Saturday, July 21, 2007

Idea Management using a Stock Market Metaphor

An article from the New York Times reported that Rite-Solutions, a software company that builds advanced command-and-control systems for the US Navy, developed an interesting approach to Idea Management Systems by creating:
. . . an internal market where any employee can propose that the company acquire a new technology, enter a new business or make an efficiency improvement. These proposals become stocks, complete with ticker symbols, discussion lists and e-mail alerts. Employees buy or sell the stocks, and prices change to reflect the sentiments of the company's engineers, computer scientists and project managers — as well as its marketers, accountants and even the receptionist.
In this approach,
Fifty-five stocks are listed on the company's internal market, which is called Mutual Fun. Each stock comes with a detailed description — called an expect-us, as opposed to a prospectus — and begins trading at a price of $10. Every employee gets $10,000 in "opinion money" to allocate among the offerings, and employees signal their enthusiasm by investing in a stock and, better yet, volunteering to work on the project. Volunteers share in the proceeds, in the form of real money, if the stock becomes a product or delivers savings.
This approach has already been highly successful, for example one of the earliest stocks - with a ticker symbol: VIEW - was a proposal to apply military three-dimensional visualization technology to help sailors and domestic security personnel practice making decisions in emergency situations. While the initial proponent of the ideas was unenthusiastic about promoting it, it received extensive support in the internal marketplace - and the resulting product line, "Rite-View," now accounts for 30% of total sales.

This approach is interesting because it draws on the principles of Idea Management Systems (tap into the contextual experience and situation of employees to generate relevant and interesting ideas) but also provides an effective rating system - and a well-known metaphor (the market) - to guide and inform that activity. It is also similar in principle to the approach to giving employees a stake in the company taken in the book The Great Game of Business.

This system also forges connections across disciplinary boundaries - for example, pattern-recognition algorithms used in military applications and for electronic gambling systems at casinos were applied in educational settings by a non-technical member of the administrative staff. Engineers were keen to support it, and this resulted in a contract with Hasbro to build its "VuGo Multimedia System."

The key principles applied in the Rite-Solutions approach are to solicit employee ideas, and to provide a mechanism so employees will invest in voting for what they consider to be the best ones. Since the 'opinion' money can be converted into real money for successful ideas, employees have a real stake, and the principles of 'the wisdom of markets' apply.

However, it must be noted that an idea funnel is still required: a stage-gate process must be in place for the organisation to assess the contributed ideas against the resources required and the market demand to confirm the business case for proceeding, and to ensure the ROI on the investment in the new product or service proposition.
The NYT article concludes by discussing open innovation through the application of similar principles to external marketplaces of ideas, for example at InnoCentive. Similar networks exist elsewhere - for example the Innovation Xchange Network in Australia.

The full text of the article can be accessed at the New York Times website. The article was written by William C. Taylor, a co-founder and founding editor of Fast Company magazine

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