• Strategy
  • CFO.com | US

Crowd Control

Motorola uses a prediction-market variant to determine which among thousands of employee-submitted ideas merit a further look.

In 2003 Motorola rolled out a system through which employees could propose ideas for products or anything else that might boost the company’s value. By one measure it was an unqualified success: it produced 10,000 ideas over the next four years.

But the volume of submissions to the system, called Think Tank, overwhelmed the review boards that were set up to vet the ideas. A backlog swelled, and missed opportunities abounded. In one case, a competitor brought out a product with features that had been suggested by a Motorola employee years earlier, according to Rami Levy, a technologist with the company’s mobile devices business. “There was no effective way to pick out the right ideas, no matter how many people we put on the boards,” he says.

One idea that did attract attention was to solve the idea-overload problem by launching a variant of a prediction market, in which participants bet, like stock traders, on the likelihood of certain events happening. The basic idea behind prediction markets is that the “wisdom of crowds” tends to enhance forecasting accuracy.

The trading system Motorola subsequently deployed in late 2007 is more accurately described as a decision market, because its purpose is to help the company decide what ideas merit high-priority treatment. Other large companies, including General Electric, Qualcomm, and BestBuy, have likewise employed the concept in recent years. Levy presented a case study of Motorola’s implementation and results at last week’s 2010 Corporate Performance Management Conference in New York, hosted by CFO.

Called TIX, or Think Tank Idea Exchange, the system relies in part on a voting mechanism Motorola had adopted in 2005 when trying to get control over the proliferating ideas. Employees simply signify with a “yes” vote the ideas they believe should be pursued. Ideas that receive at least five votes are eligible for TIX.

All employees may participate in the decision market, and in fact Levy says most ideas come from lower-level workers. Participation is far-flung, with traders coming from 120 sites worldwide and ideas from 80 sites. Most ideas relate to new products or enhancements, but anything is fair game; even ideas for acquisitions and other enterprise strategies have been submitted. There is a low barrier to entry, with no requirement for a business case or plan to accompany an idea. On the other hand, those who propose ideas can’t hide from scrutiny: anonymous submissions are not allowed.

Each week for the first two months of a three-month cycle, the company loads new ideas into the system, where they remain for 30 days. During that time, employees, who are staked to 100,000 imaginary dollars, can trade in the ideas as if they were stocks. An initial offering price is set for each stock, and then, as with real securities, the price rises or falls depending on trading activity. Players can even short stocks that represent what they think are bad ideas.

At the end of a stock’s market period, Motorola deems it a “winner” or “loser” based on a matrix of criteria: the stock’s volume-weighted average price (VWAP) over the last 15 days of trading, the number of shares outstanding, how many people traded the stock, and the average daily trading volume. Winners (there have been about 120 to date) are given top priority with the review boards.


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