Crowdsourcing Improves Business Strategy

By Samuel Greengard Print this article Print

Today's social media tools and geolocation services are driving a crowdsourcing revolution in business that’s powerful and disruptive.

By Samuel Greengard

Although crowdsourcing isn't a new topic—Wikipedia has built an entire business model based on it—the concept is steadily moving into the mainstream of business. According to consulting firm McKinsey & Co., organizations such as 3M, Dutch insurer AEGON, global IT services provider HCL Technologies, software producer Red Hat and defense contractor Rite-Solutions have all turned to crowdsourcing to address key business issues.

McKinsey consultants Arne Gast and Michele Zanini say the concept can dramatically boost organizational alignment and the quality of strategy "by pulling in diverse and detailed frontline perspectives that are typically overlooked." At the same time, the approach helps build "enthusiasm and alignment behind a company's strategic direction—a critical component of long-term organizational health, effective execution and strong financial performance."

At its heart, crowdsourcing revolves around large groups of people or a community handling tasks that have traditionally been associated with a specialist or small group of experts. Jeff Howe, author of Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business (Random House), coined the term in 2006. He cited technology as a way to draw a greater number of people into large tasks, while tapping knowledge and expertise that previously flew under the radar. It can involve a diverse array of tools, including blogs, wikis, SMS, collaboration platforms, voting tools and more.

Today's social media tools and geolocation services—many powered by mobile technology—are driving a crowdsourcing revolution that's proving powerful and disruptive. For example, Red Hat relies on Wikis to generate, manage and organize ideas on an ad hoc and organic basis. Initiative leaders receive input continuously from employees and respond back via town hall-style meetings, Internet chat sessions and frequent blog posts. This effort has reshaped the way Red Hat conducts strategic planning, McKinsey reports.

At HCL Technologies, crowdsourcing is laying the foundation for strategic business planning. More than 8,000 employees review internal business plans to create "radical transparency across units, and open up the conversation to large cross-sections of the company," the authors note. An unintended benefit has been more honest assessments and better overall business analysis. This has helped transform the firm from commoditized application support to a more strategic services organization.

These companies aren't alone. When McKinsey examined data from more than 600 organizations over the last decade, it found that even at the healthiest companies, about 25 percent of employees aren't certain of their company's strategic direction. The figure rises to nearly 60 percent for companies it identified as having poor organizational-health scores.

However, "The payoff for cohesion is significant: Companies with a top-quartile score in directional alignment are twice as likely as others to have above-median financial performance," Gast and Zanini point out.

Although crowdsourcing remains in its infancy—organizations are still exploring it and finding ways to make it work within an enterprise structure—it's a concept that is clearly ready for primetime. Says Peter Lee, a former Defense Advanced Research Project Agency (DARPA) executive: Crowdsourcing “is changing the way government, corporations and others tackle complex issues and problems. It is leading to an entirely different mindset about how product development, problem solving and decision making take place.”  

This article was originally published on 2012-05-30
Samuel Greengard is a freelance writer for Baseline.
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