In the last part of this Blog entry, we discussed the basic premise of the Crowd and why we are looking more to the Crowd for insights. There have been many studies on whether the Crowd is really smart or is it a distortion field which is swayed by the voice of a few powerful influencers. Most notable among these include a study in 2009, led by Carnegie Mellon University (CMU) professor Vassilis Kostakos pokes a big hole in the prevailing wisdom that the "wisdom of crowds" is a trustworthy force on today's web. His research focused on studying the voting patterns across several sites featuring user-generated reviews including Amazon, IMDb, and BookCrossing. Do you know that the Crowd has moved beyond just user reviews.

Let's look at some real life examples - a popular one quoted by Don Tapscott in his book MacroWikinomics is "Local Motors", a company that builds custom cars that is based on deisgn ideas submitted by car enthusiasts from around the world. Not only can you design your own car, you can visit a local motor location, order parts, customize your car and do whatever you want to build it to your specification. Their mission statement reads "To lead the next generation of crowd-powered automotive manufacturing, design, and technology in order to enable the creation of game changing vehicles".  Another great example is Fiat Mio an open innovation of a car by Fiat Motor Company.

Why is open innovation with crowdsourcing more popular? two reasons (1) The internet has created a virtual world where there are no physical boundaries. This means you can simply form communities of common interest and that leads to building a crowd that is very knowledgeable and passionate about a particular topic or topics, (2) When you open a problem to be solved by a large crowd of individuals, you get a set of solutions that will have a higher confidence factor to work and a potential lower risk factor. 

Let's come back to the reviews and feedback on various forums, why do you care or why does an online or a brick&mortar retailer care or why does your 401k investment management care? the reasons for this from a business perspective are to create that transparency and trust in you as a customer or a prospect. Your opinion will be formed based on experiences of others and you need to hear the positive and negative sentiments equally to get an informed opinion or decision. Word of mouth marketing in any social media channel allows you to get access to more metrics than ever before and the socially aware customer is a better customer to acquire and retain.

Crowdsourcing has also become mainstream with companies like Kaggle, Threadless, CrowdAnalytix, Cambrian House and Innocentive hosting competitions for the Crowd to solve. These problems range from simple to complex puzzles and often come with cash prizes.

Linux, Hadoop and many popular software's today are stellar examples of the Wisdom of Crowds.

In conclusion, we see from ancient and recent history that the Crowd formed from a community of interest has often proved to be powerful and game changing. As we move into the future, the internet and social media together have created the platform for virtual crowds to form and create powerful game changing movements.

In the recently concluded Super Bowl 2012, we all know NY Giants won the championship, but in the preceding weeks there was an increasing sentiment expressed on Twitter about Eli Manning and at the end we all know the result.

If you have read James Surowiecki's book titled The Wisdom of Crowds, there is a famous example of the power of the crowd demonstrated by Sir Francis Galton. The story goes In 1906, he was visiting a livestock fair in England, where he stumbled upon an intriguing contest. An ox was put on display, and the villagers were invited to guess the animal's weight after it was slaughtered and dressed, paying 6 pence to participate. Nearly 800 people  participated, but not one person hit the exact mark: 1,198 pounds. Galton collected the answers and applied the statistical mean of these guesses from independent people in the crowd: Astonishingly the mean of those 800 guesses was 1,197 pounds, accurate to fraction of a percent. This marks the first of the series of experiments conducted by scientists to prove the collective intelligence of the crowd.

What this proves to us is when you apply a set of smart people to solve a problem, any problem, chances of a solution are very more possible than a single person trying to do the same. Today the same type of contests are held by companies such as Kaggle, 99Designs, Innocentive, CrowdAnalytix and many others, where statisticians and analytic experts compete to solve such problems.

What is the use of these contests and these business models? well there are several benefits

• The problem can be solved better by a crowd where it can be solved faster
• The open innovation platform provides you access to more experts than any consulting expertise can provide
• Costs can be better managed in an open contest where the solution has a fixed price and timeline

And the list goes on. We will see how challenges arise in this subject in tomorrow's blog

The topic is deep and wide,  next week at TDWI Las Vegas, there is a night school session on this subject that I'm hosting, feel free to attend.