Tapping the Wisdom of Insiders

Have you ever sat around a conference room table and listened to another executive make a promise or prediction that sounds like this: “If we can green-light this product (or project) today, we could have it out (or implemented) by the end of the year”?  Did you speak up? Or, did you sink down further into your chair and say to yourself, “No way. I’ll take the ‘over’ on that one.”

Would it have made a difference if your company had software that would allow employees to wager anonymously on decisions like those mentioned above?

I have been interested in “prediction markets” since reading an article in 2002 in MIT’s Technology Review. These types of tools date back to the 1988 launch of the Iowa Electronic Markets that allowed participants to buy/sell shares in the presidential candidates.

“I’ll take “Unrest in Somalia” for $100, Alex.”

I was more intrigued though by the potential uses being considered by DARPA and for the intelligence community. DARPA wanted to set up a betting pool based on the perceived odds that defense contractors would deliver projects on-time and within the approved budget. The magazine noted that organizations like the FBI could have used a prediction market to assess the likelihood of a terrorist attack by al-Qaida.

My interest in prediction markets surged again two years ago when I read an article about Crowdcast in The New York Times. After finishing the paper, I sent an email to Mat Fogarty, the company’s founder and CEO. We talked by phone and then I flew out to the Bay Area to meet him and his team.

If my boss had only asked me ….

Prior to starting Crowdcast, Mat had been responsible for sales forecasting at Electronic Arts, the video game producer. He realized that many new and/or lower-level employees knew more about a game’s status than senior executives. His goal was to build a system that tapped their wisdom. EA became his first client.

I also met Dr. Leslie Fine who serves as chief scientist. Prior to signing on, she had worked at Hewlett-Packard on that company’s BRAIN project which was used to predict sales volumes and future pricing trends.

I was reminded about Crowdcast last Wednesday after reading an article about one company’s plan to build a network of re-charging stations around the planet where electric car owners can switch out their batteries. This type of high risk scenario was one of the use cases that I saw for prediction markets.

Ironically, a few hours later I received an email from Mat and Leslie looking to catch up. Over the last few years they have helped companies manage at least 10,000 bets using their cloud platform for “Enterprise Collective Intelligence.” The most popular wagers continue to involve sales forecasting, project and portfolio management, and risk assessment.

Every voice can be heard … without switching to consensus management

The software has evolved a lot, too. Here’s an example from the PowerPoint deck they sent me. Participants log on and see a screen showing sales volumes for the trailing four quarters.  Next to this chart is a sidebar with four questions:  How many units will we sell in Q3?  How many will we sell in Q4? What are our biggest risks?  Will competitor X enter our market?

If you click on the Q3 question, you’re prompted to enter a range of numbers from say 40,000 to 50,000 units. Then you’re asked how much you’re willing to wager. Crowdcast’s algorithms immediately calculate the odds and present you with the possible payout for a right answer. As you would expect, narrow ranges result in higher potential rewards. Your potential reward changes during the course of the bet. In the case of sales example, there is no reward for betting the farm on the last day of the quarter.

Participants may be asked why they made that particular wager. That can be a good source for important data not visible in the organization. Lastly, your wager can be compared to those from other departments or geographies.

There is also a leaderboard. While this tracks the employees with the best results, it doesn’t divulge the individual bets or their optimism or pessimism.  This is only a partial snapshot as there is a lot more here than I’ve described.

Would you like a prediction market built into your next enterprise app?

Today, Crowdcast’s software is often integrated into CRM, project management, and performance management software. Looking at their slides, I could immediately envision how we might integrate Mat’s software with Infor PM or one of our financial apps to compare the crowd’s predictions to actual results.

Are you ready for a prediction market at your company? If you want to be a leader, you can’t afford to have too many people slumping down in their chairs instead of speaking up. The truth is in the Crowdcast tagline – Your people know.

As always, I welcome your feedback and ideas.