Principle

The crowdsourcing business model consists of a large number of players (consumers, amateur or professional service providers, the general public, etc.) carrying out a task or project that is normally carried out by a single person. Crowdsourcing can be done via an open call for actors or a targeted call if it is a project requiring specific skills.

Advantages of this economic model

Crowdsourcing allows the company to call on external people and thus benefit from their different and new points of view in relation to the company’s activities. It will also allow the company to exploit the intelligence, know-how and creativity of a large number of individuals in order to pool their imaginations to solve the innovative task, project or challenge that required the use of crowdsourcing.

Moreover, for the development of a future product, if the company uses crowdsourcing, it will receive the opinions, possible designs of future consumers, ensuring that they will buy its product in the future because consumers will buy what they have created.

On an economic level, crowdsourcing is much more advantageous as it will avoid the company having to pay development costs internally or having to use a design/creation agency.

From a financial point of view, the money or prizes paid to the participants in the crowdsourced event will therefore be much cheaper for the company than having to call on a professional.

For those involved in crowdsourcing, the aim is to get involved in such a challenge because they will receive a financial reward or a prize awarded by the company in exchange for their commitment. For a company, crowdsourcing can also be a way to do its market research at a low cost since by distributing its products to customers they will be able to provide advice and feedback to improve the product. For customers, it is also advantageous because they become brand ambassadors and get the products for free.

Evolution of the model over time

Historically several crowdsourcing initiatives have been significant as in 1714 with the British government launching the “longitude act”, an open call with a £20,000 reward for anyone who would provide an effective solution to determine the longitude of a ship. Then in 1884, the editors of the Oxford English Dictionary also made use of crowdsourcing. They asked people to submit their own definitions of as many words as possible. This crowdsourcing initiative helped to enrich the dictionary and English lexicons around the world. However, it was in 2006 that crowdsourcing took on this name following an article: The rise of crowdsourcing written by Jeff Howe and Mark Robinson, editors at Wired magazine.

Impact of digitalization

Since then crowdsourcing has been booming and is increasingly being used in particular to find the solution to challenges that one person in a company could not solve alone. Today crowdsourcing has become much more digital thanks to digital tools and many crowdsourcing platforms have been created.

With the Web and the development of digital crowdsourcing platforms, it is now possible to bring together a much larger number of players scattered around the world. This connection via crowdsourcing also makes it possible to collect much more data and information than if one person did it alone.

Impact of the sustainable revolution

With today’s environmental issues, crowdsourcing allows you to make either a targeted call on issues related to sustainable development or an open call that, thanks to the collaboration of multiple actors, will highlight trends and products on sustainable development. Indeed, among the multitude of actors involved, there will inevitably be some who are invested in sustainable development issues, enabling them to propose solutions and ideas with a positive impact on the environment. This is the case, for example, of the rethink plastic hackathon organized by Unilever.

Variants of the model

Crowdsourcing can be found in three other forms which are :

Crowdfunding: consists of an alternative method of financing since it allows, via participatory financing platforms, to collect funds from Internet users to finance a project.

Mass collaboration: consists of a collective action, bringing together a large number of people around a single project.

Open innovation: consists in the innovation process being based on sharing and collaboration by including people from outside the company in order to make the best use of collective intelligence.

Value chain & types of stakeholders

Crowdsourcing allows outsourcing to the greatest number of people by involving several types of players:

The people in the company who launch the challenge, the crowdsourcing project.

“The crowd: the people who take part in the call, by sending data, answers, solutions, etc.

The “jury” of the company, the employees who evaluate the solutions.

These are usually the people who launched the crowdsourcing project and who are also accompanied by employees of the company with expertise in the field in order to check the relevance of the crowd’s work.

Reference companies

Innocentive: InnoCentive is an open innovation and crowdsourcing company, they enable organizations to bring their unsolved problems and unmet needs, defined as “challenges”, to the crowd.

Procter & Gamble: Procter & Gamble launches Connect & Develop, the crowdsourcing platform for detecting innovations developed by external players.

Myfab: MyFab.com, opened in 2008, is an online sales site where Internet users vote for items offered online.
Kickstarter: Kickstarter is an American participatory financing company that allows Internet users to finance projects still at the idea stage.

Some key figures

During the Super Bowl in 2013 Coca-Cola launched “Coke Chase”, an interactive crowdsourcing-based ad. In the advert, three teams competed in the desert in a race for a giant Coca-Cola bottle. Fans and internet users had to vote for their favorite team on social networks and propose sabotage for the teams they did not want to see win. In the end, 1 million votes were counted and 7.3 million sabotages were proposed.

Starbucks coffee used crowdsourcing by launching the “My Starbucks Idea” website. The site enabled 150,000 ideas posted by customers and 2,000,000 votes on the questionnaires that were posted.

Products or services adapted to this model

Crowdsourcing can be used in multiple sectors and is now integrated as a vector for innovation projects. However, for two sectors crowdsourcing is all the more important because in these sectors projects cannot be solved by a single person:- IT (Synack platform)- Manufacturing & engineering (Sony First flight platform or Surcle.io)

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• Principles:

It is an economic model that is still very rare and quite original. It consists of providing a customer with a good or service at a low or zero price and to be remunerated by taking a commission on the savings made thanks to this product. This model is therefore only possible under certain necessary conditions. First of all, the company wishing to use this model must have found a product that is more efficient than its competitors in order for it to make savings.

Secondly, it is necessary to be able to keep up with a long time lag between production cost expenditures and commission income over a certain period of time. This model is often used in a partnership or by municipalities or public agencies to guide people’s behavior. This model also allows SMEs to enter markets where competitors are already well established and provides incentives for households that are willing to take action but cannot afford to do so. 

Advantages for the seller

This model generates trust and therefore facilitates the acquisition of new customers. It is therefore a very interesting way to enter a market and to get rid of competitors who are already well established. 

This model can also encourage a small company to invest in an innovation that it believes to be revolutionary because the company knows that if it manages to be better than its competitors it will be able to sell its product thanks to this model. 
 

Benefits for the customer

The customer has almost nothing to lose in this model. They receive a product at a price well below its value, which allows them to save money. Moreover, he does not have to advance the costs related to the production of the product. This model removes the price barrier at entry.

Disadvantages for the customer

The customer becomes somewhat committed to the company in the medium to long term, since it is over time that the model becomes profitable.

Challenges

– To be able to measure the savings made to apply the commission and to prevent the client from disappointing. For this reason, this model is not applicable to every market. It can only work for goods or services for which customers pay according to their consumption. 

– Find significant capital and investment capacity to start production at the beginning of the project.

– Have good communication/marketing to publicize your offer and to generate trust and confidence and ensure that the savings achieved will be greater than the costs to be paid. 

– Technological progress is very fast so it seems complex to guarantee energy savings in the long term with the same technology. However, repayment contracts based on the savings achieved require a certain minimum duration

Evolution over time

In 1998, Kayla Ente won the sustainability award from Nuan, a Dutch energy supplier, for designing a financial system to promote renewable energy. This model was later called Pay as You Save. Kayla Ente later became the founder and director of BHESCo, Brighton & Hove Energy Services Co-op, which was called Trisolar when it was established in 2009. This energy company has implemented a Pay as You Save strategy.

The Pay as You Save scheme has also been used in Great Britain with the launch of the Green Deal in 2013 by the British government. Great Britain wanted to encourage the development of energy efficiency in the homes of its citizens and has therefore set up a Pay as You Save system to encourage British citizens to make the effort to install more environmentally friendly materials and objects. This Green Deal policy has not been a great success and the British government stopped its investments in 2015, but it has shown that this Pay As You Save strategy is perfectly adapted as a trigger for the green revolution by public authorities.

With the growing importance of sustainable and responsible energy, the pay as you save model is becoming more and more relevant. It is indeed a means used to encourage people to change their practices in order to adopt more environmentally friendly habits. 

Value chain & types of stakeholders & customer journey 

– the producer
– the customer
– the investor who makes capital available to start production: often public bodies such as municipalities or governments. 

Reference companies

– BEHSCo
– The Indian company Energy Efficiency Services Ltd (EESL) and its UJALA programme (Unnat Jyoti by Affordable LEDs and Appliances for All) is a successful example of the pay as you save model. EESL led the project to develop the use of LEDs in India to promote more responsible energy. Due to the poverty of the society, EESL set up a pay as you save model to finance this project which led to the installation of 370 million LEDs. EESL is now expanding internationally and is using this business model to promote a shift towards clean energy. 
– Ouachita Electric Cooperative (USA) has a program to finance energy efficiency improvements, called HELP PAYS (Pay as You Save).
– City Energy Network Ltd

Some key figures

Case study: renewal of the bus fleet in Santiago with electric buses instead of diesel buses, which are more polluting. 
Each dollar of COUNTRY subsidy mobilizes more than $70 of private investment in electric buses, far exceeding the leverage of equivalent subsidies from non-COUNTRY programs. A $568,000 grant would catalyze a $23 million investment in the purchase of 100 buses that cost a total of $42 million.

As an example, the same amount without a COUNTRY could cover the full initial premium for just 1.4 buses, and directly covering the additional initial costs for 100 electric buses would cost a grant provider over US$25 million. Thus the implementation of a COUNTRY strategy reduces this subsidy requirement by 97%. 

Products or services adapted to this model

– Energy-related products 
– Products with high initial costs

Sectors of activity using this model 

– Energy suppliers. E.g.: Promotion of solar energy: The Solar Saver Pilot initiative conducted in Hawaii in 2007 by the Sunrun company to promote the installation of solar panels on the roofs of households. Midwest Energy did the same in 2008 with its How$mart initiative (Kansas, USA) to improve energy efficiency. Windsor Efficiency PAYS highlighted a water conservation program launched in 2012 that is still relevant today. 
-Mobility and transport: electric buses

Opportunities identified

A loan from banks for entrepreneurs who want to develop their projects. Repayment with a certain percentage of the profit over a number of years following the loan. 

Can this business model be extended to goods or services other than those for which clients pay according to their consumption? Could one sell a car, advertised as the world’s most fuel-efficient car, by taking a commission on the savings made on petrol fill-ups, even if it means charging a certain amount at the time of purchase? Often cars are bought on credit, so instead of paying back the loan every month, the household would pay part of the savings made on a very fuel-efficient engine. On average the French spend 1500€/year on petrol.

• Principles:

Franchising is a type of business that is operated by an entity known as the franchisor, who grants the franchisee exclusive rights to sell or market a product or service under a specific brand in a certain geographical area. This legal agreement allows the franchisee to use the production, commercialization, and marketing processes, as well as to benefit from the reputation and prestige of the brand.

In exchange for the rights to use the franchisor’s business model, the product or service in combination with training, support, and operational instructions, the franchisee pays a fee to the franchisor. Typically, this fee (known as a royalty) is a certain monthly amount or percentage of sales.

• Advantages and challenges

For the franchisor, starting and operating a new branch to expand the business involves a lot of time and financial investment. The franchise business model helps a brand to expand without having to cope with these limitations.

For the franchisee, this business model has plenty of advantages. Firstly, the franchisor has already invested much time and money in creating a market for their product. So the franchisee will have the benefits of working for an established brand with existing demand. In addition, franchisors often offer various other benefits such as financing programs, help with finding a location, in-person or online training, marketing, and advertising campaigns, and so on.

Moreover, franchisees also have access to an entire network of fellow franchisees, who may be able to offer advice or offer you a solution to a common problem. As most franchises are cost-efficient and demonstrate high degrees of operational excellence, this leads to lower production costs, which is reflected in reduced final prices for the customers. Since franchises must follow set guidelines, they tend to focus on the quality of the product or services, as well as on customer satisfaction.

Nevertheless, this business model also includes some challenges for franchisees as they are restricted in some ways by the franchisor. Unlike an independent business, the franchises are controlled by the headquarters who ensure that the established guidelines are met for the proper functioning of the business. This means that there are certain restrictions in terms of decision-making at both the operational and management levels.

• Evolution over time

Franchising can be dated back to the middle ages, when local titled landowner would grant rights to the peasants or serfs to conduct business on their domain. Modern-day franchising is believed to have started in the 18th century with Benjamin Franklin, who entered into the first franchise agreement with Thomas Whitmarsh to provide printing services in South Carolina. In the early 1850s, Isaac M. Singer again used the franchising model to distribute the Singer sewing machines. But, it would be another century before Mcdonald’s would make the franchising model truly popular.

The development of technology, digital transformations, and global platforms across the entire value chain fostered the deployment of new accelerated franchise-type growth models. Moreover, this model took advantage of cloud computing that improved communication between the network.

• Key figures

Today, there are thousands of franchises across hundreds of industries and sectors. According to a U.S. government report, the franchise industry employed 21 million people and generated $2.3 trillion of economic activity in 2018. The biggest global franchise is McDonald’s that has over 30 000 franchisees worldwide and generated 21.000 billion of revenue in 2019.

• Products or services adapted to this model

The franchising model can be used in basically every sector and for a variety of products/services as it is merely an organizational form for companies. Nevertheless, the products or services adapted to this model are mostly offered to consumers (B2C) as a franchising model enables to reach a wide range of geographically dispersed customers. This business model is most used for fast-food and other restaurants, retail stores, and hotels.

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OUR ANALYSIS

• Principles: The rental of goods or services is an old and widespread business model. It allows customers to pay the company periodically for the time-limited use of a product without having to own the product. The company takes care of the maintenance of its physical assets, insurance costs and other usual expenses. It depreciates the costs of acquiring the products as it rents the goods.

• Advantage & Challenge: This business model makes it more accessible and reaches a larger market when the price of the product is important. It also ensures regular income for the lessor, as the lessee is required to pay periodically an amount agreed between the two parties. Finally, the lessor has the advantage of retaining ownership of the product, which ensures additional income in the event of resale. For the lessee, this model is advantageous when what he rents would cost him more than he uses. Instead of having to buy the property, they pay a fixed sum at regular intervals. From a financial point of view, the first disadvantage is the fact that the lessor will be subject to a double tax (first tax at the time of the acquisition of the property and then taxed at the time of regular payments made by the lessee). In addition, the maintenance of the property may require significant resources, particularly in terms of repairs and logistics. Finally, one of the challenges is also the increasing disintermediation.

• Evolution of the business model & maturity: This model is extremely old, it already existed under the Roman Empire. At the beginning of the 19th century, the industrial revolution favoured the expansion of this model with the rental of cars and printers. Digitalization has facilitated the rental process, and today it is possible to rent a large and growing number of goods on the internet. Finally, the importance of renting can also be explained by the environmental awareness that pushes to consume more sensibly, and renting is a very good alternative that favours the use rather than the possession of goods.

• Key figures: According to a report by the company FaitBit, the rental industry was worth $19 billion in 2017 and is expected to reach $59.4 billion by 2022. Moreover, 80% of rental revenues are generated in Europe and North America.

• Product adapted to the business model: This model does not apply to all sectors, it is especially widespread in sectors where the price of goods is consequent such as real estate, vehicles, equipment, furniture rental…

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OUR ANALYSIS

• Principles

This business model is based on a physical or virtual platform whose main purpose is to allow the direct connection of two or more groups of people who all have an advantage in interacting with each other through the platform. The platform becomes increasingly valuable to users as the number of users increases.The possible sources of revenue for multi-sided platforms vary. Indeed, a platform can decide to make access free and charge advertisers by providing them with an audience. The platform can also charge for its service through subscriptions or a commission on every transaction.

• Advantages & Challenges

The main advantage of this business model is that the network effect reduces the marketing costs of customer acquisition. Due to the interdependence between the different parties, an increase in the number of users on one side of the platform reinforces the attractiveness of the platform on the other side. In addition, a multi-sided platform has a low marginal cost since the maintenance costs of a platform are mostly fixed (servers, developers, marketing, etc.). For users on both sides of the platform, the time and costs of searching for the right product/customer are reduced as these are both easily available through the platform. But the network effect, which is the main driving force behind the success of this model, also poses a big challenge in the start-up phase. The initial acquisition costs can be significant because of the need to create an initial user base sufficient to bring the network effect into play between the different stakeholders.

• Evolution of the business model & maturity

The first traces of multi-sided platforms as we know them today date back to the 1950s with the creation of Diner Club payment cards to simplify payments between customers and restaurateurs (such as the American Express). Digitalization has had a significant impact on the business model as it has enabled multi-sided platforms to reach a growing number of markets and connect people who no longer need to be in close proximity to make transactions. In recent years, the model is also impacted by the sustainable revolution because it can be used as a tool to promote the sharing economy. Another sustainable example is platforms that connect users who have had a problem with their products with people who are able to repair them.

• Key figures

Airbnb, one of the main companies employing this business model, had a turnover of more than 3 billion dollars in 2018 and reached a stock market valuation of 31 billion dollars a year later. Today, the application has more than 3 million households available on the platform and more than 150 million users.

• Products & services adapted to the business model

Thanks to the digital revolution, more and more sectors are becoming adapted to the multi-sided business model. Indeed, from the transport sector to real estate and services, everything can now be offered on multi-sided platforms.

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OUR ANALYSIS

The principle of the business model “Open source” or “open source code” in French, means software whose source code is accessible, modifiable, and integrable by a community of contributors, thus offering real freedom to developers. These products, technologies, or services in question, developed by a “community”, do not belong to a specific company or individual. It goes even further because this business model even includes improvements that external contributors can make: this is called “open innovation”.

The free distribution made possible by “open source” software has made it possible to democratize a certain number of technologies within companies.

Here are the basic principles defining this business model:

– The possibility of having access to the source code;

– The possibility of modifying the source code;

– The possibility of redistributing the new software, thus modeled.

ADVANTAGES & CHALLENGES

This “open source” model is first of all a cost-effective solution for the company using it. Both in terms of time and means to be put forward to develop the software, since it is mostly developed by members of the community. Indeed, one of the main advantages, often mentioned, of open source software is the diversity, scope, and availability of the army of developers who contribute to the project. This can be an incredibly powerful argument to demonstrate the value of open source for a company.

Advocates of this business model believe that by involving collective intelligence it can only contribute to improving the technology or solution in question. Especially since the philanthropic aspect of this approach as well as the freedom granted by its use can also be an argument of choice.

Finally, the possibilities of adding extensions and customization are unlimited. However, the larger the community and the greater the number of contributors, the greater the possibility of problems or potential security risks. In this sense, more contributors mean more risks. This is a very real concern. As a community grows, more developers contribute code to the project. As more and more developers contribute to the code and their solutions to problems, there is a very real need to establish guidelines that all contributors must follow, such as setting coding standards, accepting a common license, peer-to-peer exchange, etc.

IMPACT

Open-source software impacts the company’s IT strategy in many areas. It changes the way to conduct a research and development project with a more collaborative approach focused on a community of developers, as shown by Wikipedia. Open source also makes the creation of software solutions evolve by lowering development costs and implementation times. Not only is software designed faster and at competitive costs, but it is also of better quality thanks to the possibility of relying on a community of contributors to enrich the functionalities and test the solution. As a result, it has become a strong argument when it comes to defending an IT budget or convincing management to deploy a digital tool within the company. The digital transformation has been a gas pedal for open source, making it indispensable to any IT strategy, making it a strategic tool for digitizing business processes and uses.

EVOLUTION OVER TIME

Open Source is a concept in computing that was developed in the 1990s. Since then, it has served as a basic principle for the creation of many software and IT solutions. The tech giant IBM is the first to use this “open source” business model. Initially, this system was established to allow IBM users to exchange on operating systems, technical programming, databases as evidenced by the Mozilla Open source project that led to the creation of the Firefox search engine. But the first company to have produced a profitable and profitable version of open source was RedHat.

The first “open source” versions of Red Hat Linux were delivered to customers on floppy disks and CDs. Later, paid subscriptions were introduced in exchange for more comprehensive support. Until then the free license had been equated with a free software license without anyone making money behind it. It was then that software publishers, discovering the need for services (maintenance, testing, hotline) will take over the file in the form of subscriptions as mentioned above, in order to provide software of a high level of quality while monetizing its services.

On the other hand, the massive spread of open source solutions, the freedom and simplicity they offer, and their unbeatable cost will have a lasting impact on the way IT is done. Easier access to technology, non-prohibitive TCO, simplified implementation, the democratization of new uses, sharing… A digital revolution later, it is clear that Open Source remains a constant source of inspiration and innovation for software manufacturers.

VARIATION OF THE MODEL

There are three main families of “open source” software: Foundation products: Like the Apache Foundation, or Eclipse, they are non-profit organizations that stimulate and pilot the development of great open source products. Foundations and other non-profit organizations play a very important role in the open-source ecosystem. The largest open-source products, and those with the widest distribution, come from these foundations or are supported by them.

Community or distributor products: These companies select tools and components around a Linux kernel, provide packaging, distribution, and support. They often also act as publishers.

Their activity can be summarized as follows:

– Selecting products and versions, surrounding the Linux kernel

– Validate the maturity and robustness of these products

– Distributing these products and their updates, i.e. ensuring their delivery to user-customers

– Provide support for these products: hotline, processing of requests, advice, training, etc.

Publisher products: These companies create a software product, which they distribute under an open-source license, in whole or in part. They ensure the promotion of their product and propose offers of support. The publisher is the one who holds the rights of the product, ensures the development, promotion, distribution, and support.

REFERENCE COMPANIES

REDHAT: This is the most obvious proof that selling open source software can be profitable. Like Canonical, it offers its software for free and charges for technical support services to companies. Red Hat also sells subscriptions to its “premium” distribution, Red Hat Enterprise Linux, which appeals to enterprise users because of its rigorous testing and stability. Finally, the company sells enterprise software certifications, which allow employers to find highly qualified IT professionals who have been certified by Red Hat and have demonstrated their mastery of Red Hat software tools.

FREE: includes a variety of software that can be used for text input (such as Word), presentations (similar to PowerPoint), and a full spreadsheet (equivalent to Excel). It is the open-source equivalent of Microsoft Office which, unlike LibreOffice, is proprietary software.

GIMP: photo editor built-in Open Source. It offers handling similar to that of Adobe Photoshop and has very powerful image processing tools.

VLC MEDIA PLAYER: It is the most popular media player in the world. It works with all types of files (especially streaming video).

MOZILLA FIREFOX: One of the first Open Source browsers. It has a simple, practical interface and it is respectful of the privacy of its users. The constant revision of the source code of the browser allows solving minor bugs as quickly as possible. Like Mozilla Firefox, many other browsers of this type are very effective like Brave, Opera, Chromium, Midori…

LINUX: it is a platform that is available in many operating systems. It is very popular, especially in the field of computer security and intrusion tests but also for servers. It is the best Open Source operating system available today.

KEY FIGURES

Open source is at the heart of innovation because it is a business model that is constantly renewing and evolving. As proof, according to a study published in 2015 and carried out by the firm PAC for the Conseil National du Logiciel Libre et du Syntec Numérique (National Council for Free Software and Digital Syntec), 70% of open source players invest more than 10% of their income in Research and Development activities, and more than half devote more than 15% to it!

According to a ReportBuyer study published in March 2018, the global market for open source services is expected to grow from $11.4 billion in 2017 to $32.95 billion in 2022 (or from €9.34 billion to €27 billion), with an annual growth rate of 23.65%. The largest market for open source services is and will remain North America (45%). Europe, Middle East, and Africa (EMEA, accounting for 20%, behind Asia-Pacific at 30%) region is also expected to see “considerable adoption of open source technologies”, particularly in Germany, Spain and Italy, while Greece and the UK are expected to lag behind other European countries, the study said. The study also stresses that France is “the European leader in open source”: with 23% of the European open-source market, France is thus consolidating its position as a European leader.

PRODUCTS ADAPTED TO THIS BUSINESS MODEL

The strength of open source is that it comes in several forms and with creativity, its forms are multiplying: the industry

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