The concept is from an article in Wired magazine on the emergence of Distributed Labor Networks.

It refers to the usage of distributed, voluntary collaboration from a wide community of users/participants, used in the context of commercial value generation and innovation. It can be associated with Revenue Sharing strategies.

Please note that when there is a direct connection between production and payment, crowdsourcing then differs from non-reciprocal Peer Production

A related term used in the media field, and not necessarily connnected to commercialization, is User-Generated Content

Definition

"crowdsourcing involves paying (often very small amounts of money) for the content produced by crowds of people. This model does not likely lead to exceptional content by passionate people, but rather acceptable content by people motivated largely by money. This type of content, I believe, does not support the readership ratios seen in Wikipedia and digg, and you can verify this by visiting some sites that are known to crowdsource.

I put it out to you, that instead of budgetting for crowdsourcing, your money would be better spent catering to your 1% of passionate users." (http://blog.productwiki.com/2007/02/wisdom-of-crowds-nay.html)

How Crowdsourcing differs from Peer Production

Peer production is defined by:

- voluntary engagement

- a participatory process

- universal access property regimes

- there is no direct link between input and output (non-reciprocal character of peer production)

Most corporate-driven crowdsourcing will only apply the very first principle, i.e. voluntary engagement; they will aim to drive the production process; and the results will be proprietary. Finally, they will introduce payment or Revenue Sharing schemes. In terms of the hierarchy of engagement, crowdsourcing is more akin to swarming than to the collective intelligence of an intentional community.

Examples

The article mentions Innocentive as an example of the process.

"YourEncore, for example, allows companies to find and hire retired scientists for one-off assignments. NineSigma is an online marketplace for innovations, matching seeker companies with solvers in a marketplace similar to InnoCentive."

Rent A Coder [1]

Case Studies

Examples from an article at http://www.bnet.com/2403-13068_23-52962.html

Proctor & Gamble

"During a 2002 Proctor & Gamble brainstorming session, a company manager had a flash of inspiration: Why not print text or images on Pringles potato chips? Great idea, but there was a catch: no one at P&G knew how to do it. To find the expertise it needed, P&G tapped into RTC North, a network of European scientists, and found a small bakery in Bologna, Italy, run by a professor who had invented a technology that uses ink-jet techniques to print pictures on pastries. By licensing the technology, P&G was able to launch the new Pringles Prints chips in less than a year—and at a fraction of the cost of doing it in-house. Indeed, after decades of rarely looking outside its own walls for ways to improve brands like Pringles and Crest, P&G now taps the brainpower of scientists around the world by using crowdsource research networks like Innocentive.com and YourEncore.com. The result: 40 percent of the company's new innovations now come from outside P&G, up from 10 percent in 2000."

O'Reilly Media

How do you know if your products receive adequate placement on store shelves? Executives at O'Reilly Media, a privately held company best known for publishing technical manuals, heard anecdotal stories that its books were difficult to find in big chain bookstores. Sending teams of market researchers from store to store would have been prohibitively expensive, so the company instead turned to an online user group devoted to its books. O'Reilly sent email to members of the group, soliciting volunteers to visit local booksellers and submit monthly reports of what titles were on the shelves. Some 500 people volunteered, and 75 of those happened to live near bookstores that were of particular interest to O'Reilly execs. For three months, the volunteers submitted spreadsheets to the company, along with anecdotal impressions of their experiences inside the stores. In return, O'Reilly gave the volunteers free books. "It answered our question: Are bookstore chains doing a decent job getting our books on the shelves?" says Sara Winge, O'Reilly spokeswoman. "Turns out, the stores were doing a pretty good job, but that was a very hard question to answer without having volunteers who were willing to actually go see for themselves."

Citations

Jeff Howe: "Just as distributed computing projects like UC Berkeley’s SETI@home have tapped the unused processing power of millions of individual computers, so distributed labor networks are using the Internet to exploit the spare processing power of millions of human brains.

For the last decade or so, companies have been looking overseas, to India or China, for cheap labor. But now it doesn’t matter where the laborers are – they might be down the block, they might be in Indonesia – as long as they are connected to the network.

Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn’t always free, but it costs a lot less than paying traditional employees. It’s not outsourcing; it’s crowdsourcing."

Read the article at http://www.wired.com/wired/archive/14.06/crowds.html