Crowdsourcing Risk and Reward – How to Evaluate Options for Success

To be upfront about where we stand, yes - we are great supporters of tapping into the wisdom of the crowd for many pursuits – for citizen engagement, open innovation, or crowdfunding. That said, we realize that it’s important to be aware of the fact that there are risks to consider. This article is a response to the concerns raised by people we meet along an organization’s path of considering crowdsourcing to fulfill a particular need for their organization or their constituents.

To start, it’s important to get a few definitions out of the way in case you are new to the topic. For those with experience with these concepts, please bear with us.

What is Crowdsourcing?

Crowdsourcing is one of those concepts that have competing definitions. On one hand, crowdsourcing is an engagement method whereby organizations (such as cities, brands and entrepreneurs) seek input from communities of people.  These communities can be open or closed, homogenous or diverse.  Participants are invited to contribute ideas, solutions, or support in an open process whereby the elements of creativity, competition and campaigning are reinforced through social media to come up with more powerful ideas or solutions than could be obtained through other means. Ideation is also used to as a term to describe this concept or process. Citizen engagement, open innovation and ideation are terms that are also used.

Crowdsourcing can also be defined as the division of labour by a distributed, multi-dimensional workforce, (sometimes paid – sometimes volunteer), motivated to accomplish a set of tasks that combined together to achieve an overall goal or solve a problem. This motivation can be financial, reputation building, or part of being a good citizen of a particular community (ie. computer programmer).

In a Bloomberg Businessweek article, Crowdsourcing: Consumers as Creators, Paul Boutin writes:

Crowdsourcing is a subset of what Eric von Hippel calls “user-centered innovation,” in which manufacturers rely on customers not just to define their needs, but to define the products or enhancements to meet them. But unlike the bottom-up, ad-hoc communities that develop open-source software or better windsurfing gear, crowdsourced work is managed and owned by a single company that sells the results.¹

To paraphrase von Hippel, it relies on would-be customers’ willingness to hand over their ideas to the company, either cheaply or for free, in order to see them go into production for the benefit of themselves and other customers.

Risk and perspective

Risk, always, is viewed from two perspectives: those running a crowdsourcing initiative, and those participating in one. While this article is written for those thinking of running a crowdsourcing initiative, we thought we should address the fact that risk is also something participants think of as well.

Participant risk

The risks participants should be aware of include:

  • Privacy – Make sure your information is secure and used by the intended party only. This includes personal and financial information. Checking to make sure the site you are visiting has SSL certificates active, does not redirect you to unknown URLs (web addresses), and is not asking for information that you don’t feel comfortable giving.
  • Reputation – Make sure you are dealing with authentic and transparent organizations.  You wouldn’t want to be involved with an organization that is up to ‘no good’ away from the Internet; so being aware of who is running an online engagement makes sense.
  • Intellectual Property – If you participate in a crowdsourcing or open innovation initiative, make sure the ideas or comments you contribute are your own and not taken from someone else that might be upset you were passing them off as yours. Ideas are open for everyone to contribute but some sites allow you to contribute product ideas that might have a financial reward associated to them and misrepresentation can get you into trouble.

Organizer risk

As someone who is looking at using crowdsourcing, the first thing to keep in mind is that – whether you are a brand, a city, or other organization – your crowd is already talking about you. A quick search of social media properties and traditional forums will give you the sense that for good or bad, people are talking about you behind your back. The risk of providing a place for this conversation to happen where you can monitor and benefit from it outweighs the risk of not doing so.

Understanding Crowdsourcing risks

Most social and business practices aren’t risk-free, and neither is crowdsourcing. It can be a useful tool that can be used by individuals, citizens, or any organization or company in any industry. However, before diving into a crowdsourcing initiative, you should evaluate and address certain risks to protect your brand and the integrity of your organization. As with all endeavours, risk is measured on the Risk – Reward continuum that is inherent for each organization.

Evaluating risk tolerance

Successfully engaging the crowd means opening up your doors to new people, perspectives, ideas, and solutions to problems and other things they want to share with your organization. To start, ask yourself a few simple questions to help you set the strategy:

  • Question 1: What am I trying to achieve with this initiative and what is the reward?
  • Question 2: Is the crowd I am trying to attract external (open) or internal (closed)?
  • Question 3: Am I able to trust a vendor to take care of this risk or does my organization prefer to manage it directly?

For many organizations, crowdsourcing may seem too risky. This perceived risk can often get in the way of open innovation and crowdsourcing. In the article 2 Ways to Reduce Open Innovation Risk: Convert the Naysayers and Bring on the Seasoned Veterans, Jackie Hutter, IP Strategist, writes:

In order to be successful (and not only have a single chance to try Open Innovation), one must be able to navigate the corporate politics that would stop the process, as well being able to minimize the risk associated with going outside for new product ideas. I think I have a solution to each of these concerns.²

The Risks

As we discussed, crowdsourcing risks should be looked at with perspective in mind. The following table lists risk to all parties for two types of crowdsourcing initiatives.

The first type of crowdsourcing is that focused on open innovation – the aspect that is the most commonly used in industry and is the basis for the first instances of using the crowd to complete tasks and come up with solutions to problems that are technical in nature. The second type focuses on using this methodology for engaging citizens – whether it be a city, a province or state or country – to not only solve problems, but also gauge support and refine solutions for a particular community based challenge. This could be policies, programs, etc.

Table: The risks of Crowdsourcing

Crowdsourcing for Open Innovation

Crowdsourcing for Citizen Engagement

Reduced internal capacity for innovation Lack of resources for proper management of campaign
Gamification by special interest groups or individuals Gamification by special interest groups or individuals – trying to rig the voting
Controversy over IP ownership after idea is submitted Confusion by the crowd caused by lack of clarity in campaign
Confusion by the crowd caused by lack of clarity in campaign Participation is low due to lack of awareness of the engagement initiative
Originality of idea (relates to ownership mentioned above) Distrust among community caused by past experiences – lack of follow-through by those running the campaign in the past.
Campaign for innovation is not set-up to allow the organization to respond in a timely manner
Low participation due to lack of awareness of open innovation initiative
The crowd stops participating due to the perception the organization is non-responsive to their input

Risk: Crowdsourcing does not solve your organization’s problem

Some of the biggest companies in the world rely on crowdsourcing. Starbucks, Nokia, Dell, IBM, Netflix and many, many more organizations have successfully used crowdsourcing in a number of ways. Some of the greatest innovations at these organizations have come from the ideas brought forward by the crowd. However, in order for crowdsourcing to work, the crowd needs to know what you expect from them and the project needs to be very focused. Your organization’s culture plays a major role in the success of crowdsourcing. In a New York Times article by Steve Lohr, “The Crowd is Wise (When it’s Focused),” Lohr wrote about the importance of corporate culture:

Opening the corporate doors to ideas and inspiration from the collective crowd holds great potential, but there are pitfalls, warns Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley. To succeed, Mr. Chesbrough said, a company must have a culture open to outside ideas and a system for vetting and acting on them.

“In business, it’s not how many ideas you have,“ he observed. “What matters is how many ideas you translate into products and services.³

Risk: The crowd doesn’t have the answer

Many organizations don’t feel that the ideas offered by the crowd will actually solve the problem at hand or lead to innovation suitable for investment. The solution to your problem isn’t always going to be found within the walls of your organization. Organizations are expected to do more with less, and that often means fewer employees. In the article 2 Ways to Reduce Open Innovation Risk: Convert the Naysayers and Bring on the Seasoned Veterans, Hutter writes:

Because of this “extreme downsizing,” however, the experienced coaches and seasoned players are not on the usual playing fields; that is, they are not in the corporations where they learned their crafts (on someone else’s dime). Moreover, many of them–presumably the best and most entrepreneurial of them–are not sitting on the sidelines after being cut from the corporate teams for which they have been playing for many years.⁴

Risk: Failure to participate

Some people worry that crowdsourcing is that shiny new thing that everyone wants to be part of at the beginning, and the hype will die down a few campaigns in. Crowdsourcing isn’t new. The term itself has been around for six years or so, but organizations had been using various forms of crowdsourcing before then. Look at the longevity of crowdsourcing projects like My Starbucks Idea, Dell’s Ideastorm and Nokia’s IdeasProject. These projects continue to receive widespread support from their crowds – and they have all been around (and producing results) for many years. One of the things each of these organizations does well is communicate with their crowd. These groups promote ideas that have become a reality and the crowd that they are listening – and that their ideas do have value.  Simple tasks such as commenting on ideas and getting in on the conversation help to build deeper relationships. These relationships help build loyal crowd members, who in turn get involved in more projects and share projects with their own crowds.

Risk: Crowdsourcing takes too much time

People worry that projects will take too much time to complete if crowdsourcing introduced to the process because of the large number of people involved and the number of submissions received. In many organizations, they think that it will just be easier to limit participation to a team in the company or the company as a whole because there are fewer ideas to deal with and decisions can be made faster. However, just because you can move through a process faster, doesn’t mean the solution is going to be the best one. There are two ways to address the time issue:

  • Different projects require different response times
  • Create contest type projects that have time deadlines attached to them.

In addition to these options, you’ll also want to develop a plan for handling submissions so that they are all reviewed in a timely manner. If needed, set deadlines and work backwards to figure out which activities you need to complete and when. This will help you stay organized and keep the crowdsourcing project on track.

For time-sensitive projects, crowdsourcing can be used to bring large groups of people and information together in a short period of time. Using social media to leverage your crowdsourcing project allows you to cast a wide net, reaching your crowd to solve a problem/find an answer.

Crowdsourcing focuses on small asks, where people often have an easier time of relating to the project or ‘getting their head around it’ in order to support it to the level they wish. Reaching a wider range of people through crowdsourcing and social media often means that projects can be funded on time.

Risk: Idea theft

Another thing organizations often worry about is idea theft. Ideas are only ideas until they are executed. Sometimes an organization may not have the resources to execute the ideas. While some companies will modify ideas to put their own spin on them in order to make them a reality.

Risk: Maintaining privacy

Many of the crowdsourcing platforms use technical security measures such as SSL certificates when they develop their platforms to protect the privacy of those that participate in the campaigns run by our clients. Because platforms often closely integrate with clients’ websites, making sure they are developed properly in order protect privacy is taken seriously from the start.

Risk: “Gaming the system”

There are many ways to try and prevent gaming of the system – but there it can be a balancing act. Restricting access to people you know (ie. log in to access a campaign) is one option, but the problem with this is that you risk narrow your crowd, which isn’t not always desired for the campaign you are running. The crowd also does a fairly good job of preventing people from trying to gain the system by reporting abuse, etc. Any platform that you would consider should have security features in place that prevent gaming of the voting functionality, for example, to ensure integrity of the system around voting and ranking.

Crowdsourcing best practices

There are a number of crowdsourcing best practices, whether for open innovation or citizen engagement that should be considered as a way to reduce risk for your organization.  Since these endeavours require commitment to execute successfully, there are a few questions you’ll want to answer and research you’ll want to do as a starting point.

In conclusion, asking whether crowdsourcing is right for you after evaluating the risks and benefits is the natural question. You need to think about the main objective and ask if crowdsourcing is right for your organization. Here are some questions you’ll want to give some thought to:

  • Is your organization culturally open to input from outside – there is no sense going down the crowdsourcing or open innovation path if your team is closed minded or will feel threatened?
  • Do you have the resources to investigate the ideas and innovation that come from the crowdsourcing process?
  • Does the presence, or not, of a reward for the winning idea change things? What is the risk associated with this?
  • Do you want to use internal development resources to create something from scatch or use an existing platform? If you choose to use a platform that exists, have you considered the criteria you might use to evaluate crowdsourcing platforms to make sure they contain the functionality you require?

Crowdsourcing risks shouldn’t get in the way of enabling open innovation or citizen engagement at your organization. Using your crowd to solve problems is a great way to make your crowd feel included and empowered, helping boost brand loyalty. Crowdsourcing risks cannot go ignored, as wrong turns can have a negative impact on the success of your crowdsourcing or crowdfunding project.

By Paul Dombowsky


[1] Lohr, Steve  New York Times  07/19/2007 http://www.nytimes.com/2009/07/19/technology/internet/19unboxed.html/

[2] Hutter, 2 Ways to Reduce Open Innovation …http://ipassetmaximizerblog.com/?p=1092

[3] Boutin, Paul Bloomberg Businessweek “Crowdsourcing: Consumers as Creators” http://www.businessweek.com/innovate/content/jul2006/id20060713_755844.htm

[4] Jackie Hutter, IP Strategist “2 Ways to Reduce Open Innovation Risk: Convert the Naysayers and Bring on the Seasoned Veterans” http://ipassetmaximizerblog.com/?p=1092

About the author


Paul Dombowsky is the founder and CEO of Ideavibes and the charity crowdfunding initiative Fundchange. Paul started Ideavibes after over fifteen years in marketing roles at various technology or related firms. His expertise with web marketing, social media, and marketing automation, as well as keen interest in how social networks are now influencing all aspects of product development and marketing, laid the foundation for building a lean web app company. Paul developed a particular interest in open innovation and crowdsourcing through his work with TELUS Communications and his experience supporting various non-profits since graduating from Acadia University in 1990. Ideavibes as a company, and the platform, have been built though Paul’s intent on collaborating with the best and brightest from all aspects of business, government, and the non-profit sector.

  • Curious

    You say..

    “Some of the biggest companies in the world rely on crowdsourcing.
    Starbucks, Nokia, Dell, IBM, Netflix and many, many more organizations
    have successfully used crowdsourcing in a number of ways. Some of the
    greatest innovations at these organizations have come from the ideas
    brought forward by the crowd.”

    Could you please give some examples of these great innovations?

    Thanks!

  • Pingback: Informe de vigilancia de mercado Junio 2012 - Innolandia.es, servicios online para innovarInnolandia.es, servicios online para innovar

  • http://twitter.com/CrowdCreativity Zooppa for Marketers

    @Curious: Our clients, including Siemens, AT&T, Zappos, and Got Milk?, provide a few examples of how big companies are applying principles of crowdsourcing to creative advertising. I recommend reading a few of the case studies on our site: http://bit.ly/KrR4Ob

  • CS

    interesting article. Risks and chances have to balanced. We are ourselves using open innovation crowdsourcing of ideas in projects (http://www.stepchange-innovations.com). It is very valuable to  collect user feedback for product design and finetuning of marketing approaches, however, in my experience it often reveals gaps and not so many solutions and real new innovative ideas. Of course depending how is participating, that´s the key anyway. The IP issues associated with this is one thing. Another thing is that the crowd – or better say the opinion leaders of the crowd – tend to rediscuss things that are already known for the insiders.  And managers tend to filter out the topics that fit to their existing concepts. It requires very intelligent management of the information gathering to make maximum use of it.

  • Pingback: The dark side of the crowd | Pourquoi

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