The idea of crowd intelligence is simple: the wisdom of a large group of people is nearly always greater than the intelligence of any single member. The theory is especially hot in Internet circles – where obviously it’s very easy to access the collective intelligence of users – but it’s also emerging as a hot forecasting tool in financial markets. The idea is as old as the hills, but it’s re-emerged due to technological developments (eg, convergence and social networks), and a book called ‘The Wisdom of Crowds’ by James Surowiecki. Goldman Sachs, Deutsche Bank and Hewlett-Packard are all using group wisdom to predict everything from next quarter sales figures to future economic indicators. Group prediction can even be played for fun on various websites like www.ideosphere.com, www.hsx.com and www. longbets.org. Is this a future trend or just a short-term management fad? What do you all think?

First, in the 1980s, it was ponytails, now, in the noughties, it’s longtails. The longtail effect has long been used by statisticians to describe ‘power-law’ distributions, such as the usage of certain words in the English language (words occurring frequently followed by a slowly trailing ‘demand’ curve). But following an article in Wired magazine a while back, the phrase has become the buzzword of choice in management consultancies and venture capital firms. The reason for this is that longtails explain the fragmentation of consumer markets and the shift from mass to niche marketing. For example, due to the aggregating effect of the Internet, it is now possible to make money selling obscure products and services. Traditionally, a book retailer would focus on big sellers because it did not have enough physical space to stock every book ever published. But now, Amazon makes 30% of sales on book titles outside the top 130,000 sellers. Another example of a business making money from low-volume products is i-Tunes. What does this mean for business? One implication is a shift away from ‘hits’. Another is a move away from researching what people want – just put it out there and find out. This in turn means moving away from conventional marketing and media advertising to investment in intelligent or ‘collaborative’ filtering. From a cultural point of view, the trend is also interesting because we may also be witnessing a shift away from ‘shared culture’ (which is hit dependant) to a more individualised culture that is not.

A trend that’s sweeping through the technology industry is simplicity. The idea is starting to make its presence felt in other areas too. Business tends to make things complicated because it’s easier that way. Engineers, in particular, are guilty as charged because complexity sometimes impresses other engineers. Hence most products are over-engineered and feature a myriad of functions that most people will never need or use. Complexity also costs money and can lead to reliability issues – as Mercedes recently discovered when complexity reduced the reliability of some luxury models. Banks complicate product offerings because this makes sense internally, while marketing departments offer customers a plethora of choices because that’s what they learn in Market Segmentation 101. The problem is that ordinary people are busy and don’t spend their whole day thinking about bank accounts or toothpaste. They just want something that does the job and nothing more. A recent survey by the Consumer Electronics Association in the US found that 87% of people (customers) cite ease of use as the most important feature of any new product. Technology companies are the worst offenders in not understanding what customers want because of closed feedback loops and the lack of direct contact with end users. So what’s the solution? Making products simple is actually very complicated. First you need to make your company simple. This means simplifying not only structure and process, but also culture and mission. A good example of a company that’s been ‘simplified’ is Philips. The company now runs just seventy businesses instead of five hundred and there are five divisions instead of fifty. There’s even a Simplicity Advisory Board to ensure that things are made simple but not simpler. Another trick to simplify your relationships with your customers is to communicate in their language, not yours. In other words, if your mother doesn’t understand it, neither will anyone else.

Companies are slowly catching on to the fact that none of their employees is as smart as all of their employees. And if you want to get really smart, try engaging your suppliers and customers in the product development and innovation process too. Even NASA has got into the act using amateurs to map craters on Mars, while Procter & Gamble has said that 50% of new products should come from outside the company. (See also personalisation and customer co-creation trends).