Chapter 2 Literature Review
2.3 Service Participation and Virtuous Cycle
2.3.2 Managing Crowdsourcing Platforms in a Virtuous Cycle
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2.3.2 Managing Crowdsourcing Platforms in a Virtuous Cycle
Crowdsourcing taps global input for work, but it increases complexity (Olson &
Rosacker, 2012). It has also changed traditional industry chains and work structures, and businesses that have adopted crowdsourcing platforms as their business model have demanded new approaches to strategy (Eisenmann et al., 2006). It is imperative to define the CFs of service participation on crowdsourcing platforms to arrive at a clear understanding of virtuous cycles that work on crowdsourcing platforms in which two separate user groups can have their needs and wants fulfilled on the platform.
Because CFs are guides that are necessary for an organization or a project to achieve its mission, they can be defined as activities that are required to ensure the success of a company or an organization in which the results, if they are satisfactory, will assure successful performance (Rockart, 1979).
Businesses with network effects face unique barriers in attracting an initial group of users (Coles and Edelman, 2011). In a crowdsourced two-sided platform with network effects, the value of user participation depends on the number of other users. In
addition, sustaining participants return to reuse the platform, and maintaining the balance between providers and requestors on the platforms is difficult. Thus, our third research question focuses on how to balance supply and demand on the platforms and make them work in a virtuous manner.
Issues involving such platform management include network effects, technology revolutions, building robust two-sided markets, and so forth. Platform managers should execute certain policies to facilitate supply and demand on the platform to ensure that it grows in a virtuous manner. Based on the previous literature, we developed a conceptual framework of crowdsourcing platforms with pre-determined CFs that generally facilitate supply and demand on the platforms for purposes of investigating the virtuous cycles of service participation on crowdsourcing platforms (see Figure 1). These CFs can be separated into three dimensions: technology, strategy, and operation.
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Figure 1.Conceptual Framework of CFs for Virtuous Cycle of Crowdsourcing Platforms
Technology
Had the Internet, ICT, and CAMS not have been created, we would never have seen the fierce emergence of platform business models. In addition, technology
implementation can differentiate services (i.e., specify economies of scope) and lower costs (i.e., diminish marginal costs). For example, crowdsourcing platforms typically build a website or an app that makes it easy to create or access products or services, revolutionizing transaction processes, making them simpler and more convenient for users. Spagnoletti et al. (2015) proposed a fundamental architecture for digital platforms, consisting of core, interface, and complements. Core IT application services ensure that the content and service activities occurring on the platform are reliable. Interface includes the user interface, operating system, protocols, and application programming interfaces. Complements IT capabilities are consistent with the core and interface and, in particular, fit users’ needs and desires for certain
functions. In addition, according to previous motivation studies, ease of use and the aesthetics of a platform are considered two of the motivations that draw crowds to join a platform (Brabham, 2012).
Thanks to network effects, which can be positive or negative and are sometimes accompanied by switching costs, participants easily come and go, depending on the value of the provided or requested products or services. For platform managers, they theoretically cut market segmentation into relatively weak network effects and low
Cross-side Network Effects Same-side
Network Effects
Same-side Network
Effects
Requestor Provider
Platform
Pricing
Differentiation
Trust & Safety
Channel &
Promotion Scalability
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switching cost, although strong network effects always bring numerous people – and other benefits – in. Technology not only revolutionizes work structures such as technological convergence and simplifies transaction modes but also – along with the benefits of network effects – rapidly expands economies of scale and business
reputation. In the user-generated context, with two distinct user groups on
crowdsourcing platforms, these platforms catalyze a virtuous cycle with scalability, and more demand from one user group spurs more from the other, when successful (Eisenmann et al., 2006). They also noted three key strategy challenges that a successful two-sided platform should address: setting the correct pricing strategy, coping with winner-take-all competition, and avoiding envelopment.
To sum up, critical factors in technology are that the platform provides differentiated services along with the core of technology, interfaces of technology, and complements of technology. In addition, the platform helps lower the costs of platform operations and control scalability while network effects cause effect.
Strategy
It is imperative that a manager understands the conditions of the company, planning strategies to respond to challenges that are confronted in the market environment and making decisions to resolve every problem. Value creation is frequently associated with high risk, although the purpose of the strategy is to create values and manage risks. The efforts for a platform manager have mainly focused on mechanisms that control platform users’ communications and interactions. First, technical proposals should be on time to avoid moving too early or too late (Eisenmann, 2008). As long as business activities have a certain level of complexity, timing is always important.
There are many examples of failure in history. Markets may not be ready if they are launched too early, whereas competitors have been shot if we do not prepare or respond late. Once we are able to discern the structure of the timing behind the event, managers can do the right things at the right time.
Second, price is one of the financial incentives that link to other issues.
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typically starts with a market segmentation to differentiate the competitors, as reasonable pricing can attract crowds and satisfy their needs and wants. People care about a company’s core business service and development. If they receive good value in the products or services from a platform, they will identify with the company, helping build a robust community to some extent. Brabham (2012) also reported that the crowds on crowdsourcing platforms feature collective intelligence and crowd wisdom, indicating that a common goal is important for gathering them together.
Providing vouchers or bundle pricing for products or services are other incentive strategies that can sustain people using and re-using, and these are typically together with promotions in operational aspect.
In addition, resource allocation is another imperative deployment of strategy that includes being familiar with characteristics of inner resources, intellectual property (IP) management, and accessing and utilizing outer resources. Using the type of Labor and OplusO crowdsourcing platform as examples, the provided and requested
products or services on the platform are extended using idle resources, such as recruiters who find unemployed turks to perform activities on AMT or house owners who offer vacant rooms to travelers on Airbnb. However, requested and provided services or products on the other two types of platform are the same as for the concept of sharing, yet IP management (Eisenmann, 2008) is increasingly the subject of attention and discussions. Providers on these two types are eager to receive certain benefits while providing benefits, except for those who are engaged in altruism. On the other hand, requestors typically desire to have things offered at low prices or even free. Therefore, as a manager, to see and to understand the characteristics of inner resource and IP management is important to developing strategies. Last, accessing and utilizing outer resources helps consolidate and expand business territory.
To sum up, it is critical strategically that platform managers seize the value proposition of the business at the right time, with good pricing plans, and by understanding resources and their utilization.
Operation
Strategy operations are particularly significant after strategies are deployed. These operations should be executed precisely to help the procedures of daily routines,
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operations among systems, and the execution of various projects in a business. In addition, sales channels, promotional campaigns, and other mechanisms involving regulations help an organization’s operations. To reach target users, according to BusinessDictionary.com, a sales channel can bring products or services to market so that they can be purchased by consumers. Through sales channels, products or services can be sold directly from physical or online stores to users, or they can be sold by an intermediary (such as a retailer or a dealer) to users. On the other hand, promotional campaigns, which typically use different media resources, such as the Internet, newspapers, television, radio, print advertising, and holding an exhibition, in particular, push the sales of products or services to target users as well.
Due to the ease with which users can interact over the Internet, Schadler et al. (2014) warned that mobile has reprogrammed consumers’ brains. With ubiquitous mobile apps, people now turn to their smartphones for everything. For example, people ask their smartphones, “What are the best places to visit in Taipei?” and expect a list in response immediately. This Pavlovian response is the mobile mind shift and these authors also warned that the new competitive battleground is the mobile moment.
Moreover, their book, The Mobile Mind Shift, stressed understanding and grasping mobile moments whenever user needs are encountered because technology has empowered people and transformed business. Moreover, grasping mobile moments includes understanding target users’ mobile strength and reaching users’ mobile expectations and behaviors. As we have discussed in section 2.1.4 , platform
managers should execute mechanisms to confront the impact of mobile mind shifts, such as online to offline commerce and should remember to use the suggested IDEA cycle, which was introduced in The Mobile Mind Shift to enhance users’ attraction and retention.
Finally, to be concerned with operations involves constructing a safe and trusted transaction environment; according to our study of users’ motivations related to service participations, it is vital to both sides to join onto a platform. For example, avoiding licensing issues and protecting IP make people believe that the platform is
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To sum up, the critical factors in operations include that platform managers implement a robust mechanism in each phase (including sales channels and
promotional campaigns) with mobile mind shifts at work all the time and establish a safe and trustworthy transaction environment to gain users’ confidence and reliance.
In summary, Coles and Edelman (2011) suggested that a platform encompasses the common components and rules employed by network users in most of their
interactions; moreover, platforms are not always created or maintained by a single firm. Components of technology include services required by users and a fundamental architecture that specifies how core, interface, and complements fit together. Strategy and operations include standards that ensure that crowds, money, and information exchange smoothly with no obstructions, that mechanisms constrain the behavior of network users, and that contracts specifying the terms of exchange and the rights and responsibilities of network participants.