Crowdsourcing is Reshaping Business Strategy

Posted on September 10, 2010 by Christian

This is the first of a series of ten articles describing technology-driven business trends reshaping business strategy across all industries.

The first article in the series is about crowdsourcing, a term coined by Jeff Howe in a June 2006 article of Wired magazine. The official definition of crowdsourcing from Jeff Howe, is “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.”

Web 2.0 technologies provide the infrastructure for crowdsourcing. Their interactivity creates contacts at a lower cost and encourages participation on all levels of an organization. Web 2.0 technologies also bring greater scope and scale to organizations, strengthening bonds with customers and improving communications with suppliers and outside partners. This model of labor has been more and more embraced by all kinds of organizations. 70 percent of the executives recently surveyed by McKinsey said that their companies regularly created value through Web communities.

Wikipedia is one of the best known examples of crowdsourcing at work. Thousands of Wikipedia users have created an encyclopedia that studies have shown is as accurate as traditional volumes like Encyclopedia Britannica. Google is another example, as it organizes websites based on how they link to each other. Google sees links as votes for the relevance of a page. Basically Google is tapping the wisdom of crowds to determine which websites are the most relevant.

Intuit is among somewhat more traditional companies that use crowdsourcing to extend their reach and lower the cost of serving customers. For example, it hosts customer support communities for its financial and tax return products, where more experienced customers give advice and support to those who need help. The most significant contributors become visible to the community by showing the number of questions they have answered and the number of “thanks” they have received from other users. By McKinsey estimates, when customer communities handle an issue, the per-contact cost can be as low as 10 percent of the cost to resolve the issue through traditional call centers. Other companies are extending their reach by using the crowdsourcing for word-of-mouth marketing. P&G’s Vocalpoint network of influential mothers is an example. Mothers share their experiences using P&G’s new products with members of their social circle, typically 20 to 25 moms. In markets where Vocalpoint influencers are active, product revenues have reached twice those without a Vocalpoint network.

Click here for a list of other companies relying on crowdsourcing.

To assure crowdsourcing success follow these rules:

Upfront research is necessary. Don’t neglect the up-front research needed to identify potential participants who have the right skill sets and will be motivated to participate over the longer term.
Crowds should operate within constraints. To harness the collective intelligence of crowds, there need to be rules in place to maintain order. Not everything can be democratic. Sometimes a decision needs to be made, and having a core team (or single person) make the ultimate decision can provide the guidance necessary to get things done and prevent crazy ideas and groupthink from wreaking havoc on your product.
Crowds must retain their individuality. Encourage your group to disagree, and try not to let any members of the group disproportionately influence the rest.
Crowds are better at vetting content than creating it. It is important to note that in most cases, the group merely votes on the final product; they do not actually create it.
Provide feedback and the right incentives. Give feedback to stimulate continuing participation and commitment. Getting incentives right is important as well: participants value reputation more than money.
Gain a high level of trust within a Web community to earn the engagement of top participants.

Ten technology-driven business trends to watch

Posted on August 4, 2010 by Christian

The McKinsey Global Institute recently published a paper describing 10 technology-driven business trends that are reshaping the business strategy across all industries. The surging web technologies, the increased computing power, and fast and ubiquitous communications are reshaping every aspect of business, from human capital, sales and marketing, customer care, R&D to organizational structures.

Trend 1: Crowdsourcing
Trend 2: New Boundaries for Organizations
Trend 3: Collaboration Networks
Trend 4: The ’Internet of Things’
Trend 5: Data Exhaust
Trend 6: Tech’s Environmental Footprint
Trend 7: Software as a Service (SaaS)
Trend 8: Multi-sided business models
Trend 9: Bottom up Innovation
Trend 10: Government 2.0

The rapidly shifting technology touches every aspect of a company, hence executives need to think strategically about how to adapt management and organizational structures to meet these new demands and opportunities.

The impact of the first six trends will often vary considerably in different parts of the organization and should be managed assigning the responsibility for identifying the specific implications of each issue to functional groups and business units. In addition, because some of the most powerful applications of these trends will cut across traditional organizational boundaries, executives should also identify parts of the company that are handling similar issues and make them work together.

Software-as-a-Service, Multi-sided Business Models, and Bottom up Innovation are causing far-reaching changes in the business environment that require shifts in a company’s strategy. CEOs and their immediate senior teams should start monitoring these issues to generate the interdisciplinary, enterprise-wide insights needed to take full advantage these trends. Once opportunities start emerging, senior executives should quickly test these on a small, closed environment and then expand successes quickly to other areas.

And finally the tenth trend, using technology to improve communities and generate societal benefits by linking citizens, requires action by not just senior business executives but also leaders in government, nongovernmental organizations, and citizens.

Social technology growth marches on in 2009

Posted on August 25, 2009 by Syndicated Author

Josh Bernoff, co-author of Groundswell: Winning in a World Transformed by Social Technologies (Harvard Business Press, 2008) and Senior VP at Forrester Research released the latest analysis regarding the adoption of social media and its technologies: This year more than four out of five online Americans are active in either creating, participating in, or reading some form of social content at least once a month.

First of, a little background information. Forrester analyzes consumers’ participation in social technologies with a tool called the “Social Technographics Profile” (check my post and use the same tool of this analysis here). The profile puts online people into overlapping groups based on their participation. Groups and behaviors are graphically shown in a ladder (Figure 1):

The ladder categories are kept consistent to allow Forrester to make year-to-year comparisons, across ages and genders, and across geographies. Thus, more interesting than the results of 2009, is the trend over the last 3 years (Figure 2):

Trend of Creators, Critics and Collectors:
In the US, social technology Creators and Collectors grew slowly, and Critics didn’t grow at all. Creator activity appeals only to those who like to create or upload content, and regardless of the ease of blogging and YouTube uploading, this doesn’t appeal everybody. As for Critics, those who react to content, this group hasn’t grown at all. According to Bernoff, this is a result of a small but actual decrease in the number of people contributing to discussion forums due to the fact that much of this activity has been sucked into social network sites like Facebook.
Trend of Joiners, Spectators and Inactives:
Joiner activity exploded and Spectators became nearly universal. The explosion in Joiners from 35% to 51% of online Americans reflects the appeal of Facebook, as both press coverage and invitations from friends suck more of us into social networks. Spectators — those consuming social content — reached all the way to 73% of online Americans.
Trend by Age:
Looking at the data by age, the participation among those under 35 is nearly universal (less than 10% Inactives) and even among those 55 and over, is about two-thirds.
International Trends:
Europeans adopt these technologies more slowly than in the US, with about 40% Inactives in the countries where Forrester does surveys. The Netherlands and Sweden have the most participation, Italy has the most Creators, and social networks are most popular in the UK.

Summary:

This data should end any skepticism about whether social media is real. The trend is clear: soon, if a person is online, it will almost certainly be consuming some sort of social technologies. With the level of social content being put out there, it will be virtually impossible for anyone online not to be a Spectator. And last but not least, social media is usually thought to be a way to engage younger generations, but the data shows that participation of older generations is considerable and growing at faster pace than that of the younger ones.

Today a successful digital marketing strategy should always include social media, either in the company’s own site, microsite, etc. or in a social a networking platform such as Facebook, Twitter and the like.

Five Years of the Long Tail

Posted on August 18, 2009 by Christian

Almost 5 years ago, Chris Anderson wrote an article in Wired magazine describing the niche strategy of digital businesses that sell a large number of unique items, each in relatively small quantities and elaborated the Long Tail concept in his book The Long Tail: Why the Future of Business Is Selling Less of More (ISBN 1-4013-0237-8).

Many markets have historically been dominated by a small number of best-selling products. The Pareto Principle, also known as the 80/20 rule, describes this common pattern of sales concentration. However, by greatly lowering search costs, information technology in general and Internet markets in particular have the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sale (MIT working paper titled “Goodbye Pareto Principle, Hello Long Tail” by Erik Brynjolfsson, Yu Hu, and Duncan Simester).

After 5 years not much has changed of course and when designing a successful digital business strategy, the following forces should be taken into account:

The democratization of the tools of production: the universe of available content is growing faster than ever. Almost everybody can become a producer of content with the available tools. Talent is not universal but is widely spread– give enough people the capacity to create and gems may emerge.
The democratization of distribution: the Internet makes it cheaper to reach more people increasing the supply at the tail. That in turn translates in more consumption and sales, though prices tend to zero (free).
The connection between supply and demand: the technologies that connect consumers (like search, blogs, twitter, etc) is what drives demand from the head (popular products) to the tail.

To harness the power of these forces consider to:

Make everything available: Use mass/popular products (head) to attract mainstream consumers, but almost anything is worth offering on the off chance it will find a buyer (tail).
Lower your price at the head (mass market) and charge at the tail (niche).
Help consumers find the tail: Provide the tools such as recommendations etc. to give tail products visibility to consumers.

Top Ten Sites in the Private and Public Sector

Posted on July 3, 2009 by Christian

A paper released by Governance Studies at the Brookings Institution evaluates the websites of leading US corporations with state and national governments, grades their overall performance, and examines features of digital innovation, including: personalization, interactivity, transparency, PDA access, disability access, language translation, number of online services, privacy, security, and user feedback.

These are the results:

top sites