Application of Opportunity Lenses

S U M M E R 2 0 1 7 I S S U E

Arvind Malhotra Ann Majchrzak

Lâle Kesebi Sean Looram

Developing Innovative Solutions Through Internal Crowdsourcing Internal crowdsourcing, which enlists ideas from employees, is not as well-known as other forms of crowdsourcing. Managed well, however, it can open up rich new sources of innovation.

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SUMMER 2017 MIT SLOAN MANAGEMENT REVIEW 73

AS ORGANIZATIONS LOOK for better solutions to their everyday problems, many are en- couraging their employees to use their experiences to develop new ideas and play a more active role

in the innovation process. Whether the issue involves improving hiring practices, deciding which

new products or services to offer, or creating better forecasts, companies including AT&T Inc.,

Google Inc., and Deutsche Telekom AG have turned to what’s known as internal crowdsourcing.1

Although external crowdsourcing,

which involves soliciting ideas from con-

sumers, suppliers, and anyone else who

wants to participate, has been widely

studied,2 internal crowdsourcing, which

seeks to channel the ideas and expertise

of the company’s own employees, is less

well-understood. It allows employees to

interact dynamically with coworkers in

other locations, propose new ideas, and

suggest new directions to management.

Because many large companies have

pockets of expertise and knowledge scat-

tered across different locations, we have

found that harnessing the cognitive di-

versity within organizations can open up

rich new sources of innovation. Internal

crowdsourcing is a particularly effective

way for companies to engage younger

employees and people working on the

front lines.3

We conducted a four-year study of

how multiple companies used internal

Developing Innovative Solutions Through Internal Crowdsourcing

I N N O VA T I O N

Internal crowdsourcing, which enlists ideas from employees, is not as well-known as other forms of crowdsourcing. Managed well, however, it can open up rich new sources of innovation. BY ARVIND MALHOTRA, ANN MAJCHRZAK, LÂLE KESEBI, AND SEAN LOORAM

THE LEADING QUESTION How can com- panies get the most benefit from crowd- sourcing within the organization?

FINDINGS �Allow employees to participate anonymously.

�Take steps to make sure company ex- perts don’t exert their influence too heavily.

�Use platforms and processes that foster collaboration.

74 MIT SLOAN MANAGEMENT REVIEW SUMMER 2017 SLOANREVIEW.MIT.EDU

I N N O VA T I O N

crowds that included frontline employees to find

new solutions to business challenges. We observed

internal crowdsourcing in practice, interviewed

executives who sponsored internal crowdsourcing

innovation challenges, and surveyed participants.

We also participated in the design, implementation,

and execution of internal crowdsourcing events at

several companies. (See “About the Research.”) In

this article, we will examine the benefits of internal

crowdsourcing, the roadblocks that stand in the way

of successful initiatives, and ways crowdsourcing ef-

forts can be designed to overcome those roadblocks.

The Benefits of Internal Crowdsourcing Companies that employ external crowdsourcing

need to confront several issues.4 First, because

many of the crowd participants aren’t specifically

familiar with the organization or the context in

which it operates, a high percentage of the sugges-

tions may not be easy to implement. The voice of

the customer obtained through external crowd-

sourcing may be very good at describing the pain

points and needs but not necessarily good at figur-

ing out how to solve the problems. Indeed,

proposals often call for strategic assets that compa-

nies don’t have and can’t afford. What’s more,

external crowdsourcing can stir up intellectual

property issues involving who owns the ideas.5

While internal crowds are typically not as di-

verse as external crowds (and therefore less apt to

propose radically new ideas), they have more local-

ized knowledge. This can help companies turn

suggestions into workable actions better and faster.

Employees, especially people working on the front

lines, often have intimate knowledge about the

kinds of changes that are feasible, given the compa-

ny’s circumstances and current assets. Many of the

solutions can be formulated as patches and work-

arounds to satisfy particular needs, and solutions

obtained through internal crowdsourcing can have

a rapid impact in the marketplace. In addition, the

intellectual property issues tend to be less compli-

cated because employees, rather than outsiders, are

the ones providing the ideas. (See “Comparing the

Benefits of Internal vs. External Crowds.”)

Internal crowdsourcing events enable employees

to express their ideas. By organizing these events,

companies can send the important message to em-

ployees that their knowledge is valuable and the

company depends on it. With mechanisms to share

their views and structure internal collaboration,

employees can feel empowered and engaged in the

company’s innovation efforts. Research shows that

employees working in collaborative environments

tend to be more satisfied with the innovation pro-

cess.6 This can lead to higher employee morale and

lower turnover.7

Roadblocks to Successful Internal Crowdsourcing As fruitful as internal crowdsourcing can be, it’s

common for companies to hit roadblocks in reap-

ing the full potential of internal crowds. In the

course of our research, we have identified seven

barriers that involve participation, collaboration,

and implementation. They are:

1. Rather than encourage employees to think broadly

and creatively, companies often ask employees to

concentrate on incremental adjustments to pro-

cesses and on improving existing products and

services. In doing so, many employees become con-

fused about the purpose of internal crowdsourcing

and how it’s different from other initiatives in the

company, such as continuous quality improvement

and business process reengineering.

2. Given their other work responsibilities, many

employees don’t have time to participate in

crowdsourcing activities.

ABOUT THE RESEARCH This article is based on a four-year, multi-method research project with companies en- gaged in internal crowdsourcing. In one part of our research, we conducted in-depth analyses at three large organizations (one in health care, one in telecommunications, and one in retail), and we conducted interviews with the executives in charge of the internal crowdsourcing. At the health care organization we studied, the chief medical officer was in charge of engaging frontline employees in the internal crowdsourcing process; two of us provided guidance and oversaw the execution of the company’s internal crowdsourcing effort. At the telecommunications company, we worked with a senior executive in charge of the internal crowdsourcing effort. At fashion and retail company Li & Fung Ltd., we had access to the ideas, documents, and thinking process behind the design of an internal crowdsourcing event.

In addition, we collected data related to platforms and the design of incentives for crowdsourcing challenges at seven other companies, which were identified through a university-affiliated innovation center. They included a distribution company, a Scandi- navian telecommunications company, a U.S.-based telecommunications infrastructure company, a data storage and analytics company, a graphics design software company, an industrial products company, and an e-commerce platform provider. Our partner at each organization was either the chief innovation officer or the CEO.

SLOANREVIEW.MIT.EDU SUMMER 2017 MIT SLOAN MANAGEMENT REVIEW 75

3. Employees may be hesitant to participate, partic-

ularly when managers and internal experts are

part of the mix and are using their real identities.

This dynamic may crowd out people who have

knowledge that can lead to innovative solutions

or who want to develop solutions by working

with others in the crowd.

4. Most companies run their crowdsourcing initia-

tives using a competitive process. Rather than

encouraging participants to work with others to

create solutions together, some companies dis-

tribute rewards based on the ideas submitted by

individuals.

5. Sometimes, the technology platforms themselves

focus people on contributing ideas and not on

developing solutions together.

6. After crowdsourcing events end, employees don’t

always receive sufficient information on what

happened to ideas.

7. Over and above the lack of feedback, those who

suggest solutions don’t always get opportunities

to develop their ideas into solutions.

Removing the Roadblocks In response to the roadblocks we have noted above,

we have developed a set of seven action steps to help

executives make their internal crowdsourcing efforts

more effective. The first four steps should be consid-

ered either before or during a crowdsourcing event;

the others are used once the event has occurred.

1. Keep the focus on innovation. It may be tempt-

ing to use internal crowdsourcing events to solicit

ideas about short-term improvements. However, to

get the most out of internal crowdsourcing, compa-

nies should resist this impulse and encourage

employees to keep their focus on long-term opportu-

nities. A large research and development (R&D)

company we studied, for example, announced that it

wanted employees to identify products and services

that would be feasible in 2025. This encouraged

employees to think more broadly than usual.

Other companies have defined challenges in a

more open-ended way. A U.S. telecom infrastruc-

ture products and services provider presented

its employees with a general question: “What are

some strategies for our company to transition to a

services-centric business to address new markets

and new customers?” How questions are framed is

a critical component of signaling and can influence

how employees approach internal crowdsourcing

initiatives.

Another critical aspect of establishing the grounds

for creativity is to share with crowdsourcing partici-

pants the criteria that will be used to filter and select

the best solutions. For example, an R&D-intensive

company we studied disclosed the following param-

eters that its executives planned to use for selecting

solutions: 50% would be weighted on crowd voting,

30% on novelty of the idea, and 20% on the potential

to create new businesses. Fashion and retail company

Li & Fung Ltd., based in Hong Kong, told employees

that solutions from internal crowdsourcing would

be picked based on six criteria: (1) ability to meet cus-

tomers’ unmet needs, (2) delighting the customer,

(3) the solution’s newness, (4) marketability, (5) com-

mercial viability, and (6) scalability.

2. Give internal crowdsourcing participants

slack time. One of the main reasons people partici-

pate in external crowdsourcing events is to have fun.8

However, a critical difference between external and

internal crowdsourcing is that many employees,

particularly frontline employees, have very little dis-

cretionary time to participate. A managed health

care company came up with a smart way to engage

internal employees without undermining existing

schedules. It notified supervisors of proposed dates

for internal crowdsourcing events and asked them to

COMPARING THE BENEFITS OF INTERNAL VS. EXTERNAL CROWDS While internal crowds are typically not as diverse as external crowds, the solutions employees propose may be more readily implemented and can have a rapid impact in the marketplace.

Where Is the Crowd?

Outside the company Inside the company

Hidden benefit: Creating marketing buzz

Implementability of solutions

Ease of handling intellectual property issues

Overcoming “not invented here” syndrome

Organizational learning/knowledge diffusion

Diversity of ideas

Direct engagement with customers

Implicit customer feedback on solutions

Increased marketability of solutions

Hidden benefit: Employee engagement

Advantages of external

crowds

Advantages of internal crowds

76 MIT SLOAN MANAGEMENT REVIEW SUMMER 2017 SLOANREVIEW.MIT.EDU

I N N O VA T I O N

select days when they could give employees some

downtime. Once the dates were set, supervisors en-

couraged employees to participate in the internal

crowdsourcing innovation challenges. We found

that offering employees slack time to participate in

internal crowdsourcing events can be a key factor in

making the events successful, especially when the

companies want the employees to work together to

develop new solutions. When done well, internal

crowdsourcing challenges not only produce ideas

but also engage employees in a learning process.

3. Allow for anonymous participation. Diffi-

culties can occur when participants in internal

crowdsourcing use their organizational identities.

Rather than freely promoting ideas that address the

issues at hand, some individuals may feel com-

pelled to defend their formal positions. Internal

crowdsourcing participants should feel safe about

contributing knowledge, regardless of their senior-

ity or role in the company. One way to encourage

this is to offer a degree of anonymity. Several of the

companies we studied allowed employees to con-

tribute their ideas anonymously, freeing them up to

share knowledge that they might have kept to

themselves if they felt pressured to advocate on be-

half of the units they represented. Providing a

psychologically safe environment leads to greater

employee participation and collaboration, result-

ing in more effective innovations.9 At Li & Fung, for

example, almost 90% of the solutions the company

received through internal crowdsourcing chal-

lenges were from junior to mid-level employees,

and about 30% of the solutions were proposed by

people working in support functions such as

human resources, IT, and finance.

Participants who are forced to use their real

names often feel exposed during internal crowd-

sourcing challenges, especially if they are recognized

internally as subject matter experts. With anonym-

ity, they don’t have to worry about how their ideas

“look.” This allows them to focus on learning and

integrating the knowledge being shared.

4. Take steps to ensure that company experts

don’t exert their influence too heavily. Experts

within a company may be inclined to wield their

knowledge during the idea generation process, and

this can be harmful. Although the voices of experts

are often valuable, they can intimidate others in the

company, who worry that they are out of place ex-

pressing ideas to a crowd that includes experts.

For internal crowdsourcing to produce innovative

outcomes, efforts should be made to keep the process

open to diverse perspectives. At an R&D-intensive

company, the managers in charge of an internal

crowdsourcing effort initially prohibited R&D em-

ployees from participating in a crowdsourcing event.

The company changed its position when participants

asked to see research evidence related to the question

they were considering and specifically asked if they

could hear from R&D experts.

A U.S. manufacturer, by contrast, determined that

internal crowdsourcing participation by internal ex-

perts could be a strong plus. For its crowdsourcing

initiative, the company asked some internal experts

to serve as the moderators of crowd discussions. This

involved teeing up questions to challenge the crowd

to think of different ways to create new solutions.

Among the questions the expert moderators asked:

How could the idea be extended in new ways? How

could we combine it with another idea? How could

we differentiate it from other products on the mar-

ket? How could we adapt the product to a different

target audience?

There are benefits to both approaches. However,

the decision to involve internal experts has a downside

as well as an upside. Companies need to recognize that

internal experts are often motivated to promote their

own ideas. However, participants need to know that

their suggestions will be highly valued. When engag-

ing experts in an internal crowdsourcing event,

companies should train them to operate as modera-

tors and to do what they can to encourage others.

5. Use a collaborative process for internal crowd-

sourcing. One of the secrets to unlocking the creative

potential of internal crowds is recognizing that the goal

isn’t simply to generate winning ideas. It’s also to build

a system through which people within the organiza-

tion share knowledge, learn from one another, and

offer pertinent knowledge for use in new solutions.

We saw companies use one or both steps of a

two-step process to foster collaboration in internal

crowdsourcing innovation challenges. First, they

asked people to share pertinent knowledge related

to innovation opportunities. The emphasis here

was on broad employee participation: asking peo-

ple to share facts, examples, trade-offs, and even

SLOANREVIEW.MIT.EDU SUMMER 2017 MIT SLOAN MANAGEMENT REVIEW 77

wild ideas. Then the companies asked people to

help shape the knowledge into comprehensive so-

lutions. The majority of the companies we studied

relied heavily on the second approach.

However, some companies find it useful to use a

hybrid, multistage approach whereby in initial stages

the internal crowd shares raw ideas through a technol-

ogy platform. Then, in the later stages, ad hoc teams

are formed to pursue the most promising ideas fur-

ther and develop them into comprehensive solutions.

For example, Li & Fung asked employees from around

the world to submit their ideas via a web-based plat-

form. After that, a team of executives and internal

experts selected the most promising ideas, based on

preestablished criteria. Employees had opportunities

to vote on the best ideas, narrowing the selections

down to eight. In the final stage, teams composed of

the idea originators and others who helped refine the

ideas presented the solutions to a senior team that

oversaw the internal crowdsourcing challenge. The

top three teams were then asked to refine their solu-

tions before traveling to corporate headquarters to

present to a broader set of executives.

Companies that use a multistage process should

provide incentives so that employees feel it’s worth

their while to follow the process and support the

overall goal. If rewards go only to people who pro-

pose solid ideas, there can be negative consequences.

People with half-baked ideas will submit them in

hopes of winning, but those who don’t have solid

ideas (but might have input that could conceivably

lead to important ideas) will hesitate to share their

knowledge without incentives to do so. On the other

hand, if incentives are offered only to good collabo-

rators, there won’t be incentives to contribute initial

ideas that can lead to the development of compre-

hensive solutions. For these reasons, most of the

companies we studied that succeeded with internal

crowdsourcing offered different types of incentives.

For example, a large industrial products company

offered modest rewards ($50 gift cards) to both

top idea contributors and collaborators. Top collab-

orators were determined by aggregating points for

contributing new ideas, commenting on and refin-

ing other people’s ideas, and combining multiple

ideas into more robust solutions. They also received

points based on their voting on other people’s ideas.

We found that many participants lacked the time

to engage fully in innovation activities. Instead, they

logged on to the platform, took part in an innova-

tion activity if it was easy to do so, and then left. We

also found that crowd members responded in differ-

ent ways to internal crowdsourcing platforms. Some

responded to outcome-based incentives; others re-

sponded to process-based incentives. Regardless of

how companies structure their internal crowdsourc-

ing process, executives should remember that

processes and incentives drive behavior.

6. Design platfor ms that facilitate shared

development and evolution of solutions. Cur-

rently, there are a number of platforms available for

crowdsourcing. Ironically, the technology plat-

forms that are intended to help companies use

internal crowdsourcing can cause roadblocks. In

many cases, the platform makes it easy only for par-

ticipants to submit their own ideas; it does little to

connect individuals with ideas from other partici-

pants. The inability to see what other participants

are suggesting can be a barrier to collaboration.

Even if the platform allows for knowledge to be

visible by others, it may allow for only limited inter-

action (for example, commenting or voting on

others’ contributions). Internal crowdsourcing

platforms that support more innovative solutions

use an implicit multistage process. The platforms

encourage crowds to share knowledge (such as how

other companies or other industries have solved

similar problems) and then work that information

into creative solutions. In particular, there are three

features that we believe foster creativity in internal

crowdsourcing: (1) knowledge sharing among the

crowd across a variety of knowledge types (not just

Currently, there are a number of platforms available for crowdsourcing. Ironically, the technology platforms that are intended to help companies use internal crowdsourcing can cause roadblocks.

78 MIT SLOAN MANAGEMENT REVIEW SUMMER 2017 SLOANREVIEW.MIT.EDU

I N N O VA T I O N

ideas); (2) the opportunity for coevolution of solu-

tions by the crowd; and (3) the degree to which

feedback from the crowd helps to refine ideas.

With these features in mind, we studied how

companies used platforms to foster innovation in in-

ternal crowdsourcing challenges. The most popular

platforms were online discussion forums and idea

suggestion systems. When executives charged with

innovation sought to engage individuals, they

tended to use one of these platforms. However, such

platforms do not explicitly encourage processes for

groups to collaborate to create solutions together.

Rather, they encourage individuals to post their

ideas in the hope that other people will come in and

refine the ideas. Although ideas can be refined after

they have been posted, the platforms aren’t designed

to support and promote members of the crowd

sharing knowledge that’s relevant to the innovation

opportunity. Online discussion forums also don’t

tend to make it easy for crowds to collaboratively

piece together knowledge; even if some of the raw

ideas have innovation potential, companies often

need to wait until after the crowdsourcing event

to sift through all the contributions, collect the in-

novation nuggets, and then work the ideas into

comprehensive solutions. This post-crowdsourcing

process can be onerous (particularly if the crowd

generates thousands of potential innovation ideas).

Given the time constraints and executives’ predilec-

tions for picking solutions that leverage existing

assets and capabilities, the executives in charge of

sifting through and combining the ideas posted by

the crowd may settle for less than optimal solutions.

While many companies use idea suggestion sys-

tems and online discussion forums, we found that

some companies utilize co-creation platforms as a

way to encourage greater crowd engagement and

produce more innovative solutions from internal

crowds. Such platforms explicitly encourage activi-

ties that go beyond the rudimentary activities of

idea posting, commenting, and selecting. Typically,

the first stage encourages people to share knowledge

based on their rich and diverse experiences. This

may include providing: (1) facts and established

practices relevant to the opportunity; (2) exam-

ples of how other companies have addressed similar

opportunities; (3) preliminary ideas that other

people might build upon; and (4) insights about

how to approach trade-offs not as compromises but

as opportunities for innovation. The second stage

then encourages people to integrate the knowledge

into coherent solutions.

7. Be transparent about plans for follow-up

post-crowdsourcing. Once employees have partici-

pated in internal crowdsourcing events, they want to

know about the results. Which ideas were selected

for further development and why? Will people be

asked to develop some of the solutions more fully?

Companies need to have procedures for how crowd-

sourcing suggestions are handled. At the managed

health care company, for example, the executives

pledged to send out a detailed review of the crowd

recommendations within one week of the comple-

tion of the internal crowdsourcing event. The project

team committed to sending an email to all partici-

pants both announcing the winners and describing

how the team planned to move ideas forward.

It’s common for employees to be curious about

how the ideas they submit are being viewed — and

more specifically, who “owns” the solutions. In several

settings, we found that crowdsourcing participants

wanted to play a role in prototyping, testing, and

implementing the ideas they proposed. A large inter-

national software company responds to this type of

interest by inviting members of winning teams (both

the initial proposers and collaborators) to participate

in implementation efforts.

To maintain interest among employees whose

suggested solutions are not selected for further devel-

opment, companies should work to establish an

Once employees have participated in internal crowdsourcing events, they want to know about the results. Which ideas were selected for further development and why?

SLOANREVIEW.MIT.EDU SUMMER 2017 MIT SLOAN MANAGEMENT REVIEW 79

atmosphere of openness and fairness. This can in-

clude providing opportunities for people to submit

solutions more than once. One telecom company, for

example, encourages employees whose solutions

were not selected in the initial round to resubmit the

ideas for consideration. The senior executive in

charge of internal crowdsourcing sees this as a way to

encourage participation and to demonstrate fairness.

Another way to demonstrate fairness is to com-

mit to providing substantive feedback to employees

who suggest solutions that are not chosen. Although

companies are accustomed to giving recognition to

teams who submit winning solutions, they don’t al-

ways offer clear criteria to guide the process or take

the time to follow up with employees who don’t win.

But these efforts can pay big dividends in terms of

driving future participation and generating better

solutions later on. If internal crowdsourcing is to

become an important mechanism for the organiza-

tion’s ongoing renewal, management needs to be

serious about offering feedback.

In general, because roadblocks can surface at dif-

ferent points in the internal crowdsourcing process,

the activity needs to be actively managed to ensure

high levels of employee participation. However, it

may be well worth the investment. The potential

benefits of greater employee engagement are signifi-

cant. A senior manager at an e-commerce solutions

provider, for example, told us that during a 10-day

crowdsourcing challenge, employees proposed more

than 100 new solutions. Moreover, companies such

as Li & Fung have noted that the level of employee

participation in internal crowdsourcing events

often goes well beyond what other collaboration

mechanisms (such as virtual teams, face-to-face

brainstorming, and innovation workshops) achieve.

Despite its challenges, internal crowdsourcing can be

used to unlock a company’s innovation potential.

Arvind Malhotra is the H. Allen Andrew Professor of Entrepreneurial Education and professor of strategy and entrepreneurship at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School. Ann Majchrzak is the USC Associates Chair in Business Administration and a professor of data sciences and operations at the University of Southern California’s Marshall School of Business, in Los Angeles. Lâle Kesebi is the chief communica- tions officer and head of strategic engagement at Li & Fung Ltd. Sean Looram is executive vice president at Li & Fung. Comment on this article at

http://sloanreview.mit.edu/x/58423, or contact the authors at [email protected].

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