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Crowdfunding for Corporations; Embracing Incubation in New Ways

Anyone doing business today knows that the rules change regularly, making it difficult to keep up with the latest trends. Startups in particular keep turning their heads to follow the next great opportunity. When working with startups, keep in mind the words of Reid Hoffman, LinkedIn founder and investor in all things tech, who said, “Starting a company is like throwing yourself off the cliff and assembling the airplane on the way down.”

The need for startups to keep changing and adapting with the market is familiar to most corporations, because they do it themselves. However, there is a difference between being a gatekeeper, who allows only certain ideas to come to life, and a communicator, who establishes a relationship with the crowd to form a picture of the path to success. This article is about the new ways big corporations are evolving their R&D processes to embrace innovation and what that means for startups and their incubation programs.

What is Crowdsourcing?

Crowdsourcing can be summed up in three words; distributed problem solving. For instance, a business takes a project and dissects it into micro-tasks. These tasks are assigned to workers who are skilled to complete them, such as freelance copywriters creating SEO content for articles and websites. Crowdsourcing is essentially a workforce that is assigned tasks to complete projects of any scale with high-value output.

In the normal course of doing business, an enterprise would have their own team of programmers, developers, scientists and other employees to discover new technologies or perform R&D tasks. Crowdsourcing takes this to another level and asks the worldwide resource of creative, industrious thinkers to perform micro-tasks in order to complete the project. This approach saves time and cost. It also enables the corporation to reach the market before their competitors. The overall benefits look significant:

  • Cost Savings
  • Broad Workforce
  • Flexible Processes
  • Higher Creativity Level
  • Efficient Project Completion
  • Reduced Time to Market

Who is using Crowdsourcing?

To name a few, Coca-Cola, PepsiCo and Oreo are all turning to crowdsourcing as a cost-effective marketing strategy. Zeroing in on Coca-Cola as an example, the company announced last year that they would shift to an open business model, and they have kept their promise. Since the announcement, Coke has been working with their customers for new product development. They harnessed the power of their 50 million Facebook friends and asked for suggestions for an invention, social app or cause that could spread happiness. Using contests to design new products is a great way to discover what is on the minds of consumers and what they feel is valuable or worthwhile.

Patagonia, a designer of outdoor gear and clothing, took a different approach to crowdsourcing. They noticed consumers sharing stories about their old Patagonia gear on social media. They created a Tumblr to capture their stories. Testimonial and review marketing is a huge part of brand confidence. Crowdsourcing content like this made it possible for the company to have a powerful voice in the market and demonstrate their value, longevity and appeal.

What is Crowdfunding?

Crowdfunding, like crowdsourcing, looks to the world at large, but instead of projects and tasks, crowdfunding looks for capital. Crowdfunding is a platform that connects individuals or startups in need of funding with people who are willing to contribute financially. Most people think of individuals or charities when they think of crowdfunding, but there some exciting crowdfunding efforts going on with large corporations as well.

Using crowdfunding to develop new products and services isn’t as crazy as it sounds. Corporations use crowdfunding as an economical way of product testing by offering early access to products at a reduced price. Consumers who buy in at this stage are emotionally and financially invested in the product. This compels them to provide valuable feedback and testing at a greatly reduced cost over typical R&D focus groups and studies. While big business is still new to the game, the widely reported benefits are promising:

  • Access to Hedged Risk Capital
  • Faster, Easier Funding
  • Customer Loyalty
  • Low Cost PR
  • Advanced Sales
  • Inbuilt Marketing

Who is Using Crowdfunding?

Large corporations like Lego, General Electric, Gillette and Tyson Foods are using crowdfunding sources to engage customers on a level at which traditional R&D is not suitable. Drilling down to Lego as an example, the company would normally use traditional processes to research and develop a new product before taking it to a global launch. When Lego came up with an idea for toys aimed at adults, they wanted to make sure it resonated with consumers and chose crowdfunding to do the job.

The new Lego Forma product, mechanical models of animals requiring assembly, is aimed at adults who want to explore their creativity. By offering Forma at a 22 percent discount off the regular price, Lego created a huge focus group of invested consumers who would provide them with valuable feedback. As a result, Lego exceeded its goal of 500 donors by ten times, with 5,000 consumers providing feedback on the new Lego Forma. This valuable information goes right into the creation process, but the relationship Lego is building with consumers is priceless.

What is the Real Benefit?

Yes, there are efficiencies and cost savings by taking new ideas to the crowd. However, we observe that the reason for the success on both sides of crowdfunding and crowdsourcing come down to one thing: communication. Making good use of social apps and other methods of communication to invite the crowd to become an insider, with full bragging rights on testing a new product, is the real benefit that corporations reap from participating in crowd-based activities. In purchasing a pilot-product, consumers experience a certain level of investment in the product and if it sinks or swims.

As we said before, the rules of being a startup are changing, and consumer preferences on products, services and delivery methods are driving these changes. In such a competitive market, having a great product is no reason to stop and wait for success to come along. Send that product out into the crowd and continue to “build the airplane”. You will find useful feedback and funding from your new partners and creating a two-way communication to build your brand.

The Crowded Incubator

Is it apparent what our crowdsourcing and crowdfunding examples have in common? If you said that they were not actually startups at all, you would be right. These are all established, multinational corporations who are taking a chance on the crowd to facilitate their next big product innovations. Nevertheless, what does that mean for startups?

Most startups will agree that raising capital is the largest hurdle they have in front of them. Belonging to an incubation or acceleration program is not a guarantee of funding, especially for those in the early stages. As venture capital sources become scarcer and scarcer, new approaches like crowdfunding for capital and crowdsourcing for resources have enabled more startups to reach the next stage in their development. Business incubation and acceleration programs nurture startups with value-added services including:


 

Corporations that employ innovation management tools and collaborative innovation practices are more likely to develop new and interesting additions to their product or service portfolios. A new generation of business incubation and acceleration programs is developing right before our eyes, and they incorporate all these principals of change. 

Each form of funding, both venture capital and crowdfunding, will continue to serve a purpose in the future of the ecosystem. Working with a university-linked program gives entrepreneurs validation and credibility. And this gives potential investment partners a comfort level that they know how to run a business and that they have a viable product or service. From there, a successful crowdfunding effort demonstrates a market need, polishes the branding and makes the startup ready for an infusion of capital from a solid corporate partner.

Global Partners

We have demonstrated the benefits of crowdsourcing and crowdfunding and that their largest benefit is the new way consumers will communicate, and buy from, your corporate brand. What doesn’t come with crowd-driven interaction is time. This is where UBI Global comes in; thanks to our network of over 700 incubation and acceleration programs all over the world, we are the crowd-driven incubation and acceleration resource your company needs for your next project.

Enterprise organizations work with UBI Global to find niche audiences for their new ideas and bring them to life with worldwide investment and intelligence. The UBI Global network of business incubation programs amplify new ideas and nurture them to become viable market leaders. Our programs follow best practices to reduce investment risk by proving market demand and providing entrepreneurs with solid business foundations.

To find a partner program, contact us today for a personalized recommendation. We invite you to join our global community by becoming a UBI Global member. Benefits include instant access to the UBI Global business incubation network through our new social platform, UBI Connect, plus our member insights and exclusive events.

Don’t wait for the crowd to come to you; let UBI Global connect your company with the masses and future success.

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