Harness the Crowd to Run Your Business

Aliza Sherman recently launched a firm that develops mobile applications for the iPhone and iPad. She needed a graphic designer to illustrate her apps.

Graphic designers quoted $3,000 to $5,000 for their services, so Sherman logged onto oDesk.com, which links employers with remote staffers through a process called crowdsourcing. She found someone who agreed to do the work for under $300.

“This illustrator was brilliant,” says Sherman, founder of Mediaegg. “She did such great work that I gave her two more jobs.”

Crowdsourcing involves assigning tasks to an online “crowd” through an open call on a growing number of websites. Resourceful entrepreneurs use these websites to reduce their operating costs by tapping a global network of service providers—from vendors and suppliers to freelancers—who compete to win the assignment.

“Through crowdsourcing, I’ve been able to work with incredible talent from around the world that I would’ve never been able to reach otherwise,” says Sherman, who adds that her illustrator is from the Philippines and recently moved to Canada. “And I’m paying a fraction of what I’d expect to pay.”

From Raising Cash to Buying Paper

While crowdsourcing can connect you to skilled workers for specific assignments, you can also engage an online crowd to gather public input about some aspect of your company (such as your proposed tagline or ad campaign).

Some entrepreneurs are even applying the crowdsourcing model to raise capital to grow their business. So-called crowdfunding websites such as ProFounder.com, Peerbackers.com, RocketHub.com and IndieGoGo.com help business owners explain their fundraising objectives and how they’d invest the money. A crowd (in this case, potential investors) can pledge funds in exchange for a cut of revenue—and the websites usually keep a small percentage of any cash that changes hands.

Crowdsourcing can also help you save time and solve problems to run your business more efficiently. Amazon’s “Mechanical Turk” (www.mturk.com) is a prime example.

“Say you’re looking for a paper supplier,” says Daren Brabham, assistant professor of public relations and new media at the University of North Carolina. “You want the best price, you don’t have time to price-shop and you want to buy local. So you broadcast a challenge on Mechanical Turk and offer a bounty of $1 for each response–and maybe prize money to the best response.”

If your time is worth $100 hour, Brabham says it may make sense to pay $90 for 90 leads from your online corps of researchers. Furthermore, their input can help you unearth creative solutions that you might otherwise miss.

Brabham recommends setting clear parameters that govern the type of task or project you seek. If the crowd knows exactly what you want, you’re more apt to generate valuable responses that meet your narrowly defined needs.

Most crowdsourcing websites guide you through the process of defining your project with specificity. In describing your “brief” (i.e., an overview of your task), you’ll be prompted to answer questions such as your goals, deadline and target audience.

Streamline Your Search

Savvy entrepreneurs make speedy strategic decisions. They don’t dither or get bogged down in bureaucracy.

Crowdsourcing can complement fast-paced decision-making. Within days of sending your completed request into cyberspace, you can receive dozens of substantive responses.

Say you’re looking to hire an advertising firm. The traditional approach might involve issuing a formal RFP (Request for Proposal) and then reviewing 20 or more pitches. You then need to prune the list to a handful of finalists—and interview each of them after they submit storyboards that represent their best ideas.

“If all you need is a quick burst of creativity on a specific element of your ad campaign, then bypassing the traditional route and exploring talent on the open market can make sense,” says Craig Kleber, a partner at Hall & Partners, a global brand research firm. “It’s a faster way to access fresh thinking.”

As a relatively new concept, crowdsourcing is just starting to gain traction as a tool for business owners to shop for vendors and freelancers. Barry Libert, chief executive of Mzinga.com, a social software provider, estimates “we’re probably in the top of the third inning for small businesses using crowdsourcing.”

With each passing month, online communities are offering more crowdsourcing solutions for wide-ranging business needs. If you’re unsure whether crowdsourcing tools exist for your task, Libert suggests typing “crowdsourcing” and “logo design” (or whatever the nature of your project) into a search engine.

“A Google search can show if there’s a market out there where a crowd offers the services you need,” says Libert, author of Social Nation.

Once you identify a crowdsourcing website, do your due diligence. Check its fee structure so that you know how much you’ll pay to access its crowd. Review other users’ experience; many sites post ratings and comments from other business owners. As a safeguard, type the website’s name and “scam” into a search engine to uncover any questionable business practices.

When starting to crowdsource, “go slow, start small and expand into each area where you use contractors,” Libert advises. Experiment with a simple request at first and measure the results. Over time, you’ll learn how to maximize the use of crowdsourcing and extract more value from the online community.

Morey Stettner is the editor of Managing People at Work and the author of five business books, including Skills for New Managers (McGraw-Hill). Based in Portsmouth, N.H., he coaches executives on their communication skills.