Crowdsourcing can be done in various ways. It can be done internally, or within the company, like at IBM. Employees generate novel ideas to compete for funding. This is considered closed participation as only employees can compete. Another type of closed participation would be to outsource the problem to an elite group of experts. This is best for determining the feasibility of a project or when building on a previous idea. However, studies have shown, that when looking for innovation, crowdsourcing idea generation to non-experts can lead to ideas that are of both greater value and creativity than those generated by experts in the field. In a recent paper by Kristin Poetx and Martin Schreier (source), they discovered that ideas generated by users or customers of products or companies, scored significantly higher in terms of novelty, customer benefit, and overall quality as apposed to those generated by professionals. This is called open participation as anyone can be involved.
Companies generating novel ideas via crowdsourcing is already becoming a trend. Coca-cola, Nokia, Adidas, Dell, Threadless, and General Mills are just a few of the major companies that are already letting a 'crowd' of non-experts innovate for them.
Open participation has its drawbacks, such as the huge quantity of participants' ideas that have to be looked through, but it is one of the biggest strategies for companies seeking innovative ideas or solutions.
However, it is not the only strategy. For high quality ideas it is necessary to have a clearly defined problem as people need to know exactly what they are trying to solve or create in order to be useful. It also helps to have participants who are intrinsically motivated, for example people who want to be part of something greater than themselves. With open participation, however, that is not easy to control, but there are other things companies can do.
Companies can offer extrinsic motivation, such as a reward or recognition, as a strategy to not only get people to participate, but encourage quality ideas. The method for submitting ideas, such as a website like InnoCentive, needs to be user-friendly so as not to discourage participants. Also, enough information needs to be available to the open source pool in order to get effective results. Obviously a company cannot share all their secrets with people outside of the business, but participants need to know enough about the problem to give it context within the organization seeking ideas or solutions.
Crowdsourcing requires time, that a company must be willing to give for it to be effective, but the results can provide innovative, high quality ideas and solutions for any business.