The wisdom of crowds is a contentious issue. By all means, providing random people with a problem related to a specific business shouldn’t work – but it does. It works so well crowd-based industries have seen billions of dollars in transactions over the past five years.
Whether it be through crowdfunding or crowdsourcing, the internet has provided businesses the ability to open up their problems and solutions to a wider audience. That audience, which often has a vested interest in the problem, can provide more accurate solutions than if the business tried to tackle the task on its own.
Just as Kaggle provided GE with better data on flight information, or Kickstarter has allowed thousands of projects to start outside of the traditional manufacturing and technology business models, crowd-based work is enabling better productivity in huge organisations.
The rise of equity distribution in crowdsourcing, introduced through legislation in Britain, the United States and Australia, has also given rise to new possibilities – the creation of businesses is becoming more fast, nimble and effective than ever before.
Crowdsourcing enables companies to adopt a new human resource model by engaging with a globally distributed workforce to complete tasks on demand and at scale. Wether small or large, businesses are already taking advantage of this new phenomenon.
Years ago, it would take scientists years to decode DNA strands. Using crowdsourcing and modern communication tools, it only takes hours.
This has become especially popular in the design space, where companies such as DesignCrowd and 99designs are providing crowdsourced solutions. (99designs won a $US35 million investment from Accel Partners in 2010).
Businesses like Kaggle have transformed the way businesses work to find faster solutions. Founded in 2010 in Melbourne and moved to San Francisco in 2011. Kaggle connects companies to a large global community of more than 140,000 data scientists.
Keggle has helped companies such as GE provide better flight information, and even assisted NASA in accurate imaging of dark matter.
It isn’t just large businesses which are benefiting – smaller companies make up the majority of businesses using micro-tasks, and start-ups are using freelancers to keep their operations lean and moving quickly.
Crowdfunding has ignited a global financial revolution and its growth year-on-year demonstrates its acceptance as a key ingredient. More than one million successful campaigns were run by crowdfunding platforms in 2012. Around the world various governments have recognised the importance of crowdfunding and have started to draft legislation to allow crowdfunding models to thrive.
Even more striking is Kickstarter’s ability to provide products a second life. Game studio Double Fine was able to become the first video game project to break $1 million after its original pitch was rejected by publishers, while manufacturers such as Peak Design have been able to create sustainable projects from one product.
Oculus Rift, which launched through crowdfunding in 2012, was purchased by Facebook for $2 billion, (a point of contention between the company and some of its more passionate backers).
Movie and music studios now use Kickstarter as a way to test-drive risky subjects before providing financing, checking to see if there is an audience first.
Kickstarter is clearly at the heart of this transformation. Launched in 2009, Kickstarter is now the largest crowdfunding platform in the world.
Of course, there are plenty of risks. Communication between a project and its backers is crucial, as late updates breed a bad reputation. Similarly, many backers feel they have ownership of a product and its company – even if they don’t own any equity.
While crowdfunding is allowing more projects to become successful, they come at a price –and that price can often risk a company’s entire reputation. Especially if the project earns more money than it needs, and ultimately fails anyway.
The rise of crowdfunding means more projects re getting off the ground outside of traditional funding models. Crowdsourcing is allowing those projects to get more done at a cheaper price, and is even helping large businesses create ideas and get projects done faster than they’ve ever achieved before.
These types of projects aren’t going away – their growth rates are exponential. The question remains for businesses how they’re going to incorporate these new types of funding and project management into their own corporate structures.
The wisdom of the crowd has allowed businesses and organisations to achieve more than they ever would – but they come with risks. Managing them will require careful attention and precision, but make no mistake – whether you like it or not, the crowd is part of your future.
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