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.

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.

I read this article about leveraging employee ideas in The Wall Street Journal a few months ago that accentuates the value of employee input for successful innovation. It stuck with me because I’ve been thinking about how our innovation management platform automates their concept.

The WSJ piece floats the idea of innovation communities:

Companies that have successfully made innovation part of their regular continuing strategy did so by harnessing the creative energies and the insights of their employees across functions and ranks. That’s easy to say. But how, exactly, did they do it? One powerful answer, we found, is in what we like to call innovation communities.

Every company does it a little differently, but innovation communities typically grow from a seed planted by senior management—a desire for a new product, market or business process. A forum of employees then work together to make desire a reality.

Innovation communities tackle projects too big, too risky and too expensive to be pursued by individual operating units. They can be created with little additional cost, because no consultants are needed. After all, those in the midst of the fray already know most of the details relevant to the project.

We think innovation communities are a neat concept, but we also think you don’t need management overhead to create an innovation community; they already exist! Prediction markets provide another way to tap into innovative ideas from employees. Our Foresight platform has helped a number of customers create organization-wide innovation communities who participate in a prediction market, prioritizing ideas and then driving the best ones to the top of the list.

And this is what social predictive analytics is all about. Our platform unleashes employees in an already social environment and produces analytics provide forecasting guidance. Executives wind up with forward-looking indicators helping to identify real-time emerging risks and trends in demand management, innovation management, and major initiatives. And that’s why we have so many satisfied customers.

We suspect you’ve already got an innovation community. When you’re ready to deploy Foresight to harness social predictive analytics, let us know.

Consensus Point CEO Linda Rebrovick announced today that Brian Hogue has joined the enterprise software company as Vice President of Products. “With dozens of leading companies having achieved success with Foresight, we’re confident in our technology as a platform,” said Rebrovick. “We’re delighted that we’re joined by someone with Brian’s skills and experience to leverage the opportunities for proven predictive analytics products.”

Brian has over 15 years of experience delivering technology solutions. He has held a range of technology leadership positions in health care, public policy and digital publishing. Most recently he played a significant leadership role in developing Ingram Digital’s industry leading eBook asset management and distribution platform.

Hogue’s primary responsibilities will be to guide product strategy, drive product innovation from concept through general release, to oversee the software as a service (SaaS) implementation environments, and to lead interface development and integration with Consensus Point customers and partners. Foresight, the prediction markets and social analytics platform created by Consensus Point, is in its sixth major release. Hogue will oversee the launch of the seventh major release, which is currently in development.
 
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.

Because we hang out with smart people like our Chief Scientist Robin Hanson, we’re sometimes inspired to read scholarly publications relevant to our work. Earlier this year, a Masters Thesis came out of Erasmus School of Economics with an intriguing title: “The Relevancy of Group Expertise for the Accuracy of a Prediction Market.” Danielle Almeida’s prose hooked us from the first page…

First of all, Almeida provides a pithy description of prediction markets:

A prediction market is a futures market in which a large group of people can express their opinion about the out coming of a certain event by buying shares from the answer that – according to the participant – is most likely to be correct. Prediction markets are increasingly implemented in enterprise environments.

The author then makes a list that reminds us of our own list of dos and don’ts:

• Invite as many participants as possible to the company’s prediction market: there is no relevance with regard to the accuracy of the out coming of the prediction market.
• In general, employees that have more knowledge on the subject need less explanation why you want them to participate. Also, more knowledgeable employees are more likely to keep participating when related questions are asked consecutive. This means that non-experts might need an extra stimulation to participate.
• Be aware of the ‘contradictory effect of the prediction market’ that might occur when non-experts are involved. It seems that they have different approaches to come to their decisions. While experts merely buy the shares of the answer they believe is most likely to be right, some non-experts tend to play a more strategic game.

You’ve been hearing us talk about the efficacy of prediction markets for a while, but what we offer is much more than just a platform. We know the platform, and we know how to make it effective in the enterprise. Which is why we offer extensive consultative services, from implementation through monitoring and management.

Finally, we hate spoilers, but we’re going to go ahead and give away the ending because we can’t help it:

Based on this research, we would like to recommend all companies to consider implementing a prediction market to support their decision making process in case predictions are a necessary part of the decision making process. We have proven with this research that – based on several data – a group of experts is not capable of making significant better predictions than non-experts.

Especially companies that have hired expensive experts to make forecasts about future events – such as turnover and product innovation – can save a lot of money, by just asking employees, suppliers and customers to make these forecasts for them. Even on a larger scale than previously researched, experts do not outperform non- experts significantly when using a prediction market to forecast.

If you’re an executive who needs better forecasting guidance, you don’t need an expert; you need experts in implementing prediction markets like Foresight. Our expert advice: call us.

Last week, Robin and I presented to a group of Chicago-based knowledge managers on the topic of enterprise prediction markets. We were focused on efficacy in the enterprise: what makes markets work in a business environment and why. Of course, the first thing that makes them work is selecting the right platform. We also tried to provide some background on market theory, as well as applied lessons.

We think the reasons markets work for forecasting guidance are fascinating, and we’re perpetually fascinated by Robin and his research. We’re continually impressed by customer success, too. We did our best to ensure that the talk included a mix of theory and applied material drawn directly from those customer successes.

Here are a few lessons from the talk on how to operate an enterprise prediction market with ongoing success:

Do:

• Integrate
 into
 enterprise
 processes
• Nurture executive sponsorship
• Make accessible to all
• Customize to your business
• Make it part of your value proposition

Don’t:

• Run a 30-day pilot
• Use a similar group of participants
• Run a market without promoting it
• Assume leaders will act on insights

If you’d like to dig deeper into the why of the do and don’t, we’ve posted the slides from our talk. And if you’d like to engage our services, we hope you’ll contact us.

As companies begin to focus on growth, innovation has once again become a priority, based on a recent McKinsey Global Survey. While 84% of executives say innovation is extremely or very important to their companies’ growth strategy, many of the challenges—finding the right talent, encouraging collaboration and risk taking, organizing the innovation process from beginning to end—are remarkably consistent.

The authors offer some suggestions on how companies can be more successful at innovation: “In particular, they can formalize processes for setting priorities and commercializing products and integrate innovation into their strategic-planning efforts.”

That’s where Foresight can help:

• Foresight can enable improved innovation processes and tactics, by uncovering gaps in processes.
• Foresight can accelerate the time to review good ideas, by 50% or more.
• Strategic planning and innovation are both aided with the type of forecasting guidance and collective thought leadership offered by Foresight, enabling improved business impact.

A key graf on trends and challenges:

The results also show that the approach companies use to generate good ideas and turn them into products and services has changed little since before the crisis, and not because executives thought what they were doing worked perfectly. Further, many of the challenges—finding the right talent, encouraging collaboration and risk taking, organizing the innovation process from beginning to end—are remarkably consistent. Indeed, surveys over the past few years suggest that the core barriers to successful innovation haven’t changed, and companies have made little progress in surmounting them.

Gartner’s much-reviewed Hype Cycle shows prediction markets progressing toward mainstream adoption. We’re expecting that this signal of maturity means that they will continue to make game-changers out of the companies that employ them as innovation management tools.

After all, the authors of the summary are optimistic:

More positively, the results also suggest some ways that companies can become more successful at innovation. In particular, they can formalize processes for setting priorities and commercializing products and integrate innovation into their strategic-planning efforts.

Here’s where our Foresight platform stands to benefit survey respondents most:

Another consistent pattern is that far fewer respondents say their companies are good at the specific processes and tactics frequently tied to successful innovation—such as generating breakthrough ideas, selecting the right ideas, prototyping, and developing business cases. Respondents say their companies are best at adapting once they’re in the market, with 58 percent claiming to be successful. As in the past, executives have the most difficulty stopping ideas at the right time, with only 26 percent of respondents to this survey saying they do this well.

If you were one of the 2,240 executives who responded to McKinsey’s survey and expressed anything less than confidence about your company’s abilities in innovation management, it’s time we heard from you.

Just before the Labor Day weekend, business and academia came together for a roundtable at the University of Miami School of Business Administration, “featuring presentations that highlighted various approaches to the discipline of risk management.” We were delighted to read about a roundtable of this sort bridging business and academics because we think such collaborative efforts are important, but we also have an important solution to a number of risk management problems. So we were especially delighted that after a clear statement of problems of risk, an especially incisive member of the faculty introduced the concept of prediction markets to the group.

Here are Brian Rice and Henry Pujol, a pair of executives from Royal Caribbean Cruises, explaining the risk scenario:

Brian Rice, executive vice president and CFO of Royal Caribbean Cruises and a member of the School’s Board of Overseers, spearheaded iniatives to develop the roundtable and kicked it off by explaining the importance of risk management in today’s business culture. He pointed to the familiar crises Toyota and BP faced this year, and stressed how corporations are charged with preparing for the inevitable.

“Risk is a big part of our culture. It’s something we’re very focused on at Royal Caribbean,” Rice said. Henry Pujol, the company’s principal accounting officer and a member of the School’s Accounting Advisory Board, explained the cruise line’s top-down approach to risk management in the first presentation. Royal Caribbean has moved from a once-a-year risk management process to an around-the-clock audit.

“Some risks are easy to identify, like the price of fuel,” Pujol said. “Others are more difficult to recognize. The biggest challenge is the unknown. We’ve learned that we may not be able to prevent every risk, but we can react so there is not a panic moment. We prepare ourselves for the unexpected using what-if scenarios.”

And here’s David Kelly, an associate professor of economics, on the value of prediction markets:

“Prediction markets give us a very low-cost way to measure risk precisely and continuously,” Kelly said. “In most cases, it’s more accurate than expert opinions and surveys.”

We’ve already helped customers experience profound success managing risk in the enterprise, and we invite you to explore examples of our customer success.

Maybe, in addition to our world-renowned Chief Scientist Robin Hanson, we need to add a Chief Economist…

The 5th annual Global Intranet Strategies Survey just closed. Jane McConnell, its creator, gleaned some important insights even before it closed. To our eye, she saves the best for last: prediction markets appear to be emerging in the enterprise.

The trends Ms. McConnell identified are worth reprinting in their entirety:

• Mobile optimization is not happening very fast. There has been no evolution since last year’s survey: Only 7% say their intranet is optimized for mobile access, 24% are running pilots or are in the planning stages. This is identical to last year.
• Social media is advancing inside. It is implemented to some extent in 70 % of the organizations, up 10 % points from last year. Out of these, 20 % have had social media for less than one year, and over 25% have had it for 3 or more years.
• Enterprises are looking outwards…. 40% say “We create official, branded spaces on external networking platforms such as Facebook.” But most are still being cautious….and only 11% say “We encourage employees to blog on the internet.”
• Collaboration is now “self-service” for some. Out of 276 organizations with blogs, wikis and/or collaborative spaces, approximately 40% provide a self-service solution where people can do it themselves with no or minimal help desk support. However, from 45 to 55% say that only IT can open these spaces.
• Are prediction markets emerging? 10% of the participating organizations already have them. Another 7% are in the pilot or planning stages. Last year, the highest we had were 3% who were testing prediction markets.

Keep in mind, an intranet is the network that is built inside an organization, frequently for the purposes of communication, project management, sales process, etc. When we implement our Foresight platform, it is often in the context of an intranet.

The final insight about prediction markets tracks nicely with Gartner’s latest edition of their Hype Cycle for Social Software, in which prediction markets were clearly maturing. We’re anxiously awaiting the final results of the survey. In the meantime, isn’t it time your organization set up a pilot?