State of the Art in Crowdsourcing

* Article: Enabled Innovation: Instruments and Methods of Internet-based Collaborative Innovation. Katarina Stanoevska-Slabeva.

URL = http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf

Paper on Crowdsourcing enabled innovation prepared for the 1st Berlin Symposium on Internet and Society, Oct. 25–27, 2011

Abstract

1.

"Crowdsourcing has become a widely applied practice in the context of innovation and problem solving. The paper provides first an overvierw of the stste-of-the-art in crowdsourcing in terms of definitions used, application areas, players involved as well as processes and tools. Than potential future forms of crowdsourcing are discussed. Finally, based on the results of the first two parts future research questions are extracted."

2.

"The goal of the state-of-the-art analysis of research in the field of crowdsourcing is to provide an extensive overview of the available body of knowledge related to it and to illustrate current developments on published single examples. The state-ofthe- art analysis will focus on classifying crowdsourcing and providing an overview of available knowledge on relevant aspects of crowdsourcing. It is based on an extensive and systematic literature research and review. Besides providing an overview, the literature review will also provide the bases for identification of future research trends in crowdsourcing in particular and Internet-based innovation in general."

Contents

"One major change happened in the relationship of companies to customers.

Terms as prosumers, open innovation, crowdsourcing denote the changing relationships of companies to their customers and the participatory users on the web. From passive consumers of defined products, customers are becoming increasingly part of innovation processes in companies. The Internet as a communication medium is the basis for new tools and platforms that are enabling efficient collaboration as well as collection and sharing of contributions from a large number of customers and users on a global scale. With the help of such platforms companies are increasingly involving customers and users into their innovation processes. The form and intensity of this involvement varies; staring from crowdsourcing of ideas, for example for new products, over rating of such ideas, to collective implementation of such ideas. Global Internet-based collaborative innovation processes contribute increasingly to innovation processes in companies.

The goal of this article is to provide an overview of the available body of knowledge related to Internet-enabled innovation and concentrates on three aspects:

1. To provide an overview of the state-of-the-art in Internet-based innovation in terms of used definitions in literature, as well as published concept, approaches and tools.

2. To illustrate potential future trends in crowdsourcing on the example of user initiated crowdsourcing as well as crowdsourcing practices in the media industry.

3. To identify and summarize potential future trends and future research directions in Internet-based collaborative innovation.

In accordance with the article's goals, its content is structured as follows:

Chapter 2 provides an overview of definitions and relates different terms denoting user innovation. In the remaining chapters, the paper focuses on crowdsourcing.

Chapter 3 provides a comprehensive state-of-the art overview of literature related to user innovation in crowdsourcing.

Chapter 4 illustrates potential future trends on two examples.

Chapter 5 includes a discussion of results and concludes the paper with a proposal for future research directions."

Excerpts

Definitions

Prosumers

Katarina Stanoevska-Slabeva:

"Most of the concepts for Internet-based innovation are based on or draw from the concept of active customers that are at the same time producers. i.e. prosumers. The vision to involve customers in the production process has a long tradition and goes back to Alvin Toffler (cited in Klein & Totz 2004), who introduced the idea to involve consumers as co-producers, i.e. prosumers, into the value chains of companies in 1972. Under the pressure of increasing price competition in the 90s, and enabled by the Internet, companies started to involve customer through digitalized processes to voluntarily take over part of the value generation. A well known example are banks, which based on e-banking involved the customers in services such as cash collection through automated teller machines, self-processing of payments and similar." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Lead-User Innovation

Katarina Stanoevska-Slabeva:

"In order to denote the involvement of customers in the innovation process, von Hippel (1978, 1986) described the important role of the user in innovation and introduced the term lead-user innovation. According to him (von Hippel 2005) leadusers have the following two characteristics: “… they are ahead of the majority of users in their populations with respect to an important market trend, and they expect to gain relatively high benefits from a solution to the needs they have encountered there.” (von Hippel 2005). Thus, lead-user innovation is related to available products, and is based on the experience of the user with the product and his background. Other concepts related to Internet-based innovation that require active users and customers are crowdsourcing, open innovation, open source software development and user innovation communities." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Crowdsourcing

Katarina Stanoevska-Slabeva:

"The term crowdsourcing was introduced by Howe (2006) in order to denote the new phenomena of outsourcing to the crowd. Howe (2006) provided also the very first definition of crowdsourcing as follows: “… crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined and generally large network of people in the form of an open call. This can take the form of peer production when the job is performed collaboratively, but is also often undertaken by sole individuals. The crucial prerequisite is the use of the open call format in the wide network of potential laborers.”

More recently in his blog, Howe (2008, 2009) consolidated the definition in the following form:

· “The white paper version: crowdsourcing is the act of taking a job traditionally performed by a designed agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call.”

· “The sound bite version: The application of open source principals to fields outside of software.”

Based on the original definition of Howe (2006) other authors provide extended definitions that concretize the generic terms used by Howe. For example, (Gassmann et. al. 2010), specify the tasks that are sourced from the crowd as being mostly knowledge generating and problem-solving tasks, but also repetitive tasks. They furthermore, concretize that the open call is supported through a Website.

Both definitions point to the distinguishing features of crowdsourcing:

· It is initiated and coordinated by a company that outsources an existing task or has a problem that needs a solution.

· It is directed to the crowd and not to companies and individual users.

· The usual way to initiate crowdsourcing is through an open call over the Internet.

According to Surowiecki (2005), a crowd can be defined as a large set of anonymous individuals. Implicit in this definition is the idea that a firm cannot build its own crowd. The strength of the crowd is the possibility to choose from the contribution of many contributors with different backgrounds, qualifications and talents." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf) '

Open Innovation

Katarina Stanoevska-Slabeva:

"According to Chesbrough, Vanhaverbeke & West (2006) “[…] open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation respectively.”

With this definition the authors imply two types of open innovation knowledge flows:

1) inside-out or outbound knowledge flows involve knowledge developed within the firm and made accessible to other firms;

2) outside-in or inbound flows refer to knowledge developed in the environment and being integrated by the firm." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Open Source Software Communities

Katarina Stanoevska-Slabeva:

"While crowdsourcing and open innovation are initiated by companies other forms of Internet-based innovation can be completely initiated and carried out by users.

One of the earlier phenomena of user-initiated Internet-based innovation is open source software communities. They emerged in the late 80s, but spread more intensively after the broad diffusion of Internet. According to (von Hippel and von Krogh, 2009), “Open source software is software that is made freely available to all. Open source software development projects are Internet-based communities of software developers who voluntarily collaborate to develop software that they or their organizations need … Well-known examples of open source software having many users are the GNU/Linux computer operating systems, Apache server software and the Perl programming language.”

The characteristics of open source software communities can be summarized as follows (see also von Hippel & von Krogh 2009):

· They are initiated by one or several users that need certain software for intellectual, personal or business reasons. Thus, open source software communities have no connections to companies.

· The users participate voluntarily and for free in the software development process.

· The functioning of open source software communities is enabled by online platforms providing specific functionalities for cooperative development of software.

· During their existence, open source software development communities create certain organizational and communication structures that enable an efficient and successful coordination of all development activities as well as management of the various software releases.

· The final product is a specific software that can be further developed and used for free not only by members of the development community, but also by any user and company." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

User Innovation Communities

Katarina Stanoevska-Slabeva:

"The concept of user innovation communities was introduced by (von Hippel 2001, 2005). He introduced the term to denote user innovation communities that function according to similar principles as open source software communities, but are not restricted only to software or information products, but can also incorporate user development of physical products. Thus, user innovation communities refer to a broader phenomenon compared to open source software communities. According to (Von Hippel 2005), user innovation communities are defined “… as meaning nodes consisting of individuals or firms interconnected by information transfer links which may involve face-to-face, electronic, or other communication. These can, but need not, exist within the boundaries of a membership group. They often do, but need not, incorporate the qualities of communities for participants, where ‘communities’ is defined as meaning networks of interpersonal ties that provide sociability, support, information, a sense of belonging, and social identity …”

von Hippel (2001) furthermore defines the basic preconditions necessary to be in place for a user community to be possible:

1) at least some users have sufficient incentive to innovate;

2) at least some users have an incentive to voluntarily reveal their innovations and the means to do so; and

3) user-led diffusion of innovation can compete with commercial production and distribution." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Discussion

Relationship among Different Concepts of Internet-based collaborative Innovation

Katarina Stanoevska-Slabeva:

"The phenomena of an active customer, i.e. prosumer, and the active Internet user as the main member of the crowd as well as a participatory culture are the basic prerequisites for Internet-based collaborative innovation. All types of Internetbased innovation imply an opening up of the innovation processes of companies towards contributions from outside the company. Even though the phenomena denoted by terms related to Internet-based innovation have many similarities and are often used in literature interchangeably, they also have differentiating features.

One basic difference is given by applying the criterion of who is initiating the innovation process.

While open innovation is mainly company-initiated, open source software development and user innovation communities are purely user-initiated innovation processes.

Crowdsourcing is mainly initiated by companies as well, but can also be initiated by users. There are also some differentiating features among the concepts within these categories of Internet-based innovation.

The differences among open innovation and crowdsourcing, as mainly company initiated approaches can be summarized as follows: The first is that open innovation is applied within innovation processes, while crowdsourcing is applied also within other processes in companies as for example marketing (see for example Whitla, 2009). The second difference is that open innovation also implies knowledge flows between firms while crowdsourcing refers to links between a firm and the crowd as a large set of anonymous contributors.

According to (Schenk and Guittard, 2011) crowdsourcing can be considered “… as a way to implement outside in knowledge flows with the crowd as a particular knowledge provider.” Thus, it can be considered as a subset of open innovation. The third distinguishing feature is the intensity of dependence on information and communication (ICT) technologies. While certain forms of open innovation are based on conventional means of communication, crowdsourcing is more dependent on ICT as a necessary mean for attracting and hosting the activities of the crowd and for coordinating and aggregating the contributions of a large number of users." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Application Areas of Crowdsourcing: What can be crowdsourced?

Katarina Stanoevska-Slabeva:

An interesting question is what at all is crowdsourcable? Is any task or problem suitable for crowdsourcing? Or phrased in another way, for which tasks can companies expect a successful implementation of crowdsourcing? According to (Schenk & Guittard 2011) in general crowdsourcing is a priori not relevant for production tasks. They rather consider it to be relevant “… to perform information on knowledge related tasks involving low fixed equipment costs. In general, crowdsourcing makes it possible to mobilize competences and expertise which are distributed among the crowd. Competence generally refers to the ability of an individual to achieve a set of tasks.” (Schenk & Guittard 2011).

(Gassman et. al. 2010) list in their definition three types of tasks that are subject to crowdsourcing: problem solving, idea generation and repetitive tasks. However they do not describe the suggested types of task in more detail. A more detailed exploration of the suitable tasks for crowdsourcing is provided by (Schenk & Guittard 2011). According to them, crowdsourcable tasks can be classified based on the required competences of the individuals in the crowd into three types: simple, complex and creative tasks. (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Typology

Katarina Stanoevska-Slabeva: [1]

"In literature two basic approaches to classify crowdsourcing can be identified:

1) based on the type of task that is crowdsourced. A representative classification in this context is the classification provided by Howe (2008), and

2) based on the initiator of crowdsourcing. A representative classification according to this criterion is given by (Gassmann et. al. 2009). Both classifications are summarized below."

Classification based on task

Katarina Stanoevska-Slabeva:

"The classification of Howe will be taken as starting point to relate also classification of other authors. By applying the criteria, type of task outsourced to the crowd, Howe (2008) classifies crowdsourcing in three main categories:

Crowdsourcing Idea Game

Katarina Stanoevska-Slabeva:

· The first category is the idea game which is essentially just a massive call for ideas.

Example: A broadly published example of an idea market is the IBM Jam (for a detailed description see (Bjelland & Wood 2008). In 2006 IBM initiated a global idea jam related to the question how to best use and efficiently commercialize existing technological developments in the company. The global ‘Innovation Jam’ took place in two three-day phases in 2006. It involved 150,000 IBM employees, family members, business partners, clients (from 67 companies) and university researchers. Participants from 104 countries jammed and conversations continued 24 hours a day. In its press releases IBM described the Innovation Jam as “the largest online brainstorming session ever”. The discussion and sourcing for ideas was pre-structured in six major categories of emerging technologies and each of the categories comprised several subtopics. The task of the crowd was to brainstorm about potential new ways how technology developed at IBM might be applied by IBM to enhance existing or develop new products. More than 46,000 ideas were posted. Phase Two of the Innovation Jam was devoted to ‘refining’ ideas from the first phase. The Innovation Jam uncovered and mobilized support for substantial new ways of using IBM technology.

This kind of crowdsourcing is considered as ‘Selective Crowdsourcing’ by (Schenk & Guittard 2011). The company initiating the process of crowdsourcing has to choose one solution from all solutions provided by the crowd. Selective crowdsourcing in general implies a winner takes it all mechanism where only the creator of the winning solution is rewarded." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Crowdsourced Problem Solving

Katarina Stanoevska-Slabeva:

· "The second form is the problem solving or Crowd Casting Network in which someone with the problem broadcasts it to a large undefined network of potential solvers.

For example, the shoe company ‘Fluevog’ is crowdsourcing designs for new shoes.

Another example is the online platform InnoCentive on which companies can source for solutions for scientific problems.

These two crowdsourcing examples are also Selective Crowdsourcing. However, according to (Schenk & Guittard 2011), this type of crowdsourcing can also be ‘integrative’ or consolidating crowdsourcing.

The goal of Integrative Crowdsourcing is to create a complete solution by integrating complementary contributions from the crowd. An important aspect of integrative crowdsourcing is the definition of clear interfaces among single complementary contributions." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Prediction Markets

Katarina Stanoevska-Slabeva:

· "The third category is the prediction market or information market in which investors from the crowd buy and sell futures related to some expected outcome such as the presidential election or the Oscar for the best picture (Howe, 2006). The prediction market is applied for questions related to assessment of future scenarios (for an extensive literature review on prediction markets see also Tziralis and Tatsiopoulos, 2007).

One example of a prediction market is the Hollywood Stock Exchange (HSX). HSX is an online simulation, where registered users can trade in movie stocks. “Participants start with a total of 2 million so-called Hollywood dollars, and can manage their portfolio by strategically buying and selling stocks” (Elberse & Jehoshua Eliashberg 2003). HSX participants trade in movie stocks based on their information about the star power, trailers or other advertising products (e.g. press releases) in the prerelease period. Single movie stocks and ranking lists of price changes on the HSX are an explicit aggregation of the opinions of the involved HSX participants and opinion leaders. The HSX ranking lists are an important predictor of the first weekend and overall box-office sales of a movie." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Crowdsourcing typology by initiator

Katarina Stanoevska-Slabeva:

The second representative classification of crowdsourcing approaches is provided by (Gassmann et. al. 2010) and is based on potential initiators as classification criteria of the crowdsourcing activities. According to these criteria, the authors identify five different crowdsourcing approaches:

1. Crowdsourcing initiated and supported by intermediary platforms.

(Gassmann et. al. 2010) further divide this category of crowdsourcing in the following subcategories: intermediary platforms for research and development, for marketing and design, for freelancers and for idea-generation.

2. User initiated crowdsourcing

which is further subdivided in user websites and open source software communities.

3. Company initiated platforms

which are platforms that are created and maintained by companies. Such platforms are typically integrated within the companies’ online activities. They are further divided in the following subcategories: product ideas and problem solutions as well as branding and design.

4. Idea market places

An example for this type of crowdsourcing is the company Spreadshirt which allows users to design their own spreadshirt designs and produces only those spreadshirts that are mostly liked by the participating customers. Other such similar examples are Threadless or CafePress.

5. Public crowdsourcing initiatives

that means initiatives that are similar to the previously mentioned ones but which are initiated by public authorities. One example mentioned by the authors (Gassmann et. al. 2010) is the ideageneration campaign, which was initiated by the Irish government in order to collect ideas from the population regarding the question how to achieve higher economic growth."

Classification based on the complexity of the task: Simple, complex and creative tasks

Katarina Stanoevska-Slabeva:

"A more detailed exploration of the suitable tasks for crowdsourcing is provided by (Schenk & Guittard 2011). According to them, crowdsourcable tasks can be classified based on the required competences of the individuals in the crowd into three types: simple, complex and creative tasks." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Simple Crowdsourcing Tasks

Katarina Stanoevska-Slabeva:

"According to (Schenk & Guittard 2011), simple tasks are easy to describe and do not require a high cognitive effort and expertise to be understood by a broad, anonymous mass of individuals. Moreover, their completion requires a relatively low involvement from individuals. When simple tasks are concerned, the added value of crowdsourcing does not stem from individual abilities but from the low cost realization of tasks on a large scale. Therefore, financial incentives in crowdsourcing of simple tasks do not go beyond micro payments.

An example of a simple task crowdsourcing is the Open Street Map project, where geographic data is collected and pooled together in order to establish a world map under the creative common license. In this project, contributions are voluntarily and incentives may include self-benefits from the system or the satisfaction of contributing to a public good (Schenk & Guittard 2011)." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Complex Crowdsourcing Tasks

Katarina Stanoevska-Slabeva:

"According to Cambell (1988), complex tasks are characterized by the following features: multiple potential outcomes, multiple potential solution path and presence of uncertainty. Their understanding and performance requires special expertise, problem solving abilities and involves knowledge intensive activities. According to (Schenk & Guittard 2011), the notion of scale does not enter into account (as opposed to simple tasks crowdsourcing), but the firm facing an unsolved complex problem hopes to benefit from expertise and problem solving skills of individuals within the crowd.

Crowdsourcing of complex tasks only makes sense when the required expertise and skills are distributed among the anonymous individuals of the participating crowd. Thus, the required expertise and the relevant incentive schemes are typically problem-specific. This kind of crowdsourcing typically involves a higher remuneration. Complex tasks are related to new product development in innovation projects where the problem solving can be regarded as a complex process.

A specialized intermediary for crowdsourcing of complex tasks is the platform InnoCentive (Lohse 2010). The InnoCentivee platforms is an intermediary which on the one hand, supports companies to publish their complex tasks within research and development activities and, on the other hand, was able to create a Solver-Community consisting of more than 200,000 experts and scientists." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)

Creative Crowdsourcing Tasks

Katarina Stanoevska-Slabeva:

"Creative tasks are where creativity and uniqueness have the highest priority. Typical examples of creative tasks are the design of logos or similar marketing material. The main goal of a company crowdsourcing creative tasks is not to have a problem solved but to rather benefit from the creative power of the interdisciplinary crowd. (Schenk & Guittard 2011) suggest that regarding creative tasks incentives or participants can be very heterogeneous, ranging from monetary driven to passion-driven involvement. As a matter of fact, observation of crowdsourcing platforms for creative tasks indicate that remuneration associated with crowdsourcing of creative tasks is of an intermediate amount, usually of a few hundred dollars (Brabham 2008, 2009). At least one of the above described types of tasks or even all three types can be identified in many industries." (http://berlinsymposium.org/sites/berlinsymposium.org/files/crowdsourcingenabledinnovation.pdf)