Crowdsourcing is THE Competitive Advantage

The idea of crowdsourcing is like outsourcing, but with your users. If you’re smart about it, you can leverage your crowd as a significant competitive advantage. I could easily use YouTube as an example of how their audience is a core component of what makes them as big as they are, arguably more so than anything else, but that example is obvious. I want two use two examples that may not be as relevant, and two products that are relatively brand new in their extremely competitive categories: the iPhone, and a game for the Playstation 3 called Little Big Planet.

The iPhone’s Competitive Advantage

I have friends who are cellphone junkies. They always seem to have the latest thing from Japan or Hong Kong, and they’re always showing me how their camera has double digit megapixels, or can play (presumably) HD video. That’s great. Then I’ll ask them if their phone can listen to what’s being played on the radio, and tell me what it’s called, and who’s it by. They’ll say no. Then I’ll show them applications that give me restaurant recommendations, VOIP, local news, movie show times, recipes, my fortune, and even pickup lines. The fact is, their phone can’t do that, and there probably isn’t a single company out there that could even begin to match the number of applications that are available on the iPhone. That says a lot when there are literally hundreds of phones out there, but not one of them begins to give the functionality and utility that the iPhone does. That’s a competitive advantage.

Did Apple create any of these apps? They created 2 that I know of. Did they create an amazing toolkit for developers? Yeah, and they created over 10,000 apps for the iPhone. Many of these a are free, but many of these cost money as well, and considering that Apple’s taking a commission off of each sale, that’s a pretty sweet deal. Not only are they making money by using the apps as a major selling point for prospective buyers, but they’re also making a ton of money on each microtransaction that’s being made.

Little Big Planet

Little Big Planet is essentially a game that allows players to create levels. Imagine playing the original Super Mario Bros., but being able to create a level very easily and quickly, much like the way you can develop a polished piece of video using iMovie. Your idea is everything, and the game gives you that sense of building something, like the first time you played with Lego.

When it launched in November 2008, Little Big Planet was a new intellectual property (IP) from a relatively unknown developer. In the games industry, a new IP that’s system-exclusive is almost destined for failure, especially in the holiday season. But guess what? LBP rocked out. It didn’t achieve the highest sales or anything during Q4, but it was successful by most measures. And more so than many of the other games it competed with at launch, it continues to receives tons of playtime from it growing install base. As of now, there are over 100,000 levels created from it’s user base of over 1.3 million worldwide. With such a large user base that continues to play the game, well past its traditional product life cycle, the company now can leverage more money from their customers by offering additional premium content. It’s smart business, and while I have no idea what their marketing budget was, it seems to be paying off.

Applications

Three (of the MANY) reasons Apple and Sony were successful with crowdsourcing:

TOOLS. With both the iPhone and Little Big Planet, it’s important to see how both platforms had incredibly easy-to-use tools. Programmers were right at home with the iPhone, and anyone who’s ever picked up a videogame controller feels comfortable with LBP.

UTILITY. The utility involved is also instantly provided. With the developers, it’s the ability to monetize their product, or acheive recognition in a very competitive industry. With LBP, the utility is fun and entertainment.

PRE-HYPE. Both of these products also benefited from a considerable amount of pre-hype. Developers had been excited for programming for the iPhone for months, whereas gamers had been pumped for Little Big Planet a year and a half before its release. The prehype was a very large reason why both of these platforms were able to reach critical mass as fast as they did.

Catch a man’s fish, feed him for a day – teach a man to fish, feed him for life.
Teach your users to extend your products, then you’ve got competitive advantage.

Check Out

[ Wired: The Rise of Crowdsourcing ]
[ iPhone - TIME - Top 11 iPhone Applications ]
[ Little Big Planet - 1UP's Favourite User-Generated Levels in LBP ]

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