Professional consultants or Crowd-sourcing?

Experts wrote the Encyclopedia Britannica, and it ruled for 250 years. Then amateurs wrote Wikipedia.

I was recently asked to talk about when it is better to hire an expert, and when it is better to crowd-source the task. Here is what I have to say about that:

There will be always a place for professional business consultants. Yes, their fees are often unjustifiably high. But if you need help with a standard task that requires a particular kind of training and experience, such as preparing your company for an IPO or managing a merger or acquisition, professional consultants may be your best bet.

However, on some tasks crowds consistently outperform experts, while costing much less. Research shows, crowds are particularly good at:

Crowd-labor: The simplest and most popular crowd-sourcing model. Works best with simple projects that require the same operation repeated many times, especially when a fresh set of eyes is helpful (different people, in different locations, with different sets of knowledge, completing the same task but each focusing on different aspects of the problem).

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Examples:

GalaxyZoo: Hundreds of thousands of amateur astronomer volunteers classify millions of galaxies in the pictures taken by the SDSS telescope. You don’t need a professional astronomer to determine, based on the picture, if the galaxy color is yellow or blue and if it is spinning clockwise or counterclockwise. But if there are millions of pictures, a large crowd will do the job faster and better than a small professional research team. It also helps that each member of the crowd normally works only a few minutes at a time. Professionals working for many hours a day get tired and tend to make more mistakes.

eBird: Tens of thousands of bird-watchers around the world report bird sightings. The resulting database maps bird populations and migration with unprecedented detail and accuracy, something no professional team could have created on its own.

Software error detection: Crowds of coders test computer programs for code errors. There are often many of bugs in a software code when it’s first released and it takes thousands of hours to find them. The different skills, ideas, and perspectives of the coders in the crowd allows to test the software for a greater variety of errors: even the best one programmer can’t think of every possible way the program can crash, but a large enough crowd can.

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Successful applications in X-Culture:

X-Culture students are often asked to conduct a comprehensive global competition survey. Finding a competitor and information about the company is not difficult. The challenge is that there may be many of them around the world and it takes time to check and process every web search result.
Similarly, we have a great success with X-Culture challenges that ask to research a particular market for a cost of expatriate assignment (cost of lodging, transportation, bodyguards, family accommodations in a multitude of locations), trade regulations (import tariffs and certification rules for a multitude of products), or legal issues (labor lows, minimum wages, banking policies).
All of these are relatively simple tasks, but the sheer number of companies, laws, or locations that need to be researched, and particularly when the information is in different languages, makes a diverse globally-dispersed crowd like X-Culture uniquely suited to successfully complete this sort of research projects. It would take a company months and thousands of dollars to collect the information the X-Culture crowd can return in weeks.

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Crowd-prediction: Also known as “crowd-averaging” or “crowd-voting”, this classic model relies on the proverbial “wisdom of crowds.” Each individual member of the crowd may not know the exact answer, but the majority vote or the crowd’s average prediction tends to be remarkably accurate, be it guessing the number of candies in a jar or predicting the results of an election.

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Examples:

Prediction markets: Crowds predict world events (e.g., The Good Judgement Project) or outcomes of elections (e.g., Iowa Electronic Markets). With the right process, crowd-powered prediction markets consistently return more accurate predictions than those given by industry experts.
Who Wants To be A Millionaire: “Ask the Audience” lifeline returns the correct answer 94% of the time, while “Call an Expert” is correct only 57%.
Many high-tech and financial companies, including Google, HP, Microsoft, WSJ, have been reported to rely on crowd-powered prediction markets to forecast future events and inform business decisions. There are also many online platforms with thousands of clients that rely on crowds to predict all kinds of events (e.g., Betfair, iPredict, PredictIt, SciCast, Smarkets, and already mentioned GJP and IEM).

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Successful applications in X-Culture:

Almost all X-Culture business partners ask for market success predictions, optimal price point selections, and other forecasts.
When one person, even an expert, tells you Norway is the best new market for your product, that’s just an opinion. When a thousand people are working on your challenge and 800 of them conclude Norway is the best new market, you better start doing business there.
Likewise, it’s a more useful estimate if a thousand people research the market and their average recommend optimal price is $75, than if one expert does her research and recommends $75.

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Crowd-creation: A clever solution, an innovative design, a viral marketing gimmick – it’s all about creative ideas. There is a limit to how many new ideas is the most creative thinkers can generate. But when you have a huge diverse crowd, you have a virtually unlimited pool of new ideas. You can use professionals later to polish the best solution, but the crowd beats experts at generating the best initial ideas.

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Examples:

Threadless: A crowd of over 2.4 million submits thousands of new t-shirt designs every week. The crowd votes on the best designs and the company produces the most popular ones. With the endless flow of creative t-shirt designs (and help from crowd-prediction), Threadless sells millions of t-shirts annually and never had a design that didn’t sell.
Wikipedia: Hundreds of thousands of people write and correct millions of encyclopedia articles. In a matter of a few years, Wikipedia created more articles than are included in the 250-year-old Encyclopedia Britannica. Although the quality of some Wikipedia entries is questionable, the huge number of contributors allows to quickly detect and correct errors, resulting in a reasonably high quality of Wikipedia articles overall. Constant crowd-editing keeps Wikipedia articles up-to-date, often updated within minutes after related events, something a professionally printed encyclopedia could not do.
Many other creativity crowd-sourcing platforms return remarkable results: Crowdsound, NeedaJingle, Crowd Studio (music); Tongal, Zooppa (video); 99designs, crowdSPRING (graphics); Boom Ideanet (advertising).

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Successful applications in X-Culture:

X-Culture students are often asked to come up with new product designs or features, or develop a creative marketing campaign or slogans.
The ideas presented by the students may not always be professionally polished, but there is no shortage of creative solutions. Review enough of them and you’ll find one you’ll love.

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Crowd-outreach: Using a crowd to solve your problem is like sending thousands of ants to search for food. If there is something edible out there, one of them will stumble upon it. Serendipity is what makes crowd-sourcing successful. No one in the crowd is a genius who can solve any problem. It is all about finding the right person for solving your particular problem. If the crowd is large enough, someone is bound to know that little thing that leads to a genius solution or a business deal. This same person may not solve a different problem equally well, but knows something or someone uniquely instrumental for solving your particular problem, something or someone you don’t know and would have never come up with this genius solution on your own.

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Examples:

Innocentive: A platform for broadcasting all kinds of challenges, usually related to natural sciences, technology, or math. Anyone can review the list of available challenges and suggest a solution. The best solutions are often suggested by amateur scientists, students, or retired teachers. On Innocentive, it’s all about serendipity. People don’t spend much time on each problem, but instead browse the listings until they stumble upon one that they are uniquely suited to solve.
Freelancing: Free-lancing platforms such as Upwork, Toptal, Elance, 99Designs, Peoplebyhour, iFreelance, HourlyNerd and the like use the outreach crowd-sourcing model. In most cases, they allow you to advertise your challenge to a huge crowd of qualified people in hopes one of them will come up with the best problem solution or a product design, and at a low price.

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Successful applications in X-Culture:

The best solutions in X-Culture don’t always come from students from the most prestigious universities or who have the highest IQ or the best writing skills. Usually the best ideas are a matter of luck and serendipity. If you partner up with X-Culture, over 4,000 MBA and business students from around the world will review your challenge. It’s a huge pool of knowledge and resources: somebody will know something you don’t know.

Most X-Culture partners not only ask for a market expansion strategy, but also offer students to put their proposals to an ultimate effectiveness test: try to find a buyer or distributor for the project in the new market. Not always, but often students succeed at this task. If enough people are looking for a customer for you, somebody will know someone in the industry who’d like to try your product.

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Crowd-funding: It’s a special case of crowd-sourcing. You ask the crowd not to solve your challenge, but to fund your idea. The crowd may simply give you the money if they support your cause, or invest in your startup for a share of your future profits. However, the most interesting part here is not the money, but how the crowd decides to allocate it. Projects that attract a large crowd willing to fund them tend to be very successful. If the crowd thinks you have an idea worthy an investment, it is likely a good idea. On the other hand, if the crowd, in its wisdom, ignores your call for funding, maybe you should look for a new idea.

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Examples:

There are dozens of popular crowdfunding platforms, some designed for supporting important social projects, others aimed at for-profit investors (e.g., Kickstarter, Indiegogo, RocketHub, Crowdwise, and more).

Some crowdfunding platforms aim at particular industries. For example, Selleaband and Patreon are for funding music and art projects and Appbackr for raising funds for developing mobile and computer apps.

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Successful applications in X-Culture:

We select 5-6 business partners for a given round of the X-Culture competition. The 4,000 people working in 750 teams can choose any one challenge of the 5-6 available. Our students don’t invest money in the challenges, but they invest their time and the popularity of the project is usually indicative of the project potential. If your challenge attracts a large number of X-Culture teams, you can be certain you have a viable product poised for success. If you submit your challenge to the X-Culture competition, at the very least you’ll know, by its popularity, how promising your product is.
We’ve been also approached by venture capital firms that are interested in using the crowd to assess their investment options. Venture capitalists receive lots of investment requests – and the crowd could be very effective at selecting the most promising startups.

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How the X-Culture Crowd is different from other crowds?

There are many crowd-sourcing platforms out there. But X-Culture is different.

With a few exceptions (e.g., The Netflix Prize, MATLAB Programming Contest), almost all crowd-sourcing platforms do not provide their crowd members with opportunities to interact.

Thus, the best solution you get is the solution developed by the smartest member of the crowd. It’s usually better than a solution you could have developed on your own, but not good enough for us.

X-Culture does things differently.

We experiment with various crowd management models that allow crowd members to exchange ideas, learn from one another, build upon one another’s ideas.

This way, the final solution is better than any single member of the crowd could have ever developed on his or her own. This collaborative competition results in solution that even the smartest member of the crown would have not developed working individually.

Watch this TEDx Talk on our experiments with crowd-sourcing models and their roles in the future the business consulting industry.