Homework assignment week 8: crowdsourcing, crowdfunding and prediction markets


The article by Pisano and Verganti (2008) defines a crowdsourcing quadrant. The Innovation Mall with an open network and hierarchical governance. The Innovation Community with an open network and flat governance. The Elite Circle uses a closed network and hierarchical governance. Finally, the Consortium with a closed network and flat governance. The article provides a lot of examples, but I think it paints a rosy picture. Implementing such strategies is hard and risky in practice. Therefore I miss a critical note or challenges of this framework.

The second article by Malone et al. (2010) provides a crowdsourcing framework of four questions. Fist, what is being done; the activity and the solutions can the crowd provide. Second, who is doing it; the crowd or the management. Third, why are they doing it; for love, glory, money or a combination of these incentives. Finally, how is it being done; by a collection of individuals or a collaboration and does the crowd decide on individual or group level. Pros to this framework are that it’s flexible and that incentives are included. Cons are that the framework isn’t fully developed yet and there’s no assessment of the challenges when implementing it.

The third article by Borison and Hamm (2010) is on prediction markets as a tool for strategic decision making. This uses competitive betting to tap into collective intelligence on future matters. The informed guesswork of the crowd is consolidated into hard probability either for private or public issues. I believe the prediction market tool is most effective in social issues, because the private sector is volatile and risky. Still, because of the immaturity of the tool, it’s probably best to combine it with the more traditional decision theory.

In addition an article on crowdfunding. This study by Mollick (2014) looks at the dynamics of crowdfunding. Success is based on quality judgements, geographic components and timely product is delivery. A good pitch, network size and funding duration are quality indicators. Cultural location characteristics also have an effect on the success of a project. Timely delivery is often a problem, even when the funding is successful. The article creates a clear outline of crowdfunding and helps to shed a light on assessing quality for funders and informs entrepreneurs about increasing their chances.

Of the mini-cases on crowdfunding the first one is about the Pebble Smart Watch. Having set their funding goal on $100.000, the company raised $10.266.845 from 68,929 backers using Kickstarter. This crowdfunding campaign enabled Pebble to create the crowds interest for their smart watch, which a strength. Its weakness was the planning and manufacturing issues, delaying the backers pre-orders over three months.

pebble

The second mini-case is about the ‘Luchtsingel’ in Rotterdam. Backers could buy a bridge element ranging from €25 to €1.250, with their name or a message, receiving recognition for support. The initiative was funded for €50.000. The strength of this campaign was that the backing community was actively used to collect votes in the contest for best public initiative of Rotterdam, making the project win €4.000.000. Its weakness was not using a crowdfunding platform. Funding now remained very local while other Dutch people would have liked to back this project too.

prijzen delen

luchtsingel

References

Alios, J.D. (2015, February 24th). Pebble SmartWatch: Crowdfunding Again Tops $3 Million Immediately [online article]. Accessed at: http://www.crowdfundinsider.com.

Borison, A., & Hamm, G. (2010). Prediction markets: A new tool for strategic decisionmaking. California Management Review52(4), 125-141.

Kleverlaan, R. (2012, March 16th). 4 miljoen voor Luchtsingel: crowdfunding als hefboomvoor financiering [online article]. Accessed at: http://www.frankwatching.com/

Malone, T. W., Laubacher, R., & Dellarocas, C. (2010). The collective intelligencegenome. IEEE Engineering Management Review38(3), 38.

Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Business Venturing29(1), 1-16.

Pisano, G. P., & Verganti, R. (2008). Which kind of collaboration is right for you. Harvard business review86(12), 78-86

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One thought on “Homework assignment week 8: crowdsourcing, crowdfunding and prediction markets

  1. I don’t know if it’s ‘done’ to place the first reaction on one of your own blogs, but I wanted to make an additive on my own blog/assignment. Unfortunately I didn’t have enough room, because of the word count, to mention that the ‘Luchtsingel’ project can still be funded! When you like the city of Rotterdam, architecture or initiatives that send a positive message to everyone in the urban environment, please go to http://www.luchtsingel.org and click ‘doe mee; koop een plank’. There you can crowdfund a bridge element on which you can leave your name and/or message to be ‘immortalized’ on the ‘Luchtsingel’ of Rotterdam. Or you can go to Schiekade (near Hofplein) in Rotterdam to check this ‘work in progress’ project out yourself. It’s worth it!

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