BitInsight

Utilizing prediction markets in an executive search process

2010-05-20T16:40:00.000-07:00

As the leader of English at Large's Search Committee for a new Executive Director in early 2009 we were facing several critical issues. We needed to hire a new Executive Director as quickly as possible. It was also critically important that the entire Board be engaged in the hiring process. To accommodate a large pool of candidates and enable a geographically distributed Board to participate an online prediction market was established with each candidate representing a market choice. Resumes and cover letters were distributed electronically to board members prior to the start of the market and the market was opened for approximately 10 days. The market proved extremely effective in sorting the candidates and allowing rapid execution against a tight deadline. A small pool of prospective hires were identified via this process who were then telephoned screened and interviewed per traditional methods. A new Executive Director was identified and hired in record time through this effort.

Difficult to create a news brand via prediction markets

2010-05-10T16:37:00.000-07:00

The inability of hubdub.com (the news prediction game) and The Industry Standard to successfully leverage prediction markets into a new form of media brand demonstrates the difficulty of using this technology for this purpose.

Who is using prediction markets

2010-05-10T15:29:00.000-07:00

A non-exhaustive search of published reports list the following companies as users of prediction markets: Eli Lilly (A. Bingham), Best Buy (J. Severts), Google (B. Cowgill), Harrahs (F. Keeton), Ingenix (T. Brown Stevenson), GE Research (C. LaComb), Headwall Photonics (D. Bannon), Corning, Qualcomm, Microsoft, and HP. Best buy, Google, Harrahs, Microsoft, and HP were using the approach for sales forecasting and Eli Lilly, GE Research, and Headwall Photonics were using the approach for new product development. I'm uncertain what the applications were at Corning, Qualcomm, and Ingenix.

Virtual Groups - planning for success

2008-10-22T05:22:00.000-07:00

Research on virtual groups indicates the importance of initial communications to set the proper behavior norms for group participants. Interestingly the active behavior of a small number of individuals in virtual groups is also noted as driving overall behavior norms. Speculation for this is that the dearth of social cues in the available media enhances those cues that are available and increases their impact (this also relates to the importance of careful up-front communication). The beneficial impact of well orchestrated and clearly defined virtual group norms is well documented and managing this process carefully when establishing a virtual group is critical.

Leveraging Science to Optimize Sales

2008-07-21T13:35:00.000-07:00

Steve Diamond, Managing Director at BitInsight, and Malcolm Rees, Global Head of Sales for DHL Express, recently published an article in the magazine SellingPower called A Scientific Approach to Managing the Salesforce at DHL Express. The article notes that to be effective it is important to tie your sales management and productivity tools to your company's strategy, to benchmark a small number of high leverage key performance indicators (KPIs) for sales team tracking, to evaluate behaviors as well as results, and to fully engage the organization in this effort.

The article emphasizes that effective use of sales force management tools requires generating timely, accurate data and using this data to drive decisions. Critical to this effort is knowing what metrics to track and knowing what tracking data results are optimal. This article provides insight into how DHL Express addresses these two critical points via benchmarking and gap analysis.

Semantics

2008-07-14T05:22:00.001-07:00

In the technology realm one constantly sees references to knowledge management, business intelligence, data mining, artificial intelligence, collective wisdom, collective insight, etc. While this nomenclature typically refers to specific actions or tools, the implied meanings derived from the separate elements of these combined words must be considered carefully, especially when this implied meaning drives expectations of the benefit derived from implementing technologies in these respective areas.

To clarify this potential semantic ‘confusion’ a quick search of definitions at dictionary.com can prove helpful. The complete definition is available via the link however critical elements of the definition are listed below:

Data: facts; statistics; information
Intelligence: capacity; aptitude
Knowledge: personal knowledge; result of study or experience; facts, truths, principles
Wisdom: knowledge of what is true or right; judgment
Insight: instance; apprehending the true nature.

Classification of the various actions and tools under these categories does not necessarily imply definitional accuracy. Careful consideration should always be given to what is really being delivered versus being swayed by the nomenclature’s ‘semantic lens.’

Better Choices

2008-07-11T05:57:00.000-07:00

The Chief Security Officer of Siemens gave an excellent talk at a recent Infragard meeting discussing success. Referencing a Conference Board report he noted two facts:

Most people are within 10% of each other in terms of IQ
Most people work the same number of hours/days per year.

As we all know however not everyone is equally successful at what they do so what drives this difference? The premise presented is ‘choice’ where making and repeating good choices is what truly drives the majority of difference in performance.

Successful people were noted as ones that make choices that ‘others don’t like to make’ and good choices were identified as those that are:

Fact based
Relationship based
Drive follow thought
Receive long term commitment.

If one accepts this premise, assisting employees in making better choices could have a dramatic impact on a company’s performance! Is a culture and infrastructure that supports better choice what drives much of the difference in company performance within a given industry?

Collective Benefit

2008-07-10T06:12:00.000-07:00

Even more so than with other business issues one would anticipate that corporate security concerns would bias corporations toward non-disclosure and confidentiality however InfraGard, an information sharing and analysis effort sponsored by the FBI that serves the interests and combines the knowledge base of a wide range of members throws this conventional wisdom "out the window."

At the recent annual meeting of Infragard's New England Chapter the benefits of collaboration were clearly articulated by the session presenters. Quotes from the meeting included:

"The collective view is more powerful."
"Collaboration and cooperation"
"Strength in numbers"
"Most valuable interactions are those among peer groups."

Infragard is not the only collaborative example in the security realm. The SANS Institute is another fine example of the benefits of information sharing, in this case to communicate vulnerability information and disseminate educational material. Even the tools used in the security space leverage open source resources; the majority of intrusion detection systems deployed worldwide capitalize on SNORT, the open source intrusion detection and prevention system.

The risk/benefits of information sharing must always be weighted however, as we see in the security arena, the benefits of accelerated action and improved performance in many instances will justify a corporation's policy towards openness and collaboration.

Enterprise 2.0 Conference Reality Check Wisdom

2008-06-12T12:02:00.000-07:00

Professor Andrew McAfee from Harvard Business School moderated a great panel at the recent Enterprise 2.0 Conference in Boston titled Enterprise 2.0 Reality Check. Panel participants included Pete Fields (SVP, eCommerce Division, Wachovia), Ned Lerner (Director of Tools & Technology, Sony Entertainment), Simon Revell (Manager of Enterprise 2.0 Technology Development, Pfizer Ltd), Don Burke (Intellipedia Doyen, CIA) and Sean Dennehy (Intellipedia Evangelist, CIA). The session covered the various deployment experiences and lessons learned by the panelists in rolling out Enterprise 2.0 enabled user applications. Words of Wisdom included:

Encouraging use:

How someone answers the question "Does you vote make a difference?" is the strongest indicator of whether they will vote in an election. Similarly users must feel contributing to collaborative environments will "make a difference".
Need strong facilitation for collaborative tools to be successful
Utilize Enterprise 2.0 consultants and manage user expectations
Users need to understand that all perspectives are heard, considered and respected
Key is to get someone to "figure it out" and they will bring others
Social me first...get small success stories
Find the right project
Give up control and employees will do the right thing
Just do it!
See from the users perspective (is their value in the application to them)
Study your in-box to target opportunities for collaboration tool applications with real value
Change work practices to incorporate collaborative tools
Allow switch of tasks from traditional way to new way using collaborative tools
Note that many "early adopter" users are technology-centric (perhaps target them first)

Communicating value:

Top executives bring in consulting firms such as McKinsey or Accenture and pay millions of dollars to get the truth from employees that can be accessed via collaborative technologies
Vibrancy of the application is a good metric
Elevator pitch is "Using technology to connect people for business value."
Expectation management is key; successful adoptions may involve less than 10% of potential users and of users only 1% may be active, 10% occasional users, and the rest observers
Use anecdotes to "sell" value
Remember that the "crowd" provides input they do not become the decision makers

Barriers to adoption:

Middle management is not comfortable with these tools (four generations in the workforce now)
Change in general is accelerating however fundamentals of management have not changed
User issues, not management, is the major impediment to adoption
Change management is key - easy to under-estimate inertia
Smaller organizations will likely not see as great a network effect (although still useful)
How much does management want an honest dialog?

Innovations Unleashed through Enterprise 2.0 technologies

2008-05-28T10:26:00.000-07:00

The Harvard Alumni Association in partnership with Harvard's Office of Technology Development (OTD) and Harvard Business School held a seminar recently on efforts to engage Harvard alumni to facilitate efforts to bring Harvard innovations to market. The University generates 250 new inventions per year supported by a research budget of approximately $600 million. The OTD executes approximately 50 license agreements per year and generates approximately $24 million of royalties annually for the University. Isaac Kohlberg, Senior Associate Provost and Chief Technology Development Officer, has done an outstanding job expanding the efforts of OTD to capitalize on the Universities innovations and, in seeking engagement with Harvard's alumni network, has introduced a creative approach to facilitate the difficult task of translating a raw technology into a successful enterprise.

Successful engagement with Harvard's more than 300,000 strong alumni to facilitate this task will require careful leverage of many recent social networking and Enterprise 2.0 innovations however the technologies to accomplish this effort are now in place and the timing is excellent for the launch of this exciting initiative.

Cultural Awareness via Advisory Board Diversity

2008-05-14T05:20:00.000-07:00

Several years ago, while I was running the North American subsidiary of a multi-national company, a senior engineer from our headquarters site (where English was the second language) reached out to my team about a potential temporary assignment in the U.S. In his resume he noted his interest in "mind games" to which I and my team, noting we had enough "mind games" to deal with already, passed on his offer without further consideration. As I thought about this episode some time later I realized the employee's "mind game" reference was quite literal, i.e. solving rubix cube, versus our instant and more nuanced interpretation. Unfortunately for the employee and my team an excellent opportunity was not given its proper consideration.

The simple example above plays out daily in cross cultural dealings between geographically dispersed corporate operations or in the execution of global go-to-market situations and, potentially, with much more serious consequences . As noted by Frank Brown, Dean of INSEAD (the international business school), in a recent article titled Cultural Capital in the C-Suite in the April/May 2008 issue of Chief Executive magazine most U.S. corporations do not have representative cultural diversity on their Boards, creating a potential disadvantage for their overseas expansion.

As part of our service offerings at BitInsight we establish and manage local Advisory Boards for international subsidiaries to provide feedback and governance to both the local team as well as the overseas parent. These Advisory Boards are typically sponsored and financed by the parent organization. Providing a dispassionate sounding board in-country that services both the local team and overseas management is one mechanism to help bridge this cultural divide.

Unemotional Market Input for Decision Support

2008-05-13T12:15:00.000-07:00

As noted in a recent Harvard Business Review article titled Winning Is Everything, rivalry, time pressure and being in the spotlight often lead to emotionally charged negotiations and decision disasters (or opportunities for exploitation depending on what side of the negotiating table you are sitting on).

Leveraging prediction markets as a tool for decision support can diffuse some of these negative effects by adding a dispassionate viewpoint and capturing the "wisdom of crowds" as additional input to be considered. At BitInsight, a consulting firm utilizing prediction markets, we see interest in applying prediction market techniques to assist with acquisition decision support. The technique is ideally incorporated into an on-going decision support process and not applied for the first time in the "heat" of a large negotiation.

Ultimately a market will decide on the wisdom of an acquisition decision made by any single individual. Isn't it better to have this feedback before-the-fact via an internal prediction market where little real money is at stake (if any) versus after-the-fact via the capital markets?

Seed Funding via Prediction Markets

2008-05-08T07:17:00.000-07:00

In our consulting engagements at BitInsight we see clients leveraging the power of prediction markets to assist with resource allocation decisions, typically to support growth. These include allocation of funding to existing product lines, application of resources to evaluate and/or execute acquisitions, and the utilization of capital to support longer term research and development. A great presentation on the application of prediction markets for product development decision support was presented by Christina Ann LaComb from GE at the recent Conference on Corporate Applications of Prediction/Information Markets. A recent post on The Deal.com also noted the application of prediction markets to support acquisition analysis.

An intriguing application of prediction markets, which we have not seen applied to date, is to utilize them to assist the funding of basic research and development outside the context of the enterprise. A recent article in American Scientist titled A Market for Basic Science proposes an interesting mechanism to enable this process. Assuming legal considerations can be addressed, our in-enterprise experience would indicate that this could be a very effective application of a prediction market.

Defining the Sandbox for Prediction Markets

2008-05-02T07:36:00.000-07:00

The announcement by the Commodities Futures Trading Commission (CFTC) that they will be soliciting input for review and consideration on potential regulation of prediction markets hopefully will result in useful regulatory clarity that will facilitate the growing use of this valuable forecasting and decision support tool.

While highly restrictive regulation is unwarranted and could seriously impact the application of prediction markets for enterprise decision support and public policy debate, defining a large enough sandbox within which prediction markets can be established, run, and continue to evolve without the need for regulatory consideration is welcome. Precedent does exist within which to establish this clarity. As examples the Iowa Electronic Markets (IEM) has operated a public market for several years and allows traders to place up to $500 at risk (supported by two no-action letters by the CFTC), Hedgestreet's prediction markets that allow users to offset very large volumes of potential financial risk are regulated by the CFTC, and numerous enterprises run internal prediction markets to assist with forecasting and decision support without any CFTC involvement. Assuming the CFTC does take action, hopefully it will cast a wide enough net to allow the use of prediction markets to continue to flourish.

Positioning Prediction Markets for the Enterprise

2008-04-25T10:15:00.000-07:00

As I noted in an earlier post, Prediction markets can be viewed as data mining tools to access the unstructured data stored in an enterprise’s distributed human capital resources. Prediction markets are a tool that allows the enterprise to rapidly, broadly, and cost effectively access these individual's information (both employees and external constituents).

The feedback from the Prediction Market provides another source of data to be considered and leveraged by corporate decision makers. Ideally negative prediction market indicators can serve as warning lights suggesting the need for further investigation and action by the corporation to address potential problems. The response of the prediction market to any actions taken can serve as one of many inputs into the action's potential effectiveness. The real-time nature of prediction market feedback makes it a useful proxy for key results that may not be available until some point in the future. As an example, if Wall Street and Boeing's chairman had paid attention to bet2give's Boeing 787 delivery date stock several months ago the recent 787 delivery delay announcements might not have been so surprising.

There is enormous hype around Prediction Markets and collective wisdom today however enterprise adoption has proven modest. Defining Prediction Markets for what they are, data mining tools and directional indicators, may make them more palatable to senior management whose buy-in and support are critical to gaining their acceptance.

Predictable Problems Deploying Prediction Markets

2008-04-24T14:39:00.000-07:00

Prediction Markets are proven, powerful tools to assist with forecasting and decision support. The recent Conference on Corporate Applications of Prediction/Information Markets provides excellent case studies from numerous enterprises that are capitalizing on these capabilities today. Much academic research has been conducted and is publiclly available validating the effectiveness of prediction markets and their application in predicting election results provides a highly visible consumer application.

Despite this, as noted in a recent article in Inside Knowledge Magazine, the number of companies that have implemented an internal prediction market is modest (lower bound was in the 30s as of 2006, although growing rapidly). Feedback from companies utilizing prediction markets has identified critical deployment considerations, including trader knowledge, question/security design, and trader participation however the limited trials and low adoption rate of prediction markets indicates that resistance to their use pre-dates these deployment considerations.

Tom Davenport, a Professor as Babson College, has identified traditional hierarchical organizations as a major obstacle to the use of prediction markets (as well as trader participation once deployed). At BitInsight (www.bitinsight.com), a consulting firm utilizing prediction markets as part of a decision support service, our experience would concur with this organizational resistance. The resistance ranges from disbelief in the process, concerns about data leakage, concerns about the impact on current business processes, and concerns that the process will “undermine management” (to use the words of Microsoft in their presentation on their prediction market, PredictionPoint).

By definition prediction markets are highly visible and if not carefully managed can be controversial, note the furor over DARPA’s terrorism futures market. This visibility adds to the personal risk from failure and precludes “skunk work” executions in most cases. The (ideally for many questions) cross organizational nature of the trading pool also adds organizational obstacles to market introduction.

Prediction markets are the data mining tool to access the unstructured data stored in the enterprise’s distributed human capital (broadly defined). It provides another source of data to be considered and leveraged; it does not, per se, make or even recommend any decisions to the corporation. Defining the tool as such may make it more palatable to senior management whose buy-in and support are absolutely critical to successful trial and on-going incorporation of this technique within the enterprise’s business processes.

Social Networking - Killer Application or Killer Feature?

2008-02-01T05:35:00.000-08:00

Social networking capabilities are a killer feature that can be applied to create killer applications such as Facebook and MySpace. The applications can be quite unique such as eBay and Wikipedia which leverage social networking capabilities to create a clearly distinct contextual user experience. According to a study by Jakob Nielsen (2006) only 1% of web interactivity is truly communal so applications such as Wikipedia service, as an application, a far broader audience then the participatory social network that created them.

Tools are being created by companies such as Socialtext (wiki tools), Worklight (Facebook application tool), etc. to facilitate the use of social networking capabilities within Enterprise applications (see the links to Harvard B-School Professor Andrew McAfee's blog for an interesting perspective on this point). I suspect that as this area matures the social networking capabilities will become an important element within broader enterprise applications such as CRM.

Sales Coaching 2.0

2008-01-21T10:34:00.000-08:00

Complex B2B sales are notorious for long lead times in making new sales hires productive. Given this it is absolutely essential that you have an established and proven sales process in place and the tools to track performance against these metrics so new hire activity and development can be monitored and directed as needed.

Outside the realm of traditional sales management metrics however these sales require significant custom knowledge on products and services as well as complex social networks (both customer and internal) that must be worked for successful opportunity closure. Harvard Business Review had an excellent article on this second point titled Better Sales Networks in their July 2006 issue.

Traditionally sales training and coaching by Sales Management has been employed to attempt to address this issue. This complexity can also be addressed by proper teaming of the new sales hire with seasoned field engineering talent and coaching of new sales hires by seasoned sales executives. Teaming quota and compensation are one of the sure fire ways to drive this organizational coaching behavior however one must be sensitive to the potential impact on the seasoned executive’s attitude and performance.

New Enterprise 2.0 tools for social collaboration have the potential to facilitate this sales coaching effort by supporting more effective remote delivery, by increasing the frequency of coaching activities, by allowing a broader audience to collaborate on the coaching effort, and by enabling ad-hoc teaming to more easily occur to support customer solution creation and opportunity closure.

Matching New Media to Your Content and Users

2008-01-11T07:23:00.001-08:00

As alternative media options proliferate it is important that companies strategically select the best media choice for their users and content and potentially consider multiple media delivery paths (with appropriate content adjustment) to optimally service their customers and users. With the rapid growth of collaborative Web 2.0 tools, leverage of customers/users for robust content creation can be exploited.

The following represents feedback I recently provided to an inquiry on this topic (specifically with reference to teleseminars). There is no one “killer” communication media and teleseminars are part of the bag-of-tricks that companies can exploit. Teleseminars (participatory audio only broadcasts) are closely related to podcasting and provide content for future podcast downloads. Teleseminars can be very effective however one must assure that the medium and content are a good match and that the target demographics of your user base make sense for this medium. Specifically on podcasting interesting research has been done by Edison Research, the Pew Internet and American Life Project, and eMarketer. The research shows that podcasting is growing as a medium (current market use/penetration is modest however expanding so there is much upside) and new monetization options are being established as well so it is clearly "current" technology. Advertising options are expanding (note potential Google support of podcasting with Adsense in 2008) and business is still playing with different financial models depending on the nature of their core business.

I have seen effective use of teleseminars and podcasting by professional associations and alumni groups where free teleseminars are used as a membership benefit which encourages one to pay your annual dues (the Harvard Business School Alumni Association is exploiting this capability very effectively). Teleseminars are also a very useful training vehicle (again depending on content) that can be part of a paid multimedia delivery offering. Finally advertising can be incorporated into a podcast download (or front end a teleseminar) such as Public Radio does with its' podcasts or the teleseminar can be one of several cost effective content creation vechicles to drive users to your website for future purchases or to support on-line ad revenue traffic.

Just as "Video Killed the Radio Star" was a point statement versus a complete industry shift in the TV/radio media wars teleseminars are a growing and useful vehicle as part of a complete communication/client delivery strategy.

Facebook's Beacon, Privacy and the Drive to Personalization and Revenue

2007-12-18T07:46:00.000-08:00

Facebook's demise in light of the Beacon fiasco (if you want to even call it that), as noted in a recent blog at fortune.cnn.com, is clearly overstated. While the Beacon introduction can be taken as an indication of hubris which ultimately will cause the firm to mis-step, its' release is merely a small bump in the road for a spectacularly successful company. Beacon is not the first poor roll out of a new service by Facebook that raised protest from their user community. Facebook's introduction of their News feed functionality in 2006 caused a similar uproar and has since moved on to become a valuable feature of the Facebook experience. The level of protest against the Beacon service is also fairly modest, at least within community, compared to other Facebook issues, such as the voluminous user feedback on the former limitation of verb use to "is" for status updates as noted in Josh Catone's blog. While the latter is not exactly an interesting topic for New York Times coverage it clearly was a sensitive issue for users! Beta testing new service acceptability in front of 50,000,000 plus users may be unwise however it is far from catastrophic (at least in this case).

So what exactly is Beacon and what are the real issues and concerns with the service? From Facebook's perspective Beacon is a capability that allows them to track Facebook user purchases on traditional e-commerce websites such as Overstock.com (more than 40 websites are participating with Facebook in this effort). The e-commerce web sites run the Beacon software application and send details to Facebook of user purchases. This information is extremely valuable to Facebook in its on-going effort to gather more information on users to assist in target advertising efforts that ultimately drive higher revenue opportunities for the firm. Utilizing the information gathered via Beacon, Facebook then decided to allow the sharing of user's purchase information with their Facebook buddies via the News feed as an enhanced service feature.

Beacon as a Facebook user feature is not likely to prove acceptable. As noted by Professor Misiek Diskorski from Harvard Business School, the Beacon functionality does not pass the two requirements of any successful on-line social networking feature. These are:

Features cannot disclose information that people would not disclose publically offline.
Features must communicate information that friends or recipients will find helpful.

The Beacon user service as first introduced also had an immediate impact on users by demonstrating to them the type of information Facebook was collecting on their broader internet activity and requiring them to take action on this information. Benefit, immediacy, impact and transparency are four important measures to consider in any new service design. While Beacon certainly provided immediacy, impact and transparency, as first released, these features without the requisite user benefit merely speed user backlash.

On privacy, Beacon also fails the test of user acceptability. Data mining and tracking of user behavior on a company’s web site are common practices and users have demonstrated a willingness to accept this lack of privacy as a cost of access to the services the web property provides. The Beacon service steps outside the Facebook property and tracks user behavior more broadly without providing any real user benefit as noted above. The introduction of a user service of low utility based on this data merely highlights for users the real corporate driver of revenue generation through personalization. As quoted in a December 10, 2007 Computerworld article discussing privacy and the Facebook Beacon advertising service Pam Dixon, executive director of the World Privacy Forum, noted that "There are other sites and other places where very similar data arrangements exist, but it all happens under the radar." Fortunately for Facebook, users have shown an amazing willingness to accept their loss of privacy on the web however a service such as Beacon, with limited user benefit and requiring complicity and potential brand damage to third party web properties for its execution, poses potentially damaging strategic implications long term.

By changing the Beacon service as presented to users from "opt-out" to "opt-in" Facebook will gain valuable information as to the utility of any user services they can design with this information. While Facebook’s initial success was driven by the concept of trust (closed "safe" community versus open social networking sites such as MySpace) this trust must now always be questioned. When you "opt-out" of Beacon is the tracking of outside network web activity still occurring and just not being presented? A good question; however the drive for personalization and revenue by Facebook should come as no surprise and their lack of propriety will have little impact on the behavior of 50,000,000 plus users. Time to get back to Facebook!

Innovation and the CIO

2007-12-03T20:11:00.000-08:00

It is interesting to note the significant coverage CIO Magazine and other IT-centric publications have placed on the role of IT in support of innovation within the enterprise. The February 1, 2007 issue of CIO Magazine ran a special report on I.T.'s role in innovation. The September 15, 2007 issue returned to the topic with editorial coverage by the magazine's CEO (with recommended links to www.innovation.net, www.innocentive.com. www.open-innovation.com, and www.wikinomics.com) and articles on Innovation ROI and Collaboration for Innovation. Intel's Premier IT magazine also covered the topic in it's Winter 2007 article discussing Developing Systemic Innovation in an IT Organization.

The reality of innovation within the IT enterprise does not appear to many of us to meet the potential discussed in these articles. In a November 15, 2007 CIO Magazine article titled "No Innovation for You" Gary Hamel, an expert on business strategy, blames obsolete management practices for the failure to establish a culture of innovation. Gary poses an interesting question by asking CIOs what percentage of their total budget and headcount is devoted to things that are unique in their industry. While Gary feels this percentage should be somewhere in the 30 to 50% range it requires no answer to the rhetorical question to know the reality is not at all close to such a figure.

This issue is not a CIO specific problem and stems from the enterprise's budgetary and rewards infrastructure. IT organizations are typically understaffed and underfunded so the focus remains on keeping the ship afloat versus innovating for the future. If operational shortfalls occur (and they do frequently despite best efforts) the application of resources to innovative programs versus optimizing current operational performance is clearly not a career enhancing decision for the ambitious CIO. For IT to realistically become a true partner in corporate innovation executive level commitment and support must be behind the innovation initiatives the CIO supports. Given the enabling power of the IT infrastructure to support innovation throughout the enterprise this support is critical for innovation to blossom company wide.

At times a ground swell of non-supported use of certain enabling technologies by corporate users can force IT to embrace these systems for either control or security reasons (and gain the buy-in for this effort by senior management). The corporate introduction of instant messaging and intelligent mobile devices followed this path within many firms. The availability and application of many Web 2.0 enabled services in the consumer internet arena makes it likely that many of these new capabilities will follow this path to corporate adoption and Enterprise 2.0 deployment.

As Gary noted in the recent CIO Magazine article "...The internet is doing exactly what management is supposed to do. It's amplifying and aggregating human capabilities. It's democratizing the tools of creativity..." Enabling the CIO to support this sea change in the tools of innovation is key to long term enterprise success.

Monetizing Opportunities on the Web - thoughts from HBS Cyberposium 13

2007-11-29T11:31:00.000-08:00

On November 10, 2007 Harvard Business School hosted CYBERPOSIUM 13 an annual conference which this year focused on "Innovation Without Borders". The conference breakout sessions included "My Free Media, Now!" that discussed the business models that will enable monetization of old media companies, "...What good is Social Networking" that touched on the benefits and lessons learned from social networking's meteoric rise in recent times, and "Online Games and Virtual Worlds: More than Just entertainment?" which discussed how companies are monetizing these virtual worlds.

The media session noted the almost complete migration of on-line content to and ad supported financial model (with the on-line Wall Street Journal noted as a highly successful exception to this rule). The need to up the ad revenue through not just providing "eyeballs" but encouraging engagement (and thus generating more revenue) was noted. Targeting advertising to appropriate viewers was highlighted with an objective to move the CPM (cost per thousand) for viewers from modest revenues ($1/1,000 viewers) to figures such as $100/1,000 for highly targeted technical publications and viewers. Potential beneficial linkages between the traditional media content and the cyber-media content was also discussed.

The social networking tract demonstrated several different business models. LinkedIn's Senior Director of Products, Adam Nash, noted that their business model is not to try and monetize every visitor but to build applications and monetize via subscriptions to individuals and corporations (although they also sell more standard classified ads for job listings and related topics of interest to their users).

It was noted that users want a public profile on-line however it is important to assure key pieces of information are not made available by users to prevent the facilitation of identity theft. Having a private versus public network supported by user generated content and trust was identified as important to retain the faith in and utility of the system for users.

The gaming/virtual world session noted significant market potential with penetration of massively multi-media on-line games (MMO) at only 15% of on-line gamers and virtual worlds such as Second Life with less than 1% penetration. Even at these penetration levels significant revenues are being generated. It was noted that the World of Warcraft game is generating more than $300 million of revenue/profit per year. Revenue models range from selling user subscriptions (World of Warcraft) to providing the games free and selling elements to use/improve the gaming experience (an example was made of a cart racing game in Asia that is free to users and still generates over $100 million per year selling elements to add to/personalize user carts).

Second life's corporate business model is to earn money by selling real estate on the site which can then be developed by users. Second Life's business model has created opportunities for its' users to capitalize on the environment by creating and selling products in the virtual world. Philip Rosedale, the founder and CEO of Linden Labs (makers of Second Life), noted that about 4,000 users earn more than $1,000 per month in the virtual world and that 40,000 users are cash positive on their virtual world experience.

Issues with user interface challenges to enable more mainstream adoption and the problems of game piracy that require constant game evolution to mitigate were also discussed.