Darivette Cruz
Nicole Koleczek
Mr. Rehak
6th per. Honors English II
12 May 2014
The Effectiveness of Crowdsourcing in
Business
‘Crowdsourcing’,
first defined by Jeff Howe and Mark Robinson in the June 2006 issue of Wired
Magazine (Howe), is a new, web-based business model that solves problems
through a distributed network of people. Jeff
Howe, a contributing editor and publisher at Wired Magazine, states:
"Simply defined, 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
and the large network of potential laborers" (Jefferey). Crowdsourcing is accomplished by a number of people in
putting their opinions or knowledge to help build up a business. It can also be achieved by having a single person with
enough background to help out the business/company. Examples of crowdsourcing
include applications such as Airbnb, Airtasker, and goCatch (Fung).
Crowdsourcing is effective in business because of the access to
resources, scale, and transparency (Fung). Crowdsourcing can be like a business
partner as well. These
reasons will be the main topics discussed in the next few paragraphs and will
highlight the key points as to why crowdsourcing is effective.
Crowdsourcing
can be thought of as an innovative business partner (Boudreau). For example, the company Apple has used the world to build
up their business. They used apps to enhance their
technology and collect data from people all over the world. After the collection of this data, Apple is able to figure
out what the customers want. Due to this
newfound information, Apple applies it to the new items being brought into the
world and this is what has made them a success.
Therefore, proper resources, or skills and items, allow a business to
increase profit. Tim Fung, the CEO and founder of AirTasker, states that menial tasks are
completed more skillfully through services such as photography, promotional
staffing, office work or design. Profiles,
reviews, and reputation credentials advertise these skills and items. A large, universally shared set of these resources is
accessible.
Scale, or size and location, also allows a business to increase profit. An example would be
specific events or promotions are completed more skillfully through a large
workforce rather than individual employment. Having more than one individual will
increase the speed at which information will be received and will also increase
the amount of work getting done. Also, lowering costs is more flexible. Sources are
redirected toward achieving business objectives.
Transparency, or real world data, allows a business to increase profit. For example, data
transactions are completed more skillfully through a large volume rather than a
small one. As the saying goes,
two heads are better than one, which applies to crowdsourcing. Valid data will be
rewarded whereas invalid data not. As “user-generated reputation” becomes more
prevalent, other methods of building trust such as advertising become
irrelevant.
Although
effective because of the access to resources, scale and transparency,
crowdsourcing may be ineffective in business because of certain obligations to
support management, marketplace, and control (Fung). Yes there are upsides to crowdsourcing, but that definitely does
not mean there are not some downsides that will go along with it. These are just a few of the downsides to crowdsourcing for
business, also known as crowdfunding. These
key points will be discussed in the next few paragraphs and will bring out the
main reasons as to why crowdsourcing will not be effective for funding purposes.
Management
should be efficient in cost when accessing resources, or skills and items. As Rohit Arora stated, “This method of raising money may
prove inadequate for larger ventures requiring millions of dollars worth of
financing.” He is basically saying that in
order for crowdsourcing to benefit a project or business, it has to be a small
amount of money required to be raised. For
example, a big business like Pebble Watches promised the participants some
products. Pebble Watches ends up losing
because it cost more money for them to ship the product and no money is really
gained from the people participating. It
is basically a free giveaway. A company may
promise participants a product in exchange for information about it but profit
may decrease because of invalid information (Arora).
Tom Murphy,
a partner at the law firm of McDermott and Emery, states “Crowdfunded companies will have large numbers of
shareholders – likely upwards of 1,000 – to whom they and their directors and
officers are accountable and owe fiduciary duties (Murphy).” Many people can take
and own a part of a business funding project. That company is responsible and owes money
to all those people who have taken part. If the company fails, or does not meet
their target, this can anger the investors. Angry investors’ leads to the act of suing
the company/business for what little money they may have earned. The investors can claim the company
is a fraud or the company has breached the contract (Arora). This can be false but most likely the court will vote in
favor of the investors because they can falsify evidence or take things out of
context.
That
scenario will usually only happen if a company fails and if the investors are
enraged they are not receiving the money they thought they would have gotten by
that point in time. How exactly can a company fail
though? By accepting false information, that is how. To save more money, a company or business will pay the
cheapest price to get valuable information. Low
payment in exchange for information is often accepted by those who are not as
knowledgeable about a company's work (Paul). A
company or business has to be willing to pay top dollar if they want to receive
top notch data. The second a person puts out false
information, the reputation and the business itself will go up in flames.
Marketplace should
be fair when accessing scale, or size and location. For example, a product or company may be tarnished by
unsatisfied customers or investors through negative reviews (Floren). Also, websites such as Kickstarter do not guarantee the
success of that certain product or company as only 10% actually succeed
(“Blunder”). Websites such as Indiegogo,
Fundables, and CircleUp may also profit from a business’s earnings and apply
fees (MarketingMoxie). There are always
hidden ways a site will be able to take part in the money flowing in for a
company’s product. Whether they tell that company
outright or just take the money without notification, that site will always
have a percentage of the money.
Control
should be qualitative when accessing transparency, or real world data. For example, Marcia Yudkin, owner of a marketing solutions
website and a marketing mentor, states that participants would more or less
state invalid information about a product or company (Yudkin). There is a higher chance of invalid information being passed
along than valid data being received. Also,
participants do not necessarily have to know anything about the product or
company. Whatever comes to mind is what they
will put down. Participants usually ignore the
criteria given to them by the company. A
participant will not take the time to learn about a product or business the way
a professional consultant would (Yudkin). Invalid
information about the product or company may also hurt the product or company
(“Pitfalls”). Crowdsourcing is basically trusting
and using a source of unknown people in order to complete the task at hand
(Bradley).
Crowdsourcing,
a new web-based business model that solves problems through a
distributed network of people, is used in business to
increase profit. Crowdsourcing is
effective in business because of its access to resources
(skills and items), scale (size and
location), and transparency (real world data). With enough skills, a person can build up
their business and make a reasonable amount of profit out of
it. If they can find the right
location to collect their information from, then they are set. They have to take the time to sort
out all the real information from the false information. This part will be crucial to their
business/company because if they make a mistake, things will
fall apart. A business will
collapse. Although
crowdsourcing may be ineffective in business because of certain
obligations to support the cost of management, a fair
marketplace, and quality control, it is
overall effective in increasing profit.
Arora, Rohit. “7 Reasons to Avoid Crowdfunding.” Fox
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