at the intersection of design, storytelling, technology, & love

“Crowdsourcing” is defined as taking a task traditionally performed by an employee or organization, and outsourcing it to a group (or crowd) of people.

Crowdsourcing has given rise to a new breed of company. While historically companies served their customers in formal, one-way exchanges, crowdsourced companies are run by their customers, and serve as a conduit for their customers’ talent and ambition.

Crowdsourcing has given rise to companies whose entire business model is based on selling products dreamed up by their customers. For example, a company called Quirky lets customers submit home-grown product ideas which, if rated favorably by visitors to their website, are manufactured and sold. Following Quirky’s example, Threadless has introduced a similar model in the T-shirt space; Innocentive and IdeaBlob in the innovation space. Read: the only products these companies sell are the ones designed by their customers.

This phenomenon in not limited to web startups; traditional brick-and-mortar companies have also integrated crowdsourcing into their operations.

Starbucks has used crowdsourcing to change the way it runs its stores. Through the “My Starbucks Idea” website, Starbucks customers can create and prioritize the management decisions that Starbucks makes at a corporate level and rolls out through it coffeeshops.

Frito-Lay has used crowdsourcing to create TV ads for their products. In 2009 they crowdsourced the development of their SuperBowl ad for Doritos chips. The result? Not only was the ad televised to 95 million people, but in market surveys it ranked as the most memorable ad of the night.

So why should companies crowdsource?

For starters, I believe that companies that outsource can improve brand loyalty and lower costs. No doubt customers will think more highly of a company that not only hears their recommendations, but implements them (Starbucks). Doritos proved that crowdsourcing certain aspects of operations can lead to a product (advertisement) that is extremely cheap to make and very effective. Finally, Accenture recently reported that “68 percent of returns are products that work properly but do not meet customers’ expectations.” I believe that companies that open up the design process to their users are more likely to close this gap. And what is the impact on the bottom line? In 2009, $13.8 billion.

The philosophy of a company is actually sort of beautiful: a publicly owned entity in service of its stakeholders. In practice the difficulty of integrating potentially millions of stakeholders into the organization has made realizing this philosophy difficult, resulting in a disconnect (often public), between a company and its customers. Crowdsourcing enables a new reality, where companies are not only more responsive to customers, but in many cases are the customers themselves.