DO |
|---|
| Expect transparency Whatever information you uncover—about revenue, product completion dates, or pricing—will be available to the entire market and will be difficult to hide. Unless you really want to know if your company will miss revenue targets or product launch dates, it's best not to ask. |
| Pony up some cash (even if it's not real dough) Employees will show more interest in participating in play-money markets if they start with a sizable nest egg, say $10,000. |
| Cast a wide net Many companies choose only the most senior or informed employees to play the market, but economists say those who are less informed also provide value. They give the experts incentive to bet and possibly make money, and sometimes low-level employees have a grain of knowledge that's crucial to an accurate forecast. |
| Keep it simple Make sure employees understand how the market works. If a stock market trading scenario is too complex, try a simplified version such as the market-maker system used in the Yahoo! Tech Buzz game. Invest in education for participants. |
| Pick your words Only include carefully worded questions with clearly defined parameters. Participants who misinterpret questions often become disgruntled and eventually lose trust—and interest—in a market. |
| Check with lawyers There may be disclosure issues surrounding some prediction markets, such as ones that predict revenue or, say, whether a certain drug will be approved by the Food and Drug Administration. |
DON'T |
| Go it alone Unless you've got a lab and researchers with expertise in creating markets, it's wise to get help from either a vendor or a consultant. If markets aren't set up correctly, you won't get accurate information. |
| Expect enthusiasm from middle management CEOs usually like getting direct access to the thoughts of the rank and file but that process often bypasses middle managers, who like being information gatekeepers. Be sure to explain to all employees why you're setting up a prediction market. |
| Forget prizes Give employees incentives to participate. Participation rates typically hover around 50% with corporate prediction markets. Some workers want prizes while others want recognition. Be sure to include prize money in your budget. |
| Limit markets to internal employees In certain cases, partners, suppliers, customers, and even the general public can offer valuable information. Yahoo!, for instance, gleans information about paid search advertising from its Tech Buzz game, which is open to the public. |
A Guide to Prediction Markets: Tip Sheet
These forecasting tools are just making their way into the boardroom. Here are some pointers on understanding and using these markets
Unless you have a crystal ball, you could probably use some help seeing the future. Prediction markets offer executives a new way of forecasting future events such as revenue targets and product completion dates by aggregating information from many different employees. These markets work much like the stock market, except that prices generally reflect the probability that specific events will occur at a future date. Prediction markets are just making their way into corporate planning sessions. Here's what you need to know to get started: