There’s been an increased interest in Europe in Enterprise 2.0 tools, such as enterprise prediction markets. Consensus Point has foreseen this trend, and, to meet this demand, our latest version of Foresight and Logica FutureScope will soon include internationalization features, including multi-language capabilities. More on that soon. What a happy coincidence, then, that a year-end release of an Enterprise 2.0 study for Europe created by Tech4i2, Headshift, and IDC includes considerable discussion of prediction markets and other E20 tools to grasp the opportunities of “Enterprise 2.0 in Europe”.

The project resulted in a blog that tracked the progress of the study, as well as a final report, which is well worth a read.

One of the interesting takeaways is the report’s conclusion that Web/Enterprise 2.0 is more than just a shift in technology and tools; it’s also a shift in values. Keying off this idea, the report offers a lengthy examination of use cases of E20.

We were pleased to see a reference to Consensus Point (page 15) as a leading provider of prediction markets, along with a crisp definition in the collective intelligence section of use cases:

Prediction markets: these are markets created within organisations for the purpose of making predictions about real-world events; the value of an asset in the market is supposed to be indicative of the probability of it happening. Employees express their belief in the likelihood of an outcome by buying or selling stocks in a prediction asset.

The final section of the report is devoted almost entirely to the policy ramifications of Enterprise 2.0, but just prior to that, there’s an excellent discussion of whether E20 can help identifying good ideas:

For European and worldwide companies, across sectors, a key competitive asset lies in innovative ideas: generating them, turning them fast into market opportunities, as well as learning and adapting from market reaction. Employees are the largest source of innovation inside companies…

E20 seems to offer opportunities for accelerating the rate of innovation and the identification of good ideas through an open approach. Rather than relying on a one-to-one approach, ideas are called for, published and commented openly, where anyone can see and comment on other people’s ideas. This open approach embraces the “publish-then-filter” concept related to web2.0. Ideas and content are first published on the web, and then filtered. This filtering does not rely mainly on the individual expertise of gatekeepers, but on “the wisdom of crowds”.

If you need help identifying good ideas, we’ve got a tool that aligns well with Enterprise 2.0 values. Get in touch.

Writing in The Wall Street Journal recently, Jason Zweig turned in a helpful checklist of how to predict the stockmarket based on market forecasts. The bullet point summary is useful, but we were pleased that the overall recommendation was to use many different sources, including prediction markets!

I’ve written before about how the standalone power of prediction markets can be easily integrated into a forecasting strategy employing multiple tools. So it’s refreshing to see Zweig co-sign this approach in his piece:

Every January, hordes of highly paid experts attempt to predict what the economy and the markets will do in the coming year. Later in the year, nearly all of the forecasts turn out to be wrong.

Here, we hope to offer something different: a blueprint for how to make practical use of these predictions, even when you suspect they are wrong. Taken together, forecasts can point toward the best and worst outcomes you can reasonably expect in a given year—and tell you how confident you should (or shouldn’t) be.

In short, Zweig suggests the following approach:

• Don’t bet a year ahead.
• Embrace error.
• Listen to the markets.
• Average many different forecasts.

“Finally, consult a prediction market…” Our customers would agree because they utilize many different forecasts, including our prediction market platform, Foresight. Contact us to find out how.

We were delighted to see Roxana Strohmenger take up the notion of prediction markets as an opportunity for market research success. Citing Surowiecki, she gets straight to the heart of what makes prediction markets so powerful:

The beauty of this method is that it is not relying on asking individuals to make predictions about what they will do in the future but rather what they think other people will do. Research has shown that we are unreliable witnesses to our own motivations. However, as social animals, we are actually very good at noticing what other people are doing, sensing why they might be doing it, and predicting what they will do. Therefore, a crowd can successfully predict the future and ― for a market research professional’s purposes ― can predict which products will do well and which will fail in the marketplace.

She’s also clearly focused on the ROI impact for market research:

Prediction markets have typically been used during the discovery stage, when market researchers are ascertaining which ideas should continue on for extensive research and development. Rather than spending significant amounts of time and money on a target population using monadic testing for each idea put forward, researchers instead use prediction markets to quickly and inexpensively determine which idea is predicted to be the winning concept and then run that concept through the product development life cycle. When comparing against findings from monadic testing, companies that have used prediction markets have repeatedly found that the results are exactly the same in terms of what is deemed the winning concept. And instead of taking several weeks and paying significant amounts of money for these studies, they have reduced the research process down to several days and reduced their costs by the order of 50%. This is definitely a methodology that should become a staple of any market research professional’s tool kit.

This material was from her blog post, “A Cool Research Methodology That I Predict You Will Use,” from Jan 18, 2011. We look forward to keeping up with Ms. Strohmenger’s coverage of this sector.

If you’d like to see your brand serving as the focus of a case study on successful market research, get in touch.

McKinsey has been engaged in a multi-year study of how organizations are using Web 2.0 and the resulting impact. They’ve shared some results in a recent write-up, and they’re striking: companies using the Web intensively gain greater market share and higher margins. This is encouraging news for us because we have an enterprise-class web application with a social focus.

McKinsey identifies three types of organizations that have realized significant business benefit from their use of Web 2.0: internally networked organizations, externally networked organizations, and fully networked enterprises.

Here’s there summary of the latter:

… some companies use Web 2.0 in revolutionary ways. This elite group of organizations—3 percent of those in our survey—derives very high levels of benefits from Web 2.0’s widespread use, involving employees, customers, and business partners, according to the survey. Respondents at these organizations reported higher levels of employee benefits than internally networked organizations did and higher levels of customer and partner benefits than did externally networked organizations. In applying Web 2.0 technologies, fully networked enterprises seem to have moved much further along the learning curve than other organizations have. The integration of Web 2.0 into day-to-day activities is high, executives say, and they report that these technologies are promoting higher levels of collaboration by helping to break down organizational barriers that impede information flows.

Our Foresight platform not only contributes to fully networking an organization, but it’s a great fit within an organization that is already moving in this direction, with rich buy-in from stakeholders throughout and on the periphery of the organization. Participation in a prediction market not only increases employee satisfaction, but it improves forecasting accuracy and delivers true ROI. Best of all, it’s a social network in a Web 2.0 framerwork that can be custom integrated into the workflow of an organization of any size.

This is why we were pleased to see this among the final recommendations from the McKinsey report:

Break down the barriers to organizational change. Fully networked organizations appear to have more fluid information flows, deploy talent more flexibly to deal with problems, and allow employees lower in the corporate hierarchy to make decisions. Organizational collaboration is correlated with self-reported market share gains; distributed decision making and work, with increased self-reported profitability.

Leveraging our social predictive analytics solution could be just the thing you need to foster organizational change and collaboration in 2011.

A recent article in the Financial Times got my attention because it seemed to pit scenario planning against forecasting as tools for the enterprise to prepare for the future. The best part about using prediction markets for forecasting guidance is that forecasting and scenario planning don’t have to be mutually exclusive strategic approaches.

From the article:

Imagine a future in which everyone got by on just three hours’ sleep a night; or in which employers were required to hire equal numbers of men and women for every type of job; or in which a technological meltdown persuaded millions to quit their cities in favour of rural self-sufficiency. Now imagine what each of these unlikely scenarios might mean for your business.

Such thinking might seem woolly but an increasing number of organisations are trying similar exercises as they struggle to make predictions in turbulent times. The practice of “scenario-building” (or “scenario-planning”) can, say its advocates, inform both long-term strategy and present-day decisions but most importantly it can equip senior managers with a mode of thinking that will help them deal more effectively with the unexpected.

I don’t disagree with the impact scenario planning can have, but it’s impact can be refined and strengthened when paired with prediction markets. Imagine if you could get your organization to undertake the exercise of scenario planning by presenting each of the scenarios as questions in a market. The market would offer insight into which of the scenarios are likeliest to have a real-world impact on your business rather than just serving as an exercise in creative thinking or outside-the-box forecasting.

Instead of having to consider the meaning of a seemingly random assortment of scenarios designed to provide outside-the-box thinking–those presented in the example from the article, for instance–imagine if you could know that your employees actually expected one of them to mean something important, for instance if impending legislation made organizational gender equity more relevant than a productivity pill.

If you’re engaged in scenario planning, make sure you’re identifying scenarios worth planning for. Prediction markets aren’t just forecasting; they’re collective forecasting. Let your organization help you know what to expect, with Consensus Point’s Foresight.

Yesterday, our Chief Scientist Robin Hanson presented at the Society for Risk Analysis 2010 Annual Meeting. We mention it because risk management is one of the primary domains of problems to which our Foresight platform can be applied.

Robin is known for thinking big and thinking about the future, and his talk yesterday was representative in both regards. Here’s the abstract:

Catastrophic Risk Forecasts from Refuge Entry Futures
Speculative markets have demonstrated powerful abilities to forecast future events, which has inspired a new field of prediction markets to explore such possibilities. Can such power be harnessed to forecast global catastrophic risk?

One problem is that such mechanisms offered weaker incentives to forecast distant future events, yet we want forecasts about distant future catastrophes. But this is a generic problem with all ways to forecast the distant future; it is not specific to this mechanism. Bets also have a problem forecasting the end of the world, as no one is left afterward to collect on bets. So to let speculators advise us about world’s end, we might have them trade an asset available now that remains valuable as close as possible to an end. Imagine a refuge with a good chance of surviving a wide range of disasters. It might be hidden deep in a mine, stocked with years of food and power, and continuously populated with thirty experts and thirty amateurs. Locked down against pandemics, it is opened every month for supplies and new residents. A refuge ticket gives you the right to use an amateur refuge slot for a given time period. To exercise a ticket, you show up at its entrance at the assigned time. Refuge tickets could be auctioned years in advance, broken into conditional parts, and traded in subsidized markets. For example, one might buy a refuge ticket valid on a certain date only in the event that USA and Russia had just broken off diplomatic relations, or in the event a city somewhere is nuked. The price of such resort tickets would rise with the chance of such events. By trading such tickets conditional on a policy that might mitigate a crisis, such as a treaty, prices could reflect conditional chances of such events.

Okay, so that’s not a traditional business problem. But if you’re an executive who’s uncomfortable with uncertainty, you should get in touch with Consensus Point.

Transformative economist Arthur Laffer, inventor of the Laffer Curve, has joined the board of directors of Nashville-based Consensus Point, creators of the Foresight prediction markets and social predictive analytics platform.

“Dr. Laffer’s insights have had a profound effect on fiscal and economic policy over the past decades,” said Consensus Point CEO Linda Rebrovick. “And we’re profoundly excited to have someone of his stature bring his wisdom to bear on this exciting technology and its related opportunities.”

“I’ve been intrigued by the broad applications of prediction markets since I first became familiar with the concept,” said Laffer. “The power of markets has shaped my thinking and the world, and I’m delighted to be able to advise Consensus Point and help enterprise find greater efficiencies and thus greater profits through the use of a powerful prediction markets platform.”

About Arthur Laffer: Dr. Laffer is the founder and chairman of Laffer Associates, an economic research firm that provides global investment research services to institutional asset managers, pension funds, financial institutions, and corporations. Previously, he was a founding member of the Congressional Policy Advisory Board (105th-107th Congresses), a member of President Reagan’s Economic Policy Advisory Board (1981-1989), and was the first Chief Economist at the Office of Management and Budget (1970-1972).

Laffer currently sits on the board of directors or board of advisors of a number of companies, including Alpha Theory, Armor Concepts, Atrevida Partners, BAP Power, BridgeHealth Medical, Cubit, Dataium, Executive Trading Solutions, HealthEdge Partners, LifePics, and Pillar Data Systems.

About Consensus Point: Consensus Point, a Nashville-based company, offers Foresight, a leading social predictive analytics solution providing forward-looking indicators to identify real-time emerging risks and trends in demand management, innovation management, and major initiatives.

Consensus Point is proud to serve some of the world’s leading companies from our Nashville headquarters. Last week, we announced our partnership with the Nashville Entrepreneur Center to create Startup Exchange. Now, we’re pleased and proud to have been named to Nashville Post’s Fast 50.

From the envelope:

This email is to notify you that your company will appear on Nashville Post magazine’s first ever list of the 50 fast growing, emerging companies to watch in Middle Tennessee.

Selection was based on numerous factors, ranging from revenue and employee growth to growth over a period of years, growth as compared to industry average, projected growth and projected pitfalls, among other criteria. But selection of the list also involved editorial judgment. Many of the companies selected applied to be considered for the list, but many were also chosen by the editorial staff at Nashville Post based on awareness of a company’s success or references from knowledgeable sources about area companies performing well. A handful are even selected for their promise of near-term growth, which, combined with their stories, snugly fit the list’s mission to identify “hot” companies.

And this is how Nashville Post describes the group:

Nashville Post’s Fast 50 is our annual look at Middle Tennessee companies on a roll. Fast-growing, emerging or, in some cases, simply brimming with promise, they represent some of the best the Nashville area has to offer in terms of entrepreneurial vision and growth.

From startups gaining their financial legs to more established companies whose mature growth is remarkable, this array of companies — big and small, highly profitable and increasingly profitable, full of dreams or realizing their dreams — is perhaps best described as a list of ‘companies to watch.’

It is our goal, every day, to be a company to watch.

We are pleased to be partners with the Nashville Entrepreneur Center in launching their Startup Exchange (ECX). ECX is a marketplace for investors and participants to simulate buying and selling startups affiliated with the Entrepreneur Center. And, of course, it’s powered by Foresight.

Trades in the market will reflect the confidence of investors in a startup’s ability to hit milestones including funding, pitches, and product launch. The EC Exchange also acts as a forum for dialogue and feedback between startups and the community excited by what they’re doing.

The Entrepreneur Center serves as the “Front Door” of Nashville for entrepreneurs. It serves as a gateway that fuses training, relationships, and resources to cultivate economic development and drive Nashville’s future as the epicenter of entrepreneurial endeavors.

For more information on ECX, just ask.

We were excited to read an excellent white paper we recently downloaded from our friends at Moxie Software (formerly nGenera). Called “Building the Collaborative Enterprise,”iIt includes 10 questions to ask about business opportunities through collaboration. Question #8 out of 10 stood out to us: “Are we pooling our judgments to obtain the best possible forecasts and predictions?” The ensuing discussion is all about prediction markets.

Prediction markets are an emerging way to aggregate individual opinions and insights into remarkably accurate forecasts. In a prediction market, participants trade “contracts,” essentially bets on future events, such as the outcome of an election or success of a new movie. The system is very similar to stock and futures exchanges, where participants buy and sell contracts based on their expectations. Contract values are proxies for the underlying probability that an outcome will occur, as expected by the market participants.

Effectively used by companies such as Hewlett-Packard, Google and Yahoo!, prediction markets are being implemented in a growing number of organizations. Common business questions include: What are sales for a given product going to be next quarter? Will the price of a particular raw material be higher or lower in three months? How many customer complaints are we going to receive by a particular date?

Prediction markets provide an innovative and efficient way to mine and aggregate otherwise buried information and insight. They offer a powerful new way to harness collective intelligence – turning unspoken views and tacit knowledge into tangible, quantitative predictions about the future. While the structure of these markets may vary, they all share the same goal: better information revelation. The assumption is that with the right motivation, large numbers of diverse participants can do a better job of predicting future events than the smartest individual.

This is a nice summary of the concept of prediction markets, including wonderful examples of the kinds of questions that emerge in successful implementations. We’d contend, though, that prediction markets are no longer “emerging”; they’re in the field and yielding success. Just ask our customers, many of whom are experiencing improved forecasting guidance by getting collective answers to questions similar to those provided as examples by Moxie.

In the process of getting to a more collaborative enterprise, our Foresight platform can build much stronger capacity for pooling judgments. As Moxie notes, in this series called Boardroom Imperatives, the business outcome is accurate business forecasts. If this outcome appeals to you, let us know.