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Crowdsourcing: Metrics for Success

This deck excerpts research conducted by ScaleVP and our EIRs in the

crowdsourcing sector in early 2008

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ScaleVP Crowdsourcing EIRs

Pam Smith http://www.linkedin.co

m/pub/pam-kline-smith/0/7/a31

Daphne Carmeli http://www.linkedin.co

m/in/daphnecarmeli

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Project Goals

Identify the key categories of crowdsourcing for services and virtual goods, as well as key companies in each:

• 35 sub categories defined, aligned with defined SIC codes• 200 companies identified

Defined as:• Majority of work done by the crowd• Money is exchanged, directly or indirectly• Focused on private companies• Not multi-level marketing or job boards

Postulate metrics unique to crowdsourcing for success

Interview select services-oriented crowdsourcing companies Determine key metrics for crowdsourcing success – that are unique to crowdsourcing and

complement the general business metrics that apply in any market

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Executive Summary

Base value of crowdsourcing is connecting suppliers and work within 3 stages of engagement:

– Finding suppliers/work, delivering work and administering all aspects of the process.

– The greater the extent to which companies facilitate all stages, the greater the value created

Market sector choice is a key determinant for success; focus where outsourcing already exists. – Minimizes adoption barriers for this new model

– Drives new efficiencies into familiar markets

Necessary, yet undifferentiated, requirements for all crowdsourced companies include:

– Attracting and rating appropriate suppliers

– Ensure supply/demand balance

– Developing a platform to facilitate all three stages of workforce engagement

Metrics for differentiation come within the delivery stage of workforce engagement:

– Driving/routing the right task to the right supplier, or ‘precise procurement’

– Marketplace is self-managed vs. company managed

Priming the pump necessary to gain initial traction:

– Reducing risk for buyers and suppliers

– Building community tools to keep suppliers engaged when they are not working

Crowdsourcing is a pre-chasm market with lots of experimentation

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Crowdsourcing Landscape Overview

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Crowdsourced Services | What’s Happening and Where?

Crowded (200 companies); new entrants joining all the time and established players adopting the

model

“Land grab”: everyone vying for market share and major players all expanding into contiguous spaces

Crowdsourcing is a pre-chasm market with lots of experimentation

Sector Number of Players Performance/Growth rate

Technical Support High High

Call Center High High

Coding/Testing Medium High

Innovation High Low

Prediction High Low

Business Consulting Medium Medium

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The Stages of Crowdsourcing

Prime the pump

Lay the groundwork

Accelerate

Build for the future

Define the model Build the community

Build the infrastructure

Find the buyers

Create leverage Rank suppliers and

differentiate quality

Create halo effects Look for contiguous markets

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Key Activities to Prime the Pump

Prime the pump Reducing risk for buyers and suppliers

Legitimize work opportunity for suppliers Evidence success for the buyer

Building community tools to keep suppliers

engaged

when they are not working

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Crowdsourcing Metrics

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Original Metrics Category DefinitionMeeting Requirements for the Players

Infrastructure

Buyers Suppliers

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Meeting the Requirements for the Stages of Engagement

Finding Delivering Administering

Creating value for the suppliers so they want to participate

Creating differentiated value for the buyer

Creating the right infrastructure to make it all work

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Key differentiation and predictors of success are related to the Delivery Stage

Finding : Necessary, rarely a problem, not an area of differentiation– Quality needs to be ensured (up front certification and/or ongoing rating/monitoring)

– Buyers find enough suppliers; suppliers find enough work

– Benefits should span multiple categories

Delivering: Key area of differentiation and predictor of success– Less control over the work itself by company, more leverage, higher margins

– More precise matching of buyers’ needs to best supplier, the greater the value

Administering: Necessary, not an area of differentiation – Great routing is a key to success (typically considered ‘secret sauce’)

– Community building tools are requirements to play

– Payments/Billing (I.e., frequency, security) is a key to stickiness to the platform

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Required Metrics for all Companies:Finding, Delivering, Administering

Required Metrics

Abundance of available, skilled

labor Multiple motivations for suppliers Ability to differentiate quality & rate

suppliers Ensure supply and demand

balancing Multiple advantages from

crowdsourcing for the buyer Managed payments/administration

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Required Metrics

Positive Differentiators

Positive DifferentiatorsCritical metrics and predictors of success

Precise Procurement (driving work

to the best supplier) High degree of self-management

of

the work

Abundance of available, skilled labor Multiple motivations for workers Ability to differentiate quality & rate

workers Supply and demand balancing Multiple advantages from

crowdsourcing for the buyer Managed payments/admin

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Importance of the Differentiated Success Metrics

Metric Impact

Precise procurement(‘secret sauce’)

• Drives participation of buyers and suppliers• Drives higher levels of quality and success

High degree of self management

• Drives highest margin and greater leverage• Creates transparency and more of a free market

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Comparing Business Models of Successful CompaniesOnForce & LiveOps

Variable OnForce LiveOps

Focus Onsite technical support Remote call center services

Size of Supplier Community About 10,000 About 20,000

Size of Traditional Outsourced Market

High High

Precise Procurement Based on 5 variables; identifies up to 20 possible providers

Based on changing variables per program; identifies best agent for each call

Self-management High Low

Revenues and Margins Lower Revenue, Higher Margin Higher Revenue, Lower Margin

Payment Model 10% transaction paid by supplier and $11 paid by buyer

LiveOps gets the mark-up between what they pay suppliers and what customers pay them

Pricing dynamics Buyers set desired price; suppliers denote willingness to accept price

LiveOps sets price for buyers and suppliers

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Potential Evolution of Crowdsourcing

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Potential Future Metrics: Creating “Halo” Effects

Leveraging the community to provide services to the crowdsourced company

– I.e., using the community to do the coding (oDesk) or to audit the calls

(LiveOps)

Turning suppliers into buyers and vice versa

Creating sub-communities that have been vetted and can be “sold” by the owner

to create a new revenue stream

– i.e., OnForce creates sub-networks of suppliers that meet a customer's

specifications

– That customer (I.e., Siemens) could “rent” the list to others needing those

same skills, making money off of their ability to rate and rank the suppliers

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Guesses About Future Evolution

Many companies are already seeing their participants using the platform for

areas not within their original intent

Most of the leading companies have designs on sectors and areas of focus

outside their current focus

It is likely that the market for work will consolidate into one or a limited

number of marketplaces where all sorts of work are bought and sold freely

(as has happened in the market for goods with eBay)

The race is on for a winner, and to date none of the giants from other fields

have entered the contest