HBS Working Knowledge (Anil Kambil) writes that by gathering collective wisdom, idea markets can improve your forecasting, knowledge management, and decision making. The three steps that managers need to take to put an idea market into organizational practice are:
Step 1: Tap into strategically important but difficult-to-measure customer behaviors – Take new product development, a process usually fraught with uncertainty. Will customers like the new idea? Will it be better than a competitor’s new product? Now, imagine that a firm could solve these problems using markets, which may be twice as effective at predicting customer preferences as traditional tools like the focus groups, surveys, and conjoint analysis.
Step 2: Unlock knowledge to tackle organization-wide challenges – As a real-time and dynamic polling system, idea markets can play a useful role in eliciting and aggregating the beliefs of individuals within an organization or a broader network. But these markets can also generate valuable signals to decision makers. When idea market prices move dramatically, decision makers should ask, Why is the price moving? What is changing in the beliefs of participants? Market makers can build message and discussion boards into systems to reveal trader beliefs and other key pieces of information.
Step 3: Exploit markets to gain buy-in from customers and managers – Survey methods often require hundreds of participants, but idea markets can work with as few as twenty to thirty participants. Managers who want to implement idea markets can therefore sell them as a cheaper and more nimble way to gauge customer preferences and employee insights than traditional approaches. Finally, markets are dynamic and allow participants to adjust their beliefs based on price and the trading actions of one another revealed in the markets.