The leading Crowdfunding consultancy

Advocating Crowdsourcing – Accenture and Deloitte join the drive

Crowdassets are becoming the key source of competitive advantage. We have said this for a long time now and it seems some of the bigger consultancies are catching on – at last. But do they really get it?

We have endeavoured to share the breadth and diversity of opportunity available in the crowdasset model and assist organisations to move to a more crowd enabled strategy. For example our Presentation “Social Media at Work” at the Think Digital event, back in 2012, offered a quick fire introduction to it. But it’s not been an easy path. These ideas have often been considered unconventional at best and positively crazy at worst.

But founded in the thinking of people like Yochai Benkler’s Wealth of Networks, Henry Chesbrough’s Open Innovation and the Erik Von Hippel’s work on Sources of Innovation these “Open For Business” models are now being shown to be both academically, practically, socially, technically and, increasingly, commercially valid.

We have progressively developed the crowdasset model and the techniques associated with helping organisations to identify where these opportunities exist and how they can work to tap into them and integrate them strategically. The robustness of our models have allowed us to place all the emerging trends into the horizon of the crowdasset model. So crowdsourcing, crowdfunding, collaborative economy, prediction markets, viral communication, open sourcing, open innovation and many other potential crowdempowered approaches for commercial and civic application.

Recently we have seen Accenture and Deloitte, in their respective 2014 Technology Trends publications, highlighted crowdsourcing as a major emerging trend and point to some good examples of how firms like GE, BMW and Mastercard are entering this sector.

This is good to see and we welcome their adoption and championing of the vision and recommend a read of both of the reports.

But it’s worth looking a little deeper to see if they truly do “get it”.

The reports are, perhaps understandably, approaching these opportunities from a technology led stand point. This after all is the stock in trade of both firms and the thread for the reports. But in crowd driven approaches it is a mistake to focus on the technology. Technology is merely the enabler, the value and the asset itself is based in the crowd and it is from the perspective of where the value lies that any strategic approach to utilising it must be approached. Of course it is necessary to have a technical understanding but many, indeed most, firms will have sufficient technical infrastructure in place to profit from the crowdasset economy, but what they might lack is the knowledge of how to unlock that, the mindset to consider it, or the culture to embrace it, and this is where we come in to help.

We would assert that the solution is much more behavioural and culturally led and, if there is a need for additional technology, and there probably isn’t, this will follow after the strategic approach has been established.

One of the features of the crowdasset framework we use to help both explain and explore the crowd empowered business opportunity is an expression of the degree to which the power relationships change as an organisation becomes “open for business”, and how much trust is a key feature. To operate effectively in a trust based environment behaviours and approaches that might challenge many strongly held management assumptions and principles need to be adopted.

So in reviewing the two reports from these major consultancies it’s a little troubling to find Paul Daugherty – Chief Technology Officer at Accenture – using such un-reconstructed and un-open language to describe the crowd as a “work force” as opposed to partners and collaborators, and seems to focus on the value of using this asset being primarily in the notion that the crowd might “do it for free”. This is not the primary value of the vast majority of crowd based transactions. In most crowdsourcing it is the unique, novel and wide insight and expertise that is the value to be found in the crowd and not that you might get it “for free”.

We also read that to Accenture “Channeling these efforts to drive business goals is a challenge”. We would say that in many crowd based circumstances you don’t “channel”. You might nudge, nurture, influence and encourage but channeling sounds far too direct and controlling to work well in the crowd.

The use of such language and to not grasp the real asset value is to suggest that perhaps the level of sophistication in how to develop a sustainable strategic advantage from taping into crowd assets is not quite there yet in Accenture.

For Deloitte there are some more positive indications. For them the application of crowdsourcing may not be intuitive” – this is most certainly the case.

They recognize some of the cultural challenges in adopting crowd based approaches suggesting that  “Incentive structures, performance management, operating models, and delivery models may, in some cases, need to be redrawn” and they see it is apart of a broader shift in the way the business is run by suggesting that we should “ use crowdsourcing as a tangible example of the shift to social  business.” This is entirely correct and to properly create value from the crowd and to truly create value from its disruptive power requires significant readjustment and a more holistic and encompassing approach.

They show understanding of how this can be challenging for all involved by asserting that “Employees may feel threatened by crowdsourcing” – quite so, and it is important to manage that process effectively to reduce resistance to the activity.

Some of the practical changes are also acknowledged  “Leaders should foster a culture where appropriate crowd experiments are encouraged while minimizing security, privacy, and compliance risks.” Indeed so, a process we would refer to as adopting “safe fail” as opposed to “fail safe” projects.

In a clarion call they evangelise the new initiative with the words “Leading companies are blasting through corporate walls with industrialized solutions to reach broader crowds capable of generating answers and executing tasks faster and more cost effectively than employees.” All encouraging and correct albeit with still a narrow focus on cost advantage and couched in a bit of hyperbole laden corporate speak.

They round off with “The crowd is waiting and willing. How will you put it to work?” a sentiment we would wholeheartedly endorse, and have done for some years.

So all in all of the two I am more minded to the Deloitte offering but as you might expect I would suggest twintangibles have a better handle on it than either of them!

 

The Web, The future of Business and Being Prepared

On Wednesday FutureLearn was launched in the UK. An ambitious initiative which sees a group of Universities entering the MOOC (massive open online courses) learning space offering a range of free courses in flexible formats through a variety of devices.

It’s an extraordinary development and is the logical extension of initiatives like the Open University which tapped into the technical innovations of its time with TV led teaching, distance learning and videotapes.

A fascinating range of courses are on offer, on subjects as diverse as Richard III, Game programming, Branding, Higgs Boson to teeth photography – yes, there is one on teeth photography, I didn’t make it up.

But one that caught my eye is perhaps oddly a nod towards the FutureLearn initiative itself. Called “Web science: how the web is changing the world” it is offered by the University of Southampton and describes the course as being about “how the web has changed our world in the past 25 years and what might happen next.”

That could be fascinating and I hope it looks at the extraordinary impact and possibilities that the web has had on the world of business.

In much the same way as some of us can look back over a period of development in innovation in the delivery of education, we can also reflect on the transformation in our business lives brought about by social and collaborative technology. In my first role in business, at a 50 seat firm more that 30 years ago, we had two phone lines into the building and a manual switch board who might place a call for you if you asked nicely. Manual typewriters, routine casual sexism, bad ties and rigid hierarchy were all de rigueur. Suggesting that everyone in the firm might have had a phone on their desk would have been quickly dismissed as the ravings of a lunatic, had we had the opportunity to speak up about anything. What would my old boss have made of smartphones, social media and wikis? Doesn’t bear thinking about.

But the developments are never ending. Crowdsourcing, crowdfunding, open innovation, social business, collaborative consumption, the makers movement and social knowledge are all founded in the possibilities for interaction and collaboration that technology provides. They force us to rethink many of our most soundly held thinking about how business is done, and consider how the previously uneconomic becomes suddenly economic, the impossible possible and the unthinkable thinkable. This constantly innovates new threats and opportunities for all business on all sector and all locations.

In such a fast moving and disruptive environment it can be hard to keep up. And that is where we come in. We are constantly investigating the emerging waves of the digital business world and love to help our clients understand, innovate and thrive in a world changed and enhanced through the advent of social and collaborative technologies and the cultures that underpin them.

We don’t predict the future, we just help guide people through it.

Banks and Crowdfunding

Few weeks ago the news came out that ATB Financial, a Canadian bank, has joined the crowdfunding market, launching a reward-based crowdfunding platform called Alberta BoostR. The platform, focused on local economy and targeted to local small business, has already hosted a successful $10.000 project for custom-made handcrafted heeled boots and has got another 4 projects published on the site. They don’t take any commission on the projects, and they consider this initiative as “an entry door into the space of crowdfunding”, a potentially disruptive business opportunity.

The arrival of banks in the realm of crowdfunding has been happening slowly in the past couple of years, but it’s definitely happening, and it’s a trend to carefully observe.

We can add a few other examples from Europe.

Angel.me, a Belgian equity and reward-based crowdfunding platform, gained support from Belgian bank Belfius. The bank organises events with Angel.me and directs entrepreneurs to the platform. In this case, therefore, there is not a direct involvement, but rather a partnership with mutual benefits: Angel.me gets more credibility from being associated with a traditional financial institution, and for Belfius it is an opportunity to position itself as a modern bank, targeted for starting entrepreneurs.

Another popular example is Seeds.nl, a crowdfunding pilot launched by the Dutch bank ABN AMRO’s innovation platform, Dialogues Incubator, last year.

The online platform Seeds.nl invited interested parties to invest a minimum of 50 euros in five companies. The companies selected – GreenGraffiti, Greenjoy, On The Ground Reporter, We Beat The Mountain and Yuno – all seek to contribute positively to society in terms of their social, educational and environmental impact. Seeds facilitated the conclusion of an agreement between the company and its investors. The four-month pilot saw 3 companies out of 5 being successful and the initiative is probably set to continue.

The final example comes from Germany: Fidor Bank AG, a licensed, internet bank based in Germany which is geared towards “Social Banking”. Fidor Bank offers a wide range of services including Crowdfunding directly to their customers on their website.  It establishes a dialogue between customers, allowing individual members to complete financial transactions of different types (lending, financing, trading) with one another by using FidorPay account.

Innovation in the financial industry can be difficult, and banks and financial institution are understandably cautious relying very much on their established market position. The financial crisis and the capital requirements placed on them has made it difficult for them to offer loans and funding to many individuals and business, and this has the result of blocking innovation and economic development at a global level.

However, the emergence of innovation in finance as a product of the expansion and ubiquity of social technologies presents both challenges and opportunities for banks and financial institutions, and it’s important that banks look at these new trends and the different business models originating from them. Crowdfunding is one of them, and its development as a potential alternative supply of capital, particularly for startups and personal loans. P2P lending is  popular not only in Western countries, but also in new economic powerhouses like China, where more than 2000 such websites are reported to be operating.

 As highlighted in an interesting report released by US bank BBVA, “there is a real risk that banks stop being the primary source for personal and small businesses loans”. And as shown in the examples above, some banks are already engaging in this market place and placing social and crowd-based products and services next to their more traditional offer. It’s not about a total change and replacement of the old, but rather a plan for mutually beneficial co-existence. What is certain is that the mono-banking culture is being challenged. As said above, the “crowd” is finding other solutions where banks are evidently failing.

Equity-based crowdfunding is now legal in Italy

Equity-based crowdfunding is now legal in Italy

Yesterday, the Italian Financial Authority has formally announced the legislation on equity based crowdfunding and tomorrow the Regulation will be published on the Gazzetta Ufficiale. After the 15-day vacatio legis (period between the promulgation of a law and the time the law takes legal effect), equity-based crowdfunding will be legal in Italy, which becomes the first country in Europe to implement equity-crowdfunding laws.

The imminent publication of the regulation on crowdfunding by CONSOB, the Italian Financial Authority, introduced by the Legislative Decree n. 179 (Growth Decree) in December last year – was officially announced by Dr. D’Agostino, vice-director of CONSOB, at an event organized by Mission Community held in Milan yesterday.

Dr. D’Agostino began his presentation with a review of the circumstances  that have led to the development of equity crowdfunding as a means of alternative finance in Italy. He explained that the Bank of Italy says that the country is in a time of contraction of bank financing, especially for small enterprises, which have enormous difficulty in accessing capital markets; furthermore, that private equity has never taken off in Italy.

This represented a challenge when Consob was tasked to regulate a very new phenomenon, in a non-harmonized European regulatory framework, where there is no benchmark to refer to. He pointed out that in other countries, equity crowdfunding is “regulated” through exemptions from traditional legislation, and there are no established and consolidated regulations dealing specifically with crowdfunding. Consob, therefore, adopted a very open approach, as the most appropriate means of developing highly participatory and “crowdsourced” legislation with clarity in a new and complex matter. D’Agostino believes that the transparent nature of the regulatory instrument is also apparent from the fact that an “ad hoc” regulation was preferred to regulations scattered all over the legislation. This means that a single document is available for consultation, greatly facilitating the understanding of regulatory constraints.

Consob opened the collection of ideas and analysis to all stakeholders through a survey that  received “a huge number of contributions”, and which was followed – in February – by an open hearing that was intended to capture the essential aspects of the regulation in order to get to a first draft. This was then  placed once again in public consultation during March/April from which it received further contributions from the public.

Last Wednesday, the first part of this process has come to an end and tomorrow the Regulation will be published on the Gazzetta Ufficiale. After the 15-day vacatio legis period, the Regulation will take legal effect, but new portal operators can already  apply to be included in the register.

Dr. D’Agostino revealed some of the details contained in the regulation, notably the constraints under which it will permit this type of crowdfunding. Equity crowdfunding will only be for risk capital and not debt capital, this includes equities and shares issues from Limited Companies. Perhaps the most significant constraint is that equity crowdfunding is only permitted for “innovative startups”, as defined in the decree (you can read more on this in our previous post about equity crowdfunding in Italy http://twintangibles.co.uk/italian-equity-crowdfunding-regulation-what-you-need-to-know/)

The purposes of the regulation is to facilitate the financing of companies with a very high risk profile and high-tech orientation. It is also intended to regulate the online platforms operators with the aim to reduce operational and legal risk, as well as the risk of litigation and fraud.

The legislators who introduced the initial decree that has led to the development of the regulation wanted specific provisions to bring a level of discipline to the running of the platforms. In addressing this the CONSOB has included a mechanism for the creation of an “ad hoc” register of operators to provide traceability and transparency.

Consequently wanna-be portal managers have to apply to be included in the register, whereas banks and financial intermediaries will “by right” be permitted manage their crowdfunding portal without prior registration. However they have an obligation to inform Consob when they start and they will then be included in a special section of the above mentioned register.

In terms of the professional requirements for operators, considerable flexibility has been introduced permitting non-executive directors of the platform to come from backgrounds other than financial ones. The  CEO, however, must have experience in the financial sector. Consob has also introduced the so-called “interlocking” ban, so as to avoid situations in which certain personalities who meet the right professional criteria are in the Board of more than one portal, simply to fulfill legal requirements.

Dr. D’Agostino emphasised that the regulations try to reduce the administrative burden in the process in order to encourage growth in the sector. That said a number of “information obligations” on operators are included in particular with regard to requirements to inform investors. The information obligation specifically addresses share offers and reaffirms the need to carry out suitability tests on investors, and that before making any investment the investors must complete a questionnaire that verifies that they are aware of the high risk involved in their investments. The obligation to provide information to the customer on the amount of money invested has also been introduced.

There are also efforts to simplify the investment process for smaller investors through the elimination of some requirements for investments of less than 500 Euro/offer (1000/year) (exemption from MiFID).

One important point to note is that it is absolutely forbidden for crowdfunding portal operators to give any investment advice but portals must make an effort to make information about offers as clear and complete as possible.

One of the most debated points of the proposed Regulation during the consultation process was the requirement for professional investors to subscribe  to at least a 5% of the shares in any offer. This was hotly debated and the compromise seems to be that this requirement now must be met in order to complete the process but is not necessary as a pre condition and prior to an offer being made. As it happens incubators of innovative start-ups are included in the professional investors category, so this offers a mechanism to those entrepreneurial champions to easily participate as equity based investors.

Italy can be proud of the fact that it is the only country in the EU with a legislation on equity crowdfunding even if it is limited to innovative startups. This places a responsibility not only on Consob, which will have the important task to supervise and monitor the market so that everything can develop in a fair and transparent way, but also on the entire sector.

Dr D’Agostino, emphasised the emerging nature of this sector  and the innovation at the heart of this regulation. He made the point that, in such circumstances, it is impossible to be certain that this type of regulation is robust, and that failures are in the nature of these initiatives. Consequently it is the  responsibility of all to challenge opportunistic and questionable behaviours. But, above all, he believes, that it is right to explore this form of alternative financing, and that open debate in such a young and emerging sector is a good thing. All Italian crowdfunding lacks at present is a critical mass and it is hoped that the regulation can act as a catalyst for growth and make this development a reality and not just an ambition.

Page 1 of 212

Contacts

Call: +44(0)7717 714 595

Join Our Mail List

twintangibles Ltd is a company registered in Scotland with company number SC397987. Registered office is Blue Square House, 272 Bath Street, Glasgow, Scotland, G2 4JR

Correspondence Address is:
twintangibles, Blue Square House, 272 Bath Street, Glasgow, Scotland, G2 4JR