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The Pros and Cons of Crowdsourcing: Is it for Your Small Business?

Date: August 02, 2010

Crowdsourcing

What if you could tap into hundreds of the brightest minds out there to get the idea for your next product, campaign or solution to a problem your business is having?

The Internet has made that possible with crowdsourcing, a process by which a business solicits an online audience, or “crowd”—rather than an individual or a company—to work on projects or give feedback on ideas. The information seeker posts a query for ideas along with an incentive for the solution, then sits back while the responses roll in. Businesses have used it to source everything from logo design to complex programming quandaries. But it’s not the right solution for every business.

Whether you’re considering crowdsourcing as a business model or want to try it for a specific project, consider several pros and cons:

Pro: Choice of Ideas

There’s strength in numbers when it comes to crowdsourcing. Rather than relying on one person or agency to work on a project, you can select the best ideas from the  “crowd” of people you solicit online.

Minted, a San Francisco-based company that uses crowdsourcing to create the designs behind stationery and greeting cards, continuously holds design competitions on its website. Designers submit ideas, and the online Minted community votes on them. The winner receives a monetary prize and 5% net revenue on the sale of the product as an incentive. “We get a lot more variety and a lot more creative vision,” says Mariam Naficy, CEO and founder of Minted. 

Con: Timing

It can take a lot of time to sift through the outpour of responses from people wanting to contribute to a project. John Winsor, CEO of Victors and Spoils, built his Boulder, Colo., ad agency on crowdsourcing. Winsor works with clients on ad campaigns to determine which online crowd platform is best used to pitch an idea. He uses platforms like crowdSPRING (www.crowdSPRING.com) and 99 designs (www.99designs.com), which allow anyone to pitch ideas to their community of talent.

Windsor’s full-time staff then sifts through hundreds of ideas and presents the best ones to the client. The client has the final say. “It’s not a typical agency relationship,” Winsor says. “It takes a lot more time than when one person is dedicated to it.”

Con: Managing a Crowd

Logistics can get complicated when you’re paying numerous people to work on different projects. If you use crowdsourcing often, Naficy suggests using software to build, manage and organize labor, and to have full-time staff dedicated to overseeing it. “[A crowdsourced business] is not a typical retailer,” Naficy says.

Pro: Lower Cost, Lower Risk

In some cases, crowdsourcing can save your business money. For Winsor, it means he can pay someone a one-time flat rate for their service—and quality results—rather than going to an ad agency that charges thousands of dollars.

For Naficy, crowdsourcing doesn’t necessarily save her business money, but it provides a guarantee that Minted products are successful since the online community votes on designs. “It’s a reduction in risk and an increase in variety, rather than a decrease in cost,” she says.

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