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Tuesday
Feb242009

How Do Companies Harness the Power of Web 2.0 Technologies like Prediction Markets?

Broad participation is key to successful prediction markets: the more the better!Web 2.0 technologies are tools that utilize broad participation, collaborative creativity, and social mapping as a means to generating value. They include blogs, wikis, social networks, podcasts, information tagging, and prediction markets. When properly implemented, these tools have the ability to create great value for companies. However according to a group of surveys conducted by McKinsey, the number of executives dissatisfied with their company’s adoption of Web 2.0 technologies is the same as the number of those who are satisfied.

McKinsey’s recent publication points out that one important factor for effective Web 2.0 adoption is to clearly understand the differences between today’s Web 2.0 technologies and the corporate technology adoptions of the 1990s (such as supply chain management and or customer relationship management):

Corporate Technology of the 1990s

Web 2.0 Technologies

  • Direction given from the top
  • Engages fewer and more senior individuals
  • Does not require interactive participation
  • Technically complex to implement
  • Strong bottom-up element
  • Engage a broad base of workers
  • Require high degree of participation to be effective
  • Requires users to generate new information or edit content
  • Technically simple to implement

 

 

 

 

 

 

 

Based on the unique nature of Web 2.0 tools, McKinsey suggests the following six tips for making Web 2.0 technologies work:

  1. The transformation to a bottom-up culture needs help from the top.
  2. The best uses come from users—but they require help to scale.
  3. What’s in the workflow is what gets used.
  4. Appeal to the participants’ egos and needs—not just their wallets.
  5. The right solution comes from the right participants.
  6. Balance the top-down and self-management of risk.

How does this apply to prediction markets and internal corporate information markets? Some of the tips above are relevant: scale and quality of participation are key to effective prediction markets. Participation can be fostered when the use of a prediction markets bears relevance to employees’ daily responsibilities and also when employees recognize that senior management values the results of the prediction market. However, unlike other Web 2.0 tools, appealing to a participant’s ego instead of wallet, works against the logic of prediction markets which require an environment of anonymity and a fertilizer called “putting your money where you mouth is” in order to bear fruit.

Another interesting question that comes up from this McKinsey publication is whether combining prediction markets with certain other Web 2.0 technologies can help to make them more effective and widely used?

For more information read the McKinsey’s article here.

Flicker credit: ChrisL_AK

 

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