Information markets, wikis and other applications that tap into the collective intelligence of groups have recently generated tremendous interest. But what”s the reality behind the hype?
The human brain is a magnificent instrument that has evolved over thousands of years to enable us to prosper in an impressive range of conditions. But it is wired to avoid complexity (not embrace it) and to respond quickly to ensure survival (not explore numerous options). In other words, our evolved decision heuristics have certain limitations, which have been studied extensively and documented over the last few decades, particularly by researchers in the field of behavioral economics. Indeed, the ways in which our brains are biased may be well suited to the environment of our ancestors, when a fast decision was often better than no decision at all. But the hypercompetitive and fast-paced world of business today requires short response times and more accurate responses and more exploration of potential opportunities.
The good news is that, thanks to the Internet and other information technologies, we now have access to more data — sometimes much more data — about customers, employees and other stakeholders so that, in principle, we can gain a more accurate and intimate understanding of our environment. But that’s not enough; decisions still need to be made. We must explore the data so that we can discover opportunities, evaluate them and proceed accordingly. The problem is that our limitations as individual decision makers have left us ill equipped to solve many of today’s demanding business problems. What if, though, we relied more on others to find those solutions?
To be sure, companies have long used teams to solve problems, focus groups to explore customer needs, consumer surveys to understand the market and annual meetings to listen to shareholders. But the words “solve,” “explore,” “understand” and “listen” have now taken on a whole new meaning. Thanks to recent technologies, including many Web 2.0 applications,1 companies can now tap into “the collective” on a greater scale than ever before. Indeed, the increasing use of information markets, wikis, “crowdsourcing,” “the wisdom of crowds” concepts, social networks, collaborative software and other Web-based tools constitutes a paradigm shift in the way that companies make decisions.2 Call it the emerging era of “Decisions 2.0.&