How to Implement Collective Intelligence to Achieve Effective Business Strategy?

Homa Milani-March 2010

Knowledge has become the key economic resource and the dominant and perhaps the only source of comparative advantage - Peter Drucker.

Abstract Business Strategy is all about achieving advantages for the organization with finding new solutions or opportunities, Collective Intelligence could be a great source for both of them. In this article the relation between effective business strategy and collective intelligence has beed defined, and later on the gens which are the core of collective Strategy has been debated and finally the process for implementing the Collective intelligence in enterprise has been defined. Key Words: Business Strategy, Collective Intelligence, Knowledge Management Introduction Think about the organization: Is it only a collection of individual intelligences or does it have a collective intelligence? We all now living in information society and the information society is gradually transforming industrial and commercial companies into intelligent enterprises. Those who do not evolve in this direction are taking the risk of falling out of sync with the society now emerging. The intelligent enterprise stands on three pillars: collective intelligence (quantity and quality of intellectual cooperation), knowledge management (quantity and quality of knowledge) and information and collaboration technologies (quantity and quality of software, hardware and networks facilitating relational and information flows). [1] Maximizing the organization's human and intellectual capital is its key to succeed in the new, knowledge-based economy. [7] If knowing how to produce and sell has become a basic necessity, it no longer constitutes a sufficiently differentiating factor in international competition. In the past, enterprises were industrial and commercial; in the future, they will increasingly have to be intelligent. The intelligent enterprise is built principally on Collective Intelligence and Knowledge Management, which cannot exist and effectively function without information technologies. Business performance in an information society means knowing how to mobilize collective intelligence and the knowledge of stakeholders (employees, suppliers, customers, etc.). [1] What is Collective Intelligence? Collective intelligence is a shared or group intelligence that emerges from the collaboration and competition of many individuals, that is shared ideas, contents, tasks, projects, goals, etc in order to achieve in a much better and productive way a common goal. If you think of it, its

almost just like saying what teamwork is, so what is the difference? A teamwork has a certain kind of strategy and planning which makes it perfect for tasks distribution and workflow, while collective intelligence is in the group nature and refers more to the fact of sharing what everyone knows to empower strategy and workflow itself.[14] In another word, Collective intelligence is central element for solving problems and predicting future outcomes, obviously these two will affect corporate strategies but how? This is the question that I will try to anwer it in this paper. Knowledge Management
No one knows everything, everyone knows something Pierre Levy

Most large firms only capture and act on a fraction of the knowledge contained within their organization. Sometimes this knowledge is hidden within dozens of databases, reports and information systems. In other cases, knowledge is locked inside someones head and is lost to the organization when that person leaves .The Business Knowledge Management describes a range of strategies and tools that try to capture this valuable knowledge, to deliver it to other people who can benefit from it and to ensure that information can be acted on swiftly to the firms advantage.[2] The Economist Intelligence Unit conducted a survey with 122 senior executives of large organizations with over $1bn in annual sales revenue, and from a cross-section of industries such as Financial services, Healthcare and Pharmaceuticals, Telecommunications and professional services companies to find out: [2] How important are the following technologies to achieving your companys strategic goals over the next three years? The first 3 most important Technologies were these: Business intelligence/knowledge management solutions New customer relationship management (CRM) applications Supply-chain integration and automation solutions.[2]

So as we can see Knowledge Management is in top priority of most companies which are in different industries, so Here is the question: What is the relation between Knowledge Management & Collective Intelligence? The best answer is: As Andr Boder mentioned in his article Collective Intelligence is a key stone of Knowledge Management. [3] Dr. Thomas Malone, Director of the MIT Center for Collective Intelligence observes about intelligence gathering : With new information technologiesespecially the Internetit is now possible to harness the intelligence of huge numbers of people . . . however, we need to understand what the possibilities are in a much deeper way than we do so far. The time has come make collective intelligence a topic of serious academic study.[6]

By Collective Intelligence firms can benefits exploiting the knowledge of their employees & harnesses the power of the companys collective knowledge and insight on a daily basis to help managers make smart decisions. To do so we need a collective intelligence platform that enables everyone your employees and partners to share insight on what is planned & augments historic transactional data with forward-looking people-driven intelligence and creates efficient communication channels that crisscrossed the company and connected the people with questions to those with answers regardless of the department & geographical location. Business Strategy Johnson and Scholes define strategy in their book, Exploring Corporate Strategy as follows: Strategy is the direction and scope of an organization over the long-term, which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. Affect of Collective Intelligence on Strategy Collective intelligence is central element for solving problems by finding solutions, predicting future outcomes, and directing corporate strategies. [9] However, even slightly degraded collective intelligence in business can lead to lost opportunity. So the stakes are high. More CEOs get fired as a result of flawed thinking than for poor execution. Poorly conceived strategy, no matter how well-executed is still poor strategy. When collective intelligence is degraded even slightly, it limits people's ability to see information that is right in front of their eyes. Listen to people from Cisco Systems talk about the shift that occurred when they began to achieve inspired collective intelligence even though they never use the term."The Boards and councils have been able to innovate with tremendous speed. Fifteen minutes and one week to get a business plan that used to take six months![8] Strategy Map A strategy map is a diagram that is used to document the primary strategic goals being pursued by an organization or management team.Why I use strategy map at this article? Simply because it covers both Productivity Strategy & Growth Strategy in one hand and in other hand it consider both the Long term Strategy and Short term.

Learning and Growth Perspective: Culture

Successful Collective Intelligence is about shifting culture and behaviortechnology is an important element, but is subsidiary. You can only get people to volunteer knowledgeyou cant force it. However, firms that provide forums, tools and opportunities for informal networking can encourage employees actively to share knowledge.[2] "Cisco operates as a distributed idea-engine where leadership emerges organically, unfettered by a central command. We want a culture where it is unacceptable not to share what you know. As a result, Cisco has become a laboratory of connectedness and productivity." Cisco has expanded the boundaries (a distributed idea-engine), raised the level of importance of those new boundaries above the usual silos and hierarchy that exist in most organizations (where leadership emerges organically, unfettered by a central command and becomes a laboratory of connectedness and productivity) and defined the behavior necessary for membership (a culture where it is unacceptable not to share what you know). Every organization can fashion its own version of what Cisco has created for itself.[8] Teamwork

"Neuron connections are essential to human intelligence; people connections are essential to organizational intelligence.[1] As Pierre Levy said, No one knows everything, everyone knows something. its a fact that a team or groups intelligence is better and more effective, mostly due to the fact that it allows us to fill the gaps in individual knowledge by using the wisdom of the crowd.As an structured and organized collaboration plan will help us empower our teams effectiveness by assigning everyone the most accurate tasks according to their skills, collaborative knowledge will encourage our team members to assist, participate, communicate, share and collaborate with each others knowledge and training. [5]

If collaboration only seeks to share data, information, files, records, workflow and teamwork, we would be missing an important link, the one that we get when we make our team not only collaborate by joining and adding their tasks and goals to accomplish a common goal, but make them share knowledge and building a community of practice. Then we will have commitment, global thinking, enhance competences, experience, dynamic deeds and all gaps will be fulfilled, a collaborative knowledge teamwork which provides the best of information, planning, skills and training.[5] The purpose of collective management is to develop trust among members of the team and to promote collective commitment in action .[1] Think of the effectiveness of a management team in terms of a simple equation: CE = CI - CD CE: the teams Collective Effectiveness; CI: the teams Collective Intelligence; CD: the teams Collective Dysfunction (i.e. the teams inefficiency or friction). It follows that there are two ways to increase the effectiveness of an organization: Increase the intelligence or decrease the dysfunction.[1] Internal Perspective: -Risk management: The additional features offered by Crowdcast include the ability to reach out to a different set of stakeholders within an organization to gather information about key risks. These assessments can include anything from the probability of a product missing a launch date to the prediction of a competitive threat. By CI there will be open communication platform between executives and their employees. Understanding the risk exposure in any organization is a top priority among industry leaders. [13] By providing an effective conduit and proper incentives for employees to share their risk predictions with their leaders, organizations can better take action to mitigate these risks. Allowing executives to understand the gap between a formal risk assessment and a supplementary risk assessment performed through collective intelligence Enabling executives to identify and prioritize risks, and to decide whether to mitigate, transfer, or accept them [13] Innovation Process

As Chesbrough said:companies that dont innovate, die. Nowadays many of companies no more rely on their employees knowledge for new ideas. Starbucks has been using a social media approach in My Starbucks Idea to ask customers for big ideas, little ideas, revolutionary ideas. Services such as Idea Scale help a company tap into such ideas from the community.[6] Also research shows that that companies innovations are more commercially attractive when the product and service developments involve lead users, defined as users of the product or

service, that freely share their knowledge and innovations. Companies that leverage lead users are most often ahead on industry trends.[9] Collective Intelligence enables both inside marketing professionals and outside crowds of amateurs to solve our organizational problems or fulfilled the customers needs thus leveraging the development of innovative products , which often leads to competitive advantage. However it should mentioned we need to creat the facilities for this reason just like starbuks which create : mystarbucksidea.force.com/ and in just 2 weeks they got 14,000 idea all around the world and according to their website by the April 2011 they got 80,000 idea about their products and environment. Their customer could log in and vote for ideas. Customer Perspective: It is not just internal processes that can benefit from better knowledge management, however. Most companies believe that relationships with customers are changing, and that to compete they will need to develop a much deeper knowledge of customer needs and behavior over the coming years. Ability to understand their customers needs, and to predict changes in their behavior, could give them a decisive advantage over their competitors. Price Quality Availability Brand

Brand and product managers routinely answer big questions. How much to spend on advertising for a new product or line extension? What should a new product cost? How much inventory to carry? Which supplier is most cost-effective and least risky? [4] But what if you could do more? What if you could easily tap the wisdom and experience of everyone no matter the department and geographic location who has knowledge about your product? What if you had efficient communication channels that crisscrossed the company and connected the people with questions to those with answers? What if there was a way for everyone to share unique insights about key metrics and align behind a common purpose? [4] Harnessing the power of a diverse community improves the chances of success. Diverse groups are more likely to come at a problem in different ways, not likely thought of by a homogeneous group.[9] how we can have access to diverse community? The answer could be: by Social media What does all this have to do with social media technology? Simply put, social media is the prime engine driving the rise of collective intelligence and collaboration networks. More and more businesses are turning to social media tools and methods to build internal communication tools that build on the strengths of applications like Facebook.[6]

Financial Perspective: Improve Cost structure:

According to Porter the way an organization designs, develops, commercializes, markets, and sells its product determines its cost structure and differentiation from competitors.Organizations could use Open Innovation in order to improve its Cost structure. Here is an example: Utilizing the global crowds of amateurs process who now have access to the same tools as professionals to in the advertising and other marketing is often cheaper and faster than relying on in-house expertise or contractors. For example, LOreal often relies on user-generated content for programming and advertising. The best users generated ad can cost as little as $1,000.00, whereas a similar add would take LOreals in-house resources roughly $164,200 to produce.[9] Enhance Customer Value

Value creation can e.g. be related to solving a problem, improving performance, or reducing risk and cost [10] and by Collective intelligence we could come up with lots of new solution and innovation to create or enhance our product value. Value Chain

it is important to know what the customers main problems are and the potential impact of those problems on organizational products or service offerings. It is often best to focus on the problems, or pain points, that the customers are experiencing. By focusing on solving larger problems, value is created through greater benefits realized by those who are most impacted Customers will pay more for solutions that address their primary concerns, since those solutions present the most visible value to the customer [9] Collective intelligence in Action Before implementing the Collective Intelligence it is necessary that we understand it is beyond of fuzzy collection of cool ideas , however it will look like a magic for managers if it implement in right way. Collective intelligence poses a problem because it enters the realms of the social, human, psychological, and hence the irrational. In the face of such uncharted territory, our natural tendency is to turn and run! People shy away from collective intelligence because they think it will rob them of control.[1] Before we take any actions, we should first make sure that these terms are understood by all level of our company: Business Model, Strategy and Strategy map & our Action Plan for Collective Intelligence. Business Model:

The generic Business Model identify three interrelated strands which form the basis of a metamodel for business models: characteristics of the companys way of thinking, its operational system, and capacity for value generation.[10]The business model reflects the companys way of competing, whether it concerns being unique or being the most cost-efficient company in the industry.[10] As noted by Chesbroug, the primary tenets of the generic business model include (a) value proposition, (b) market segmentation, (c) value chain, (d) revenue generation, and (e) competitive strategy. [9] We need to make sure that all stakeholders and our employees understand the Business Model.
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Strategy

After we have a clear understanding of Business model it is time to review the Strategy, to have a successful Collective Intelligence among our employee it is necessary to define the strategy in all level of company. The passage of competitive advantage from tangible assets to intangible helps highlight the role of knowledge management including Collective intelligence in the enterprise. Action Plan: Genes Vincent Iacolare, Frdric Lvy and Franois Lorek of the Altran Group also emphasize that a concrete action plan must be developed to manage the process of building collective intelligence. It is important to define the what (what actions for implementation), the how (the software/hardware/network tools needed to optimize and facilitate work), and the who (people who have the skills to use the tools effectively). [1] Who is performing the task? Why are they doing it? What is being accomplished? How is it being done? [12]

Who undertakes the activity? Here there are two basic genes: Hierarchy. In traditional hierarchical organizations, this question is typically answered when someone in authority assigns a particular person or group of people to perform the task. The task may be assigned to personnel inside the firm or to people outside it. Crowd. In the Crowd gene, activities can be undertaken by anyone in a large group who chooses to do so, without being assigned by someone in a position of authority. Why do people take part in the activity? What motivates them to participate?

Money. The promise of financial gain is an important motivator for most actors in markets and traditional organizations. Love. The Love gene can take several forms: enjoyment of an activity, by the opportunities it provides to socialize with others, or because it makes them feel they are contributing to a cause larger than themselves. Glory. Glory or recognition is another important motivator. What is being done? In the many organizational goals encountered in collective intelligence systems can be boiled down into two basic genes. Create. In this gene, the actors in the system generate something newa piece of software code, a blog entry, a T-shirt design. Decide. In this gene, the actors evaluate and select alternatives How is it being done? In traditional organizations, the How question is typically answered by describing the organizational structures and processes. Many collective intelligence systems still use hierarchies for some of their tasks, but what is novel is how they use crowds. Independent Create Collection Dependent Collaboration

Decide Individual Decisions (Markets and Group Decision( Vote, Market Prediction) Social Networks.)

Process of Implementing Collective Intelligence Gather and share information, Reflect (interact on the information), Consult (Prepare for decision), Decide , Capitalize and share information, Act.[1] These are the steps for implementing the Collective intelligence. A. Gather and share information (S1)

The gathering of information refers both to internal information (already capitalized as prior objectives were achieved) and external information (e.g. on the internet, in purchased market studies, at libraries). The information then has to be shared with those people who will be participating in the reflection stage, since discussion can hardly be productive without it. In fact, steps S1 and S2 could beoverlaid or iterated.[1] B. Reflect (S2) By Reflecting we mean asking questions and seeking answers. Reflecting as a group helps: - A shared vision of reality - Increase creativity and innovation - Move peoples thinking forward - Get support behind change - Facilitate evolution of the internal cultural - Reduce decision error - Create a more harmonious social culture and develop solidarity [1] It is crucial that the decision maker actively participate throughout this stage, otherwise the outcome will not be meaningful to him. Integrating a collective dimension into reflection does not mean the decision maker can bow out.Support for a decision happens during the collective reflection stage and not down the road when it comes to collective action.[1]

C. Consult (S3) To consult means to take a survey, to ask people for their opinion. In the AXIO context, the people consulted are those who have a stake in the collective either directly or indirectly, not people inside the entity of reference that defines the collective. These stakeholders may include employees, shareholders, customers, suppliers, consultants, experts, elected officials, unions, NGOs, and others.[1] D. Decision (S4) In companies, decisions are thus typically made by one person decision maker always decides alone as far as her superiors are concerned, even if she/he has organized a collective decision. The responsibility for a decision does not dissolve into the collective.[1] E. Capitalize and share information (S5) Capitalized information is information that has been made explicit and given form outside the head of the person holding it.On average, 60% of the information useful to an organization is not capitalized. Of the 40% that is capitalized by people within the organization, how much of it is shared?

the quantity of information spontaneously shared within an organization as a matter of course is, on average, 10%: memos, procedures, org charts, directories, instructions, etc.[1] The problem with information sharing is both human (experienced as a lose of power) and technical (it is not enough just to make information available; people have to be able to find it).[1] F. Act (S6) Implement a decision. Upstream from action arise the issue of training: Do skills need to be developed for the action to succeed? Who should be trained? Downstream from action arise the issues of evaluation and capitalization. Evaluations are generally conducted by ones immediate supervisor for purposes of an annual performance review. The evaluation focuses more on the decision maker than on the decision itself, no particular effort being invested in drawing lessons from the decision for the sake of the collective.[1] Who will manage Collective Intelligence? Many large organizations now have a dedicated head of Knowledge Management, or at least a high-ranking sponsor, to ensure the right collaborative environment. In an organization, managing collective intelligence means combining all of the tools, methods and processes that enable connection and cooperation among individual intelligences in order to achieve a common objective, accomplish a mission or complete a task. To manage the collective intelligence of an organization is to cultivate a dynamic of intellectual cooperation among individuals (interpersonal cooperation), create internal cooperation among teams and entities(through a collaborative intranet, for example), and develop external cooperation with the organizations customers, suppliers and even competitors.[1] How long each cycle lasts depends on the size of the company, ranging from two to four weeks for a very small company, and six to eight months for a very large one. In any event, it is best that the project not last longer than 8 months, so that it not get bogged down and thus fail.[1] Managers point of view One must also distinguish collective reflection from collective decision-making. Peoples kneejerk reaction when they first hear about Collective Intelligence is often: Thats all very nice but a boss has to make the decisions! They then go on to explain that CI would be very dangerous because would make a company democratic (an organization within which all decisions are taken by majority vote). [1] Great confusion thus exists between reflecting and deciding. And that is unfortunate, because it scares those who would like to change the status quo. But Collective Intelligence has nothing to do with the actual act of deciding, but with thinking, cooperating, innovating, creating. Collective Intelligence obviously helps decisions emerge, but does not directly impact the

decision itself. Little does it matter if one or several people make the ultimate decision. What matters is the mobilization of collective intelligence and knowledge in the process of getting to that point. Many managers resist collective intelligence as a process because they fear it will cause them to lose power. Collective Intelligence does not redistribute power (everyone keeps their place and same amount of power), but changes management practices and how power is exercised. Collective Intelligence thus implies a new kind of organizational governance, namely management of Collective Intelligence.[1] Employees point of view Managing collective intelligence implies a radical change that will naturally elicit a lot of resistance. But were talking about a social innovation: no one will want to go back to the way it was! As always, the problem lies not in developing new ideas but in escaping from the old ones.[1] Where there are gaps? We start CI from there! [9] Recommendations Recommendation # 1 - Focus on creating an innovative organizational culture, in which experimentation and failure are supported and encouraged. Recommendation # 2 - Create a collective intelligence (CI) system by answering the four primary questions: Who is performing the task? Why are they doing it? What is being accomplished? How is it being done? Recommendation # 3 - Focus on the utilization of an open innovation business model by developing a plan for and defining the primary tenets of the model, to include (a) value proposition, (b) market segmentation, (c) value chain, (d) revenue generation, and (e) competitive strategy. Recommendation # 4 - Map out the four types of innovation: 1) Neutral, 2) Positive, 3) Negative, and 4) Open. An organization should operate in all 4 quadrants, but for market leadership open innovation is the most critical . Recommendation # 5 - Understand how the CI system can be deployed into the value chain where internal and external knowledge is leveraged. Define how the CI system will integrate with the current value chain and which parts exist to support the system and which elements need to be developed.[9]

References: 1. Managing Collective Intelligence by Olivier Zara 2. Know how Managing knowledge for competitive advantage. 3."Collective intelligence: a keystone in knowledge management", By Andr Boder , Journal of Knowledge Management, Vol. 10 Iss: 1, pp.81 93 4. How Consumer Packaged Goods Companies use Collective Intelligence, Tools to Improve Operational Performance 5. Collective intelligence in workplaces By Lorie Vela 6.http://blog.greennurture.com/2010/03/despite-fear-factor-social-media-yields-collectiveintelligence/ 7. Community Building: Renewing Spirit and Learning in Business, By George Pr 8. Inspired Collective Intelligence, By Lewis E. Frees 9.Collective Intelligence for Competitive Advantage: Crowdsourcing and Open Innovation,By Sean Lane, Nike Inc. 10.What constitutes a Business Model: The perception of financial analysts By Christian Nielsen and Per Nikolaj Bukh 12.Harnessing Crowds: Mapping the Genome of Collective Intelligence, By Thomas W. Malone, Robert Laubacher, and Chrysanthos Dellarocas , 13.www.crowdcast.com 14- Collective Intelligence and collaboration ,By Lorie Vela

Appendix One Definition: Data = an observation, e.g. "The temperature is 30F." Information = an analysis of data, e.g. "It is cold." Knowledge = experience regarding information, e.g. "The heat should be turned on."

Collaboration and cooperation: A case of tangled connotations The concepts of collaboration and cooperation have become widely confused with that of communicating or providing information. Purely communication-focused tools, methods and software, for instance, are often trendily billed as facilitating collaborative work. Throughout this book, collaboration and cooperation are specifically and synonymously used to mean: to voluntarily work with other people to achieve an objective. For most people, both terms generally mean the same thing. If we go back to their Latin roots, this makes sense: etymologically there is little difference between co laborare and co operare. But cooperation and collaboration carry different connotations that become important in the management context. In English, cooperation often denotes acquiescenceobligingly or lessthanwholeheartedly going along with something. Criminal defendants cooperate with police to secure a plea bargain. Workers cooperate when they do what their boss wants. Cooperation implies a certain power dynamic. In contrast, collaboration denotes a mutual desire and initiative to work together as equals.