Every business needs to innovate regularly, but betting on new ideas is always risky and the failure rate is high. The New York Times recently ran a detailed article about how companies can better their odds of harnessing and selecting winning new ideas, by turning to prediction markets and the wisdom of crowds.
The InterContinental Hotels case study features NewsFutures’ Idea Pageant, a proprietary prediction market variant that we designed especially with a large-scale innovation process in mind: Whereas regular “trading” markets can be used to rank a few ideas, this approach is terminally cumbersome when dealing with several dozens or hundreds of ideas… The Idea Pageant, on the contrary, is highly scalable, as this case study illustrates.
Here’s the relevant extract from the New York Times article:
At InterContinental Hotels, Zubin Dowlaty, vice president for emerging technologies, decided to create an online market last fall to “harvest and prioritize ideas” from within the hotel’s 1,000-person technology staff. “We wanted to tap the creative class that may not be able to voice their ideas,” Mr. Dowlaty said.
With InterContinental’s prediction market, players were asked to submit ideas anonymously, with a description and the benefit to customers and company. The bettors were given virtual tokens, each receiving 10 green ones to be placed on the best ideas and three red for bad ideas.
There were no limits on the number of times bettors could change their wagers as new ideas came to market, and the market was open for four weeks. The five top ideas (most green tokens), five bottom ideas (most red) and the top five bettors (most accurate, according to market consensus) were listed regularly.
The winners got $500, while second- and third-place finishers received $250 each. The winners, Mr. Dowlaty said, were engineers, analysts and contractors, not managers.
More than 200 people participated, submitting 85 ideas. One person proposed bringing back quarter-operated vibrating beds. “That one got beat down really fast,” Mr. Dowlaty said.
The winning ideas were suggestions to improve searching the company’s Web site to find and book hotel rooms. Two projects have been started as a result of the market, Mr. Dowlaty said.
We were happy to learn later that one of the two projects that got started as a result of the market featured such an innovative way of using Google Maps that Google wrote a case study about it…