Crowdsourcing: The New Comparative Advantage?

03/15/2011 05:01 pm ET | Updated May 25, 2011

Crowdsourcing connects people with tasks as divergent as weighing a bull, creating a Super Bowl Ad, and finding gold. Wikipedia, itself a prime example, defines crowdsourcing as "the act of outsourcing tasks, traditionally performed by an employee or contractor, to an undefined, large group of people or community (a "crowd"), through an open call."

The Wisdom of Crowds
James Surowiecki opens his acclaimed book, The Wisdom of Crowds, with an anecdote about Francis Galton's experience in 1907 discovering that averaging the guesses of a group of untrained locals produced better estimates of a bull's weight than the company's own highly trained experts. Today, we see this the principles of the wisdom of crowds applied to things as widesspread as the theory of efficient markets for stocks.

From the idea that those outside of your company can provide expertise and value in your own areas, crowdsourcing has exploded over the last several years as technology has helped create a "flatter" and more interconnected world. When combined with market-based incentives, companies have discovered that the whole world can come to their service. Dorrito's top-rated Super Bowl ads the last several years have been the result of crowdsourcing contests where they allow aspiring creative talent to win the right to have their ad aired. The cost of the production is less than 1/100th the cost of the air time to show it.

An even more dramatic story is that of Goldcorp, a mining company on the brink of disaster because they couldn't find gold. In March of 2000, just as the dot-com bubble was bursting, they bucked the dominant wisdom of industry experts and opened up all of their data to the world so they could launch a series of contests with over $575,000 in prize money to help them find gold. The results where so successful that they increased their market cap from just over a hundred million dollars to over nine billion.

Technology-Based Crowdsourcing
More recently, we have seen technology-based crowdsourcing, where the ubquitous connectivity of the Internet, new cloud technologies, and intertwined social networks have supercharged how people collaborate. This has resulted in the rise of crowdsourcing for a much broader set of tasks than ever before. For the first time in human history a simple Internet connection can allow you to participate in a world of problems related to design and development anywhere on the planet.

Instead of determining what tasks can be done in low-cost labor markets and creating rigid structures that allow scale in accessing them, companies and individuals can focus on the output they are attempting to create and purchase iit like any other good they would order online. Logos and designs (, ads and video (,, technical development (, and other crowdsourcing sites disrupt traditional labor models and result in higher quality end results. Even AOL has gotten in on the act with, allowing writers to compete and get paid for successful submissions. These services run thousands of contests each year and the consumer (in most cases a company) chooses or allow sthe market to choose a winner and pays only for that optimal match for their work.

Its easy to see why companies would be drawn to use these models, but the participants -- designers and developers who may be independent workers, full time employees moonlighting at night for extra money or to develop new skills, retrained workers trying to break into new fields, and even just those looking for the glow of being recognized -- all have something to gain from participation in addition to the financial compensation. Skills development, work choice, transparency of outcomes to effort, social connections and recognition, gamification of work, etc. -- all make crowdsourced markets highly attractive to participants.

The New Comparative Advantage
In a world changing so quickly, new models for work will and must emerge. Growing labor forces in India and China, democratic expansions that allows more individual choice, lower friction in work moving across the globe in milliseconds instead of months, and more interconnected people and problems -- all drive the need for more than just subtle shifts in collaboration and creation.

The cutting edge -- where technology like "the cloud" and virtual goods themselves are invented, constructed, and consumed -- must be a leader in this change. In the future, people, organizations, and even countries that are able to coordinate and tap into the best across the planet in an instant will be at a substantive advantage -- and not one that is solely based on cost like today's shift of labor to low cost markets.

Crowdsourcing matched with markets offers an important and emerging tool in individual, corporate, and macro-economic collaboration. Participating in and exploring these mechanisms creates emergent experience and the potential for discontinuous innovation. The crowd is coming, its simply a question of if you will be leading or following it.