Crowdsourcing ~ Management 2.0 developing social capital

I've just been reading an excerpt of Jeff Howe's new book, 'Crowdsourcing' on wired.com.

Howe defines crowdsourcing as the act of taking a job traditionally performed by an employee and outsourcing it to an undefined, generally large group of people using the transformative power of today's technology which allows communities to be formed by shared interest rather than vicinity. This enables the power of the many to be leveraged to accomplish feats that were once the province of the specialised few.

The idea obviously builds on 'The Wisdom of Crowds' in which James Surowiecki argues that although we generally trust experts and distrust the wisdom of the masses (In 'The Cult of the Amateur', Andrew Keen even outlines grave consequences from the dangerous blurring of professionalism and amateur content), "under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them."

In order for a crowd to be smart, he says, it needs to satisfy four conditions:

Diversity of opinion to bring in different information
Independence of members from one another to keep people from being swayed by a single opinion leader
Decentralisation in which power is not collected in one location by an omniscient or farseeing planner, but are made by many individuals
A good method for aggregating opinions (not design by committee).

In this situation, people's errors balance each other out; and including all opinions guarantees that the results are "smarter" than if a single expert had been in charge (The Economist also recently reported that multiple guesses made by the same person at different times are also better than one).

But for Howe, the crowd is more than wise - "it's talented, creative and stunningly productive".

He provides a number of examples of crowdsourcing which although already very well quoted, are all relevant and persuasive:

"Once famous for its insular culture, Procter & Gamble now crowdsources much of its R&D process, using global networks of scientists such as InnoCentive and NineSigma, which boast a combined membership of 2 million professional and amateur researchers. Even companies operating in a conventional field such as mining have found crowdsourcing applications. The Canadian gold-mining group Goldcorp put geological survey data online and offered a $575,000 prize to anyone who could identify likely areas for exploration. Goldcorp says the contest produced 110 targets that yielded $3 billion in gold."

Probably the best well known of these 'Ideagoras' is InnoCentive which allows companies to post their unsolved problems on a website where 'brain gangs': scientists and thinkers from all over the world can supply solutions. The best suggestions win rewards. They pitch the idea as follows:

"By joining the open innovation revolution and tapping into the power of crowdsourcing, your institution not only increases its research and development capacity significantly, but also reduces cost, risk and research failure."

Business Week has discussed how Colgate Palmolive has used InnoCentive successfully:

"Take Colgate-Palmolive. The company needed a more efficient method for getting its toothpaste into the tube—a seemingly straightforward problem. When its internal R&D team came up empty-handed, the company posted the specs on InnoCentive, one of many new marketplaces that link problems with problem-solvers. A Canadian engineer named Ed Melcarek proposed putting a positive charge on fluoride powder, then grounding the tube. It was an effective application of elementary physics, but not one that Colgate-Palmolive's team of chemists had ever contemplated. Melcarek was duly rewarded with $25,000 for a few hours work."

This week's Sunday Times provides further examples:

"Dell, the computer company, has also embraced the philosophy, setting up a website called IdeaStorm for customers to suggest the 'new products and services you’d like to see Dell develop'. Last month it unveiled nine new laptops incorporating the best ideas from the crowd-sourcers who had bombarded IdeaStorm with suggestions.

In America the Library of Congress asked members of Flickr, the photo-sharing website, to identify unknown people in its picture collections. Within weeks hundreds had been correctly captioned by friends and relatives.

Among the apostles of change in the UK is Tom Steinberg, one of the founders of mySociety.org, a not-for-profit organisation that builds websites to make government more open and transparent. It created FixMyStreet.com and TheyWorkForYou.com, a site that gives details of members of parliament, how they vote and what they say. It can, for example, alert you by e-mail when a specified person or subject crops up in parliament."

In this environment, the quality of work is all that counts and can be performed by people of every imaginable background: "if you can perform the service, design the product or solve the problem, you've got the job".

I think crowdsourcing provides an important opportunity for organisations to ensure they are accessing the best and widest possible sources of human capital. After all, as Howe points out in BNET's Useful Commute podcast, "no matter who you are, and who you work for, most of the smartest people work for someone else".

And Rule 4 from Thomas Friedman's 'The World is Flat' suggests that:

"The best companies are the best collaborators. In the flat world, more and more business will be done through collaborations within and between companies, for a very simple reason: the next layers of value creation are becoming so complex that no single firm or department is going to be able to master them alone."

Howe notes that crowdsourcing is triggering a dramatic shift in the way that work is organized and talent is employed. And he warns, "as the crowd comes to supplant traditional forms of labour, pain and disruption are inevitable".

So what's HR's answer to this new trend? Does it even have a role?

I think it can have, depending on the type of crowd the organisation wants to create. Howe talks about outsourcing to an undefined group because you may never know who will have the best solution.

"Sometimes the solutions come from unexpected quarters. An Alaskan company wanted to find a way to stop oil freezing in storage tanks; the answer came not from an oil industry expert, but from a chemist thousands of miles away who pointed out that concrete does not set if it is kept in motion and the same principle might apply to oil."

But sometimes you may want to keep your cards closer to your chest, and Howe also talks about examples where customers become partners, involved in co-developing products and services as well as consuming them.

So how about developing the same sort of relationships with key potential recruits: the people the organisation would like to join the firm (for example, in my book, I describe a group I call career partners). Or alumni who have previously worked with the firm?

Couldn't these 'employee partners' be formed into a sort of crowd? They're a group of people who in some ways at least are aligned with the organisation, are going to be interested in learning about what it's doing, and quite possibly keen to promote themselves and their knowledge.

I think they could form a crowd, and more broadly, I suspect crowdsourcing provides at least as many opportunities for HR to increase, as it does to decrease, its role and its impact on a business.