Demand driven or predictive bliss…or both?

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On Lora Cecere’s blog, she articulates the concept of becoming demand-driven as an organization. One specific point was the following: “In supply-based organization, the supply chain is incented based on cost reduction, procurement is incented based on the lowest purchased cost, distribution/logistics is rewarded for on-time shipments with the lowest costs, sales is rewarded for sell-in of volume into the channel, and marketing is rewarded for market share.  These incentives cannot be aligned to maximize value.” I could not agree more.

Ok…a bit of stream of consciousness coming, so hold on for the ride. The quote above made me think of the way resources are allocated to the numerous change projects that are proposed everyday. After all, you won’t get noticed if you just stick with the status quo. Some organizations have systems in place to determine who gets R&D, quality and marketing’s time, but it often results in those with the most informal power, politics, or sponsor who is highest on the organizational depth chart who backs a project that determines the winner. Or, the R&D folks are just bombarded with stuff, so they choose how they spend their limited time based on whatever happens to be motivating them that particular month or which projects best fits with their incentives this year. What is the result? Many failed projects for every one good one, with the exact ratio depending on the consultant that you talk to.

So just like competing incentives that don’t help the organization as a whole, the internal fight for resources is quite unproductive as well. Most of us have just become used to this way of doing things, but what if there was a way to tap the collective wisdom to understand which projects stood the best chance of success. There is…and some blogger internet hack happened to write an article about it. Prediction markets. Reduce the politics, internal maneuvering, and make your decisions based on the knowledge that your people possess. The only issue is determining whether a project is a success…that, admittedly, could get ugly. However, I believe there is a solution if we take things case by case. The pay-off will be a higher success rate and a more motivated workforce as well.

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