Since it was coined by Wired magazine’s Jeff Howe in 2006, the term “crowdsourcing” has been ascribed to the bringing together of the user and the producer to create newer and better results.

The term has come to describe the practice of giving a wide group of people the opportunity to provide innovative, user driven ideas or products, and driving them into production, often with the support of a larger company.  While there are various pros and cons inherent in the process, the overriding motivation for both sides – the creative consumer and the production company – is that together they can make better decisions than conventional industry experts. 

It is a branch of what professor Eric von Hippel calls “user-centered innovation,” in which producers look to their customers to identify and streamline their needs and outline further enhancements.

Von Hippel is Head of the Innovation and Entrepreneurship Group at the MIT Sloan School of Management, and specialises in research related to the nature and economics of distributed and open innovation. In his book Democratizing Innovation, von Hippel explores how users have propelled the innovation process for centuries, and the opportunities for companies to profit from user-driven innovation.

“The tools for high-quality innovation are getting so cheap and so ubiquitous that individuals can innovate for themselves at a steadily higher quality and at a steadily decreasing cost,” he says. “When innovation resources are cheap and well diffused, what firms ought to do is let a thousand flowers bloom, as they say, and then select the best flower.”

Casting the Net
Big companies have taken notice of the power of the crowd, and a few have found ways to harness this power in the hopes of discovering mutually beneficial improvements.

In 2006, Netflix, the world’s largest online movie rental service spanning 100,000 DVD titles, launched an open competition inviting users to find ways to improve their existing movie recommendation rating system Cinematch – a service that analyses the movie-viewing habits of the company’s 8.7 million users and recommends other titles they might enjoy.

Netflix is looking for an improvement of 10% to the system and will award the winner with US$1 million for their efforts. After two years a grand prize winner has yet to emerge, but this is not for lack of trying. So far, over 35,000 user teams from 180 countries have participated, and the company recently awarded a second annual Progress Prize of US$50,000 to the team that has come closest with a 9.44% improvement.

The competition site features a live leaderboard that clearly showing the progress achieved so far, the names of the teams responsible and the date of their achievement. This year’s winning team, Bellkor in BigChaos, is made up of enthusiastic scientists and researchers, most of whom work in related fields.

“Every day computer scientists and machine learning experts from around the world deploy creative and innovative strategies trying to pass the 10% mark and win the Netflix Prize,” says Netflix Chief Product Officer Neil Hunt.

Drawing on success
Vancouver-based Zeros 2 Heroes Media (who call themselves the “People’s Publisher”) takes user participation a step further, encouraging the aspiring writers, artists and fanboys on their network to have a say in how their favourite comics will develop. Stories are pitched and scrutinised by the readers themselves, who won’t hold back in killing a bad idea in its tracks or helping bringing a great story to life. By tapping this enthusiastic, often obsessive crowd, the company hopes to revolutionise the way genre entertainment properties are developed.

After a month of voting earlier this year, fans crowned writer Greg Robinson winner of Canada’s Comic Creation Nation for his pitch Age of Heroes – the first issue of which will be produced and published online by Zeroes 2 Heroes. 

“Fans know what a good story is and where it can go so we trust them to decide what ideas we should invest in,” says Zeroes 2 Heroes Media Chairman Paul Gertz. “I have no doubt that the fans made a great decision to see Age of Heroes go into production.” As of June this year, 16 projects from a selection of writers have been successfully pitched based on user votes.

Whatever the final product may be, marketing bosses are keeping a close eye on the crowdsourcing world, and surprisingly many of them have already dived in. A recent survey conducted by the Marketing Executives Networking Group (MENG) found that 62% of senior-level marketing executives surveyed have been using crowdsourcing to help them shape the development of their products.

Conducted in December 2007, the study aimed to gauge the opinions and experiences of leading marketing executives. Not only did the study find that many had been using crowdsourcing, but also that they rated crowdsourcing and consumer collaboration as more effective than internal research and development staff.

As for crowdsourcing’s role in tapping business insight, the survey feedback displays optimism about the future potential. Eight out of ten respondents felt it was probable that opportunities exist to source this expertise from business and knowledge networks, with half of these particular executives feeling there was a definite opportunity, and 84% rating this information as valuable or highly valuable.

“Corporate executives should seek to explore ways to leverage their employees, customers and consumers not only for new product and service development, but also for channel management and customer satisfaction,” says Steve Fisher, Chairman of the MENG Consulting Special Interest Group that coordinated the survey. “Service providers should look for opportunities within their clients’ businesses to do the same.”