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The new innovation model
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  1. 1. CrowdsourcingThe new innovation modelWhite paper | March 2012
  2. 2. Shikatani Lacroix is a leading branding and design firmlocated in Toronto, Canada. The company winscommissions from all around the world, across CPG, retailand service industries, helping clients achieve successwithin their operating markets. It does this by enabling itsclients’ brands to better connect with consumers through avariety of core services including corporate identity,naming and communication, brand experience, packaging,retail, wayfinding and product design.About the AuthorAnn Meredith Brown, Director of Social Media, PublicRelations & Corporate Communications at ShikataniLacroixAn accomplished wordsmith, Ann has garnered a decade’sworth of experience in copyediting, copywriting,researching and reporting. She is responsible fordeveloping and executing Shikatani Lacroix’s social mediaand communications strategies.Ann possesses in-depth knowledge of the design andadvertising industries. She is the founding editor of DesignEdge Canada, a news and trends magazine and website forthe Canadian graphic design industry.White paper | March 2012 | Crowdsourcing | 1
  3. 3. The new innovation modelIn today’s hyper-socialized world, consumers have come toexpect authentic experiences that they can customize andpersonalize specifically to their wants and needs. The samegoes for their interactions with brands. To engageconsumers, marketers must create environments thatenable consumers to interact with, contribute to, and tailorbrands, while avoiding the power struggle tocontrol their brand over a consumer’s need to ownit and live it.This shift in the power balance between individualsand organizations has been witnessed in the use ofopen source and collaborative networks. While theinternet helped fuel the trend towardscrowdsourcing and user-generated content, socialmedia has opened the flood gates to creatingintimate, collaborative interactions as marketersuse social tools to connect with consumers ontheir terms.By taking advantage of these social tools, successfulcompanies are encouraging and facilitating user-generatedcontent to find, create and leverage knowledge andexpertise to solve problems and foster innovation fasterand at a lower cost than ever before. As a result, marketersare not only creating stronger engagement and loyalty fortheir brands, they are creating a new innovation model.White paper | March 2012 | Crowdsourcing | 2
  4. 4. Crowdsourcing and user-generated contentAccording to, an authoritativecrowdsourcing and crowdfunding initiative by crowdpowered business enterprise Massolution, it all started withthe world wide web and its early applications that allowedus to connect to anyone from anywhere at any time. Thencame the social infrastructure that provided the means forbrands to interact in a consequential way. Social platformshave turned passive consumers of information into activeproducers of content. Now production infrastructure isbeing constructed to enable interconnected communitiesto engage and produce. When people use thisinfrastructure to problem solve or to generate somethingnew and of value, it’s called crowdsourcing.1As brands participate in these social communities – byasking and answering questions, engaging customers, andsharing content – numerous opportunities arise to involvethe community with content creation, says Lee Odden,CEO of TopRank Online Marketing, a digital marketingagency that specializing in search engine optimization andsocial media public relations consulting. According toOdden, crowdsourcing helps a brand create new,meaningful content and provides an opportunity forrelevant recognition of participants within the brandssocial community.2White paper | March 2012 | Crowdsourcing | 31 Crowdsourcing.org2
  5. 5. Channeling this user-generated content offers severaladvantages,3 says Odden:• UGC is trusted.• Contributors have an interest in helping promote thecontent.• UGC provides more information sources for prospectsand customers.• UGC publishing allows for critical feedback aboutproducts and services.• UGC publishing provides tools for brand evangelists.• UGC facilitates brand conversations within themarketplace.As such, crowdsourcing and UGC might bring to mind logodesign contests, homemade commercials, and online photocompetitions of recent years as brands bid to engageconsumers on a more interactive level by asking for theircontribution. However, this exchange has become muchmore intimate with the advent of myriad social mediachannels. Brands are now engaging consumers to becomepart of their marketing programs in their own personalspace. And the reality is that most consumers do want tocontribute because the prospect of being part ofsomething bigger has always been popular.As more brands use crowdsourcing to tap into the globalbrain, organizations are realizing that this trend goesbeyond simple content creation and is spawning a newmodel of innovation that is helping solve real problems.White paper | March 2012 | Crowdsourcing | 43 Clickz.comAs brands usecrowdsourcingto tap into theglobal brain,organizationsare realizingthat this trendgoes beyondsimple contentcreation and isspawning a newmodel ofinnovation thatis helping solvereal problems
  6. 6. Open innovationIn The Open Innovation Marketplace: Creating Value in theChallenge Driven Enterprise, authors Alpheus Bingham andDwayne Spradlin discuss how organizations can use openinnovation, a.k.a crowdsourcing, to create global networksto connect with knowledge from virtually any source, andthen collaboratively transform that knowledge into higher-value innovation.Bingham and Spradlin are the founder and president/CEOof InnoCentive, a company that leverages open innovationand crowdsourcing to help organizations solve pressingchallenges. According to InnoCentive, it enablesorganizations to solve their key problems by connectingthem to diverse sources of innovation including employees,customers, partners, and the world’s largest problemsolving marketplace.4As The Open Innovation Marketplace explains, a more openapproach to innovation promises access to “smart people”that are outside of an organization. While internal expertsmay have a better understanding of the nature of theproblem or need, often the best minds for a given task lieoutside the walls of the organization. But most strategiesfall far short of effectively tapping that external crowd. Anew framework for innovation should position leaders tounderstand the most appropriate mechanisms to find,enroll, use and extract value from those external resources.5White paper | March 2012 | Crowdsourcing | 54 Innocentive.com5 The Open Innovation Marketplace: Creating Value in the ChallengeDriven Enterprise
  7. 7. “Businesses that adopt this approach will have a uniqueopportunity to operate more effectively than ever beforeand to build more flexible organizations with better, faster,and more cost-effective access to an entire world ofproductive capacity. And will have the flexibility to respondto market opportunities when they arise.”Bingham and Spradlin define this approach as ChallengeDriven Innovation, “an innovation framework thataccelerates traditional innovation outcomes by leveragingopen innovation and crowdsourcing along with definedmethodology, process, and tools to help organizationsdevelop and implement actionable solutions to their keyproblems, opportunities, and challenges.”This can be accomplished, they say, by remaking anorganization into a Challenge Driven Enterprise, whereproblems or initiatives are articulated as challenges andefforts are aligned with strategic goals, making sustainedperformance improvement possible.Bingham and Spradlin define the hallmarks of a ChallengeDriven Enterprise as follows:6“Open” Business Model: Businesses focus their attentionon their true core competencies, orchestration and strategyto deliver against their missions. They orchestrate networksand ecosystems of customers, employees, partners, andmarkets. These models are highly virtualized in order tomaximize innovation, agility, capital flexibility, andshareholder returns.White paper | March 2012 | Crowdsourcing | 66 The Open Innovation Marketplace: Creating Value in the ChallengeDriven Enterprise“An ‘Open’BusinessModelorchestratesnetworks andecosystems ofcustomers,employees,partners, andmarkets”The Open InnovationMarketplace: Creating Value inthe Challenge DrivenEnterprise
  8. 8. Talent Management: Think strategic virtual HumanResource Management. These businesses not onlyunderstand, but embrace key trends such as globalization,social networking, generational shifts, and project-basedwork. Further, they recognize the importance ofengagement with all their communities and the wholeworld to drive new ideas, product development, innovation,and even production capacity. This 21st-century evolutionof HR makes it more strategic than ever before and vital tothe success of the business.Challenge Culture: Challenges are integrated into theculture at all levels and in all functions. The needs andbarriers are well articulated and, where possible, portable.Executives, managers, and team members are trained andempowered to identify critical problems and issues and tosystematically manage these challenges through to closurefor the benefit of shareholders. They can be tackledinternally or externally as conditions best dictate. Challengecultures care only that problems are solved. Who solvesthem and how is secondary to advancing the businessmission every day. Politics, “not invented here” attitudes,and bureaucracy are not tolerated and eliminated asinefficient and wasteful. Transparency, process integrity,and measurement are vital and hold accountable allsignificant projects, initiatives, and investments.Recognition, reward, and promotion systems are aligned.Orchestration skills are evident.White paper | March 2012 | Crowdsourcing | 7
  9. 9. Case studiesThese principles are demonstrated by the following casestudies which successfully use the mechanics ofcrowdsourcing to breed innovation.My Starbucks IdeaStarbucks’ first foray into the social mediaspace was its launch of website, which allows users to submit anddiscuss their ideas, vote on their favouriteideas, and see ideas in action, puts a socialmedia spin on the traditional customercomment card.The site has generated over 100,000 ideasfrom customers and partners since itlaunched in March 2008. The site has received over onemillion votes, registered more than 250,000 accounts, andlaunched 150 ideas and counting. The site also provides aforum for Starbucks to communicate about ideas it hasimplemented and explain why it has declined some of theideas it has received. According to Matthew Guiste, directorof global social media at Starbucks, “It’s a very simple site,and I think its simplicity is one of the reasons it’s beensuccessful.”This open-sourced innovation model has produced suchvaried ideas as the introduction of in-store recycling,Starbucks canvas shopping bags, and more Starbucks inthe Netherlands.White paper | March 2012 | Crowdsourcing | 8
  10. 10. LEGO CuusooLEGO also launched a crowdsourcing venture in 2008 incollaboration with Cuusoo, a Japanese partner of the LEGOGroup. The system allows LEGO fans to upload their ownidea for a LEGO product. The design is then voted on byother fans. Once the idea receives 10,000votes, the project gets a formal review anda chance to go into production. The creatorreceives a 1% royalty on net revenues fromthe set.The first Cuusoo project hit the shelves in2011 – a limited-edition version of theJapanese deep sea submersible, theShinkai 6500. The second, a Japaneseasteroid reconnaissance spacecraft calledthe Hayabusa, was released in early March2012. While the Shinkai took 420 days toaccumulate enough votes for a review(1,000 were needed for the Japan-onlyproject), Minecraft Micro World, Cuusoo’slatest project, chalked up 10,000 votes injust 48 hours. What’s more, this third project will be comingoff the line in a record six months, compared to LEGO’stypical two- to three-year turnaround. Minecraft will beavailable in summer 2012.So far, more than 700,000 videos of LEGO Cuusoocreations have been posted on YouTube. And in a sluggishtoy market, LEGO Group sales rose by 17% in 2011 to US$3.5 billion.White paper | March 2012 | Crowdsourcing | 9
  11. 11. Dell IdeaStormIn response to angry consumers whose growing discontentfor the Dell brand was gaining momentum and spreadingvirally through the internet,Dell invited participationthrough a collaborativeenvironment calledIdeaStorm. With its “Whereyour ideas reign”positioning, IdeaStormaimed to contain negativefeedback and encourageproduct development andcustomer relationshipmanagement.Eighteen months after its2007 launch, IdeaStormreduced unfavorablecomments from 48% tounder 20%. Activelyimplementing a two-way dialogue helped Dell achieveorganizational goals and meaningful engagement withcustomers as it listened and acted upon feedback.Version 2.0 was launched in March 2012, which allows sitemembers to upload their personal photo, bio and socialnetworking links such as Facebook, Twitter, LinkedIn andGoogle+. Idea posters will also have the ability to promotecomments on their idea that they believe add value byconsidering it an “Extension” of their idea.White paper | March 2012 | Crowdsourcing | 10
  12. 12. There have been over 16,903 ideas submitted, 736,384votes logged, 95,221 comments added, and 491 ideasimplemented. Resulting innovations from IdeaStorminclude backlit keyboards, national call centres and bladeworkstations.Dell’s revenue increased 6% in fiscal 2008 to $61 billion,after a modest 3% increase the previous year. Its earningsper share increased by 15 percent to $1.31.ConclusionNo longer used simply as a conduit for content creation,brand engagement and problem solving, crowdsourcing ismaturing beyond the new model for innovation to becomea disruptive force that drives significant and enduringchange into business.White paper | March 2012 | Crowdsourcing | 11
  13. 13. Reference Editorial – The Open InnovationMarketplace – Crowdsourcing and user-generated content – The Open Innovation Marketplace Starbucks Ideahttp://www.mystarbucksidea.comMy Starbucks Idea - Social Media & Open Innovation atStarbucks with Matthew Guiste Cuusoohttp://legocuusoo.posterous.comDell IdeaStormhttp://www.ideastorm.comDell Financial Reporting – Fiscal Year 2008 in Review paper | March 2012 | Crowdsourcing | 12
  14. 14. For more information, contact:Jean-Pierre Lacroix, PresidentShikatani Lacroix387 Richmond Street EastToronto, OntarioM5A 1P6Telephone: 416-367-1999Email: jplacroix@sld.comWhite paper | March 2012 | Crowdsourcing | 13