Over the past few years, you may have heard about a concept called “crowdsourcing”. It is the process that enables customers to play a role in creating a new product or service and, in some cases, solve a business challenge.

Customers know what they want and can often articulate what they need better than anyone else, so it makes perfect sense for them to have an input in conceiving ideas and being involved in business related decisions.

The key to crowdsourcing is to find a way to solicit customer ideas directly, evaluate them efficiently and implement the best ideas that make sense to the business. In the past companies have approached this through suggestion boxes and online forms, however these approaches fall short due to the fact that there is no open dialogue about the ideas and the process doesn’t scale easily.

The term “crowdsourcing” has evolved to encompass everything from getting feedback via ideas sites to contest-driven experiences to brands talking about their social listening programs as crowdsourcing. Dell’s own IdeaStorm is an idea site that brings together an online community where customers can submit ideas related to Dell’s products, services and business.

Customers can discuss ideas with Dell and each other, “promote” and “demote” ideas, and see which ideas Dell will implement based on their input. The most popular ideas rise to the top-based solely on customer votes.

The Pepsi Refresh Project is a contest driven experience, where non-profit organisations and individuals take part in a national contest by submitting proposals for their ideas to help build better communities. The ideas are listed online and voted on over the course of a month. If the idea manages to get into the top 15, the organisation or individual secures prize money to help implement their idea.

Wikipedia has used crowdsourcing to build a business which would not have been possible without calling on its community. It actively asks its community to comment on and provide content for the site, with the aim of building an encyclopaedic database that is free to the public.

The submitted content needs to be heavily scrutinised and backed up with valid factual references, to ensure that the quality and reliability of the content is of a good standard. Wikipedia does this by managing its crowdsourced content, using editors to check the accuracy of the community’s submissions.

Crowdsourcing’s intention and interpretation can vary, but there are a few key considerations that are critical to a crowdsourcing strategy. First off, businesses must understand their “crowd” (A.K.A their community). Businesses need to think about who makes up their crowd, what topics they are knowledgeable and passionate about, and what their level of expertise is with the product, service or industry.

If businesses do not think about who their crowd is, then the reliability and quality of information will suffer. There is no point putting a subject out there that your crowd does not have any expertise or knowledge in.

It is also critical that the business sets the context and boundaries for ideas and discussion, otherwise the community will experience a decline over time. Signalling the topics or issues that the business wants to hear about directs the topic of conversation, encouraging productive ideas and suggestions from the community that the business can respond to.

If businesses have no intention of acting on the feedback and ideas the crowd provides, this type of activity can be a liability instead of an asset. Before embarking on any sort of crowdsource strategy, businesses must understand the implications of opening the door to this type of feedback, and be willing to act on what they hear, knowing many things will challenge the status quo.

Having team members present and attending in the community drives activity and engagement, as they can provide feedback on the ideas populated by the community and identify ideas that will benefit the business.

The ideal circumstances for a crowdsourcing initiative are when the business is at a high state of readiness to receive input, reacting to and implementing feedback. It is critical that businesses signal to the community the topics they would like to discuss, attracting the appropriate members of “the crowd” to engage in conversation, and then acting on key findings.

Many crowdsourcing efforts focus on the content created by the project – the actual Wikipedia site, or the ideas submitted on an ideas site. The actual content created is certainly a valuable asset, but it is only part of the picture. The crowd can also be an extremely valuable asset, and my company has seen this through its recent research on the value created by the IdeaStorm site.

Dell found that IdeaStorm members spend more money, purchase more frequently and have a higher value over their lifetime. So, in addition to all the great ideas, the IdeaStorm community is driving customer engagement and revenue.

Businesses must be aware of the potential pitfalls of crowdsourcing and make sure they have the right strategy in place, otherwise crowdsourcing efforts will damage their reputation with their community and they will likely receive poor results from their efforts. However, if businesses carefully plan their outsourcing strategy they can reap huge rewards.