Tag: social networking

Adrian McDermottAdrian McDermott November 8, 2010

Benefitting from the wisdom of the crowd

One reason that innovation software, and the idea of crowd sourcing, has become popular in the last few years has been the influence of a single book, James Surowiecki’s The Wisdom of Crowds. While in the market of business publications there have been plenty of sensations – Malcolm Gladwell’s The Tipping Point would be an obvious example – it is hard to think of any in the last decade whose influence is unchallenged and still growing. I should make it clear, however, that this blog post is not a book review, but rather a discussion of some of the main ideas of “The Wisdom of Crowds”.

The other reason for the attention paid to Surowiecki’s ideas is that they are radically different to received wisdom and could be very important to many companies at a time when the margin for error is becoming very small. The technical and innovation lead that Europe and the US had over China and other Asia Pac economies has been vanishing gradually over decades, as quality of manufacturing and speed of innovation have improved steadily. Companies have to be strong in every area of their operation, from market analysis through to delivering the products that fit and even redefine the market. Intelligence, innovation and decision making have to be done well, and fast!

How businesses usually solve problems
The standard model of business decision making has been that the more important the decision, the more senior and the fewer people are involved in it. Where the expertise at the top is insufficient, outside experts are called in to assist. The rationale of course is that the best brains in the business have got to the top, and there is no point using the company’s second-best. Plenty of tools have emerged to stimulate analytical and idea creation abilities within these groups, but the point remains that the make-up of these groups is very restricted.

The problems with this approach:
1. Life changes: It is a truism that in each new war, the generals at the top, i.e. the commanders who fought most successfully in the previous war, are soon replaced because they are fighting the wrong war. Likewise in companies, a history of promotion shows at best success in dealing with past challenges, at worst a series of lucky breaks or a talent for getting spotted.

2. Experts are people who seem to know something you don’t.  It is very hard to tell whether they really know it. Experts are also famous for disagreeing with each other: the top expert is often simply someone who scored the most recent victory in an continuous argument.

3. Similar to point 1, experts have a history of solving past problems, but this guarantees nothing in respect of new ones, especially where these need a new way of thinking. For experts, too, awareness of past success can create a block to envisaging new solutions.

4. Experts often share a common academic background, which can bias their take on a problem, and often respond to each other either for validation or differentiation, both of which remove the critical element of independence.

5. The smartness of an organization has a relationship to the total smartness of all the people in it – the sheer weight of numbers of people thinking about a problem makes a real difference to the likelihood of successful analysis.

6. Restricting analysis of a problem to a small number of people leads to the danger of consensus for political reasons – either fair of disagreeing with the boss, or trying to pre-agree, i.e. to predict what the boss will want to hear, or maintaining consensus in the group. These are powerful factors and make it a dangerous business to try to be heterodox or introduce information that does not fit.

That all seems pretty damning, but to date, getting wider feedback in a practical way has been very difficult both technically and politically, and this is perhaps the main reason that we have stuck with the status quo for so long. However, collaboration and innovation technologies make solving these problems a practical proposition, and one that it makes no sense to ignore. But before looking at how such solutions can work, we should briefly look at why they work.

The organization is smarter than any of its subsets

That is the main single point that Surowiecki has to make, and he has compiled a lot of convincing research in social psychology to make the case. In experiment after experiment, a diverse group of people who are not expert has more predictive ability than any single expert or of a smaller group with more expertise. The phenomenon has long been known. Over a century ago, Francis Galton compared ordinary people’s guesses of the weight of an ox (in a competition in a country fair) to those of experts (e.g. cattle breeders). Galton was a snob, to put it bluntly, and wanted to prove how defective the judgment of the ordinary person was. The averaged guess of the crowd was astonishingly close, however, to the real weight, and much better than that of the experts. This phenomenon has been seen repeatedly since in experiments pitching large diverse groups of people against small groups of experts to predict election results, share prices and first-week box office takings.

Target practice: amateurs can miss by more, but their combined score hits the spot

In many cases, the accuracy of predictions made by a large, assorted group of people is almost eery, as though there is some paranormal power at work. More prosaically, though, it is easier to think of it as like throwing a large number darts at a target. An unskilled group will generally miss by quite a bit, but not all in the same way, whereas star players may well share strategies and training, hence make similar kinds of errors. Applying the idea to more information-related themes, one could say that a large, diverse group of people have all kinds of different ignorance, and make all kinds of errors, compared with a more homogenous group.

What is essential for groups to make accurate judgments:
1. Diversity. Groups work well when the types of people and the information sources they use are diverse. Larger numbers of participants offer more diversity and less risk of “groupthink”. Small groups, especially where members share common interests, are likely to polarize towards a consensus, rather than risk a split.
2. Independence. Crowd sourcing works best when participants are not responding to each others’ opinions – or trying to predict them. This is perhaps the biggest single source of problems in decision making. One effect is to predict what the most important or prestigious group member might think, meaning that the focus is on second-guessing, rather than on the real problem. A second effect is cascading, when one person’s judgment sways that of others, independent of their own ideas. Nearly all forms of open discussion cause positive feedback effects or distortion
3. Decentralization. When questions of loyalty, prestige or career advancement come in, the effects of distortion and feedback are serious. These distortions are particularly strong when information flow is strongly influenced by, and reinforces, hierarchies.
3. Selection. There has to be a way to actually get the information from the people who have it, to the people who want it, that does not create bias or feedback. It is easy enough to talk about open businesses, but it is a model that is extremely rare in practice, because it is part of a manager’s job to stay in control, and without the sense of control it is hard to manage! This is perhaps the place where collaboration and innovation software play their greatest part, enabling decision makers to retain control, but gain a wide enough variety of input.

The power of social technologies to improve analysis and idea selection

One thing that sets The Wisdom of Crowds apart from titles that have caused a storm and then disappeared, is that the thesis does not depend on the internet for its validity. The research cited spans many decades. However, social technologies are the great enabler. Companies need a strong sense of leadership, and people who have demonstrated good judgment, effort and responsibility are rightly chosen to lead. However, that does not mean they have to have all the ideas. What they need is a way of selecting and aggregating the best of a diverse input of ideas from all the brains of the company – and of course that includes their own ideas, too. What employees need is a simple, enjoyable way to contribute those ideas, and one that establishes their worth as idea generators for the company. This is not a utopian vision, but a simply reality, and one that is increasingly being espoused by companies that dare to think positively.

Ralf HallerRalf Haller July 1, 2010

Ask the right questions first before you invest into any projects

I am reading an excellent book on how to do Productive Thinking in a business setting: Think Better by Tim Hurson. In essence he describes a sophisticated systematic way how to better do brainstorming sessions combined with critical thinking to come to creative answers. In the six step process he uses step 3 is the most important one: What’s the Question?  Quoting Peter Drucker:

The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong question.

I think that this is an entirely correct statement and also in my experience the most common reason why initiatives such as in marketing, sales or product design, product development fail is that the wrong questions have been asked to formulate the challenge or problem and then all efforts are targeted at solving the wrong problem.

Tim Hurson writes that the ultimate question – a truly Catalytic Question – must be figured out first and unless you don’t do that it doesn’t matter how good the rest of your work is.

Idea management software solutions such as the one we represent - Kindling – are excellent tools to not only find ideas but also find the right questions to start with before all efforts are made to try to solve the wrong or not core issue.

Adrian McDermottAdrian McDermott May 26, 2010

Innovators – Early Adopters – Early Majority… – is this product adoption model flawed?

The classic Everett Rogers graph of product diffusion, including ideas such as innovators and early adopters, is well known even the world over, and the terms used can be found in every magazine article about new market trends. But is it right?

Rogers stated that adopters of any new innovation or idea could be categorized as innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%) and laggards (16%), based on a bell curve. These ideas about diffusion of innovation are among the standard vocabulary of product managers and marketers. But in a Marketing Bulletin, 1995 article I was shown recently, Malcolm Wright and Don Charlett raise some big questions about the Rogers Model, stating that the Bass Model, also from the 1960s, is more accurate.

Examples they quote to show how the Bass model has given good predictions include consumer durables like televisions and clothes driers, but also more complex projects such as diffusion of cocoa-spraying chemicals among Nigerian farmers, spread of an educational innovation in the US, and purchase of photovoltaic home energy systems in South-West US.

So, what is wrong with Rogers’ model?

I had assumed like many that complex products need a little market testing by innovators and early adopters before the mass market will adopt them. However, some of the examples quoted above in support of the Bass Model instead are pretty complex. Wright and Charlett question two key assumptions:

  1. That some individuals are “venturesome”, as a personality trait that is consistent and correlates with length of time in education; however, the evidence for this trait is weak.
  2. That the early phase of marketing is dominated by media advertising, and word of mouth becomes important as the market begins to mature.

The Bass Model stresses the influence of interpersonal communication, including nonverbal observation, right from the start.

So why has the Rogers Model been so popular?

My guess is that it probably worked quite well when applied to buggy software that needed a period of beta testing or of being in stealth mode, but then the idea became over-generalized.

If Bass works best, what does that mean for marketers?

Before answering that question, I would pose another one. Why might it be even more important now? The key lies in network effects. Social media creates powerful network effects, so if the power of interpersonal communication was important before, it is now even more so. If the Bass Model is really more accurate, focusing on mass advertising as products are launched, or concentrating mostly on early adopters could waste valuable time and make the difference between product success or failure. The key is to realise that network effects are the best friend a marketer can have, and should be aimed for as early as possible.

Ralf HallerRalf Haller April 8, 2010

First solar-powered plane to take off

Only a week after CERN in Geneva could successfully create electron collisions that could lead to new understanding of how the cosmos started, another French Swiss (in the French speaking area of Switzerland) world first was achieved. The first solar-powered plane took off with a test pilot setting an important milestone for this ambitious project called SolarImpulse trying to fly around the world with a purely solar-powered plane.

I asked myself why it is that the Romands (as the French speaking Swiss are called) seem to be so much into world’s first recently.  Is it coincidence or has it to do with a certain attitude and entrepreneurial spirit that they have in their genes? I was also quite amazed to see how openly both events were celebrated which was so much different than the cool banker style that one otherwise gets to see on TV (and in movies like James Bond) when it comes to the Swiss nature. :-)

From a more general view you could also say that the good guys are in the West of Switzerland (creating great positive public news) and the bad guys (if you want to use that word) are in the East where the bankers are at home. Uuups that comparison might not go well though with the folks in Zurich I suppose.

But let’s get back to the SolarImpulse project. Congratulations to a great achievement and a great PR event. The website contains also great social community ideas and crowd financing approaches such as the possibility to buy a solar cell and name it your own for just 200 CHF. With 12,000 solar cells integrated into the wings that also adds up to a nice 2.4 million CHF. Well done too guys and good luck for the next milestones!