Six steps to creating an 'internal market' within your organization

It's the curse of organizations in the 21st century: too much information.  The average company now takes in gigabytes worth of information and data every day -- what's relevant?  What's important?  Does any of it make a difference? I've heard it said that out of the 100,000 events that are digitally captured every day, only four or five may be of material significance to the business. How do you find and identify that information? Someone in the organization knows, but even that person may not fully realize the importance of the information they hold.

Two business researchers, writing in MIT Sloan Management Review, have an answer -- let market forces drive the value of information passing through the enterprise. The authors, Hind Benbya and Marshall Van Alstyne, say the time is ripe for internal knowledge markets, which are essentially an employee crowdsourcing mechanism that prices the value of the information they offer. The authors define such markets as "protected environments where users trade their knowledge via price mechanisms." Organizations including Infosys, Siemens, McKinsey & Co., Eli Lilly, and the US Government have been trialing internal markets to better disseminate information, they add. (Thanks to my FastForward colleague Bill Ives for the pointer to this article.)

Such markets have been around in the public domain for years, but only lately have companies experimented with them internally. Money talks, they say -- we've seen online markets such as InTrade provide predictions for everything from elections to global warming temperatures. Can such markets also provide predictive knowledge inside companies as well?

"Markets cause resources to speak up and self-identify," Benbya and Van Alstyne point out. "They facilitate reuse of existing information, cause new information to be created when needed and efficiently regulate use of resources, including people’s time."

The venue for such a market would be an internal collaboration platform, such as a wiki site. Benbya and Van Alstyne offer the following points of advice for the conduct of an internal market:

1. Let prices float. Fixed rewards -- such as awarding a set number of credits for posting a question or answer on an internal bulletin board -- results in a glut of useless information. Instead, they say a system of "virtual currency" works better. For example, at Infosys, a 17,000-employee consulting and information technology company, employees submitting research papers, project experiences and other knowledge goods to an internal knowledge market called K-Shop "are compensated via a company-issued virtual currency known as knowledge currency units (KCUs), which can be redeemed for cash and prizes."

2. Capture knowledge at both ends of the “long tail.” Successful markets are two-sided markets with producers and consumers. The authors urge a two-prong approach to supporting internal markets -- seed and subsidize. They site the example of Apple, which subsidizes developers with platform tools and support services to build its community.

3. Consider offering points for improving information quality. A properly designed knowledge market can address the problem of too much useless information being posted and proliferated. Mechanisms can be put in place where market participants "earn points for commenting on the usefulness of answers, flagging obsolete content and organizing dispersed content."

4. Provide "protected spaces" to overcome shyness. "The internal knowledge market should include smaller, more private specialty markets where employees can voice questions and concerns with less widespread visibility," Benbya and Van Alstyne say. There needs to be a way to ask and answer questions anonymously.

5. To reduce hoarding, balance competition with collaboration. "The best incentives... balance competition and collaboration," the authors say.

6. Protect strategic information. Benbya and Van Alstyne recommend private spaces for highly sensitive information exchange.

This post was originally published on Smartplanet.com