(Editor’s note: Josh Green is CEO of Panjiva, which helps companies find overseas suppliers. He contributed this column to VentureBeat.)
Over the last decade, many businesses came to believe the "wisdom of crowds" could be harnessed to predict the future. The idea went something like this: By aggregating opinions from a wide variety of people, you could get insight an individual couldn’t provide.
It worked, to a degree. But, as you may have gathered from the ongoing financial meltdown, even a large group of people can be completely wrong.
Nevertheless, many businesses remain significantly interested in finding ways to leverage this sort of dispersed information to gain insight about what the future holds.
It won’t be through the "wisdom of crowds," though. Today, the hunt is on for a way to flag critical information and quickly direct it to those who need to know. As it turns out, a tool developed in the world of finance may be able to serve as a model for this.
Over a decade ago, those charged with risk management at J.P. Morgan recognized that the information needed to manage risk resided in the heads of the same people who were exposing the firm to risk. But collecting actionable information from those on the front lines and communicating it to the broader organization was tricky. The company quickly began devising a tool to help it accomplish this.
The result was the development of VID - an incredibly simple (yet elegant) system of Vulnerability IDentification - that JP Morgan used to effectively manage risk in subsequent years.
VID didn’t seek to aggregate information into homogenized "wisdom of crowds" answers. Rather, it enabled individuals to communicate their specific concerns, in a rank-ordered manner, to those who were in a position to take action.
The recent economic downturn exposed the limitations of the corporate world's existing risk management warning systems, so don’t be surprised if VID-like tools start to pop up here first. Of course, corporate executives can hardly be faulted for failing to anticipate a sudden financial system meltdown. However, in the aftermath of that meltdown, many executives found themselves unable to specifically identify which risks posed the most significant threat to their businesses.
I saw this first-hand in my sector - supply chain management. Senior executives across a wide variety of companies found themselves confronted with the threat of supplier bankruptcies - and the frustration of not knowing which specific suppliers were most at risk. As companies scrambled to enhance their risk management capabilities, there was a ravenous hunger for data.
Specifically, we saw a sharp increase in demand for financial and operational data about suppliers. However, in my many conversations with senior executives, I repeatedly heard: "I have an army of people on the ground; surely they know where the risks are."
What these companies lacked was a way to systematically capture and leverage the wisdom of their teams for risk management purposes.
Bottom line: there's a big opportunity for entrepreneurs who can marry Web 2.0 technologies, which excel at connecting people and information, with a deep understanding of the needs of corporations. In the months and years ahead, expect to see more focused applications that leverage these technologies to solve targeted problems, such as how to manage risk across a large organization.
We may have failed to harness the wisdom of crowds, but we can still succeed at harnessing the wisdom of teams.
Photo by lumaxart via Flickr