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November 3, 2014

The Power of Crowdsourcing

Summary:

Traditional companies, such as insurers, must quickly adapt to the new models, or they will fall by the wayside.

Photo Courtesy of Cambodia4kids

From Ben Franklin (inventor of the lightning rod and bifocals) to Thomas Edison (the phonograph and popular form of the incandescent light bulb) to Tim Berners-Lee (the World Wide Web)/Internet, inventions have spawned new generations of ideas and disrupted, transformed and created businesses. That process continues. . . but at a much faster pace, with smart phones, social media, the Internet of Things and much more.

Today, there is the shared economy movement, built around crowdsourcing and open innovation. There is no turning back … only moving forward.

Now, we instantly interact with businesses and individuals on different mobile devices. Collaboration via the Internet has quickly become mainstream in our daily lives, both personally and professionally. Mass collaboration is rising to new heights via crowdsourcing and open innovation, creating transformative outcomes.

Crowdsourcing enables companies to tap into the power of the masses and communities, while open innovation helps identify, develop and market new ideas, products, services and more within these communities. Together, the combination obliterates the traditional internal, hierarchical or linear thinking and development approaches and creates an entirely new playing field that accelerates the execution of innovation within organizations.

Just a few years ago, crowdsourcing was viewed as a method for ideation – a method to have people collaborate online, in an open forum, to develop the best ideas. But today crowdsourcing has moved well past this to new, more sophisticated and disruptive levels.

Crowdsourcing is eliminating the traditional boundaries between companies, creating a porous environment to engage the rest of the world, whether customers, partners or others. It is fueling open innovation and the development of new businesses at an unprecedented pace that, in turn, fuels change in traditional businesses. It is reshaping business and the economy, creating a major new outside industry trend – the shared economy.

According to a Forbes article, “Airbnb And The Unstoppable Rise Of The Share Economy,” in January 2013, for 2013 the revenue flowing through the shared economy directly into peoples’ wallets surpassed $3.5 billion, with growth exceeding 25%. It was noted that this rate of peer-to-peer sharing was moving beyond being an income boost to becoming a disruptive economic force. Fueling this trend are the Millennials, a large and influential economic group. Strapped with high college loan debt that limits their ability to purchase homes, cars or other high-value items, they are trending toward subscribing instead of buying music, movies or TV shows (thanks to the likes of Pandora, Netflix and others). They prefer to access news from Twitter, Facebook or Flipboard, or to buy used goods from eBay or Craigslist. Millennials have grown up with the technology that enables sharing, accessing or subscribing as an acceptable alternative to owning.

The shared economy empowers people to become co-creators, funders and customers of new businesses that are disrupting traditional industries. Just consider Airbnb and Uber, two companies viewed as leaders in the shared economy that are reportedly worth billions, rivaling in value their traditional counterparts, taxis and hotels.

In this new shared economy, traditional companies – like insurers – must quickly adapt to be relevant. Insurers need to begin to ask themselves these questions: What new products and services can we provide to these new business models? How will the new models reshape discounts or the bundling of insurance products? How could we partner with some of these new businesses? How will we need to rethink the customer relationship?

The shared economy is empowering individuals and businesses to access specialized skills, resources, goods or services from anyone, anywhere, anytime. New business models are challenging decades of business assumptions that were based on ownership rather than short-term access or subscription. As a result, the fundamentals of insurance are being redefined, from risk models to pricing, products and services.

While many insurers may see crowdsourcing and open innovation as risky, other industries are experiencing the transformative power. They are fueling the intensity and raising customer expectations that will affect insurance.

Collaboration must happen both within and outside the insurance industry because the challenges and opportunities have become much bigger and broader. Insurers must reorient their business practices from product development to services aimed at creating more value and a deeper customer experience.

There is an unparalleled opportunity for any company, in any industry, to ignite a new future that is powered by the human imagination through crowdsourcing and open innovation.

The overriding and most critical question for insurers is not if, but how will they embrace the shared economy, crowdsourcing and open innovation – first to get in the game, then to influence change, and ultimately to win.

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About the Author

Denise Garth is senior vice president, strategic marketing, responsible for leading marketing, industry relations and innovation in support of Majesco’s client-centric strategy.

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