Using the 'Wisdom of the Crowds'

Ricardo Harvin
E-mail questions for Tech Tools to techtools@uschamber.com.

If two heads are better than one, then imagine the potential benefits of having dozens, hundreds, or even thousands of them working on developing or determining new products and services for your business.

That's the basic concept behind the growing industry of prediction marketing-harnessing the wisdom of many to help you decide where to focus your time, energy, and money.

Prediction marketing software develops processes for generating ideas and collecting input from employees, partners, and customers on anything from changes to your product line to project completion schedules (for example, whether your new store will open on time).

You can solicit contributions from a select group (just your product development team), open it to all employees, or extend it to people outside the company. Include incentives to encourage participation. It may be enough to simply recognize the person who submits the "winning" idea or whose prediction comes closest to the overall consensus.

If you're soliciting input or feedback from customers, you may want to offer them a small discount or the opportunity to be among the first to benefit from what comes out of the process.

Expect a wide variety of submissions and weed out those that are not feasible or that you know will not help your business. Present a pared down list of ideas that your market will judge.

The methods by which your market will judge the ideas and input you present range from simple voting to sophisticated exchanges that function like stock markets, allowing people to use virtual money in order to "bet" on what they like (the new widget idea) and "sell" what they don't like (the new store will open six weeks late).

Prediction markets work best when there's a diverse group of participants; the answer comes from the group and isn't dictated from the top; participants act based on their own knowledge and insight, not on what others think; and you use the results to make business decisions.

At least one product allows you to run small, full-featured markets for 45 days at no cost
(see E-Sources). In most cases, your cost will be determined by the size, type, and complexity of your market.

Let prediction markets help you start tapping into the wisdom that's all around you.

E-Sources:

N.Y. Times article "Betting to Improve the Odds"
The Big Picture article, "Why Prediction Markets Fail"
Inkling Markets - Offers free 45 day market for up to 400 traders