In the consumer world, we have learned to exploit the collective wisdom of a community as part of our on-line buying experience. Can this "wisdom of crowds" apply to business communities, asks M Institute co-founder Jyoti Banerjee?
Tomorrow we will go to the Christmas fair at my daughter's school and attempt to guess how many jelly-beans are in a glass bowl. It's what you do at school fairs. What is certain is that no one will guess the right number. What is also likely is that almost all the answers given by the individuals entering the contest will be far off the mark. Yet, if it were possible to average the answers across all participants, the resulting mean will be about as good an answer as we can expect all day. One or two of the girls may improve on the mean score but they will represent a tiny minority.
How can I be so confident of this result? Just over a century ago , Francis Galton, polymath inventor of the idea of a statistical mean, found that the sort of aggregation used by measures of central tendency (such as the mean, median, etc) results in the removal of errors that individual datapoints could suffer from. At a country fair near Plymouth, he found a large group of people guessing the dressed weight of a slaughtered bull. The average across 787 entries turned out to be 1,197 pounds, which turned out to be within a pound of the actual weight of the dressed bull. Given that the crowd had a few smart people, a few informed people, and a bunch of no-hopers, what right did the average answer across the crowd have any right to be anything but dead wrong?
Wisdom of crowds
More recently, New Yorker columnist James Surowiecki picked up on Galton's idea when he penned "The Wisdom of Crowds" which features a deceptively simple idea based on Galton's work: large groups of people are smarter than an elite few, no matter how brilliant - better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.
What makes them smarter than the smartest? The wisdom of crowds. Think of the smartest girls failing to beat the stats average in the jelly-bean contest. Think of a crowd of people guessing the right weight of a bull. Think of Google searching a billion pages of Internet text and finding the one page that you wanted. That, my friends, is the wisdom of crowds.
Of course, the reality is that we don't trust in crowds. We put our trusts in experts. We show the worth we attribute to these experts by awarding them large financial rewards. We make them out to be cool people. Yet, we should really ignore the experts and just get down to the pub and take a straw poll. We are almost certainly guaranteed a better result.
Applying wisdom to business
So how can we wise up to crowds in our business decision-making?
The closest we get to the application of the wisdom of crowds is in observing user ratings on consumer websites. Many magazines publish product reviews on-line and award scores out of ten, or five stars, etc. Some of these on-line publications also allow users to report their findings with the product. It gets really interesting when the expert reviewer comes up with a score that is radically different from the user rating. Which is a more reliable result? The one expert user's opinion or the aggregated score of dozens or even hundreds of relatively uninformed consumers? Increasingly, it is the wisdom of the user community (i.e. the crowds) that provides a more reliable indicator.
Businesses are now trying to discover if they too could apply the wisdom of crowds to their decision-making. One such attempt is being made by software author Microsoft, which is incorporating community support tools in its ERP software package Microsoft Dynamics. At November's Convergence 2006 in Munich, Satya Nadella, the new head of Microsoft's Business Solutions division, showed how on-line community tools are now available directly within the software application (click here to read my blog article on the linking of Dynamics and Vistawhich was also shown in Munich).
The scenario is a simple one to follow. The user wants to do something that they have never done before - say, consolidation of accounts that are in different base currencies. Its not a question of how the software does it, as much as how to choose between alternative ways to carry out such a task. Nadella argues that by providing community tools inside the application it is easier for the user to put their query to a wider group of people, and get a better quality of reply. His thinking is clearly based on the wisdom of crowds.
Communities of support
To make the scenario work better, the community needs to allow ranking of the quality of answers. To support this, Microsoft is enabling answers to be rated by the community, and those ratings to be attached to each person providing an answer. The more answers provided by a member of the community, the more likely you would be to trust them. But better still, if the rest of the community likes their answers, you should trust them even more. Finally, if they are also qualified (unsurprisingly, Microsoft is offering qualifications for the support community) their answers should be treated with even more respect.
Clearly, it is in the interest of a participant in a community to share the knowledge they have because it will help them get the best information when they themselves are in need of help.
Will it work? So far I have not seen community tools working outside consumer or IT support environments. But Nadella has done his homework in trying to figure out how best to exploit the collective wisdom of a community in a business context.
Of course, it should be said that Microsoft's approach is not really about the wisdom of crowds. If it were so, there would be no community ranking of expert opinion providers, or favouring of heavy users of the system over light users, etc. Every answer would be aggregated to remove the errors of individual responses. That would be the wisdom of crowds.
But maybe we are not ready for such thinking in our businesses. Maybe gurus and experts still have some shelf-life in the present system of business. And, it may be wise not follow the crowds anyway: observe the small matters of the Internet bubble of the 1990s, or the tulip bubble of over three hundred years ago. One observer of the tulip bubble, Charles Mackay, had this to say: "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
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