“What’s the pay off of crowdsourcing?” That’s the question I hear from every executive or manager that I talk to. As companies punch a new holes in their belts to tighten further, everyone is asking how to continue innovating, while reducing costs. Is that even possible? In fact, yes. Economic downturns are a hotbed of breakthroughs. The phrase, “necessity is the mother of all invention” didn’t come out of nowhere!

So why make the shift to open innovation right now? Bottom line: For profit and market leadership. Crowdsourcing has proven to be the most ingenious means to predict and deliver on what the market wants, plus it brings your organization closer to those stakeholders that are most passionate, good or bad. Here are four business cases where we see crowdsourcing paying off

The Four Go-To Ways of Crowdsourcing

• Market prediction
• Product or business innovation
• Research discovery
• Brand Collaboration

Crowdsourcing for Market prediction let’s you test market desires. Does the world really want to ride a Segway? Traditional market research can fall far short of assessing future consumer desires. The only sure answer you’ll get is to ask the people involved, whether it is your customers, your partners, or your employees.

American Idol is an example where global TV viewers and web followers are asked to vote on who they like best as the next music celebrity. Sony BMG created American Idol to take the risk out of guessing on pop stars… No matter what your personal thoughts on how talented the winners of American Idol, the general public lets Sony BMG know that if they invest in the winner, they are guaranteed to sell millions of albums and are laughing all the way to the bank. The viewers are invited in, engaged and contribute to Sony BMG’s market leadership, all along while be rewarded by the most popular (and successful) entertainment on TV.

Crowdsourcing for Product innovation or business innovation is about asking the crowd to tell you what it wants before you launch a product on a guess. If you ask your customers what would make their lives easier, then produce it, how couldn’t they love you? Some companies pitch product ideas for input, some ask for raw ideas and others pitch a problem to the crowd to see what products percolate up!

The Swiffer came from a call to the crowd for upgrade ideas on a broom. P&G has a connect+develop crowdsourcing community where it constantly invites ideas on future products and enhancements to current ones. P&G’s net profit tripled to $10 billion in 2007 after just a few years of really embracing crowdsourcing.

Crowdsourcing for Research and discovery is about getting to answers you otherwise wouldn’t with the help of the crowd. Solving the impossible isn’t so far off when you let in a crowd with more time, or different experience than you have.

A good example is the “Goldcorp Challenge” launched on the mining company’s website in March 2000 with big cash prizes up for grabs. Abandoning secretive conventions of the mining industry, Goldcorp offered up online all of the geophysical data had gathered since 1948 and asked the crowd to predict where on its property they’d find the next gold discovery. Turns out, 8 million ounces of gold were found based on crowd submissions, and that’s 8 million ounces all of Goldcorp’s expert geological staff couldn’t find. Goldcorp CEO, Rob McEwen estimates the crowdsourcing effort saved the company two to three years of exploration time.

Crowdsourcing for Brand collaboration lets you invite brand input or creative

Common examples of brand collaboration are asking a crowd to do a tv ad for them… Doritos has done it, converse running shoes has done it, so has Heinz ketchup.

For Converse, thousands of ad spots flooded in from its open call, dozens of which its ad agency declared brilliant. Converse now invites the crowd to design their own shoes – they branched out to more than one of the four ways to crowdsource.

When Heinz asked their customers to make a commercial for them and upload it to youtube, it wasn’t striving to get a commercial made for free, Heinz wanted to find out how people connect with the brand. They gave a cash prize and they gave their customers the opportunity to be heard and explain why they love Heinz ketchup. That insight on your brand is worth millions to large corporations.

What uses of crowdsourcing have you seen pay off? Which would you recommend avoiding? Share your thoughts.

Photo by Holden Caulfield