Elsevier

Business Horizons

Volume 60, Issue 2, March–April 2017, Pages 237-245
Business Horizons

Leveraging collective intelligence: How to design and manage crowd-based business models

https://doi.org/10.1016/j.bushor.2016.11.008Get rights and content

Abstract

Advances in digital technologies have increased the possibilities for outsourcing business activities to crowds of independent contributors. Using the collective intelligence of a crowd opens a new range of business opportunities. In fact, crowdsourcing has led to the emergence of entirely new business models. Such crowd-based business models (CBBMs) can lead to an important competitive advantage while simultaneously presenting new challenges to entrepreneurs and executives. This article identifies and discusses three key challenges in designing and managing CBBMs: determining (1) the crowd's value to the firm, (2) how to create superior value for the crowd, and (3) how to capture value from the crowd effectively. Building on the crowd capital perspective and an analysis of the tactics and practices of successful CBBMs, this article offers propositions on how to overcome these challenges and manage such business models effectively. The identified practices can inspire decision makers when designing innovative CBBMs for their industries. Finally, the article concludes with a framework with the key decisions and tactics for effectively managing CBBMs.

Section snippets

Crowds as value creators: New possibilities

Practitioners and researchers increasingly have identified crowdsourcing as a viable strategy to gather creative ideas and solutions, make decisions, and outsource small tasks (Prpić, Shukla, Kietzmann, & McCarthy, 2015). So far, the focus has been primarily on how firms can capture the aggregated wisdom of the crowd (Surowiecki, 2005) for their business challenges. Over recent years, however, firms from different industries have started to develop new business models that fundamentally

Measure to manage: What is the crowd's value to the firm?

While CBBMs can be highly effective, the decision to implement such a business model needs to be complemented with a thorough analysis of the crowd's potential value to the firm. Moreover, managing a CBBM requires an understanding about the optimal size of the firm's crowd. To achieve this, managers of CBBMs need to decide whether a further increase in the crowd's size will lead to more value creation to customers and ultimately more value to the firm. The crowd's value to the firm can be

Four practices for creating superior value for the crowd

According to the crowd capital perspective, firms are benefiting from crowdsourcing when they successfully build the capabilities for acquiring and assimilating crowd members and harnessing crowd capital (Prpić et al., 2015). Similarly, building a sustainable CBBM requires mechanisms that attract and engage crowd members who will contribute long-term to the firm. Being in a competitive situation when it comes to assembling crowds, companies must develop a clear value proposition to attract

Five tactics for capturing more value from the crowd

The third managerial challenge consists of actually capturing the value from the crowd's contributions. This relates to the third step in the crowd capital framework: harnessing the crowd capital. The analysis of the presented CBBMs suggests that managers use common mechanisms and practices to capture more value from crowds: (1) create complementarities between crowd contributions, (2) turn crowd members into firm ambassadors, (3) foster entrepreneurial behavior in crowd members, (4) manage

Final thoughts

CBBMs extend the usefulness of crowdsourcing by building an entire value logic around crowd contributors that directly influences the customer experience. This logic goes beyond the idea of an aggregated ‘wisdom of the crowd’ by acknowledging the individual skills and expertise of every crowd member. In this article, I have advanced the understanding of crowd-based business models, aiming to sensitize managers in favor of a more analytical approach to designing and managing CBBMs. While crowds

References (38)

  • D.J. Teece

    Business models, business strategy, and innovation

    Long Range Planning

    (2010)
  • M. Wilson et al.

    Crowdsourcing in a time of empowered stakeholders: Lessons from crowdsourcing campaigns

    Business Horizons

    (2017)
  • B.L. Bayus

    Crowdsourcing new product ideas over time: An analysis of the Dell IdeaStorm community

    Management Science

    (2013)
  • P. Belleflamme et al.

    Negative intra-group externalities in two-sided markets

    International Economic Review

    (2009)
  • K.J. Boudreau

    Let a thousand flowers bloom? An early look at large numbers of software app developers and patterns of innovation

    Organization Science

    (2012)
  • K.J. Boudreau et al.

    Unpaid crowd complementors: The platform network effect mirage

    Strategic Management Journal

    (2015)
  • R. Casadesus-Masanell et al.

    When does a platform create value by limiting choice?

    Journal of Economics and Management Strategy

    (2014)
  • Choi, J. H., & Lee, J. S. (2016, January 11). Online social networks for crowdsourced multimedia-involved behavioral...
  • T. Eisenmann et al.

    Strategies for two-sided markets

    Harvard Business Review

    (2006)
  • Cited by (43)

    • Innovation intelligence in managing co-creation process between tech-enabled corporations and startups

      2023, Technological Forecasting and Social Change
      Citation Excerpt :

      First, this research extends the literature on technology entrepreneurship, emphasizing on impact of digital technologies on collective intelligence (Elia et al., 2020b). Adopting a lens of innovation intelligence, this study proposes accessing and fortifying collective intelligence by probing the mechanisms of partially virtual community (co-presence of partners and contributors) as a co-creation space of corporate and startup; whereas most of the previous research (Dellermann et al., 2020; Elia et al., 2014; Elia and Margherita, 2016; Elia et al., 2020b; Mačiuliene and Skaržauskiene, 2016; Margherita et al., 2020; Täuscher, 2017) focus on the digital- environment as a wholly virtual community (glob and unlimited participants) which are designed to leverage collective intelligence based on the goals of different stages of entrepreneurship. Second, it gives a better understanding of open innovation by deeply explaining the co-creation process between corporate startups.

    • The crowdfunding model, collective intelligence, and open innovation

      2021, Journal of Open Innovation: Technology, Market, and Complexity
    View all citing articles on Scopus
    View full text