In the past, companies relied on the suggestion box to obtain ideas for improving prod-ucts and processes. Today the suggestion box has been replaced by the Internet, a much more efficient and far-reaching means for businesses to tap into the knowledge and expe-rience of consumers, professionals, suppliers, and employees. For many companies, the Internet has become a venue for collective idea generation and collaboration—resulting in a broad base of ideas and an intimate connection with the marketplace. The result has been two major developments in the area of product and process improvement known as mass collaboration 12 and crowdsourcing. 13 As Figure 4-9 shows, mass collaboration is
Customer Touch Points
Customer Problems and Interaction Opportunities to Improve the Customer Experience and Build Customer Value Order Planning Customers do not recognize the business’s solution as relevant Order Development Insufficient or incomplete information for meaningful evaluation Order Evaluation Customers encounter difficulties/frustrations in placing orders Order Placement Difficulties in placing order
Order Entry Order recorded or priced incorrectly
Order Processing Order in process but customer not aware of order status and delivery Order Delivery Product delivered late or damaged; wrong product delivered Customer Invoice Bill has errors, no one to contact, and calls lead to “voicemail hell”
After-Sale Services Problems after purchase with no one to call; calls not returned Product Usage Inadequate instructions; no hotline offered
Product Problems Product does not work and must be returned at customer’s expense Returns and Claims Customer has to fight to get warranty claim resolved
FIGURE 4-8 CUSTOMER TOUCH POINTS
the use of collective intelligence in a collaborative environment, whereas crowdsourcing uses collective intelligence to solve specific problems or solicit ideas—often as part of a competition or for a reward.
Mass Collaboration
Mass collaboration can take many different forms and involve different kinds of collabora-tors, but the main purpose is to collaborate with a large group of people who have expertise and diverse perspectives that extend beyond the walls of the organization. The main differ-ence between crowdsourcing and mass collaboration is the level of multidirectional interac-tion. Through mass collaboration, a business not only solicits the contributions of people all over the globe but collaborates with them on initiatives that add significant value.
A business could seek the collaborative input of a unique group of individuals, such as scientists in a specific field, or it could look to a broad spectrum of individuals, such as all current and prospective users of a particular product. The four groups that businesses most frequently involve in mass collaboration are prosumers, professionals or specialists, suppliers, and employees, as discussed in the next four sections.
Prosumers—Customers as Co-Inventors
Prosumers are consumer product-inventors. The customers in this unique subset of con-sumers take product usage beyond its intended capability. They often modify a product in a way that improves performance or serves an altogether new purpose. Businesses that engage prosumers in product development through mass collaboration frequently dis-cover innovative ways to increase the customer value of their products.
For example, among automobile enthusiasts, BMW enjoys a reputation for reliability and high-quality design. BMW has thousands of R&D professionals, many dedicated to specific aspects of automotive design. But when it came time to rethink the company’s telemetric features, such as GPS navigation, BMW released a digital design kit on its web site and asked for proposals from customers. Thousands responded with features they envisioned, and BMW’s engineers used many of the proposals in developing value-added benefits. Figure 4-9 shows how the mass collaboration process leads to possible solutions.
Apple also used mass collaboration for improving the iPod, and LEGO involved its target customers—children—in the design of LEGO Robots. As might be expected,
Open-Ended Group Collaboration and
Information Exchange Collaborative Web Sites and Wikis
Facilitate an Information-Sharing
Environment Mass Collaboration
Focused Problem Solving and Product
Idea Generation Crowdsourcing
New and Innovative Solutions for
Challenging Processes and Problems Resulting
in Product Improvements
FIGURE 4-9 MASS COLLABORATION AND CROWDSOURCING
LEGO’s collaborative web site also attracted many engineers who offered some good ideas, too. However, it is important to recognize that prosumers are advanced users who do not always represent the needs of an overall target market.
Partnerships—Engaging Professionals
What small business wouldn’t want to partner with BMW? But how likely is it that such a partnership would actually come about, especially if the small business is in a remote part of the world, far removed from any of BMW’s operations? The odds of such a part-nership are exceedingly small. Or at least they used to be. BMW now hosts a virtual design agency on its web site that gives small and medium-size businesses an opportunity to submit ideas that could lead to ongoing relationships with BMW.
Consider a Canadian gold mine that had seemingly depleted the gold from one of its properties over a 50-year period. Like any large mining company, this company employed its own geologists, and for years they had explored the possibility of extracting the “una-vailable” gold from the property. Then, using a Wiki site, the company presented its prob-lem to geologists around the world. This worldwide audience of professionals reviewed the property’s geology, the company’s activities to date, and the recommendations and comments of one another. From this group of geologists came new ideas that resulted in an extraction that equaled the entire output of the mine during the previous 50 years.
Eli Lilly and IBM are other examples of companies that use mass collaboration. Eli Lilly’s Wiki site allows scientists around the world to participate in developing cures and preventive treatment for diseases. IBM estimates that its collaboration with open-source communities saves the company almost $1 billion annually over the cost of maintaining an in-house operation that would produce the same results.
Businesses must dedicate resources to filtering and aggregating partner contributions.
The reward is that mass collaborations with outside professionals and specialists lead to product enhancements in less time and at a lower cost than the conventional closed approach.
Suppliers—Leveraging Supplier Participation
In the world of mass collaboration, suppliers must also have the opportunity to share their ideas on product and process improvement. Using the traditional approach, a company would develop the design specifications for a product and the suppliers would use those specifications in preparing their bids—a process that greatly limited the use of suppliers’
creativity. With mass collaboration, suppliers become part of the design process.
Boeing’s sleek, fuel-efficient 787, for example, is the result of a collaborative effort among some 100 suppliers in six countries. Boeing structured this truly collaborative design effort as a horizontal network of partners who worked together to produce a product with an exceptionally high level of performance. By targeting suppliers as its collaborators, Boeing gained access to the best ideas and capabilities in the worldwide aircraft industry.
Channel intermediaries are another group that businesses frequently involve. An inter-mediary that sees customers daily develops a good knowledge of their likes and dislikes, as well as a keen awareness of their needs. For businesses with indirect sales channels, the collaboration of intermediaries can rapidly lead to products with greater customer value.
Employees—An Under-Leveraged Opportunity
A business’s frontline employees are perhaps in the best position to see possibilities for improvements to products and processes. These employees, however, can rarely break
through the firewall surrounding the high-level employees who evaluate ideas and take steps to adopt new product benefits and processes. By encouraging employee participa-tion through mass collaboraparticipa-tion, a business overcomes the invisible barrier between the front line and the front office.
At a large company, the employees are also often consumers of the company’s prod-ucts. Many Procter & Gamble employees, for instance, undoubtedly use the company’s products in their daily lives. Why wouldn’t management want to hear from them about how the products might be improved?
Perhaps a maintenance supervisor has found a way to extend the life of an expensive piece of equipment on the product floor. If the supervisor has an effective way to share that information with other maintenance managers, the business would realize a tremen-dous cost savings. Mass collaboration of this type provides yet another source of value creation for businesses and customers.
Crowdsourcing
The Internet has provided a platform for companies to leverage the collective intelligence of their customer bases and experts. Participants are motivated by a reward system and often take pride in being a part of the community. Crowdsourcing initiatives—unlike open-source projects—typically have a specific purpose or problem to solve. In this respect, the process is far more focused and typically yields results more quickly.
The Netflix Prize is one of the best-known and successful examples of crowdsourc-ing to date. Netflix offered a $1 million reward for every 10 percent improvement in the company’s movie recommendation algorithm. 14 Having reached a limit with its internal capabilities, Netflix sought to harness the power of collective intelligence to significantly and quickly improve its product offering. The 3-year contest garnered interest and par-ticipation from around the world. By the conclusion of the Netflix Prize, there were 51,051 contestants on 41,305 teams from 186 countries. In total, Netflix received 44,014 valid submissions. 15 At the conclusion of the contest, two teams that finished within 20 minutes of each other had developed a number of elements that Netflix soon integrated into its recommendation algorithm. Netflix CEO Reed Hastings told the New York Times of the process, “You look at the cumulative hours and you’re getting Ph.D.’s for a dollar an hour. . . . We strongly believe this has been a big winner for Netflix.” 16
A number of companies have taken the idea of leveraging collective intelligence one step further and have built their business models around crowdsourcing. Quirky.com, Threadless.com, and Local Motors are all examples of companies that harness the power of the crowd to solicit market-generated product ideas and improvements.
Quirky.com is a unique product design firm that leverages collective intelligence to bring user-generated product ideas to market. Users are invited to submit ideas, vote for their favorites, and engage in the improvement process. Community members earn “influ-encer” points based on their contributions to the refinement of the product. These people are then rewarded with a royalty stream based on the significance of their improvements.
According to Quirky.com, “The world influences our business in real-time, and we share our revenue directly with the people who helped us make successful decisions.” 17 Users are motivated by the potential monetary rewards, but they are also driven by the sense of contribution and community involvement. Beyond user motivation, the products are developed by a community of eager buyers who are ultimately consumer evangelists. The
company has also significantly reduced its manufacturing risks by implementing a pre-order trigger point that must be met before the design is sent to the factory. 18
Threadless.com employs a similar community-based model but limits its product offering to user-generated T-shirt designs. Users submit designs to a weekly contest and vote for their favorites. On the basis of the community feedback, the winning designs are selected and produced. The winning designers receive a monetary reward, a royalty stream, and bragging rights. In this way, the company harnesses the collective intelli-gence of a community of over 500,000 people to design and select T-shirts. 19
“The auto industry was extremely out of whack with what customers were looking for . . . I wanted to see car companies adapt more quickly,” said Jay Rogers, co-founder of Local Motors. 20 The company was founded around an old idea—car kits. But this old idea was transformed by innovation when the company offered a community of enthusi-asts and potential customers a chance to be involved in the design and engineering proc-ess. Local Motors also sponsors contests to further refine components of its Rally Fighter.
In addition, the company provides a web destination for users to connect with one another and share their stories and photos of their modifications.
Procter & Gamble is one of the many companies using mass collaboration and crowdsourcing to develop improved products. An example aired on National Public Radio illustrates the process. P&G’s own scientists are working on research and develop-ment, but in order to quickly find a molecule that would remove red wine and similar stains from fabric, the company decided to crowdsource the problem, offering a cash award to the first scientist anywhere in the world who could produce an effective and safe molecule. The reasoning behind the decision makes sense: Would the discovery of the new molecule more likely come from the relatively few scientists working for P&G or from the hundreds of thousands of scientists worldwide? By crowdsourcing ideas, P&G gained access to expertise and creativity far beyond its own domain and was likely to find a solution quickly and with a smaller investment.