'Crowdsourcing' is revolutionising the way firms conduct their market research and development, writes Karlin Lillington.

Crowdsourcing. No, it isn't the process of ensuring a large audience for a keynote speech, but a commercial blend of open source development principles, Web 2.0 social networking and interactive web concepts, and outsourcing.

It's also a phenomenon that was already happening when the convenient term was coined last summer by Wired magazine writer Jeff Howe and editor Mark Robinson, who published an article in the June issue describing online collaborations done by the masses for commercial companies with little or no direct payback.

A Wikipedia entry on the term notes that "crowdsourcing presumes that a large number of enthusiasts can outperform a small group of experienced professionals".

Or, as Michiel Boreel puts it, "There are always far more smart people outside your company than working for your company."

Crowdsourcing taps their insights, passions and interests in a productive way: "When people are passionate about something, they will do something for you, using the same principles that are viable in the software world."

Boreel is chief technology officer at Sogeti, the new name for the consulting arm of CapGemini, which relaunched this week in Dublin. Boreel, who was over for the launch, is also founder-director of the firm's Institute for the Analysis of New Technology, which tracks new trends in the technology sector and publishes a book each year on a chosen hot topic.

This past year, the open collaborative model of crowdsourcing was the focus of the institute's research and resultant book. They started with the concept of open source development on its own, says Boreel, "but we soon realised it was much more than a technology. It was a whole area of innovation."

So how does crowdsourcing work in the real world? One example comes from IBM, which has been using a vast online brainstorming session called the innovation jam to bring together employees, customers and even family members to propose potential areas for innovation and development. IBM's chief executive, Sam Palmisano, has promised to put $100 million towards good ideas - and in 72 hours last July, 140,000 people came up with 37,000 ideas in four thematic areas chosen by IBM.

Boreel also cites Lego, which similarly drew on an outside crowd - in this case, online communities passionate about Lego - to overhaul its product portfolio and generate new ideas. The result was a new product offering where customers can download software to design any object they want - Boreel uses a plane as an example - and then, Lego will prepare a kit to make that design, and send it to the customer. Lego has 2.5 million customers using that area of its website now, he says.

Some have even built websites whose entire business model is facilitating crowdsourcing.

Eli Lilly runs InnoCentive, a website that BusinessWeek says charges hefty fees to clients like Boeing and Procter and Gamble to use to find solutions to difficult problems.

Perhaps a plastics company needs to create a polymer with specific qualities.

It can outsource it to InnoCentive.com, which taps a huge membership of universities, researchers, and students who might take on the task.

If successful, the individual gets paid a reward - up to $1 million for some projects. Innocentive has signed agreements with universities in locations like China to try and unearth motivated researchers with fresh perspectives.

Another website, iStockPhoto.com, brings together tens of thousands of amateur photographers who contribute stock photography that can be licensed for use by companies. Getty Images liked the idea so much that it bought the site for $50 million.

What motivates individuals to be part of these hives of activity? In some cases, such as on InnoCentive, there's a clear pay-off for a good idea, but often, as with Lego, no cash in involved.

The reward seems to be simply the buzz that comes from contributing to a project in an area one cares about deeply.

Boreel calls this payback "flow" - "a psychological phenomenon where people like something so much that a sense of time passing vanishes as you work. You enter into a state of flow." Programmers often describe themselves as being in this disconnected yet focused state when coding, video gamers when playing a game, performers when onstage before an audience. "We all know it," says Boreel.

Not everyone is enamoured by the idea, or even the term crowdsourcing. Its Wikipedia entry has sparked a debate over whether it should even be included as a valid term, and some sceptically see it as corporate exploitation under another name.

Notes one commentator: "In English, it basically means 'pay a bunch of suckers little or nothing to do your work for you'. It's not a new concept. . . but now it's on THE INTERNET."

Nonetheless, precisely because of the internet, a kind of broad, collaborative form of R&D and innovation has been enabled that is a far cry from the more prevalent closed, internal, marketing and small focus group approach to product development within companies.

For precisely this reason, crowdsourcing can be extremely difficult for companies, says Boreel, because it requires accepting bottom-up rather than top-down input; handing over a large degree of control and management, and, perhaps hardest of all - listening, responding, and admitting mistakes when they are made.

Most companies want to create communities they can utilise, rather than understanding the communities are already there and need to be responded to, he says. In addition, companies are failing to recognise that online communities, and internet-adept consumers, are increasingly going to be the norm as children who have been online from preschool age come of age.

Such consumers and clients will want responsive and interactive companies that listen to them - not those that talk at and sell to them. And in a YouTube and e-mail world, brands can be destroyed "just like that" if response to a problem bugging consumers is poor, he notes.

"The challenge for companies is how to organise in a bottom-up world. What is the role of the organisation then?" says Boreel. "It's hard, it's inconvenient, and the most difficult thing is, it's unpredictable, and many hope it will go away."