Dennis Glavin is an experienced product manager having held leadership positions at Stamps.com, Motorola, and Jobster. He has done us all a wonderful favor of summarizing "The Wisdom of Crowds" by James Surowiecki. He illustrates two perspectives of how it works and how it could fail and offers 10 tips to lead us towards a successful execution of decision markets.

Enjoy!

By Dennis Glavin
One of the "must read" books in business in recent years is "The Wisdom of Crowds." The author, James Surowiecki, follows in the steps of Malcolm Gladwell (The Tipping Point, Blink) and Steven Levitt (Freakonomics) with a refreshing look at how our world works. Product managers take note, if your business has a large addressable market, you owe it to yourself to give it a read.

Premise: Many Are Smarter Than the Few

The book opens with early 20th century British scientist, Francis Galton. Visiting his country home for a fair, Galton participates in a weight judging content for a prize ox. While he doesn't win, Galton's curiosity is piqued. He arranges to get all of the entries and makes a startling discovery: the average of all entries is closest to the actual weight of the ox than any one entry. Thus, the premise of the book is set; the collective wisdom of a group exceeds the wisdom of the individual.

The book continues with a discussion of futures markets applied to decisions. These "decision markets" are speculative markets focusing on particular decisions. The Iowa Electronic Markets most famously have allowed participants to buy seats on political markets. These markets have repeatedly predicted political outcomes in the real world. Decision markets build on the concept of Galton's discovery. In a decision market, all of the participants have some small bit of wisdom. The market allows participants to apply that wisdom with an economic value. Result? Better decisions.

The appeal to a product manager is hard to miss. Imagine if you could harness the collective knowledge of your company to make the decisions for the four Ps: The features that maximize customer utility? The profit optimizing price? The best distribution channels? Promotions that drive sale and adoption? A product built on the collective wisdom of a top company would be unstoppable.

There's always a but and in this case, it's a big one. As a veteran of more than one startup, I've seen new managers try out this approach in software companies to negotiate product direction and features. Here's what happened in one such company (relevant details have been changed to protect the innocent):

The talented, but green, VP of Product Management had the resources to invest in four major feature areas for an upcoming release. The company president had been out evangelizing three such features, so the VP could choose one. He assembled the development, marketing and program manager teams and asked each to use two votes on set of feature candidates. While there was no clean winner, there was a plurality of support for a particular feature. The VP chose it.

The teams met the following week for an executive review. The first three features sailed through the review with flying colors, but the last was shredded, demoralizing the team and setting the company's development schedule back. Lacking a clear leader and consensus, the feature fell to the bottom of the company priorities, causing the company to lose ground against its competitors.

The key takeaway here is that while companies have the collective wisdom they need, it's up to a product manager to manage the company decision market the right way. There is collective wisdom in companies, but as organizational entities, most modern companies aren't yet ready to openly embrace decision markets. To leverage that collective wisdom, successful product managers need to give their decision markets some help.

Here's a few time honored tips from a frequent trader in the decision market of product management:

1. Gather expectations and input from stakeholders early: Don't wait until a week before a decision point to test your decision market - check early and often.

2. Set objectives and priorities: Markets don't do this, but as a product manager you need to. A market needs a leader, and you want to be it.

3. Drive buy-in at the decision making levels: If you're not the executive, make sure that you've got buy-in to the decision. Cement buy-in by probing decision makers for data that may cause their buy-in to waver.

4. Build consensus in small groups first: Build a representative group of your decision market and build consensus there. This is your springboard to larger buy-in of your direction.

5. Deliver your message in multiple ways: When it's time to present your ideas to the executive teams, use visuals, text and a demo [if possible] to communicate your ideas. Not everyone consumers information the same way - don't leave anyone out.

6. Bring the data: Sure, the R&D team can 'vote' in the decision market with gut feelings, but the product manager needs the market data.

7. Prioritize, prioritize, and prioritize: The market doesn't let your R&D team set its priorities, don't let internal teams set the priorities. It's up to you to prioritize the features or resources your product needs.

8. Set expectations with schedules and touch points: Keep the exec team on your side by telling them when the updates are coming, and then have the updates ready.

9. Revenue talks: Make sure you can talk about the revenue or strategic opportunity your product brings and the limitations on it.

10. Understand 'what if' before it gets asked: The market place of ideas is dynamic. While you're presenting an idea, even one of your idea's supporters is going to come up with a new idea. Be ready to answer the 'what if we did something else' and the 'what if the market changes' questions.

I've touched on just one facet of "The Wisdom of Crowds." For anyone considering a management or marketing position, it's a must read.