Replacing the committee with the crowd - as the first filter

So if we are going to take Committees out of the way, at least in the first pass, what are we going to replace it with? In 'The Wisdom of Crowds', James Surowiecki argues that under certain conditions the independently aggregated perspectives of the 'crowd' can do much to counter-act biased or partial perspectives of individuals. Daniel Kahneman, a nobel laureate in economics, concurs¹ that this approach can be an effective way to neutralise, the 'halo effect', or the tendency of dominant, yet biased, views of influencing those of others. This growing body of behavioural economic research challenges the view that that lone 'experts' are the only way to make smart decisions. His essential contention is that, within certain important parameters², diverse crowds can make better decisions than either the lone experts or the homophilic committee, but the concept is often misunderstood.

The key question is: 'is the assessment of an early-stage venture too complex to use the concept of the wisdom of the crowd as a filter process?' A good body of evidence, and our experience, suggests not. Surowieki provides many examples of crowd-driven intelligence, but its radical use in a large gold mining company, Goldcorp, is an interesting example.With 55,000 acres of land, Goldcorp was struggling to find the buried treasure. To avert a wild goose chase Goldcorp's CEO shared, on the web, Goldcorp's geological data going back to 1948 and offered $575,000 in prizes to those who could come up with the best way to find and extract the gold. Participants in the contest found 55 drilling targets Goldcorp had not identified. Eighty percent hit 'pay dirt' and since the challenge was initiated an astounding eight million ounces of gold have been found - in four years Goldcorp's cost of production dropped 600%. Many examples have followed suit including the use of Twitter traffic as a means of predicting share performance in the stock market.

Knowledge Transfer is complex but may lend itself more naturally to crowd based wisdom

Such examples are just as complex as many of the ventures that Knowledge Transfer Offices (KTOs) are dealing with and concerns around commercial advantage and secrecy are just as important. Yet this was a radically successful strategy. Indeed it is possible that knowledge transfer lends itself much more naturally to such an approach because using the wisdom of the crowd in a KT project selection process has multiple benefits:

It assists in better project selection - less group think

As long as you abide by the core principles and understand its limitations, 'crowd wisdom' can allow the KTO to quickly and cheaply prioritise propositions for support. Crowds with cognitive diversity and multiple perspectives in aggregate, provide stronger raw intelligence than that of any single person.

Critical to the approach is the concept of diversity, that is the crowd should be able to address a broad range of commercial inputs. In this context, this could include suggestions as to the range of applications, design and usability issues, business model, technical and regulatory matters, etc. This is not an argument against the use of experts, far from it. Rather it's a argument for deploying experts on projects that have been more effectively screened.

The use of social media groups allows for the easy assembly of a diverse range of experts and potential end-users, and engages them in early idea testing. The use of social media for this engagement allows for the accommodation of this diversity and the aggregation of differing, but relevant, perspectives. This aggregation is important because each input is independent and therefore guards against the 'groupthink' that often arises in committees and teams

It helps recast the problem

'Breakthroughs occur when a person restructures the problem, thereby recognising that one is exploring the wrong space'

Don Norman, Design without Designers.

Hutch Carpenter of Spigit uses this quote, and draws on academic research to make this point about the need to recast 'problems'. In a concise blog he sums up two benefits that are derived from opening up the innovation early to the crowd. Firstly, the crowd might have missing knowledge - technical or market - that enhances the proposition. More valuably the crowd, or someone in it, might have an entirely different perspective on what the value proposition might be. This is well supported in the research on 'The Value of Openness in Scientific Problem Solving' from which the salient point is quoted here:

'Our most counter-intuitive finding was the positive and significant impact of the self-assessed distance between the problem and the solver's field of expertise on the probability of creating a winning solution. This finding implies that the farther the solvers assessed the problem as being from their own field of expertise, the more likely they were to create a winning submission. We reason that the significance of this effect may be due to the ability of "outsiders" from relatively distant fields to see problems with fresh eyes and apply solutions that are novel to the problem domain but well known and understood by them.'

In a business context, Eric Ries has popularised the concept of the business 'pivot' in his recent Lean Start-up book whereby a start-up learns from its engagement with early users that the technology, business model, or the value perceived in an early venture lies elsewhere or is better addressed by an alternative approach. Countless examples of pivots are given. Such 'pivot's are precisely a result of external perspectives being internalised. One topical example is that of Groupon - a large venture that started out as a 'collective activism platform' to bring people together to solve problems, and through launching a very minimal, barely viable, technical product quickly learned that the real value lay in aggregated crowd procurement of pizzas etc. Groupon ended up breaking records in terms of growth in a space very different from its early proposition. This was not what Groupon set out to do, but it is what the wisdom of the crowd suggested they needed to do.

Problem solving diagram from: The Benefits of Letting Others Recast Your Problem. Acknowledgment: Hutch Carpenter.

It helps open up the project to market-pull

A major drawback of the typical approach to KT is the tendency towards technology-push - rather than market-pull. It's easy in such a busy environment to get stuck in reactive mode. This tendency is often reinforced by the rigid workflows referred to above, and the need to respond to invention disclosures from faculties in an efficient manner. The common focus on IP management rather than exploitation compounds this. The problem is that this push approach increases the risk of wasted effort, because push is just too hard in the face of lack of market demand.

There's a growing recognition in many KTOs that the odds of success are slim if the question of 'what does the market want' is not taken as the starting point. Determining what the market wants used to be difficult, and attempts to solve it via expensive market assessment reports were often seen as the solution. They were never really the solution, yet remain just as expensive. Real feedback comes from connections with real people, people who are interested in buying, not from notional percentages of market size. Accessing the market directly, is now much easier via the use of networks - often facilitated, but not exclusively, via social media networks.

Whilst an assembled 'crowd' is no replacement for thorough business planning and detailed market assessment, as an early stage proxy for sifting to find projects to focus on, it will lead to better intelligence on market-pull than the committee ever can. Finding just one real-life potential interested party (or even licensee) in the early stages will help overcome many problems and deliberately plugging networks such as the InnovationXchange into a KTO's innovation crowd, can make a difference to early-stage opportunities. Given that there will always be an element of technology-push we would argue that a much more radical market-pull strategy in KT is valuable and that it could challenge some of the assumed truths of Technology Transfer.

By way of example Mac Motorcycles was started by a motorbike-mad designer who wanted to create a product that was distinct in the motorcycle market. By breaking every rule in the book ie prototyping using shared images online; engaging with a crowd and not even protecting their IP, they have generated a demand and allowed the product to be shaped by a large community of fans before it was even clear that they could manufacture the product. The upshot is that they have a developed order book, offers of investment, and a product about to be launched that meets a very keen market segment. Most knowledge transfer practitioners may well have cautioned against each of these heretical steps, but they have clearly reduced risk, and cost and increased demand and the value of the product.

Indeed this example demonstrates that the next step may well be beyond seeking market-pull towards co-creation. Yet whilst this lesson is easy to apply in a university Research and Development (R&D) context it will inevitably involve negotiations with research teams and Principal Investigators (PIs) that are set on a particular course of research and this may be the most difficult aspect of executing such a strategy. However, for commercialisation, and indirectly for research funding, it is likely to bring strong benefits. This will require a shift not just in the attitude of the KTO but in the attitude of the PI and the research team.

It opens up the project to cash and people

Entrepreneur-consultants provide new knowledge and new perspectives. But their main raison d'être for participating in the 'crowd' is to get access to good opportunities that they believe have commercial potential. Allocation of projects to the best business development agents is assisted by the transparency of the discussions that take place on line in KT 2.0 community. Getting this allocation right provides a major advantage. For example in the Leeds New Opportunities Group, external entrepreneurs in a KT 2.0 innovation community that provide the most useful feedback on early-stage inventions are also likely to be best placed to drive them forward. Crucially, in addition, the allocation of the right project to the right business development agent also significantly improves the strength of the pitches they can make for funding. They may also be the agents that might be best placed to pitch for funding.

At the University of Leeds, the Commercialisation team moved up from a 'record' of zero awards under one particular Proof of Concept (PoC) scheme to near on a 100% success rate when it started to utilise external business development agents to pitch for the funding. These pitches were simply more compelling when made by someone that lived in the domain to which they related (as opposed to the KTO core team). Angels and Venture Capital fund managers can also be invited directly into these innovation networks.

It engages wide-ranging resource for free

Any serious appraisal of commercial due diligence is going to cost, though not necessarily cash! But, at least for a first filter of innovative ideas, it pays to distribute the workload. The digital age has introduced new ways to filter information. With a small team evaluating all ideas the workload can be large. However it is possible to change that equation. With a large number of external participants evaluating a small number of ideas, the work of identifying the most promising ideas is significantly easier and better. What's more, it can be done for free, if you gauge correctly how to parcel the workload out.

The great thing here is that people will self-select to provide feedback. They naturally weigh in on what interests them and they will often engage in these tasks for free either to win business, to demonstrate knowledge or gain connectivity.

It provides transparency and automation

Finally, the use of external scrutiny and involvement is a useful injection of transparency and objectivity into a process that can all too often fall prey to academic pressure. The automation of this via the use of social media can help relieve the KTO of one of its most pressurised pinch points.

¹ Thinking Fast and Slow, Daniel Kahneman, Allen Lane, 2011

² For a good video presentation on the principles and limitations of Crowd-based Wisdom see: http://www.youtube.com/watch?v=RX-7xwPPY8I&NR=1

³ http://www.business-strategy-innovation.com/wordpress/2010/11/the-benefits-of-letting-others-recast-your-problem/