What Is Crowdsourcing and How Does It Work? Definition and Example

Crowdsourcing is making big waves in most industries around the world. It can be extremely powerful when leveraged in the right place at the right time. You may have heard the term before -- but do you know what is actually is? Discover more about what crowdsourcing is, how it works, and why so many businesses are using the practice to enhance operations.

Crowdsourcing is the practice of utilizing the wisdom of a group for a common goal. It is best applied when attempting to solve complex problems in an innovative way or streamline intricate processes.

The term was first coined by Jeff Howe in a 2006 article about the practice. Though crowdsourcing has existed for centuries in some form, the practice rose to popularity around the same time as the emergence of commerce, social media, and the smartphone culture. Increased connectivity between people across the globe has been the biggest contributor to the growing interest in the practice.

Crowdsourcing has become an important tool for businesses to leverage in a variety of areas, including data collection, creating operational efficiencies, and general problem-solving. It has allowed many companies to scale at an unprecedented rate, to the point where the practice has revolutionized entire industries.

Crowdsourcing can manifest in a number of different ways, depending on the business' goal.

In order to crowdsource successfully, a business must first break a larger project up into individual micro-tasks. Workers will then unite to tackle these micro-tasks in small pieces, effectively expediting the process.

The way a business decides to gather workers that will perform these tasks often correlates with the kind of task that needs to be completed. A business may use a digital space -- sometimes called a crowdsourcing platform or micro-labor site -- to unite these workers into one place and serve them the micro-tasks.

For more complex projects that require workers with particular specialties, the business may utilize a more specialized platform that is industry-specific. For example, many software developers utilize GitHub for this purpose. If a business is gathering customer data, they may turn to social media or a similar consumer-facing platform to crowdsource information from customers.

Crowdsourcing has a number of benefits that businesses can leverage to their advantage. Find out more about why so many organizations are investing their resources into crowdsourcing.

Scaling is a difficult problem for any business to solve, particularly when it comes to working on massive projects with inadequate resources at your disposal. However, crowdsourcing provides an easy solution for scaling out any workforce by farming out small portions of a project that can be completed by remote workers at any given time or place. This flexibility is one of the top reasons businesses develop an interest in crowdsourcing.

Unless a company is operating on a massive scale, most of them don't staff all of the resources they need at any given time. Crowdsourcing provides the ability to access people who have skill sets that are unavailable within the company. This can be invaluable for projects or problems that require specialized knowledge or skill sets that are scarce.

Crowdsourcing allows businesses to perform tasks more quickly than a single employee. Breaking up a project into a collection of smaller pieces and providing those pieces to a larger group of workers expedites the completion of projects. Overall, crowdsourcing presents a more efficient way to do work.

Crowdsourcing offers a cheaper way to complete projects. When a group of people unite digitally to complete a task, businesses can bypass most of the costs typically associated with operations. This includes the overhead costs of housing and paying employees a full salary, as well as the costs that could be incurred from paying for employees to learn new skills and more. Depending on the projects being completed, faster turnaround times can also equate to increased profits.

If a business chooses to seek out consumers in their crowdsourcing efforts, this can result in an extraordinary level of consumer engagement. Most traditional marketing media hold consumer attention for a short span of time. By asking consumers to participate in solving a specific problem or provide much-coveted data about their brand, the business is gaining valuable attention that many companies pay big bucks to gain.

Many highly visible companies have utilized crowdsourcing in different ways, whether it's to bolster their current product offerings, obtain consumer data to steer future product decisions, fund smaller creative projects, and much more. Here are some examples of both small and large companies that have used crowdsourcing to their advantage.

Many companies chose to utilize crowdsourced data to enhance their current product offerings. In fact, some even use crowdsourcing to form the backbone of their product or serve as a differentiator.

One of the most famous examples of a company that utilizes crowdsourcing in this way is Waze. There are many mobile-ready GPS apps available on the market, but Waze sets itself apart from competitors like Google Maps by crowdsourcing travel-specific information into its product. Users enter information about traffic jams, road hazards, and even police radar hotspots and then makes this information visible to users. This not only results in a GPS product that provides consumers with more value, but also transforms the product into a community-driven app that keeps their users actively engaged.

One of the most common types of crowdsourcing comes in the form of open-source software. Open-source development allows developers to access the source code, permitting them to modify and improve the code as they see fit. Ultimately, this allows many eyes to analyze the code and utilize their unique skill sets to make it better.

A number of different companies have used crowdsourcing in this way to create standout software that is used worldwide. Some examples of open-source software include the Linux operating system, Firefox browsers, and Hashicorp development tools.

Many consumers have become accustomed to using crowdsourcing for raising capital, a technique also called crowdfunding. This technique allows anyone -- from an individual to a large company -- to engage people who are interested in their ideas and raise capital without pitching to large investors, banks, or other gatekeepers that could withhold funding.

Some examples of successful products that began as crowdfunded projects include the Oculus headset, Tile, and the Pebble Watch.

While crowdsourcing can be done in a variety of different ways, most businesses turn to an array of crowdsourcing platforms to access workers. Some crowdsourcing platforms can also be used to help divide up projects into micro-tasks. Finding the best crowdsourcing platform depends on what sort of work the business needs to be completed. These are some of the best crowdsourcing platforms for different kinds of tasks.

For tasks like data entry, transcription, content creation, user studies, and more, Amazon's Mechanical Turk offers the perfect solution. Workers from around the globe log on to Mechanical Turk 24/7 to HITs, or "human intelligence tasks." The site allows you to split your projects in micro-tasks and can support a wide variety of project types.

It is best used for generally easy tasks or user surveys, rather than more creative or innovation-based work. As the ask requester, you can set any rate that you would like per task and have some control over the type of workers who respond to those tasks.

There is a wide variety of creative crowdsourcing platforms out there that can provide a number of different designs for logos, websites, advertisements, product packaging, and more. 99Designs is one of the most well-known for a reason. Pulling together designers from around the world, 99Designs uses crowdsourcing to provide unique and affordable creative services to companies both large and small.

Crowdfunding has grown in popularity tremendously, so there are many reputable platforms to choose from. One of the best known is Kickstarter. Kickstarter is geared primarily toward creative projects such as music, art, film, and more.

This crowdfunding platform offers reasonable fees for their services, making them stand out among other crowdfunding platforms. Many Kickstarter campaigns have gone on to raise thousands, and sometimes even millions, of dollars.