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My Stock Portfolio Is Up

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by C. Engdahl
Product Marketing Manager
SopheonDespite my love of movies and general interest in the movie industry, I have long avoided participating in the Hollywood Stock Exchange (http://www.hsx.com/). I always figured I had better things to do with my spare time than spend it buying and selling 'shares' of actors, directors, and upcoming films using simulated money, and then watching these 'investments' move up and down in the HSX market.

I recently succumbed however to the intrigue of the HSX. As an example of a front-end of innovation tool, the HSX was too compelling for me to resist. Apparently I don't have better things to do with my spare time anymore.

Participation in the HSX does not make me a Hollywood insider. I have no illusions that buying these virtual stocks will get me closer to the glitz and glamour of Hollywood. Anyone with a web connection can join. I imagine I'm one of several hundred thousand people (if not close to a million) participating in this multi-player web-based game. That works just fine for me. I'm actually more interested in the writers and directors of films and am content to admire these talents from afar.

What intrigues me more than the virtual elbow rubbing with Hollywood stars, and motivates me to participate in the HSX despite no actual monetary gain, is the underlying premise, technology, and community power of the application itself. Like a regular stock exchange, the act of buying and selling HSX stocks causes share prices to fluctuate up and down. The ultimate HSX share prices are meant to be an indicator of actual box office success. More specifically, the stock prices are meant to predict the box office take for the first four weekends of a motion picture release. If the HSX share price is H$60 for instance, this suggests the movie in question will earn $60 million during its first four weekends. This makes the HSX a type of 'prediction market'' and apparently a pretty good one at that.

In April 2006 the HSX forecast that 'The Da Vinci Code' would bring in 207 million dollars in the first four weekends after release. By the end of June 2006, when the first four weeks of the movie had come and gone, 'The Da Vinci Code' reportedly earned almost 206 million in actual revenue. Not a bad prediction. And apparently, although I can't confirm this (unless you're willing to accept Wikipedia as a credible source), the players on HSX in 2007 accurately predicted 32 of the 39 major-category Oscar nominees and 7 out of 8 top-category winners.

Pretty impressive.

I'm sort of fascinated by the potential power of the HSX. I'm trying to think though whether it could be widely applied in other situations. It almost seems a bit too sophisticated though for most industries and organizations. In some sense it's a little obscure for my tastes too in that the inner workings are not readily transparent. Although the tool seems excellent, a sophisticated prediction market such as this is clearly not meant for, nor needed by every organization.

Despite its somewhat specialized application, the power and approach of the HSX highlights for me two very important elements that I believe are necessary to create an effective front-end information solution (by 'front-end information solution' I mean things like prediction markets, idea generation tools, more comprehensive idea development solutions, or other applications).

1. A good front-end solution utilizes a clearly prescribed and consistent method for guiding front-end activities. In the case of HSX, the method is the act of buying and selling 'stocks'. This method is consistent over time and is easy to understand even by those new to the HSX game. In other situations, an organization might use specific techniques (i.e. brainstorming or idea generation, etc.) or processes (Stage-Gate') to shape their efforts. Whatever method you choose, try to make it simple to understand and consistent over time. This isn't to say you shouldn't change or experiment with different methods and techniques when dealing with front-end initiatives. Not at all. I'd suggest though that your choices be deliberate and not simply a hodge-podge collection of haphazard, disconnected activities.

2. The HSX also incorporates the element of interaction. Its participants, through the act of buying and selling, are engaging one another and exchanging information. To develop great information and ideas on the front-end of innovation, an organization needs interaction and collaboration amongst its innovation participants. Rarely does great innovation happen in isolation. (Note: I wouldn't use the word collaboration to describe the HSX if only because it sounds too much like collusion ' a no-no for any type of stock exchange.) In addition to the interaction through trades, the HSX also provides a platform for discussion amongst players. Discussion, whether virtual or face-to-face, is essential to most every innovation process. The exchange of ideas is always good for discovering greatness.

Time for me to go. I need to check my portfolio.

I think the market's actually up today.

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