CrowdsourcingThe new innovation model

White paper | March 2012

Shikatani Lacroix is a leading branding and design firm

located in Toronto, Canada. The company wins

commissions from all around the world, across CPG, retail

and service industries, helping clients achieve success

within their operating markets. It does this by enabling its

clients’ brands to better connect with consumers through a

variety of core services including corporate identity,

naming and communication, brand experience, packaging,

retail, wayfinding and product design.

About the Author

Ann Meredith Brown, Director of Social Media, Public Relations & Corporate Communications at Shikatani Lacroix

An accomplished wordsmith, Ann has garnered a decade’s

worth of experience in copyediting, copywriting,

researching and reporting. She is responsible for

developing and executing Shikatani Lacroix’s social media

and communications strategies.

Ann possesses in-depth knowledge of the design and

advertising industries. She is the founding editor of Design

Edge Canada, a news and trends magazine and website for

the Canadian graphic design industry.

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The new innovation model

In today’s hyper-socialized world, consumers have come to

expect authentic experiences that they can customize and

personalize specifically to their wants and needs. The same

goes for their interactions with brands. To engage

consumers, marketers must create environments that

enable consumers to interact with, contribute to, and tailor

brands, while avoiding the power struggle to

control their brand over a consumer’s need to own

it and live it.

This shift in the power balance between individuals

and organizations has been witnessed in the use of

open source and collaborative networks. While the

internet helped fuel the trend towards

crowdsourcing and user-generated content, social

media has opened the flood gates to creating

intimate, collaborative interactions as marketers

use social tools to connect with consumers on

their terms.

By taking advantage of these social tools, successful

companies are encouraging and facilitating user-generated

content to find, create and leverage knowledge and

expertise to solve problems and foster innovation faster

and at a lower cost than ever before. As a result, marketers

are not only creating stronger engagement and loyalty for

their brands, they are creating a new innovation model.

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Crowdsourcing and user-generated content

According to Crowdsourcing.org, an authoritative

crowdsourcing and crowdfunding initiative by crowd

powered business enterprise Massolution, it all started with

the world wide web and its early applications that allowed

us to connect to anyone from anywhere at any time. Then

came the social infrastructure that provided the means for

brands to interact in a consequential way. Social platforms

have turned passive consumers of information into active

producers of content. Now production infrastructure is

being constructed to enable interconnected communities

to engage and produce. When people use this

infrastructure to problem solve or to generate something

new and of value, it’s called crowdsourcing.1

As brands participate in these social communities – by

asking and answering questions, engaging customers, and

sharing content – numerous opportunities arise to involve

the community with content creation, says Lee Odden,

CEO of TopRank Online Marketing, a digital marketing

agency that specializing in search engine optimization and

social media public relations consulting. According to

Odden, crowdsourcing helps a brand create new,

meaningful content and provides an opportunity for

relevant recognition of participants within the brand's

social community.2

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1 Crowdsourcing.org

2 Clickz.com

Channeling this user-generated content offers several

advantages,3 says Odden:

• UGC is trusted.

• Contributors have an interest in helping promote the

content.

• UGC provides more information sources for prospects

and customers.

• UGC publishing allows for critical feedback about

products and services.

• UGC publishing provides tools for brand evangelists.

• UGC facilitates brand conversations within the

marketplace.

As such, crowdsourcing and UGC might bring to mind logo

design contests, homemade commercials, and online photo

competitions of recent years as brands bid to engage

consumers on a more interactive level by asking for their

contribution. However, this exchange has become much

more intimate with the advent of myriad social media

channels. Brands are now engaging consumers to become

part of their marketing programs in their own personal

space. And the reality is that most consumers do want to

contribute because the prospect of being part of

something bigger has always been popular.

As more brands use crowdsourcing to tap into the global

brain, organizations are realizing that this trend goes

beyond simple content creation and is spawning a new

model of innovation that is helping solve real problems.

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3 Clickz.com

As brands use

crowdsourcing

to tap into the

global brain,

organizations

are realizing

that this trend

goes beyond

simple content

creation and is

spawning a new

model of

innovation that

is helping solve

real problems

Open innovation

In The Open Innovation Marketplace: Creating Value in the

Challenge Driven Enterprise, authors Alpheus Bingham and

Dwayne Spradlin discuss how organizations can use open

innovation, a.k.a crowdsourcing, to create global networks

to connect with knowledge from virtually any source, and

then collaboratively transform that knowledge into higher-

value innovation.

Bingham and Spradlin are the founder and president/CEO

of InnoCentive, a company that leverages open innovation

and crowdsourcing to help organizations solve pressing

challenges. According to InnoCentive, it enables

organizations to solve their key problems by connecting

them to diverse sources of innovation including employees,

customers, partners, and the world’s largest problem

solving marketplace.4

As The Open Innovation Marketplace explains, a more open

approach to innovation promises access to “smart people”

that are outside of an organization. While internal experts

may have a better understanding of the nature of the

problem or need, often the best minds for a given task lie

outside the walls of the organization. But most strategies

fall far short of effectively tapping that external crowd. A

new framework for innovation should position leaders to

understand the most appropriate mechanisms to find,

enroll, use and extract value from those external resources.5

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4 Innocentive.com

5 The Open Innovation Marketplace: Creating Value in the Challenge Driven Enterprise

“Businesses that adopt this approach will have a unique

opportunity to operate more effectively than ever before

and to build more flexible organizations with better, faster,

and more cost-effective access to an entire world of

productive capacity. And will have the flexibility to respond

to market opportunities when they arise.”

Bingham and Spradlin define this approach as Challenge

Driven Innovation, “an innovation framework that

accelerates traditional innovation outcomes by leveraging

open innovation and crowdsourcing along with defined

methodology, process, and tools to help organizations

develop and implement actionable solutions to their key

problems, opportunities, and challenges.”

This can be accomplished, they say, by remaking an

organization into a Challenge Driven Enterprise, where

problems or initiatives are articulated as challenges and

efforts are aligned with strategic goals, making sustained

performance improvement possible.

Bingham and Spradlin define the hallmarks of a Challenge

Driven Enterprise as follows:6

“Open” Business Model: Businesses focus their attention

on their true core competencies, orchestration and strategy

to deliver against their missions. They orchestrate networks

and ecosystems of customers, employees, partners, and

markets. These models are highly virtualized in order to

maximize innovation, agility, capital flexibility, and

shareholder returns.

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6 The Open Innovation Marketplace: Creating Value in the Challenge Driven Enterprise

“An ‘Open’

Business

Model

orchestrates

networks and

ecosystems of

customers,

employees,

partners, and

markets”The Open Innovation

Marketplace: Creating Value in

the Challenge Driven

Enterprise

Talent Management: Think strategic virtual Human

Resource Management. These businesses not only

understand, but embrace key trends such as globalization,

social networking, generational shifts, and project-based

work. Further, they recognize the importance of

engagement with all their communities and the whole

world to drive new ideas, product development, innovation,

and even production capacity. This 21st-century evolution

of HR makes it more strategic than ever before and vital to

the success of the business.

Challenge Culture: Challenges are integrated into the

culture at all levels and in all functions. The needs and

barriers are well articulated and, where possible, portable.

Executives, managers, and team members are trained and

empowered to identify critical problems and issues and to

systematically manage these challenges through to closure

for the benefit of shareholders. They can be tackled

internally or externally as conditions best dictate. Challenge

cultures care only that problems are solved. Who solves

them and how is secondary to advancing the business

mission every day. Politics, “not invented here” attitudes,

and bureaucracy are not tolerated and eliminated as

inefficient and wasteful. Transparency, process integrity,

and measurement are vital and hold accountable all

significant projects, initiatives, and investments.

Recognition, reward, and promotion systems are aligned.

Orchestration skills are evident.

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Case studies

These principles are demonstrated by the following case

studies which successfully use the mechanics of

crowdsourcing to breed innovation.

My Starbucks Idea

Starbucks’ first foray into the social media

space was its launch of MyStarbucksIdea.com.

The website, which allows users to submit and

discuss their ideas, vote on their favourite

ideas, and see ideas in action, puts a social

media spin on the traditional customer

comment card.

The site has generated over 100,000 ideas

from customers and partners since it

launched in March 2008. The site has received over one

million votes, registered more than 250,000 accounts, and

launched 150 ideas and counting. The site also provides a

forum for Starbucks to communicate about ideas it has

implemented and explain why it has declined some of the

ideas it has received. According to Matthew Guiste, director

of global social media at Starbucks, “It’s a very simple site,

and I think its simplicity is one of the reasons it’s been

successful.”

This open-sourced innovation model has produced such

varied ideas as the introduction of in-store recycling,

Starbucks canvas shopping bags, and more Starbucks in

the Netherlands.

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LEGO Cuusoo

LEGO also launched a crowdsourcing venture in 2008 in

collaboration with Cuusoo, a Japanese partner of the LEGO

Group. The system allows LEGO fans to upload their own

idea for a LEGO product. The design is then voted on by

other fans. Once the idea receives 10,000

votes, the project gets a formal review and

a chance to go into production. The creator

receives a 1% royalty on net revenues from

the set.

The first Cuusoo project hit the shelves in

2011 – a limited-edition version of the

Japanese deep sea submersible, the

Shinkai 6500. The second, a Japanese

asteroid reconnaissance spacecraft called

the Hayabusa, was released in early March

2012. While the Shinkai took 420 days to

accumulate enough votes for a review

(1,000 were needed for the Japan-only

project), Minecraft Micro World, Cuusoo’s

latest project, chalked up 10,000 votes in

just 48 hours. What’s more, this third project will be coming

off the line in a record six months, compared to LEGO’s

typical two- to three-year turnaround. Minecraft will be

available in summer 2012.

So far, more than 700,000 videos of LEGO Cuusoo

creations have been posted on YouTube. And in a sluggish

toy market, LEGO Group sales rose by 17% in 2011 to US

$3.5 billion.

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Dell IdeaStorm

In response to angry consumers whose growing discontent

for the Dell brand was gaining momentum and spreading

virally through the internet,

Dell invited participation

through a collaborative

environment called

IdeaStorm. With its “Where

your ideas reign”

positioning, IdeaStorm

aimed to contain negative

feedback and encourage

product development and

customer relationship

management.

Eighteen months after its

2007 launch, IdeaStorm

reduced unfavorable

comments from 48% to

under 20%. Actively

implementing a two-way dialogue helped Dell achieve

organizational goals and meaningful engagement with

customers as it listened and acted upon feedback.

Version 2.0 was launched in March 2012, which allows site

members to upload their personal photo, bio and social

networking links such as Facebook, Twitter, LinkedIn and

Google+. Idea posters will also have the ability to promote

comments on their idea that they believe add value by

considering it an “Extension” of their idea.

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There have been over 16,903 ideas submitted, 736,384

votes logged, 95,221 comments added, and 491 ideas

implemented. Resulting innovations from IdeaStorm

include backlit keyboards, national call centres and blade

workstations.

Dell’s revenue increased 6% in fiscal 2008 to $61 billion,

after a modest 3% increase the previous year. Its earnings

per share increased by 15 percent to $1.31.

Conclusion

No longer used simply as a conduit for content creation,

brand engagement and problem solving, crowdsourcing is

maturing beyond the new model for innovation to become

a disruptive force that drives significant and enduring

change into business.

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Reference materials

Crowdsourcing.org Editorial – The Open Innovation Marketplacehttp://www.crowdsourcing.org/editorial/innocentive-creating-value-in-the-challenge-driven-enterprise/3503

Clickz.com – Crowdsourcing and user-generated contenthttp://www.clickz.com/clickz/column/2098809/crowdsourcing-user-generated-content

InnoCentivehttp://www.innocentive.com

InnoCentive – The Open Innovation Marketplacehttp://www.innocentive.com/open-innovation-marketplace-creating-value-challenge-driven-enterprise

My Starbucks Ideahttp://www.mystarbucksidea.com

My Starbucks Idea - Social Media & Open Innovation at Starbucks with Matthew Guistehttp://www.youtube.com/watch?v=pjNM8drAqG0

LEGO Cuusoohttp://legocuusoo.posterous.com

Dell IdeaStormhttp://www.ideastorm.com

Dell Financial Reporting – Fiscal Year 2008 in Review http://content.dell.com/us/en/corp/d/corp-comm/ir-FY08-in-Review

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For more information, contact:

Jean-Pierre Lacroix, President

Shikatani Lacroix

387 Richmond Street East

Toronto, Ontario

M5A 1P6

Telephone: 416-367-1999

Email: jplacroix@sld.com

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