Developing and leveraging crowd capital: A valuable resource for organizations both global and local

Typhoon Hagupit, the devastating typhoon that hit the Philippines this past December, was notable for its particular ferocity – marked by 27 deaths and over one million residents evacuated. In some coastal areas, over 80 percent of all homes in the typhoon’s path were destroyed. 

What leaves cause for hope in the aftermath of this tragic weather event was the innovative form of emergency response launched by the United Nations. While the Philippines was recovering from the devastation, the U.N. quickly deployed a crowdsourcing platform to provide humanitarian aid, respond to urgent needs, and assess infrastructure damage. 

Teaming up with the crowdsourcing platform Micro-Mappers, the U.N.’s Office for the Coordination of Human Affairs (OCHA) asked Twitter users to identify posts highlighting damage, emergencies and individuals in need of help, as well as tweeted photos showing the damage. From this people-sourced information, a crisis map comprised of accumulated information showed where emergence response was needed most.

This is a global example of an organization tapping into the power of the crowd to address a problem – this one being particularly acute. But more companies and government bodies, large and small, are also reaching out to their publics via crowdsourcing. The cash-strapped City of Baltimore, for example, is using crowdsourcing on its revamped website to get feedback from city residents about how they want the city to budget their collective taxpayer dollars. Coca-Cola Shanghai, meanwhile, is utilizing crowdsourcing to garner what AdAge described  as “impressionist market research” videos to describe what Coke tastes like – and ultimately deliver some creative marketing ideas for the company in China. 

The simple premise of crowdsourcing for business is the combination of crowds and outsourcing. The activity has seen significant growth in recent years because of the proliferation of the Internet, the uptake of mobile technologies, and the massive explosion of social media usage. That’s not to say that crowdsourcing doesn’t exist offline, but as the above examples illustrate, its biggest advances and growth stories are happening via the Internet. 

Crowdsourcing also represents a rather positive direction that is something new for crowds, which haven’t always been held in such high esteem. In 1895, the French sociologist Gustave Le Bon authored a book entitled The Crowd: A Study of the Popular Mind. In it, he warned of crowd psychology characterized by "impulsiveness, irritability, incapacity to reason, the absence of judgment of the critical spirit and the exaggeration of sentiments”, among other negative sentiments.  Over a century later, crowdsourcing reverses such wariness of crowds, recognizing important crowd traits that were ignored for too long – intelligence, creativity, innovation and enthusiasm. 

A new research paper I have with colleagues in the journal Business Horizons shows four different kinds of crowdsourcing. See Figure 1.

Figure 1. Four types of crowdsourcing (Prpić, Shukla, Kietzmann and McCarthy 2015)

Firstly, there is crowd-voting – think of online popularity contests, or reality TV shows like American Idol. The aggregate vote helps an organization come to a decision that is certainly democratic for voting stakeholders. Secondly, there is micro-task crowdsourcing – where an organization breaks a problem down into much smaller jobs to be completed by the crowd. Thirdly, there is idea crowdsourcing, which solicits creativity and new ideas from the crowd – whether they be t-shirt designs or movie trailers – helping organizations to leverage the diversity and innovativeness of their audiences. Finally, solution crowdsourcing invites real solutions to well-defined business problems. A good example is when video streaming service Netflix invited users to help improve the company’s predictive accuracy, a system that determines whether a particular viewer is going to enjoy a particular movie based on demographics, tastes and historical viewing habits. 

The key here is that various crowdsourcing approaches can be used for different goals, and can even be used in collaboration with one another. In sum, the answer to which approach to use is - it depends!

But how do organizations get started on this path to harnessing both the expertise and the opinions of their respective crowds? How do managers implement a top-down approach to getting bottom-up resources – gaining crowd capital in the process? To this end, our research proposes three key stages to gaining crowd capital: constructing the crowd, developing crowd capabilities, and harnessing crowd capital (see figure 2).

Figure 2 - Constructing and harnessing crowd capital (Prpić, Shukla, Kietzmann and McCarthy 2015)

For the first stage, constructing the crowd, it is vital that the primary purpose for crowd engagement is strategic and aligned with organizational goals. Once addressed, organizations can fine-tune their selection process: How big is the crowd? Where does it exist in the online or offline worlds? What are its characteristics or capabilities? What specific requirements or conditions should it fulfill? 

After deciding on the who of crowdsourcing, an organization needs to turn its attention to the how. Specifically, how does a firm acquire resources dispersed in a crowd, and how does it align crowd contributions with existing organizational operations and processes. Going back to the example of Hurricane Hagupit, the United Nations had to tap into the knowledge of online denizens while synching up their information with the know-how and operations already in place with its emergence response operations.

We know that successful organizations needs to be proficient in identifying and acquiring external resources. In a crowd context, this means they need to understand how to interact with crowds to draw out knowledge, and choosing an appropriate technology that facilitates this engagement. For Coca-Cola Shanghai, this was the crowdsourcing platform platform eYeka. For the city of Baltimore, it was a proper government website. 

The assimilation element in the crowd capital creation process lies in the organizations ability to analyse, interpret and understand the crowd contributions. That is, how does an organization digest all of this new information? This might involve tasking teams or individuals within the organization to curate the crowd contributions and ensure such contributions are on target. 

This leads to the harnessing crowd capital. Our research maintains that an organization’s own employees, for example, can serve as a filter for crowd contributions, while the crowd inversely can help make decisions based on an organization’s groundwork. What matters is that different types of crowdsourcing may be employed simultaneously or sequentially.

The sourcing of crowds to power organizations represents a remarkable milestone in the evolution of business and government. Crowd voting, micro-task crowdsourcing, idea crowdsourcing, and solution crowdsourcing are just a few crowdsourcing concepts that individual organizations are assigning to the many. 

Over 100 years ago, Le Bon was right about the power of the crowd – but was wrong in downplaying their helpfulness to organizations. By both understanding and utilizing crowd capital, organizations can evolve to become more accountable, sustainable, and responsible -- in certain cases even more profitable and efficient. Today’s organizations are wise to draw strength from numbers at this historic confluence of online technology and positive public engagement.

You can view and download a presentation related to this posting here: 

Three Myths of Innovation

In a recent series of video interviews for The Refinery Leadership Partners I explored three common and damaging myths about innovation.
Myth 1 - Innovation is just about products 
With much of the world’s corporate and public R&D budgets dedicated to developing new technologies that are then patented and embedded in new products such as medicines, cars, cell phones, computers, etc., it is easy to believe that innovation is only about new product development. Innovation however, applies to anything that can be changed and then adopted by users to address some form of problem or opportunity. Consider, for example, Pink Shirt Day, a ‘social innovation’. On the 27th February 2007 two Nova Scotia grade 9 students asked their friends to come to school wearing pink clothing as a protest against bullies who were tormenting a boy who often wore a pink shirt. This innovation was a novel way of protesting and raising awareness of bullying. It has since has been adopted by schools in North America, with the 27th February each year known as Pink Shirt Day.

Thus, innovation the verb (i.e. process) and innovation the noun (i.e., result) can be applied to all instances of adopted change. For example, the first time companies used celebrities to endorse their products was a marketing innovation; when the manufacturer Pilkington invented float glass technology this was a process innovation; and when Netflix transformed how we access and consume movies and TV shows this was a service and business model innovation. 

Myth 2 – Innovation is everybody’s job 
I agree that many companies probably need to do more innovation, but I think there is a stronger need for companies to do innovation in a smarter way. So I when hear the mantra that ‘innovation is everybody’s job’ I wince, because if everyone is innovating (and innovating all the time) that doesn’t leave many people to look after existing customers and to make sure they receive existing products and services in a way that will delight them.

Smart innovation is about balancing and adjusting the extent to which employees focus on exploration activities (i.e., being innovative) versus focusing on exploitation activities (i.e., being efficient and reliable). This capability to strike a balance, and when necessary adjust the balance over time, is known as organizational ambidexterity. The extent to which a company’s employees should focus on exploration or exploitation will depend on the rate and direction of change (i.e., the environmental velocity) in a company’s industry. The greater the industry velocity, the more a company should pursue exploration. 

Myth 3 – Listen to the customer 
When innovating, should companies listen to and learn from their existing customers? It depends! If companies want to develop incremental innovations that refine their existing offerings, then listening to customers will very likely be a good source of information. But if companies are aiming to develop radical or discontinuous innovations, then their existing customers are unlikely to value the performance attributes of the innovation. This is the logic behind this quote by Steve Jobs:

“It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."

Thus, it is doubtful that companies will shape and create new markets by listening to customers who are on the whole comfortable with their current products and services.

One exception to this lesson is when companies observe and understand the actions and needs of creative consumers, defined as: "customers who adapt, modify, or transform a proprietary offering" (Berthon et al. 2007: 39). Creative consumers include individuals such as Walt Blackader, a ‘lead user’ who developed the sport of rodeo kayaking and associated products forit; and households in rural India that use their top loading washing machines to churn curd and make lassi, a yogurt-based drink. Creative consumers are the sources of many radical and discontinuous innovations because they possess and combine information on the problem/opportunity and information on the solution.

More innovation myths

For a comprehensive list of other innovation myths and associated lessons check out ScottBerkun’s excellent blog

Further Reading

This posting is based on research and content from the following publications:

Using Cladistics to Understand and Shape the Evolution of Economic, Social and Technological Systems

"there is natural speculation that organizations,
like species,can be engineered by understanding the evolutionary processes well enough to intervene and produce competitive organizational effects'' (March, 1994)

What is cladistics?
Here is the second posting on how evolutionary concepts can be used to understand and manage both innovation and change.

  The evolution of mobile phones: miniaturization
in the style of a Russian Doll by Kyle Bean.

Most economic, social and technological systems change over time, and in a way that is much like biological evolution. Thus, to map and understand the change in industries, products and technologies, myself and other researchers have borrowed the technique of cladistics (also known as phylogenetic systematics) from the biological sciences, to classify how different types of system have evolved overtime.

The word ‘cladistics’ is derived from the Greek word ‘clades’ meaning ‘branches’; cladistics is concerned with understanding how systems adapt and branch out over time. A cladistics analysis results in a ‘cladogram’ (see Figure 1 and Table 1), a tree-like diagram that depicts the pattern of relationships among different types of systems that share a common ancestor. The creation of a cladogram involves following three core assumptions (see McCarthy, 2005):  

1. The systems in any population (e.g., different organizations in the same industry, or different products in the same market) are related to each other, in that they have descended from a common ancestor. For instance, automotive companies such as the Morgan Motor Company, Tesla Motors, and the Ford Motor Company all have very different strategies and practices, but they can all be traced back to Karl Friedrich Benz and Bertha Benz who founded the first manufacturer of gasoline-powered automobiles – the company Mercedes-Benz.

2. System evolution follows a tree-like branching pattern with large punctuated changes (known as cladogenesis) producing new branches i.e. new systems or new species. For instance, the shift from the Ancient Craft Production method of automobiles, to Mass Producers in the 1920s, and then to Just-in-Time Systems in the 1970s (see Figure 1) represents some of the key branching moments in the history of the automobile manufacturing industry. Also, consider the evolution of mobile phone handsets. In 30 years they have transitioned from large shoe box sized devices, with antennas and keys, that were only able to make telephone calls, to much smaller candy bar sized devices with touch screen communication and no antennas. Currently mobile phones are evolving into multi-media devices that are again slowly increasing in size. 

3. Cladogenetic change is accompanied by a more continuous series of incremental change known as anagenesis. This is the improvement or refinement of a system rather than the creation of an entirely new type of system. Anagenesis is evolution within a branch lineage, while cladogenesis is evolution that results in a new branch.

For more information on how to undertake a cladistics analysis, see the five step process described in section 5 of this article. 

Figure 1 Automotive industry cladogram
(from McCarthy et al. 2000)

Table 1 Operational practices (characteristics) for the
automotive industry cladogram (from McCarthy et al. 2000)

Cladistic studies of industries and products

So what does a cladistics analysis tell us? Here are four core insights that cladograms provide for management scholars and practitioners:

  • System Recipes – the lineage or branching network for each type of system in a cladogram represents the DNA or recipe for that system. For example, if you wanted to know precisely what constitutes a Lean Producer strategy (see Figure 1) you simply trace all the characteristics on the branches that connect the ancestor branch (Ancient Craft Systems) to the Lean Producer branch. Thus, the first three characteristics in this recipe would be 1, 2 and 47, and the final three characteristics would be 15, 23, and 29.
  • Change Sequence – cladograms help us to understand how to transform one type of system to another type of system (e.g., from Mass Producer to Lean Producer) by providing information about the sequence in which changes should be made. For instance, a flexible, multifunctional workforce (characteristic 24) must first be in place in order to practice set-up time reduction (characteristic 25).
  • Path dependency – where you want to take a system, regardless of whether it is a social system or a technological system, often depends on where the system has come from. This is known as path dependency. If an organization wishes to successfully change from a Mass Producer to a Lean Producer it must adopt the characteristics on the Lean Producer branch (e.g., 29, 23, 15, 49, 35, etc.) but also it must drop, unlearn or stop doing those Mass Producer characteristics that will be in conflict with being a Lean Producer (e.g., 52, 46, 20 and 14).
  • The Velocity of Change – whether it is products, technologies or industries, a cladogram depicts the velocity of change. The changes in both the rate and direction of characteristics overtime can be counted to determine how dynamic the system is changing, both in terms of pace and continuity. Once the velocity is determined managers should then ensure that the velocities of their companies innovation processes (organizational, product and technological) are appropriate for their industry and market conditions.

Further Reading