Crowdsourcing may have been around for a long time, but the advent of the Internet and other communication technologies has opened up many possibilities for the phenomenon to play out. Nowadays crowdsourcing plays a bigger role in strategic management than ever before. This paper adresses that under certain circumstances crowdsourcing transforms distant search into local search, improving the effectiveness of problem solving for firms. Under certain circumstances a firm may choose to crowdsource problem solving rather than solve the problem internally or contract it to a designated supplier.

These circumstances depend on several factors: the characteristics of the problem, the knowledge required for the solution, the crowd, and the solutions to be evaluated. In the paper, the authors compare the different forms (designated contractor, internal sourcing and crowdsourcing) for every aforementioned factor. By outlining the circumstances under which crowdsourcing may be a better mechanism for solving some problems, this article helps deepen our understanding of firm boundaries. However, the paper mainly highlights the circumstances in which crowdsourcing is the optimal form, but does not consider the consequences of crowdsourcing. The paper was lacking of considering the legal base of crowdsourcing, in most crowdsource cases there is no contract. Workers can run anytime they want, and an idea might be reused in anytime. If the authors would consider some (negative) consequences the paper would increase in reliability.

A related business example which can be linked to the article is the Netflix Prize. Adding this competition element, the Netflix example is a typical form of tournament-based crowdsourcing. In 2006, Neflix launched the Netflix Prize, “a machine learning and data mining competition for movie recommendations.” Netflix intention with the $1 million prize  was that it may encourage a range of algorithmic solutions to improve the company’s existing recommendation program, Cinematch, by 10%. The Netflix Prize demonstrates the power of crowdsourcing in developing innovative solutions for complex problems. Further, it is an interesting example of how setting various stages in the competition can help further push teams to achieve new success by combining their solutions with other contestants.

As mentioned above, the characteristics of the required solution knowledge, the problem to be solved, the crowd, and the solutions to be evaluated all have an impact on a focal agent’s probability of crowdsourcing a problem. Furthermore, the paper addresses that IT moderates that relation. How? The Internet facilitates the performance of tasks through crowdsourcing, which involves more arm’s-length transactions than traditional outsourcing to a designated contractor. The potential improvements in problem solving costs and effectiveness that come from crowdsourcing could have important consequences for both existing and emerging strategies.

References:

Afuah, A., & Tucci, C. (2012). Crowdsourcing as a solution to distant search. The Management Review

https://digit.hbs.org/submission/the-netflix-prize-crowdsourcing-to-improve-dvd-recommendations/