From Crowd-sourcing to Crowd-Funding: Is it possible for these two concepts to meet?

It should work in theory—the crowd comes up with an idea, and then organise themselves into an enterprise of sorts and then use the same methods to gain funding for the initiative.  It’s not as though using the crowd is anything particularly new—crowd-sourcing and crowd-funding initiatives have been in play for the past five years.  So why can’t they seem to integrate?

Ideas formulated by crowdsourcing are praised for their innovation and use of collaboration.  Those business initiatives funded by the crowd give life to new companies and instantly give their founders the financial support needed.  In theory, the true success of the crowd would mean the integration of the two. Yet it appears that the errors made by unsuccessful crowd based initiatives are those that are preventing the integration of crowdsourcing and crowd-funding.

These problems stem from the inherent lack of leadership in the form of engaged experts.  When you leave something up to the crowd, it becomes unclear as to in the end, who will be responsible for what.  You can have a good idea, but deciding who will take care of its implementation is where the problems start.  The need for a “Master of Ceremonies” becomes evident—someone who can control the day to day, and essentially to control the crowd seems to be the missing piece.  Contradictory?  Perhaps.  Necessary? Yes.

People may have their own ideas, but in the end, they will always defer to the opinion of one who is an expert in the matter.  Whether it’s a software designer or an experienced investor, once an idea has been given validation by someone with a bit of expertise, the general opinion will tend to follow in kind—be it to agree with the expert or call for a new idea. (For more on how experts contribute to the crowd check out this older post)

In order for this to work as effectively as it can, a specific kind of platform would need to be created—one where those with budding ideas can meet likeminded individuals and not only create new initiatives, but find people who believe in it and make it into a reality.  It might seem to be a lofty goal to reach in short period of time.  But e-retailing platforms, such as styletrek.com, not only invite users to submit the name of an up and coming designer to be sold on the site, but reward the user for their contribution by giving them 1% of all profits earned by the designer through sales on the platform.  Though it is only on a micro-scale, it shows signs that the use of the crowd in business can have a real impact on both substance (the submission of new designers is the crowd’s answer to a buyer at a multi-brand store) and finance. Part of styletrek.com’s success is not in the least due in part to the fact that the e-retailer’s owners are industry veterans with an advisory board of equally successful peers.

Of course, crowdsourcing and crowd-funding in their purest sense are far less controlled.  But as we are trying to understand the full amount of their potential, is a more structured model the way to go about this integration?  Or should the platform be done from the ground up?  Allowing natural leaders to arise from the crowd and guide those that follow.  Or is there another option, utilising technologies that have yet to have been conceived?

 

Comments

[Andrea Pesoli]

This is a great post.

Companies too have the same issue when they turn to their own (internal) crowd for ideas (a sort of crowdsourcing).

Identifying promising ideas and successfully engaging management in their funding is only part of the journey. To be classed as a successful innovation, the ideas have to be productive in practice. Research has shown that the characteristics of exploitation teams are substantially different to exploration teams.

Also, the engagement process (this is akin to the crowdfunding phase) is where the informality of the exploration process meets the formality of the management hierarchy, required to fund the progression of prospective ideas. The success or otherwise of the engagement process will rely critically on the influencing skills of the brokers/ bridges.

To cut a long story short, the same networked approach used inside companies could be applied to a "standard" crowdsourcing+crowdfunding initiative, to understand the hidden or shadow communities that exists (or affinities) within people and the different roles that individuals play in these networks. Once identified, they can then be leveraged to facilitate the innovation results that have proven so elusive to firms and organizations relying on more structured approaches.

Ps: a recent article on the MIT Sloan Management Review also notes that a small number of “idea scouts” and “idea connectors” are disproportionately influential in producing successful open innovation outcomes. Smart companies make sure they are linked. http://sloanreview.mit.edu/the-magazine/2011-fall/53108/creating-employee-networks-that-deliver-open-innovation/