The first wave of web impact has been based on the efficiency of online markets. Online auctions sell used (as well as new) stuff, E-commerce saves time, and Match-making sites actually have produced loads of happily married couples. The next wave of transformation? Some are betting on product and service innovation through crowdsourcing. Jeff Howe coined the term in a 2006 article in Wired magazine. It's essentially the application of open-source principles to fields beyond software.
Wednesday's Morning Edition on National Public Radio featured a story about this trend, and showcased RYZ Wear athletic shoes. In consumer E-commerce crowdsourcing, companies like RYZ Wear, Threadless.com and JPG Magazine rely on customers to design their products – like tennis shoes, T-shirts and photography magazines - and vote on which ones are keepers and which are not. The ”crowd” takes on responsibility for product design and development and market research, allowing for dramatically lower R&D, inventory and marketing expenses.
Crowdsourcing is at work in longer lead-time products like PCs, too. In February 2007, Dell launched IdeaStorm, essentially a Web 2.0 suggestion box. Customers told the company what features and functions they wanted to see on future laptops. This month, Dell rolled out nine new laptops, all of which incorporated design elements proposed, promoted and debated by the IdeaStorm community.
The service version of crowdsourcing is newer and less proven. Case in point - Elements Restaurant, which will open in Washington, D.C. in 2009. Nearly 400 members of the Elements community have helped develop the concept, the look, the logo and even the name. A July 26th Washington Post story quotes Linda Welch, 49, the Washington businesswoman who launched and is funding the Elements project, as saying "most businesses are started because you have a great idea, and you take it out to the public to see if customers like it. This is the opposite. We're finding out what people want and doing it." Elements will be the first "crowdsourced" restaurant, conceived and developed by an open community of experts and interested parties who earn a piece of the profits in exchange for their contributions to launching the business according to an a la carte menu - pun intended. An interesting model, to be sure.
Howe has a book coming out next week on the topic. It’s called Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business. No doubt, he will have more examples of innovation by the crowd. It will take time to determine how this wave of web-induced transformation will fare.
The strategist in me is skeptical; the customer side of me is hopeful. Kudos to those on the forefront of figuring it out.