And the winner is … collective intelligence!
2013 is a year with many elections in Germany. In addition to the general elections, where Peer Steinbrück is trying to unseat the incumbent chancellor Angela Merkel, regional elections in Lower Saxony, Bavaria and Hesse will shake things up even more. But long before election day the forecasting battle starts – to goal is to provide to most accurate prediction regarding the outcome of the elections. Gallup and other established pollsters are no longer the only ones trying to accurately forecast election results: for several years now prediction markets have gained a firm foothold and established themselves as a viable alternative to traditional polling methods. And rightly so: the collective intelligence of the participants in the prediction markets regularly beats the forecasts of pollsters in terms of accuracy. In the US, where prediction markets have a longer tradition, the Iowa Electronic Markets are predicting the percentage of votes for Republicans and Democrats since 1988 with a higher accuray than all the other polls. Maximizing Profits The basic principle is simple: Prediction markets are plattforms where future events can be traded, similar to a stock. The underlying assumption is that prices reflect all available information, as defined by the efficient market hypothesis. Price therefore mirrors the expectation regarding the outcome of the event. If the price is too high or too low according to the opinion of a trader, he or she will sell the stock or buy more. After the trading window is closed, the forecast is contained in the final price of a stock. here. Similar to prediction markets for elections, through the mechanism of buying and selling contracts on the platform, a price is established, which reflects the average view of employees on how a scenario will play out. Managers in a company are able to use this information to improve the quality of their decisions. Software that saves you money There is a large amount of empirical studies and experiments that show that predictions based on the Social Forecasting Methodology are more accurate and cheaper in comparison to regular market research methods, such as conjoint analysis. A case in point: consumer goods manufacturer Henkel was able to increase the accuracy of their sales planning by 22% using the CrowdWorx software. See also our case study for this customer.Employees get it right Accurate forecasts are not only important for political parties and journalists – companies also need predictions for future planning. Predictions are the basis for sales planning, risk management and evaluating the potential of innovations and new products. CrowdWorx offers companies custom-made solutions in order to harness the forecasting power of collective intelligence, With CrowdWorx, the Internet Crowd is replaced by the companies’ employees. Using CrowdWorx’ Social Forecasting System, employees are able to make forecasts with regards to uncertain future events. Among others they can forecast the potential of a new product or a new sales channel – further sample questions you can find