Could Crowdfunding be the Future of New Project Development?

Reading this article reminds us that the jump from concepting and ideation to actual production is something that can be very difficult. Could crowdfunding be a possible solution to this more difficult problem of funding ideas?

Traditionally, design companies show new product development workflow as something like this.

With design concepting and ideation on the left progressively working towards a proof of concept and prototype, then finally flowing through to production and distribution. All very simple when you know how. Of course this is the idealized view of product development and it requires time and effort, not to mention money to make this process work.

The reality is as the article suggests more like this.

Where the concepting and ideation are can be quick and full of possibilities then the reality of having to make and distribute and getting investors involved can change the new products possibility of surviving in the marketplace. Ultimately you have to get to a point in the product development where considerations about marketing and product placement occur. To get people to buy your product thoughts on differentiation from competition and potential rivals has to occur. Most likely you will need some kind of advertising and marketing effort to make that happen. When should these have been considered? Probably quite early on in the product life-cycle. Then the questions of manufacturing and shipping to consumers has to discussed and solved. Apple hasn't just been innovative in their products but also in the infrastructures that support the making and shipping of these items. Innovation si more than a good idea and great product.

So this leads onto the focus of the article, for the majority of start ups and small businesses that have lower budgets and not the reach and resources for these systems to be put in place, how can they solve these issues without help? Could a form of crowdsourcing that involves investments from a crowd, called crowdfunding help?

Firstly there are 2 important questions to ask yourself.

1. Do I have the time to make this commitment?
2. Do I want to develop this publicly

These questions of course have huge impacts on whether you should begin a crowdfunded project.

Certainly crowdfunding has been shown to work in gathering money for projects\ that seem worthwhile. One attempt at this that has proven successful has been the work by Grameen bank, an attempt at helping the third World at getting micro financial help for individual projects that can help those in extreme poverty.

So how might this fit into the building of an idea at what stage should you seek funding from other people. The website suggests getting people involved at the proof of concept stage, of course this makes sense that people want to see at least something working in action rather than pure speculation. Then the idea has already started to prove at least it can be made. The speculation of course might still be in the interest of the public at large and it's possibility of future growth and success. But then that is what investment is all about, speculation on future growth.

There are already many sites forming on this concept such as kickstarter and IndieGoGo, they are proving out the model and already have many projects looking for crowd funding. Time will tell how successful these become. but already signs are looking positive for this new venture into funding. Kickstarter has already as of 2010, had 319 successful projects and raised over $9.1 Million in funding these efforts. Top catagories seem to be towards film and music efforts with design making a growth sector in third. The reason suggested is that designer primarily spend their time working on projects for others and are not as used to pitching their ideas for themselves.

Noted reasons for Kickstarters crowdsourcing success are suggested to be:

1. They filter which projects get posted to the crowd -
makes them interesting and worthwhile

2. You only get funding if you meet the threshold of prior to launching your project
keeps projects realistic and encourages crowd participation in promotion as projects get close to reaching their goals

3. Easy to find and promote projects
Easy is always good in these efforts, as it makes it easier for anyone to get involved.

4. Its success has made it more successful
As Malcolm Gladwell would suggest reaching a tipping point in success will only lead to more interest by others.

5. It's not about the money
Like most crowdsourcing efforts the crowd is most motivated by personal pet projects and interests.

You can find out more information about crowdsourcing in a previous post here.

Gamification of the crowd

I recent article I read highlights some of the power of crowds and mixes in some gaming concepts to make a novel use of crowdsourcing to help scientific progress. The amazing claim is that the power of the crowd actually came up with an enzyme that was better than anything the scientists working in the field had come up with on their own. The new crowd produced enzyme is 18 times more effective than it was before the crowd got involved.

The crowd playing this game are logged into a system called FoldIt, that basically requires folding proteins to form a correct solution. It is like a biological version of Rubik's cube. It has rules and systems, that can be learnt and lend themselves to crowdsourcing. The power of the crowd is the ability to tackle these complex objects in bite sized pieces and problems. One of the fascinating things is that the crowd are not all experts in protein folding and in fact do not need to be to play. The rules of gene folding are like the rules of a game that can be learnt and played with.

The lesson to be learnt here is that by creating a compelling game that has easy rules and ability to experiment without consequence has not only grown a large interested group of game players, but has actually enabled time and effort playing the game to be turned into something practical in the real world. This fails nicely inline with the whole concept of innovation and working on bite sized problems, using a growth mindset and playing in safe environments. Nice confirmation of some of those concepts.

You can read some more about some of my crowdsourcing discoveries here and here.

Successful Crowdsourcing Requirements

As part of a project I am working on at the moment I am thinking carefully about how it might benefit from crowdsourcing the content for the site. I can't talk too much about the project right now, but I can share my discoveries about crowdsourcing so far. As I mentioned in a previous post I recently read the book by Jeff Howe, and in a previous post I had found a few key motivators to crowdsourcing on the web. Jeff, kindly puts a summary at the end of his book that extends this list, with the following observations that he made on crowsourcing and what makes it work. His key discoveries for successful crowdsourcing include:

Picking the right model. 

As outlined in his book, which I don't plan to repeat fully here I suggest you buy and read it yourself, he talks about the different models of crowdsourcing that exist, including crowd creation, collective intelligence and crowd voting. Each of these has different goals and needs from the crowd, and some projects require one of these approaches and some require all three.

Pick the Right Crowd.

Picking the right group of minds to tap into is of course important to any endeavor as you want to have the product of their efforts to be inline with your needs and goals.

Offer the right incentives.

offering the right incentives of course falls inline with the right crowd and right model. Some crowds are inspired and work to impress peers and some work to make money, each crowd can be motivated by different things, so it is important to know what motivates your crowd, and allow those motivations to shine and work in your site.

Don't assume the crowd is your new workforce.

It seems that it is easy to fall into the mindset that crowdsourcing is going to save you time and effort and reduce the need for fulltime employees. But as Jeff explains, often the content they produce needs guidance, and filtering, by someone professional in the area of the crowds domain. Crowds also don't always show loyality if they feel cheated and any attempt to think of them as substitute works will back fire.

Dumbness of crowds or the benevolent dictator

This is an extension of the previous principle, crowds are not always very good at self organizing and often need guidance from a guide, or principle that helps focus the crowds efforts.

Keep it simple

The way to think about crowds is to see them as many different people with many different skills and more importantly with various amounts of time available to work on their projects. So as such breaking problems or tasks that are of different sizes ideally smaller the better, is more likely to yield results. Those that have an hour to spare can use it, and those that have 5 mins can also take part in the collaborative efforts.

Sturgeons Law

This is simply that most of the content(+90%) that people of such varing degrees of ability will produce will be less than satisfactory. But 10% will be amazing and above average. The task of course is to get as many people invloved as possible to increase the amount of great work produced.

10% Rule to aid Sturgeons Law

Allow the crowd to sort through the content themselves voting the best up to the top and allowing the bad items to fall to the bottom of the fish tank. The 10% concept comes from the view, of Bradley Horowitz that approximately 1% of a crowd produces something, 10% votes and comments on it and 90% will just consume it. So the 10% is a valuable asset to getting the best of the crowd.

The community is always right.

This simply suggests that the community can be guided, but in the end you are a follower to the crowds wants and desires. After all, if the community feels ignored or pushed, then they will just leave for something else.

Ask what you can do for the crowd.

It is important for crowd to be considered as individual people, they are going to have needs, wants and desires. Your job as a crowdsorcerer  is to put in place those things that address the crowds Maslow needs, if you want to really see success then work with the community you create.

So there you have it a nice summary of some considerations for crowdsourcing efforts. I have already begun to rethink how my project might benefit from some of this advice. Time will tell how successful it becomes. 

Crowdsourcing

Crowdsourcing is a fascinating term coined Jeff Howe, journalist at Wired magazine, to describe the use of large groups of people working on a common task in bite sized chunks. His latest book, Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business, is a great overview and summary of the current trend and ideas on group problem solving and content generation. 


Not everyone agrees with the concepts he raises that the group is more potent than the individual creator, but he does raise some interesting talking points around the open source programming model and content sites like iStockPhoto and YouTube. For me the most fascinating aspect of crowdsourcing and what it allows is that someone whom is a professional in one field of work, can lend his skills to another, which has long been recognized as a good way to innovate. Also the concept of people having other interests outside of their chosen career, that can be used and improved by adopting a crowd of interest, seems to fall nicely inline with modern thinking around people being passionate about things that are not necessarily done for money or profitable gain, but more for personal fulfillment and challenge. 


Overall I think crowdsourcing has some very interesting concepts and the examples given in the book are very compelling, whether or not it can be replicated easily across different domains remains to be seen, but at the least I like the ideas of working as a group of passionate like minded individuals to solve bigger problems in smaller pieces. This book is a great introduction to the concepts and is an easy read to get upto speed on the current trend.