Saturday, July 25, 2009

Crowdsourcing Delivers Personalized Innovation

The new dimension of innovation is about having customer as an integral part of the system. Firms can no longer afford to stay separate from customers and still come up with great innovations. The success of social media websites (like Facebook) is frequently attributed to engaging customers in the creation of new innovations - also referred to as crowdsourcing.

The topic of innovation is multi-dimensional, which no firm in the globe can afford to ignore today. Being innovative is necessary to stay competitive in the business. The new age of innovation has a lot to do with making the customer an integral part of the innovation system by engaging and involving them with the product or service that the firm is working on.

This is all the more true with consumer-targeted social networking sites like Facebook, where the users drive how the product should look. The customer-centric innovation started off with creating and opening up a software development kit (SDK) for anyone to create and host their applications. 

Want to get a real experience with what we are talking about? Just login to your Facebook or Orkut profile and click on the "applications" link. You will see an array of cool stuff in the form of quizzes, music, games, etc. Who do you think has developed them? Do you think Facebook or Orkut has enough employees to develop thousands of these applications? Definitely not!

http://www.business-strategy-innovation.com/uploaded_images/Vote-Buttons-735145.bmp

It is done by enthusiastic folks around the globe with decent web programming knowledge. They downloaded the SDK, developed the app and hosted it all for free. The buck doesn't stop there. After it gets uploaded, the importance of these applications is decided by other users. As more folks add a particular application to their profile, its rating goes up. If the application is not interesting enough for the community, it gets automatically pushed down the stack. From the user's perspective, they can choose and install applications of interest to them, thereby 'personalizing' their profile. This is the real power of crowdsourcing - consumers as creators.

According to Wikipedia, crowdsourcing is a neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people or community in the form of an open call. In the context of social networking, the crowdsourcing goes beyond outsourcing, where users become voluntary creators to benefit of the community.

By democratizing their SDK, firms like Facebook benefit greatly by harnessing the innovative ability of anybody in the world. This breadth of innovation is impossible to groom and sustain within the confines of the firm's employees. Also, the cost of making such innovation happen inside the organization is extremely high compared to crowdsourcing.

On a larger scale, the idea of crowdsourcing has been harnessed by Apple (iPhone) and Google (Android) - these firms designed a monetization model allowing developers to host their applications and quote a price. When users download the developer's application a portion of payment goes to the developer. 

In his recent work on 'New age of Innovation', renowned management thinker C.K.Prahalad calls this phenomenon as 'N = 1 R = G'. In order to provide one unique user experience (N = 1) firms need to leverage resources (R) globally (G). It is mainly because every consumer has his unique preferences when using a product, which cannot be satisfied by the firm hiring more people. This new school of thought is much different from the previous generation of technology products where every feature was developed by the firm in a closed development environment. In this new age, the role of the firm is to create a platform and leave it open for consumers to create the applications they want. 

So, next time you are set out to innovate something, ask yourself: 'Am I involving my customers in the process?'

Posted via web from swathidharshananaidu's posterous

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