Outsourcing is a business buzzword with a bad reputation. Like its kissing cousin, downsizing, it often speaks of a corporate irresponsibility, a ruthless appetite for cheap labour that, to many, is tantamount to another example of boardroom greed. And yet many companies are finding a new way of outsourcing large parts of their business while avoiding any sort of scorn. Like outsourcing, so-called "crowdsourcing" similarly seeks out sources of cheap labour, but instead of making employees redundant, its focuses on getting feedback and ideas from the people who know the products best: the customers.
Crowdsourcing, a term originally coined by Jeff Howe in an article in Wired in 2006, is gaining currency this year as everyone from Butlins to the Beastie Boys is keen to engage an army of "click-workers" who will work on behalf of the company, often for little or no reward. Lego, for example, encourages its most fanatical customers to redesign its famous sets; Oxfam is looking for a new slogan and rather than commission an advertising agency, it is asking its members to come up with one instead; Google is sending GPS units to India and recruiting a small army of volunteers to chart the country's roads for its maps. Other big corporations, Dell in particular, have turned potential liabilities — customer complaints — into increased profit margins by listening to their customers. What started as "Dell hell" has been transformed into a heavenly bottom line.
Starbucks is the latest corporation to follow the crowd by turning to its customers in the search for a better cup of coffee. Visitors to a special website powered by Salesforce.com (mystarbucksidea.force.com) are encouraged to suggest ideas that might improve their experience or just vote on ideas already posted by others. Admittedly, many of the ideas are trivial — people fighting to save their favourite breakfast muffin from being withdrawn — but the second most popular idea since the site launched is a plea for Starbucks to offer customers incentives to recycle plastic, which is now under review. The company has also responded to a plea for free Wi-Fi in some of its US stores.
Development
Of course, crowdsourcing for ideas and content is not as new as it sounds. In the 19th century, the Oxford English Dictionary was compiled using an early form of the idea. Volunteers quoted actual word usages on slips of paper, then posted them to an editor. But recently, the idea has been more clearly defined, by both Howe and James Surowiecki's earlier book, the Wisdom of Crowds. And it has been transformed by the power and popularity of the internet.
Crowdsourcing is allowing companies to canvass not just consumers but expert opinion too — with real cash incentives to boot. Proctor & Gamble, at the august age of 171, is perhaps an unlikely leader in this more democratic form of doing business. A decade ago, P&G was stagnating: growth had slowed and its innovations were drying up. The new chief executive, AG Lafley, initiated a new department with the goal of getting 50% of the company's new products developed from outside by 2007, a target surpassed with surprising ease.
"It's grounded in a recognition that the world is full of technologies, ideas and capabilities that, when married with assets that we have, can be terrific sources of growth," says Nigel Trotman, associate director of P&G's external business development. P&G now receive up to 5,000 unsolicited submissions through its pgdevelop.com portal, ranging from the company's competitors to individual inventors working alone in a lab at home. "That's 5,000 ideas we would not have seen if we had not opened our doors," adds Trotman. "We are now seeing more ideas and increasing our external awareness. That can only be a good thing."
Big v small
The evidence from Starbucks and P&G shows that some of the world's biggest companies can easily engage a crowd. Smaller businesses, naturally, find it much harder to source an army of volunteers, let alone get them to engage with their brand. Recently, however, a relaunched service from Amazon — a pioneer of customer generated reviews — is creating a market that might be able connect the two. Companies subscribed to its Mechanical Turk (mturk.com) service can post simple tasks, such as image tagging, data collection, basic market research and product comparison, and offer to pay potential click-workers a few pence to complete them.
"Many businesses [have been] unable to take advantage of an on-demand, scalable workforce because they did not have programming skills or their developer resources were committed elsewhere," explains Sharon Chiarella, vice president of Amazon Mechanical Turk. "With our new web-based tools, any business, in just a few minutes, can submit work that requires human intelligence to a workforce of hundreds of thousands workers."
As crowdsourcing becomes a more accepted practice, the first agencies dealing specifically with its challenges are beginning to appear. Charlie Osmond, co-founder of Fresh Minds, a market research and recruitment company in London, recently won a £5m investment prize to spin off an agency to help companies engage with their customers across the internet "We help business tap into the world of social media," he says. "It is a fast changing world, and it's really only in the last couple of years that business begun to believe that people would want to talk about their brands, services and products online."
The new company, Fresh Networks, builds bespoke "enterprise platforms" that can be integrated into an existing website, featuring many of the same social media tools — blogs, forums, video uploads — that exist on social networking sites such as Facebook. Although it only launched last month, Fresh Networks has already won accounts with the likes of BT, Vitabotics and Butlins.
Osmond admits that some companies are "definitely nervous" about this new, more open form of business, especially in terms of "opening themselves up to positive and negative criticism online and encouraging debate with their customers who aren't happy." He says that the evidence is to the contrary. In his experience, most people who participate online want to be positive, citing the 15m user-generated reviews now contained on the travel site Tripadvisor as evidence that the majority of comments are positive
Cultural change
But beyond this search for new products, crowdsourcing is perhaps helping to change the ways that companies approach business. "I think culturally, certainly in the workplace, things are changing," says Olivia Cook, account director for Select Minds, the UK arm of a US company that builds social networks around company alumni.
In the past, these workers would have been shown the door; now they are being recruited to keep in touch for future product trials and help business development.
"People are consulting their little black book and keeping contacts close to their chests far less often, and seeing the greater benefit of sharing. Some companies are really getting it, while others are not," says Cook. "It's all about keeping in touch with people who may be in a position to refer you business in the future."
Nevertheless, crowdsourcing is beginning to draw its critics, too. Some note that added costs to bring a project to its conclusion, once the initial excitement has faded.
Most surprisingly, Jimmy Wales, the founder of Wikipedia, has said that he finds the term "incredibly irritating," telling a Business 2.0 journalist that "any company that thinks it's going to build a site by outsourcing all the work to its users not only disrespects the users but completely misunderstands what it should be doing. Your job is to provide a structure for your users to collaborate, and that takes a lot of work."
Most think an economic downturn is likely to encourage the use of crowdsourcing as companies search for new ways of cutting overheads, and a crowd of underemployed "click-workers" find that they have a little too much time on their hands. Indeed, it could become a very crowded place indeed.
