Crowdsourcing Improves Business Strategy

By Samuel Greengard

Although crowdsourcing isn’t a new topic?Wikipedia has builtan entire business model based on it?the concept is steadily moving into themainstream of business. According to consulting firm McKinsey & Co.,organizations such as 3M, Dutch insurer AEGON, global IT services provider HCLTechnologies, software producer Red Hat and defense contractor Rite-Solutionshave all turned to crowdsourcing to address key business issues.

McKinsey consultants Arne Gast and Michele Zanini say theconcept can dramatically boost organizational alignment and the quality ofstrategy "by pulling in diverse and detailed frontline perspectives thatare typically overlooked." At the same time, the approach helps build"enthusiasm and alignment behind a company’s strategic direction?acritical component of long-term organizational health, effective execution andstrong financial performance."

At its heart, crowdsourcing revolves around large groups ofpeople or a community handling tasks that have traditionally been associatedwith 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 numberof people into large tasks, while tapping knowledge and expertise thatpreviously 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 poweredby mobile technology?are driving a crowdsourcing revolution that’s provingpowerful and disruptive. For example, Red Hat relies on Wikis to generate,manage and organize ideas on an ad hoc and organic basis. Initiative leadersreceive input continuously from employees and respond back via town hall-stylemeetings, Internet chat sessions and frequent blog posts. This effort hasreshaped the way Red Hat conducts strategic planning, McKinsey reports.

At HCL Technologies, crowdsourcing is laying the foundationfor strategic business planning. More than 8,000 employees review internalbusiness plans to create "radical transparency across units, and open upthe conversation to large cross-sections of the company," the authorsnote. An unintended benefit has been more honest assessments and better overallbusiness analysis. This has helped transform the firm from commoditizedapplication support to a more strategic services organization.

These companies aren’t alone. When McKinsey examined datafrom more than 600 organizations over the last decade, it found that even atthe healthiest companies, about 25 percent of employees aren’t certain of theircompany’s strategic direction. The figure rises to nearly 60 percent forcompanies it identified as having poor organizational-health scores.

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

Although crowdsourcing remains in its infancy?organizationsare still exploring it and finding ways to make it work within an enterprisestructure?it’s a concept that is clearly ready for primetime. Says Peter Lee, aformer Defense Advanced Research Project Agency (DARPA) executive: Crowdsourcing?is changing the way government, corporations and others tackle complex issuesand problems. It is leading to an entirely different mindset about how productdevelopment, problem solving and decision making take place.?