Crowdsource Business Model

In present days, average American people spend more than 24 hours a week on the internet (Condliffe, 2018). At this time, people often chatting with their friends, relatives or buying something from the uses of the market-place. The trending of spending time with the internet can be beneficial for radical, innovative, and sophisticated companies if they use this spare time for the benefit of both users or companies. As per Mariam Webster crowdsourcing, defined only in 2006, is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people and especially from the online community rather than from traditional employees or suppliers. (Webster, 2019). Crowdsourcing is a sourcing model in which individuals or organizations obtain goods and services, including ideas and finances, from a large, relatively open, and often rapidly-evolving group of internet users; it divides work between participants to achieve a cumulative result (Wikipedia, 2019). In another word, crowdsourcing is the process to obtain information or idea with help of the internet, from random people, that can be used in the organization for their research, innovation, or creation.

As per the crowdsourcing week, Crowdsourcing is the practice of engaging a ‘crowd’ or group for a common goal — often innovation, problem-solving, or efficiency. It is powered by new technologies, social media, and web 2.0 (Crowdsourcing Week, 2019). It means that any organization can have access to new ideas and solutions, deep consumer involvement, chances for co-creating of the goods and services, boosting the works, and reducing the expenses of the company through crowdsourcing.

In today’s world, many new business organizations have used a crowdsourcing model as a backbone of the company and they succeed in it. Their highly educated users provide a different type of design and share their knowledge about the product. Conventional or existing companies are in trouble today to reinvent as most of the new companies are using the crowdsourcing model which is based on the collective decision, based on the internet that allows communicating each other frequently. The crowdsourcing model enables to change their experience by bottom-up instead of top-bottom or centralize to decentralize. We can take the Cheeky Panda as an example which had started their business in 2016 that totally depends on crowdsourcing and pre-order. The owners of this business ran a 6-week campaign to raise £10000 as a donation and pre-order which they received more than 67% of donations and pre-order within only 6 days. Although the concept of the owner was brilliant, crowdsourcing was the main reason for the success of Cheeky Panda, the most ordered tissue-paper in Amazon, today. (Reffell, 2017)

In my opinion, in the cutting age, crowdsourcing is the main idea in order to enhance and insist on the business and it has several reasons that contribute to the success of any business, which will be illustrated below.

The success of Threadless

While In 2000, the founder of Threadless won a prize worth $1000 in a T-shirt design competition in the UK, since then Threadless started their business and applied the crowdsource model. The founder of Threadless and his friend invited the public to send a design of T-shirt, invite them to vote, and lastly, they print these t-shirts, market them and sell to the public. It is simply the idea that allows the public to participate in the competition by sending the new or innovative idea, design to the company to win the project. Threadless received the designs from all around the world to online contests, the other public ranks each of design to on 1-5 rank. The staff of Threadless selected the best of the best t-shirt design every week and proceed to print and sold them on the site. This company paid the royalties and cash prize to the winning artist.

Even though Threadless started its business through crowdsourcing, it is later transformed into community sourcing. In the starting period, what they made and produced was solely dependent on the online vote and random opinion from the customer. Nevertheless, what they have achieved so much success today is transferring to community sourcing from crowdsourcing has led them. The venture does not focus on generating a profit by selling their product, instead, they focused to give the opportunity to the newly-arrived artist to share their design with the globe and connect them with other artists. The company focuses to build the relationship, sharing their experiences with the community and cultivate them. As per the Jake Nickell- Chief Community Officer of Threadless, Threadless attributes a lot of their success to the realization that they are not in charge of their company, their customers are. (Nickell, 2011)

The Competitive Advantage of Threadless

Threadless claims that the main reason for the success is their community, a group of devoted people toward the company. Crowdsource is one of the difficult businesses that every business venture wants to apply but not a success. In fact, it is not the right path for every business. However, there are several reasons that make Threadless stand out from the crowd.

1. Considering Community First

Threadless is one of the business ventures that puts community first instead of their profit. This company always seeking to make a group of devoted people, who can contribute to the company, connect with the artist, works as a bridge of professional and raw-artists. For example, recently the CEO of Threadless change his job responsibilities titled as Chief Community Officer—for making new families, find the expectation of community members, and research about what they can contribute to each other for their betterment.

2. Find the right crowd

Threadless always putting the community first and in order to make the community in the first place, it was able to find the right crowd. The diverse and talented artist from the world is now being cultivated by this company. Even though Threadless does not have a huge marketing department to advertise its product, and they do not depend on the sales force, they believe in their crowd (community) and invest huge money to develop the group. In the present day, 2.19 million Twitter and 890000 people are on Facebook who following Threadless and it is shown as their strength.

3. Incentive

The group of the management of its company knows that what actually motivates the people who can contribute preciously and actively to the betterment of the organization and pushing themselves to be artists. It is started with the connectivity of the different artists themselves, and Threadless makes a platform to share their design, idea with each other. Apart from that cash prize and a certain percentage of royalties on profit is being distributed to the contributor.

4. Listen to the consumer

It is certainly true that listening to the consumer is tied with the community, anyone can link with their consumer. It is the responsibility of the company itself to allow the consumer to provide valuable feedback for further improvement. It is always beneficial to the company, and it is applied with Threadless too. Make sure you have the capacity to listen to what your audience/community is saying (Bedard, 2015). Thus, if any company is not ready to listen to its consumer, it will never be successful.

The Logic of Crowdsourcing

As the Crowdsourcing model is directly linked with the consumer, it knows the demands of the customers instantly. This is to say it knows the fast-changing consumer need, shorter product life cycle, and the ever-increasing competitive environment. Turning the consumer into the creator of the product insight company about what their consumers want to and what the market demand is. Instead of designing the product in a closed-door, crowdsourcing is depending on the input from the consumer in the product development phase, hence the company can modify as per the demand. Furthermore, more artists or creatures create more consumers and more consumers create more artists. This dynamic of crowdsourcing attracts people to stay and transact in the community and company.

The company which has applied the crowdsourcing model is depending on its internal assets and resources. By getting the consumer to contribute the goods and product as per their necessity, the cost structure of this company would be lower than their competitors since they can design the product at a minimal fee or they can cut the budget for some departments—like marketing, designing, research, and development, etc. Furthermore, reducing the staff’s salary can also invest in the manufacturing of the product. For instance, the successful crowdsourcing company, Threadless, also has a tiny marketing department.
Crowdsourcing that manages to build a community as a main resource of the organization is very hard to copy by the competitors. However, everything has its benefits and challenges and crowdsourcing is not the exception.

Limitation of Crowdsourcing

Why do many companies fail to set up their effective business based on the crowd? Why the crowdsourcing does not long-lasting? Basically, crowdsourcing is based on people who have some basic knowledge about goods and products. If the crowd does not have the basic skills and traits about the product, the companies suffer from the wrong decision they have directed by its customer. Crowdsourcing has certain limitations.

1. Find out the right crowd

One of the biggest limitations for those companies that embrace crowdsourcing as a business model is finding the right crowd. If the company fails to find out the effective, sustain and passionate people who are very serious about the new innovation and design, the company might take a wrong decision following the crowd. Taking the Durex as an example which runs the campaign to vote for the city which they serve the emergency condom deliver the program to the couple wherever the couple is. But they cannot limit the name of the city, almost most of the city is voted. Later, the city name, Batman, Turkey was selected for the first serve. The company almost set up the business planned for this city which the public was voted. Later, it was found that the main character of Batman city is a small conservative Muslim city. It was not the potential market for Durex and the campaign withdraw instantly. (Faisal, 2015)

2. Not sustaining community

Sometimes, the role of the consumer is also becoming a limitation for the crowdsourcing model. In this model of business, consumers are co-creator of the product, and it needs a sustainable community that can contribute to innovative ideas. But communities are not sustaining toward the company and its products due to the high volume of business ventures, products, and ever-increasing demands. In this circumstance, the business company should have a different approach to sustain them by increasing incentive, royalties, or put the other motivation factors such as connecting the artist, organization different programs, etc.

3. Danger of manipulation

Another biggest limitation of Crowdsourcing is the danger of manipulation. If you asked to vote for the crowd about your plan, your competitors might create a false crowd and vote for the plan that you will have lots of losses to follow them. Or, if your designated consumers are not devoted to you, the feedback from them can mislead you to your destination. For example, the recommendation seeking on social media, Facebook, can easily mislead people (Thieringer, 2019). Some companies just try copying others' paths to succeed and apply crowdsourcing on their venture. But sometimes, it might not be a good idea.

Potential Beneficiaries of Crowdsourcing

There are thousands of companies that fail due to their business approach and model. In this list, one of the Nepalese businesses, Jamarko, is trying to survive in the market.

Jamarko was established by two Nepales sisters, Aruna and Muna, in 2001. It was just a cottage manufacturing company while it was established. In Nepal, it is, unfortunately, true that people often throw their garbage in the public street. Even shopkeeper sweep their shop and throw trash in the public place. That is the main reason, the main city of Nepal became worse from an environmental perspective. In this circumstance, Jamarko uses recyclable garbage to produce the notebook, greetings card, paper bag, photo frame, wrapping paper, boxes, and jewelry boxes and sell them to the market. It was not only a business idea, yet also it is an innovative idea about the protection of our environment too. Even though it is a fascinating idea to raise money and save the environment, it has lots of challenges to sustain in the completive market. Jamarko faced lots of challenges such as financing, human resources, market, consumer behavior, etc. People are not interested to work in such garbage work. Sometimes, they employ the street child, but while earning the money, the street child leaves them and they are not devoted to work with. Lots of such businesses opened after the establishment of Jamarko, but they did not sustain. Because it takes lots of money to sort out and recycle the garbage. So, if the Jamarko invites the people to stand together in the contribution of Jamarko, lots of public support them and standing in side by side of the organization. The community can support Jamarko from different angles.

As Jamarko faced main challenges in funding, they could appeal to raise funds by donation or pre-order of the company’s product. People want to buy the recycled product even if they might slightly expensive than regular products. Or, they can create a community of different companies in Nepal which allocate a certain percentage of their profit in corporate social responsibility, and Jamrko can use it for the betterment of the environment.

Another problem with Jamarko is the marketing of their product. Despite the fact that Nepal does not have the access to the international market as the first world have, but this organization can put some effort to create a community on the internet so that they value the product this company manufactured. In Nepal, there are lots of international organizations that work for saving the environment. For example, WWF, Swiss, Helvetas, and so on. If this company invites people (in collaboration with the international organization in Nepal) to be a crowd, it would be the best idea for the marketing of Jamarko in the whole world. And when there is good marketing, followers and will act curious about the product. Another way to collaborate with these international organizations in Nepal is proposing them to provide the fund for awarding the person who can provide the best design of these products that international people wanted. It is true that the product manufactured in Nepal are not highly suitable for international use, or international people want international design.

The additional potential company of the crowdsource would be The Mint Studio. The company was established in 2016 and undergoing success on its path. This company is associated with the White lotus craft, which supports free garments to marginalize women in Nepal. It sells different types of products for men and women. Kids, and home and living stuff in Nepalese market. All the products they sell are made in Nepal. But, the consumer behavior of Nepal is seeking international clothes such as made in Thailand and China instead of made in Nepal. So, they face different types of challenges in the market. In this circumstance, using Crowdsource would be the best option for The Mint Studio. Because, the main reason to attract Nepalese people to international clothing is its brand, quality, and price. If Mint Studio formulates the community of such artists who can provide the design of the product which has all of them, quality, and price, the brand will automatically come to their hands. In order to address the main business garment challenges in Nepal, this company can use Crowdsource as a business approach.

On the other hand, there is a lot of air- pollution in Kathmandu. People always seek clothes that fit in the Bike as it is the main mode of transportation there, in the polluted area. The Mint Studio can request people to send such a design of the different wind-cheater jacket, trouser, and even sunglass too. The company decides about the financial incentive or royalties about these designs, but it has high popularity among the bike users in that place, which is more than the cost structure. They can invite people to vote, actively participate in the designing process and provide valuable feedback to the company.


Crowdsourcing is including a large number of people for generating the idea for work through the website and social media. In business, crowdsourcing is getting the right design from the people to be manufacture and ranking them and placed the number with the voting of the people or finding the popularity of these newly designed products in the market. In another word, crowdsourcing is the process to obtain information or idea from a random person, with help of the internet, that can be used in the organization for their research, innovation, or creation. Having this in mind, crowdsourcing may not the best option for such a company because it also has some limitations and challenges. In my opinion, it has a great benefit than its drawbacks.

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