Mob wisdom means business

So-called 'crowdsourcing' lets companies create massive focus groups, garner fresh ideas, and even predict the future

Group crowdsourcing is also cropping up. InnoCentive describes its community as "open innovation." It is an alliance of various companies, called Seekers, designed to tap in to the creativity and collective intelligence of a global network of subject matter experts, called Solvers. In InnoCentive's Open Innovation Marketplace, Solvers are handsomely rewarded with prizes reaching $100,000 for their solutions.

Ensuring optimal results

Crowdsourcing success very much depends on the quality and quantity of participation. The best way to maximize participation is to have a firm grasp on the desired outcome and to reward people for contributing. If the desired outcome is to get as much information about a particular topic as possible, then the rules of the "game" need to reward participants who deliver quality information about that topic and penalize those who don't.

It's easy to see how crowdsourcing, by its nature, can quickly get out of hand. It's helpful to staff your crowdsourcing team with people who can think like both computer scientists and economists -- able to see 10 moves ahead. The ability to look for unintended as well as intended outcomes and to determine how to manage those facets for the betterment of the project is a critical skill.

Once your initiative has been launched, keeping a close eye on crowd engagement is essential to success. This means more than just noting whether folks are signing up and participating. You must continually assess whether your ability to forecast outcomes has improved as a result of your crowdsourcing data or, qualitatively speaking, whether the opportunities surfaced are gravitating toward solutions that make sense to implement.

Here, time is an important factor. In the short run, flukes are possible, but long-term improvement tracking is a key component of crowdsourcing success. Establish policies for analyzing results with the long term in mind.

The value of predictions

The most popular use of crowdsourcing by far is the prediction market, in which participants are given fake money or stock credits to use in trading-style transactions.

Prediction markets use the flow of the crowd's currency to predict the occurrence of future events. Accurate predictions are important because they help companies allocate resources more effectively and benefit financially from projections.

Best Buy used an internal prediction market to determine when it would open its first store in China. The winning employees were rewarded with gift cards, and Best Buy was rewarded with near-prescient knowledge of when to prepare for its China debut.

For the past two years, Google has operated a very successful internal crowdsourcing project open only to its employees. The project forecasts product launch dates, new office openings, and other strategic corporate decisions. Google's employees have accurately predicted the probability of more than 200 separate events, which might be one of the reasons Google is able to gain and maintain such wide competitive margins.

Crowdsourcingat your service

Several software development firms make it easier for companies to engage in predictive markets by selling or leasing a hosted, turnkey version of predictive market software. Two such companies are Inkling and Predictify.

Inkling has developed a product called Inkling Markets that helps customers tap the collective wisdom of partners, employees, and customers.

"In most companies, people work in one department, and although they have been 'narrowcasted' to focus on one position, they probably have a good idea of what's going on in other areas of the company," says Adam Seigel, CEO and co-founder of Inkling. "And they probably have informed opinions about all sorts of topics. Before prediction markets, there wasn't really a good way to capture the collective intelligence within a corporation."

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