Discover a Crowdsourcing initiative – CrowdSpirit Part IV

4.How does CrowdSpirit have a competitive advantage over large companies? Why would it be in the community’s interest to join CrowdSpirit rather than an existing large company ?

To illustrate this point, let’s use a worked example. Here is small simulation that explains why the crowdsourcing model will always result in greater returns to the community with CrowdSpirit than with a large company.

1- Let’s initially take a pessimistic approach for CrowdSpirit and we assume that W company will sell its product more expensive than CrowdSpirit due to its brand image.

The winner is W company

2- We now take a realistic approach and assume than W company will have better overall production and distribution costs and bigger profit margins thanks to their huge volume..

The winner is W company

3-W company will have of course a marketing cost to promote their products which CrowdSpirit won’t have thanks to their ambassadors community..

The winner is CrowdSpirit

4-The investment cost for developing the product will be supported by the W company which will be not the case for the CrowdSpirit model as the investors will support this cost.

The winner is CrowdSpirit

5-A share of the support costs will be supported by the community whereas it’s not the case for W company.

The winner is CrowdSpirit

6-Finally, as it was easily forecast, the overall net margin will be much more important for W company.

The winner is W company

Now let’s talk about the way to share this beautifull net margin between all the parties:

7- Le’ts be realistics and assuming that W company will share 25% of this nett margin (which is extremely huge !!!) with the community. CrowdSpirit will have of course a totally different approach and will share almost 80% of the revenues with the community.Thanks to its very low cost structure.

The winner is W company

8- and 9- Let’s assume now that both Inventor, contributors and testors will earn exactly the same amount in both models. This is the basis of competition

There is no winner

10-11-12 Investors, Ambassadors and Supportors won’t exist on the W company business model: they already have all their sales network in place, they fund all their projects with their own funds and they have also their own support. This is a big advantage of CrowdSpirit in giving this involvement to the community.

The winner is CrowdSpirit

13- At the end, you can see that even if the pie (net margin) is more important for the W Company, at the end the revenues will be much more important for the community in CrowdSpirit due to the very low-cost structure of CrowdSpirit.

The final winner is CrowdSpirit

As a conclusion , you can say that the mass volume of W company will compensate the less important revenues for the community, but in that case you underestimate the power of the Crowdsourcing community. We can generate very important volumes very quickly and everywhere thanks to the Buzz which is incredible and also to a totally outsourced manufacturing and supply chain model which will be able to support the volumes required.

Last but not least, we need to keep in mind that one of the main advantages of CrowdSpirit will be its agility and flexibility. Of course, CrowdSpirit will be much faster at designing and marketing a totally new product than a large company. To illustrate this, everybody has seen the iPhone prototype on the Consumer Electronic Show…so why do we have to wait until December to get it in Europe (Of course, I do not take account of any further delays that will occur)…Will you be patient enough to wait a year to get.

Let’s review tomorrow the CrowdSpirit Timeline and the remains Q&A that you can ask

Lionel, CrowdSpirit Founder

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4 Responses to “Discover a Crowdsourcing initiative – CrowdSpirit Part IV”

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CrowdSpirit » 4th Article on OpenBusiness - Why CrowdSpirit has a competitive advantage versus big group ? says:

January 25, 2007 at 9:17 am

[...] Today, I will demonstrate why the community will have always a best interest to participate to our adventure versus a potential big group one . Here is all the details Lionel, CrowdSpirit Founder [...]
Start-Up Geschäftsmodell: CrowdSpirit » ANDERS|denken Blog says:

January 26, 2007 at 12:42 am

[...] Teil 1: Das Geschäftsmodell im Detail Teil 2: Der Mehrwert von CrowdSourcing Teil 3: CrowdSourcing und Qualität Teil 4: Der Vorteil einer eigenen Community Teil 5: Wann es los gehen wird (folgt am 26.1.07) [...]
CrowdSpirit » Dell is adding a proof that CrowdSourcing will work but not with their way ;-) says:

February 20, 2007 at 12:49 pm

[...] Great system, isn’t it Come on, let’s be serious, as I was originally forecasted on this article large company will never offer you such “high-end offer” than CrowdSpirit will offer you. The answer is simple, they do think that they can make business without you, which is true on a short term period but not on a long term…so why would they pay you for your idea as they’re more thinking that you have an opportunity to send an idea to the THE BIG company DELL [...]
OpenBusiness » Blog Archive » CrowdSourcing the DELL Way says:

February 22, 2007 at 2:51 pm

[...] Great system, isn’t it you send all your IP for FREE !!!! Come on, let’s be serious, as I originally forecast on this article large company will never offer you a “high-end offer ” like CrowdSpirit. The answer is simple, they do think that they can make business without you, which is true on a short term period but not on a long term…so why would they pay you for your idea as they’re more thinking that you have an opportunity to send an idea to the THE BIG company DELL [...]