It was a busy week for local technology news.

—Two teams from San Diego and a third from Northern California demonstrated their development of advanced chemical sensor prototypes that are tiny enough to be found inside ordinary cell phones. The U.S. Department of Homeland Security is funding the Cell-All program, with a goal of basically creating an anti-terrorism app for cell phones that would enable authorities to crowd-source chemical detection.

—MaxLinear has filed for its initial public stock offering. The Carlsbad, CA-based fabless chipmaker, which specializes in designing semiconductor-based television receivers, intends to raise about $100 million through its IPO. The market may be de-frosting a bit, with 47 IPOs so far in 2009, compared with 45 last year, and 272 in 2007.

—ProQuo, a San Diego-based Web 2.0 company that was founded in 2007, was quietly shut down after taking in a total of $15 million in venture capital from Menlo Park, CA-based Draper Fisher Jurvetson and San Diego-based Mission Ventures. ProQuo was never able to validate its business model; its website offered consumers a way to remove their names from mass-mailing lists for free, and the company planned to sell its optimized lists back to mass marketing companies.

—San Diego’s wireless industry group, CommNexus, celebrated the opening of EvoNexus, its free high-tech incubator, by announcing the selection of three more startup companies: EcoATM, MicroPower Technologies, and TetraVue. CommNexus CEO Rory Moore says EvoNexus is believed to be the first incubator that is completely free for startups—that is, it doesn’t even require an equity stake in participating companies, as most incubuators do.

—Jitterbug, the San Diego wireless provider that puts an emphasis on simplicity, has acquired MobiWatch, a Waltham, MA-based startup developing mobile personal emergency response services. A regulatory filing shows that Jitterbug’s parent, GreatCall, provided 630,000 shares of common stock to MobiWatch and its shareholders in a deal valued at $107,100.

—San Diego-based Networkfleet is using its technology to help companies that operate fleets of vehicles go green by monitoring engine emissions and ensuring that vehicles are operating efficiently. Co-founder Diego Borrego told me the company also expects to be a player as consolidations sweep through the fleet tracking industry.

—EcoDog, a Vista, CA, cleantech startup that has developed a device that helps homeowners sniff out savings in their electric utility bill, was named best of show at GadgetFest, the annual fall competition sponsored by CommNexus, the San Diego wireless industry group. EcoDog founding CEO Ron Pitt won over the crowd when he declared, “My product is the only product up here tonight that saves you more money than it costs.”

—San Diego-based cleantech startup EESG is looking to raise $1.2 million to expand the 10-employee company’s sales staff, purchase inventory, and ramp up public relations and marketing. The company’s founders told me they have raised about half so far, including $300,000 from Longboard Capital Advisors, a green investment firm based in Santa Monica, CA.

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Last time I checked, there were 85,000 iPhone applications in Apple’s iTunes App Store, a number that seems to grow by thousands every week. But most of those apps were dreamed up by developers, not by average users. Now there’s a way for anyone with a bright idea for an iPhone app to submit it—and, if other people like the idea enough, to see it get made.

It’s called Appswell, and it launched yesterday. The idea behind the Cambridge, MA-based startup, the brainchild of a young serial Web entrepreneur named Dan Sullivan, is to take advantage of the collective creativity of iPhone users to come up with the next great money-making app, and give everyone a chance to share in the proceeds.

Anyone with an iPhone can submit an idea to Appswell or vote on other users’ ideas. Each month, the company will turn the most popular idea into an app, and reward the creator with a $1,000 cash prize and a stake in future sales.

“Rather than a bunch of developers putting 20 things on a whiteboard, we think we have a method of engaging thousands of people,” says Sullivan. “For the consumer who has a great idea in his head but isn’t a developer and will never build it, we are narrowing the gap for getting that idea tested and vetted and turning it into reality.”

Appropriately, there’s just one way to submit an idea for an app: through Appswell’s own free iPhone app. (The app, and the company itself, were ready to launch back in mid-September, when I first met Sullivan. But like so many other companies, Appswell had to wait for weeks while the still-mysterious iTunes App Store approval process inched forward. Sullivan finally got the okay last night.)

The app itself couldn’t be simpler. To submit an idea, users simply create an account, click “Add your idea,” and enter a name, a category, and a short text description. Users can also browse ideas submitted by others by category, popularity, or recentness. If you see an app idea you like, you can vote for it, comment on it, or share it via e-mail or Twitter.

At the end of each month, Sullivan says, the company will hold a week-long, American Idol-style showdown between the five most popular app ideas. The winning idea will be turned into an actual app by Appswell’s developers—assuming that it’s pitched at general consumers, can be sold for $1 to $2, and meets Apple’s standards. The winner gets the cash prize plus 10 percent of future proceeds from the app.

The Appswell app is so new that users have submitted only a couple dozen ideas so far, some of which were seeded by beta testers, according to Sullivan. The most popular idea, as of this morning, was for a “sound board maker” that would let users make short sound recordings and edit them into comical audio clips.

Sullivan says he believes Appswell is the first company to try the crowdsourcing model in the iPhone app arena. But he thinks the experiences of companies in other markets—he points to Threadless’s T-shirts and Local Motors‘ car design competitions—bode well for his startup. The beauty of Appswell’s model, he says, is that …Next Page »

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Sometimes the only way to flush out the truth on something is to state an opinion and spark a discussion. Using on-demand workers has been around for over 10 years, but there are precious few resources available for someone to get educated. Hopefully my report will stimulate discussion and bring a greater level of awareness to the paid crowdsourcing market.

Let’s look at crowdsourcing’s evolution this decade:

* Wikipedia started the revolution

* Jeff Howe coined the term crowdsourcing

* Elance and Guru made it into sophisticated electronic marketplaces

* Amazon’s Mechanical Turk turned it into a computing platform

* Kermit Pattison writes prolifically about it

* John Winsor’s company does creative things with it

* 50+ companies provide products and services designed to bring it to the everyday business person

So after 10 years and more than two million workers getting paid half a billion dollars for work online, where is the Gartner Magic Quadrant, or the Forrester Wave Diagram, or the TechCrunch Top 50 list?

The novelty of free crowdsourcing (getting something useful done by the masses for nothing) has been the romantic aspect most often studied and written about. “Free” differs from paid crowdsourcing in that free work gets accomplished only if it’s entertaining, emotionally fulfilling, or leads to recognition. The less sexy and decidedly more complex “paid” cousin, which uses money as leverage to generate results, has been more of a mystery. Ask 10 business managers whether they’ve used on-demand workers through an online service, and nine will cock their head like a lab that just heard a dog whistle.

Paid crowdsourcing can find a useful metaphor in e-commerce’s 15-year rise from cutting edge to preferred shopping mechanism. Want a book today? We don’t send our intern to the store to buy it. We go to Amazon, search on the book title, add it to our cart, insert our credit card information, and submit. One or two days later, we receive our book. Why is online commerce so mainstream …Next Page »

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Tomorrow, Boston-based uTest, a startup that crowdsources software quality-assurance projects to a global community of 19,000 freelance testers, is expected to announce the official results of its first “Search Engine Bug Battle.” Xconomy got an early look at the data today, and the folks in Redmond and Bellevue, WA, may not be happy about the results: uTest community members found 321 distinct bugs in Bing, Microsoft’s new search engine, more than the three other tested engines combined.

On the up side for Microsoft, part of the reason Bing fared so poorly compared to the other three engines that testers examined—Google, Yahoo, and Google’s experimental new search engine, Caffeine—may be that Bing is new and high-profile, meaning that testers probed it with extra zeal. Some 85 percent of the 1,100 uTest members who entered the contest chose to make Bing one of the engines they tested. (The same fraction tested Google.) And after testing Bing, 10 percent of the contestants told uTest they liked Bing so much they would make it their default search engine.

Another mitigating factor: Bing “has the youngest code base, compared to Google or Yahoo, so you’d expect to see more bugs,” Matt Johnston, uTest’s vice president of marketing and community, points out. “They’re also introducing features that are new to the search space, including multimedia features, visual search, interactive roll-over features.”

In other words, Bing has more stuff for aggressive software testers to break. Just today, for example, Microsoft unveiled a new “visual search” feature at Bing: users can now initiate and refine their searches by clicking on images, at least in specific categories such as “U.S. politicians.”

uTest’s bug battles are quarterly contests in which the company’s freelance members compete to discover bugs in popular software applications. uTest hands out cash prizes to the testers who find the most. It’s the fourth such battle for uTest, and the first one to focus on search engines. (Previous battles focused on Web browsers, social networking sites, and Twitter applications.)

uTest members not only found more bugs in Bing—321, compared to 130 for Google—but those they did find were more urgent. Contestants described 60 percent of the Bing bugs as either “high severity” or “showstoppers”—those in need of immediate attention—whereas only 8 percent of the Google bugs were showstoppers. A similar percentage of Yahoo’s 70 bugs were classified as showstoppers (10 percent).

The company followed up on the bug competition by surveying members about their search engine experiences. Alas, Bing suffered here too. Asked what quality is most important in a search engine, 71 percent of the uTest contestants answered …Next Page »

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Evidently, a lot of companies have trouble innovating—or there wouldn’t be so many startups offering “enterprise crowdsourcing” and “innovation management” tools to help them.

Several of these startups are right here in New England and have been featured in Xconomy. For example, there’s Innocentive, which helps companies stage international competitions to solve discrete problems like “find a novel protease inhibitor”; TopCoder, which is similar to Innocentive, but specializes in crowdsourcing big software development projects; uTest, which crowdsources software quality-assurance testing; Invention Machine, which makes software that helps engineers brainstorm; and Induct Software, which was founded in Norway but has a Boston-based CEO, and is building a customizable, Web-based system that allows companies to codify a process for innovation.

But older than all of these companies except Invention Machine, and far more obsessed with the “management” side of innovation management, is a Boston-based firm called Imaginatik (AIM: IMTK). Founder and CEO Mark Turrell, whom I reached last week at his home in Berlin, says Imaginatik (pronounced imagin-ATT-ic) stands out within the innovation industry for its pragmatism about how organizations really work—and about the importance, in the rush toward “transparency,” of making sure that certain information and intellectual property stays inside the right boxes.

“There are a lot of pragmatic reasons why transparency doesn’t work and is actually bad,” Turrell says. “Do you want your sales team knowing six months in advance that your product development cycle has actually been pushed back? For a lot of companies, even the idea that you could share your problems [internally] and have 500 strangers across your organization give you responses is really scary.”

That’s why many of the features of Idea Central, Imaginatik’s Web-based idea collection platform, are focused around organizing and controlling the process of internal crowdsourcing. After 15 years studying group collaboration and developing software to facilitate it—and after selling Idea Central to companies like Bombardier, Boeing, Cargill, Chubb, Novartis, Pfizer, and Whirlpool that together have almost a million end users—Turrell says Imaginatik has learned that coming up with ideas is relatively easy. But managing and implementing them, within the context of an established corporate culture, is exceedingly complex.

“We built the first prototype of our software suite in a couple of hours, back in 1998,” Turrell says. “But very quickly the testers said, ‘What if I don’t want to share this idea with you? What if I don’t want to be named? What if we’re innovating around a supply chain system for a company like Whirlpool—should Supplier A ever see Supplier B’s ideas?’ All of a sudden, just in terms of security and change management and behavior, this became something that very much depended on a good understanding of business processes.”

Turrell says Imaginatik spent about six years testing different iterations of its software within real organizations, “just really fundamentally understanding how this stuff works in practice, and not only in one organization, but how it can be replicated, whether you’re an insurance company or a pharmaceuticals company, whether you’re in Shanghai or Poughkeepsie.”

The company finally “nailed the formula” around 2004, he says, but it took a couple more years to line up the capital needed to …Next Page »

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In a development that may cause déjà vu for anyone who read my May 2008 story about Waltham, MA-based Innocentive raising approximately $7 million as part of a Series B funding round, Innocentive has raised approximately $7 million as part of a Series B funding round. Again.

This time around, it’s $7.3 million, in a Series “B-2″ round to be exact—from the same source as last year’s $6.5 million “B-1″ round: Spencer Trask Ventures, a New York investment network funded by high-net-worth individuals.

Innocentive was launched by the drugmaker Eli Lilly in 2001 and spun out as an independent venture in 2006. It is essentially an online idea marketplace where companies and other organizations, called seekers, post problems they need solved. Experts, called solvers, submit proposed solutions and compete for monetary prizes.

Spencer Trask has now put nearly $23 million into the venture, including a $9 million Series A round in 2006. Many of the same individuals who participated in the earlier rounds have come back for this week’s round, but Spencer Trask has also brought in “lots of new investors,” says Dwayne Spradlin, Innocentive’s CEO.

“We have definitely proven that this more open style of innovation is really incredibly powerful, and we continue to see examples of that every day,” Spradlin says. In the last year, the company has successfully rolled out several new features, including a software-as-a-service version of its platform, called Innocentive@Work, that companies can use “to tap pools of creativity and inventiveness within their own companies…or just push the proverbial button and go to outside innovators,” he says. The number of solvers participating in Innocentive’s global network has increased from 140,000 to 180,000, and the percentage of challenges that are marked as “solved” by seekers has increased from the mid-30s to almost 50 percent, he adds.

Moreover, Innocentive has set sales and revenue records in recent quarters, even in the midst of recession. “For companies living with high fixed-cost R&D organizations, where they may have 100 or 1,000 people working on problems but they are really not diverse, crowdsourcing innovation seems to solve things much more effectively than anyone thought,” Spradlin says.

Given that Innocentive is on track to be profitable within a couple of quarters, a new round of funding wasn’t really needed, Spradlin says. “The irony of fundraising is that you tend to be able to raise money when you don’t need it,” he says. “But our board really came to the conclusion that we did so well late last year and in the first half of this year that it would be silly not to double down and really spend for growth.”

He says the new money will be used mainly to expand sales and marketing operations—including opening an Innocentive office in Europe—and to accelerate work on new site features such as the ability to support teams of solvers from different geographies.

The cash may also give Innocentive the opportunity to go on a bit of a buying spree. “One of the things we’re potentially interested in,” says Spradlin, “is identifying other companies with capabilities that complement ours, where there may be opportunities to roll some of those up into what is really the dominant brand in this evolving space.”

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Imaginatik, a provider crowdsourcing software for large businesses, said yesterday that it has raised $2.6 million from unnamed new and previous investors. The firm (AIM:IMTK) has main offices in Boston and Winchester, United Kingdom, according to its website. The company said the funding will bankroll its growth plans and further development of enterprise crowdsourcing software, which is designed for such tasks gathering and managing ideas from large groups of collaborators.

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Local Motors, the Wareham, MA startup building crowd-sourced cars, has announced that starting at noon Wednesday, customers can go online to get in line to buy a Rally Fighter, the company’s first production vehicle. The $50,000 car, which we’ve described in the past as “half muscle car, half dune buggy,” contains a 265-horsepower, 3.0-liter, clean diesel BMW engine. Buyers can put down $99 today to buy a number in line, put down $5,000 later to lock in a build date, and pay the remaining $44,901 on delivery.

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It’s a good day for Vivek Bhaskaran. The co-founder of Seattle-based Survey Analytics, a marketing and customer relations startup that has been bootstrapped since 2004, has just scored a big win with the White House. The company’s software platform for hosting and managing feedback communities (engaging customers and gathering unsolicited feedback), called IdeaScale, is being used to power the U.S. government’s Open Government Dialogue site. Financial terms of the partnership were not announced.

Today, the National Academy of Public Administration, White House Office of Science and Technology Policy, and IdeaScale launched the site to solicit ideas from the public on how the federal government can become more transparent, participatory, and collaborative. This online brainstorming session will enable the White House to hear people’s most important ideas on open government—including innovative approaches to policy, specific project suggestions (including government-wide or agency-specific ideas), and any examples and stories relating to law, policy, technology, culture, and practice.

Using this Web platform, people can share their ideas and recommendations for how to make government more open, as well as vote on others’ proposed ideas. Originally designed for companies to engage with their customers, IdeaScale has gotten “a ton of traction,” Bhaskaran says. “With collaboration feedback, people and customers can hear each other while they give feedback.”

Back on January 21, President Obama issued the Memorandum on Transparency and Open Government, stating his goal of implementing sweeping changes in the level of participation and openness in government.

Last July, IdeaScale powered AskTheSpeaker.org, a crowdsourcing application used at a political conference in Austin, TX, where House Speaker Nancy Pelosi was presenting. That led to the White House contacting Survey Analytics about using IdeaScale to help with the open government directive. “Their job is to come up with directives to be more open and transparent,” Bhaskaran says.

The current brainstorming session will provide ideas for two more stages of collaboration, Bhaskaran says. Next, a discussion phase will occur where the top-rated ideas will be explored further. Finally, a draft phase will be started, where anyone in the public can help edit the language for the final recommendations.

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Southborough, MA-based uTest, a Web-based service that helps software companies crowdsource their quality assurance processes to freelance testers, relaunched its website today with an emphasis on collaboration tools for its community of more than 16,000 testers. A new forum area allows testers to create personal profiles, exchange private messages, and share their best practices, while a “Meet our Testers” application shows the locations of testers on an interactive global map. “Collaboration has always been critical to successful software testing, as the process often involves multiple teams and multiple projects,” Doron Reuveni, CEO of uTest, said in a statement. “uTest is excited to further extend our leadership in human software testing by facilitating the free exchange of ideas.”

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The economy is forcing companies of all sizes to do more with less. The big winners are increasingly the small businesses and specialized sole proprietors. On one hand, they provide the “just in time” component services no longer staffed at the downsized firms, and on the other, they are adept at operating with lean resources and contracting for component services themselves.

This atomization of business is more than a reaction to the current economy. It’s a function of the nature of work today, and of the growing availability of technologies that will soon transform this approach to business-as-usual.

In the U.S. we are increasingly a knowledge worker economy, which lends itself perfectly to digitized deliverables. The ability to provide results electronically (vs. manual labor on the factory floor) greatly benefits small businesses and individual contractors, as geographical location and infrastructure are no longer barriers. More and more opportunities will be available to productive workers to serve countless niches.

The supply side is coming via the fracturing of integrated companies into specialty service firms and contractors. With the pay-for-performance contract, results become the job cost of the contractor. Companies can now hire highly specialized experts, spec out the results they want and pay only when the contractor achieves those results.

As an example, our small company Smartsheet outsources Graphics Production, Press Calendar Monitoring, Case Studies, Website Development, Website QA , Accounting, Video Production, Copy Review, and some Product Testing to different people who work an average of 1 – 4 days per month for our company. In addition, we use crowdsourcing (high volume on-demand outsourced data gathering) for prospect profile information, e-mail addresses, list building, and website keyword surveys, to name a few.

The main barrier to this volume of atomization has traditionally been the “productivity tax” on the coordinator who manages all the players working outside the company. The information overload becomes intense with too many e-mails, spreadsheets, and overhead material with so many separate contributors. The logistics and technological challenges often outweighed the gains. But new online tools are changing all that.

New technologies are making it very easy for delivered work to be traded online. These tools are also departing from the forced project management structure and process that has been the impediment to successful work management technology adoption for the past 20 years. They have been the equivalent of being required to understand how stock and bond trading worked in order to use eTrade.

Collaborative work management tools will be tightly integrated with online work marketplaces (LivePerson, eLance, RentaCoder) as well as crowdsourcing technologies (Amazon Mechanical Turk, Smartsourcing). Think of these solutions as part of a global switchboard that connects real and virtual teams on an as-needed basis in order to accomplish specific work. They will be as universally accessible as Gmail, and available to all. And the important components—the tasks, milestones and deadlines, as well as the team members who own specific responsibilities—will always be clearly visible to whoever owns the end results.

As the overhead costs of internal employees continue to rise from regulated increases in health care, payroll, and other taxes, looking outside the company walls will become more and more appealing. Integrated work collaboration tools enable every business to be a services provider and every business to be a services requestor.

My advice to everyone is to be very good at what you enjoy doing, and be prepared to shop it to the highest bidders around the world. Businesses will pay 3 – 4 times the rate of an internal employee for the same work delivered in a quarter the time with higher quality and less management. In fact, it will become table stakes to stay competitive.

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Can competitions and prizes get you to the Moon? Google thinks so—it’s backing the $30 million Lunar X Prize, which will be awarded to the first privately funded team that sends a remote-controlled robot to the Moon, drives it 500 meters, and collects video of the trip. Back here on Earth, the $10 million Archon X Prize is being offered to the first team that can build a device that sequences 100 human genomes in 10 days or less, and the Wellpoint Foundation is proposing a $10 million Healthcare X Prize for the first organization that figures out how to deliver a 50 percent improvement in the cost-effectiveness of community healthcare over a three-year period. Right here in the Boston area, Waltham, MA-based InnoCentive is using the prize model to attract solutions for dozens of problems, ranging from improving the fire resistance of polyurethane foam to accelerating the growth of soybean shoots.

But in Glastonbury, CT, there’s a company called TopCoder with a prize-based business model that predates all of these efforts. It’s using the model to create products that are arguably more relevant to our economy in the short term—better software applications. And it’s doing it for far less money; first-place winners rarely take home more than $3,000.

Companies like AOL, ESPN, Ameriprise, Ferguson, Geico, and LendingTree have outsourced thousands of software development projects to TopCoder’s worldwide freelance community—”from something as simple as a Web page all the way up to full-blown enterprise resource planning (ERP) systems,” in the words of company founder and chairman Jack Hughes.

The model is so successful that it’s attracting the attention of business scholars from Harvard, MIT, and other academic centers. “They’re creating enterprise-class software projects in a highly distributed setting, and for me that was an order of complexity that I wasn’t expecting,” says Karim Lakhani, an assistant professor at Harvard Business School who has written two papers about TopCoder.

You might wonder why the competition model attracts any willing participants, considering that competing takes a lot of work, and that the big money is usually reserved for the top-placing teams, while everyone else gets zilch. Indeed, I’ve always wondered whether giant prize programs like the X Prizes are an efficient way for a society to array its resources—just look at the 26 organizations that collectively invested more than $100 million competing for the $10 million Ansari X Prize. All but one of the teams walked away with nothing after Burt Rutan’s SpaceShipOne won the prize in 2004.

But TopCoder has invented a system that seems to work, both for its clients and for its community members. For one thing, the company never bought into the winner-take-all concept. For each competition, the company sets the dollar amount of the first-prize award based on the size of the job and the amount the client is willing to pay. TopCoder sets aside about half as much for the second-prize winner. The third-, fourth-, and fifth-place winners don’t get cash, but they do get points—and everyone gets paid later out of a general prize pot based on how many points they’ve accumulated.

“We wanted to avoid the problem of people submitting and always coming in third and never getting paid,” says Hughes. While it’s standard practice elsewhere in the software business to offshore software development to the cheapest available labor pool, “We just weren’t interested in that,” says Hughes. “We were more interested in …Next Page »

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The Rally Fighter is half dune buggy, half muscle car. Designed for off-road racing in the deserts of the Southwest, it looks a lot like any ride you might see on the cover of Road & Track. But what’s different about the Rally Fighter is that it’s a product of the Web 2.0 revolution: it was the winning design in an online competition that Wareham, MA-based Local Motors conducted last fall among its growing Web-based community of amateur and freelance automotive designers.

Crowdsourcing the design process through regionally-themed online design contests is half of Local Motors’ business model. The other half is “mass customizing” the actual vehicles at a network of what the company calls “micro-factories.” If you’re going to start a car company these days, you might as well try a radical new approach—and that’s definitely what co-founder, president, and CEO Jay Rogers is doing. My December 18 story has all the history and details.

On Friday, I reconnected with Iraq vet and Harvard MBA Rogers by phone to get the latest news about Local Motors—and to ask him for his opinion about other vehicle-related events in the news, including the first flight of Terrafugia’s “roadable aircraft” and this week’s unveiling by GM and Segway of the P.U.M.A., a multi-passenger vehicle that balances on two wheels like the famous Segway Personal Transporter. I also probed a bit about the seeming disconnect between Local Motors’ self-avowed green mission—he talked a lot back in December about the nation’s dependence on foreign oil, and about how to make cars lighter and more fuel-efficient—and the fact that the company’s first product is a racecar built to tear around the desert. He had some interesting responses, which you’ll see toward the end of the following transcript.

Xconomy: We last talked in mid-December. What’s been happening at Local Motors since then?

Local Motors CEO and co-founder Jay Rogers

Jay Rogers: We just passed our first anniversary, and one of the big things that stands out is that on the day of our birthday, March 25, we were invited to a Web-based conference [organized by Canadian automotive journalist Michael Banovsky] with Bertone, one of the top two automotive design houses in the world. It was an incredible recognition of what we have achieved in just 12 months. We are known enough that people see us as a design firm that has put together something notable. It shows the power of Web 2.0 to create a new entity. These older design houses don’t have the bandwidth to create a lot of new concepts, and as governments and everyone else around the world are looking at how to reinvigorate stale parts of the auto industry, we make a very compelling alternative.

Since December we have also run two or three more competitions. We just finished Chicago and the Carolinas and are about to launch Detroit. That is going to be much more toward the practical end than the conceptual end. We are going to do a design for the budding entrepreneurs in Detroit. A lot of machinists and pattern makers, as you can imagine, are out of work. What they need is a jobber’s car—a coupe with a roach coach or a hold for a set of tools, something that’s economical and isn’t a big truck. It’s going to be a real exercise in how Local Motors can target a vehicle that is relevant to a local area, especially one that is as embattled as Detroit.

The other thing is that we are in negotiations right now in Phoenix, Arizona, and here in Massachusetts to place our first micro-factory. We don’t have anything to announce just yet, but we are in some very exciting negotiations and are going to end up with a very good location in one or the other place, or it could very well be both.

We were also applying for the federal assistance program from the Department of Energy for new vehicle manufacturing concepts. At the time we last talked, GM and Chrysler were looking to hog a lot of that money. But this week, those companies were determined to be non-viable, which means they are not eligible for those loans. Which means we have a much better shot at getting some money. That’s a very positive thing.

One more thing we did which was actually very exciting was that we began to flex our muscles in the competitions, and instead of just doing exterior design, we ran an interior design competition for the Rally Fighter, our first model. Critics were saying “You can’t open-source the design of a car,” but this showed an entirely different face of our design competition. The winning concept is now going to be the interior of the Rally Fighter.

We are also breaking down [the design competitions] into discrete parts. We needed an air extractor for our engine bay, and we got 50 to 60 side-vent ideas in about six days. We posted it Friday night and we were done by the next Wednesday. Because this was so successful, we are going to be running more discrete engineering projects as competitions, instead of us doing them ourselves. It’s great for us to go to the community like this.

X: How is the Rally Fighter coming? When I visited, you had a full-scale model, but it was made of blue foam.

JR: The Rally Fighter’s body is going to be frozen this week. That means the look and feel, all of the micro-details, which is a huge achievement for us. If you were to look at it today, you’d see a …Next Page »

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Bellevue, WA-based Smartsheet, a project-management software firm, announced it has formed a partnership with Amazon to deliver outsourcing services to the masses. The new release, called Smartsourcing, is powered by the 100,000 virtual workers in Amazon Mechanical Turk. Each outsourced task, such as finding a list of articles, e-mail addresses, or experts on a topic, costs between $0.01 and $5.

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Commercialization is rarely a solitary pursuit; bringing an idea to the world requires a set of diverse skills and knowledge, a proverbial commercialization village. Or a crowd. Enter the power of crowdsourcing.

Crowdsourcing refers to aggregating a large number of people to express their opinions or ideas about specific topics—and the term first appeared in a 2006 Wired magazine article by Jeff Howe. But simply bringing together a large number of people is not enough to create new products. An integral part of engaging a large community to solve the world’s biggest problems is matching the right type of crowd to two stages of the commercialization process: a diverse crowd for brainstorming of breakthrough innovations, and a large crowd for refining the product for the market.

By its definition, innovation requires a break with the status quo. Research repeatedly shows that groups with diverse backgrounds propose the largest number of unique solutions to a problem. This has also been my experience with BrainBuzzes, brainstorming events that I organize for Young Inventors International. The simplest explanation for this phenomenon arises from research by James March and the late Nobel Laureate and Turing Award winner Herbert Simon, who suggest that our capacity to search for solutions is limited by what we know. Thus, we find solutions that are “locally” optimal to what we know, but which may not be “globally” optimal for innovation because we are restricted in our search space. By bringing together a diverse group of people, we end up expanding the search field for increasingly “global” solutions and drawing on expertise from unrelated fields. While a larger number of people can brainstorm more solutions, diversity is key when crowdsourcing new, breakthrough product ideas.

One of the most established Internet companies that uses crowdsourcing to assist with brainstorming is Innocentive. Innocentive brings together companies that post problems for scientists and engineers around the world; the winning solution receives a specified amount of prize money. Innocentive focuses on brainstorming new breakthrough solutions; its model allows the company to provide economic opportunities to a diverse group of researchers from outside of North America whose experiences may be different from those of their North American colleagues. Another web site, Innovation Exchange, works on a similar premise, although it also allows for collaboration among problem solvers.

However, the success of an innovation depends not only on its ingenuity but also on its appeal to and adoption by the market. The market is perilous and fickle, and the products that are most likely to succeed are those that are best able to anticipate and satisfy the needs of the largest number of customers. For many years, marketing experts have used focus groups of potential customers to assist with identifying issues of usefulness and usability of new products. Today, the Internet allows for relatively easy aggregation of large numbers of people who can provide feedback on a product or vote on the optimal solution. The number of participants matters more in this case. Indeed, the ideal crowd to source is one comprising of all potential customers.

Other companies in the space include Cambrian House, Kluster, IdeaScale, CrowdSpirit, FellowForce, and IdeaBlob. All of these companies incorporate elements of voting for the best ideas. But to arrive at the wisdom of the crowd, the sites require large amounts of traffic. As more of these sites arise, there is a battle for users and, unless there are incentives for participants to contribute, these communities may suffer. For product refinement and focus group crowdsourcing, the best model might be for companies to encourage feedback on their own web site, such as Dell does through its Idea Storm site and Salesforce does through its Idea Exchange. This model is likely to generate better results because the companies already receive large amounts of traffic interested in their products and participants can be rewarded with free products or product discounts relevant to their interests.

While giving away products, discounts, or flat fees might suffice as compensation for focus group participants, determining sufficient compensation for innovators who create truly disruptive ideas with breakthrough market potential is more difficult. If correct incentives do not exist to compensate participants for their contribution of intellectual property, those with the most promising ideas will choose to commercialize them on their own. Understanding the type of group that must be sourced for a specific purpose allows us to begin designing rewards that will attract the right crowd essential to the complex journey of commercialization.

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Yesterday Amazon announced it has created a Web interface that makes its “Mechanical Turk” service easier for businesses to use. Until now, companies needed software coding expertise to set up and manage the service, whereby anonymous Web users can sign up to perform small tasks for small payments. In Boston, Wade recently wrote about one company that uses the service, Needham, MA-based Mobicious, to screen photos submitted to its SnapMyLife mobile phone application.

Launched in late 2005, Amazon Mechanical Turk aggregates so-called “human intelligence tasks” that are hard for computers but easy for people, like recognizing objects in photos, judging whether a photo is offensive, or identifying actors in DVDs. The name comes from the 18th-century chess-playing machine called The Turk: it plays on the fact that the “machine” was actually an elaborate hoax operated by a person inside.

It’s a pretty interesting idea, and now a much broader range of companies can potentially use it. ZDNet has a nice piece explaining what business users can do with it, and showing the new interface that attempts to take the service “beyond the geek chic crowd.”

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Andover, MA-based citizen journalism site Helium officially launched a crowdsourcing service called Helium Marketplace today. Using the marketplace, publishers who need articles written can list subjects, deadlines, and prices, and writers can respond by uploading drafts. The user community rates the articles, and publishers select the ones they want from a rank-ordered list, with Helium taking a 20 percent cut of the payment. Helium was founded in 2006 and the marketplace has been in a beta-testing phase since last year.

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