What is crowdsourcing? Definition, advantages & tips

If you're looking for the advantages and disadvantages of crowdsourcing, you can't avoid taking a look at the past. How did it work before the digital revolution, before the Internet age?

Crowdsourcing definition

What does crowdsourcing mean? Crowdsourcing combines the terms "crowd" and outsourcing. When a company engages in crowdsourcing, it outsources internal work processes. It is therefore an independent form of division of labor.

This does not relate to the outsourcing of production (classic outsourcing), but rather to corporate processes such as the collection of ideas for new products.

Crowdsourcing, which "taps into" the behavior, know-how and attitudes of many people, has not only revolutionized market research, however, but also offers several other advantages. But there are also dangers lurking.

But what is the difference between crowdsourcing and open innovation? Crowdsourcing can be understood as an overarching term. For example, it includes the anonymous use of cell phone data, which can be used to analyze road traffic, for example. Open innovation refers primarily to the involvement of the outside world in innovation processes in order to increase their potential.

Pros and cons of crowdsourcing

These are the advantages of crowdsourcing.

Efficiency, cost savings, and many other crowdsource benefits generate interest in the new way of working. The following list will give you an idea of the full range of important benefits.

Advantage 1: Crowdsourcing offers high probability of success

Market research is elementary in all lifecycle phases of a product or technology. If you use open innovation for this purpose, you receive valuable input from the masses. Digital crowdsourcing platforms guarantee that people can work on your project at any place and at any time. An important advantage!

Advantage 2: Crowdsourcing saves costs and time

If you have people working for you, you usually pay a lot of money. But when people come together digitally, the cost is much lower. And if you manage to motivate your target group in the right way, you can minimize the financial, time and organizational effort.

Advantage 3: Building customer contact and database

Open Innovation projects create attention - and attention from potential customers is worth hard cash. In the process, the attention span lasts more than just a few seconds, as with traditional advertising. Participants become intensively involved with the brand, a product or an idea. It goes without saying that this can have a positive effect on future purchasing decisions.

Along the way, companies also collect valuable data from a valuable target group that they can contact in the future. Open innovation is therefore also a marketing measure. There are numerous examples of success.

Advantage 4: Gain brand ambassadors - or even employees

If a company manages to inspire people with its innovation as part of its crowdsourcing project, participants can quickly become brand ambassadors.

Example: An outdoor company provides 100 new types of functional shirts for a product test. The product testers are then out and about - and act as brand ambassadors along the way.

Open innovation can also be used for employee scouting. Either openly communicated, by offering an invitation to a job interview as a reward for participation. Or unspoken, by actively approaching particularly qualified feedback providers.

Used correctly, open innovation offers almost nothing but advantages, as experience has shown. No wonder large companies like Daimler have been using this method for years.

But are there no disadvantages to crowdsourcing? Perhaps we should rather speak of risks. We list three dangers below.

Disadvantage 1: Risk of manipulation

Open innovation platforms can minimize the risk of manipulating the project because they rely on qualified communities. Otherwise, it's entirely possible that competitors will negatively influence your innovation project by providing false feedback.

So, for example, if you ask for opinions on a certain product on your Facebook channel or even have people vote on it, this approach is relatively easy to manipulate.

Disadvantage 2: Risk of image loss

If your idea or product that you want to present to the crowd is only supposedly innovative, you run the risk of losing your image. The same applies to unprofessional project management: crowdsourcing cannot be planned one hundred percent, but you should be prepared for all conceivable cases. With an experienced partner at your side, you minimize this risk.

Disadvantage 3: Risk of internal disputes

No one likes to be talked into their area of responsibility. Companies should therefore make sure to actively involve the people responsible for development processes in open innovation projects. Otherwise, they may feel threatened.

Crowdsourcing tips

Every entrepreneur has the opportunity to use crowdsourcing, regardless of the size of the company. To get the most out of it, it is necessary to take crowdsourcing advice from leading experts into account.

Crowdsourcing tip 1: Motivate the crowd - but do it right!

Yes, they do exist, the highly motivated participants who do not want any financial or material reward for their commitment. Especially when it comes to a social project. But such co-workers are rare. You should motivate your target group with an appropriate reward.

But appropriate also means: Don't overdo it! This will attract people who have no interest in your open innovation project, but are only interested in the reward. Prize competitions that reward the best feedback increase the quality of the feedback. However, some people will give up if the chance of winning seems too small.

Crowdsourcing tip 2: Work transparently!

A good communication strategy is elementary in crowdsourcing and open innovation. Inform the project participants transparently about the next steps and communicate at eye level. Important: The participants must not feel exploited under any circumstances, otherwise you put the good reputation of your company at risk.

Crowdsourcing tip 3: Hold out for any feedback!

Market research can hurt. If you're secretly hoping for nothing but praise for your idea or product, you're not on the right track. So if 95 percent of those surveyed express skepticism or open criticism, you should also be prepared to radically rethink. Better at this point than when the end consumers decide in the store.

Crowdsourcing tip 4: Contact especially qualified feedback givers!

Not all feedback will get you anywhere. But there are some participants in every project who will amaze you - with razor-sharp analysis and tremendous subject matter expertise. Reach out to these experts and engage them in the future. You may even find a new brand ambassador or collaborator.

Crowdsourcing tip 5: Use the social networks - but not only!

Theoretically, this would also be a form of open innovation: You post an idea or a photo of a prototype on your Facebook channel and ask people what they think of it.

But do you actually get feedback from the right target group or only from people who like your brand anyway? And how do you make sure that the input isn't also used by your competitors? And who has the copyright if you want to use an idea?

Finally, we answer the most frequently asked questions related to crowdsourcing.

This is the outsourcing of internal work processes. In particular, ideas for projects (e.g. new flavors or designs) are often collected in the form of crowdsourcing campaigns.

Crowdsourcing websites bring people together to share their creative ideas or to let them compete in a project.