We’re very excited to have been selected to power Logica’s new predictive market, called FutureScope. Foresight, our prediction markets platform, is the underlying technology. Just as exciting to us is the inclusion of the principal partners in the project, Big Think and The Economist.

Milt Capps, who covers the local venture beat with enthusiasm, covered the new partnership in a wide-ranging profile of Consensus Point earlier today:

[Consensus Point CEO Linda] Rebrovick told VNC the Logica connection creates “a global footprint for Consensus Point,” in that Logica is believed to be the “first example of a global business service company offering a public insight and prediction market,” open to 40,000 Logica employees, Logica clients, subject-matter experts and most others who register at the FutureScope site launched earlier today.

Logica will initially use the FutureScope market to support clients exploring an array of “sustainability” issues and themes. Logica’s global information technology and business services are offered to enable clients to pursue the opportunities and problems they discover.

Logica just completed a rebranding initiative that involved an overhaul of their website. We’re impressed by both the breadth and depth of their thinking that has gone into their vision for themselves in the future, and we’re excited to see what the power of a high-profile predictive market might reveal more broadly.

Stay tuned to this space for more information in the near future. In the meantime, contact us if you’ve recently discovered the power of prediction markets and want to leverage the power of Foresight.

We recently read an interesting article in Forbes’s CMO Network about the apparent pitfalls of crowdsourcing:

Several weeks ago, the CMO of a company I am involved with in Europe sent me a note pointing out that an agency was offering “hundreds of marketing ideas” to help the company build its business for only $25,000. “Surely we can’t lose; it’s worth a shot,” he said. Two days later, back in the U.S., I found myself discussing the merits of the “executive creative director versus the crowd” with the head of an advertising agency and a journalist.

What are the facts? Well, there are literally hundreds of companies on the Web and in the real world that wield the power of the crowd. The idea is relatively simple: Usually the process involves issuing a brief, which is then submitted to the “crowd,” which then offers ideas for free. Each person who contributes hope that his or her idea will be used. The winner takes all, (in most cases a relatively low fee) and for the client: an idea. Maybe my colleague is right: It would appear the buyer couldn’t lose.

Jez Frampton, the author, then presents what appears to be a cautionary tale about the crowd:

It is the ability to select and profitably execute an idea that delivers greatest value to the organization. This supports the old adage that success is 5% inspiration, and 95% perspiration. It is a strong argument for the ‘editor’ otherwise known as the creative director, and for a well-managed and controlled process. These happen to be two things that are notably absent from crowd-based approaches.

Our guess is that Mr. Frampton is possibly not aware of the potential for crowd-driven idea management. Maybe he hasn’t seen a demo of Foresight, our prediction market platform that is capable of comprehensive idea management.

Experience so far would suggest that the crowd can certainly speed the “exploration” of an idea. It can add richness and context. it can create fast and efficient stimulus for consumer research and could (if my creative director friend gets it right) become a useful “extra head” in the room. It could certainly change the shape (and the operating approach) of the creative side of the marketing sector, but will it replace the need for the expert partner? That remains to be seen.

We’ve seen it. Because we have Foresight. And so does Motorola, where we’ve been helping them manage ideas with great success (which CFO.com recently noticed).

Mr. Frampton ought to send his CMO friend our way. We could help him out with idea management as his “expert partner.”

We don’t see a lot of need for prefatory material here.

He [Rami Levy, a technologist with the Motorola's mobile devices business] says the combined revenue from product-based ideas and cost savings from internal innovations is “conservatively” 5 to 10 times TIX administration costs, which largely involve two to three dedicated employees. The cost to purchase and implement prediction-market software — called Foresight Server, from Consensus Point — was “under $100,000,” he says.

CFO.com has an extensive write-up of the customer success we’ve had with Motorola, and we are impressed with Mr. Levy’s ability to concisely identify the bottom line value that our Foresight prediction markets platform is capable of delivering to the enterprise.

Further, the article is an elegant case study of the sort of business scenario that is a perfect opportunity for the use of prediction markets, the path to implementation, and the ultimate value.

What we like best about the article, in fact, and consider a true success for Motorola’s implementation of our solution, is that the value goes beyond raw consideration of the bottom line:

But additional, softer benefits were key goals for the program, too. These have been realized through collaboration forums that allow employees to see and comment on others’ ideas, which are thus improved by the crowd’s input. The forums facilitate people from disparate regions and company organizations forming relationships, working together on ideas, and avoiding duplication of effort, Levy says. Motorola actually introduced the forums in 2005 along with the voting mechanism, but participation spiked after TIX was introduced and continues to rise.

The bottom line, says Levy: “TIX has proved to be an excellent conduit for enabling collaborative innovation and creating new value for Motorola in a fun and enjoyable way that encourages participation at a minimal cost.”

When was the last time you implemented something for the enterprise that not only created cost-effective value but was also fun?

You can read the full CFO.com article here, and you can contact us about Foresight here. We predict customer success if you do.

We’ve been reading Harvard Business Review blogger and MIT Center for Digital Business researcher Andrew McAfee’s excellent book, Enterprise 2.0, which is full of valuable lessons for the enterprise, including that prediction markets are a very useful collaborative tool.

For instance, here’s an interesting discovery from the Google Prediction Markets, originally proposed internally in December 2004:

Analyses … revealed that at every point in time, even as much as ten weeks away from the closing date of the market, the most expensive outcome was the one most likely to actually occur. It seemed that GPM’s markets, in other words, could quickly and accurately distinguish among possible outcomes, identify the one most likely to occur, and attach a high price to that outcome.

This is exactly what our Foresight platform does on a regular basis for our customers.

Regular readers might remember a few months back when we cross-posted one of his posts from the Harvard Business Review blog. You might also recall when we posted a presentation that Linda Rebrovick (our CEO) gave in Chicago at the Prediction Markets Cluster conference in Chicago last November.

Linda noted the following best practice examples in her presentation:

• integrate into enterprise processes
• nurture executive sponsorship
• go big or go home
• make accessible to all
• customize to your business
• make it part of your value proposition

We were struck how similar these examples were to the Six Organizational Strategies identified by McAfee:

• Determine Desired Results
• Prepare for the Long Haul
• Communicate, Educate, and Evangelize
• Move into the Flow
• Measure Progress, not ROI
• Show That Enterprise 2.0 Is Valued

Coming back to the commentary on GPM, McAfee continues:

Google’s prediction markets shared with all markets a fundamental property: the ability to generate highly valuable information by bringing people together who have little or nothing in common.

Okay, we don’t actually know how different Linda and Andrew are, but we’re pleased that our executive leadership understood key lessons before an interested commentator went to press with his book. It’s almost… predictive.

We attended last week’s Nashville Technology Council Member Breakfast, where the big news was Microsoft CEO Steve Ballmer’s visit to Nashville. Seeing Mr. Ballmer show off Bing and other new Microsoft technologies was certainly impressive, but the relevance of the other speaker, Abbie Lundberg—the former Editor-in-Chief of CIO—wasn’t lost on us, either.

Ms. Lundberg referenced a session at the National Retail Federation’s recent Retail’s BIG Show 2010 expo in which Wal-Mart’s EVP and CIO Rollin Ford told attendees that corporations don’t have a lot of secrets anymore. So the only competitive advantage becomes speed and getting from point A to point B faster.

Lundberg also revealed that, as of December 2009, surveys indicated that 40% of CIOs would increase in spending on IT. This dovetailed nicely with an MIT study that demonstrated that IT-savvy firms are 20% more profitable (if you can help us cite the study, please let us know in the comments).

Our prediction markets platform not only helps companies get from point A to point B faster, it helps them understand why arriving at point B is better than arriving at points C, D, or Z. We offter tremendous business value for companies having difficulty finding that competitive advantage.

Maybe our ability to offer innovative competitive advantage through technology is why CIO decided to write about our customer success with Motorola. If you’re a CIO increasing your IT spend this year, you might consider investing in prediction markets. We recommend Foresight.

Correction: Apparently, we misread our notes or were typing too fast. As originally written, we incorrectly stated that CIOs were projecting spending increases of 40% in 2010. Our apologies to Ms. Lundberg.

In September 2009, McKinsey & Company revealed the results of a global survey on trends in Web 2.0 in the enterprise. Prediction markets were included among 12 core Enterprise 2.0 technologies. Adoption within global corporations has risen from less than 1% in 2007 to 8% in 2009.

We were delighted that prediction markets were identified as a key Web 2.0 technology. However:

Respondents who report that Web technologies have strengthened their companies’ links to customers also cite blogs and social networks as important. Both allow companies to distribute product information more readily and, perhaps more critically, they invite customer feedback and even participation in the creation of products.

Similarly, among those capturing benefits in their dealings with suppliers and partners, the tools of choice again are blogs, social networks, and video sharing. While respondents tell us that tapping expert knowledge from outside is their top priority, few report deploying prediction markets to harvest collective insights from these external networks.

This disconnect is puzzling to us. Prediction markets offer an efficiency of consensus that is not delivered by enterprise social networks. Platforms like Foresight offer effective leading business indicators that convert straight to actionable decisions.

Respondents, have you considered requesting additional information from us so that we can help you harvest collective insights from your external networks?

Just before the end of the year, we read Ian Ayres’s musings on prediction markets over at Freakonomics. Writing on his personal blog, Consensus Point Chief Scientist Robin Hanson responded to the post and elaborated on whether prediction markets better served as methods or forums:

1. How to pick city policies, vs. how to pick the mayor.
2. How to cook a meal, vs. how to pick a restaurant.
3. How to win a game, vs. how to decide which team won.
4. How to do a study, vs. how to pick a study to publish.

These are four examples of methods vs. forums. Methods are ways to do things; forums are ways to pick who decides what to do. Yes, in a sense forums are methods, since choosing who decides indirectly picks what to do. But that is what makes forums powerful; good forums induce people to find good methods. Good elections induces good city policies, good restaurant competition induces good cooking, good game rules induce good play, and good journal review induces good articles.

To me, prediction markets are mostly interesting as forums, not methods. Alas many seem to confuse the two.

Robin elegantly puts the history of the concept into context and dismisses the idea that the wisdom of the crowds serves as an equalizer; rather true wisdom is revealed by self-selecting experts with incentives. He then goes on to suggest that academic journals might not be the best forum for choosing forecasting methods.

“Prediction markets” started from speculative markets, e.g. stocks, where accuracy comes much less from non-expert participation and much more from participants with incentives to self-select as experts. Any team that considers itself expert enough can pay to prove itself, but in fact most teams stay away and prices tend to be dominated by real experts, who get paid and really know better than most.

Prediction markets aren’t about emphasizing ordinary Joes over credentialed bigshots; they are about emphasizing whomever tends to be right. Simple opinion averages maybe be reasonable indicators of crowd wisdom, but they have too little of the forum-ness of letting self-selected expert teams come to dominate.

It seems to me that when academics like Aryes call for academic studies of prediction markets as methods, instead of as forums, they are implicitly suggesting that current academic institutions should be the forum in we choose forecasting methods. If academic journals prefer a method, they suggest, that’s the method the world should use.

In contrast, I suggest prediction markets may be a better forum than academic journals for choosing forecasting methods. Maybe the world shouldn’t use a method just because academics say its great; maybe those impressed with a method should have to put their money where their mouth is and trade on that method’s forecasts in prediction markets. Maybe the rest of us should just accept prediction market prices as our best estimates; if and when prediction market prices become dominated by traders using a method, that is when the rest of us will have implicitly accepted that method as best.

How might the academy respond? Our guess is with skepticism. Care to bet?

Okay, maybe the title is a bit overblown, but Consensus Point Co-founder and Chief Technology Officer Ken Kittlitz was second author (with Johan Almenberg and Thomas Pfeiffer) on a recent study at Harvard’s Program for Evolutionary Dynamics involving the application of prediction markets to scientific publication:

Prediction markets are powerful forecasting tools. They have the potential to aggregate private information, to generate and disseminate a consensus among the market participants, and to provide incentives for information acquisition. These market functionalities can be very valuable for scientific research. Here, we report an experiment that examines the compatibility of prediction markets with the current practice of scientific publication. We investigated three settings. In the first setting, different pieces of information were disclosed to the public during the experiment. In the second setting, participants received private information. In the third setting, each piece of information was private at first, but was subsequently disclosed to the public. An automated, subsidizing market maker provided additional incentives for trading and mitigated liquidity problems. We find that the third setting combines the advantages of the first and second settings. Market performance was as good as in the setting with public information, and better than in the setting with private information. In contrast to the first setting, participants could benefit from information advantages. Thus the publication of information does not detract from the functionality of prediction markets. We conclude that for integrating prediction markets into the practice of scientific research it is of advantage to use subsidizing market makers, and to keep markets aligned with current publication practice.

Imagine our surprise that the experiment further validates the use of prediction markets as powerful forecasting tools.

Ingenix, a Consensus Point partner, recognizes how important the power of collective intelligence can be in healthcare. With the Ingenix Prediction Market, Ingenix is helping employers optimize how healthcare dollars get spent. The end result is more profitable companies with healthier, happier employees.

Ingenix also offers a variety of solutions directly to physicians. We wouldn’t be surprised to see collective intelligence solutions from Consensus Point helping Ingenix empower doctors as well as employers.

Last week, Jonathan Bush, CEO of Athenahealth, a physician billing and practice management firm, was interviewed in the Wall Street Journal. In a wide-ranging interview covering various dimensions of healthcare policy and the ramifications from technology and innovation, this stood out to us:

Mr. Bush thinks the main benefit is the “collective intelligence” that he is starting to weave together from the 87% of American physicians who practice solo or in groups of five doctors or fewer.

Time and again the wisdom of crowds has proven valuable and most times more accurate than a single SME. Applying prediction markets in healthcare can yield benefits for policy and delivery of services.

For more on the Ingenix Prediction Market and Ingenix solutions, go to www.ingenix.com/informationis.

The Obama administration raised the innovation bar by incorporating social media into its campaign and day-to-day operations. Tales from the Technoverse’s blog post on “Technologies to Watch in 2010,” confirms that prediction markets are being successfully incorporated into government entities and will continue to be on the rise in 2010.  The Consensus Point government clients have been successful in projecting results and reducing uncertainty with prediction markets.

Excerpt from Tales from the Technoverse, “Technologies to Watch in 2010″

[Government 2.0] will also lead to greater use of 2.0 technologies to implement various versions of crowd sourcing. Where Intellipedia and Aspace are big news, internal wiki’s will become more second-nature. Pilots associated with prediction markets, using groups to predict things like project results or other public facing data, are starting to be piloted by early adopters.