com/ This is a further step on the crowdsourcing as it aims to design and sale electronic products. It looks promising but it's just started. I'd recommand you to join this community, who knows it can work and you can pontentially earn money.

[Jeff Howe]

Frank,

Discovering this blog is precisely the reason I chose to begin my own: I knew there were resources out there on the subject -- let's use your term of interactive value creation, as it serves as a better umbrella term than crowdsourcing -- that I simply hadn't been able to tap. I appreciate your careful reading of not just my article but my subsequent posts on crowdsourcing.com, including my attempt to fix a definition for crowdsourcing. The truth is that the phenomenon is in its infancy, and so is the descriptive language forming around it. I'm fully (and happily) expecting the crowd to tinker with all these terms until enough consensus builds to create a fairly stable nomenclature. As it happens, I'm really interested in mass customization, and only decided to leave it out of the piece when it became clear that it didn't quite fit under our operative rubric (or within space confines.) So I'm looking forward to backreading this blog, and the dialogue that I hope ensues between our sites.