How to join crowdfunding, [open] innovation and wisdom of crowds: IBM 1×5 project

The crowdfunding phenomenon is mainly used to help entrepreneurs, small businesses, etc.. Obviously, if a company with enough funds requested money for a crowdfunding campaign, nobody participates.

Does this mean that crowdfunding is not suitable for large companies? Of course not. As a clear example we can find IBM with its 1×5 project, a project in which this company not only gives a twist to crowdfunding, but also uses it to catch the wisdom of the crowd and generate innovation within their own company.

As in all large companies, inside IBM there are employees with great ideas, but the filtering of these ideas can be tricky. To innovate in their products and benefit from the innovation that their own employees can generate, IBM has used an internal crowdfunding platform in which employees can propose new projects and also support those projects through funding.

1×5 project

The 1×5 Project, a project that has worked successfully in two editions, follows a mixed model that benefits from the wisdom of the crowd and from crowdfunding.

In the first edition the company gave $50.000 to 511 employees from the “Software and Analytics Research” department (all other company employees could comment, act as volunteer or follow projects) and it allow the proposal of projects with certain limitations. In the second edition, IBM increased the amount and gave $150,000, providing $ 2,000 per head. In this case, the projects issue was limited to software projects aimed at any particular recipient (client, user, IBM itself, etc..).

The results were clearly positive: of the 34 proposed projects, 19 (56%) were successfully funded.
A screenshot of the platform used inside IBM. It uses a clear Kickstarter (and other crowdfunding sites) style.

Conditions

In this case, the projects were fundable during only 34 days, because as state Millen & Fontaine (2003), short periods favor the focus on the project and give a sense of urgency that encourage financial thereof.

About the amount each employee owned, this was fastened to the status of “use it or lose it“. If it was not used to fund a project during the experiment period, that money returned to IBM.

Finally, to encourage the funding of the greatest number of projects, overfunding was not allowed. When a project arrived to the amount asked, the possibility of financing was disabled, but was still enabled the possibility to comment, follow or participate as voluteer in those projects.

The employees rank

When proposing projects, or when supporting them, IBM made ​​no distinction about the rank of the employees. Any employee of the departments involved in these experiment possessed the ability to propose a project, and the possibility to fund other projects (because a participant couldn’t finance projects proposed by himself).

As Michael Muller, the 1×5 project manager, commented me “experiment has been to replace management/executive decisions with the ‘wisdom of the crowd’, and therefore we gave managers no special privileges”.

Number about participants

At the end, from the 511 employees who received funds, a total of 255 decide to participate. If we have into account the 56 people who participated by commenting, following the projects, etc.. we have a total of 311 participants.

A curious fact, which highlights Muller when analyzes this experiment, is that 40% of people who support a particular project had nothing to do with the person who proposed it. And in some cases, this percentage was even higher. It was shown that participation in projects responded mainly to common interests or needs.

In terms of geographical spread, this factor did not affect the funding of the projects.

Conclusions

After a little research about this internal crowdfunding case, it is clear that in large companies crowdfunding can be used, not as a tool to raise funds, but as a way to allow the collective intelligence to appear.

Moreover, we can consider that open innovation can appear when the innovation process is opened to other employees different from those from the R&D department. This way a network of employees that generate open innovation can be created. In this case, the project would combine the wisdom of the crowd with crowdfunding and open innovation.

Es más, podemos considerar que la innovación abierta puede darse, no tanto abriendo el proceso de innovación fuera de la empresa, sino dentro de la misma pero fuera del departmento de I+D. De esta manera se puede crear una red de contactos que genera esta innovación abierta. En este caso, este proyecto aunaría la sabiduría de la multitud con el crowdfunding y la innovación abierta.

 

References & more reading:

  • Millen, D.R. & Fontaine, M.A. (2003). Multi-team facilitation of very large-scale distributed meetings. Proc. ECSCW 2003
  • Muller, M., Geyer, W., Soule, T., Daniels, S., & Cheng, L. T. (2013, April). Crowdfunding inside the enterprise: employee-initiatives for innovation and collaboration. In Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (pp. 503-512). ACM.
  • Whelan, E., Parise, S., de Valk, J. & Aalbers, R. (2011) Creating Employee Networks That Deliver Open Innovation. MIT Sloan Management Review. Retrieved from http://sloanreview.mit.edu/article/creating-employee-networks-that-deliver-open-innovation/

One comment

  1. I would say this is really informative and articulated post. I also agree with the conclusion that large companies can use crowdfunding internally in order to allow the collective intelligence to appear.

    I am saying this based on experience as we have already worked on custom crowdfunding platforms for few large companies looking to use crowdfunding internally or externally. When I say externally which means their employee can create innovative product ideas and showcase them to customers to get early interest and access to funds before even production.

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