Wednesday 24 April 2013

The wisdom of crowds - a shortcut to better decisions

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.

Leadership, especially military leadership, is often characterised as a lonely experience - the loneliness of command. At the point of decision, a leader is alone with his or her responsibility - think of Eisenhower deciding when to launch Operation Overlord in 1944 for example.

But before the time comes for decision, leaders have the opportunity to observe and orientate. The wisdom of crowds can help make this observation and orientation quicker and more accurate. And emerging technology and techniques are making it easier to gather and respond to crowd wisdom.

Estimating distance

I was introduced to the concept of crowdsourcing as a trainee Royal Marine. We were taught that the best way to estimate the distance to a target was to ask everyone with you to make their own estimate, and then to take an average of all the estimates. The result, we were assured, is reliably more accurate than the estimate of any single individual.

This fits with the work of researchers such as Scott E. Page who wrote The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Edition). Page argues that his claims that "collective ability equals individual ability plus diversity" and "diversity trumps ability" are "mathematical truths, not feel-good mantras".

Safety in numbers

Business success depends on the engagement of crowds of people with your business idea. These may include customers, employees and investors. While the entrepreneurial vision is your own, its prospects of success depend on the response of others. Balancing your own enthusiasm with "reality checks" is essential, and there are more and more tools that make it easier to do this.

If you are able to gauge the response to your business before committing large investments of time or capital, you will reduce the risks involved, and you may pick up some valuable insights at the same time.

How to ask the crowd

With the proliferation of social media and special interest forums it is easier than ever to collect crowd insights. You could start by asking your friends on Facebook using the polling feature, or starting a discussion in a relevant LinkedIn group. For a larger crowd you could try visiting forums and posting questions - a technique I found very useful last year when investigating raising capital for This Tribe.

For more formal research there are also plenty of services like Crowdflower. And of course for crowdsourced fundraising (in which you invite a crowd to put their money where their mouths are), there are a growing number of crowdfunding platforms in the UK such as Crowdcube and Seedrs.

This is one of a series of posts on useful tools for entrepreneurs leaving the Armed Forces. Here is the full list and links.