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Every day, millions of people make all kinds of voluntary contributions to companies – from informed opinions to computing resources – that create tremendous value for those firms’ customers and, consequently, for their shareholders. First encountering this idea, several years ago, it seemed unfathomable: Volunteerism was for charities, not for red-blooded, profit-making firms.

User contributions are fueling some of the world’s fastest-growing and most competitively advantaged organizations – in some cases revolutionizing the economics of entire industries by radically shrinking their cost structures.

User contribution systems can take a range of forms, several of which you’ve likely used already. Commonplace examples include:   eBay opened an online store but left it empty, leaving it to customers to fill up its marketspace with goods to sell. User-generated content fills Zagat guidebooks, YouTube’s video library, and Wikipedia’s encyclopedia, examples where the work of unpaid amateurs rivals or surpasses the popularity of that produced by paid professionals.  Fox’s American Idol relies upon ratings by the audience to choose which amateurs perform on subsequent shows. Amazon depends on its customers for the relevance of its product recommendations that stem from collaborative filtering of customers’ purchases.   The social network and personal information in Facebook is entirely contributed by its users. 

In other cases, the contribution is not as obvious but just as central to the value proposition. Skype incurs almost no capital costs because its internet-based phone system is peer to peer system running on unused processing capacity of its customers’ personal computers. Google, too, is built on user contributions: Its search engine relies on the algorithmic aggregation of links created by others between websites, and its ad placement system relies on data from people’s click behavior, both of which are user contribution systems. Many of these contributions are also dependant on various anonymous surfing services being used.

OK, this is not saying you can or should transform your company into a Google or a Skype whose business model is primarily based on user contributions. At the same time, leaders of businesses and non-profits should understand the power of the phenomenon and learn from the growing number of companies in traditional industries – firms like Honda, Procter & Gamble, Best Buy, and Hyatt – that are tapping user contributions to improve products, better serve customers, generate new business, reduce costs, boost employee performance, and more.

The concept of user contribution isn’t new. But the companies just mentioned – both the internet highfliers and the old-economy behemoths – have actively created something called a user contribution system. That is, they’ve created methods for aggregating and leveraging people’s contributions or behaviors in ways that are useful to other people.

The users can be customers, employees, sales prospects – or even people with no previous connection to the company. Their contributions can be active (work, expertise, or information) or passive and even unknowing (behavioral data that is gathered automatically during a transaction or an activity). The system is the method, usually internet-based, by which contributions are aggregated and automatically converted into something useful to others. Although the company retains control of the system and may choose to modify its design, the system converts inputs into useful outputs in real time with little or no intervention by the company.

Such a system creates value for a business as a consequence of the value it delivers to users – personalized purchase recommendations, connections between buyers and sellers of hard-to-find items, new personal or business relationships, lower prices, membership in a community, entertainment, information of all kinds. (See UCS taxonomy chart for a breakdown of various types of user contribution systems.)

The challenge for executives is twofold: First, you must learn how to spot opportunities for creating value from user contributions. Second – and here’s the difficult part – in acting on these opportunities, you must overcome natural organizational resistance to the idea of relinquishing significant control to people outside the company. 

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