Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business

Jeff Howe, author of Crowdsourcing, proposes that the crowd will almost always outperform a set of employees given the right conditions. The crowd is anyone with access to the internet, and the right conditions include a networked virtual environment and motivation. He suggests that people who contribute to crowdsourcing are not motivated by compensation but rather by the satisfaction that comes with collaboration. Crowdsourcing also allows them to work on projects that are not necessarily tied to their experience or credentials.

Howe first used the term crowdsourcing in a 2006 Time magazine article to describe the revolution where amateurs create online content. In his latest work he incorporates online examples that utilize crowdsourcing, including innocentive.com set up for novel problem solving, yourencore.com for scientific research, and threadless.com, focusing on T‐shirt design.

The opening chapter, “The Rise of the Amateur”, defines and discusses amateurism. This is an appropriate starting point as “the energy and devotion of the amateur comprises the fuel for the crowdsourcing engine” (p. 23). Howe notes that the term “amateur” is best used on a spectrum rather than as a distinct designation from “professional”. Some individuals feel overeducated and underfulfilled as the labor market became all the more specialized. Thus they turned to online communities as a creative outlet and as a source of personal fulfillment – the beginning of crowdsourcing.

Chapter 2, “From so simple a beginning”, outlines the development, release and growth of Wikipedia from a dozen articles to over 2.2 million. This rapid expansion is based on the open source model of production where a very large diverse group of individuals outshines the work of a small set of talented, specialized professionals. Howe highlights applications of this principle in ornithology and planetary geology and future possibilities in the patent review and approval process.

Chapter 3, “Faster, cheaper, smarter, easier”, shows how technological advancement has reduced the cost of equipment and fostered the proliferation of global communication. This democratized the film industry as most anyone with a passion for entertainment can pursue their artistic interests. Clearly this is the case as over three million bands have a profile page on MySpace.

Chapter 4, “The rise and fall of the Firm”, talks about how the internet influences consumer marketing. Traditional communities common years ago were largely defined by geography but advances in technology (TV for example) have largely dismantled that social structure. However, technology has also enabled the development of communities based on mutual interest dissolving the barrier of geography. The rise of social networking sites provides the infrastructure needed to connect people with similar interests, allowing them to discuss issues and solve problems collaboratively. Now corporations can downsource: consumers are given the tools to design or modify their own products that the company then manufactures and sells.

Chapter 5, “The most universal quality”, opens with a discussion on collective intelligence. Here the idea is that a group with diversity performs better than a group of experts. The internet facilitates diversity by bringing together various problem solving skills, perspectives and abilities, thus enhancing effectiveness over specialized, homogenous talent.

In Chapter 6, “What the crowd knows”, Howe describes crowdcasting – a problem presented to a large audience yields better results because communities with strong ties (socially or in business) will tend to employ similar problem solving strategies. Netflix utilized this approach with the Netflix Prize, offering $1 million to the individual or group who could improve their Cinematch system by 10 percent. Although there is still no grand prize winner for the Netflix Prize, the top team (which is a combination of two teams) reached a 9.44 percent improvement as of September 30, 2008. Here a flaw is identified: as people get to know each other, the force of collective intelligence diminishes.

Chapter 7, “What the crowd creates”, discusses the essence of online communities. Howe suggests that communities cannot be directed and they will dissolve if felt exploited. People who join online communities are looking for meaning related to their interests. The website iStockphoto is used to highlight how an entire industry, in this case stock photography, was transformed very quickly by community production and collaboration. The chapter highlights that there is a fine line between efficiency and affinity. If consumers feel used they will abort the process and may notify others why they are absent.

Chapter 8, “What the crowd thinks”, chronicles how crowds not only create content online but how they help to filter and manage it. Using ratings, votes, hits or views, consumers quickly ascertain the collective value or popularity of an item online. This process transcends consumer marketing from YouTube or Digg to eBay and Amazon. For example the publisher of Howe's book crowdsourced the cover in the UK with one of the top designs voted online chosen as the actual jacket.

In Chapter 9, “What the crowd funds”, Howe discusses crowdfunding, otherwise known as social banking. In this application, lenders and borrowers are brought together via the internet. The example using the rapid growth of Kiva.org with philanthropic creditors in industrialized countries offering micro‐financing to entrepreneurs in developing nations provides a classic example of what Malcolm Gladwell coined in his book The Tipping Point.

Chapter 10, “Tomorrow's crowd”, discusses video game mods (short for modifications), where players create or customize game elements to highlight a central theme of the book – “the erosion of the boundary between producer and consumer has begun to exercise a considerable effect on our economy and our culture” (p. 269). Howe suggests that the participatory culture of the next generation will make commercial collaboration a staple of profitable ventures.

The final chapter provides a list of ten rules for the successful launch of a crowdsourcing initiative, including picking the right crowd, offering the right incentive, and not asking what the crowd can do for you but what you can do for the crowd. This last point is critical because it addresses a significant criticism of crowdsourcing, as discussed below.

Howe describes how the internet has made global amateur contribution possible, and this is helpful to advance science and medicine. However, when corporations profit from “free” labor or token payments for temporary, intensive laborers, perhaps something is amiss. One user of InnoCentive explained that he spends only 30 minutes on a problem and then quits. So for some, exploitation might be better described as past‐time. It is an ethical issue to consider as corporations utilize consumer input to increase efficiency, and presumably profits, yet only offer minimal remuneration to contributors. Thus the primary focus must be on offering something meaningful to the crowd as savvy consumers quickly sense when their community participation is merely for corporate profit.

Those who find it interesting to diagnose consumer marketing trends and to ponder what the future holds given the rapid pace of advancing technology will enjoy this book. Jeff Howe captures excitement and analysis in his writing, which should prove appealing to marketing scholars and professionals alike. Well written with citations to numerous online sources, readers may find crowdsourcing opportunities and perhaps come to realize that they are already part of the crowd.