co>innovative

Definition: a group of people invest or donate a small portion of a larger investment over the internet. That money is pooled together to bring off a project that otherwise would need traditional sources of funding.

Extremely cool and definitely effective, Crowdfunding is a viable application of these principles. Of course it is: it’s been going on for centuries via investing in companies and projects — but now it’s so much easier and transparent of a process. No longer focused on commercial enterprises, any enterprise in need of funds can connect the long tail of people interested in a particular topic, play, artist, film, event, political candidate, even a niche knitting and crocheting site to bring together small amounts of money to raise what is needed. Raising money from fans to record an album, for example, would have been prohibitively difficult in the past, but now a band can easily offer free downloads, take payment, show progress, and keep fans abreast of developments.

And this extends beyond simply an alternative for funding but can also be applied in untold new ways. Case in point: what about crowdfunded investigative journalism?

Verdict: Viable and ripe for experimentation.

Examples of crowdfunding:
Album recordings and band support: Sellaband, ArtistShare, SliceThePie, VIP Band Manager.
Soccer club takeover: MyFootballClub
Fashion: Catwalk Genius, nvohk,
Community funding: Liverpool Culture Cafe.
Creating a film: A Swarm of Angels, Its Our Movie, FilmRiot, IndieGoGo,
Content creation: Countless blogs seeking donations, Ze Frank, Fund A VLog, Democracy in America.
Loans: Prosper, Kiva, Zopa, Lending Club.
Brewery Funding: BeerBankRoll
Journalism: Guerrilla Journalism Fund, Assignment Zero
Software: MicroPledge
Political fund raising: ActBlue
Music festival: Tennents Mutual
Tools for crowdfunding: Crowdfunder, FirstGiving, BountyUp, Fundable

Resources:
Crowdfunding Wiki
P2P Foundation
Know The Music Biz

Read previous parts:
Part 1: Figuring out crowdsourcing: What does it mean? What’s working? What isn’t?

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I lack a specific definition or term for what I have been writing about here — mainly because there isn’t one. “Crowdsourcing” comes close, but it is a bit constraining in that it connotes outsourcing work to the crowd, which is only part of the story. Thus, in light of that, I will be posting a series covering the various aspects of whatever the hell this is that I am talking about with examples of each portion in action. It will by no means be exhaustive, but it should provide a good overview of some interesting orgs that are leveraging these principles.

So, let’s set out with a few of the current names for it and related concepts that feed into it:

The overarching themes revolve around: Crowdsourcing; Outside Innovation; Innovation Networks; the Wisdom of crowds; and Customer co-creation.

These larger initiatives are supported by: Web 2.0/Social Computing; Mass Customization; the Long Tail; Open Innovation; Peer production; Prediction markets; Voting and ratings; Competitions and prizes; Lead users; Transparent business practices; and Democratized content creation and distribution.

(Don’t forget, Sami Viitamaki has a pretty generalized but effective take on how to think about Crowdsourcing in particular with his FLIRT model.)

So, going forward I am going to touch on a variety of topics that will hopefully clear things up a bit. Some of the topics I will cover:

• Crowdfunding
• Prediction markets
• Crowdsourcing: Graphic design
• Customer co-creation and crowdsourcing: New product development
• Home Fabbing and Crowdsourcing: Physical product design and development
• Crowdsourcing: Content creation
• Crowd feedback; or, Business starts to listen
• Crowdsourcing: Problem solving
  
• Many hands make light work: The atomization of work resulting in the completion of massive jobs.
  
• Crowdcooperation
  

All of this stuff is connected somehow, is undergirded by similar philosophies, tools and technology, and methodologies — and I love geeking out about it. There are some powerful changes hidden in all of this and, while many of the concepts have been with us and operating for some time — centuries even — only recently has a confluence of developments led to the ability to really harness it all.

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You want to know what Spigit is?  Read my last post about Kluster and imagine a more powerful, enterprise version of the service.

A friend of mine asked recently whether this crowdsourcing stuff works; if I could point to a single product that had resulted from “crowdsourcing”.  The answer is yes and no.  It depends on what you’re talking about.  Is it potentially overhyped? Absolutely. Is there one monster “Crowdsourcing Success”?  No.  Are there projects out there that are attempting to leech off of the crowd for their own gain? Yup. (I like to call these “failures”.)

It’s not a magic bullet and it definitely won’t replace a vast majority of processes for product development/design/refinement or classic freelancing/outsourcing work. But it’s an alternative, niche way to develop things and get certain things done.  (Crowdsourcing has become an umbrella term to describe a whole bunch of crap going on, so it’s a bit of a fuzzy term, similar to Web 2.0.)

But there are tons of examples of various areas that have been successful that can be called crowdsourcing in one way or another:

Open source:
No examples necessary.

Funding:
Sellaband, crowdfunding of several album recordings.
A Swarm of Angels, crowdfuding and voting to create a film.
SliceThePie, funding, investing in bands
Prosper: P2P loans

Graphic Design:
Threadless, awesome tshirt designs submitted and voted on by anyone. Top 7 get made each week. I think their revenues are like 20 or 30 million a year.
Sitepoint: this is more of a design contest, you post what you want and how much you’ll pay. Dozens of people submit designs and you pick your favorite. Still, it’s crowdsourcing.

Product enhancements and new product development:
Dell’s Ideastorm, customer suggestions for new products and enhancements
P&G Connect+Develop, throw your ideas/products over the P&G wall and see if they want to buy it
Lego Mindstorms Community,

Writing:
Assignment Zero, crowdsourced research and interviewing for a Wired article

Small tasks done by many people:
Amazon’s Mechanical turk.

Complex scientific/chemistry/engineering problem solving:
Innocentive, used by large companies, post a complex problem, put a price on it, and open it up to people. This has been pretty successful.  Companies get to tap into resources that they don’t have internally.

Just plain crazy:
MyFootballClub: crowd ownership and control via voting of a soccer team in europe.
Tribewanted, crowd voting, building, eco-tourism Fijian island vacation. I highly recommend it.

Yet to be proven
Crowdspirit, consumer electronics development, which is probably the closest thing to what you’re envisioning.
Cambrian House, focused on website/software ideas and creation: a good example of a ton of talk with little to show for it from what I can tell.
Kluster
Spigit

And, of course, there are myriad closed, high-powered, complex collaboration platforms that allow people to interact across teams/geographies to design and engineer complex equipment.

In terms of Kluster: Ben Kaufman’s first company was called Mophie and they did actually use many crowdsourcing/outside innovation concepts to develop real, successful products (specifically iPod accessories).  At Macworld last year, they had an intense, in-person version in which people submitted ideas or drawings, these were voted on, etc, and by the end of the event Mophie’s industrial designers had created a CAD mockup of the most popular designs/ideas.  They took preorders and then eventually sold them as real products.  They are taking that core concept and creating a platform for anyone to do it, digitally.  And they also had in place an early version of kluster that was actually used successfully to create products called Illuminator.  (They did a similar thing this year at TED.)

Bottom line: the basic philosophy has been applied in many cases successfully, but it is still a nascent idea that hasn’t been fully worked out yet.  (Not to mention that there have been and will continue to be many failed attempts and companies who attempt to exploit the crowd for their own gain, which will fail as well.)  Sort of reminds me of the early days of search: search engines were largely crap dependent on just counting the words on a site to see if it was relevent, then, of course, people just repeated the word they wanted to be top search for over and over again. It wasn’t until Google came in with PageRank that search took a drastic leap forward: the signal to noise ratio went way up.

(On a side note: the concept of lead users http://en.wikipedia.org/wiki/Lead_user has been around for 20 years and successful harnassing of lead user innovations for the creation of real products is well documented.)

The thing that really intrigues me about kluster is: can you create a platform that can hit the required scale and quality of participation and actually create a marketplace (with real money involved) in which users are rewarded for their creativity and judgement (both intrinsically, because they are interested in it and want the products, and extrinsically, financially.) They need to: get scale and quality of participation and have a high signal to noise ratio.  My thought is that they should focus on a more narrowly defined category of goods, instead of such a wide range.

Three main points:
1) This is not magic. It still requires the hard work of individual people designing, engineering, innovating, and — my new favorite word — ideating.

2) It’s difficult to do right.

3) And most important: There is a vast difference between tapping into the innovation and ideas of your most passionate customers and attempting to incent outsiders to contribute who do not have a stake or love for your product. Projects that will most readily succeed are those that tap into passion that already exists rather than attempting to create it via incentives. 

– If you have any other examples of successful crowdsourcing-ish implementations, let me know and I’ll update the list.–

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Similar in philosophy to Sellaband.com though more complex and powerful, Slice The Pie creates a marketplace for the trading, promoting, financing, and finding of new bands.

What you can do:

• As a FAN: essentially start a label with a portfolio of acts (albeit, owning just a portion of those acts); get paid to review music, finance new artists; get to know artists and be involved in the creative process; trade in artists by buying/selling contracts.
• As an ARTIST: submit 3 tracks, then get 30 reviews. The 20 best rated artists go to the Showcase, by getting fan support they recieve 15K pounds to finance recording of album and they get to keep control of copyright
• As a TRADER: buy and sell artists contracts, make money when the artist does; build a portfolio of great acts and help promote them.

Of course: will it work? And will it help ferret out good new bands? Who knows, but it’s friggin cool. The main issue is whether they are able to hit critical mass. An illiquid market could get pretty boring. And without enough activity on the site, they won’t be able to finance new acts.

It’s definitely a cool alternative the regular route 0f impressing (and then being beholden to) a few head guys at a label. The great thing about all of these tools and online services is that it puts the power much more squarely in the hands of the artists and the fans. It becomes much more of a meritocracy.

Here’s an example of a band that just won 15K in the showcase.

(I wonder how many bands without label support have a full time or contracted online promotions guy to manage these various contests and social computing sites….)

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Itsourmovie.com is another example of a new way to finance movies (or anything really). Similar in concept to A Swarm of Angels — though, it seems, much more likely to produce something of quality — It’s Our Movie begins with a script and director (Alex Jovy, nominated for an oscar for a short film) and looks to the crowd for funding, audition tapes, and feedback. They have apparently raised ₤121,970 from the internet, but since the film is fully funded, they must have gotten the rest of the ₤1.2 million through a more traditional route.

It’s Our Movie gets right what A Swarm Of Angels does not: it is extremely difficult, if not impossible, to take inputs from untold hundreds and thousands and create a coherent creative output, which is what ASOA is attempting to do. The crowd CAN identify quality outputs fairly well and can also produce quality outputs as individuals, but collaboration through the web is not conducive to voting or pulling together a script, for example, as ASOA has attempted. Alex is an experienced director, has control of the project, has done the difficult work of creating the script, and is simply using the crowd’s input wherever it is best suited.

Can’t wait to see what these two projects produce.

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