Start-Up’s Software Goes to Employees for Company Forecasts
By Claire Cain Miller
New York Times
June 25, 2009, 1:39 pm
To get the best predictions about when your company’s latest product will ship or how it will sell, you might try asking your employees — anonymously. A start-up, Crowdcast, began selling corporate forecasting software on Thursday that does just that.
The employees on the front lines — the sales team talking to customers or the people packaging new products — have firsthand information that could be valuable to executives. But top management do not always get the most accurate information, because employees do not want to tell them the bad news, or they want to underpromise so the boss thinks they are outperforming.
“It’s a huge problem in corporations — by the time information gets to the top, it’s meaningless or too late,” said Mat Fogarty, Crowdcast’s founder and chief executive. Mr. Fogarty spent a decade doing corporate forecasting at Electronic Arts and Unilever, where he saw how inaccurate official corporate forecasts could be. “There is a lot of information not getting to decision-makers, and that’s expensive,” he said.
At Electronic Arts, Mr. Fogarty said, the most junior people often had the most insight into the quality of new video games, and he picked up the best information about the latest version of Madden while playing soccer games on the company lawn.
Often the administrative assistant who books meetings has valuable inside information, but no one ever asks for it, said Leslie R. Fine, Crowdcast’s chief scientist. She came from Hewlett-Packard Labs, where she led the development of Brain, which H.P. used internally to predict things like printer sales and memory pricing.
Other companies, including Google, have developed internal markets. Some start-ups have also tried this, including Spigit and NewsFutures.
Crowdcast’s mission, said Ms. Fine, who has a doctorate in economics, was to “take the promise of prediction markets and the wisdom-of-crowds stuff and make it applicable inside businesses.” The start-up has been financed with $3 million from Alsop Louie Partners.
Here’s how it works: companies pay an annual fee for the Web-based software and employees start out with a certain amount of virtual money. When people inside the company pose a question — such as when a new game will be ready to ship or whether a competitor’s new drug will get regulatory approval — employees offer a response and choose an amount to bet on its accuracy. In comments, they can anonymously explain their reasoning. Then, if they are right, they get more money and a louder voice in the future; if they are wrong, they lose money and do not have as much to bet later on.
Star predictors get real prizes, like gift cards or lunch with the boss. Gift cards are sent anonymously through the Crowdcast system. Even if the names of star predictors are revealed for prizes like a lunch, managers do not know which bets they made on which questions, only that they were highly accurate.
During a pilot period, five large companies, including Warner Brothers and General Motors, have been using Crowdcast to predict revenue, ship dates or new products from competitors. About 4,000 bets have been placed, and predictions have been about 50 percent more accurate than official forecasts, Ms. Fine said.
At a media company with a new product to ship, 1,200 employees predicted a ship date and sales figures that resulted in 61 percent less error than executives’ previous prediction, according to Crowdcast. A pharmaceutical company asked a panel of scientists and doctors to predict regulatory decisions and new drug sales using Crowdcast, and they were more accurate than the company’s original prediction 86 percent of the time.
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